<PAGE> 1
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED OCTOBER 30, 1997)
$900,000,000
(APPROXIMATE)
ADVANTA MORTGAGE LOAN TRUST 1997-4
$146,039,000 ADJUSTABLE RATE CLASS A-1 GROUP I CERTIFICATES
$91,159,000 6.53% CLASS A-2 GROUP I CERTIFICATES
$33,579,000 6.55% CLASS A-3 GROUP I CERTIFICATES
$59,837,000 6.66% CLASS A-4 GROUP I CERTIFICATES
$15,601,000 6.72% CLASS A-5 GROUP I CERTIFICATES
$41,285,000 7.10% CLASS A-6 GROUP I CERTIFICATES
$50,000,000 6.63% CLASS A-7 GROUP I CERTIFICATES
5.00% CLASS A-IO GROUP I CERTIFICATES *
$98,000,000 ADJUSTABLE RATE CLASS A-8 GROUP II CERTIFICATES
$302,000,000 ADJUSTABLE RATE CLASS A-9 GROUP II CERTIFICATES
$17,500,000 7.04% CLASS M-1 GROUP I CERTIFICATES
$30,000,000 7.24% CLASS M-2 GROUP I CERTIFICATES
$15,000,000 7.54% CLASS B-1 GROUP I CERTIFICATES
MORTGAGE LOAN ASSET-BACKED CERTIFICATES, SERIES 1997-4
ADVANTA MORTGAGE CONDUIT SERVICES, INC.
SPONSOR OF THE TRUST
ADVANTA MORTGAGE CORP. USA
MASTER SERVICER
The Advanta Mortgage Loan Asset-Backed Certificates, Series 1997-4
will consist of (i) the Class A-1 Group I Certificates (the "Class A-1
Certificates"), the Class A-2 Group I Certificates (the "Class A-2
Certificates"), the Class A-3 Group I Certificates (the "Class A-3
Certificates"), the Class A-4 Group I Certificates (the "Class A-4
Certificates"), the Class A-5 Group I Certificates (the "Class A-5
Certificates"), the Class A-6 Group I Certificates (the "Class A-6
Certificates"), the Class A-7 Group I Certificates (the "Class A-7
Certificates"), the Class A-IO Group I Certificates* (the "Class A-IO
Certificates"), the Class A-8 Group II Certificates (the "Class A-8
Certificates") and the Class A-9 Group II Certificates (the "Class A-9
Certificates", collectively, the "Class A Certificates"), (ii) the Class M-1
Group I Certificates (the "Class M-1 Certificates"") and the Class M-2 Group I
Certificates (the "Class M-2 Certificates", together with the Class M-1
Certificates, the "Mezzanine Certificates"), (iii) the Class B-1 Group I
Certificates (the "Class B-1 Certificates", together with the Mezzanine
Certificates, the "Subordinate Certificates"), and (iv) the residual class with
respect to each REMIC held by the Trust (the "Class R Certificates"). Only the
Class A Certificates and the Subordinate Certificates (collectively, the
"Offered Certificates") are offered hereby.
(cover continued on next page)
SEE "RISK FACTORS" AT PAGE S-33 HEREIN AND AT PAGE 14 IN THE PROSPECTUS, FOR A
DISCUSSION OF CERTAIN RISK FACTORS WHICH SHOULD BE CONSIDERED BY PROSPECTIVE
INVESTORS IN THE OFFERED CERTIFICATES OFFERED HEREBY.
----------------------------
THE OFFERED CERTIFICATES REPRESENT BENEFICIAL INTERESTS ONLY IN THE TRUST
CREATED BY THE POOLING AND SERVICING AGREEMENT AND DO NOT REPRESENT
INTERESTS IN OR OBLIGATIONS OF ADVANTA MORTGAGE CONDUIT SERVICES,
INC., ADVANTA MORTGAGE CORP. USA, THE TRUSTEE OR ANY ORIGINATOR.
NEITHER THE OFFERED CERTIFICATES NOR THE MORTGAGE LOANS ARE
INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
----------------------------
The Offered Certificates will be offered by the Underwriters from time
to time to the public in negotiated transactions or otherwise at varying prices
to be determined at the time of the related sale. Proceeds to the Sponsor are
anticipated to be approximately $903,277,567 from the sale of the Offered
Certificates, plus accrued interest, if any, at the applicable Pass-Through
Rate, but before deducting expenses payable by the Sponsor, estimated to be
$500,000. The Underwriters have agreed to reimburse the Sponsor with respect
to certain of such expenses.
The Offered Certificates are offered subject to receipt and acceptance
by the underwriters (the "Underwriters") and to the Underwriters' right to
reject any order in whole or in part and to withdraw, cancel or modify the
offer without notice. It is expected that delivery of the Offered Certificates
in book-entry form will be made on or about December 18, 1997 only through The
Depository Trust Company ("DTC"), the Euroclear System ("Euroclear") and CEDEL,
S.A. ("CEDEL").
- ------------------------
*Interest will be calculated on the Class A-IO Certificates on the
basis of a notional principal balance equal to the aggregate outstanding
Principal Balance of the Class A-7 Certificates (the "Notional Principal
Balance").
LEHMAN BROTHERS
J.P. MORGAN & CO.
MORGAN STANLEY DEAN
WITTER
PRUDENTIAL SECURITIES
INCORPORATED
December 4, 1997
<PAGE> 2
The Offered Certificates will represent undivided ownership interests
in a pool of mortgage loans (the "Mortgage Loans" ), all monies due under the
Mortgage Loans on or after the related Cut-Off Date, security interests in the
properties which secure the Mortgage Loans, funds on deposit in certain trust
accounts and certain other property. The Trust will be created pursuant to a
Pooling and Servicing Agreement (the "Pooling and Servicing Agreement") to be
dated as of December 1, 1997, among the Master Servicer, the Sponsor and
Bankers Trust Company of California, N.A., as Trustee (the "Trustee").
On or prior to the Closing Date, the Sponsor will acquire certain of
the Mortgage Loans (the "Initial Mortgage Loans") from certain affiliated and
unaffiliated originators (respectively, the "Affiliated Originators" and the
"Unaffiliated Originators") as described herein. Additional Mortgage Loans
(the "Subsequent Mortgage Loans") may be purchased by the Trust from time to
time after the Closing Date but on or before January 16, 1998, from funds on
deposit in an account (the "Pre-Funding Account") to be established by the
Trustee. On the Closing Date, an aggregate cash amount of $46,807,367 from the
proceeds of the sale of the Group I Certificates (as defined herein) and
$18,562,375 from the proceeds of the sale of the Group II Certificates (as
defined herein) will be deposited with the Trustee in the Pre-Funding Account.
The assets of the Trust also will include a certificate guaranty
insurance policy (the "Class A-8 and Class A-9 Insurance Policy") from Ambac
Assurance Corporation, which will unconditionally and irrevocably guarantee
payment of amounts due to the Owners of the Class A-8 Certificates and the
Class A-9 Certificates to the extent described herein.
[AMBAC LOGO]
The information in this Prospectus Supplement is qualified in
its entirety by the more detailed information appearing or incorporated by
reference in the accompanying Prospectus. Prior to making an investment
decision with respect to the Offered Certificates offered hereby, prospective
investors should carefully consider the information contained in this
Prospectus Supplement and the Prospectus.
There currently is no secondary market for the Offered
Certificates. The Underwriters intend to make a market in the Offered
Certificates but have no obligation to do so. There is no assurance that one
will develop or, if one does develop, that it will continue until the Offered
Certificates are paid in full.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN
TRANSACTIONS THAT AFFECT THE PRICE OF THE OFFERED CERTIFICATES. SUCH
TRANSACTIONS MAY INCLUDE THE PURCHASE OF OFFERED CERTIFICATES TO COVER
SYNDICATE SHORT POSITIONS. FOR A DESCRIPTION OF THESE TRANSACTIONS, SEE
"UNDERWRITING".
UNTIL 90 DAYS FROM THE DATE OF THIS PROSPECTUS SUPPLEMENT, ALL
DEALERS EFFECTING TRANSACTIONS IN THE OFFERED CERTIFICATES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS AND
A PROSPECTUS SUPPLEMENT. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS AND A PROSPECTUS SUPPLEMENT WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
AVAILABLE INFORMATION
The Sponsor has filed a Registration Statement under the
Securities Act of 1933, as amended (the "1933 Act"), with the Securities and
Exchange Commission (the "Commission") on behalf of the Trust with respect to
the Offered Certificates offered pursuant to the Prospectus dated October 30,
1997 and this Prospectus Supplement. For further information, reference is
made to the Registration Statement and amendments thereof and to the exhibits
thereto, which are available for inspection without charge at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549; 7 World Trade Center, 13th Floor, New York, New York
10048; and at The Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago,
S-2
<PAGE> 3
Illinois 60661. The Commission maintains a site on the World Wide Web at
http://www.sec.gov containing reports, proxy materials, information statements
and other items. Copies of the Registration Statement and amendments thereof
and exhibits thereto may be obtained from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates.
REPORTS TO THE CERTIFICATEHOLDERS
So long as the Offered Certificates are in book-entry form,
monthly and annual reports concerning the Certificates and the Trust will be
sent by the Trustee to Cede & Co., as the nominee of DTC and as registered
holder of the Offered Certificates pursuant to the Pooling and Servicing
Agreement. DTC will supply such reports to Beneficial Owners in accordance
with its procedures. See "Risk Factors," "Description of the Securities --
Form of Securities" and "Reports to Securityholders" in the Prospectus. To the
extent required by the Securities Exchange Act of 1934, as amended, the Trust
will provide financial information to the Owners which has been examined and
reported upon, with an opinion expressed by an independent public accountant;
to the extent not so required, such financial information will be unaudited.
The Trust will be formed to own the Mortgage Loans, and to issue the
Certificates. The Trust will have no assets or obligations prior to issuance
of the Certificates and will engage in no activities other than those described
herein. Accordingly, no financial statements with respect to the Trust are
included in this Prospectus Supplement.
S-3
<PAGE> 4
SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus Supplement and in
the Prospectus. Reference is made to the Index of Principal Defined Terms and
the Index of Principal Definitions for the location in the Prospectus
Supplement or the Prospectus, respectively, of the definitions of certain
capitalized terms.
<TABLE>
<S> <C>
Issuer Advanta Mortgage Loan Trust 1997-4 (the "Trust").
Sponsor Advanta Mortgage Conduit Services, Inc., a Delaware
corporation. The Sponsor's principal executive offices are
located at 16875 West Bernardo Drive, San Diego, California
92127, and its phone number is (619) 674-1800.
Master Servicer Advanta Mortgage Corp. USA, a Delaware corporation. The
Master Servicer's principal executive offices are located at
16875 West Bernardo Drive, San Diego, California 92127.
Originators The Mortgage Loans to be acquired by the Trust from the
Sponsor will be acquired by the Sponsor from Affiliated
Originators or from one or more Unaffiliated Originators.
Class A-8 and Class A-9 Insurer Ambac Assurance Corporation, a Wisconsin-domiciled stock
insurance company.
Trustee Bankers Trust Company of California, N.A., a national banking
association (the "Trustee").
Initial Cut-Off Date December 1, 1997 (opening of business).
Closing Date December 18, 1997.
The Certificates The Mortgage Loan Asset-Backed Certificates, Series 1997-4
(the "Certificates") will consist of the Offered Certificates
and the Class R Certificates; the Class R Certificates are not
offered hereby. The Certificates will be issued pursuant to
the Pooling and Servicing Agreement. Only the Offered
Certificates are offered hereby.
The assets of the Trust will include two pools of closed-end
mortgage loans secured by mortgages on one-to-four family
residential properties to be conveyed to the Trust on the
Closing Date or, with respect to the Subsequent Mortgage
Loans, from time to time during the Funding Period (as defined
herein). All of the Mortgage Loans in the fixed rate pool
("Group I") and in the adjustable rate pool ("Group II"
together with Group I, "Groups" and each a "Group") have
remaining terms to maturity of 30 years or less and are
secured by Mortgages which may be either in a first or in a
junior lien position, together with certain other rights.
The Offered Certificates are issuable in original principal
amounts of $1,000 and integral multiples thereof, except that
one certificate for each Class (as defined below) of Offered
Certificates may be issued in a lesser amount.
</TABLE>
S-4
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<TABLE>
<S> <C>
Pass-Through Rates
and Balances $900,000,000 Mortgage Loan Asset-Backed Certificates, Series
1997-4, to be issued in the following Classes (each, a
"Class") and original Certificate Principal Balances (each, a
"Certificate Principal Balance"), as set forth below:
Pass-Through Original Certificate
Class Rate Balance
---------------------------------------------------------------
Class A-1 Certificates (1) $ 146,039,000
Class A-2 Certificates 6.53% $ 91,159,000
Class A-3 Certificates 6.55% $ 33,579,000
Class A-4 Certificates 6.66% $ 59,837,000
Class A-5 Certificates 6.72% $ 15,601,000
Class A-6 Certificates 7.10%(2) $ 41,285,000
Class A-7 Certificates 6.63%(2) $ 50,000,000
Class A-IO Certificates 5.00% (3)
Class A-8 Certificates (4) $ 98,000,000
Class A-9 Certificates (5) $ 302,000,000
Class M-1 Certificates 7.04%(2) $ 17,500,000
Class M-2 Certificates 7.24%(2) $ 30,000,000
Class B-1 Certificates 7.54%(2) $ 15,000,000
(1) On each Payment Date, the "Class A-1 Pass-Through Rate"
will be equal to the lesser of (x) LIBOR plus 0.14% per annum
(the "Class A-1 Formula Pass-Through Rate"), and (y) the
Group I Available Funds Cap Rate applicable to such Payment
Date.
(2) The Pass-Through Rate with respect to the Class A-6,
Class A-7, Class M-1, Class M-2 and Class B-1 Certificates
will on any Payment Date equal the lesser of (x) the
Pass-Through Rate for such Class set forth above and (y) the
Group I Available Funds Cap Rate applicable to such Payment
Date.
(3) Interest will be calculated on the Class A-IO
Certificates on each Payment Date on the basis of a Notional
Principal Balance equal to (x) for the first 30 Payment
Dates, the outstanding Certificate Principal Balance of the
Class A-7 Certificates and (y) thereafter, zero, with the
result that the Owners of the Class A-IO Certificates will
receive no distributions after the 30th Payment Date.
Reference to the Notional Principal Balance of the Class A-IO
Certificates is solely for convenience with respect to
certain calculations and does not represent the right to
receive any distribution allocable to principal.
(4) On each Payment Date, the "Class A-8 Pass-Through Rate"
will be equal to the lesser of (x) LIBOR plus 0.17% per annum
(the "Class A-8 Formula Pass-Through Rate"), and (y) the
Group II Available Funds Cap Rate applicable to such Payment
Date.
</TABLE>
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<PAGE> 6
<TABLE>
<S> <C>
(5) On each Payment Date, the "Class A-9 Pass-Through Rate"
will be equal to the lesser of (x) with respect to any
Payment Date which occurs on or prior to the Clean-up Call
Date (as defined herein), LIBOR plus 0.24% per annum and for
any Payment Date thereafter, LIBOR plus 0.48% per annum (the
"Class A-9 Formula Pass-Through Rate") and (y) the Group II
Available Funds Cap Rate applicable to such Payment Date.
The Pooling and Servicing Agreement defines the "Group I
Available Funds Cap Rate," as of any Payment Date, to be an
amount, expressed as a per annum rate, equal to (a)(i) the
aggregate amount of interest due and collected (or advanced)
on all of the Mortgage Loans in Group I for the related
Remittance Period minus (ii) the aggregate of the Servicing
Fee and the Trustee's Fee, in each case relating to Group I,
on such Payment Date and minus (iii) an amount equal to the
interest amount payable to the Class A-IO Certificates on
such Payment Date divided by (b) the aggregate Principal
Balance of the Mortgage Loans in Group I immediately prior to
such Payment Date, calculated on the basis of a 360-day year
assumed to consist of twelve 30-day months (or, in the case
of such calculation being made with respect to the Class A-1
Certificates, calculated on the basis of the actual number of
days in the prior month, divided by 360). As of any date of
determination, the "Principal Balance" with respect to each
Mortgage Loan, is the outstanding principal balance thereof.
The Pooling and Servicing Agreement defines the "Group II
Available Funds Cap Rate," as of any Payment Date, to be an
amount, expressed as a per annum rate, equal to (a)(i) the
aggregate amount of interest due and collected (or advanced)
on all of the Mortgage Loans in Group II for the related
Remittance Period minus (ii) the aggregate of the Servicing
Fee, the Premium and the Trustee's Fee, in each case relating
to Group II, on such Payment Date and minus (iii) commencing
on the 7th Payment Date following the Closing Date, an amount
equal to 0.50% per annum times the aggregate Principal
Balance of the Mortgage Loans in Group II as of the beginning
of such related Remittance Period, divided by (b) the
aggregate Principal Balance of the Mortgage Loans in Group II
immediately prior to such Payment Date, calculated on the
basis of a 360 day year and the actual number of days
elapsed.
The excess, if any, of (x) the interest due on the Class A-8
Certificates on any Payment Date calculated at the Class A-8
Formula Pass-Through Rate applicable to such Payment Date
over (y) the interest due on the Class A-8 Certificates
calculated at the Group II Available Funds Cap Rate
applicable to such Payment Date is the "Class A-8
Supplemental Interest Amount" applicable to the Class A-8
Certificates for such Payment Date.
The excess, if any, of (x) the interest due on the Class A-9
Certificates on any Payment Date calculated at the Class A-9
Formula Pass-Through Rate applicable to such Payment Date
over (y) the interest due on the Class A-9 Certificates
calculated at the Group II Available Funds Cap Rate
applicable to such
</TABLE>
S-6
<PAGE> 7
<TABLE>
<S> <C>
Payment Date is the "Class A-9 Supplemental Interest Amount"
applicable to the Class A-9 Certificates for such Payment Date.
If, on any Payment Date, there is a Class A-8 Supplemental
Interest Amount or a Class A-9 Supplemental Interest Amount
due (each of which is also referred to as "Supplemental
Interest Amounts"), the Owners of certain of the Class R
Certificates have agreed to pay such amounts pro rata based
on the aggregate amount of Supplemental Interest Amounts due
on each of the Class A-8 Certificates and the Class A-9
Certificates from the sources of funds specified in the
Pooling and Servicing Agreement, including amounts which
would otherwise be distributed to such Owners by the Trust on
such Payment Date. If the full amount of any Supplemental
Interest Amount is not paid on a Payment Date, then the
unpaid amount will accrue interest at the applicable Formula
Pass-Through Rate until such amount is paid. If the Master
Servicer, acting directly or through a permitted designee,
exercises its right to an optional termination ("Optional
Termination"), neither of the Supplemental Interest Amounts
may be paid in full.
The Class A-8 and Class A-9 Insurer does not guarantee the
payment of, nor do the ratings assigned to the Class A-8
Certificates or the Class A-9 Certificates address the
likelihood of the payment of, any Supplemental Interest
Amounts.
The Class A Certificates (other than the Class A-8
Certificates and the Class A-9 Certificates), the Mezzanine
Certificates and the Class B-1 Certificates are collectively
referred to as the "Group I Certificates" and the Class A-8
Certificates and Class A-9 Certificates are collectively
referred to as the "Group II Certificates."
On any date after the Closing Date, the "Aggregate
Certificate Principal Balance" is the sum of the Certificate
Principal Balance of all Classes of the Offered Certificates.
The Aggregate Certificate Principal Balance for a particular
Mortgage Loan Group is the sum of the Certificate Principal
Balances of all Classes of the Offered Certificates relating
to such Group.
The Mortgage Loans The statistical information presented in this Prospectus
Supplement concerning the pools of Mortgage Loans is as of
the Initial Cut-Off Date. The aggregate principal balance as
of the Initial Cut-Off Date for Group I (the "Group I
Statistic Calculation Pool" is $391,100,496.44 and with
respect to Group II (the "Group II Statistic Calculation
Pool", together with the Group I Statistic Calculation Pool,
the "Statistic Calculation Pools") is $353,220,751.29. The
Sponsor expects that the actual aggregate principal balance
of the Initial Mortgage Loans, as of the Closing Date, plus
the Subsequent Mortgage Loans, as of the related Subsequent
Transfer Dates, will be approximately $500,000,000 with
respect to Group I and approximately $400,000,000 with
respect to Group II. The additional Mortgage Loans will
represent Mortgage Loans acquired or to be acquired by the
Sponsor prior to the Closing Date and Subsequent
</TABLE>
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<PAGE> 8
<TABLE>
<S> <C>
Mortgage Loans to be acquired by the Sponsor after the Closing Date.
On the Closing Date, $46,807,367 (the "Group I Original
Pre-Funded Amount") and $18,562,375 (the "Group II Original
Pre-Funded Amount", together with the Group I Original
Pre-Funded Amount, the "Original Pre-Funded Amounts") will be
deposited with the Trustee and used to purchase the
Subsequent Mortgage Loans for assignment to Group I or Group
II, as applicable. The Subsequent Mortgage Loans, if
available, will be originated by one or more of the
Originators and sold by such Originator(s) to the Sponsor,
which will then cause all right, title and interest of the
Originators in each such Subsequent Mortgage Loan to be
transferred to the Trust. The Subsequent Mortgage Loans must
conform to certain specified characteristics.
The Sponsor will be obligated to cause the sale of the
Subsequent Mortgage Loans to the Trust, and the Trust will be
obligated, subject to the satisfaction of certain conditions
described herein, to purchase such Subsequent Mortgage Loans
from time to time (each such date of purchase, a "Subsequent
Transfer Date") on or before January 16, 1998, subject to the
availability thereof. In connection with each purchase of
Subsequent Mortgage Loans, the Trust will be required to pay
a cash purchase price of 100% of the principal amount thereof
from the applicable Pre-Funded Amount held in the Pre-Funding
Account. The Sponsor will designate as a cut-off date (each,
a "Subsequent Cut-Off Date") the first day of the month in
which Subsequent Mortgage Loans will be conveyed to the Trust
during the Funding Period (as defined herein). The Trust may
purchase the Subsequent Mortgage Loans only from the Sponsor
or one of its affiliates and not from any other person. See
"The Mortgage Loan Pool" herein.
With respect to the Statistic Calculation Pools, some
amortization of the Mortgage Loans in such pools will occur
prior to the Closing Date. Certain loans included in the
Statistic Calculation Pools may prepay in full, or may be
determined not to meet the eligibility requirements for the
final pools and as a result may not be included in the final
pools. As a result of the foregoing, the statistical
distribution of such characteristics as of the Closing Date
in the final Mortgage Loan pools will vary somewhat from the
statistical distribution of the Statistic Calculation Pools
as presented in this Prospectus Supplement, although such
variance will not be material.
Unless otherwise noted, all statistical percentages in this
Prospectus Supplement are measured by the aggregate principal
balance of the related Mortgage Loans in the Statistic
Calculation Pools.
The Mortgage Loans will be predominantly home equity loans,
i.e., loans used by obligors (each, a "Mortgagor") (x) to
refinance an existing mortgage loan on more favorable terms,
(y) to consolidate debt, or (z) to obtain cash proceeds by
borrowing
</TABLE>
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<TABLE>
<S> <C>
against the Mortgagor's equity in the related
Mortgaged Property. The Mortgage Loans to be sold to the
Trust by the Sponsor consisted, with respect to the Statistic
Calculation Pools, of 10,724 Mortgages and the related Notes
on one-to-four family residential properties, including
investment properties (which may be condominiums, townhouses
or homes in one-to-four family residences), located in 49
states and the District of Columbia. The Mortgage Loans are
secured by Mortgages of which 95.70% by principal balance are
first mortgages or deeds of trust and 4.30% by principal
balance are secured by junior mortgages or deeds of trust.
The Mortgage Loans are all closed-end mortgage loans in that
the mortgagee is not required to make future advances
thereunder.
Less than 0.26% of the Mortgage Loans are insured by primary
mortgage insurance policies. There is no pool insurance
insuring any of the Mortgage Loans.
The Mortgage Loans are not guaranteed by the Sponsor, the
Master Servicer, any Affiliated Originator or Unaffiliated
Originator or any of their respective affiliates. The
Mortgage Loans are required to be serviced by the Master
Servicer in accordance with accepted servicing practices and
with reasonable care, using that degree of skill and
attention that the Master Servicer exercises with respect to
comparable mortgage loans that it services for itself and
others. See "Description of the Securities -- Collection
and Other Servicing Procedures" in the Prospectus.
Pre-Funding Account On the Closing Date the Trustee, upon receipt thereof, will
deposit the Original Pre-Funded Amounts in the Pre-Funding
Account. The Group I Original Pre-Funded Amount will be
funded from the sale of the Group I Certificates and may be
used to acquire Subsequent Mortgage Loans for assignment to
Group I during the Funding Period (as defined below). The
Group II Original Pre-Funded Amount will be funded from the
sale of the Group II Certificates and may be used to acquire
Subsequent Mortgage Loans for assignment to Group II during
the Funding Period. Subsequent Mortgages may be transferred
to the Trust during the period (the "Funding Period") from
the Closing Date until the earliest of (i) the date on which
each Pre-Funded Amount is less than $100,000, (ii) the date
on which an Event of Default occurs under the Pooling and
Servicing Agreement or (iii) January 16, 1998.
The amount on deposit in the Pre-Funding Account with respect
to Group I (the "Group I Pre-Funded Amount") and with respect
to Group II (the "Group II Pre-Funded Amount", together with
the Group I Pre-Funded Amount, the "Pre-Funded Amounts") will
be reduced by the principal balance of Subsequent Mortgage
Loans purchased by the Trust and assigned to the applicable
Group from time to time in accordance with the terms of the
Pooling and Servicing Agreement. The Sponsor expects that
each of the Pre-Funded Amounts will be reduced to less than
$100,000 by the January 1998 Payment Date.
</TABLE>
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<TABLE>
<S> <C>
Any remaining amounts of the Group I Pre-Funded Amount and
the Group II Pre-Funded Amount at the end of the Funding
Period will be added to the applicable Group I or Group II
Principal Distribution Amount and used to prepay the related
Group Certificates on the January 1998 Payment Date in
accordance with the payment priorities described herein, from
and to the extent of such remaining funds.
Capitalized Interest Account On the Closing Date, the Trustee will be required to deposit
a portion of the sale proceeds of the Certificates in an
account (the "Capitalized Interest Account"). The respective
amounts deposited therein will be used, as necessary, by the
Trustee during the Funding Period to fund the negative
arbitrage on the Pre-Funding Account monies. Any amounts
remaining in the Capitalized Interest Account on the Payment
Date which follows the end of the Funding Period and not used
for such purposes are required to be paid directly to the
Owners of the Class R Certificates on such Payment Date.
Final Scheduled Payment Dates The final scheduled Payment Dates (the "Final Scheduled
Payment Dates") for each of the respective Classes of Offered
Certificates are as described below, although it is
anticipated that the actual final Payment Date for each Class
(other than the Class A-IO Certificates) will occur earlier
than the Final Scheduled Payment Date. See "Prepayment and
Yield Considerations" herein.
Final Scheduled
Class Payment Date
---------------------------------------------------------
Class A-1 Certificates: August 25, 2010
Class A-2 Certificates: September 25, 2012
Class A-3 Certificates: August 25, 2014
Class A-4 Certificates: March 25, 2022
Class A-5 Certificates: March 25, 2024
Class A-6 Certificates: January 25, 2029
Class A-7 Certificates: January 25, 2029
Class A-IO Certificates: June 25, 2000
Class A-8 Certificates: February 25, 2024
Class A-9 Certificates: December 25, 2027
Class M-1 Certificates: January 25, 2029
Class M-2 Certificates: January 25, 2029
Class B-1 Certificates: January 25, 2029
Distributions--General On the 25th day of each month, or, if such day is not a
Business Day, then the next succeeding Business Day,
commencing January 26, 1998 (each such day being a "Payment
Date"), the Trustee will be required, subject to the
availability of amounts therefor and, pursuant to the
cashflow priorities hereinafter described, to distribute to
the Owners of the Group I Certificates (except the Class
A-1 Certificates) of record as of the last Business Day of
the calendar month immediately preceding the calendar month
in which such Payment Date occurs and to the Owners of the
Group II Certificates and the Class A-1 Certificates of
record as of the Business Day immediately preceding such
Payment Date (each
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such date, the "Record Date") the Class Distribution Amount for
the related Class. The "Class Distribution Amount" shall be an
amount equal to the sum of (x) the related Current Interest
(as defined below) for such Class, (y) the related Interest
Carry Forward Amount (as defined below) and (z) except in the
case of the Class A-IO Certificates, the related Principal
Distribution Amount (as defined herein) for such Class. A
"Business Day" is any day other than a Saturday, Sunday or a
day on which the Class A-8 and Class A-9 Insurer and banking
institutions in New York City or in the city in which the
corporate trust office of the Trustee is located are
authorized or obligated by law or executive order to close.
"Current Interest" with respect to each Class of Offered
Certificates means, with respect to any Payment Date (i)
the aggregate amount of interest accrued during the
preceding Accrual Period on the Certificate Principal
Balance of the related Class of Offered Certificates at the
related Pass-Through Rate or, in the case of the Class A-IO
Certificates, on the Notional Principal Balance of the
Class A-IO Certificates plus (ii) with respect to the
Group II Certificates only, the Preference Amount (as
defined herein) as it relates to interest previously paid
on the Group II Certificates prior to such Payment Date.
The Current Interest does not include any Supplemental
Interest Amounts, any Interest Carry Forward Amount or
Civil Relief Act Shortfalls.
The "Interest Carry Forward Amount" with respect to any
Class of the Offered Certificates for any Payment Date is
the sum of (x) the amount, if any, by which (i) the Current
Interest for such Class as of the immediately preceding
Payment Date plus any Interest Carry Forward Amount for
such Class and outstanding on such immediately preceding
Payment Date exceeded (ii) the amount of the actual
distribution with respect to interest made to the Owners of
such Class of Offered Certificates on such immediately
preceding Payment Date plus (y) interest on such amount
calculated for the related Accrual Period at the related
Pass-Through Rate in effect with respect to such Class of
Offered Certificates.
"Civil Relief Act Shortfalls" are interest shortfalls
resulting from the application of the Soldiers' and
Sailors' Relief Act of 1940, as amended. See "Certain
Legal Aspects of Mortgage Loans and Related Matters -
Soldiers' and Sailors' Civil Relief Act of 1940" in the
Prospectus.
For each Payment Date, interest due with respect to the
Group I Certificates (except the Class A-1 Certificates)
will be interest which has accrued on the related
Certificate Principal Balance during the calendar month
immediately preceding the month in which such Payment Date
occurs. Calculations of interest on the Group I
Certificates (except the Class A-1 Certificates) will be
made on the basis of a 360-day year assumed to consist of
twelve 30-day months.
The interest due with respect to the Group II Certificates
and
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the Class A-1 Certificates will be the interest which
has accrued thereon at the applicable Pass-Through Rate
from the preceding Payment Date (or from the Closing Date
in the case of the first Payment Date) to and including the
date prior to the current Payment Date. Calculations of
interest on the Group II Certificates and the Class A-1
Certificates will be made on the basis of the actual number
of days elapsed in the accrual period and a 360-day year.
Each period referred to above relating to the accrual of
interest is the "Accrual Period" for the related Class of
Offered Certificates.
Interest On each Payment Date, the Interest Remittance Amount with
respect to the related Mortgage Loan Group will be
distributed in the following order of priority:
First, to the Trustee, the trustee's fee (the "Trustee's
Fee");
Second, with respect to Group II, the premium then due to
the Class A-8 and Class A-9 Insurer (the "Premium");
Third, to the Owners of the Class A Certificates related to
such Mortgage Loan Group, the related Class A Current
Interest plus the Interest Carry Forward Amount with
respect to each such Class of Class A Certificates without
any priority among such Class A Certificates; provided,
that if the Interest Remittance Amount (as defined below)
less the Trustee's Fee (and less the Premium with respect
to Group II only) (such amount, the "Interest Amount
Available") is not sufficient to make a full distribution
of interest with respect to all Classes of the Class A
Certificates, the Interest Amount Available will be
distributed among the outstanding Classes of Class A
Certificates pro rata based on the aggregate amount of
interest due on each such Class, and the amount of such
shortfall will be carried forward with accrued interest;
Fourth, with respect to Group I, to the extent of the
Interest Amount Available with respect to Group I then
remaining, to the Owners of the Class M-1 Certificates, the
Class M-1 Current Interest;
Fifth, with respect to Group I, to the extent of the
Interest Amount Available with respect to Group I then
remaining, to the Owners of the Class M-2 Certificates, the
Class M-2 Current Interest;
Sixth, with respect to Group I, to the extent of the
Interest Amount Available with respect to Group I then
remaining, to the Owners of the Class B-1 Certificates, the
Class B-1 Current Interest; and
Seventh, the sum of (x) the amount, if any, of the Interest
Amount Available remaining in the Certificate Account with
respect to such Mortgage Loan Group after application with
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respect to the priorities set forth above plus (y) the
amount of any Overcollateralization Release Amount (as
defined herein) with respect to such Mortgage Loan Group
for such Payment Date (such amounts, together for such
Mortgage Loan Group, the "Monthly Excess Cashflow Amount"
for a Payment Date) shall be applied as described below
under "Credit Enhancement--Application of Monthly Excess
Cashflow Amounts" in this Summary.
The "Interest Remittance Amount" means, with respect to
each Mortgage Loan Group, as of any Monthly Remittance
Date, the sum, without duplication, of (i) all interest
collected, or advanced, by the Master Servicer during or in
respect of the related Remittance Period on the Mortgage
Loans in such Mortgage Loan Group (less the Servicing Fee),
(ii) all Compensating Interest paid by the Master Servicer
on such Monthly Remittance Date with respect to such
Mortgage Loan Group and (iii) the portion of any
Substitution Amount relating to interest with respect to
such Mortgage Loan Group.
Principal GENERAL. The Group I Certificates and the Group II
Certificates will generally receive principal distributions
on each Payment Date which are based on principal
collections, monies released from the Pre-Funding Account
and Realized Losses (to the extent that Monthly Excess
Interest Amounts are available), with respect to the
related Mortgage Loan Group. In addition, the
overcollateralization feature of the Trust results in
accelerated payments of principal with respect to each
Mortgage Loan Group to achieve, and thereafter maintain, a
specified level of overcollateralization with respect to
such Mortgage Loan Group. Such accelerated principal will
generally be funded from excess interest with respect to
the related Mortgage Loan Group.
With respect to each Mortgage Loan Group, the following
terms have the following meanings:
"Class A Principal Distribution Amount" as of any Payment
Date means (X) with respect to Group I (a) prior to the
Stepdown Date with respect to Group I or with respect to
which a Group I Delinquency Trigger Event is in effect,
100% of the Principal Distribution Amount for Group I and
(b) on or after the Stepdown Date with respect to Group I
and as long as a Group I Delinquency Trigger Event is not
in effect, (x) the aggregate Certificate Principal Balance
of the Class A Certificates related to Group I immediately
prior to such Payment Date minus (y) the product of (i)
70.00% and (ii) the outstanding Principal Balance of the
Mortgage Loans in Group I as of the last day of the related
Remittance Period and (Y) with respect to Group II, 100% of
the Principal Distribution Amount for Group II.
"Extra Principal Distribution Amount" means, for a Mortgage
Loan Group and as of any Payment Date, the lesser of (x)
the Monthly Excess Interest Amount for such Mortgage Loan
Group and Payment Date, plus any Monthly Excess Cashflow
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Amount available from the other Mortgage Loans Group and
applied in accordance with the principles described herein
on such Payment Date, and (y) the Overcollateralization
Deficiency for such Mortgage Loan Group and Payment Date.
A "Liquidated Loan" is, in general, a defaulted Mortgage
Loan as to which the Master Servicer has determined that
all amounts that it expects to recover on such Mortgage
Loan have been recovered (exclusive of any possibility of a
deficiency judgment).
A "Monthly Remittance Date" is any date on which funds on
deposit in the Principal and Interest Account are remitted
to the Certificate Account, which is the 18th day of each
month or, if such day is not a Business Day, the
immediately preceding Business Day, commencing in the month
following the month in which the Closing Date occurs.
"Overcollateralization Amount" means with respect to a
Mortgage Loan Group and as of any Payment Date the
difference between (x) the aggregate Principal Balances of
the Mortgage Loans in such Mortgage Loan Group plus the
Pre-Funded Amount, if any, for such Mortgage Loan Group on
deposit in the Pre-Funding Account, each as of the close of
business on the last day of the immediately preceding
Remittance Period and (y) the Certificate Principal Balance
of all Classes of Offered Certificates related to such
Mortgage Loan Group (after taking into account all
distributions of principal on such Payment Date).
"Overcollateralization Deficiency" means, for a Mortgage
Loan Group and as of any Payment Date, the excess, if any,
of (x) the Targeted Overcollateralization Amount for such
Mortgage Loan Group and Payment Date over (y) the
Overcollateralization Amount for such Mortgage Loan Group
and Payment Date, calculated for this purpose after taking
into account the reduction on such Payment Date of the
Certificate Principal Balance of all Classes of the Offered
Certificates related to such Mortgage Loan Group resulting
from the distribution of the related Principal Remittance
Amount (but not the related Extra Principal Distribution
Amount) on such Payment Date, but prior to taking into
account any related Applied Realized Loss Amount on such
Payment Date.
"Overcollateralization Release Amount" means, for a
Mortgage Loan Group and as of any Payment Date, the lesser
of (x) the related Principal Remittance Amount for such
Payment Date and (y) the excess of (i) the related
Overcollateralization Amount for such Payment Date,
assuming that 100% of the related Principal Remittance
Amount is applied on such Payment Date to the payment of
principal on the Offered Certificates related to such
Mortgage Loan Group over (ii) the Targeted
Overcollateralization Amount for such Mortgage Loan Group
and Payment Date.
"Principal Distribution Amount" means, with respect to
either
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Mortgage Loan Group and as of any Payment Date, the
sum of (i) the Principal Remittance Amount with respect to
such Mortgage Loan Group minus, for Payment Dates occurring
on and after the related Stepdown Date, the
Overcollateralization Release Amount, if any, with respect
to such Mortgage Loan Group, if any, (ii) the Extra
Principal Distribution Amount with respect to such Mortgage
Loan Group, if any, (iii) any monies released from the
Pre-Funding Account as a prepayment of the related Group
Certificates on or prior to the January 1998 Payment Date
and (iv) in the case of Group II only, the principal
portion of any Insured Payment (as defined herein) made by
the Class A-8 and Class A-9 Insurer. The Principal
Distribution Amount with respect to Group I is the "Group I
Principal Distribution Amount." The Principal Distribution
Amount with respect to Group II is the "Group II Principal
Distribution Amount."
"Principal Remittance Amount" means, for a Mortgage Loan
Group and as of any Monthly Remittance Date, the sum,
without duplication, of (i) the principal actually
collected by the Master Servicer on the Mortgage Loans in
such Mortgage Loan Group during the related Remittance
Period, (ii) the Principal Balance of each Mortgage Loan in
such Mortgage Loan Group that was repurchased from the
Trust during the related Remittance Period, (iii) any
Substitution Amount relating to principal delivered by the
Sponsor in connection with a substitution of a Mortgage
Loan in such Mortgage Loan Group during the related
Remittance Period, (iv) all Net Liquidation Proceeds
actually collected by the Master Servicer during the
related Remittance Period with respect to Mortgage Loans in
such Mortgage Loan Group (to the extent such Net
Liquidation Proceeds related to principal) and (v) the
proceeds of any liquidation of the Trust Estate related to
such Mortgage Loan Group.
The "Remittance Period" with respect to any Monthly
Remittance Date is the calendar month immediately preceding
the calendar month in which the Monthly Remittance Date
occurs.
"Stepdown Date" means, (i) with respect to Group I, the
latest to occur of (x) the Payment Date in January, 2001,
(y) the date on which principal equal to 50% of the Group I
Original Pool Balance (as defined herein) has been received
by the Trust and (z) the first Payment Date on which the
Group I Senior Enhancement Percentage equals 30.00%, and
(ii) with respect to Group II, the date set forth in the
Pooling and Servicing Agreement.
"Targeted Overcollateralization Amount" means:
(A) for Group I and as of any Payment Date, (x) prior to
the Stepdown Date with respect to Group I, 2.50% of the
Group I Original Pool Balance and (y) on and after the
Stepdown Date with respect to Group I (a) if neither a
Group I Delinquency Trigger Event nor a Group I Cumulative
Realized Loss
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Trigger Event is in effect, the greater of
(i) 5.00% of the aggregate outstanding Principal Balance of
the Group I Mortgage Loans as of the last day of the
related Remittance Period and (ii) $2,500,000 or (b) if a
Group I Delinquency Trigger Event is in effect, whether or
not a Group I Cumulative Realized Loss Trigger Event is
also in effect, the Targeted Overcollateralization Amount
shall be equal to the product of (i) 2.50% and (ii) the
Group I Original Pool Balance or (c) if a Group I
Cumulative Realized Loss Trigger Event is in effect (if a
Group I Delinquency Trigger Event is not in effect), the
Targeted Overcollateralization Amount shall be equal to the
Targeted Overcollateralization Amount for the immediately
preceding Payment Date; and
(B) for Group II, an amount required by the Class A-8 and
Class A-9 Insurer pursuant to the Pooling and Servicing
Agreement.
The "Group I Original Pool Balance" shall be the aggregate
original pool balance of the Initial Mortgage Loans in
Group I as of the related Cut-Off Date plus the Group I
Original Pre-Funded Amount.
GROUP II-PRINCIPAL DISTRIBUTIONS. On each Payment Date,
principal will be distributed to the Owners of the Group II
Certificates in an amount equal to the Group II Principal
Distribution Amount, concurrently until the Certificate
Principal Balance on each such Class of Group II
Certificates has been reduced to zero.
The Group II Certificates are "concurrent pay" classes such
that the Owners of each such Class receives a fixed
allocation percentage of the Group II Principal
Distribution Amount until the Certificate Principal Balance
of the Class A-8 Certificates has been reduced to zero.
Once the Class A-8 Certificates have been reduced to zero,
100% of the Group II Principal Distribution Amount shall be
paid to the Class A-9 Certificates. For the Class A-8
Certificates, such allocated percentage (the "Class A-8
Principal Percentage") shall be (a) 37.5%, until the Class
A-8 Certificate Principal Balance has been reduced to zero,
and (b) thereafter will be zero. For the Class A-9
Certificates, such allocated percentage (the "Class A-9
Principal Percentage") shall be 100.00% minus the Class A-8
Principal Percentage; provided, however, that on any
Payment Date on which the Overcollateralization Amounts
related to Group II is zero and the Class A-8 and Class A-9
Insurance Policy is not in effect, any amounts of principal
payable to the Owners of the Group II Certificates on such
Payment Date shall be distributed pro rata and not in
accordance with the "concurrent pay" allocation
percentages.
GROUP I-PRINCIPAL DISTRIBUTIONS. With respect to Group I
and on each Payment Date (a) before the Stepdown Date with
respect to Group I or (b) with respect to which a Group I
Delinquency Trigger Event is in effect, the Owners of the
Class A Group I Certificates (other than the Class A-IO
Certificates)
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will be entitled to receive payment of 100%
of the Principal Distribution Amount with respect to Group
I for such Payment Date as follows: first, to the Owners
of the Class A-7 Certificates, the Class A-7 Lockout
Distribution Amount and then to the Owners of the Class A
Group I Certificates (other than the Class A-7
Certificates), in sequential order until the Certificate
Principal Balance of each such Class of Class A Group I
Certificates has been reduced to zero.
With respect to Group I and on each Payment Date (a) on or
after the Stepdown Date with respect to Group I and (b) as
long as a Group I Delinquency Trigger Event is not in
effect and is not continuing, the Owners of all Classes of
the Group I Certificates (other than the Class A-IO
Certificates) will be entitled to receive payments of
principal, in the following order of priority and, in the
amounts set forth below and to the extent of the Principal
Distribution Amount with respect to Group I as follows:
First, the lesser of (x) the Group I Principal Distribution
Amount and (y) the Class A Principal Distribution Amount
with respect to Group I shall be distributed to the Owners
of the Class A-7 Certificates, in an amount equal to the
Class A-7 Lockout Distribution Amount, with the remainder
paid to the Owners of the Class A Group I Certificates
(other than the Class A-7 Certificates), in sequential
order until the Certificate Principal Balance of each such
Class of Class A Group I Certificates has been reduced to
zero;
Second, the lesser of (x) the excess of (i) the Group I
Principal Distribution Amount over (ii) the amount
distributed to the Owners of the Class A Group I
Certificates in clause First above and (y) the Class M-1
Principal Distribution Amount shall be distributed to the
Owners of the Class M-1 Certificates, until the Class M-1
Certificate Principal Balance has been reduced to zero;
Third, the lesser of (x) the excess of (i) the Group I
Principal Distribution Amount over (ii) the sum of the
amount distributed to the Owners of the Class A Group I
Certificates in clause First above and the amount
distributed to the Owners of the Class M-1 Certificates in
clause Second above and (y) the Class M-2 Principal
Distribution Amount shall be distributed to the Owners of
the Class M-2 Certificates, until the Class M-2 Certificate
Principal Balance has been reduced to zero;
Fourth, the lesser of (x) the excess of (i) the Group I
Principal Distribution Amount over (ii) the sum of the
amount distributed to the Owners of the Class A Group I
Certificates pursuant to clause First above, the amount
distributed to the Owners of the Class M-1 Certificates
pursuant to clause Second above and the amount distributed
to the Owners of the Class M-2 Certificates pursuant to
clause Third above and (y) the Class B-1 Principal
Distribution Amount shall be distributed to the Owners of
the Class B-1 Certificates, until
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the Class B-1 Certificate Principal Balance has been reduced to zero;
Fifth, the lesser of (x) any amount of the Group I
Principal Distribution Amount remaining after making all of
the distributions in clauses First, Second, Third and
Fourth above and (y) (1) if no Group I Cumulative Realized
Loss Trigger Event is in effect, the positive difference,
if any, of (A) $2,500,000 minus (B) the Targeted
Overcollateralization Amount (disregarding clause
(y)(a)(ii) of the definition of Targeted
Overcollateralization Amount relating to Group I) for Group
I for such Payment Date or (2) if a Group I Cumulative
Realized Loss Trigger Event is in effect, the positive
difference, if any, of (A) the Targeted
Overcollateralization Amount for Group I for the
immediately preceding Payment Date minus (B) the Targeted
Overcollateralization Amount (disregarding clause (y)(c) of
the definition of Targeted Overcollateralization Amount for
Group I) for Group I for such Payment Date shall be, in
either case (1) or (2), applied as a payment of principal
with respect to the Subordinate Certificates in reverse
order of seniority (ie., first to the Class B-1
Certificates, second to the Class M-2 Certificates, third
to the Class M-1 Certificates and fourth, to the Class A
Group I Certificates) until their respective Certificate
Principal Balances have been reduced to zero; and
Sixth, any amount of the Group I Principal Distribution
Amount remaining after making all of the distributions in
clauses First, Second, Third, Fourth and Fifth above shall
be distributed as part of the Monthly Excess Cashflow
Amounts with respect to Group I and shall be applied as
described below under "Credit Enhancement--Application of
Monthly Excess Cashflow Amounts" in this Summary.
Notwithstanding the foregoing, in the event that, on any
Payment Date, the Certificate Principal Balance of all of
the Class A Group I Certificates is zero, all amounts of
principal that would have been distributed to such Class A
Group I Certificates on such Payment Date will be
distributed to the Subordinate Certificates sequentially in
the following order: first, to the Class M-1 Certificates
until the Certificate Principal Balance of the Class M-1
Certificates has been reduced to zero, second, to the Class
M-2 Certificates until the Certificate Principal Balance of
the Class M-2 Certificates has been reduced to zero, and
third, to the Class B-1 Certificates until the Certificate
Principal Balance of the Class B-1 Certificates has been
reduced to zero.
The Class A Group I Certificates (other than the Class A-7
Certificates and the Class A-IO Certificates) are
"sequential pay" classes such that the Owners of the Class
A-6 Certificates will receive no payments of principal
until the Class A-5 Certificate Principal Balance has been
reduced to zero, the Owners of the Class A-5 Certificates
will receive no payments of principal until the Class A-4
Certificate Principal Balance has been reduced to zero, the
owners of the Class A-4
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Certificates will receive no payments of principal until the
Class A-3 Certificate Principal Balance has been reduced to zero,
the Owners of the Class A-3 Certificates will receive no payments of
principal until the Class A-2 Certificate Principal Balance
has been reduced to zero, and the Owners of the Class A-2
Certificates will receive no payments of principal until
the Class A-1 Certificate Principal Balance has been
reduced to zero; provided, however, that on any Payment
Date on which the sum of the Certificate Principal Balance
of the Subordinate Certificates and the
Overcollateralization Amount related to Group I is zero,
any amounts of principal payable to the Owners of the Class
A Group I Certificates on such Payment Date shall be
distributed pro rata and not sequentially.
The Owners of the Class A-7 Certificates are entitled to
receive payments of the Class A-7 Lockout Distribution
Amount specified herein; provided, that if on any Payment
Date the Class A-6 Certificate Principal Balance is zero,
the Owners of the Class A-7 Certificates will be entitled
to receive the entire Class A Principal Distribution
Amount with respect to Group I for such Payment Date.
The "Class A-7 Lockout Distribution Amount" for any Payment
Date will be the product of (i) the applicable Class A-7
Lockout Percentage for such Payment Date and (ii) the Class
A-7 Lockout Pro Rata Distribution Amount for such Payment
Date.
The "Class A-7 Lockout Percentage" for each Payment Date is
as follows:
Payment Dates Lockout Percentage
------------- ------------------
January 1998 - December 2000 0%
January 2001 - December 2002 45%
January 2003 - December 2003 80%
January 2004 - December 2004 100%
January 2005 and thereafter 300%
In no event shall the Class A-7 Lockout Distribution
Amount for a Payment Date exceed the Class A Principal
Distribution Amount with respect to Group I for such
Payment Date.
The "Class A-7 Lockout Pro Rata Distribution Amount" for
any Payment Date will be an amount equal to the product of
(x) a fraction, the numerator of which is the Certificate
Principal Balance of the Class A-7 Certificates
immediately prior to such Payment Date and the denominator
of which is the aggregate Certificate Principal Balance of
all Classes of the Class A Certificates relating to Group
I immediately prior to such Payment Date and (y) the Class
A Principal Distribution Amount with respect to Group I
for such Payment Date.
The Class A-IO Certificates are interest-only certificates
and are not entitled to receive distributions of
principal.
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A "Group I Delinquency Trigger Event" has occurred with
respect to Group I and any Payment Date on or after the
Stepdown Date with respect to Group I if the percentage
obtained by dividing (x) the principal amount of 60+ Day
Delinquent Loans in Group I by (y) the aggregate
outstanding Principal Balance of the Mortgage Loans in
Group I as of the last day of the immediately preceding
Remittance Period equals or exceeds 50% of the Group I
Senior Enhancement Percentage.
A "Group I Cumulative Realized Loss Trigger Event" has
occurred on any date of determination if the amount of
Group I Cumulative Realized Losses expressed as a
percentage of the Group I Original Pool Balance on any
date of determination equals or exceeds the percentage for
such date set below:
Cumulative Loss
Date Percentage
---- ----------
January 1998 - December 2000 1.90%
January 2001 - December 2001 3.10%
January 2002 - December 2002 3.90%
January 2003 - December 2003 4.40%
January 2004 - December 2004 4.80%
January 2005 and thereafter 5.00%
"Class M-1 Principal Distribution Amount" means, with
respect to Group I and as of any Payment Date on or after
the Stepdown Date with respect to Group I and as long as a
Group I Delinquency Trigger Event is not in effect, the
excess of (x) the sum of (i) the aggregate Certificate
Principal Balance of the Class A Group I Certificates
(after taking into account the payment of the Class A
Principal Distribution Amount for Group I on such Payment
Date) and (ii) the Class M-1 Certificate Principal Balance
immediately prior to such Payment Date over (y) the
product of 77.00% and (ii) the outstanding Principal
Balance of the Mortgage Loans in Group I as of the last
day of the related Remittance Period.
"Class M-2 Principal Distribution Amount" means, with
respect to Group I and as of any Payment Date on or after
the Stepdown Date with respect to Group I and as long as a
Group I Delinquency Trigger Event is not in effect, the
excess of (x) the sum of (i) the aggregate Certificate
Principal Balance of the Class A Group I Certificates
(after taking into account the payment of the Class A
Principal Distribution Amount for Group I on such Payment
Date), (ii) the Class M-1 Certificate Principal Balance
(after taking into account the payment of the Class M-1
Principal Distribution Amount on such Payment Date) and
(iii) the Class M-2 Certificate Principal Balance
immediately prior to such Payment Date over (y) the
product of (i) 89.00% and (ii) the outstanding aggregate
Principal Balance of the Mortgage Loans in Group I as of
the last day of the related Remittance Period.
"Class B-1 Principal Distribution Amount" means, with
respect to Group I and as of any Payment Date on or after
the
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Stepdown Date with respect to Group I and as long as a
Group I Delinquency Trigger Event is not in effect, the
excess of (x) the sum of (i) the aggregate Certificate
Principal Balance of the Class A Group I Certificates
related to Group I (after taking into account the payment
of the Class A Principal Distribution Amount for Group I
on such Payment Date), (ii) the Class M-1 Certificate
Principal Balance (after taking into account the payment
of the Class M-1 Principal Distribution Amount on such
Payment Date), (iii) the Class M-2 Certificate Principal
Balance (after taking into account the payment of the
Class M-2 Principal Distribution Amount on such date) and
(iv) the Class B-1 Certificate Principal Balance
immediately prior to such Payment Date over (y) the
product of (i) 95.00% and (ii) the outstanding aggregate
Principal Balance of the Mortgage Loans in Group I as of
the last day of the related Remittance Period.
"Group I Senior Enhancement Percentage" with respect to
any Payment Date is the percentage obtained by dividing
(x) the sum of (i) the aggregate Certificate Principal
Balance of the Subordinate Certificates and (ii) the
Group I Overcollateralization Amount, in each case after
taking into account the distribution of the Group I
Principal Distribution Amount on such Payment Date by (y)
the aggregate Principal Balance of the Mortgage Loans in
Group I plus the Group I Pre-Funded Amount, in each case
as of the last day of the related Remittance Period.
"Group I Senior Specified Enhancement Percentage" means,
on any date of determination thereof, 30.00%.
In addition to the terms defined above, the discussion
below makes use of a number of defined terms which are
defined under "Description of the Offered
Certificates--Distributions" herein.
Mandatory Prepayment of Offered The Group I Original Pre-Funded Amount of $46,807,367 and
Certificates the Group II Original Pre-Funded Amount of $18,562,375 may
be used to acquire Subsequent Mortgage Loans in the
respective Groups. In the event that on January 16, 1998,
not all of the Original Pre-Funded Amounts have been used
to acquire Subsequent Mortgage Loans, then the respective
Group Certificates then entitled to receive principal will
be prepaid in part on the January 1998 Payment Date in
accordance with the payment priorities described herein,
from and to the extent of such remaining funds.
Credit Enhancement GROUP I. The Credit Enhancement provided for the benefit
of the Owners of the Class A Group I Certificates consists
of the subordination of the Subordinate Certificates, the
priority of application of Realized Losses, the
application of the Group I Monthly Excess Cashflow Amounts
and the cross-collateralization feature of the Trust.
The initial aggregate Certificate Principal Balance of the
Subordinate Certificates will equal 12.50% of the initial
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aggregate Certificate Principal Balance of the Group I
Certificates. The Subordinate Certificates provide credit
enhancement only for Group I.
GROUP II. The Credit Enhancement provided for the benefit
of the Owners of the Group II Certificates consists of the
Class A-8 and Class A-9 Insurance Policy, the application
of the Group II Monthly Excess Cashflow Amounts and the
cross-collateralization feature of the Trust. The Group
II Certificates will have the benefit of certain levels of
overcollateralization as required by the Class A-8 and
Class A-9 Insurer.
Application of Realized Losses (Group I and Group II). The
Pooling and Servicing Agreement provides that if a
Mortgage Loan becomes a Liquidated Loan during a
Remittance Period, the Net Liquidation Proceeds relating
thereto and allocated to principal may be less than the
Principal Balance of such Mortgage Loan. The amount of
such insufficiency is a "Realized Loss". Realized Losses
which occur in a Mortgage Loan Group will, in effect, be
absorbed first, by the Class R Certificates (both through
the application of the Monthly Excess Interest Amount to
fund such deficiency and through a reduction in the
related Overcollateralization Amount). In the case of
Group I, any remaining deficiency after absorption by the
Class R Certificates will be absorbed, second, by the
Owners of the Class B-1 Certificates, third, by the Owners
of the Class M-2 Certificates, and, fourth, by the Owners
of the Class M-1 Certificates. In the case of Group II,
any remaining deficiency after absorption by the Class R
Certificates will be covered by the Class A-8 and Class
A-9 Insurance Policy to the extent of the Applied Realized
Loss Amount for Group II.
To the extent that a Mortgage Loan Group experiences
Realized Losses, such Realized Losses will reduce the
aggregate outstanding Principal Balance of the Mortgage
Loans in such Mortgage Loan Group (i.e., a reduction in
the collateral balance will occur). Since the
Overcollateralization Amount with respect to a Mortgage
Loan Group is the excess, if any, of the related
collateral balance over the related Aggregate Certificate
Principal Balance, Realized Losses, to the extent
experienced, will in the first instance reduce the related
Overcollateralization Amount.
The Pooling and Servicing Agreement requires that the
Overcollateralization Amount with respect to a Mortgage
Loan Group be initially increased to, and thereafter
maintained at, the related Targeted Overcollateralization
Amount. This increase and subsequent maintenance is
intended to be accomplished by the application of Monthly
Excess Cashflow Amounts to the funding of the related
Extra Principal Distribution Amount. Such Extra Principal
Distribution Amounts, since they are funded from interest
collections on the collateral but are distributed as
principal on the Offered Certificates, will increase the
related
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Overcollateralization Amount.
If, on any Payment Date and with respect to either
Mortgage Loan Group, after taking into account all
Realized Losses experienced with respect to such Mortgage
Loan Group during the prior Remittance Period and after
taking into account the distribution of principal
(including the Extra Principal Distribution Amount) with
respect to the related Certificates on such Payment Date,
the Aggregate Certificate Principal Balance with respect
to the related Group exceeds the aggregate Principal
Balance of the Mortgage Loans in the related Group as of
the end of the related Remittance Period (i.e., if the
level of overcollateralization is negative), such excess
is an "Applied Realized Loss Amount" with respect to the
related Group. In the case of Group I, such an Applied
Realized Loss Amount will be applied as a reduction in the
Certificate Principal Balance of the Subordinate
Certificates in reverse order of seniority (i.e., first,
against the Class B-1 Certificate Principal Balance until
it is reduced to zero, second, against the Class M-2
Certificate Balance until it is reduced to zero and
finally, against the Class M-1 Certificate Principal
Balance until it is reduced to zero). In the case of
Group II, the Trustee will make a claim under the Class
A-8 and Class A-9 Insurance Policy with respect to an
Applied Realized Loss Amount with respect to Group II. The
Pooling and Servicing Agreement does not permit the "write
down" of the Certificate Principal Balance of any Class A
Certificate.
Once the Certificate Principal Balance of a Class of
Subordinate Certificates has been "written down," the
amount of such write down will no longer bear interest,
nor will such amount thereafter be "reinstated" or
"written up," although the amount of such write down may,
on future Payment Dates be paid to Owners of the
Subordinate Certificates which experienced the write down,
in direct order of seniority (i.e., first, the Class M-1
Certificates, second, the Class M-2 Certificates and,
third, the Class B-1 Certificates). The source of funding
of such payments will be the amount, if any, of the
Monthly Excess Cashflow Amount remaining on such future
Payment Dates after the funding of the Extra Principal
Distribution Amount and after the payment of Interest
Carry Forward Amounts, if any, with respect to the
Subordinate Certificates on such Payment Date.
Application of Monthly Excess Cashflow Amounts --
Overcollateralization Mechanics (Group I and Group II).
The weighted average net coupon rate ("Coupon Rate") for
the Mortgage Loans in each Mortgage Loan Group is
generally expected to be higher than the weighted average
of the Pass-Through Rates on the Offered Certificates
related to such Mortgage Loan Group, thus generating
certain excess interest collections which, in the absence
of losses on the Mortgage Loans will not be necessary to
fund interest distributions on the Offered Certificates.
The Pooling and Servicing Agreement provides that this
excess interest be applied to the extent available, to
make accelerated payments of principal
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(i.e., the Extra Principal Distribution Amount) to the Class or Classes
then entitled to receive distributions of principal; such
application will cause the Aggregate Certificate Balance
with respect to a Mortgage Loan Group to amortize more
rapidly than the Mortgage Loans in such Mortgage Loan
Group, resulting in Overcollateralization. This excess
interest for a Remittance Period and with respect to a
Mortgage Loan Group, together with interest on the related
Overcollateralization Amount itself, on the related
Payment Date is the "Monthly Excess Interest Amount" for
such Payment Date and Mortgage Loan Group.
The required level of overcollateralization for any
Mortgage Loan Group and Payment Date is the "Targeted
Overcollateralization Amount" for such Mortgage Loan Group
and Payment Date. The Targeted Overcollateralization
Amount is initially (i.e., prior to the related Stepdown
Date) $12,500,000 with respect to Group I and, with
respect to Group II, an amount required by the Class A-8
and Class A-9 Insurer. Because the actual level of the
Overcollateralization Amount with respect to each Mortgage
Loan Group as of the Closing Date is less than the related
Targeted Overcollateralization Amount, in the early months
of the transaction, subject to the availability of Monthly
Excess Interest Amounts, Extra Principal Distribution
Amounts will be paid, with the result that the
Overcollateralization Amount with respect to each Mortgage
Loan Group will increase to the level of the related
Targeted Overcollateralization Amount.
If, once the Targeted Overcollateralization Amount with
respect to each Mortgage Loan Group has been reached,
Realized Losses occur in such Mortgage Loan Group, such
Realized Losses will result in an Overcollateralization
Deficiency (since such Realized Losses reduce the
Principal Balance of the related Mortgage Loans without
giving rise to a corresponding reduction of the related
Aggregate Certificate Principal Balance). The cashflow
priorities of the Trust require that, in this situation,
an Extra Principal Distribution Amount be paid (subject to
the availability of any Monthly Excess Interest Amount)
for the purpose of re-establishing the
Overcollateralization Amount at the then required Targeted
Overcollateralization Amount.
On and after the related Stepdown Date, the Targeted
Overcollateralization Amount with respect to Group I and
Group II, respectively, is permitted to decrease or
"step-down" below their initial levels (which, in the case
of Group I is $12,500,000, and which, in the case of Group
II, is an amount required by the Class A-8 and Class A-9
Insurer) to levels equal to specified percentages (which
in the case of Group I is 5.00% of the then current
aggregate outstanding Principal Balance of the Group I
Mortgage Loans, and which, in the case of Group II is a
level required by the Class A-8 and Class A-9 Insurer, and
subject to a floor of $2,500,000 for Group I and, with
respect to Group II, an amount required by
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the Class A-8 and Class A-9 Insurer); provided, further, that, in the
case of Group I, if a Group I Delinquency Trigger Event or
a Group I Cumulative Realized Loss Trigger Event is then
in effect, the Targeted Overcollateralization Amount for
Group I shall be at the level set forth in the definition
thereof. If the Targeted Overcollateralization Amount
with respect to each Mortgage Loan Group is permitted to
"stepdown" on a Payment Date, the Pooling and Servicing
Agreement permits a portion of the related Principal
Remittance Amount for such Payment Date not to be passed
through as a distribution of principal on such Payment
Date. This has the effect of decelerating the
amortization of the Offered Certificates with respect to
each Mortgage Loan Group relative to the aggregate
outstanding Principal Balance of the Mortgage Loans,
thereby reducing the actual level of the related
Overcollateralization Amount to the new, lower Targeted
Overcollateralization Amount. This portion of the
Principal Remittance Amount not distributed as principal
on the related Certificates therefore releases
overcollateralization from the Trust with respect to the
related Mortgage Loan Group. The amount of such releases
are the "Overcollateralization Release Amounts."
A. On any Payment Date, the sum of the Group I Monthly
Excess Interest Amount and the Group I
Overcollateralization Release Amount is the Group I
Monthly Excess Cashflow Amount, which is required
to be applied in the following order of priority on
such Payment Date:
(1) to fund any remaining Class A Interest Carry Forward
Amount, if any, with respect to Group I;
(2) to fund the Overcollateralization Deficiency, if any, for
such Payment Date with respect to Group I;
(3) to fund the Class M-1 Interest Carry Forward Amount, if
any;
(4) to fund the Class M-1 Realized Loss Amortization Amount
for such Payment Date, if any;
(5) to fund the Class M-2 Interest Carry Forward Amount, if
any;
(6) to fund the Class M-2 Realized Loss Amortization Amount
for such Payment Date, if any;
(7) to fund the Class B-1 Interest Carry Forward Amount, if
any;
(8) to fund the Class B-1 Realized Loss Amortization Amount
for such Payment Date, if any;
(9) to fund any amounts with respect to Group II listed
in clauses B(1), (2) and (3) below for such Payment
Date
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to the extent that such amounts have not been
funded in full through the application of Group II
Monthly Excess Cashflow Amounts on such Payment
Date;
(10) to the Master Servicer to the extent of any
unreimbursed Delinquency Advances or Servicing
Advances including Nonrecoverable Delinquency
Advances and Nonrecoverable Servicing Advances; and
(11) to fund a distribution to Owners of the Class R
Certificates.
B. On any Payment Date, the sum of the Group II
Monthly Excess Interest Amount and the Group II
Overcollateralization Release Amount is the Group
II Monthly Excess Cashflow Amount, which is
required to be applied in the following order of
priority on such Payment Date:
(1) to fund any remaining Class A Interest Carry
Forward Amount, if any, with respect to Group ii;
(2) to reimburse the class a-8 and Class A-9 Insurer
for prior, unreimbursed Insured Payments, subject
to certain limits;
(3) to fund the Overcollateralization Deficiency, if
any, for such Payment Date with respect to Group
II;
(4) to reimburse the Class A-8 and Class A-9 Insurer
for any amounts due and owing to the Class A-8 and
Class A-9 Insurer under the Insurance Agreement;
(5) to fund any amounts with respect to Group I listed
in clauses A(1) through A(8) above for such Payment
Date to the extent that such amounts have not been
funded in full through the application of Group I
Monthly Excess Cashflow Amounts on such Payment
Date; and
(6) to the Master Servicer to the extent of any
unreimbursed Delinquency Advances or Servicing
Advances including Nonrecoverable Delinquency
Advances and Nonrecoverable Servicing Advances;
(7) to make payment of any Supplemental Interest Amount
then due to the Owners of the Class A-8
Certificates or the Class A-9 Certificates or
otherwise to fund a distribution to the Owners of
the Class R Certificates;
(8) to fund a distribution to Owners of the Class R
Certificates.
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Subordination of Subordinate Certificates (Group I). The
rights of the Owners of the Subordinate Certificates and
the Class R Certificates to receive distributions with
respect to the Mortgage Loans in Group I will be
subordinated, to the extent described herein, to such
rights of the Owners of the Class A Group I Certificates.
This subordination is intended to enhance the likelihood
of regular receipt by the Owners of the Class A Group I
Certificates of the full amount of their scheduled monthly
payment of interest and principal and to afford such
Owners protection against Realized Losses allocated
against Group I.
The protection afforded to the Owners of the Class A Group
I Certificates by means of the subordination of the
Subordinate Certificates and the Class R Certificates will
be accomplished by the preferential right of the Owners of
the Class A Group I Certificates to receive, prior to any
distribution being made on a Payment Date in respect of
such Subordinate Certificates and the Class R
Certificates, the amounts of interest due them and
principal available for distribution on such Payment Date,
and, if necessary, by the right of the Owners of the Class
A Group I Certificates to receive future distributions of
amounts that would otherwise be payable to the Owners of
such Subordinate Certificates and the Class R
Certificates.
In addition, the rights of the Owners of the Class M-2,
Class B-1 and Class R Certificates to receive
distributions will be subordinated, to the extent
described herein, to such rights of the Owners of the
Class A Group I Certificates and Class M-1 Certificates.
This subordination is intended to enhance the likelihood
of regular receipt by the Owners of the Class A Group I
Certificates and the Class M-1 Certificates of the amount
of interest due them and principal available for
distribution and to afford such Owners with protection
against Realized Losses.
The rights of the Owners of the Class B-1 and the Class R
Certificates to receive distributions will be subordinated
in the same manner to such rights of the Owners of the
Class A Group I Certificates, Class M-1 and Class M-2
Certificates and the rights of Owners of the Class R
Certificates to receive distributions will be subordinated
in the same manner to such rights of the Owners of the
Group I Certificates.
The Class A-8 and Class A-9 Insurance Policy. The Sponsor
will obtain a certificate insurance policy (the "Class A-8
and Class A-9 Insurance Policy"), with respect to the
Group II Certificates, which is noncancelable, in favor of
the Trustee on behalf of the Owners of the Group II
Certificates. On each Payment Date, the Class A-8 and
Class A-9 Insurer will be required to make available to
the Trustee the amount, if any, by which the Group II
Required Distributions exceed the Net Available
Distribution Amount as of such Payment Date. The Class
A-8 and Class A-9 Insurance Policy does not guarantee to
Owners of the Group II Certificates any specified rate of
prepayments. See "The Class A-8 and Class A-9 Insurance
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Policy", and "Credit Enhancement" herein and "Description
of Credit Enhancement" in the Prospectus.
"Net Available Distribution Amount" means, with respect to
any Payment Date, the sum of (i) the amount on deposit in
the Certificate Account on such Payment Date with respect
to Group II (including any such amounts transferred on
such Payment Date from the Capitalized Interest Account
and the Pre-Funding Account), minus the Trustee's Fee with
respect to Group II and minus the premium then due to the
Class A-8 and Class A-9 Insurer, plus (ii) any Monthly
Excess Cashflow Amount available from Group I,
disregarding the amount of any Insured Payment to be made
on such Payment Date.
The Subordinate Certificates do not support the Group II
Certificates and the Class A-8 and Class A-9 Insurance
Policy does not guarantee any payments of principal and
interest with respect to the Group I Certificates.
Nature of Class A-IO Certificates: General Character as an Interest-Only Security. As the
owners of interest-only strip securities, the Owners of
the Class A-IO Certificates will be entitled to receive
monthly distributions only of interest, as described
herein. Because they will not receive any distributions
of principal, the Owners of the Class A-IO Certificates
will be affected by prepayments, liquidations and other
dispositions (including optional redemptions described
herein) of the Mortgage Loans in Group I to a greater
degree than will the Owners of the other Classes of Group
I Certificates. In addition, the Notional Principal
Balance applicable to interest calculations on the Class
A-IO Certificates is (x) through the 30th Payment Date,
the Class A-7 Certificate Principal Balance and (y)
thereafter, zero. Because the Class A-7 Certificates will
amortize in accordance with the distribution of the Class
A-7 Lockout Distribution Amount, the performance of the
Class A-IO Certificates is likely to be more stable than
if such Notional Principal Balance were calculated based
on the amortization of the underlying Group I Mortgage
Loans directly, and consequently, the yield sensitivity of
such Certificates will only be impacted at extremely high
prepayment rates. In addition, since the Group I
Statistic Calculation Pool contains 6,774 Mortgage Loans,
the prepayment experience of any one of the Group I
Mortgage Loans will not be material to an investor's
overall return.
In general, losses due to limitations, repurchases by the
Master Servicer and other dispositions of the Group I
Mortgage Loans from the Trust will have the same effect on
the Owners of the Class A-IO Certificates as do
prepayments of principal and are collectively referred to
as "Prepayments."
Because the yield to the Owners of the Class A-IO
Certificates is more sensitive to rates of prepayment, it
is advisable for potential investors in the Class A-IO
Certificates to consider carefully, and to make their own
evaluation of, the effect of any particular assumption
regarding the rates and the
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timing of prepayments. In general, when interest rates
decline, prepayments in a pool of receivables
such as the Group I Mortgage Loans will increase
as borrowers seek to refinance at lower
rates. Because, however, the amortization of the Class
A-IO Certificates is tied to the Notional Principal
Balance, and the Notional Principal Balance will amortize
in accordance with the distribution of the Class A-7
Lockout Distribution Amount, the prepayment scenarios
described above are mitigated and the performance of the
Class A-IO Certificates is expected to be more stable and
the yield sensitivity of such Certificates will only be
impacted at extremely high prepayment rates. See
"Prepayment and Yield Considerations -- Yield Sensitivity
of the Class A-IO Certificates" herein for other factors
which may also influence prepayment rates.
Applicability of Credit Enhancement to the Class A-IO
Certificates. As described above under "Credit
Enhancement," the Trust includes provisions which
subordinate the distributions on the Subordinate
Certificates and the Class R Certificates for each Payment
Date for the purpose, inter alia, of funding the full
amount used on each Class of the Class A Group I
Certificates, including the Class A-IO Certificates, on
each Payment Date.
In general, the protection afforded by such subordination
and overcollateralization features is for credit risk and
not for prepayment risk. These features do not guarantee
or insure that any particular rate of prepayment is
experienced by the Trust. If the entire pool of Group I
Mortgage Loans were to prepay in the initial month, with
the result that the Owners of the Class A-IO Certificates
receive only a single month's interest and thus suffer a
nearly complete loss on their investments, no amounts
would be available from the overcollateralization feature
to mitigate such loss.
Accrual of "Original Issue Discount." The Class A-IO
Certificates will be issued with "original issue discount"
within the meaning of the Code. As a result, in certain
rapid prepayment environments the effect of the rules
governing the accrual of original issue discount may
require Owners of the Class A-IO Certificates to accrue
original issue discount at a rate in excess of the rate at
which distributions are received by such Owners. See
"Certain Federal Income Tax Consequences" herein and in
the Prospectus.
Delinquency Advances, The Master Servicer will be obligated to make Delinquency
Compensating Interest Advances to the extent that such Delinquency Advances, in
and Servicing Advances the Master Servicer's reasonable judgment, are recoverable
from the related Mortgage Loan. Delinquency Advances are
recoverable from (i) future collections on the Mortgage
Loan which gave rise to the Delinquency Advance, (ii)
Liquidation Proceeds for such Mortgage Loan and (iii) from
certain excess cash flows not applied for any other
purpose. "Delinquency Advances" are amounts deposited in
the Principal and Interest Account by the Master Servicer
equal to
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the sum of the interest portions (net of the
Servicing Fees and certain other administrative amounts,
if any) due, but not collected with respect to delinquent
Mortgage Loans during the related Remittance Period. No
Delinquency Advance will be required to be made by the
Master Servicer if, in the good faith judgment of the
Master Servicer, such Delinquency Advance would not
ultimately be recoverable from the related Mortgage Loan
(any such advance, a "Nonrecoverable Delinquency
Advance"); and if previously made by the Master Servicer,
a Nonrecoverable Delinquency Advance will be reimbursable
from any amounts in the Principal and Interest Account
prior to any distributions being made to
Certificateholders.
The Master Servicer will also be obligated to make
advances with respect to certain taxes and insurance
premiums not paid by Mortgagors on a timely basis. No
Servicing Advance will be required to be made by Master
Servicer, if in the good faith judgment of the Master
Servicer, such Servicing Advance would not be recoverable
from the related Mortgage Loan (any such advance, a
"Nonrecoverable Servicing Advance"); and if previously
made by the Master Servicer, a Nonrecoverable Servicing
Advance will be reimbursable from any amounts in the
Principal and Interest Account prior to any distribution
being made to Certificateholders.
In addition, the Master Servicer will also be required to
deposit Compensating Interest in the Principal and
Interest Account with respect to any full Prepayment
received on a Mortgage Loan during the related Remittance
Period out of its own funds without any right of
reimbursement therefor. "Compensating Interest" is an
amount equal to the difference between (x) 30 days'
interest at the Mortgage Loan's coupon rate on the
principal balance as of the first day of the related
Remittance Period and (y) to the extent not previously
advanced, the interest paid by the Mortgagor with respect
to the Mortgage Loan. The Master Servicer will not be
required to pay Compensating Interest with respect to any
Remittance Period in an amount in excess of the aggregate
Servicing Fee received by the Master Servicer for such
Remittance Period.
Book-Entry Registration of the Offered The Offered Certificates will initially be issued in
Certificates book-entry form. Persons acquiring beneficial ownership
interests in such Offered Certificates ("Beneficial
Owners") may elect to hold their interests through DTC, in
the United States, or CEDEL or Euroclear in Europe.
Transfers within DTC, CEDEL or Euroclear, as the case may
be, will be in accordance with the rules and operating
procedures of the relevant system. See "Description of
the Offered Certificates -- Book-Entry Registration of
the Offered Certificates" herein, and "Description of the
Certificates -- Book-Entry Registration" in the
Prospectus.
Servicing Fee Advanta Mortgage Corp. USA will retain a Servicing Fee
equal to 0.50% per annum.
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Optional Termination The Master Servicer, acting directly or through a
permitted designee, will have the right to purchase from
the Trust all the Mortgage Loans then held by the Trust at
a price at least equal to par plus accrued interest net of
the Servicing Fee and any amounts owed to the Master
Servicer, on any Remittance Date after the Remittance
Period during which the outstanding aggregate principal
balances of the Mortgage Loans in the Trust had declined
to 10% or less of the Original Pool Balance. The first
such Remittance Date on which such option may be exercised
is the "Clean-up Call Date".
Ratings It is a condition to the issuance of the Offered
Certificates that each Class of the Offered Certificates
receive ratings from Moody's Investors Service, Inc.
("Moody's") and Standard & Poor's Corporation ("Standard &
Poor's") as set forth below:
Moody's Standard & Poor's
Class Rating Rating
----------- ----------- -------------------
Class A-1 Aaa AAA
Class A-2 Aaa AAA
Class A-3 Aaa AAA
Class A-4 Aaa AAA
Class A-5 Aaa AAA
Class A-6 Aaa AAA
Class A-7 Aaa AAA
Class A-IO Aaa AAAr
Class A-8 Aaa AAA
Class A-9 Aaa AAA
Class M-1 Aa2 AA
Class M-2 A2 A
Class B-1 Baa2 BBB
A security rating is not a recommendation to buy, sell or
hold securities, and may be subject to revision or
withdrawal at any time by the assigning entity. The "r"
of the "AAAr" rating of the Class A-IO Certificates by
Standard & Poor's is attached to highlight derivative,
hybrid, and certain other obligations that Standard &
Poor's believes may experience high volatility or high
variability in expected returns due to non-credit risks.
The Class A-8 and Class A-9 Insurer does not guarantee the
payment of, nor do the ratings address the likelihood of
the payment of, any Supplemental Interest Amounts. See
"Prepayment and Yield Considerations" and "Ratings"
herein.
Federal Tax Aspects For federal income tax purposes, an election will be made
to treat certain assets of the Trust as one or more
REMICs. Each
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of the Group I Certificates will be a
"regular interest" in a REMIC which will be treated as a
debt instrument of the Trust for federal income tax
purposes. The Group II Certificates will be comprised of
a "regular" interest in a REMIC and the right to receive
Supplemental Interest Payments, which right has the tax
characteristics described herein. A class of Class R
Certificates will be designated as the "residual interest"
with respect to each REMIC election made by the Trust. See
"Certain Federal Income Tax Consequences" herein and in
the Prospectus.
ERISA Considerations The Class A Certificates may be purchased by employee
benefit plans that are subject to ERISA. The Subordinate
Certificates may not be purchased by employee benefit
plans that are subject to ERISA except as provided herein.
See "ERISA Considerations" herein and in the Prospectus.
Legal Investment The Offered Certificates will not constitute "mortgage
Considerations related securities" for purposes of the Secondary Mortgage
Market Enhancement Act of 1984 ("SMMEA"). In addition,
institutions whose activities are subject to review by
federal or state regulatory authorities may be or may
become subject to restrictions, which may be retroactively
imposed by such regulatory authorities, on the investment
by such institutions in certain forms of mortgage related
securities. All investors whose investment authority is
subject to legal restrictions should consult their own
legal advisors to determine whether, and to what extent,
the Offered Certificates will constitute legal investments
for them.
Certain Legal Matters Certain legal matters relating to the validity of the
issuance of the Certificates will be passed upon by Dewey
Ballantine LLP, New York, New York.
</TABLE>
S-32
<PAGE> 33
RISK FACTORS
Prospective investors in the Offered Certificates should consider the
following factors, as well as the factors set forth under "Risk Factors" in the
Prospectus, in connection with the purchase of the Offered Certificates.
Risk of Higher Default Rates for Mortgage Loans with Balloon Payments.
10.27% of the Mortgage Loans in the Statistic Calculation Pools by aggregate
principal balance are Balloon Loans. See "Risk Factors -- Risk of Losses
Associated with Balloon Loans" in the Prospectus.
Group I Subordination--Limited Protection Afforded to Class A
Certificates. The rights of the Owners of the Class M-1 Certificates to
receive distributions with respect to the Mortgage Loans will be subordinate to
the rights of the holders of the Class A Group I Certificates to receive such
distributions; the rights of Owners of the Class M-2 Certificates to receive
distributions with respect to the Mortgage Loans will be subordinate to the
rights of the Owners of the Class A Group I Certificates and the Class M-1
Certificates to receive such distributions and the rights of the Owners of the
Class B-1 Certificates to receive distributions with respect to the Mortgage
Loans will be subordinate to the rights of the Owners of the Class A Group I
Certificates, Class M-1 and Class M-2 Certificates to receive such
distributions. The subordination of the Subordinate Certificates relative to
the Class A Group I Certificates (and of the lower-ranking Classes of the
Subordinate Certificates to the higher-ranking Classes thereof) is intended to
enhance the likelihood of regular receipt by the Owners of such Class A Group I
Certificates (and such higher-ranking Classes) of the full amount of the
monthly distributions allocable to them, and to afford such Owners protection
against losses.
Group I Subordination--Allocation of Losses to Subordinate
Certificates. The rights of the Owners of each Class of Subordinate
Certificates to receive distributions of principal and interest with respect to
the Mortgage Loans will be subordinate to the rights of the Owners of the Class
A Group I Certificates to receive such distributions and to the rights of the
Owners of each higher-ranking Class of Subordinate Certificates to receive such
distributions. See "Credit Enhancement--Subordination of Subordinate
Certificates" herein.
The yields to maturity on the Mezzanine Certificates and the Class B-1
Certificates will be sensitive, in varying degrees, to defaults on the Mortgage
Loans (and the timing thereof). Investors should fully consider the risks
associated with an investment in the Mezzanine Certificates or the Class B-1
Certificates, including the possibility that such investors may not fully
recover their initial investment as a result of Realized Losses on the Mortgage
Loans. See "Credit Enhancement--Application of Realized Losses" and
"Prepayment and Yield Considerations--Projected Payment and Yield for Offered
Certificates" herein.
Special Risks Associated with the Class A-IO Certificates. As the
owners of interest-only strip securities, the Owners of the Class A-IO
Certificates will be entitled to receive monthly distributions only of
interest, as described herein. Because they will not receive any distributions
of principal, the Owners of the Class A-IO Certificates will generally be
affected by prepayments, liquidations and other dispositions (including
optional redemptions described herein) of the Mortgage Loans in Group I to a
greater degree than will the Owners of the other Classes of the Group I
Certificates. Investors should note, however, that the Notional Principal
Balance applicable to interest calculations on the Class A-IO Certificates is
(x) through the 30th Payment Date, the Class A-7 Certificate Principal Balance
and (y) thereafter, zero. Because the Class A-7 Certificates will amortize in
accordance with the distribution of the Class A-7 Lockout Distribution Amount,
the yield sensitivity of the Class A-IO Certificates is likely to be more
stable than if such Notional Principal Balance were calculated based on the
amortization of the underlying Group I Mortgage Loans directly. Thus, the
yield sensitivity of such Certificates will only be impacted at extremely high
prepayment rates.
Nature of Security. Since the Mortgage Loans are secured in certain
cases by junior liens subordinate to the rights of the mortgagee or beneficiary
under the related senior mortgage(s) or deed(s) of trust, the proceeds from any
liquidation, insurance or condemnation proceedings will be available to satisfy
the outstanding balance of such a junior Mortgage Loan only to the extent that
the claims of such senior mortgagee(s) or beneficiary(ies) have been satisfied
in full, including any related foreclosure costs. In addition, a junior
mortgagee may not foreclose on the property securing a junior mortgage unless
it forecloses subject to the senior mortgage(s), in which case it must either
pay the entire amount due on the senior mortgage(s) to the senior mortgagee(s)
at or prior to the foreclosure
S-33
<PAGE> 34
sale or undertake the obligation to make payments on the senior mortgage(s) in
the event the mortgagor is in default thereunder. In servicing junior
mortgages in its portfolio, it is generally the Master Servicer's practice to
satisfy the senior mortgage(s) at or prior to the foreclosure sale. The Master
Servicer may also advance funds to keep the senior mortgage(s) current until
such time as the Master Servicer satisfies the senior mortgage(s). The Trust
will have no source of funds (and may not be permitted under the REMIC
provisions of the Code) to satisfy the senior mortgage(s) or make payments due
to the senior mortgagee(s). The Master Servicer will be required to advance
such amounts in accordance with the Pooling and Servicing Agreement.
Information is provided under " -- General" with respect to the LTVs
and the CLTVs of the Mortgage Loans, in the Statistic Calculation Pools. As
discussed in the Prospectus under "Risk Factors," the value of the Mortgaged
Properties underlying such loans could be adversely affected by a number of
factors. As a result, despite the amortization of the junior and senior
mortgage loans on such Mortgaged Properties, there can be no assurance that the
CLTVs of such loans, determined as of a date subsequent to the origination
date, will be the same or lower than the CLTVs for such loans, determined as of
the origination date.
Even assuming that the Mortgaged Properties provided adequate security
for the Mortgage Loans, substantial delay could be encountered in connection
with the liquidation of defaulted Mortgage Loans and corresponding delays in
the receipt of such proceeds by the Trust could occur. Further, the Master
Servicer will be entitled to deduct from liquidation proceeds received in
respect of a fully liquidated Mortgage Loan all expenses incurred in attempting
to recover amounts due on such Mortgage Loan and not yet repaid, including
payments to senior mortgagees, legal fees, real estate taxes, and maintenance
and preservation expenses, thereby reducing collections available to the Trust.
Liquidation expenses with respect to defaulted Mortgage Loans do not
vary directly with the outstanding principal balance of the loan at the time of
default. Therefore, assuming that a servicer took the same steps in realizing
upon a defaulted mortgage loan having a small remaining principal balance as it
would in the case of a defaulted mortgage loan having a larger principal
balance, the amount realized after expenses of liquidation would be smaller as
a percentage of the outstanding principal balance of the smaller mortgage loan
than would be the case with a larger loan. Because the average outstanding
principal balances of the Mortgage Loans are small relative to the size of the
loans in a typical pool of purchase-money first mortgages, realizations net of
liquidation expenses on defaulted Mortgage Loans may also be smaller as a
percentage of the principal amount of the Mortgage Loans than would such net
realizations in the case of a typical pool of purchase-money first mortgage
loans.
Investor-owned properties represent (based solely upon statements made
by the borrowers at the time of origination of the related Mortgage Loan), as a
percentage of the aggregate principal balance of the Mortgage Loans, in the
Statistic Calculation Pools, 5.73% of the Mortgage Loans. It is possible that
the rate of delinquencies, foreclosures and losses on mortgage loans secured by
non-owner occupied properties could be higher than for loans secured by the
primary residence of the borrower.
The Subsequent Mortgage Loans and the Pre-Funding Account. If the
principal amount of eligible Mortgage Loans available during the Funding Period
and sold to the Trust is less than 100% of the respective Original Pre-Funded
Amounts, the Sponsor will have insufficient Subsequent Mortgage Loans to sell
to the Trust on the Subsequent Transfer Dates, thereby resulting in prepayments
of principal to Owners of one or more of Classes of Offered Certificates as
described herein. See "Social, Economic and Other Factors" below. Although no
assurance can be given, it is anticipated by the Sponsor that the principal
amount of Subsequent Mortgage Loans sold to the Trust will require the
application of substantially all amounts on deposit in Pre-Funding Account and
that there will be no material principal prepayment to the Owners of Offered
Certificates.
Any conveyance of Subsequent Mortgage Loans is subject to the
following conditions, among others: (i) each such Subsequent Mortgage Loan
must satisfy certain representations and warranties; (ii) the Sponsor will not
select such Subsequent Mortgage Loans in a manner that it believes is adverse
to the interests of the Owners of the Offered Certificates; (iii) the Sponsor
will deliver certain opinions of counsel with respect to the validity of the
conveyance of such Subsequent Mortgage Loans; (iv) with respect to Subsequent
Mortgage Loans to be assigned to Group II, the Class A-8 and Class A-9 Insurer
consents to such transfer; and (v) as of the Subsequent Cut-Off Date, the
Mortgage Loans at that time, including the Subsequent Mortgage Loans to be
conveyed to the Trust as of such
S-34
<PAGE> 35
Subsequent Cut-Off Date, will satisfy the criteria set forth in the Pooling and
Servicing Agreement, as described under "The Mortgage Loan Pool -- Conveyance
of Subsequent Mortgage Loans" herein.
Each Subsequent Mortgage Loan must satisfy the eligibility criteria
referred to above at the time of its addition. However, Subsequent Mortgage
Loans may have been originated by the Originators or purchased by the Sponsor
using credit criteria different from those which were applied to the Initial
Mortgage Loans and may be of a different credit quality. Therefore, following
the transfer of Subsequent Mortgage Loans, the aggregate characteristics of the
Mortgage Loans then held in Group I or Group II may vary from those of the
Initial Mortgage Loans. See "The Mortgage Loan Pool -- Conveyance of
Subsequent Mortgage Loans" herein.
Social, Economic and Other Factors. The ability of the Trust to
invest in Subsequent Mortgage Loans is largely dependent upon social, economic
and other factors which may affect the ability of the Originators to originate
Subsequent Mortgage Loans for transfer on a Subsequent Transfer Date. Economic
factors include interest rates, unemployment levels, the rate of inflation and
consumer perception of economic conditions generally. However, the Sponsor is
unable to determine and has no basis to predict whether or to what extent
economic or social factors will affect the origination and the availability of
Subsequent Mortgage Loans.
Developments Relating to Advanta Corp. During 1997. Certain
developments have occurred during 1997 with respect to Advanta Corp., the
ultimate corporate parent of the Sponsor and of the Master Servicer. The
consequences, if any, of such developments may positively, or may adversely,
affect the financial ability of the Sponsor and/or the Master Servicer to
perform their financial obligations, or to service the Mortgage Loan pool. See
"The Sponsor and the Master Servicer - Recent Developments related to Advanta
Parent".
Risk of Mortgage Loan Rates Reducing the Pass-Through Rate on the
Group II Certificates. The calculation of the Pass-Through Rate on the Group
II Certificates is based upon (i) the value of an index (LIBOR) which is
different from the value of the indices applicable to the Mortgage Loans in
Group II as described under "The Mortgage Loan Pool -- Mortgage Loans -- Group
II" (either as a result of the use of a different index, rate determination
date or rate adjustment date) and (ii) the weighted average of the Coupon Rates
of the Mortgage Loans in Group II which are subject to periodic adjustment
caps, maximum rate caps, minimum rate floors, various resets and reset
frequencies. 94.42% of the Mortgage Loans by aggregate Principal Balance in
the Group II Statistic Calculation Pool adjust semi-annually based upon the
London interbank offered rate for six-month United States dollar deposits
("Six-Month LIBOR"); 0.88% adjust annually based upon 11th District Cost of
Funds Index ("COFI"). 4.70% adjust annually based upon the one-year constant
maturity treasury (the "CMT"), whereas the Pass- Through Rate on the Group II
Certificates adjusts monthly based upon LIBOR as described under "Description
of the Certificates -- Calculation of LIBOR" herein, subject to the Group II
Available Funds Cap Rate (unless Supplemental Interest Amounts, the payment of
which is not rated, are paid in full). Consequently, the interest which
becomes due on the Mortgage Loans in Group II (net of the Servicing Fee, the
Trustee Fee, the Premium and certain required reductions) during any Remittance
Period may not equal the amount of interest that would accrue at LIBOR plus the
margin on the Group II Certificates during the related Accrual Period. 60.47%
of the Mortgage Loans by aggregate Principal Balance in the Group II Statistic
Calculation Pool are 2/28 Loans that provide for a fixed interest rate for a
period of approximately two years following origination. 11.50% of the
Mortgage Loans by aggregate Principal Balance in the Group II Statistic
Calculation Pool are 3/27 Loans that provide for a fixed interest rate for a
period of approximately three years following origination. 10.60% of the
Mortgage Loans by aggregate Principal Balance in the Group II Statistic
Calculation Pool are 5/25 Loans that provide for a fixed interest rate for a
period of approximately five years following origination. Thereafter, such
Mortgage Loans provide for interest rate and payment adjustments in a manner
similar to the Six-Month LIBOR Loans, COFI and CMT Loans. In particular, the
Pass-Through Rate on the Group II Certificates adjusts monthly, while the
interest rates of the Mortgage Loans in Group II adjust less frequently with
the result that the Group II Available Funds Cap Rate may limit increases in
the Pass-Through Rate on the Group II Certificates for extended periods in a
rising interest rate environment. In addition, LIBOR, Six-Month LIBOR, COFI
and CMT may respond to different economic and market factors, and there is not
necessarily a correlation between them. Thus, it is possible, for example,
that LIBOR may rise during periods in which Six-Month LIBOR or one-year CMT is
stable or is falling or that, even if LIBOR, Six-Month LIBOR, COFI and CMT rise
during the same period, LIBOR may rise more rapidly than Six-Month LIBOR, COFI
or CMT. Furthermore, if the Group II Available Funds Cap Rate determines the
Pass-Through Rate on the Group II Certificates for a Payment Date, the value of
the Group II Certificates will be temporarily or permanently reduced.
S-35
<PAGE> 36
THE PORTFOLIO OF MORTGAGE LOANS
The Mortgage Loan Pool includes loans which were either originated
directly by the Affiliated Originators or purchased by the Affiliated
Originators from others on a loan-by-loan basis or in bulk acquisitions of loan
portfolios and in either case acquired by the Sponsor. The Sponsor also
acquires loans from Unaffiliated Originators in long-term commitments from
Conduit Participants. Such loans are originated by Unaffiliated Originators
either directly or purchased by the Unaffiliated Originators from others on a
loan-by-loan basis.
The Originators which are affiliated with the Sponsor are Advanta
Mortgage Corp. USA, Advanta National Bank, Advanta Mortgage Corp. Midatlantic,
Advanta Mortgage Corp. Midatlantic II, Advanta Mortgage Corp. Midwest, Advanta
Mortgage Corp. of New Jersey, Advanta Mortgage Corp. Northeast and Advanta
Finance Corp..
UNAFFILIATED ORIGINATORS
MCA. The Sponsor acquired approximately 1.94% of the Mortgage Loans
as of the Initial Cut-Off Date from Mortgage Corporation of America, an
Unaffiliated Originator (such mortgage loans, the "MCA Loans"). Mortgage
Corporation of America is headquartered in Southfield, Michigan and is engaged
in originating mortgage loans through retail and wholesale channels. The MCA
Loans consist of 189 Mortgage Loans representing an aggregate principal balance
of $14,457,468.74 as of the Initial Cut-Off Date. Approximately 41.91% (by
aggregate principal balance as of the Initial Cut-Off Date) of the MCA Loans
are included in Group I and approximately 58.09% of the MCA Loans are included
in Group II. The MCA Loans are related to properties located in 21 states.
Prior to its purchase of the MCA Loans, the Sponsor performed or
caused to be performed an operational review of the origination and servicing
practices of MCA.
The weighted average CLTV of the MCA Loans as of the Initial Cut-Off
Date was 78.15%; the weighted average Mortgage Rate was 11.48% per annum; the
weighted average original term to stated maturity was 291 months; the weighted
average remaining term to stated maturity was 288 months; and 94.14% of the MCA
Loans were secured by first mortgages.
PAM. The Sponsor acquired approximately 15.92% of the Mortgage Loans
as of the Initial Cut-Off Date from PacificAmerica Money Center, Inc., an
Unaffiliated Originator (such mortgage loans, the "PAM Loans"). PacificAmerica
Money Center, Inc. is headquartered in Woodland Hills, CA and is engaged in
originating mortgage loans through retail and wholesale channels. The PAM
Loans consist of 1,308 Mortgage Loans representing an aggregate principal
balance of $118,507,536.36 as of the Initial Cut-Off Date. Approximately
19.31% (by aggregate principal balance as of the Initial Cut-Off Date) of the
PAM Loans are included in Group I and approximately 80.69% of the PAM Loans are
included in Group II. The PAM Loans are related to properties located in 37
states.
Prior to its purchase of the PAM Loans, the Sponsor performed or
caused to be performed an operational review of the origination practices of
PAM. The Sponsor has been acquiring Mortgage Loans from PAM since mid-1995.
The weighted average CLTV of the PAM Loans as of the Initial Cut-Off
Date was 77.44%, the weighted average Mortgage Rate was 11.24% per annum; the
weighted average original term to stated maturity was 349 months; the weighted
average remaining term to stated maturity was 347 months and 95.48% of the PAM
Loans were secured by first mortgages.
Goodrich & Pennington. The Sponsor acquired approximately 3.59% of
the Mortgage Loans as of the Initial Cut-Off Date from Goodrich & Pennington
Mortgage Fund, Inc., an Unaffiliated Originator (such mortgage loans, the "G&P
Loans"). Goodrich & Pennington Mortgage Fund, Inc. is headquartered in Rohnert
Park, CA and is engaged in originating mortgage loans through retail and
wholesale channels. The G&P Loans consist of 230 Mortgage Loans representing
an aggregate principal balance of $26,712,178.47 as of the Initial Cut-Off
Date. Approximately 38.24% (by aggregate principal balance as of the Initial
Cut-Off Date) of the G&P Loans are included in Group I and approximately 61.76%
of the G&P Loans are included in Group II. The G&P Loans are related to
properties located in 10 states.
S-36
<PAGE> 37
Prior to its purchase of the G&P Loans, the Sponsor performed or
caused to be performed an operational review of the origination practices of
Goodrich & Pennington Mortgage Fund, Inc.
The weighted average CLTV of the G&P Loans as of the Initial Cut-Off
Date was 77.16%; the weighted average Mortgage Rate was 9.94% per annum; the
weighted average original term to stated maturity was 351 months; the weighted
average remaining term to stated maturity was 350 months and 98.92% of the G&P
Loans were secured by first mortgages.
McGuire Mortgage Company. The Sponsor acquired approximately 0.36% of
the Mortgage Loans as of the Initial Cut-Off Date from McGuire Mortgage
Company, an Unaffiliated Originator (such mortgage loans, the "McGuire Loans").
McGuire Mortgage Company is headquartered in Prairie Village, Kansas and is
engaged in originating mortgage loans through retail channels. The McGuire
Loans consist of 39 Mortgage Loans representing an aggregate principal balance
of $2,672,781.13 as of the Initial Cut-Off Date. Approximately 43.27% (by
aggregate principal balance as of the Initial Cut-Off Date) of the McGuire
Loans are included in Group I, and approximately 56.73% of the McGuire Loans
are included in Group II. The McGuire Loans are related to properties located
in 5 states.
Prior to its purchase of the McGuire Loans, the Sponsor performed or
caused to be performed an operational review of the origination and servicing
practices of McGuire Mortgage Company.
The weighted average CLTV of the McGuire Loans as of the Initial
Cut-Off Date was 81.13%; the weighted average Mortgage Rate was 10.42% per
annum; the weighted average original term to stated maturity was 301 months;
the weighted average remaining term to stated maturity was 300 months; and
97.31% of the McGuire Loans were secured by first mortgages.
Coastal. The Sponsor acquired approximately 0.63% of the Mortgage
Loans as of the Initial Cut-Off Date from Coastal Capital Corp., an
Unaffiliated Originator (such mortgage loans, the "Coastal Loans"). Coastal is
headquartered in Jericho, New York and is engaged in originating mortgage loans
through retail and wholesale channels. The Coastal Loans consist of 64
Mortgage Loans representing an aggregate principal balance of $4,691,155.24 as
of the Initial Cut-Off Date. Approximately 95.59% (by aggregate principal
balance as of the Initial Cut-Off Date) of the Coastal Loans are included in
Group I and approximately 4.41% of the Coastal Loans are included in Group II.
The Coastal Loans are related to properties located in 5 states.
Prior to its purchase of the Coastal Loans, the Sponsor performed or
caused to be performed an operational review of the origination and servicing
practices of Coastal.
The weighted average CLTV of the Coastal Loans as of the Initial
Cut-Off Date was 74.83%; the weighted average Mortgage Rate was 11.79% per
annum; the weighted average original term to stated maturity was 261 months;
the weighted average remaining term to stated maturity was 259 months; and
92.35% of the Coastal Loans were secured by first mortgages.
First Finance. The Sponsor acquired approximately 4.76% of the
Mortgage Loans as of the Initial Cut-Off Date from First Finance, Incorporated,
an Unaffiliated Originator (such mortgage loans, the "FFI Loans"). First
Finance, Incorporated is headquartered in Bloomfield Hills, Michigan and is
engaged in originating mortgage loans through retail channels. The FFI Loans
consist of 606 Mortgage Loans representing an aggregate principal balance of
$35,442,376.90 as of the Initial Cut-Off Date. Approximately 42.76% (by
aggregate principal balance as of the Initial Cut-Off Date) of the FFI Loans
are included in Group I and approximately 57.24% of the FFI Loans are included
in Group II. The FFI Loans are related to properties located in 20 states.
Prior to its purchase of the FFI Loans, the Sponsor performed or
caused to be performed an operational review of the origination and servicing
practices of FFI.
The weighted average CLTV of FFI Loans as of the Initial Cut-Off Date
was 76.20%; the weighted average Mortgage Rate was 11.35% per annum; the
weighted average original term to stated maturity was 336 months; the
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<PAGE> 38
weighted average remaining term to stated maturity was 336 months; and 100% of
the FFI Loans were secured by first mortgages.
The MCA Loans, the G&P Loans, the PAM Loans, the McGuire Loans, the
Coastal Loans and the FFI Loans are collectively referred to herein as the
"Unaffiliated Originator Loans."
All of the Mortgage Loans purchased by the Sponsor from the
Unaffiliated Originators were originated in accordance with the Sponsor's
underwriting guidelines for Unaffiliated Originators. See "Mortgage Loan
Program -- Underwriting Guidelines" in the Prospectus.
DELINQUENCIES
Owned and Managed Servicing Portfolio. The following tables set forth
information relating to the delinquency, loan loss and foreclosure experience
of the Master Servicer for its servicing portfolio, excluding certain loans
serviced by the Master Servicer that were not originated or purchased and
reunderwritten by the Sponsor or its Affiliated Originators (the "Owned and
Managed Servicing Portfolio"), of fixed and adjustable rate mortgage loans as
of September 30, 1997, and for each of the four prior years ended December 31.
The Owned and Managed Servicing Portfolio includes, but is not limited to, the
Mortgage Loans acquired on or prior to September 30, 1997, which are contained
in the Mortgage Loan Pool, as of the Initial Cut-Off Date. In addition to the
Owned and Managed Servicing Portfolio, the Master Servicer serviced, as of
September 30, 1997, approximately 132,000 mortgage loans with an aggregate
principal balance as of such date of approximately $9.0 billion; such loans
were not originated by the Sponsor or its Affiliated Originators and are being
serviced for third parties on a contract servicing basis (the "Third-Party
Servicing Portfolio"). No loans in the Third-Party Servicing Portfolio are
included in the tables set forth below.
DELINQUENCY AND FORECLOSURE EXPERIENCE OF THE
MASTER SERVICER'S OWNED AND MANAGED SERVICING PORTFOLIO
OF MORTGAGE LOANS
<TABLE>
<CAPTION>
NINE MONTHS ENDING YEAR ENDING DECEMBER 31,
------------------- --------------------------------------------------------------------------------- --
SEPTEMBER 30, 1997 1996 1995 1994 1993
------------------- -------------------- ----------------- ---------------- -----------------
NUMBER DOLLAR NUMBER DOLLAR NUMBER DOLLAR NUMBER DOLLAR NUMBER DOLLAR
OF AMOUNT OF AMOUNT OF AMOUNT OF AMOUNT OF AMOUNT
LOANS (000) LOANS (000) LOANS (000) LOANS (000) LOANS (000)
-------- ------- ------- ------ ------ ------ ------ ------ ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Portfolio 65,715 $4,275,398 43,303 $2,595,981 32,592 $1,797,582 26,446 $1,346,100 25,460 $1,149,864
Delinquency
Percentage(1)
30-59 days 2.97% 2.83% 3.07% 2.90% 2.67% 2.44% 2.01% 1.57% 2.43% 2.22%
60-89 days 1.02 1.09 0.85 0.90 0.72 0.71 0.57 0.45 0.77 0.63
90 days or more 1.47 1.35 1.45 1.26 1.69 1.23 1.85 1.51 2.19 2.12
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Total 5.46% 5.27% 5.37% 5.06% 5.08% 4.38% 4.43% 3.53% 5.39% 4.97%
Foreclosure
rate(2) 1.60% 1.82% 1.62% 1.92% 1.29% 1.53% 1.35% 1.38% 1.32% 1.62%
REO
Properties(3) 0.38% 0.42% -- 0.52% -- 0.47% -- 0.42% --
</TABLE>
- ----------------------
(1) The period of delinquency is based on the number of days payments are
contractually past due. The delinquency statistics for the period
exclude loans in foreclosure.
(2) "Foreclosure Rate" is the number of mortgage loans or the dollar
amount of mortgage loans in foreclosure as a percentage of the total
number of mortgage loans or the dollar amount of mortgage loans, as
the case may be, as of the date indicated.
(3) REO Properties (i.e., "real estate owned" properties -- properties
relating to mortgages foreclosed or for which deeds in lieu of
foreclosure have been accepted, and held by the Master Servicer
pending disposition) percentages are calculated using the number of
loans, not the dollar amount.
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<PAGE> 39
LOAN LOSS EXPERIENCE
OF THE MASTER SERVICER'S OWNED AND MANAGED SERVICING PORTFOLIO
OF MORTGAGE LOANS*
<TABLE>
<CAPTION>
NINE MONTHS ENDING YEAR ENDING DECEMBER 31,
-------------------------------------------------------------------------------------------
SEPTEMBER 30, 1997 1996 1995 1994 1993
------------------- -------------- ---------------- ------------- ------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Average amount $3,398,080 $2,102,643 $ 1,540,238 $1,225,529 $ 1,049,447
outstanding(1)
Gross losses(2) $ 13,948 $ 15,184 $ 13,978 $ 20,886 $ 14,115
Recoveries(3) $ 44 $ 117 $ 148 $ 179 $ 123
Net losses(4) $ 13,904 $ 15,067 $ 13,830 $ 20,707 $ 13,992
Net losses as a percentage
of average amount
outstanding(5) 0.55% 0.72% 0.90% 1.69% 1.33%
</TABLE>
--------------------
(1) "Average Amount Outstanding" during the period is the arithmetic
average of the principal balances of the mortgage loans outstanding on
the last business day of each month during the period.
(2) "Gross Losses" are amounts which have been determined to be
uncollectible relating to mortgage loans for each respective period.
(3) "Recoveries" are recoveries from liquidation proceeds and deficiency
judgments.
(4) "Net Losses" represents "Gross Losses" minus "Recoveries".
(5) September 30, 1997 percentage has been based on annualized net losses.
S-39
<PAGE> 40
THE MORTGAGE LOAN POOL
GENERAL
The Mortgage Loans will be predominantly home equity loans, i.e.,
loans used (x) to refinance an existing mortgage loan on more favorable terms,
(y) to consolidate debt, or (z) to obtain cash proceeds by borrowing against
the Mortgagor's equity in the related Mortgaged Property.
The Statistic Calculation Pools contained 10,724 Mortgage Loans to be
sold by the Sponsor to the Trust evidenced by promissory notes (the "Notes")
secured by Mortgages on the Mortgaged Properties, which are located in 49
states and the District of Columbia. The Mortgaged Properties securing the
Mortgage Loans consist primarily of single-family residences (which may be
detached, part of a two-to four-family dwelling, a condominium unit or a unit
in a planned unit development). The Mortgaged Properties may be owner-occupied
(which includes second and vacation homes) and non-owner occupied investment
properties.
The Mortgage Loans will be required to satisfy the following criteria
as of the Initial Cut-Off Date: have remaining terms to maturity of no greater
than 30 years; will not be 30 or more days delinquent (except that certain
Mortgage Loans, representing in the aggregate not in excess of 0.62% of the
aggregate principal balance of all Mortgage Loans as of the Initial Cut-Off
Date, may be 30-59 days delinquent). Neither the Sponsor nor the Master
Servicer have reason to believe that the delinquency and loss experience of the
Mortgage Loans will differ in any material respect from that of the Master
Servicer's total servicing portfolio, although there can be no assurance that
this will be the case.
Less than 10.40% of the Mortgage Loans (as a percentage of the
aggregate principal balance of all Mortgage Loans contained in the Statistic
Calculation Pools) are "simple interest" or "date of payment" loans, with the
remainder "actuarial" or "pre-computed" loans. A "simple interest" loan
provides that interest which has accrued to date is paid first and the
remaining payment is applied to reduce the unpaid principal balance. An
"actuarial" loan provides for amortization of the loan over a series of fixed
level monthly installments. 95.70% of the Mortgage Loans are secured by first
lien mortgages on the related Mortgaged Properties and 4.30% of the Mortgage
Loans are secured by junior liens on the related Mortgaged Properties.
Each Mortgage Loan in the Trust will be assigned to one of two
mortgage loan groups ("Group I" and "Group II", respectively, and each a
"Mortgage Loan Group"). Each of the Mortgage Loans contained in Group I will
be secured by a Mortgage having either a first or junior lien position with
respect to the related Mortgaged Property and will have a maximum remaining
term to maturity of 30 years. The Mortgage Loans contained in Group II will be
secured by a Mortgage having either a first or a junior lien position with
respect to the related Mortgaged Property and will have a maximum remaining
term to maturity of 30 years. The Group I Certificates represent undivided
ownership interests in all Mortgage Loans contained or to be contained in Group
I and the Group II Certificates represent undivided ownership interests in all
Mortgage Loans contained or to be contained in Group II.
The CLTVs and LTVs described herein were calculated based upon the
appraised values of the related Mortgaged Properties at the time of origination
(the "Appraised Values"). In general, for purchase money loans, the CLTVs and
LTVs were calculated using the lower of the purchase price or appraised values
of the related Mortgaged Properties at the time of origination. No assurance
can be given that such appraised values of the Mortgaged Properties have
remained or will remain at their levels on the dates of origination of the
related Mortgage Loans. If property values decline such that the outstanding
balances of the Mortgage Loans, together with the outstanding balances of any
Senior Liens, become equal to or greater than the value of the Mortgaged
Properties, the actual rates of delinquencies, foreclosures and losses could be
higher than those heretofore experienced by the Master Servicer, as set forth
above under "The Portfolio of Mortgage Loans," and in the mortgage lending
industry.
S-40
<PAGE> 41
Difference between Statistic Calculation Pools and Closing Date Pools.
The statistical information presented in this Prospectus Supplement is
based on the Statistic Calculation Pools. The Statistic Calculation Pools
reflect the Mortgage Loans acquired by the Sponsor through the Initial Cut-Off
Date, and the statistical information presented herein is based on the number
and the principal balances of such Mortgage Loans as of the Initial Cut-Off
Date. These pools aggregated $391,100,496.44 with respect to Group I and
$353,220,751.29 with respect to Group II. The Sponsor expects that the actual
aggregate principal balance of the Initial Mortgage Loans, as of the Closing
Date, plus the Subsequent Mortgage Loans, as of the related Subsequent Transfer
Dates, will be approximately $500,000,000.00 with respect to Group I and
approximately $400,000,000.00 with respect to Group II. The additional
Mortgage Loans to be included in the final pools will represent Mortgage Loans
acquired or to be acquired by the Sponsor on or prior to the Closing Date or
Subsequent Mortgage Loans to be acquired by the Sponsor after the Closing Date.
In addition, with respect to the Statistic Calculation Pools, as to which
statistical information is presented herein, some amortization of the Mortgage
Loans contained in such pools will occur prior to the Closing Date. Moreover,
certain loans included in the Statistic Calculation Pools may prepay in full or
may be determined not to meet the eligibility requirements for the final pools
and as a result may not be included in the final pools. As a result of the
foregoing, the statistical distribution of characteristics as of the Closing
Date for the Initial Mortgage Loan pools will vary somewhat from the
statistical distribution of such characteristics in the Statistic Calculation
Pools as presented in this Prospectus Supplement, although such variance will
not be material.
GROUP I
The Mortgage Loans in the Group I Statistic Calculation Pool consist
of 6,774 Mortgage Loans under which the related Mortgaged Properties are
located in 49 states and the District of Columbia, as set forth herein. Group
I had an aggregate principal balance of $391,100,496.44 and the minimum
principal balance of any of the Mortgage Loans in the Group I Statistic
Calculation Pool was $417.49, the maximum principal balance thereof was
$559,727.44 and the average principal balance of such Mortgage Loans was
approximately $57,735.53. The Mortgage Rates on the Mortgage Loans in Group I
ranged from 6.83% to 18.99% per annum, and the weighted average Mortgage Rate
of such Mortgage Loans was 10.70% per annum. The original term to stated
maturity of the Mortgage Loans in Group I ranged from 36 months to 360 months,
the remaining term to stated maturity ranged from 3 months to 360 months, the
weighted average original term to stated maturity was 248 months, the weighted
average remaining term to stated maturity was 247 months and the weighted
average seasoning was 1 month. No Mortgage Loan in Group I had a stated
maturity later than December 20, 2027. 80.75% of the Mortgage Loans in Group I
by aggregate principal balance require monthly payments of principal that will
fully amortize the Mortgage Loans by their respective maturity dates, and
19.25% of such Mortgage Loans by aggregate principal balance are balloon loans.
The weighted average CLTV of the Mortgage Loans included in Group I
was 74.60%. The weighted average Junior Lien Ratio (as defined below) of the
Mortgage Loans in Group I was 35.05%; the weighted average LTV was 70.83%.
Approximately 92.56% of the Mortgage Loans in Group I by aggregate principal
balance were secured by first mortgages and approximately 7.44% by junior
mortgages.
The "Junior Lien Ratio" of a Mortgage Loan which is in a junior lien
position is equal to the ratio (expressed as a percentage) of the original
principal balance of such Mortgage Loan to the sum of (i) the original
principal balance of such Mortgage Loan and (ii) the principal balance at the
time of origination of the Mortgage Loan of any Senior Liens (computed at the
time of origination of such Mortgage Loan).
The following tables describe the Group I Mortgage Loans and the
related Mortgaged Properties based upon the Group I Statistic Calculation Pool
as constituted at the opening of business on the Initial Cut-Off Date.
S-41
<PAGE> 42
GROUP I
GEOGRAPHIC DISTRIBUTION
<TABLE>
<CAPTION>
NUMBER OF AGGREGATE % OF AGGREGATE
STATE MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
----- -------------- ----------------- -----------------
<S> <C> <C> <C>
Alabama . . . . . 54 $ 2,175,844.58 0.56%
Arizona . . . . . 180 8,375,979.14 2.14
Arkansas . . . . 46 1,969,739.34 0.50
California . . . 344 32,424,198.94 8.29
Colorado . . . . 143 10,424,595.06 2.67
Connecticut . . . 45 3,381,978.57 0.86
Delaware . . . . 43 3,273,706.84 0.84
District of Columbia 12 1,060,438.38 0.27
Florida . . . . . 356 20,019,537.76 5.12
Georgia . . . . . 156 8,928,118.22 2.28
Hawaii . . . . . 13 2,341,652.15 0.60
Idaho . . . . . . 36 1,837,379.81 0.47
Illinois . . . . 249 14,936,476.78 3.82
Indiana . . . . . 300 13,830,072.80 3.54
Iowa . . . . . . 126 5,777,237.70 1.48
Kansas . . . . . 129 7,213,870.93 1.84
Kentucky . . . . 26 1,342,422.48 0.34
Louisiana . . . . 116 5,798,032.66 1.48
Maine . . . . . . 21 1,215,969.47 0.31
Maryland . . . . 183 13,464,982.26 3.44
Massachusetts . . 77 6,537,800.24 1.67
Michigan . . . . 964 45,344,588.19 11.59
Minnesota . . . . 68 4,667,835.71 1.19
Mississippi . . . 55 2,148,337.87 0.55
Missouri . . . . 208 10,421,359.75 2.66
Montana . . . . . 17 774,982.17 0.20
Nebraska . . . . 62 2,716,060.76 0.69
Nevada . . . . . 25 2,018,546.26 0.52
New Hampshire . . 4 443,610.79 0.11
New Jersey . . . 154 11,051,848.96 2.83
New Mexico . . . 37 1,849,025.40 0.47
New York . . . . 247 17,824,953.73 4.56
North Carolina . 242 13,107,785.35 3.35
North Dakota . . 1 12,750.00 0.00
Ohio . . . . . . 348 18,188,635.40 4.65
Oklahoma . . . . 99 4,769,931.64 1.22
Oregon . . . . . 87 6,827,092.79 1.75
Pennsylvania . . 488 24,945,858.32 6.38
Rhode Island . . 30 1,550,991.23 0.40
South Carolina . 203 10,016,102.98 2.56
South Dakota . . 15 673,799.27 0.17
Tennessee . . . . 91 5,428,857.05 1.39
Texas . . . . . . 46 2,495,862.43 0.64
Utah . . . . . . 77 4,795,372.05 1.23
Vermont . . . . . 11 662,802.86 0.17
Virginia . . . . 215 12,298,978.19 3.14
Washington . . . 170 11,230,786.71 2.87
West Virginia . . 86 4,136,802.91 1.06
Wisconsin . . . . 57 3,584,250.77 0.92
Wyoming . . . . . 12 782,652.79 0.20
------- -------------------- ----------
TOTAL . . . . 6,774 $ 391,100,496.44 100.00%
======= ==================== ==========
</TABLE>
S-42
<PAGE> 43
GROUP I
DISTRIBUTION OF CLTVS
<TABLE>
<CAPTION>
RANGE OF NUMBER OF AGGREGATE % OF AGGREGATE
CLTV RATIOS MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
----------- -------------- ----------------- -----------------
<S> <C> <C> <C>
90.01 - 95.00% . . . . . . . 30 $ 1,541,600.57 0.39%
85.01 - 90.00 . . . . . . . 144 9,155,731.24 2.34
80.01 - 85.00 . . . . . . . 1,957 123,504,507.42 31.58
75.01 - 80.00 . . . . . . . 1,463 95,654,412.06 24.46
70.01 - 75.00 . . . . . . . 912 57,159,843.94 14.62
65.01 - 70.00 . . . . . . . 588 33,215,162.73 8.49
60.01 - 65.00 . . . . . . . 442 23,197,784.82 5.93
55.01 - 60.00 . . . . . . . 283 13,199,137.52 3.37
50.01 - 55.00 . . . . . . . 197 8,494,436.39 2.17
00.01 - 50.00 . . . . . . . 758 25,977,879.75 6.64
------- -------------------- ----------
TOTAL . . . . . . . . . . 6,774 $ 391,100,496.44 100.00%
======= ==================== ==========
</TABLE>
GROUP I
DISTRIBUTION OF LTVS
<TABLE>
<CAPTION>
RANGE OF NUMBER OF AGGREGATE % OF AGGREGATE
LTV RATIOS MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
---------- -------------- ----------------- -----------------
<S> <C> <C> <C> <C>
90.01 - 95.00% . . . . . . . 27 $ 1,487,338.67 0.38%
85.01 - 90.00 . . . . . . . 114 8,460,829.54 2.16
80.01 - 85.00 . . . . . . . 1,532 111,236292.32 28.44
75.01 - 80.00 . . . . . . . 1,260 88,592,479.22 22.65
70.01 - 75.00 . . . . . . . 817 54,085,863.71 13.83
65.01 - 70.00 . . . . . . . 535 31,173,191.75 7.97
60.01 - 65.00 . . . . . . . 415 22,401,066.18 5.73
55.01 - 60.00 . . . . . . . 274 12,845,563.25 3.28
50.01 - 55.00 . . . . . . . 186 8,189,668.68 2.09
00.01 - 50.00 . . . . . . . 1,614 52,628,202.92 13.46
------- -------------------- ----------
TOTAL . . . . . . . . . . 6,774 $391,100,496.44 100.00%
======= ==================== ==========
</TABLE>
S-43
<PAGE> 44
GROUP I
DISTRIBUTION OF JUNIOR LIEN RATIOS
(JUNIOR LIENS ONLY)
<TABLE>
<CAPTION>
RANGE OF NUMBER OF AGGREGATE % OF AGGREGATE
JUNIOR LIEN RATIOS MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
------------------ -------------- ----------------- -----------------
<S> <C> <C> <C>
0.001 - 10.000% . . . . . . . 13 $ 218,613.89 0.75%
10.001 - 20.000 . . . . . . . 221 4,993,653.61 17.16
20.001 - 30.000 . . . . . . . 313 8,709,496.01 29.93
30.001 - 40.000 . . . . . . . 163 5,476,934.04 18.82
40.001 - 50.000 . . . . . . . 100 4,799,580.14 16.49
50.001 - 60.000 . . . . . . . 48 2,375,899.20 8.17
60.001 - 70.000 . . . . . . . 20 737,064.56 2.53
70.001 - 80.000 . . . . . . . 18 798,379.45 2.74
80.001 - 90.000 . . . . . . . 13 924,521.20 3.18
90.001 -100.000 . . . . . . . 1 64,362.73 0.22
------- ------------------ ---------
TOTAL . . . . . . . . . . 910 $ 29,098,504.83 100.00%
======= ================== =========
</TABLE>
GROUP I
DISTRIBUTION OF MORTGAGE RATES
<TABLE>
<CAPTION>
RANGE OF NUMBER OF AGGREGATE % OF AGGREGATE
MORTGAGE RATES MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
-------------- -------------- ----------------- -----------------
<S> <C> <C> <C>
6.001 - 7.000% . . . . . . 2 $ 280,500.00 0.07%
7.001 - 8.000 . . . . . . . 35 4,119,855.29 1.05
8.001 - 9.000 . . . . . . . 733 54,656,555.99 13.98
9.001 -10.000 . . . . . . . 1,563 111,099,626.66 28.41
10.001 -11.000 . . . . . . . 1,314 82,259,097.83 21.03
11.001 -12.000 . . . . . . . 1,047 55,809,713.91 14.27
12.001 -13.000 . . . . . . . 1,299 53,261,620.16 13.62
13.001 -14.000 . . . . . . . 520 20,107,210.67 5.14
14.001 -15.000 . . . . . . . 199 7,124,325.91 1.82
15.001 -16.000 . . . . . . . 48 1,988,581.97 0.51
16.001 -17.000 . . . . . . . 12 351,589.66 0.09
18.001 -19.000 . . . . . . . 2 41,818.39 0.01
--------- ------------------ --------
TOTAL . . . . . . . . . . 6,774 $ 391,100,496.44 100.00%
========= ================== ========
</TABLE>
S-44
<PAGE> 45
GROUP I
REMAINING TERM TO MATURITY DISTRIBUTION
<TABLE>
<CAPTION>
MONTHS NUMBER OF AGGREGATE % OF AGGREGATE
------ MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
-------------- ----------------- -----------------
<S> <C> <C> <C>
1 - 12 . . . . . . . . . . . 1 $ 417.49 0.00%
25 - 36 . . . . . . . . . . . 2 128,815.47 0.03
37 - 48 . . . . . . . . . . . 4 70,224.79 0.02
49 - 60 . . . . . . . . . . . 53 1,211,913.33 0.31
61 - 72 . . . . . . . . . . . 19 471,013.84 0.12
73 - 84 . . . . . . . . . . . 59 1,761,337.20 0.45
85 - 96 . . . . . . . . . . . 38 1,360,069.49 0.35
97 - 108 . . . . . . . . . . . 6 312,127.82 0.08
109 - 120 . . . . . . . . . . . 411 13,615,693.07 3.48
121 - 132 . . . . . . . . . . . 3 104,861.99 0.03
133 - 144 . . . . . . . . . . . 55 2,501,834.78 0.64
145 - 156 . . . . . . . . . . . 2 69,414.95 0.02
157 - 168 . . . . . . . . . . . 4 358,022.93 0.09
169 - 180 . . . . . . . . . . . 3,135 159,920,157.04 40.89
181 - 192 . . . . . . . . . . . 5 203,478.81 0.05
193 - 204 . . . . . . . . . . . 10 686,668.65 0.18
205 - 216 . . . . . . . . . . . 3 265,620.91 0.07
217 - 228 . . . . . . . . . . . 120 8,373,137.85 2.14
229 - 240 . . . . . . . . . . . 1,100 69,285,295.66 17.72
241 - 252 . . . . . . . . . . . 1 45,000.00 0.01
289 - 300 . . . . . . . . . . . 13 1,304,393.13 0.33
313 - 324 . . . . . . . . . . . 1 57,800.00 0.01
337 - 348 . . . . . . . . . . . 1 33,731.36 0.01
349 - 360 . . . . . . . . . . . 1,728 128,959,465.88 32.97
-------- ------------------ --------
TOTAL . . . . . . . . . . 6,774 $ 391,100,496.44 100.00%
======== ================== ========
</TABLE>
S-45
<PAGE> 46
GROUP I
DISTRIBUTION OF PRINCIPAL BALANCES
<TABLE>
<CAPTION>
RANGE OF NUMBER OF AGGREGATE % OF AGGREGATE
PRINCIPAL BALANCES MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
------------------ -------------- ----------------- -----------------
<S> <C> <C> <C>
$ 0 - 5,000 . . . . . . . 2 $ 4,388.67 0.00%
5,001 - 10,000 . . . . . . . 47 447,967.05 0.11
10,001 - 15,000 . . . . . . . 229 3,097,207.75 0.79
15,001 - 20,000 . . . . . . . 414 7,526,123.31 1.92
20,001 - 25,000 . . . . . . . 534 12,343,374.51 3.16
25,001 - 30,000 . . . . . . . 544 15,172,950.50 3.88
30,001 - 35,000 . . . . . . . 467 15,390,950.56 3.94
35,001 - 40,000 . . . . . . . 507 19,160,620.82 4.90
40,001 - 45,000 . . . . . . . 427 18,314,655.74 4.68
45,001 - 50,000 . . . . . . . 458 21,891,519.18 5.60
50,001 - 55,000 . . . . . . . 392 20,667,376.98 5.28
55,001 - 60,000 . . . . . . . 434 25,029,483.41 6.40
60,001 - 65,000 . . . . . . . 311 19,498,438.68 4.99
65,001 - 70,000 . . . . . . . 282 19,127,479.39 4.89
70,001 - 75,000 . . . . . . . 235 17,068,741.82 4.36
75,001 - 80,000 . . . . . . . 203 15,762,226.06 4.03
80,001 - 85,000 . . . . . . . 158 13,089,029.23 3.35
85,001 - 90,000 . . . . . . . 130 11,437,213.80 2.92
90,001 - 95,000 . . . . . . . 121 11,224,341.42 2.87
95,001 - 100,000 . . . . . . . 119 11,668,949.42 2.98
100,001 - 150,000 . . . . . . . 518 62,619,988.40 16.01
150,001 - 200,000 . . . . . . . 146 24,933,355.79 6.38
200,001 - 250,000 . . . . . . . 55 12,331,529.20 3.15
250,001 - 300,000 . . . . . . . 22 6,097,003.45 1.56
300,001 - 350,000 . . . . . . . 7 2,252,409.04 0.58
350,001 - 400,000 . . . . . . . 8 2,979,838.10 0.76
400,001 - 450,000 . . . . . . . 1 403,845.00 0.10
450,001 - 500,000 . . . . . . . 2 999,761.72 0.26
550,001 - 600,000 . . . . . . . 1 559,727.44 0.14
-------- ----------------- --------
TOTAL . . . . . . . . . . . 6,774 $391,100,496.44 100.00%
======== ================= ========
</TABLE>
S-46
<PAGE> 47
GROUP I
DISTRIBUTION OF PROPERTY TYPES
<TABLE>
<CAPTION>
PROPERTY TYPE NUMBER OF AGGREGATE % OF AGGREGATE
------------- MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
-------------- ----------------- -----------------
<S> <C> <C> <C>
SF Detached/De Minimus PUD . . . 5,875 $ 340,453,561.28 87.05%
SF Row House/Townhouse/ Condo . . 301 15,514,099.71 3.97
Two to Four Family Homes . . . 242 15,763,321.47 4.03
Prefabricated Single Family . . . 337 17,270,832.04 4.42
Other . . . . . . . . . . . . . 19 2,098,681.94 0.54
-------- ------------------ ----------
TOTAL . . . . . . . . . . . 6,774 $ 391,100,496.44 100.00%
======== ================== ==========
</TABLE>
GROUP I
DISTRIBUTION OF OCCUPANCY STATUS
<TABLE>
<CAPTION>
NUMBER OF AGGREGATE % OF AGGREGATE
OCCUPANCY STATUS MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
---------------- -------------- ----------------- -----------------
<S> <C> <C> <C>
Noninvestor owned* . . . . . . . 6,261 $ 365,094,613.61 93.35%
Investor owned . . . . . . . . 513 26,005,882.83 6.65
--------- ------------------ --------
TOTAL . . . . . . . . . . . 6,774 $ 391,100,496.44 100.00%
========= ================== ========
</TABLE>
- ------------------
* Includes vacation and second homes.
GROUP I
DISTRIBUTION OF SEASONING
<TABLE>
<CAPTION>
MONTHS ELAPSED NUMBER OF AGGREGATE % OF AGGREGATE
SINCE ORIGINATION MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
----------------- -------------- ----------------- -----------------
<S> <C> <C> <C>
0 - 6 . . . . . . . . . . . 6,706 $ 387,799,477.42 99.16%
7 - 12 . . . . . . . . . . . 36 2,445,948.00 0.63
13 - 24 . . . . . . . . . . . 5 221,140.82 0.06
85 - 96 . . . . . . . . . . . 9 239,857.33 0.06
97 - 108 . . . . . . . . . . . 6 172,943.09 0.04
109 - 120 . . . . . . . . . . . 10 179,407.66 0.05
121 - 132 . . . . . . . . . . . 1 35,280.45 0.01
133 - 144 . . . . . . . . . . . 1 6,441.67 0.00
------- ------------------ --------
TOTAL . . . . . . . . . . . 6,774 $ 391,100,496.44 100.00%
======== ================== ========
</TABLE>
S-47
<PAGE> 48
GROUP II
The Mortgage Loans in the Group II Statistic Calculation Pool consist
of 3,950 loans under which the related Mortgaged Properties are located in 49
states and the District of Columbia, as set forth herein. The Mortgage Loans
in Group II had an aggregate principal balance of $353,220,751.29, the minimum
principal balance of any of such Mortgage Loans was $1,934.43, the maximum
principal balance thereof was $1,384,790.63 and the average principal balance
of such Mortgage Loans was approximately $89,422.98. The weighted average
current Mortgage Rate of the Mortgage Loans in Group II was 10.52% and the
weighted average margin was 6.23%.
The Mortgage Loans in Group II have original terms to stated maturity
from 60 months to 360 months, remaining terms to stated maturity from 16 months
to 360 months, a weighted average remaining term to stated maturity of 354
months, a weighted average original term to stated maturity of 357 months and a
weighted average seasoning of 3 months. No Mortgage Loan in Group II had a
stated maturity later than December 15, 2027. 99.67% of the Mortgage Loans in
Group II by aggregate principal balance require monthly payments of principal
that will fully amortize such Mortgage Loans by their respective maturity
dates. 0.33% of the Mortgage Loans by aggregate principal balance are
represented by balloon loans.
The weighted average CLTV of the Mortgage Loans included in Group II
was 77.77%. 99.17% of the Mortgage Loans in Group II were secured by first
mortgages.
94.42% of the Mortgage Loans in Group II bear interest (in some
instances, following an initial fixed-rate period) at a six-month LIBOR rate,
plus a margin. 91.42% are indexed on the average of the six-month LIBOR rates
based on quotations at five major banks as set forth in the "Money Rates"
section of The Wall Street Journal, Western Edition, on the first business day
of the month; 0.88% are indexed on the average of the COFI 11th District Cost
of Funds rates based on quotations by calling "FHLB" out of San Francisco the
last business day of month after 3:00 PM; 0.31% are indexed on the average of
the six-month LIBOR rates based on quotations at five major banks as set forth
in the "Money Rates" section of The Wall Street Journal, Western Edition, on
the 15th day of the month; 0.80% are indexed on the average of the six-month
LIBOR rates based on quotations of major banks, as published by the Federal
National Mortgage Association ("FNMA"), on the first business day of the month;
1.46% are indexed on the average of the six-month LIBOR rates based on
quotations at five major banks as set forth in the "Money Rates" section of the
Wall Street Journal, Western Edition, on the most recent daily quote available;
0.20% are indexed on the average of the six-month LIBOR rates based on
quotations at five major banks as set forth in the "Money Rates" section of The
Wall Street Journal, Western Edition, on the last business day of the month;
0.23% are indexed on other six-month LIBOR rates and 4.70% are indexed on the
weekly average of the one-year constant maturity treasury.
With respect to the Mortgage Loans in Group II, 60.47% of such
Mortgage Loans bear interest at a fixed rate of interest for a two-year period
following origination, 11.51% of such Mortgage Loans bear interest at a fixed
rate of interest for a three-year period following origination, 10.60% of such
Mortgage Loans bear interest at a fixed rate of interest for a five-year period
following origination. After such initial periods, such Mortgage Loans bear
interest at adjustable rates, as described above.
94.42% of the loans in Group II have semi-annual interest rate and
semi-annual payment adjustment frequencies. 5.58% of the loans in Group II
have annual interest rate and annual payment adjustment frequencies. The
margins for the Mortgage Loans in Group II range from 2.09% to 10.09%. 65.41%
of the Mortgage Loans in Group II have a periodic rate adjustment cap of 1.00%;
28.93% of such Mortgage Loans have a periodic rate adjustment cap of 1.50%;
5.61% of the Mortgage Loans in Group II have a periodic rate adjustment cap of
2.00%; 0.02% have a periodic rate adjustment cap of 3.00%; and 0.02% have other
periodic rate adjustment caps. 45.79% of the Mortgage Loans in Group II have a
lifetime cap of 7.00%; 28.42% have a lifetime cap of 6.50%; 24.47% have a
lifetime cap of 6.00% and 1.32% have other lifetime caps. The weighted average
number of months until the next reset date is approximately 24 months. The
weighted average maximum Mortgage Rate was approximately 17.09%, with maximum
Mortgage Rates that range from 10.38% to 22.49%. The weighted average minimum
Mortgage Rate was approximately 10.00%, with minimum Mortgage Rates that range
from 3.25% to 15.99%.
The following tables describe the Group II Mortgage Loans and the
related Mortgaged Properties based upon the Group II Statistic Calculation Pool
as of the opening of business on the Initial Cut-Off Date.
S-48
<PAGE> 49
GROUP II
GEOGRAPHIC DISTRIBUTION
<TABLE>
<CAPTION>
STATE NUMBER OF AGGREGATE % OF AGGREGATE
----- MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
-------------- ----------------- -----------------
<S> <C> <C> <C>
Alabama . . . . . . 2 $ 76,100.00 0.02%
Alaska . . . . . . 1 24,789.13 0.01
Arizona . . . . . . 102 7,231,310.42 2.05
Arkansas . . . . . 4 324,215.56 0.09
California . . . . 320 40,505,623.98 11.47
Colorado . . . . . 106 9,646,531.96 2.73
Connecticut . . . . 34 3,834,733.56 1.09
Delaware . . . . . 11 1,165,378.80 0.33
District of Columbia 7 612,909.73 0.17
Florida . . . . . . 164 12,309,616.64 3.48
Georgia . . . . . . 52 4,341,019.28 1.23
Hawaii . . . . . . 4 880,706.05 0.25
Idaho . . . . . . . 16 1,426,354.68 0.40
Illinois . . . . . 214 22,154,444.47 6.27
Indiana . . . . . . 132 8,802,550.23 2.49
Iowa . . . . . . . 34 2,025,210.71 0.57
Kansas . . . . . . 38 2,989,912.36 0.85
Kentucky . . . . . 24 1,660,373.79 0.47
Louisiana . . . . . 9 558,543.64 0.16
Maine . . . . . . . 8 494,512.45 0.14
Maryland . . . . . 124 13,690,723.91 3.88
Massachusetts . . . 81 8,034,333.14 2.27
Michigan . . . . . 984 72,048,289.02 20.40
Minnesota . . . . . 71 6,612,647.50 1.87
Mississippi . . . . 7 610,765.68 0.17
Missouri . . . . . 53 3,361,819.77 0.95
Montana . . . . . . 5 287,360.11 0.08
Nebraska . . . . . 7 538,996.44 0.15
Nevada . . . . . . 47 4,611,178.47 1.31
New Hampshire . . . 14 1,248,426.66 0.35
New Jersey . . . . 173 21,250,840.98 6.02
New Mexico . . . . 10 936,397.77 0.27
New York . . . . . 135 13,825,493.72 3.91
North Carolina . . 63 5,562,811.60 1.57
Ohio . . . . . . . 152 11,412,839.89 3.23
Oklahoma . . . . . 33 2,114,837.95 0.60
Oregon . . . . . . 94 10,559,147.10 2.99
Pennsylvania . . . 136 9,643,734.26 2.73
Rhode Island . . . 12 990,513.31 0.28
South Carolina . . 21 1,422,388.71 0.40
South Dakota . . . 8 543,853.32 0.15
Tennessee . . . . . 15 1,392,452.19 0.39
Texas . . . . . . . 79 6,362,229.33 1.80
Utah . . . . . . . 73 7,828,926.47 2.22
Vermont . . . . . . 3 258,000.00 0.07
Virginia . . . . . 41 4,487,613.15 1.27
Washington . . . . 137 15,375,066.79 4.35
West Virginia . . . 5 346,080.41 0.10
Wisconsin . . . . . 79 6,504,190.76 1.84
Wyoming . . . . . . 6 293,955.44 0.08
-------- ------------------- ---------
TOTAL . . . . . 3,950 $ 353,220,751.29 100.00%
======== =================== =========
</TABLE>
S-49
<PAGE> 50
GROUP II
DISTRIBUTION OF CLTVS
<TABLE>
<CAPTION>
RANGE OF NUMBER OF AGGREGATE % OF AGGREGATE
CLTV RATIOS MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
-------------- ----------------- -------------------- --------------------
<S> <C> <C> <C>
90.01 - 95.00% . . . . . . 23 $ 2,317,263.64 0.66%
85.01 - 90.00 . . . . . . . 283 30,350,790.31 8.59
80.01 - 85.00 . . . . . . . 1,143 105,154,551.22 29.77
75.01 - 80.00 . . . . . . . 1,086 103,952,392.34 29.43
70.01 - 75.00 . . . . . . . 473 40,941,655.79 11.59
65.01 - 70.00 . . . . . . . 318 27,256,145.73 7.72
60.01 - 65.00 . . . . . . . 303 23,762,708.26 6.73
55.01 - 60.00 . . . . . . . 95 6,644,947.11 1.88
50.01 - 55.00 . . . . . . . 64 3,947,675.30 1.12
00.01 - 50.00 . . . . . . . 162 8,892,621.59 2.52
-------- ------------------ --------
TOTAL . . . . . . . . . 3,950 $353,220,751.29 100.00%
======== ================== ========
</TABLE>
GROUP II
DISTRIBUTION OF LTVS
<TABLE>
<CAPTION>
RANGE OF NUMBER OF AGGREGATE % OF AGGREGATE
LTV RATIOS MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
-------------- ----------------- -------------------- --------------------
<S> <C> <C> <C>
90.01 - 95.00% . . . . . . . 19 $ 2,377,342.74 0.67%
85.01 - 90.00 . . . . . . . 251 29,575,289.57 8.37
80.01 - 85.00 . . . . . . . 1,130 105,062,306.85 29.74
75.01 - 80.00 . . . . . . . 1,067 103,650,521.13 29.34
70.01 - 75.00 . . . . . . . 451 40,197,490.50 11.38
65.01 - 70.00 . . . . . . . 317 27,526,650.95 7.79
60.01 - 65.00 . . . . . . . 291 23,247,899.54 6.58
55.01 - 60.00 . . . . . . . 92 6,632,962.89 1.88
50.01 - 55.00 . . . . . . . 67 4,166,101.26 1.18
00.01 - 50.00 . . . . . . . 265 10,784,185.86 3.05
-------- ------------------ --------
TOTAL . . . . . . . . . . 3,950 $353,220,751.29 100.00%
======== ================== ========
</TABLE>
GROUP II
DISTRIBUTION OF JUNIOR LIEN RATIOS
(JUNIOR LIENS ONLY)
<TABLE>
<CAPTION>
RANGE OF NUMBER OF AGGREGATE % OF AGGREGATE
JUNIOR LIEN RATIOS MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
--------------------- ----------------- -------------------- --------------------
<S> <C> <C> <C>
10.001 - 20.000% . . . . . . 26 $ 405,153.53 13.79%
20.001 - 30.000 . . . . . . 10 156,065.89 5.31
30.001 - 40.000 . . . . . . 19 369,771.27 12.59
40.001 - 50.000 . . . . . . 25 331,006.59 11.27
50.001 - 60.000 . . . . . . 22 623,026.51 21.21
60.001 - 70.000 . . . . . . 15 390,414.52 13.29
70.001 - 80.000 . . . . . . 7 228,577.74 7.78
80.001 - 90.000 . . . . . . 9 371,092.14 12.63
90.001 - 100.000 . . . . . . 2 62,627.79 2.13
-------- ------------------ --------
TOTAL . . . . . . . . . . 135 $ 2,937,735.98 100.00%
======== ================== ========
</TABLE>
S-50
<PAGE> 51
GROUP II
DISTRIBUTION OF CURRENT MORTGAGE RATES
<TABLE>
<CAPTION>
RANGE OF CURRENT NUMBER OF AGGREGATE % OF AGGREGATE
MORTGAGE RATES MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
--------------------- ----------------- -------------------- --------------------
<S> <C> <C> <C> <C>
6.001 - 7.000% . . . . 2 $ 507,935.90 0.14%
7.001 - 8.000 . . . . . 56 6,590,596.72 1.87
8.001 - 9.000 . . . . . 361 40,682,530.23 11.52
9.001 - 10.000 . . . . 962 98,360,631.02 27.85
10.001 - 11.000 . . . . 1,165 102,540,288.73 29.03
11.001 - 12.000 . . . . 808 62,628,434.41 17.73
12.001 - 13.000 . . . . 348 23,603,404.13 6.68
13.001 - 14.000 . . . . 137 9,928,406.83 2.81
14.001 - 15.000 . . . . 75 5,545,375.29 1.57
15.001 - 16.000 . . . . 36 2,833,148.03 0.80
-------- ------------------ --------
TOTAL . . . . . . . . . 3,950 $353,220,751.29 100.00%
======== ================== ========
</TABLE>
GROUP II
REMAINING TERM TO MATURITY DISTRIBUTION
<TABLE>
<CAPTION>
REMAINING TERM NUMBER OF AGGREGATE % OF AGGREGATE
TO MATURITY MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
--------------------- ----------------- -------------------- --------------------
<S> <C> <C> <C>
13 - 24 . . . . . . . . 10 $ 66,931.83 0.02%
25 - 36 . . . . . . . . 21 165,572.18 0.05
37 - 48 . . . . . . . . 10 78,962.59 0.02
49 - 60 . . . . . . . . 19 328,678.41 0.09
61 - 72 . . . . . . . . 3 43,642.20 0.01
109 - 120 . . . . . . . . 6 310,715.14 0.09
133 - 144 . . . . . . . . 7 192,200.57 0.05
145 - 156 . . . . . . . . 1 25,503.54 0.01
169 - 180 . . . . . . . . 48 3,127,177.13 0.89
193 - 204 . . . . . . . . 2 82,834.16 0.02
205 - 216 . . . . . . . . 9 311,484.65 0.09
217 - 228 . . . . . . . . 22 913,866.69 0.26
229 - 240 . . . . . . . . 46 1,906,962.31 0.54
241 - 252 . . . . . . . . 21 755,128.72 0.21
253 - 264 . . . . . . . . 1 49,714.98 0.01
265 - 276 . . . . . . . . 1 122,892.99 0.03
289 - 300 . . . . . . . . 14 1,250,582.75 0.35
313 - 324 . . . . . . . . . 2 355,644.38 0.10
325 - 336 . . . . . . . . 1 112,483.83 0.03
337 - 348 . . . . . . . . 11 898,743.10 0.25
349 - 360 . . . . . . . . 3,695 342,121,029.14 96.86
-------- ------------------ ----------
TOTAL . . . . . . . . . 3,950 $353,220,751.29 100.00%
======== ================== ==========
</TABLE>
S-51
<PAGE> 52
GROUP II
DISTRIBUTION OF PRINCIPAL BALANCES
<TABLE>
<CAPTION>
RANGE OF NUMBER OF AGGREGATE % OF AGGREGATE
PRINCIPAL BALANCES MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
--------------------- ----------------- ------------------- --------------------
<S> <C> <C> <C>
0 - $5,000 . . . 15 $ 60,956.05 0.02%
5,001 - 10,000 . . . 29 211,112.33 0.06
10,001 - 15,000 . . . 18 218,013.64 0.06
15,001 - 20,000 . . . 48 881,628.97 0.25
20,001 - 25,000 . . . 68 1,567,520.39 0.44
25,001 - 30,000 . . . 120 3,339,840.42 0.95
30,001 - 35,000 . . . 105 3,455,247.49 0.98
35,001 - 40,000 . . . 163 6,213,982.15 1.76
40,001 - 45,000 . . . 187 8,035,519.21 2.27
45,001 - 50,000 . . . 198 9,474,206.80 2.68
50,001 - 55,000 . . . 188 9,905,492.38 2.80
55,001 - 60,000 . . . 241 13,925,411.51 3.94
60,001 - 65,000 . . . 212 13,357,301.71 3.78
65,001 - 70,000 . . . 210 14,237,484.61 4.03
70,001 - 75,000 . . . 186 13,519,624.41 3.83
75,001 - 80,000 . . . 181 14,069,715.58 3.98
80,001 - 85,000 . . . 156 12,926,584.67 3.66
85,001 - 90,000 . . . 140 12,303,109.11 3.48
90,001 - 95,000 . . . 130 12,090,001.44 3.42
95,001 - 100,000 . . . 162 15,831,934.44 4.48
100,001 - 150,000 . . . 754 90,699,987.93 25.68
150,001 - 200,000 . . . 249 42,705,093.39 12.09
200,001 - 250,000 . . . 86 18,937,421.25 5.36
250,001 - 300,000 . . . 49 13,392,418.25 3.79
300,001 - 350,000 . . . 25 8,117,641.66 2.30
350,001 - 400,000 . . . 15 5,676,921.19 1.61
400,001 - 450,000 . . . 5 2,127,275.43 0.60
450,001 - 500,000 . . . 5 2,398,943.98 0.68
500,001 - 550,000 . . . 3 1,533,910.03 0.43
600,001 - 650,000 . . . 1 621,660.24 0.18
Greater than = 750,001 1 1,384,790.63 0.39
------- ------------------- ---------
TOTAL . . . . . . . . . . 3,950 $ 353,220,751.29 100.00%
======= =================== =========
</TABLE>
S-52
<PAGE> 53
GROUP II
DISTRIBUTION OF PROPERTY TYPES
<TABLE>
<CAPTION>
NUMBER OF AGGREGATE % OF AGGREGATE
PROPERTY TYPE MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
---------------------------- ------------------- ---------------------- ------------------------
<S> <C> <C> <C>
SF Detached/De Minimus PUD . . . 3,458 $ 310,994,872.55 88.05%
SF Row House/Townhouse/Condo . . 225 19,704,060.52 5.58
Two to Four Family Homes . . . . 148 12,070,924.11 3.42
Prefabricated Single Family . . . 96 6,921,326.01 1.96
Other . . . . . . . . . . . . . . 23 3,529,568.10 1.00
------- --------------------- ---------
TOTAL . . . . . . . . . . . . . 3,950 $ 353,220,751.29 100.00%
======= ===================== =========
</TABLE>
GROUP II
DISTRIBUTION OF OCCUPANCY STATUS
<TABLE>
<CAPTION>
NUMBER OF AGGREGATE % OF AGGREGATE
OCCUPANCY STATUS MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
---------------------------- ------------------- ---------------------- ------------------------
<S> <C> <C> <C>
Noninvestor Owned* . . . . . . . 3,685 $ 336,611,077.87 95.30%
Investor Owned . . . . . . . . . 265 16,609,673.42 4.70
------- ------------------- ---------
TOTAL . . . . . . . . . . . . . 3,950 $ 353,220,751.29 100.00%
======= =================== =========
</TABLE>
- ------------------------
* Includes vacation and second homes.
GROUP II
DISTRIBUTION OF SEASONING
<TABLE>
<CAPTION>
MONTHS ELAPSED NUMBER OF AGGREGATE % OF AGGREGATE
SINCE ORIGINATION MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
---------------------------- ------------------- ---------------------- ------------------------
<S> <C> <C> <C>
0 - 6 . . . . . . . . 3,736 $ 341,994,932.76 96.82%
7 - 12 . . . . . . . . 62 6,868,001.39 1.94
13 - 24 . . . . . . . . 6 553,916.09 0.16
25 - 36 . . . . . . . . 2 400,211.35 0.11
97 - 108 . . . . . . . . 1 49,714.98 0.01
109 - 120 . . . . . . . . 28 897,216.18 0.25
121 - 132 . . . . . . . . 46 1,284,834.03 0.36
133 - 144 . . . . . . . . 24 413,203.01 0.12
145 - 156 . . . . . . . . 32 549,016.58 0.16
157 - 168 . . . . . . . . 13 209,704.92 0.06
------- -------------------- ---------
TOTAL . . . . . . . . . 3,950 $ 353,220,751.29 100.00%
======= ==================== =========
</TABLE>
S-53
<PAGE> 54
GROUP II
DISTRIBUTION OF MAXIMUM MORTGAGE RATES
<TABLE>
<CAPTION>
RANGE OF MAXIMUM NUMBER OF AGGREGATE % OF AGGREGATE
MORTGAGE RATES MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
------------------------- ------------------- -------------------- -------------------
<S> <C> <C> <C>
10.00 to 10.49% . . . . 2 $ 109,235.08 0.03%
10.50 to 10.99 . . . . 1 112,500.00 0.03
11.50 to 11.99 . . . . 1 49,100.00 0.01
12.00 to 12.49 . . . . 1 227,000.00 0.06
13.00 to 13.49 . . . . 2 121,033.34 0.03
13.50 to 13.99 . . . . 30 1,522,859.39 0.43
14.00 to 14.49 . . . . 31 2,887,673.17 0.82
14.50 to 14.99 . . . . 75 7,855,249.99 2.22
15.00 to 15.49 . . . . 172 18,416,690.33 5.21
15.50 to 15.99 . . . . 369 40,202,088.95 11.38
16.00 to 16.49 . . . . 639 60,525,462.96 17.14
16.50 to 16.99 . . . . 594 57,214,229.11 16.20
17.00 to 17.49 . . . . 534 47,239,248.89 13.37
17.50 to 17.99 . . . . 605 48,037,000.34 13.60
18.00 to 18.49 . . . . 270 20,444,164.53 5.79
18.50 to 18.99 . . . . 219 17,980,365.58 5.09
19.00 to 19.49 . . . . 123 8,626,617.43 2.44
19.50 to 19.99 . . . . 103 7,297,894.71 2.07
20.00 to 20.49 . . . . 71 6,021,340.56 1.70
20.50 to 20.99 . . . . 41 3,315,157.66 0.94
21.00 to 21.49 . . . . 30 2,045,475.51 0.58
21.50 to 21.99 . . . . 30 2,280,642.85 0.65
22.00 to 22.49 . . . . 7 689,720.91 0.20
--------- ----------------- ---------
TOTAL . . . . . . . . . . 3,950 $353,220,751.29 100.00%
========= ================= =========
</TABLE>
S-54
<PAGE> 55
GROUP II
DISTRIBUTION OF MINIMUM MORTGAGE RATES
<TABLE>
<CAPTION>
RANGE OF MINIMUM NUMBER OF AGGREGATE % OF AGGREGATE
MORTGAGE RATES MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
---------------------------- ------------------- -------------------- -------------------
<S> <C> <C> <C>
3.00 to 3.49% . . . . 2 $ 113,362.83 0.03%
3.50 to 3.99 . . . . 8 658,912.10 0.19
4.00 to 4.49 . . . . 6 938,168.47 0.27
4.50 to 4.99 . . . . 22 2,066,208.77 0.58
5.00 to 5.49 . . . . 38 3,391,596.61 0.96
5.50 to 5.99 . . . . 59 5,041,099.45 1.43
6.00 to 6.49 . . . . 57 5,173,892.31 1.46
6.50 to 6.99 . . . . 81 6,493,803.62 1.84
7.00 to 7.49 . . . . 52 4,658,878.82 1.32
7.50 to 7.99 . . . . 57 5,102,849.50 1.44
8.00 to 8.49 . . . . 104 12,039,284.71 3.41
8.50 to 8.99 . . . . 504 51,827,534.55 14.67
9.00 to 9.49 . . . . 258 29,043,877.09 8.22
9.50 to 9.99 . . . . 531 52,472,837.29 14.86
10.00 to 10.49 . . . . 515 43,678,670.25 12.37
10.50 to 10.99 . . . . 491 43,841,434.65 12.41
11.00 to 11.49 . . . . 338 27,244,394.82 7.71
11.50 to 11.99 . . . . 337 25,676,160.15 7.27
12.00 to 12.49 . . . . 131 9,108,764.99 2.58
12.50 to 12.99 . . . . 121 8,194,788.73 2.32
13.00 to 13.49 . . . . 69 3,892,798.04 1.10
13.50 to 13.99 . . . . 61 4,707,925.32 1.33
14.00 to 14.49 . . . . 35 2,729,334.11 0.77
14.50 to 14.99 . . . . 36 2,267,088.20 0.64
15.00 to 15.49 . . . . 28 2,071,472.60 0.59
15.50 to 15.99 . . . . 9 785,613.31 0.22
--------- ----------------- ---------
TOTAL . . . . . . . . . . 3,950 $353,220,751.29 100.00%
========= ================= =========
</TABLE>
GROUP II
DISTRIBUTION OF MARGINS
<TABLE>
<CAPTION>
RANGE OF NUMBER OF AGGREGATE % OF AGGREGATE
MARGINS MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
---------------------------- ------------------- -------------------- -------------------
<S> <C> <C> <C>
2.01 to 3.00% . . 57 $ 1,720,157.32 0.49%
3.01 to 4.00 . . . 170 12,161,493.26 3.44
4.01 to 5.00 . . . 449 46,926,504.03 13.29
5.01 to 6.00 . . . 835 88,177,799.00 24.96
6.01 to 7.00 . . . 1,311 115,620,062.87 32.73
7.01 to 8.00 . . . 865 68,925,787.64 19.51
8.01 to 9.00 . . . 210 15,986,468.23 4.53
9.01 to 10.00 . . . 49 3,515,044.43 1.00
10.01 to 11.00 . . . 4 187,434.51 0.05
--------- ----------------- ---------
TOTAL . . . . . . . . . . 3,950 $353,220,751.29 100.00%
========= ================= =========
</TABLE>
S-55
<PAGE> 56
GROUP II
NEXT INTEREST ADJUSTMENT DATE DISTRIBUTION
<TABLE>
<CAPTION>
NEXT INTEREST NUMBER OF AGGREGATE % OF AGGREGATE
ADJUSTMENT DATE MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
---------------------------- ------------------- -------------------- -------------------
<S> <C> <C> <C>
January, 1998 . . . . . . . . 28 $ 2,438,681.06 0.69%
February, 1998 . . . . . . . 49 4,070,374.00 1.15
March, 1998 . . . . . . . . . 130 13,402,983.67 3.79
April, 1998 . . . . . . . . . 171 16,362,006.64 4.63
May, 1998 . . . . . . . . . . 82 8,380,736.43 2.37
June, 1998 . . . . . . . . . 52 3,821,784.84 1.08
July, 1998 . . . . . . . . . 20 1,151,222.51 0.33
August, 1998 . . . . . . . . 20 1,544,468.09 0.44
September, 1998 . . . . . . . 39 2,578,629.45 0.73
October, 1998 . . . . . . . . 48 4,636,869.79 1.31
November, 1998 . . . . . . . 47 3,187,491.62 0.90
December, 1998 . . . . . . . 17 583,993.72 0.17
January, 1999 . . . . . . . . 9 253,377.56 0.07
February, 1999 . . . . . . . 2 128,018.06 0.04
March, 1999 . . . . . . . . . 6 556,072.24 0.16
April, 1999 . . . . . . . . . 12 1,394,081.44 0.39
May, 1999 . . . . . . . . . . 28 2,915,319.01 0.83
June, 1999 . . . . . . . . . 48 4,874,458.05 1.38
July, 1999 . . . . . . . . . 62 6,134,608.61 1.74
August, 1999 . . . . . . . . 60 4,986,314.13 1.41
September, 1999 . . . . . . . 456 46,848,889.27 13.26
October, 1999 . . . . . . . . 885 79,384,660.89 22.47
November, 1999 . . . . . . . 566 46,427,591.49 13.14
December, 1999 . . . . . . . 264 19,059,119.25 5.40
February, 2000 . . . . . . . 2 244,262.70 0.07
March, 2000 . . . . . . . . . 2 206,312.76 0.06
April, 2000 . . . . . . . . . 7 804,074.62 0.23
May, 2000 . . . . . . . . . . 5 505,011.41 0.14
June, 2000 . . . . . . . . . 8 628,617.91 0.18
July, 2000 . . . . . . . . . 14 2,009,567.57 0.57
August, 2000 . . . . . . . . 10 834,228.78 0.24
September, 2000 . . . . . . . 55 4,523,413.87 1.28
October, 2000 . . . . . . . . 172 17,196,377.31 4.87
November, 2000 . . . . . . . 133 11,003,422.11 3.12
December, 2000 . . . . . . . 39 2,688,975.00 0.76
December, 2001 . . . . . . . 1 50,115.38 0.01
April, 2002 . . . . . . . . . 2 472,900.99 0.13
May, 2002 . . . . . . . . . . 2 433,068.80 0.12
June, 2002 . . . . . . . . . 3 341,494.42 0.10
July, 2002 . . . . . . . . . 4 589,517.22 0.17
September, 2002 . . . . . . . 65 6,240,079.75 1.77
October, 2002 . . . . . . . . 131 11,004,070.46 3.12
November, 2002 . . . . . . . 143 12,726,529.99 3.60
December, 2002 . . . . . . . 51 5,596,958.42 1.58
--------- ----------------- ---------
TOTAL . . . . . . . . . 3,950 $353,220,751.29 100.00%
========= ================= =========
</TABLE>
S-56
<PAGE> 57
CONVEYANCE OF SUBSEQUENT MORTGAGE LOANS
During the Funding Period, the Pooling and Servicing Agreement permits
the Trust to acquire $46,807,367 aggregate principal balance of Subsequent
Mortgage Loans for assignment to Group I and $18,562,375 aggregate principal
balance of Subsequent Mortgage Loans for assignment to Group II. Accordingly,
the statistical characteristics of either Group will vary as of any Subsequent
Cut-Off Date upon the acquisition of the Subsequent Mortgage Loans which are
assigned to such Group.
PREPAYMENT AND YIELD CONSIDERATIONS
The weighted average life of, and, if purchased at other than par, the
yield to maturity on an Offered Certificate will be directly related to the
rate of payment of principal of the Mortgage Loans in the related Mortgage Loan
Group, including for this purpose voluntary payment in whole or in part of
Mortgage Loans in the Mortgage Loan Group prior to stated maturity (a
"Prepayment"), liquidations due to defaults, casualties and condemnations, and
repurchases of Mortgage Loans in the related Mortgage Loan Group by the
Sponsor, the Originators or the Master Servicer. The actual rate of principal
prepayments on pools of mortgage loans is influenced by a variety of economic,
tax, geographic, demographic, social, legal and other factors and has
fluctuated considerably in recent years. In addition, the rate of principal
prepayments may differ among pools of mortgage loans at any time because of
specific factors relating to the mortgage loans in the particular pool,
including, among other things, the age of the mortgage loans, the geographic
locations of the properties securing the loans and the extent of the
mortgagors' equity in such properties, and changes in the mortgagors' housing
needs, job transfers and unemployment.
The timing of changes in the rate of prepayments may significantly
affect the actual yield to investors, even if the average rate of principal
prepayments is consistent with the expectations of investors. In general, the
earlier the payment of principal of the Mortgage Loans the greater the effect
on an investor's yield to maturity. As a result, the effect on an investor's
yield of prepayments occurring at a rate higher (or lower) than the rate
anticipated by the investor during the period immediately following the
issuance of the Offered Certificates will not be offset by a subsequent like
reduction (or increase) in the rate of principal prepayments. Investors must
make their own decisions as to the appropriate prepayment assumptions to be
used in deciding whether to purchase any of the Offered Certificates. The
Sponsor makes no representations or warranties as to the rate of prepayment or
the factors to be considered in connection with such determination.
PROJECTED PREPAYMENTS AND YIELDS FOR OFFERED CERTIFICATES (OTHER THAN THE CLASS
A-IO CERTIFICATES)
If purchased at other than par, the yield to maturity on an Offered
Certificate will be affected by the rate of the payment of principal of the
Mortgage Loans in the related Mortgage Loan Group. If the actual rate of
payments on the Mortgage Loans in the related Mortgage Loan Group is slower
than the rate anticipated by an investor who purchases an Offered Certificate
of the related class at a discount, the actual yield to such investor will be
lower than such investor's anticipated yield. If the actual rate of payments
on the Mortgage Loans in the related Mortgage Loan Group is faster than the
rate anticipated by an investor who purchases an Offered Certificate of the
related class at a premium, the actual yield to such investor will be lower
than such investor's anticipated yield.
The Mortgage Loans in Group I are fixed-rate mortgage loans. The rate
of prepayments with respect to conventional fixed rate mortgage loans has
fluctuated significantly in recent years. In general, if prevailing interest
rates fall significantly below the interest rates on fixed rate mortgage loans,
such mortgage loans are likely to be subject to higher prepayment rates than if
prevailing rates remain at or above the interest rate on such mortgage loans.
However, the monthly payment on mortgage loans similar to the Mortgage Loans is
often smaller than the monthly payment on a purchase-money first mortgage loan.
Consequently, a decrease in the interest rate payable as a result of a
refinancing would result in a relatively small reduction in the amount of the
Mortgagor's monthly payment, as a result of the relatively small loan balance.
Conversely, if prevailing interest rates rise appreciably above the interest
rates on fixed rate mortgage loans, such mortgage loans are likely to
experience a lower prepayment rate than if prevailing rates remain at or below
the interest rates on such mortgage loans. 74.11% of the Mortgage Loans in the
Group I Statistic Calculation Pool by aggregate principal balance had
prepayment penalties.
S-57
<PAGE> 58
All of the Mortgage Loans in Group II are adjustable rate mortgage
loans. As is the case with conventional fixed rate mortgage loans, adjustable
rate mortgage loans may be subject to a greater rate of principal prepayments
in a declining interest rate environment. For example, if prevailing interest
rates fall significantly, adjustable rate mortgage loans could be subject to
higher prepayment rates than if prevailing interest rates remain constant
because the availability of fixed-rate mortgage loans at competitive interest
rates may encourage mortgagors to refinance their adjustable rate mortgage
loans to "lock in" a lower fixed interest rate. However, no assurance can be
given as to the level of prepayments that the Mortgage Loans will experience.
67.86% of the Mortgage Loans in the Group II Statistic Calculation Pool by
aggregate principal balance had prepayment penalties.
The Final Scheduled Payment Dates for the Class A-6, Class A-7, Class
M-1, Class M-2 and Class B-1 Certificates have been calculated assuming that
the Mortgage Loan in the related Mortgage Loan Group having the latest maturity
amortizes according to its terms, plus one year. The Final Scheduled Payment
Dates for the Class A-1, Class A-2, Class A-3, Class A-4, Class A-5 and Class
A-8 Certificates have been calculated based on 0% CPR with no Monthly Excess
Cashflow used to make accelerated payments of principal to the owners of the
related Offered Certificates and on the assumption specified below in this
section. If, on the 360th Payment Date, the Certificate Principal Balance of
the Class A-9 Certificates has not been reduced to zero (after taking into
account all principal distributions on such Payment Date), a draw may be made
on the Class A-8 and Class A-9 Insurance Policy to reduce the outstanding
Principal Balance of the Class A-9 Certificates to zero.
"Weighted average life" refers to the average amount of time that will
elapse from the date of issuance of a security until each dollar of principal
of such security will be repaid to the investor. The weighted average life of
the Offered Certificates of each class will be influenced by the rate at which
principal payments on the Mortgage Loans in the related Mortgage Loan Pool are
paid, which may be in the form of scheduled amortization, accelerated
amortization or prepayments (for this purpose, the term "prepayment" includes
Prepayments and liquidations due to default) or as a result of an early
termination of the Trust.
The model used in this Prospectus Supplement is a prepayment
assumption (the "Prepayment Assumption") which represents an assumed rate of
prepayment each month relative to the then outstanding principal balance of a
pool of mortgage loans for the life of such mortgage loans. The "100%
Prepayment Assumption" assumes a conditional prepayment rate of 3% per annum of
the then outstanding principal balance of the Mortgage Loans in the first month
of the life of the Mortgage Loans and an additional 1.55% (precisely, 17/11%)
per annum in each month thereafter until the twelfth month. Beginning in the
twelfth month and in each month thereafter during the life of the Mortgage
Loans, the 100% Prepayment Assumption assumes a conditional prepayment rate of
20% per annum each month. As used in the table below, 0% Prepayment Assumption
assumes prepayment rates equal to 0% of the Prepayment Assumption, i.e., no
prepayments on the synthetic mortgage loans having the characteristics
described below. Correspondingly, 100% Prepayment Assumption assumes
prepayment rates equal to 100% of the Prepayment Assumption, and so forth. The
Prepayment Assumption does not purport to be a historical description of
prepayment experience or a prediction of the anticipated rate of prepayment of
any pool of mortgage loans, including the related Mortgage Loans. The Sponsor
believes that no existing statistics of which it is aware provide a reliable
basis for holders of Offered Certificates to predict the amount or the timing
of receipt of prepayments on the Mortgage Loans.
The tables below were prepared on the basis of the assumptions in the
following paragraph and there are discrepancies between the characteristics of
the actual Mortgage Loans and the characteristics of the Mortgage Loans assumed
in preparing the tables. Any such discrepancy may have an effect upon the
percentages of the Class A Certificate Principal Balances outstanding and the
weighted average lives of the Offered Certificates set forth in the tables. In
addition, since the actual Mortgage Loans in each Mortgage Loan Group have
characteristics which differ from those assumed in preparing the tables set
forth below, the distributions of principal on the Offered Certificates may be
made earlier or later than as indicated in the tables.
For the purpose of the tables below, it is assumed that:
(i) the Mortgage Loans consist of synthetic mortgage loans having
the characteristics set forth below,
(ii) the Closing Date is December 18, 1997,
(iii) distributions on the Certificates are made on the 25th day of
each month regardless of the
S-58
<PAGE> 59
day on which the Payment Date actually occurs, commencing in
January, 1998 in accordance with the priorities described
herein,
(iv) all prepayments are repayments in full and include 30 days'
interest thereon,
(v) no early termination of the Trust occurs,
(vi) no Mortgage Loan is ever delinquent,
(vii) the assumed levels of one-month LIBOR, six-month LIBOR, and
CMT are 5.9687%, 5.9375% and 5.56%, respectively,
(viii) Offered Certificates have the respective pass-through rates
and original principal balances as set forth herein, and
(ix) all funds originally deposited in the Pre-Funding Account are
used to purchase the Subsequent Mortgage Loans on the Closing
Date.
S-59
<PAGE> 60
PREPAYMENT SCENARIOS
<TABLE>
<CAPTION>
SCENARIO I SCENARIO II SCENARIO III SCENARIO IV SCENARIO V SCENARIO VI SCENARIO VII
---------- ----------- ------------ ----------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Group I(1) . . . . . . 0% 50% 100% 115% 150% 200% 250%
Group II(2) . . . . . . 0% 10% 20% 25% 30% 40% 50%
</TABLE>
-------------------------
(1) As a percentage of the Prepayment Assumption.
(2) As a conditional prepayment rate (CPR) percentage.
GROUP I
<TABLE>
<CAPTION>
ORIGINAL REMAINING ORIGINAL
GROSS TERM TO TERM TO AMORTIZATION
COUPON MATURITY MATURITY TERM AMORTIZATION
PRINCIPAL BALANCE RATE (MONTHS) (MONTHS) (MONTHS) METHOD
----------------- ---------- ---------- ----------- -------------- ----------
<S> <C> <C> <C> <C> <C>
$ 92,321,374.67 11.047% 179 177 359 Balloon
$ 24,987,139.09 10.702% 115 115 115 Level Pay
$ 112,774,175.74 10.700% 180 178 180 Level Pay
$ 99,184,365.33 10.268% 239 238 239 Level Pay
$ 170,732,945.17 10.809% 360 359 360 Level Pay
</TABLE>
S-60
<PAGE> 61
GROUP II
<TABLE>
<CAPTION>
PERIODIC
CAP ORIGINAL REMAINING
GROSS NEXT RATE (FIRST PERIODIC CAP TERM TO TERM TO
PRINCIPAL COUPON ADJUSTMENT RESET (SUBSEQUENT LIFE LIFE MATURITY MATURITY
BALANCE RATE DATE MARGIN DATE) RESET DATES) CAP FLOOR (MONTHS) (MONTHS)
------- ---- ---- ------ ----- ------------ --- ----- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$19,326,477.93 9.872% 9/1/98 5.625% 1.996% 1.981% 16.442% 9.413% 351 320
6,221,512.33 10.122% 8/1/00 5.877% 2.986% 2.000% 16.468% 10.021% 356 351
22,178,796.13 10.270% 3/1/98 6.396% 1.299% 1.299% 16.848% 10.036% 355 352
20,142,348.14 10.709% 4/1/98 6.659% 1.324% 1.324% 17.248% 10.465% 355 353
12,627,482.11 10.491% 5/1/98 6.470% 1.295% 1.154% 16.902% 9.952% 359 355
11,355,112.35 10.725% 5/1/99 6.596% 2.889% 1.146% 17.283% 10.203% 359 354
13,515,979.01 11.012% 7/1/99 6.733% 2.889% 1.267% 17.591% 10.395% 359 356
57,912,011.02 10.752% 9/1/99 6.539% 2.940% 1.368% 17.351% 10.696% 360 358
102,899,650.92 10.820% 10/1/99 6.655% 2.986% 1.241% 17.295% 10.618% 359 358
61,821,695.37 10.660% 11/1/99 6.454% 2.991% 1.017% 16.986% 10.407% 360 360
4,559,394.39 10.717% 7/1/00 5.956% 3.000% 1.009% 17.026% 8.882% 360 357
33,267,094.73 9.677% 10/1/00 5.441% 2.965% 1.028% 16.615% 9.195% 353 353
1,747,499.35 11.272% 6/1/02 5.871% 1.430% 1.076% 18.196% 9.245% 347 343
14,741,983.49 10.129% 10/1/02 5.103% 1.951% 1.013% 17.116% 9.051% 350 349
17,682,962.73 10.307% 11/1/02 5.012% 1.606% 1.000% 17.283% 9.093% 354 353
</TABLE>
<TABLE>
<CAPTION>
RESET
INDEX FREQUENCY
----- ---------
<S> <C>
1 Year CMT Annual
1 Year CMT Annual
6 Month LIBOR Semi-annual
6 Month LIBOR Semi-annual
6 Month LIBOR Semi-annual
6 Month LIBOR Semi-annual
6 Month LIBOR Semi-annual
6 Month LIBOR Semi-annual
6 Month LIBOR Semi-annual
6 Month LIBOR Semi-annual
6 Month LIBOR Semi-annual
6 Month LIBOR Semi-annual
6 Month LIBOR Semi-annual
6 Month LIBOR Semi-annual
6 Month LIBOR Semi-annual
</TABLE>
S-61
<PAGE> 62
The following tables set forth the percentages of the initial
principal amount of the Offered Certificates that would be outstanding after
each of the dates shown, based on prepayment scenarios described in the table
entitled "Prepayment Scenarios". The percentages have been rounded to the
nearest 1%.
PERCENTAGE OF INITIAL CLASS A-1 CERTIFICATE PRINCIPAL BALANCE OUTSTANDING
<TABLE>
<CAPTION>
Dates Scenario 1 Scenario 2 Scenario 3 Scenario 4 Scenario 5 Scenario 6 Scenario 7
----- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
12/01/1997 100 100 100 100 100 100 100
12/25/1998 86 63 41 34 17 0 0
12/25/1999 80 27 0 0 0 0 0
12/25/2000 74 0 0 0 0 0 0
12/25/2001 67 0 0 0 0 0 0
12/25/2002 59 0 0 0 0 0 0
12/25/2003 51 0 0 0 0 0 0
12/25/2004 43 0 0 0 0 0 0
12/25/2005 36 0 0 0 0 0 0
12/25/2006 27 0 0 0 0 0 0
12/25/2007 19 0 0 0 0 0 0
12/25/2008 10 0 0 0 0 0 0
12/25/2009 0 0 0 0 0 0 0
12/25/2010 0 0 0 0 0 0 0
12/25/2011 0 0 0 0 0 0 0
12/25/2012 0 0 0 0 0 0 0
12/25/2013 0 0 0 0 0 0 0
12/25/2014 0 0 0 0 0 0 0
12/25/2015 0 0 0 0 0 0 0
12/25/2016 0 0 0 0 0 0 0
12/25/2017 0 0 0 0 0 0 0
12/25/2018 0 0 0 0 0 0 0
12/25/2019 0 0 0 0 0 0 0
12/25/2020 0 0 0 0 0 0 0
12/25/2021 0 0 0 0 0 0 0
12/25/2022 0 0 0 0 0 0 0
12/25/2023 0 0 0 0 0 0 0
12/25/2024 0 0 0 0 0 0 0
12/25/2025 0 0 0 0 0 0 0
12/25/2026 0 0 0 0 0 0 0
10/25/2027 0 0 0 0 0 0 0
Weighted
Average Life
(years):(1) 6.08 1.45 0.93 0.85 0.73 0.62 0.54
Weighted
Average Life
(years):(2) 6.08 1.45 0.93 0.85 0.73 0.62 0.54
</TABLE>
(1) To Maturity
(2) To 10% Call
The weighted average life of each indicated class of Offered
Certificates has been determined by (i) multiplying the amount of each
principal payment by the number of years from the date of issuance to the
related Payment Date, (ii) adding the results and (iii) dividing the sum of the
initial respective Certificate Principal Balance for the related Offered
Certificates as of the Closing Date.
S-62
<PAGE> 63
PERCENTAGE OF INITIAL CLASS A-2 CERTIFICATE PRINCIPAL BALANCE OUTSTANDING
<TABLE>
<CAPTION>
DATES SCENARIO 1 SCENARIO 2 SCENARIO 3 SCENARIO 4 SCENARIO 5 SCENARIO 6 SCENARIO 7
----- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
12/01/1997 100 100 100 100 100 100 100
12/25/1998 100 100 100 100 100 90 51
12/25/1999 100 100 65 43 0 0 0
12/25/2000 100 91 0 0 0 0 0
12/25/2001 100 48 0 0 0 0 0
12/25/2002 100 9 0 0 0 0 0
12/25/2003 100 0 0 0 0 0 0
12/25/2004 100 0 0 0 0 0 0
12/25/2005 100 0 0 0 0 0 0
12/25/2006 100 0 0 0 0 0 0
12/25/2007 100 0 0 0 0 0 0
12/25/2008 100 0 0 0 0 0 0
12/25/2009 99 0 0 0 0 0 0
12/25/2010 80 0 0 0 0 0 0
12/25/2011 58 0 0 0 0 0 0
12/25/2012 0 0 0 0 0 0 0
12/25/2013 0 0 0 0 0 0 0
12/25/2014 0 0 0 0 0 0 0
12/25/2015 0 0 0 0 0 0 0
12/25/2016 0 0 0 0 0 0 0
12/25/2017 0 0 0 0 0 0 0
12/25/2018 0 0 0 0 0 0 0
12/25/2019 0 0 0 0 0 0 0
12/25/2020 0 0 0 0 0 0 0
12/25/2021 0 0 0 0 0 0 0
12/25/2022 0 0 0 0 0 0 0
12/25/2023 0 0 0 0 0 0 0
12/25/2024 0 0 0 0 0 0 0
12/25/2025 0 0 0 0 0 0 0
12/25/2026 0 0 0 0 0 0 0
10/25/2027 0 0 0 0 0 0 0
Weighted
Average Life
(years):(1) 14.00 4.03 2.25 2.00 1.60 1.27 1.07
Weighted
Average Life
(years):(2) 14.00 4.03 2.25 2.00 1.60 1.27 1.07
</TABLE>
(1) To Maturity
(2) To 10% Call
The weighted average life of each indicated class of Offered
Certificates has been determined by (i) multiplying the amount of each
principal payment by the number of years from the date of issuance to the
related Payment Date, (ii) adding the results and (iii) dividing the sum of the
initial respective Certificate Principal Balance for the related Offered
Certificates as of the Closing Date.
S-63
<PAGE> 64
PERCENTAGE OF INITIAL CLASS A-3 CERTIFICATE PRINCIPAL BALANCE OUTSTANDING
<TABLE>
<CAPTION>
DATES SCENARIO 1 SCENARIO 2 SCENARIO 3 SCENARIO 4 SCENARIO 5 SCENARIO 6 SCENARIO 7
----- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
12/01/1997 100 100 100 100 100 100 100
12/25/1998 100 100 100 100 100 100 100
12/25/1999 100 100 100 100 83 0 0
12/25/2000 100 100 62 0 0 0 0
12/25/2001 100 100 0 0 0 0 0
12/25/2002 100 100 0 0 0 0 0
12/25/2003 100 45 0 0 0 0 0
12/25/2004 100 0 0 0 0 0 0
12/25/2005 100 0 0 0 0 0 0
12/25/2006 100 0 0 0 0 0 0
12/25/2007 100 0 0 0 0 0 0
12/25/2008 100 0 0 0 0 0 0
12/25/2009 100 0 0 0 0 0 0
12/25/2010 100 0 0 0 0 0 0
12/25/2011 100 0 0 0 0 0 0
12/25/2012 40 0 0 0 0 0 0
12/25/2013 17 0 0 0 0 0 0
12/25/2014 0 0 0 0 0 0 0
12/25/2015 0 0 0 0 0 0 0
12/25/2016 0 0 0 0 0 0 0
12/25/2017 0 0 0 0 0 0 0
12/25/2018 0 0 0 0 0 0 0
12/25/2019 0 0 0 0 0 0 0
12/25/2020 0 0 0 0 0 0 0
12/25/2021 0 0 0 0 0 0 0
12/25/2022 0 0 0 0 0 0 0
12/25/2023 0 0 0 0 0 0 0
12/25/2024 0 0 0 0 0 0 0
12/25/2025 0 0 0 0 0 0 0
12/25/2026 0 0 0 0 0 0 0
10/25/2027 0 0 0 0 0 0 0
15.24 6.04 3.15 2.76 2.17 1.68 1.37
Weighted
Average Life
(years):(1)
15.24 6.04 3.15 2.76 2.17 1.68 1.37
Weighted
Average Life
(years):(2)
</TABLE>
(1) To Maturity
(2) To 10% Call
The weighted average life of each indicated class of Offered
Certificates has been determined by (i) multiplying the amount of each
principal payment by the number of years from the date of issuance to the
related Payment Date, (ii) adding the results and (iii) dividing the sum of the
initial respective Certificate Principal Balance for the related Offered
Certificates as of the Closing Date.
S-64
<PAGE> 65
PERCENTAGE OF INITIAL CLASS A-4 CERTIFICATE PRINCIPAL BALANCE OUTSTANDING
<TABLE>
<CAPTION>
DATES SCENARIO 1 SCENARIO 2 SCENARIO 3 SCENARIO 4 SCENARIO 5 SCENARIO 6 SCENARIO 7
----- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
12/01/1997 100 100 100 100 100 100 100
12/25/1998 100 100 100 100 100 100 100
12/25/1999 100 100 100 100 100 48 0
12/25/2000 100 100 100 93 5 0 0
12/25/2001 100 100 71 40 0 0 0
12/25/2002 100 100 26 0 0 0 0
12/25/2003 100 100 0 0 0 0 0
12/25/2004 100 97 0 0 0 0 0
12/25/2005 100 83 0 0 0 0 0
12/25/2006 100 66 0 0 0 0 0
12/25/2007 100 48 0 0 0 0 0
12/25/2008 100 31 0 0 0 0 0
12/25/2009 100 14 0 0 0 0 0
12/25/2010 100 0 0 0 0 0 0
12/25/2011 100 0 0 0 0 0 0
12/25/2012 100 0 0 0 0 0 0
12/25/2013 100 0 0 0 0 0 0
12/25/2014 94 0 0 0 0 0 0
12/25/2015 78 0 0 0 0 0 0
12/25/2016 59 0 0 0 0 0 0
12/25/2017 41 0 0 0 0 0 0
12/25/2018 33 0 0 0 0 0 0
12/25/2019 24 0 0 0 0 0 0
12/25/2020 14 0 0 0 0 0 0
12/25/2021 3 0 0 0 0 0 0
12/25/2022 0 0 0 0 0 0 0
12/25/2023 0 0 0 0 0 0 0
12/25/2024 0 0 0 0 0 0 0
12/25/2025 0 0 0 0 0 0 0
12/25/2026 0 0 0 0 0 0 0
12/25/2027 0 0 0 0 0 0 0
Weighted
Average Life
(years):(1) 20.04 9.95 4.56 3.90 2.73 2.06 1.66
Weighted
Average Life
(years):(2) 20.04 9.95 4.56 3.90 2.73 2.06 1.66
</TABLE>
(1) To Maturity
(2) To 10% Call
The weighted average life of each indicated class of Offered
Certificates has been determined by (i) multiplying the amount of each
principal payment by the number of years from the date of issuance to the
related Payment Date, (ii) adding the results and (iii) dividing the sum of the
initial respective Certificate Principal Balance for the related Offered
Certificates as of the Closing Date.
S-65
<PAGE> 66
PERCENTAGE OF INITIAL CLASS A-5 CERTIFICATE PRINCIPAL BALANCE OUTSTANDING
<TABLE>
<CAPTION>
DATES SCENARIO 1 SCENARIO 2 SCENARIO 3 SCENARIO 4 SCENARIO 5 SCENARIO 6 SCENARIO 7
----- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
12/01/1997 100 100 100 100 100 100 100
12/25/1998 100 100 100 100 100 100 100
12/25/1999 100 100 100 100 100 100 0
12/25/2000 100 100 100 100 100 0 0
12/25/2001 100 100 100 100 12 0 0
12/25/2002 100 100 100 86 0 0 0
12/25/2003 100 100 85 0 0 0 0
12/25/2004 100 100 6 0 0 0 0
12/25/2005 100 100 0 0 0 0 0
12/25/2006 100 100 0 0 0 0 0
12/25/2007 100 100 0 0 0 0 0
12/25/2008 100 100 0 0 0 0 0
12/25/2009 100 100 0 0 0 0 0
12/25/2010 100 93 0 0 0 0 0
12/25/2011 100 35 0 0 0 0 0
12/25/2012 100 0 0 0 0 0 0
12/25/2013 100 0 0 0 0 0 0
12/25/2014 100 0 0 0 0 0 0
12/25/2015 100 0 0 0 0 0 0
12/25/2016 100 0 0 0 0 0 0
12/25/2017 100 0 0 0 0 0 0
12/25/2018 100 0 0 0 0 0 0
12/25/2019 100 0 0 0 0 0 0
12/25/2020 100 0 0 0 0 0 0
12/25/2021 100 0 0 0 0 0 0
12/25/2022 63 0 0 0 0 0 0
12/25/2023 10 0 0 0 0 0 0
12/25/2024 0 0 0 0 0 0 0
12/25/2025 0 0 0 0 0 0 0
12/25/2026 0 0 0 0 0 0 0
10/25/2027 0 0 0 0 0 0 0
Weighted
Average Life
(years):(1) 25.30 13.81 6.52 5.40 3.85 2.42 1.92
Weighted
Average Life
(years):(2) 25.30 13.81 6.52 5.40 3.85 2.42 1.92
</TABLE>
(1) To Maturity
(2) To 10% Call
The weighted average life of each indicated class of Offered
Certificates has been determined by (i) multiplying the amount of each
principal payment by the number of years from the date of issuance to the
related Payment Date, (ii) adding the results and (iii) dividing the sum of the
initial respective Certificate Principal Balance for the related Offered
Certificates as of the Closing Date.
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<PAGE> 67
PERCENTAGE OF INITIAL CLASS A-6 CERTIICATE PRINCIPAL BALANCE OUTSTANDING
<TABLE>
<CAPTION>
DATES SCENARIO 1 SCENARIO 2 SCENARIO 3 SCENARIO 4 SCENARIO 5 SCENARIO 6 SCENARIO 7
----- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
12/01/1997 100 100 100 100 100 100 100
12/25/1998 100 100 100 100 100 100 100
12/25/1999 100 100 100 100 100 100 80
12/25/2000 100 100 100 100 100 0 0
12/25/2001 100 100 100 100 100 0 0
12/25/2002 100 100 100 100 54 0 0
12/25/2003 100 100 100 95 31 0 0
12/25/2004 100 100 100 71 21 0 0
12/25/2005 100 100 98 69 21 0 0
12/25/2006 100 100 84 60 21 0 0
12/25/2007 100 100 68 47 18 0 0
12/25/2008 100 100 53 36 13 0 0
12/25/2009 100 100 41 26 7 0 0
12/25/2010 100 100 31 19 2 0 0
12/25/2011 100 100 23 14 0 0 0
12/25/2012 100 68 11 4 0 0 0
12/25/2013 100 57 7 1 0 0 0
12/25/2014 100 48 4 0 0 0 0
12/25/2015 100 39 1 0 0 0 0
12/25/2016 100 31 0 0 0 0 0
12/25/2017 100 25 0 0 0 0 0
12/25/2018 100 21 0 0 0 0 0
12/25/2019 100 18 0 0 0 0 0
12/25/2020 100 15 0 0 0 0 0
12/25/2021 100 11 0 0 0 0 0
12/25/2022 100 7 0 0 0 0 0
12/25/2023 100 4 0 0 0 0 0
12/25/2024 81 1 0 0 0 0 0
12/25/2025 56 0 0 0 0 0 0
12/25/2026 28 0 0 0 0 0 0
10/25/2027 0 0 0 0 0 0 0
Weighted
Average Life
(years):(1) 28.22 18.06 11.78 9.99 6.42 2.76 2.18
Weighted
Average Life
(years):(2) 27.83 15.80 9.52 7.67 5.36 2.76 2.18
</TABLE>
(1) To Maturity
(2) To 10% Call
The weighted average life of each indicated class of Offered
Certificates has been determined by (i) multiplying the amount of each
principal payment by the number of years from the date of issuance to the
related Payment Date, (ii) adding the results and (iii) dividing the sum of the
initial respective Certificate Principal Balance for the related Offered
Certificates as of the Closing Date.
S-67
<PAGE> 68
PERCENTAGE OF INITIAL CLASS A-7 CERTIFICATE PRINCIPAL BALANCE OUTSTANDING
<TABLE>
<CAPTION>
DATES SCENARIO 1 SCENARIO 2 SCENARIO 3 SCENARIO 4 SCENARIO 5 SCENARIO 6 SCENARIO 7
----- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
12/01/1997 100 100 100 100 100 100 100
12/25/1998 100 100 100 100 100 100 100
12/25/1999 100 100 100 100 100 100 100
12/25/2000 100 100 100 100 100 98 5
12/25/2001 99 93 89 89 91 98 5
12/25/2002 97 86 79 78 77 59 5
12/25/2003 95 75 65 62 56 35 5
12/25/2004 91 65 50 46 38 20 4
12/25/2005 79 42 23 20 20 12 0
12/25/2006 67 27 10 8 8 4 0
12/25/2007 56 17 4 3 2 0 0
12/25/2008 46 10 2 1 1 0 0
12/25/2009 37 6 1 0 0 0 0
12/25/2010 28 4 0 0 0 0 0
12/25/2011 20 2 0 0 0 0 0
12/25/2012 1 0 0 0 0 0 0
12/25/2013 1 0 0 0 0 0 0
12/25/2014 0 0 0 0 0 0 0
12/25/2015 0 0 0 0 0 0 0
12/25/2016 0 0 0 0 0 0 0
12/25/2017 0 0 0 0 0 0 0
12/25/2018 0 0 0 0 0 0 0
12/25/2019 0 0 0 0 0 0 0
12/25/2020 0 0 0 0 0 0 0
12/25/2021 0 0 0 0 0 0 0
12/25/2022 0 0 0 0 0 0 0
12/25/2023 0 0 0 0 0 0 0
12/25/2024 0 0 0 0 0 0 0
12/25/2025 0 0 0 0 0 0 0
12/25/2026 0 0 0 0 0 0 0
10/25/2027 0 0 0 0 0 0 0
Weighted
Average Life
(years):(1) 10.76 7.80 6.76 6.61 6.47 5.80 2.93
Weighted
Average Life
(years):(2) 10.76 7.80 6.69 6.43 5.73 4.58 2.74
</TABLE>
(1) To Maturity
(2) To 10% Call
The weighted average life of each indicated class of Offered
Certificates has been determined by (i) multiplying the amount of each
principal payment by the number of years from the date of issuance to the
related Payment Date, (ii) adding the results and (iii) dividing the sum of the
initial respective Certificate Principal Balance for the related Offered
Certificates as of the Closing Date.
S-68
<PAGE> 69
PERCENTAGE OF INITIAL CLASS A-8 CERTIFICATE PRINCIPAL BALANCE OUTSTANDING
<TABLE>
<CAPTION>
DATES SCENARIO 1 SCENARIO 2 SCENARIO 3 SCENARIO 4 SCENARIO 5 SCENARIO 6 SCENARIO 7
----- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
12/01/1997 100 100 100 100 100 100 100
12/25/1998 93 78 63 55 48 33 19
12/25/1999 93 64 38 26 15 0 0
12/25/2000 92 51 18 6 0 0 0
12/25/2001 91 40 4 0 0 0 0
12/25/2002 90 29 0 0 0 0 0
12/25/2003 89 20 0 0 0 0 0
12/25/2004 88 12 0 0 0 0 0
12/25/2005 87 5 0 0 0 0 0
12/25/2006 85 0 0 0 0 0 0
12/25/2007 83 0 0 0 0 0 0
12/25/2008 82 0 0 0 0 0 0
12/25/2009 79 0 0 0 0 0 0
12/25/2010 77 0 0 0 0 0 0
12/25/2011 74 0 0 0 0 0 0
12/25/2012 71 0 0 0 0 0 0
12/25/2013 68 0 0 0 0 0 0
12/25/2014 64 0 0 0 0 0 0
12/25/2015 59 0 0 0 0 0 0
12/25/2016 54 0 0 0 0 0 0
12/25/2017 49 0 0 0 0 0 0
12/25/2018 42 0 0 0 0 0 0
12/25/2019 35 0 0 0 0 0 0
12/25/2020 27 0 0 0 0 0 0
12/25/2021 18 0 0 0 0 0 0
12/25/2022 8 0 0 0 0 0 0
12/25/2023 0 0 0 0 0 0 0
12/25/2024 0 0 0 0 0 0 0
12/25/2025 0 0 0 0 0 0 0
12/25/2026 0 0 0 0 0 0 0
10/25/2027 0 0 0 0 0 0 0
Weighted
Average Life
(years):(1) 17.54 3.53 1.77 1.40 1.15 0.83 0.64
Weighted
Average Life
(years):(2) 17.54 3.53 1.77 1.40 1.15 0.83 0.64
</TABLE>
(1) To Maturity
(2) To 10% Call
The weighted average life of each indicated class of Offered
Certificates has been determined by (i) multiplying the amount of each
principal payment by the number of years from the date of issuance to the
related Payment Date, (ii) adding the results and (iii) dividing the sum of the
initial respective Certificate Principal Balance for the related Offered
Certificates as of the Closing Date.
S-69
<PAGE> 70
PERCENTAGE OF INITIAL CLASS A-9 CERTIFICATE PRINCIPAL BALANCE OUTSTANDING
<TABLE>
<CAPTION>
DATES SCENARIO 1 SCENARIO 2 SCENARIO 3 SCENARIO 4 SCENARIO 5 SCENARIO 6 SCENARIO 7
----- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
12/01/1997 100 100 100 100 100 100 100
12/25/1998 96 88 80 76 72 64 56
12/25/1999 96 80 67 60 54 42 28
12/25/2000 96 74 56 49 41 26 15
12/25/2001 95 67 48 38 29 16 7
12/25/2002 95 62 39 28 20 9 3
12/25/2003 94 57 31 21 14 5 1
12/25/2004 93 52 25 16 10 3 0
12/25/2005 93 49 20 12 7 1 0
12/25/2006 92 45 15 9 4 1 0
12/25/2007 91 40 12 6 3 0 0
12/25/2008 90 35 10 4 2 0 0
12/25/2009 89 31 8 3 1 0 0
12/25/2010 88 28 6 2 0 0 0
12/25/2011 86 24 4 1 0 0 0
12/25/2012 84 21 3 1 0 0 0
12/25/2013 82 19 2 0 0 0 0
12/25/2014 80 16 2 0 0 0 0
12/25/2015 78 14 1 0 0 0 0
12/25/2016 75 12 1 0 0 0 0
12/25/2017 72 10 0 0 0 0 0
12/25/2018 69 9 0 0 0 0 0
12/25/2019 65 7 0 0 0 0 0
12/25/2020 60 6 0 0 0 0 0
12/25/2021 56 5 0 0 0 0 0
12/25/2022 50 3 0 0 0 0 0
12/25/2023 44 2 0 0 0 0 0
12/25/2024 33 1 0 0 0 0 0
12/25/2025 22 1 0 0 0 0 0
12/25/2026 10 0 0 0 0 0 0
10/25/2027 0 0 0 0 0 0 0
Weighted
Average Life
(years):(1) 22.31 9.15 4.84 3.82 3.11 2.19 1.62
Weighted
Average Life
(years):(2) 22.17 8.25 4.38 3.50 2.82 2.01 1.49
</TABLE>
(1) To Maturity
(2) To 10% Call
The weighted average life of each indicated class of Offered
Certificates has been determined by (i) multiplying the amount of each
principal payment by the number of years from the date of issuance to the
related Payment Date, (ii) adding the results and (iii) dividing the sum of the
initial respective Certificate Principal Balance for the related Offered
Certificates as of the Closing Date.
S-70
<PAGE> 71
PERCENTAGE OF INITIAL CLASS M-1 CERTIFICATE PRINCIPAL BALANCE OUTSTANDING
<TABLE>
<CAPTION>
DATES SCENARIO 1 SCENARIO 2 SCENARIO 3 SCENARIO 4 SCENARIO 5 SCENARIO 6 SCENARIO 7
----- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
12/01/1997 100 100 100 100 100 100 100
12/25/1998 100 100 100 100 100 100 100
12/25/1999 100 100 100 100 100 100 100
12/25/2000 100 100 100 100 100 100 100
12/25/2001 100 100 82 71 51 40 100
12/25/2002 100 100 64 54 35 17 67
12/25/2003 100 97 50 40 23 10 23
12/25/2004 100 84 38 30 16 6 0
12/25/2005 100 73 30 22 11 0 0
12/25/2006 100 63 23 16 7 0 0
12/25/2007 100 54 17 12 5 0 0
12/25/2008 100 46 13 9 0 0 0
12/25/2009 100 39 10 6 0 0 0
12/25/2010 100 33 7 5 0 0 0
12/25/2011 100 27 5 0 0 0 0
12/25/2012 75 16 0 0 0 0 0
12/25/2013 70 13 0 0 0 0 0
12/25/2014 65 11 0 0 0 0 0
12/25/2015 59 9 0 0 0 0 0
12/25/2016 53 7 0 0 0 0 0
12/25/2017 47 6 0 0 0 0 0
12/25/2018 44 5 0 0 0 0 0
12/25/2019 41 4 0 0 0 0 0
12/25/2020 37 0 0 0 0 0 0
12/25/2021 34 0 0 0 0 0 0
12/25/2022 29 0 0 0 0 0 0
12/25/2023 24 0 0 0 0 0 0
12/25/2024 19 0 0 0 0 0 0
12/25/2025 13 0 0 0 0 0 0
12/25/2026 7 0 0 0 0 0 0
10/25/2027 0 0 0 0 0 0 0
Weighted
Average Life
(years):(1) 20.77 11.45 6.97 6.17 4.99 4.44 5.49
Weighted
Average Life
(years):(2) 20.69 11.01 6.46 5.61 4.58 4.12 3.52
</TABLE>
(1) To Maturity
(2) To 10% Call
The weighted average life of each indicated class of Offered
Certificates has been determined by (i) multiplying the amount of each
principal payment by the number of years from the date of issuance to the
related Payment Date, (ii) adding the results and (iii) dividing the sum of the
initial respective Certificate Principal Balance for the related Offered
Certificates as of the Closing Date.
S-71
<PAGE> 72
PERCENTAGE OF INITIAL CLASS M-2 CERTIFICATE PRINCIPAL BALANCE OUTSTANDING
<TABLE>
<CAPTION>
DATES SCENARIO 1 SCENARIO 2 SCENARIO 3 SCENARIO 4 SCENARIO 5 SCENARIO 6 SCENARIO 7
----- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
12/01/1997 100 100 100 100 100 100 100
12/25/1998 100 100 100 100 100 100 100
12/25/1999 100 100 100 100 100 100 100
12/25/2000 100 100 100 100 100 100 100
12/25/2001 100 100 82 71 51 29 46
12/25/2002 100 100 64 54 35 17 6
12/25/2003 100 97 50 40 23 10 0
12/25/2004 100 84 38 30 16 3 0
12/25/2005 100 73 30 22 11 0 0
12/25/2006 100 63 23 16 5 0 0
12/25/2007 100 54 17 12 1 0 0
12/25/2008 100 46 13 8 0 0 0
12/25/2009 100 39 10 4 0 0 0
12/25/2010 100 33 6 0 0 0 0
12/25/2011 100 27 2 0 0 0 0
12/25/2012 75 16 0 0 0 0 0
12/25/2013 70 13 0 0 0 0 0
12/25/2014 65 11 0 0 0 0 0
12/25/2015 59 9 0 0 0 0 0
12/25/2016 53 6 0 0 0 0 0
12/25/2017 47 3 0 0 0 0 0
12/25/2018 44 1 0 0 0 0 0
12/25/2019 41 0 0 0 0 0 0
12/25/2020 37 0 0 0 0 0 0
12/25/2021 34 0 0 0 0 0 0
12/25/2022 29 0 0 0 0 0 0
12/25/2023 24 0 0 0 0 0 0
12/25/2024 19 0 0 0 0 0 0
12/25/2025 13 0 0 0 0 0 0
12/25/2026 4 0 0 0 0 0 0
10/25/2027 0 0 0 0 0 0 0
Weighted
Average Life
(years):(1) 20.76 11.33 6.91 6.10 4.88 4.12 4.10
Weighted
Average Life
(years):(2) 20.69 11.01 6.46 5.61 4.52 3.85 3.52
</TABLE>
(1) To Maturity
(2) To 10% Call
The weighted average life of each indicated class of Offered
Certificates has been determined by (i) multiplying the amount of each
principal payment by the number of years from the date of issuance to the
related Payment Date, (ii) adding the results and (iii) dividing the sum of the
initial respective Certificate Principal Balance for the related Offered
Certificates as of the Closing Date.
S-72
<PAGE> 73
PERCENTAGE OF INITIAL CLASS B-1 CERTIFICATE PRINCIPAL BALANCE OUTSTANDING
<TABLE>
<CAPTION>
DATES SCENARIO 1 SCENARIO 2 SCENARIO 3 SCENARIO 4 SCENARIO 5 SCENARIO 6 SCENARIO 7
----- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
12/01/1997 100 100 100 100 100 100 100
12/25/1998 100 100 100 100 100 100 100
12/25/1999 100 100 100 100 100 100 100
12/25/2000 100 100 100 100 100 100 100
12/25/2001 100 100 82 71 51 29 11
12/25/2002 100 100 64 54 35 14 0
12/25/2003 100 97 50 40 23 1 0
12/25/2004 100 84 38 30 12 0 0
12/25/2005 100 73 30 22 3 0 0
12/25/2006 100 63 23 13 0 0 0
12/25/2007 100 54 15 5 0 0 0
12/25/2008 100 46 7 0 0 0 0
12/25/2009 100 39 2 0 0 0 0
12/25/2010 100 33 0 0 0 0 0
12/25/2011 100 27 0 0 0 0 0
12/25/2012 75 13 0 0 0 0 0
12/25/2013 70 8 0 0 0 0 0
12/25/2014 65 4 0 0 0 0 0
12/25/2015 59 0 0 0 0 0 0
12/25/2016 53 0 0 0 0 0 0
12/25/2017 47 0 0 0 0 0 0
12/25/2018 44 0 0 0 0 0 0
12/25/2019 41 0 0 0 0 0 0
12/25/2020 37 0 0 0 0 0 0
12/25/2021 34 0 0 0 0 0 0
12/25/2022 29 0 0 0 0 0 0
12/25/2023 24 0 0 0 0 0 0
12/25/2024 18 0 0 0 0 0 0
12/25/2025 8 0 0 0 0 0 0
12/25/2026 0 0 0 0 0 0 0
10/25/2027 0 0 0 0 0 0 0
Weighted
Average Life
(years):(1) 20.65 10.99 6.66 5.87 4.67 3.83 3.53
Weighted
Average Life
(years):(2) 20.64 10.93 6.46 5.61 4.49 3.69 3.40
</TABLE>
(1) To Maturity
(2) To 10% Call
The weighted average life of each indicated class of Offered
Certificates has been determined by (i) multiplying the amount of each
principal payment by the number of years from the date of issuance to the
related Payment Date, (ii) adding the results and (iii) dividing the sum of the
initial respective Certificate Principal Balance for the related Offered
Certificates as of the Closing Date.
The actual characteristics and performance of the Mortgage Loans will
differ from the assumptions used in constructing the tables set forth above,
which only demonstrate how the Mortgage Loans may behave under varying
S-73
<PAGE> 74
prepayment scenarios. It is unlikely that the Mortgage Loans will prepay at
the same levels of CPR or in accordance with the Prepayment Assumptions.
Moreover, the varying remaining terms to maturity of the Mortgage Loans could
produce slower or faster principal payments then indicated in the foregoing
tables.
YIELD SENSITIVITY OF THE CLASS A-IO CERTIFICATES
As the owners of interest-only strip securities, the Owners of the
Class A-IO Certificates will be entitled to receive monthly distributions only
of interest, as described herein. Because they will not receive any
distributions of principal, the Owners of the Class A-IO Certificates will be
affected by prepayments, liquidations and other dispositions (including
optional redemptions described herein) of the Mortgage Loans in Group I to a
greater degree than will the Owners of the other Classes of Group I
Certificates. In addition, the Notional Principal Balance applicable to
interest calculations on the Class A-IO Certificates is (x) through the 30th
Payment Date, the Class A-7 Certificate Principal Balance and (y) thereafter,
zero. Because, however, the Class A-7 Certificates will amortize in accordance
with the distribution of the Class A-7 Lockout Distribution Amount, the
prepayment scenarios described above are mitigated and the performance of the
Class A-IO Certificates is expected to be more stable than if such Notional
Principal Balance were calculated based on the amortization of the underlying
Group I Mortgage Loans directly; consequently, the yield sensitivity of such
Certificates will only be impacted at extremely high prepayment rates.
PAYMENT LAG FEATURE OF GROUP I CERTIFICATES
Pursuant to the Pooling and Servicing Agreement, interest on the Group
I Certificates (except the A-1 Certificates) accrues during the calendar month
immediately preceding the month in which the related Payment Date occurs.
Payment Dates occur on the 25th day of each month (or, if such day is not a
business day, on the next business day) commencing in January 1998. Thus, the
effective yield to the Owners of the Group I Certificates (except the A-1
Certificates) will be below that otherwise produced by the related Pass-Through
Rate because distributions to Owners of the Group I Certificates in respect of
any given month will not be made until on or after the 25th day of the
following month.
USE OF PROCEEDS
The Sponsor will cause the Trust to acquire the Mortgage Loans (other
than the Subsequent Mortgage Loans) concurrently with the sale of the Offered
Certificates. The Pre-Funding Account and the Capitalized Interest Account
will be funded from a portion of the proceeds of the sale of the Offered
Certificates. The net proceeds from the sale of the Offered Certificates will
be paid over to the Originators in consideration of the transfer of the
Mortgage Loans. Such amount will be determined as a result of the pricing of
the Offered Certificates through the offering described in this Prospectus
Supplement. The net proceeds to be received from the sale of the Mortgage
Loans will be added to the Originators' general funds and will be available for
general corporate purposes, including the repayment of debt and the purchase of
new mortgage loans.
THE SPONSOR AND THE MASTER SERVICER
The Sponsor, Advanta Mortgage Conduit Services, Inc. is a direct
subsidiary of Advanta Mortgage Corp. USA, the Master Servicer, and is an
indirect subsidiary of Advanta Corp., a Delaware corporation ("Advanta
Parent"), a publicly-traded company based in Horsham, Pennsylvania with assets
as of September 30, 1997 in excess of $6.7 billion. Advanta Parent, through
its subsidiaries (including the Master Servicer) managed assets (including
mortgage loans) in excess of $20.8 billion as of September 30, 1997. See "The
Sponsor and the Transferor" in the Prospectus.
As of September 30, 1997, the Master Servicer and its subsidiaries
were servicing approximately 66,000 Mortgage Loans in the Owned and Managed
Servicing Portfolio representing an aggregate outstanding principal balance of
approximately $4.3 billion, and approximately 132,000 mortgage loans in the
Third-Party Servicing Portfolio representing an aggregate outstanding principal
balance of approximately $9.0 billion. See "The Master Servicer" in the
Prospectus.
As of September 30, 1997, the Sponsor or its affiliates have issued 33
issues of mortgage pass-through securities with an original balance of
approximately $6.2 billion.
S-74
<PAGE> 75
The Master Servicer may resign or be removed, only in accordance with
the terms of the Pooling and Servicing Agreement. No removal or resignation
shall become effective until the Trustee or a successor servicer shall have
assumed the Master Servicer's responsibilities and obligations in accordance
therewith. See "The Pooling and Servicing Agreement -- Removal and Resignation
of the Master Servicer" in the Prospectus.
The Master Servicer may not assign its obligations under the Pooling
and Servicing Agreement, in whole or in part, unless it shall have first
obtained the written consent of the Trustee and of the Class A-8 and Class A-9
Insurer, which consent shall not be unreasonably withheld; provided, that any
assignee must meet the eligibility requirements for a successor servicer set
forth in the Pooling and Servicing Agreement. See "The Pooling and Servicing
Agreement -- Removal and Resignation of the Master Servicer" in the Prospectus.
The Master Servicer may enter into Sub-Servicing Agreements with
qualified Sub-Servicers with respect to the servicing of all or any portion of
the Mortgage Loans. The Pooling and Servicing Agreement will provide that
affiliates of the Master Servicer which are qualified to service mortgage loans
are qualified Sub-Servicers. No Sub-Servicing Agreements discharge the Master
Servicer from its servicing obligations. See "Mortgage Loan Program --
Sub-Servicers" in the Prospectus.
Upon removal or resignation of the Master Servicer, the Trustee may
solicit bids for a successor servicer and, pending the appointment of a
successor Master Servicer, the Trustee will be required to serve as Master
Servicer. If the Trustee is unable to obtain a qualifying bid and is prevented
by law from acting as servicer, the Trustee will be required to appoint, or
petition a court of competent jurisdiction to appoint, an eligible successor.
Any successor is required to be a housing and home finance institution, bank or
mortgage servicing institution which is acceptable to the Trustee and the Class
A-8 and Class A-9 Insurer and shall assume all or any part of the
responsibilities, duties or liabilities of the Master Servicer.
The Offered Certificates will not represent an interest in or
obligation of, nor are the Mortgage Loans guaranteed by, the Sponsor, the
Master Servicer or Advanta Parent, nor will they be insured or guaranteed by
the Federal Deposit Insurance Corporation (the "FDIC") or any other
governmental agency or instrumentality.
RECENT DEVELOPMENTS RELATED TO ADVANTA PARENT
On March 17, 1997, Advanta Parent announced that it expected to report
1997 results well below previous expectations. Advanta Parent reported a loss
of $19.8 million for the first quarter of 1997. The losses are attributed to a
number of factors, including increases in consumer bankruptcies and charge-offs
and lower receivables balances than originally anticipated in its credit card
business.
On July 16, 1997, Advanta Parent reported net income of $5.4 million
for the second quarter of 1997, compared to net income of $45.1 million for the
second quarter of 1996. On October 15, 1997, Advanta Parent reported net
income of $42.4 million for the third quarter of 1997, compared to net income
of $44.4 million for the third quarter of 1996.
On June 30, 1997, purported shareholders of Advanta Parent, the
ultimate corporate parent of the Sponsor, the Affiliated Originators and the
Master Servicer, who are represented by a group of law firms filed a putative
class action complaint against Advanta Parent and several of its current and
former officers and directors in the United States District Court for the
Eastern District of Pennsylvania. A second, similar complaint was filed in the
same court a few days later by a different group of purported Advanta Parent
shareholders and a different group of law firms. Both complaints allege that
Advanta Parent made misrepresentations in certain of its public filings and
statements in violation of the Securities Exchange Act of 1934. The complaints
seek damages of an unspecified amount. Advanta Parent believes the complaints
are without merit and will vigorously defend itself against the actions. On
August 25, 1997, a cardholder of Advanta Parent instituted a putative class
action complaint against Advanta Parent and certain of its subsidiaries,
including Advanta National Bank, one of the Affiliated Originators, in the
Delaware Superior Court for New Castle County. Subsequently, on September 8,
10, and 12 and on October 2, 1997, similar actions were filed in the Orange
County California Superior Court, the United States District Court for the
Eastern District of Tennessee, Delaware Superior Court and the Circuit Court of
Covington County, Alabama, respectively. The complaints allege that cardholder
accounts in a specific program were improperly repriced to a higher percentage
rate of interest. The complaints assert various violations of federal and
state law with respect to such repricings, and each seeks damages of an
unspecified amount. Advanta Parent believes that the complaints are without
merit and will vigorously defend against the actions. The program at issue
comprises a very small portion of Advanta Parent's consumer credit card
receivables.
S-75
<PAGE> 76
On October 28, 1997, Advanta Parent announced that it had reached a
definitive agreement under which Fleet Financial Group, Inc. ("Fleet") will
acquire Advanta Parent's consumer credit card business (including certain
assets and liabilities of Advanta National Bank, one of the Affiliated
Originators, relating to the consumer credit card business) and will combine it
with Fleet's consumer credit card business (the "Transaction"). Advanta Parent
will continue to operate its mortgage and business services companies,
including the Sponsor, the Affiliated Originators and the Master Servicer.
Advanta Parent intends to seek shareholder approval and the
Transaction is subject to regulatory approval. The Transaction, which is
expected to close by late 1997 or early 1998, is anticipated to have a total
value to Advanta Parent of approximately $1.3 billion, including an after tax
gain of approximately $500 million.
Advanta Parent also announced that it intends to make a tender offer
to repurchase between $750 to $850 million of its common stock in 1998,
following the closing of the Transaction. Following the tender offer, it is
expected that Advanta Parent will have a book value of approximately $650
million.
Advanta Parent has reported that its overall charge-off rate on all
managed receivables (for which the mortgage loan portfolio represented
approximately 27% at September 30, 1997), for the nine months ended at
September 30, 1997, was 5.4%, compared to 3.0% for the same period of 1996.
Advanta Parent has further reported that its overall delinquency ratio (30 days
or more) for all managed receivables at September 30, 1997 was 5.7%, compared
to 4.2% at September 30, 1996.
The ability of Advanta Parent's subsidiaries to honor their financial
and other obligations is to some extent influenced by the financial condition
of Advanta Parent. Such obligations of the Sponsor and the Master Servicer,
insofar as they relate to the Trust and the Offered Certificates, primarily
consist of the Sponsor's obligation to repurchase defective Mortgage Loans and
the Master Servicer's obligation to service the Mortgage Loan pool. To the
extent that the Sponsor and/or the Master Servicer's ability to perform such
obligations is adversely affected, the Mortgage Loan pool may experience an
increased level of delinquencies and losses. The credit enhancement available
to the Trust, however, will be available, under the circumstances described
herein under "Credit Enhancement" to absorb certain losses, as described
herein.
This Prospectus Supplement contains forward-looking statements,
including but not limited to projections of future earnings, that are subject
to certain risks and uncertainties that could cause actual results to differ
materially from those projected. Significant risks and uncertainties include:
Advanta Parent and its subsidiaries' managed net interest margin, which in turn
is affected by Advanta Parent and its subsidiaries' success in originating new
credit card accounts, the receivables volume and initial pricing of new
accounts, the impact of repricing existing accounts and account attrition, the
mix of account types and interest rate fluctuations; the level of
delinquencies, customer bankruptcies, and charge-offs; and the amount and rate
of growth in Advanta Parent and its subsidiaries' expenses. Advanta Parent and
its subsidiaries' earnings also may be significantly affected by factors that
affect consumer debt, competitive pressures from other providers of financial
services, the effects of governmental regulation, the amount and cost of
financing available to Advanta Parent and its subsidiaries, the difficulty or
inability to securitize Advanta Parent and its subsidiaries' receivables and
the impact of the ratings on debt of Advanta Parent and its subsidiaries.
Additional risks that may affect Advanta Parent and its subsidiaries' future
performance are set forth in "Risk Factors" in the Prospectus and in this
Prospectus Supplement and in other filings with the Securities and Exchange
Commission.
DESCRIPTION OF THE CERTIFICATES
GENERAL
Persons in whose name an Offered Certificate is registered in the
Register maintained by the Trustee are the "Owners" of the Offered
Certificates. For so long as the Offered Certificates are in book-entry form
with DTC, the only "Owner" of the Offered Certificates as the term "Owner" is
used in the Pooling and Servicing Agreement will be Cede & Co., the nominee of
DTC. No Beneficial Owner will be entitled to receive a Definitive Certificate
representing such person's interest in the Trust, except in the event that
Definitive Certificates are issued under limited circumstances set forth in the
Pooling and Servicing Agreement. All references herein to the Owners of
Offered Certificates shall mean and include the rights of Beneficial Owners, as
such rights may be exercised through DTC and its participating organizations,
except as otherwise specified in the Pooling and Servicing Agreement. See
"Description of the Securities -- Form of Securities" in the Prospectus.
Each class of Offered Certificates (other than the Class A-IO
Certificates) shall evidence the right to receive on each Payment Date the
related Class Distribution Amount for such class of Offered Certificates, in
each
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case until the related Certificate Principal Balance has been reduced to zero.
The Class A-IO Certificates shall evidence the right to receive interest
payments only. The Owners of the Class R Certificates will be entitled to
receive distributions of residual Net Monthly Excess Cashflow not required for
other purposes pursuant to the Pooling and Servicing Agreement.
REMITTANCE DATES
The Pooling and Servicing Agreement will require that the Trustee
create and maintain a Certificate Account. See "Description of the Securities
- -- Payments on Mortgage Loans" in the Prospectus.
On the eighteenth day of each month (or, if such day is not a Business
Day, the immediately preceding Business Day) (the "Remittance Date") the Master
Servicer is required to withdraw from the Principal and Interest Account and
remit to the Trustee, for deposit in the Certificate Account, the Monthly
Remittance Amount. The Monthly Remittance Amount is the sum of the amounts
collected by the Master Servicer in respect of the Mortgage Loans during the
period beginning on the first day of the calendar month immediately preceding
the month in which the related Remittance Date occurs and ending on the last
day of such month (the "Remittance Period") plus any related Loan Purchase
Prices, Substitution Amounts, Delinquency Advances, Compensating Interest and
the proceeds of any liquidation of the Trust Estate relating to the Mortgage
Loans, less the sum of certain amounts the Master Servicer is permitted to
withdraw from the Principal and Interest Account, as described under
"Description of the Securities -- Withdrawals from the Principal and Interest
Account."
"Substitution Amounts" are amounts delivered in connection with a
qualified substitute Mortgage Loan, as described in the Pooling and Servicing
Agreement.
BOOK ENTRY REGISTRATION OF THE OFFERED CERTIFICATES
The Offered Certificates will be book-entry certificates (the
"Book-Entry Certificates"). The Beneficial Owners may elect to hold their
Offered Certificates through DTC in the United States, or CEDEL or Euroclear in
Europe if they are participants of such systems ("Participants"), or indirectly
through organizations which are Participants in such systems. The Book-Entry
Certificates will be issued in one or more certificates per class of Offered
Certificates which in the aggregate equal the principal balance of such Offered
Certificates and will initially be registered in the name of Cede & Co., the
nominee of DTC. CEDEL and Euroclear will hold omnibus positions on behalf of
their Participants through customers' securities accounts in CEDEL's and
Euroclear's names on the books of their respective depositaries which in turn
will hold such positions in customers' securities accounts in the depositaries'
names on the books of DTC. Citibank will act as depositary for CEDEL and Morgan
will act as depositary for Euroclear (in such capacities, individually the
"Relevant Depositary" and collectively the "European Depositaries"). Investors
may hold such beneficial interests in the Book-Entry Certificates in minimum
denominations representing principal amounts of $1,000 and in integral
multiples in excess thereof. Except as described below, no Beneficial Owner
will be entitled to receive a Definitive Certificate. Unless and until
Definitive Certificates are issued, it is anticipated that the only "Owner" of
such Offered Certificates will be Cede & Co., as nominee of DTC. Beneficial
Owners will not be Owners as that term is used in the Pooling and Servicing
Agreement. Beneficial Owners are only permitted to exercise their rights
indirectly through Participants and DTC.
The Beneficial Owner's ownership of a Book-Entry Certificate will be
recorded on the records of the brokerage firm, bank, thrift institution or
other financial intermediary (each, a "Financial Intermediary") that maintains
the Beneficial Owner's account for such purpose. In turn, the Financial
Intermediary's Ownership of such Book-Entry Certificate will be recorded on the
records of DTC (or of a participating firm that acts as agent for the Financial
Intermediary, whose interest will in turn be recorded on the records of DTC, if
the Beneficial Owner's Financial Intermediary is not a DTC Participant and on
the records of CEDEL or Euroclear, as appropriate).
Beneficial Owners will receive all distributions of principal of, and
interest on, the Offered Certificates from the Trustee through DTC and DTC
Participants. While such Offered Certificates are outstanding (except under
the circumstances described below), under the rules, regulations and procedures
creating and affecting DTC and its operations (the "Rules"), DTC is required to
make book-entry transfers among Participants on whose behalf it acts with
respect to such Offered Certificates and is required to receive and transmit
distributions of principal of, and interest on, such Offered Certificates.
Participants and indirect participants with whom Beneficial Owners have
accounts with respect to Offered Certificates are similarly required to make
book-entry transfers and receive and transmit such distributions on behalf of
their respective Beneficial Owners. Accordingly, although Beneficial
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Owners will not possess certificates, the Rules provide a mechanism by which
Beneficial Owners will receive distributions and will be able to transfer their
interest.
Beneficial Owners will not receive or be entitled to receive
certificates representing their respective interests in the Offered
Certificates, except under the limited circumstances described below. Unless
and until Definitive Certificates are issued, Beneficial Owners who are not
Participants may transfer ownership of Offered Certificates only through
Participants and indirect participants by instructing such Participants and
indirect participants to transfer such Offered Certificates, by book-entry
transfer, through DTC for the account of the purchasers of such Offered
Certificates, which account is maintained with their respective Participants.
Under the Rules and in accordance with DTC's normal procedures, transfers of
ownership of such Offered Certificates will be executed through DTC and the
accounts of the respective Participants at DTC will be debited and credited.
Similarly, the Participants and indirect participants will make debits or
credits, as the case may be, on their records on behalf of the selling and
purchasing Beneficial Owners.
Because of time zone differences, credits of securities received in
CEDEL or Euroclear as a result of a transaction with a Participant will be made
during subsequent securities settlement processing and dated the business day
following the DTC settlement date. Such credits or any transactions in such
securities settled during such processing will be reported to the relevant
Euroclear or CEDEL Participants on such business day. Cash received in CEDEL
or Euroclear as a result of sales of securities by or through a CEDEL
Participant (as defined below) or Euroclear Participant (as defined below) to a
DTC Participant will be received with value on the DTC settlement date but will
be available in the relevant CEDEL or Euroclear cash account only as of the
business day following settlements in DTC. For information with respect to tax
documentation procedures relating to the Certificates, see "Certain Federal
Income Tax Consequences -- Foreign Investors" and " -- Backup Withholding" in
the Prospectus and "Global Clearance, Settlement and Tax Documentation
Procedures -- Certain U.S. Federal Income Tax Documentation Requirements" in
Annex I to the Prospectus.
Transfers between Participants will occur in accordance with DTC
rules. Transfers between CEDEL Participants and Euroclear Participants will
occur in accordance with their respective rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through CEDEL
Participants or Euroclear Participants, on the other, will be effected in DTC
in accordance with DTC rules on behalf of the relevant European international
clearing system by the Relevant Depositary; however, such cross-market
transactions will require delivery of instructions to the relevant European
international clearing system by the counterparty in such system in accordance
with its rules and procedures and within its established deadlines (European
time). The relevant European international clearing system will, if the
transaction meets its settlement requirements, deliver instructions to the
Relevant Depositary to take action to effect final settlement on its behalf by
delivering or receiving securities in DTC, and making or receiving payment in
accordance with normal procedures for same day funds settlement applicable to
DTC. CEDEL Participants and Euroclear Participants may not deliver
instructions directly to the European Depositaries.
DTC, which is a New York-chartered limited purpose trust company,
performs services for its Participants ("DTC Participants"), some of which
(and/or their representatives) own DTC. In accordance with its normal
procedures, DTC is expected to record the positions held by each DTC
Participant in the Book-Entry Certificates, whether held for its own account or
as a nominee for another person. In general, beneficial ownership of
Book-Entry Certificates will be subject to the rules, regulations and
procedures governing DTC and DTC Participants as in effect from time to time.
CEDEL is incorporated under the laws of Luxembourg as a professional
depository. CEDEL holds securities for its participant organizations ("CEDEL
Participants") and facilitates the clearance and settlement of securities
transactions between CEDEL Participants through electronic book-entry changes
in accounts of CEDEL Participants, thereby eliminating the need for physical
movement of certificates. Transactions may be settled in CEDEL in any of 28
currencies, including United States dollars. CEDEL provides to its CEDEL
Participants, among other things, services for safekeeping, administration,
clearance and settlement of internationally traded securities and securities
lending and borrowing. CEDEL interfaces with domestic markets in several
countries. As a professional depository, CEDEL is subject to regulation by the
Luxembourg Monetary Institute. CEDEL Participants are recognized financial
institutions around the world, including underwriters, securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations. Indirect access to CEDEL is also available to others, such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a CEDEL Participant, either directly or indirectly.
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Euroclear was created in 1968 to hold securities for participants of
Euroclear ("Euroclear Participants") and to clear and settle transactions
between Euroclear Participants through simultaneous electronic book-entry
delivery against payment, thereby eliminating the need for physical movement of
certificates and any risk from lack of simultaneous transfers of securities and
cash. Transactions may now be settled in any of 27 currencies, including
United States dollars. Euroclear includes various other services, including
securities lending and borrowing and interfaces with domestic markets in
several countries generally similar to the arrangements for cross-market
transfers with DTC described above. Euroclear is operated by the Brussels,
Belgium office of Morgan Guaranty Trust Company of New York (the "Euroclear
Operator"), under contract with Euroclear Clearance Systems S.C., a Belgian
cooperative corporation (the "Cooperative"). All operations are conducted by
the Euroclear Operator, and all Euroclear Securities clearance accounts and
Euroclear cash accounts are accounts with the Euroclear Operator, not the
Cooperative. The Cooperative establishes policy for Euroclear on behalf of
Euroclear Participants. Euroclear Participants include banks (including
central banks), securities brokers and dealers and other professional financial
intermediaries. Indirect access to Euroclear is also available to other firms
that clear through or maintain a custodial relationship with a Euroclear
Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it
is regulated and examined by the Board of Governors of the Federal Reserve
System and the New York State Banking Department, as well as the Belgian
Banking Commission.
Securities clearance accounts and cash accounts with the Euroclear
operator are governed by the Terms and Conditions Governing Use of Euroclear
and the related Operating Procedures of the Euroclear System and applicable
Belgian law (collectively, the "Terms and Conditions"). The Terms and
Conditions govern transfers of securities and cash within Euroclear,
withdrawals of securities and cash from Euroclear, and receipts of payments
with respect to securities in Euroclear. All securities in Euroclear are held
on a fungible basis without attribution of specific certificates to specific
securities clearance accounts. The Euroclear Operator acts under the Terms and
Conditions only on behalf of Euroclear Participants, and has no record of or
relationship with persons holding through Euroclear Participants.
Distributions on the Book-Entry Certificates will be made on each
Payment Date by the Trustee to DTC. DTC will be responsible for crediting the
amount of such payments to the accounts of the applicable DTC Participants in
accordance with DTC's normal procedures. Each DTC Participant will be
responsible for disbursing such payment to the Beneficial Owners of the
Book-Entry Certificates that it represents and to each Financial Intermediary
for which it acts as agent. Each such Financial Intermediary will be
responsible for disbursing funds to the Beneficial Owners of the Book-Entry
Certificates that it represents.
Under a book-entry format, Beneficial Owners of the Book-Entry
Certificates may experience some delay in their receipt of payments, since such
payments will be forwarded by the Trustee to Cede. Distributions with respect
to Offered Certificates held through CEDEL or Euroclear will be credited to the
cash accounts of CEDEL Participants or Euroclear Participants in accordance
with the relevant system's rules and procedures, to the extent received by the
Relevant Depositary. Such distributions will be subject to tax reporting in
accordance with relevant United States tax laws and regulations. Because DTC
can only act on behalf of Financial Intermediaries, the ability of a Beneficial
Owner to pledge Book-Entry Certificates, to persons or entities that do not
participate in the Depository system, or otherwise take actions in respect of
such Book-Entry Certificates, may be limited due to the lack of physical
certificates for such Book-Entry Certificates. In addition, issuance of the
Book-Entry Certificates in book-entry form may reduce the liquidity of such
Certificates in the secondary market since certain potential investors may be
unwilling to purchase Certificates for which they cannot obtain physical
certificates.
Monthly and annual reports on the Trust provided by the Trustee to
Cede, as nominee of DTC, may be made available to Beneficial Owners upon
request, in accordance with the rules, regulations and procedures creating and
affecting the Depository, and to the Financial Intermediaries to whose DTC
accounts the Book-Entry Certificates of such Beneficial Owners are credited.
DTC has advised the Trustee that, unless and until Definitive
Certificates are issued, DTC will take any action permitted to be taken by the
holders of the Book-Entry Certificates under the Pooling and Servicing
Agreement only at the direction of one or more Financial Intermediaries to
whose DTC accounts the Book-Entry Certificates are credited, to the extent that
such actions are taken on behalf of Financial Intermediaries whose holdings
include such Book-Entry Certificates. CEDEL or the Euroclear Operator, as the
case may be, will take any action permitted to be taken by an Owner under the
Pooling and Servicing Agreement on behalf of a CEDEL Participant or Euroclear
Participant only in accordance with its relevant rules and procedures and
subject to the
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ability of the Relevant Depositary to effect such actions on its behalf through
DTC. DTC may take actions, at the direction of the related Participants, with
respect to some Offered Certificates which conflict with actions taken with
respect to other Offered Certificates.
Definitive Certificates will be issued to Beneficial Owners of the
Book-Entry Certificates, or their nominees, rather than to DTC, only if (a)
DTC or the Sponsor advises the Trustee in writing that DTC is no longer
willing, qualified or able to discharge properly its responsibilities as a
nominee and depository with respect to the Book-Entry Certificates and the
Sponsor or the Trustee is unable to locate a qualified successor, (b) the
Sponsor, at its sole option, elects to terminate a book-entry system through
DTC or (c) DTC, at the direction of the Beneficial Owners representing a
majority of the outstanding Percentage Interests of the Offered Certificates,
advises the Trustee in writing that the continuation of a book-entry system
through DTC (or a successor thereto) is no longer in the best interests of
Beneficial Owners.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the Trustee will be required to notify all Beneficial
Owners of the occurrence of such event and the availability through DTC of
Definitive Certificates. Upon surrender by DTC of the global certificate or
certificates representing the Book-Entry Certificates and instructions for
re-registration, the Trustee will issue Definitive Certificates, at the
Sponsor's expense and thereafter the Trustee will recognize the holders of such
Definitive Certificates as Owners under the Pooling and Servicing Agreement.
Although DTC, CEDEL and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of Certificates among Participants
of DTC, CEDEL and Euroclear, they are under no obligation to perform or
continue to perform such procedures and such procedures may be discontinued at
any time.
Neither the Sponsor, the Master Servicer, the Class A-8 and Class A-9
Insurer nor the Trustee will have any liability for any actions taken by DTC or
its nominee, Euroclear, or CEDEL, including, without limitation, actions for
any aspect of the records relating to or payments made on account of beneficial
ownership interests in the Offered Certificates held by Euroclear, Cedel or
Cede & Co., as nominee for DTC, or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests.
PAYMENT DATES
Distributions on the Certificates are required to be made on each
Payment Date, commencing on January 26, 1998, to the Owners on each Record Date
in an amount equal to the product of such Owner's Percentage Interest and the
amount distributed in respect of such Certificateholders' class of such
Certificates on such Payment Date. See "Description of the Securities --
Distributions" in the Prospectus.
On each Payment Date, the Owners of each Class of the Offered
Certificates (other than the Class A-IO Certificates) shall be entitled to
receive from amounts then on deposit in the certificate account established and
maintained by the Trustee in accordance with the Pooling and Servicing
Agreement (the "Certificate Account") and until the Certificate Principal
Balance of such Class of Offered Certificates is reduced to zero, and to the
extent funds are available therefor, the related Current Interest, any Interest
Carry Forward Amount and the portion of the Principal Distribution Amount, if
any, allocated therefor as of such Payment Date, allocated among the Classes of
the Offered Certificates as described below. The Class A-IO Certificates shall
be entitled to receive Current Interest and any Interest Carry Forward Amount,
but shall not receive any Principal Distribution Amounts. Distributions will
be made in immediately available funds to Owners of the Offered Certificates by
wire transfer or otherwise, to the account of such Owner at a domestic bank or
other entity having appropriate facilities therefor, if such Owner has so
notified the Trustee, or by check mailed to the address of the person entitled
thereto as it appears on the register (the "Register") maintained by the
Trustee as registrar (the "Registrar"). Beneficial Owners may experience some
delay in the receipt of their payments due to the operations of DTC. See "Risk
Factors--Book-Entry Registration" in the Prospectus and "Description of the
Offered Certificates--Book Entry Registration of the Certificates" herein and
"Description of the Certificates--Book Entry Registration" in the Prospectus.
The Pooling and Servicing Agreement will provide that an Owner, upon
receiving the final distribution on such Owner's Certificate, will be required
to send such Certificate to the Trustee.
Each Owner of record of the related Class of the Offered Certificates
will be entitled to receive such Owner's Percentage Interest in the amounts due
such Class on such Payment Date. The "Percentage Interest" of an Offered
Certificate as of any date of determination will be equal to the percentage
obtained by dividing the principal
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balance of such Certificate as of the Closing Date by the Certificate Principal
Balance for the related Class of the Offered Certificates as of the Closing
Date.
DISTRIBUTIONS
Upon receipt, the Trustee will be required to deposit into the
Certificate Account with respect to each Mortgage Loan Group (i) the total of
the principal and interest collections on the Mortgage Loans, including any Net
Liquidation Proceeds and any amounts advanced by the Master Servicer, remitted
by the Master Servicer, together with any Substitution Amount and any Loan
Purchase Price amount, (ii) the proceeds of any liquidation of the Trust Estate
along with (iii) amounts transferred from the Capitalized Interest Account and
the Pre-Funding Account.
The Pooling and Servicing Agreement establishes a pass-through rate on
each Class of the Offered Certificates (each, a "Pass-Through Rate") as set
forth in the Summary of Terms herein.
On each Payment Date, the Trustee is required to make the following
disbursements and transfers from monies then on deposit in the Certificate
Account as specified below in the following order of priority of each such
transfer and disbursement with respect to interest and principal:
INTEREST: On each Payment Date the Interest Remittance Amount with
respect to the related Mortgage Loan Group will be distributed in the following
order of priority:
First, to the Trustee, the Trustee's Fee;
Second, with respect to Group II, the Premium then due to the Class
A-8 and Class A-9 Insurer;
Third, to the Owners of the Class A Certificates related to such
Mortgage Loan Group, the related Class A Current Interest plus the
related Class A Interest Carry Forward Amount with respect to each
such Class of Class A Certificates without any priority among such
Class A Certificates; provided, that if the Interest Amount Available
is not sufficient to make a full distribution of interest with respect
to all Classes of the Class A Certificates, the Interest Amount
Available will be distributed among the outstanding Classes of Class A
Certificates pro rata based on the aggregate amount of interest due on
each such Class, and the amount of the shortfall will be carried
forward with accrued interest;
Fourth, with respect to Group I, to the extent of the Interest Amount
Available with respect to Group I then remaining, to the Owners of the
Class M-1 Certificates, the Class M-1 Current Interest;
Fifth, with respect to Group I, to the extent of the Interest Amount
Available with respect to Group I then remaining, to the Owners of the
Class M-2 Certificates, the Class M-2 Current Interest;
Sixth, with respect to Group I, to the extent of the Interest Amount
Available with respect to Group I then remaining, to the Owners of the
Class B-1 Certificates, the Class B-1 Current Interest; and
Seventh, the Monthly Excess Cashflow Amount with respect to such
Mortgage Loan Group shall be applied as described under "Credit
Enhancement--Application of Monthly Excess Cashflow Amount."
PRINCIPAL: GENERAL. The Group I Certificates and the Group II
Certificates will generally receive principal distributions on each Payment
Date which are based on principal collections, monies released from the
Pre-Funding Account and Realized Losses, with respect to the related Mortgage
Loan Group. In addition, the overcollateralization feature of the Trust
results in accelerated payments of principal with respect to each Mortgage Loan
Group to achieve, and thereafter maintain, a specialized level of
overcollateralization with respect to such Mortgage Loan Group. Such
accelerated principal will generally be funded from excess interest with
respect to the related Mortgage Loan Group.
GROUP II-PRINCIPAL DISTRIBUTIONS. On each Payment Date, principal
will be distributed to the Owners of the Group II Certificates in an amount
equal to the Group II Principal Distribution Amount, in accordance with the
"concurrent pay" allocation percentages until the Certificate Principal Balance
of each such Class of Group II Certificates has been reduced to zero.
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The Group II Certificates are "concurrent pay" classes such that the
Owners of each such Class receives a fixed allocation percentage of the Group
II Principal Distribution Amount until the Certificate Principal Balance of the
Class A-8 Certificates has been reduced to zero. Once the Class A-8
Certificates have been reduced to zero, 100% of the Group II Principal
Distribution Amount shall be paid to the Class A-9 Certificates. For the Class
A-8 Certificates, such allocated percentage (the "Class A-8 Principal
Percentage") shall be (a) 37.5%, until the Class A-8 Certificate Principal
Balance has been reduced to zero, and (b) thereafter will be zero. For the
Class A-9 Certificates, such allocated percentage (the "Class A-9 Principal
Percentage") shall be 100.00% minus the Class A-8 Principal Percentage;
provided, however, that on any Payment Date on which the Overcollateralization
Amounts related to Group II is zero and the Class A-8 and Class A-9 Insurance
Policy is not in effect, any amounts of principal payable to the Owners of the
Group II Certificates on such Payment Date shall be distributed pro rata and
not in accordance with the "concurrent pay" allocation percentages.
GROUP I-PRINCIPAL DISTRIBUTIONS. With respect to Group I and on each
Payment Date (a) before the Stepdown Date with respect to Group I or (b) with
respect to which a Group I Delinquency Trigger Event is in effect, the Owners
of the Class A Certificates (other than the Class A-IO Certificates) will be
entitled to receive payment of 100% of the Principal Distribution Amount with
respect to Group I for such Payment Date as follows: first, to the Owners of
the Class A-7 Certificates, the Class A-7 Lockout Distribution Amount and then
to the Owners of the Class A Group I Certificates (other than the Class A-7
Certificates), in sequential order until the Certificate Principal Balance of
each such Class of Class A Group I Certificates has been reduced to zero.
With respect to Group I and on each Payment Date (a) on or after the
Stepdown Date with respect to Group I and (b) as long as a Group I Delinquency
Trigger Event is not in effect and is not continuing, the Owners of all Classes
of the Group I Certificates (other than the Class A-IO Certificates) will be
entitled to receive payments of principal, in the order of priority, in the
amounts set forth below and to the extent of the Principal Distribution Amount
with respect to Group I as follows:
First, the lesser of (x) the Group I Principal Distribution
Amount and (y) the Class A Principal Distribution Amount with respect
to Group I shall be distributed to the Owners of the Class A-7
Certificates, in an amount equal to the Class A-7 Lockout Distribution
Amount, with the remainder paid to the Owners of the Class A Group I
Certificates (other than the Class A-7 Certificates), in sequential
order until the Certificate Principal Balance of each such Class of
Class A Group I Certificates has been reduced to zero;
Second, the lesser of (x) the excess of (i) the Group I
Principal Distribution Amount over (ii) the amount distributed to the
Owners of the Class A Group I Certificates in clause First above and
(y) the Class M-1 Principal Distribution Amount shall be distributed
to the Owners of the Class M-1 Certificates, until the Class M-1
Certificate Principal Balance has been reduced to zero;
Third, the lesser of (x) the excess of (i) the Group I
Principal Distribution Amount over (ii) the sum of the amount
distributed to the Owners of the Class A Group I Certificates in
clause First above and the amount distributed to the Owners of the
Class M-1 Certificates in clause Second above and (y) the Class M-2
Principal Distribution Amount shall be distributed to the Owners of
the Class M-2 Certificates, until the Class M-2 Certificate Principal
Balance has been reduced to zero;
Fourth, the lesser of (x) the excess of (i) the Group I
Principal Distribution Amount over (ii) the sum of the amount
distributed to the Owners of the Class A Group I Certificates pursuant
to clause First above, the amount distributed to the Owners of the
Class M-1 Certificates pursuant to clause Second above and the amount
distributed to the Owners of the Class M-2 Certificates pursuant to
clause Third above and (y) the Class B-1 Principal Distribution Amount
shall be distributed to the Owners of the Class B-1 Certificates,
until the Class B-1 Certificate Principal Balance has been reduced to
zero;
Fifth, the lesser of (x) any amount of the Group I Principal
Distribution Amount remaining after making all of the distributions in
clauses First, Second, Third and Fourth above and (y) (1) if no Group
I Cumulative Realized Loss Trigger Event is in effect, the positive
difference, if any, of (A) $2,500,000 minus (B) the Targeted
Overcollateralization Amount (disregarding clause (y)(a)(ii) of the
definition of Targeted Overcollateralization Amount relating to Group
I) for Group I for such Payment Date or (2) if a Group I Cumulative
Loss Trigger Event is in effect, the positive difference, if any, of
(A) the Targeted Overcollateralization Amount for Group I for the
immediately preceding Payment Date minus (B) the Targeted
Overcollateralization Amount (disregarding clause (y)(c) of the
definition of Targeted
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Overcollateralization Amount for Group I) for Group I for such Payment
Date shall, in either case (1) or (2), be applied as a payment of
principal with respect to the Subordinate Certificates in reverse
order of seniority (ie., first to the Class B-1 Certificates, second
to the Class M-2 Certificates, third to the Class M-1 Certificates and
fourth, to the Class A Group I Certificates) until their respective
Certificate Principal Balances have been reduced to zero; and
Sixth, any amount of the Group I Principal Distribution Amount
remaining after making all of the distributions in clauses First,
Second, Third, Fourth and Fifth above shall be distributed as part of
the Monthly Excess Cashflow Amounts with respect to Group I and shall
be applied as described below under "Credit Enhancement--Application
of Monthly Excess Cashflow Amounts."
The Class A Group I Certificates (other than the Class A-7 Certificates and the
Class A-IO Certificates) are "sequential pay" classes such that the Owners of
the Class A-6 Certificates will receive no payments of principal until the
Class A-5 Certificate Principal Balance has been reduced to zero, the Owners of
the Class A-5 Certificates will receive no payments of principal until the
Class A-4 Certificate Principal Balance has been reduced to zero, the Owners of
the Class A-4 Certificates will receive no payments of principal until the
Class A-3 Certificate Principal Balance has been reduced to zero, the Owners of
the Class A-3 Certificates will receive no payments of principal until the
Class A-2 Certificate Principal Balance has been reduced to zero, and the
Owners of the Class A-2 Certificates will receive no payments of principal
until the Class A-1 Certificate Principal Balance has been reduced to zero;
provided, however, that on any Payment Date on which the sum of the Certificate
Principal Balance of the Subordinate Certificates and the Overcollateralization
Amount related to Group I is zero, any amounts of principal payable to the
Owners of the Class A Group I Certificates on such Payment Date shall be
distributed pro rata and not sequentially.
Notwithstanding the foregoing, in the event that, on any Payment Date,
the Certificate Principal Balance of all of the Class A Group I Certificates is
zero, all amounts of principal that would have been distributed to such Class A
Group I Certificates on such Payment Date will be distributed to the
Subordinate Certificates sequentially in the following order: first, to the
Class M-1 Certificates until the Certificate Principal Balance of the Class M-1
Certificates has been reduced to zero, second, to the Class M-2 Certificates
until the Certificate Principal Balance of the Class M-2 Certificates has been
reduced to zero, and third, to the Class B-1 Certificates until the Certificate
Principal Balance of the Class B-1 Certificates has been reduced to zero.
CALCULATION OF LIBOR
On the second business day preceding each Payment Date or, in the case
of the first Payment Date, on the second business day preceding the Closing
Date (each such date, an "Interest Determination Date"), the Trustee will
determine the London interbank offered rate for one-month U.S. dollar deposits
("LIBOR") for the next Accrual Period for the Group II Certificates and the
Class A-1 Certificates on the basis of the offered rates of the Reference Banks
for one-month U.S. dollar deposits, as such rates appear on the Telerate Page
3750 as of 11:00 a.m. (London time) on such Interest Determination Date. As
used in this section, "business day" means a day on which banks are open for
dealing in foreign currency and exchange in London and New York City; Telerate
Page 3750 means the display page so designated on the Dow Jones Telerate
Service (or such other page on that service for the purpose of displaying
comparable rates or prices); and "Reference Banks" means four leading banks
selected by the Master Servicer and engaged in transactions in Eurodollar
deposits in the international Eurocurrency market (i) with an established place
of business in London, (ii) whose quotations appear on the Telerate Page 3750
on the Interest Determination Date in question, (iii) which have been
designated as such by the Trustee and (iv) not controlling, controlled by, or
be under common control with, the Sponsor.
On each Interest Determination Date, LIBOR for the related Accrual
Period for the Group II Certificates and the Class A-1 Certificates will be
established by the Trustee as follows:
(a) If on such Interest Determination Date two or more Reference
Banks provides such offered quotations, LIBOR for the related Accrual Period
for such Certificates shall be the arithmetic mean of such offered quotations
(rounded upwards if necessary to the nearest 1/100,000 of 1% (0.0000001), with
five one-millionths of a percentage point rounded upward, of all such
quotations.
(b) If on such Interest Determination Date fewer than two Reference
Banks provide such offered quotations, LIBOR for the related Accrual Period for
such Certificates shall be the rate for that day will be the arithmetic mean,
rounded upward, if necessary, to the nearest 1/100,000 of 1% (0.0000001), with
five one-
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millionths of a percentage point rounded upward, of the offered per annum rates
that one or more leading banks in New York City, selected by the Indenture
Trustee, are quoting as of approximately 11:00 a.m., New York City time, on
such LIBOR Determination Date to leading European banks for United States
dollar deposits for the Index Maturity; provided that if the banks selected as
aforesaid are not quoting as mentioned in this sentence, LIBOR in effect for
the applicable Interest Period will be LIBOR in effect for the previous
Interest Period.
The establishment of LIBOR on each Interest Determination Date by the
Trustee and the Trustee's calculation of the rate of interest applicable to
such Certificates for the related Accrual Period shall (in the absence of
manifest error) be final and binding. Each such rate of interest may be
obtained by telephoning the Trustee at 1-800-735-7777.
CERTAIN ACTIVITIES
The Trust has not and will not: (i) issue securities (except for the
Certificates); (ii) borrow money; (iii) make loans; (iv) invest in securities
for the purpose of exercising control; (v) underwrite securities; (vi) except
as provided in the Pooling and Servicing Agreement, engage in the purchase and
sale (or turnover) of investments; (vii) offer securities in exchange for
property (except Certificates for the Mortgage Loans); or (viii) repurchase or
otherwise reacquire its securities. See "Description of the Securities --
Reports To The Securityholders" in the Prospectus for information regarding
reports to the Owners.
CREDIT ENHANCEMENT
GROUP I. The Credit Enhancement provided for the benefit of the
Owners of the Class A Group I Certificates consists of the subordination of the
Subordinate Certificates, the priority of application of Realized Losses, the
application of the Group I Monthly Excess Cashflow Amounts and the
cross-collateralization feature of the Trust.
GROUP II. The Credit Enhancement provided for the benefit of the
Owners of the Group II Certificates consists of the Class A-8 and Class A-9
Insurance Policy, the application of the Group II Monthly Excess Cashflow
Amounts and the cross-collateralization feature of the Trust. The Group II
Certificates will have the benefit of certain levels of overcollateralization
as required by the Class A-8 and Class A-9 Insurer.
Application of Realized Losses (Group I and Group II). The Pooling
and Servicing Agreement provides that if a Mortgage Loan becomes a Liquidated
Loan during a Remittance Period, the Net Liquidation Proceeds relating thereto
and allocated to principal may be less than the Principal Balance of such
Mortgage Loan. The amount of such insufficiency is a "Realized Loss".
Realized Losses which occur in a Mortgage Loan Group will, in effect, be
absorbed first, by the Class R Certificates (both through the application of
the Monthly Excess Interest Amount to fund such deficiency and through a
reduction in the related Overcollateralization Amount). In the case of Group
I, any remaining deficiency after absorption by the Class R Certificates will
be absorbed, second, by the Owners of the Class B-1 Certificates, third, by the
Owners of the Class M-2 Certificates, and, fourth, by the Owners of the Class
M-1 Certificates. In the case of Group II, any remaining deficiency will be
covered by the Class A-8 and Class A-9 Insurance Policy to the extent of the
Applied Realized Loss Amount.
To the extent that a Mortgage Loan Group experiences Realized Losses,
such Realized Losses will reduce the aggregate outstanding Principal Balance of
the Mortgage Loans in such Mortgage Loan Group (i.e., a reduction in the
collateral balance will occur). Since the Overcollateralization Amount with
respect to a Mortgage Loan Group is the excess, if any, of the related
collateral balance over the related Aggregate Certificate Principal Balance,
Realized Losses, to the extent experienced, will in the first instance reduce
the related Overcollateralization Amount.
The Pooling and Servicing Agreement requires that the
Overcollateralization Amount with respect to a Mortgage Loan Group be initially
increased to, and thereafter maintained at, the related Targeted
Overcollateralization Amount. This increase and subsequent maintenance is
intended to be accomplished by the application of related Monthly Excess
Interest Amounts to the funding of the related Extra Principal Distribution
Amount. Such Extra Principal Distribution Amounts, since they are funded from
interest collections on the collateral but are distributed as principal on the
Offered Certificates, will increase the related Overcollateralization Amount.
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If, on any Payment Date and with respect to either Mortgage Loan
Group, after taking into account all Realized Losses experienced with respect
to such Mortgage Loan Group during the prior Remittance Period and after taking
into account the distribution of principal (including the Extra Principal
Distribution Amount) with respect to the related Certificates on such Payment
Date, the Aggregate Certificate Principal Balance with respect to the related
Group exceeds the aggregate Principal Balance of the Mortgage Loans in the
related Group as of the end of the related Remittance Period (i.e., if the
level of overcollateralization is negative), such excess is an "Applied
Realized Loss Amount" with respect to the related Group. In the case of Group
I, such an Applied Realized Loss Amount will be applied as a reduction in the
Certificate Principal Balance of the Subordinate Certificates in reverse order
of seniority (i.e., first against the Class B-1 Certificate Principal Balance
until it is reduced to zero, then against the Class M-2 Certificate Balance
until it is reduced to zero and then against the Class M-1 Certificate
Principal Balance until it is reduced to zero). In the case of Group II, the
Trustee will make a claim under the Class A-8 and Class A-9 Insurance Policy
with respect to an Applied Realized Loss Amount with respect to Group II. The
Pooling and Servicing Agreement does not permit the "write down" of the
Certificate Principal Balance of any Class A Certificate.
Once the Certificate Principal Balance of a Class of Subordinate
Certificates has been "written down," the amount of such write down will no
longer bear interest, nor will such amount thereafter be "reinstated" or
"written up," although the amount of such write down may, on future Payment
Dates be paid to Owners of the Subordinate Certificates which experienced the
write down, in direct order of seniority (i.e., first, the Class M-1
Certificates, second, the Class M-2 Certificates and, third, the Class B-1
Certificates). The source of funding of such payments will be the amount, if
any, of the Monthly Excess Cashflow Amount remaining on such future Payment
Dates after the funding of the Extra Principal Distribution Amount and after
the payment of Interest Carry Forward Amounts with respect to the Subordinate
Certificates on such Payment Date.
Application of Monthly Excess Cashflow Amounts --
Overcollateralization Mechanics (Group I and Group II). The weighted average
net Coupon Rate for the Mortgage Loans in each Mortgage Loan Group is generally
expected to be higher than the weighted average of the Pass-Through Rates on
the Offered Certificates related to such Mortgage Loan Group, thus generating
certain excess interest collections which, in the absence of losses will not be
necessary to fund interest distributions on the Offered Certificates. The
Pooling and Servicing Agreement provides that this excess interest be applied
to the extent available, to make accelerated payments of principal (i.e., the
Extra Principal Distribution Amount) to the Class or Classes then entitled to
receive distributions of principal; such application will cause the Aggregate
Certificate Balance with respect to a Mortgage Loan Group to amortize more
rapidly than the Mortgage Loans in such Mortgage Loan Group, resulting in
Overcollateralization. This excess interest for a Remittance Period and with
respect to a Mortgage Loan Group, together with interest on the related
Overcollateralization Amount itself, on the related Payment Date is the
"Monthly Excess Interest Amount" for such Payment Date and Mortgage Loan Group.
The required level of overcollateralization for any Mortgage Loan
Group and Payment Date is the Targeted Overcollateralization Amount for such
Mortgage Loan Group and Payment Date. The Targeted Overcollateralization
Amount is initially (i.e., prior to the related Stepdown Date) $12,500,000 with
respect to Group I and with respect to Group II, an amount required by the
Class A-8 and Class A-9 Insurer. Because the actual level of the
Overcollateralization Amount with respect to each Mortgage Loan Group as of the
Closing Date is less than the related Targeted Overcollateralization Amount, in
the early months of the transaction, subject to the availability of Monthly
Excess Interest Amounts, Extra Principal Distribution Amounts will be paid,
with the result that the Overcollateralization Amount with respect to each
Mortgage Loan Group will increase to the level of the related Targeted
Overcollateralization Amount.
If, once the Targeted Overcollateralization Amount with respect to
each Mortgage Loan Group has been reached, Realized Losses occur in such
Mortgage Loan Group, such Realized Losses will result in an
Overcollateralization Deficiency (since such Realized Losses reduce the
Principal Balance of the related Mortgage Loans without giving rise to a
corresponding reduction of the related Aggregate Certificate Principal
Balance). The cashflow priorities of the Trust require that, in this
situation, an Extra Principal Distribution Amount be paid (subject to the
availability of any Monthly Excess Interest Amount) for the purpose of
re-establishing the Overcollateralization Amount at the then required Targeted
Overcollateralization Amount.
On and after the related Stepdown Date, the Targeted
Overcollateralization Amount with respect to Group I and Group II,
respectively, is permitted to decrease or "step-down" below their initial
levels (which, in the case of Group I is $12,500,000 and which, in the case of
Group II, is an amount required by the Class A-8 and Class A-9 Insurer) to
levels equal to specified percentages (which in the case of Group I is 5.00% of
the then current aggregate
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outstanding Principal Balance of the Group I Mortgage Loans, and which, in the
case of Group II is a level required by the Class A-8 and Class A-9 Insurer,
and subject to a floor of $2,500,000 for Group I and, with respect to Group II,
an amount required by the Class A-8 and Class A-9 Insurer); provided, further,
that in the case of Group I, if a Group I Delinquency Trigger Event or a Group
I Cumulative Realized Loss Trigger Event is then in effect, the Targeted
Overcollateralization Amount for Group I shall be at the level set forth in the
definition thereof. If the Targeted Overcollateralization Amount with respect
to each Mortgage Loan Group is permitted to "stepdown" on a Payment Date, the
Pooling and Servicing Agreement permits a portion of the related Principal
Remittance Amount for such Payment Date not to be passed through as a
distribution of principal on such Payment Date. This has the effect of
decelerating the amortization of the Offered Certificates with respect to each
Mortgage Loan Group relative to the aggregate outstanding Principal Balance of
the Mortgage Loans, thereby reducing the actual level of the related
Overcollateralization Amount to the new, lower Targeted Overcollateralization
Amount. This portion of the Principal Remittance Amount not distributed as
principal on the related Certificates therefore releases overcollateralization
from the Trust with respect to the related Mortgage Loan Group. The amount of
such releases are the Overcollateralization Release Amounts.
A. On any Payment Date, the sum of the Group I Monthly Excess
Interest Amount and the Group I Overcollateralization Release Amount is the
Group I Monthly Excess Cashflow Amount, which is required to be applied in the
following order of priority on such Payment Date:
(1) to fund the remaining Class A Interest Carry Forward Amount, if any,
with respect to Group I;
(2) to fund the Overcollateralization Deficiency, if any, for such Payment
Date with respect to Group I;
(3) to fund the Class M-1 Interest Carry Forward Amount, if any;
(4) to fund the Class M-1 Realized Loss Amortization Amount for such
Payment Date, if any;
(5) to fund the Class M-2 Interest Carry Forward Amount, if any;
(6) to fund the Class M-2 Realized Loss Amortization Amount for such
Payment Date, if any;
(7) to fund the Class B-1 Interest Carry Forward Amount, if any;
(8) to fund the Class B-1 Realized Loss Amortization Amount for such
Payment Date, if any;
(9) to fund any amounts with respect to Group II listed in clauses B(1),
(2) and (3) below for such Payment Date to the extent that such
amounts have not been funded in full through the application of Group
II Monthly Excess Cashflow Amount on such Payment Date;
(10) to the Master Servicer to the extent of any unreimbursed Delinquency
Advances or Servicing Advances including Nonrecoverable Delinquency
Advances and Nonrecoverable Servicing Advances; and
(11) to fund a distribution to Owners of the Class R Certificates.
B. On any Payment Date, the sum of the Group II Monthly Excess
Interest Amount and the Group II Overcollateralization Release Amount is the
Group II Monthly Excess Cashflow Amount, which is required to be applied in the
following order of priority on such Payment Date:
(1) to fund any remaining Class A Interest Carry Forward Amount, if any,
with respect to Group II;
(2) to reimburse the Class A-8 and Class A-9 Insurer for prior,
unreimbursed Insured Payments, subject to certain limits;
(3) to fund the Overcollateralization Deficiency, if any, for such Payment
Date with respect to Group II;
(4) to reimburse the Class A-8 and Class A-9 Insurer for any amounts due
and owing to the Class A-8 and Class A-9 Insurer under the Insurance
Agreement;
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(5) to fund any amounts with respect to Group I listed in clauses A(1)
through A(8) above for such Payment Date to the extent that such
amounts have not been funded in full through the application of Group
I Monthly Excess Cashflow Amounts on such Payment Date;
(6) to the Master Servicer to the extent of any unreimbursed Delinquency
Advances or Servicing Advances including Nonrecoverable Delinquency
Advances and Nonrecoverable Servicing Advances;
(7) to make payment of any Supplemental Interest Amount then due to the
Owners of the Group II Certificates, or otherwise to fund a
distribution to the Owners of the Class R Certificates; and
(8) to fund a distribution to Owners of the Class R Certificates.
Subordination of Subordinate Certificates (Group I). The rights of
the Owners of the Subordinate Certificates and the Class R Certificates to
receive distributions with respect to the Mortgage Loans in Group I will be
subordinated, to the extent described herein, to such rights of the Owners of
the Class A Group I Certificates. This subordination is intended to enhance
the likelihood of regular receipt by the Owners of the Class A Group I
Certificates of the full amount of their scheduled monthly payment of interest
and principal and to afford such Owners protection against Realized Losses
allocated against Group I.
The protection afforded to the Owners of the Class A Group I
Certificates by means of the subordination of the Subordinate Certificates and
the Class R Certificates will be accomplished by the preferential right of the
Owners of the Class A Group I Certificates to receive, prior to any
distribution being made on a Payment Date in respect of such Subordinate
Certificates and the Class R Certificates, the amounts of interest due them and
principal available for distribution on such Payment Date, and, if necessary,
by the right of the Owners of the Class A Group I Certificates to receive
future distributions of amounts that would otherwise be payable to the Owners
of such Subordinate Certificates and the Class R Certificates.
In addition, the rights of the Owners of the Class M-2, Class B-1 and
Class R Certificates to receive distributions will be subordinated, to the
extent described herein, to such rights of the Owners of the Class A Group I
Certificates and Class M-1 Certificates. This subordination is intended to
enhance the likelihood of regular receipt by the Owners of the Class A Group I
Certificates and the Class M-1 Certificates of the amount of interest due them
and principal available for distribution and to afford such Owners with
protection against Realized Losses.
The rights of the Owners of the Class B-1 and the Class R Certificates
to receive distributions will be subordinated in the same manner to such rights
of the Owners of the Class A Group I Certificates, Class M-1 and Class M-2
Certificates and the rights of Owners of the Class R Certificates to receive
distributions will be subordinated in the same manner to such rights of the
Owners of the Group I Certificates.
The Class A-8 and Class A-9 Insurance Policy. The Sponsor will obtain
a certificate guaranty insurance policy (the "Class A-8 and Class A-9 Insurance
Policy"), with respect to the Class A-8 and Class A-9 Certificates, which is
noncancelable, in favor of the Trustee on behalf of the Owners of the Group II
Certificates. On each Payment Date, the Class A-8 and Class A-9 Insurer will
be required to make available to the Trustee the amount, if any, by which the
Group II Required Distributions exceeds the Net Available Distribution Amount
as of such Payment Date. The Class A-8 and Class A-9 Insurance Policy does not
guarantee to Owners of the Class A-8 Certificates and Class A-9 Certificates
any specified rate of Prepayments. See "The Class A-8 and Class A-9 Insurance
Policy", "The Class A-8 and Class A-9 Insurer" and "Credit Enhancement" herein
and "Description of Credit Enhancement" in the Prospectus.
The Certificate Principal Balance of any Class of the Class A
Certificates (except the Class A-IO Certificates), is the Original Certificate
Principal Balance of such Class as reduced by all amounts actually distributed
to the Owners of such Class of Class A Certificates on all prior Payment Dates.
CERTAIN DEFINITIONS. As used in this Prospectus Supplement, the
following terms have the following meanings:
"Class B-1 Applied Realized Loss Amount" means, as to the Class B-1
Certificates and as of any Payment Date, the lesser of (x) the Class B-1
Certificate Principal Balance (after taking into account the distribution of
the Group I Principal Distribution Amount on such Payment Date, but prior to
the application of the Class B-1 Applied
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Realized Loss Amount, if any, on such Payment Date) and (y) the Group I Applied
Realized Loss Amount as of such Payment Date.
"Class B-1 Certificate Principal Balance" means, as to the Class B-1
Certificates and as of any date of determination, the Original Class B-1
Certificate Principal Balance of such Class as reduced by the sum of (x) all
amounts actually distributed to the Owners of the Class B-1 Certificates on all
prior Payment Dates on account of principal and (y) the aggregate, cumulative
amount of Class B-1 Applied Realized Loss Amounts on all prior Payment Dates.
"Class B-1 Realized Loss Amortization Amount" means, as to the Class
B-1 Certificates and as of any Payment Date, the lesser of (x) the Class B-1
Unpaid Realized Loss Amount as of such Payment Date and (y) the excess of (i)
the Group I Monthly Excess Cashflow Amount over (ii) the sum of the Group I
Extra Principal Distribution Amount, the Class M-1 Realized Loss Amortization
Amount, the Class M-2 Realized Loss Amortization Amount, the Class M-1 Interest
Carry Forward Amount, the Class M-2 Interest Carry Forward Amount and the Class
B-1 Interest Carry Forward Amount in each case for such Payment Date.
"Class M-1 Applied Realized Loss Amount" means, as to the Class M-1
Certificates and as of any Payment Date, the lesser of (x) the Class M-1
Certificate Principal Balance (after taking into account the distribution of
the Group I Principal Distribution Amount on such Payment Date, but prior to
the application of the Class M-1 Applied Realized Loss Amount, if any, on such
Payment Date) and (y) the excess of (i) the Group I Applied Realized Loss
Amount as of such Payment Date over (ii) the sum of the Class M-2 Applied
Realized Loss Amount and the Class B-1 Applied Realized Loss Amount, in each
case as of such Payment Date.
"Class M-1 Certificate Principal Balance" means, as to the Class M-1
Certificates and as of any date of determination, the Original Class M-1
Certificate Principal Balance of such Class as reduced by the sum of (x) all
amounts actually distributed to the Owners of the Class M-1 Certificates on all
prior Payment Dates on account of principal and (y) the aggregate, cumulative
amount of Class M-1 Applied Realized Loss Amounts on all prior Payment Dates.
"Class M-1 Realized Loss Amortization Amount" means, as to the Class
M-1 Certificates of any Payment Date, the lesser of (x) the Class M-1 Unpaid
Realized Loss Amount as of such Payment Date and (y) the excess of (i) the
Group I Monthly Excess Cashflow Amount over (ii) the sum of the Group I Extra
Principal Distribution Amount and the Class M-1 Interest Carry Forward Amount,
in each case for such Payment Date.
"Class M-2 Applied Realized Loss Amount" means, as to the Class M-2
Certificates and as of any Payment Date, the lesser of (x) the Class M-2
Certificate Principal Balance (after taking into account the distribution of
the Group I Principal Distribution Amount on such Payment Date, but prior to
the application of the Class M-2 Applied Realized Loss Amount, if any, on such
Payment Date) and (y) the excess of (i) the Group I Applied Realized Loss
Amount as of such Payment Date over (ii) the Class B Applied Realized Loss
Amount as of such Payment Date.
"Class M-2 Certificate Principal Balance" means, as to the Class M-2
Certificates and as of any date of determination, the Original Class M-2
Certificate Principal Balance as reduced by the sum of (x) all amounts actually
distributed to the Owners of the Class M-2 Certificates on all prior Payment
Dates on account of principal and (y) the aggregate, cumulative amount of Class
M-2 Applied Realized Loss Amounts on all prior Payment Dates.
"Class M-2 Realized Loss Amortization Amount" means, as to the Class
M-2 Certificates and as of any Payment Date, the lesser of (x) the Class M-2
Unpaid Realized Loss Amount as of such Payment Date and (y) the excess of (i)
the Group I Monthly Excess Cashflow Amount over (ii) the sum of the Group I
Extra Principal Distribution Amount, the Class M-1 Realized Loss Amortization
Amount, the Class M-1 Interest Carry Forward Amount and the Class M-2 Interest
Carry Forward Amount, in each case for such Payment Date.
"Cumulative Realized Losses" means, with respect to Group I only, as
of any Payment Date, the aggregate amount of Realized Losses in Group I from
the Initial Cut-Off Date.
"Unpaid Realized Loss Amount" means for any Class of the Subordinate
Certificates and as to any Payment Date, the excess of (x) the aggregate
cumulative amount of Group I Applied Realized Loss Amounts with respect to such
Class for all prior Payment Dates over (y) the aggregate, cumulative amount of
Group I Realized Loss Amortization Amounts with respect to such Class for all
prior Payment Dates.
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THE POOLING AND SERVICING AGREEMENT
In addition to the provisions of the Pooling and Servicing Agreement
summarized elsewhere in this Prospectus Supplement and the Prospectus, there is
set forth below a summary of certain other provisions of the Pooling and
Servicing Agreement.
FORMATION OF THE TRUST
The Trust will be created and established pursuant to the Pooling and
Servicing Agreement on the Closing Date. On such date and on each Subsequent
Transfer Date, the Sponsor will cause the Trust to acquire the Mortgage Loans.
The Trust will issue the Offered Certificates to the Owners thereof on the
Closing Date.
The property of the Trust shall include all money, instruments and
other property to the extent such money, instruments and other property are
subject or intended to be held in trust for the benefit of the Owners, and all
proceeds thereof, including, without limitation, (i) the Mortgage Loans, (ii)
such amounts, including Eligible Investments, as from time to time may be held
by the Trustee in the Certificate Account and by the Master Servicer in the
Principal and Interest Account (except as otherwise provided in the Pooling and
Servicing Agreement), each to be created pursuant to the Pooling and Servicing
Agreement, (iii) any Mortgaged Property, the ownership of which has been
effected on behalf of the Trust as a result of foreclosure or acceptance by the
Master Servicer of a deed in lieu of foreclosure and that has not been
withdrawn from the Trust, (iv) any insurance policies relating to the Mortgage
Loans and any rights of the Sponsor or the affiliated Originators under any
insurance policies, (v) Net Liquidation Proceeds with respect to any
Liquidated Loan and (vi) proceeds from the liquidation of the Trust
(collectively, the "Trust Estate").
SALE OF MORTGAGE LOANS
On the Closing Date and each Subsequent Transfer Date, the Sponsor
will cause the Originators to transfer the Mortgage Loans pursuant to one or
more Master Mortgage Loan Transfer Agreements between the Originators and the
Sponsor (the "Master Transfer Agreements"). In the Master Transfer Agreements
the Originators will make certain representations and warranties; the Sponsor
will assign its rights to enforce such representations and warranties to the
Trustee.
Pursuant to the Pooling and Servicing Agreement, the Sponsor on the
Closing Date and each Subsequent Transfer Date will cause the Trust to acquire
all right, title and interest of the Originators in each Mortgage Loan listed
on the schedule delivered to the Trustee on the Closing Date or the related
Subsequent Transfer Date (collectively the "Schedule of Mortgage Loans") and
all their right, title and interest in all principal collected and all interest
due on each such Mortgage Loan on or after the Initial Cut-Off Date or the
Subsequent Cut-Off Date, as the case may be.
In connection with the sale of the Mortgage Loans on the Closing Date
or related Subsequent Transfer Date, the Originators will be required to
deliver to the Trustee a file (a "Mortgage Loan File") consisting of, among
other things, (i) the original Notes or certified copies thereof, endorsed by
the Originator thereof in blank or to the order of the holder, (ii) originals
of all intervening assignments, showing a complete chain of title from
origination to the applicable Originators, if any, including warehousing
assignments, with evidence of recording thereon, (iii) originals of all
assumption and modification agreements if any, and, unless such Mortgage Loan
is covered by a counsel's opinion as described in the next paragraph, (iv)
either: (a) the original Mortgage, with evidence of recording thereon, (b) a
true and accurate copy of the Mortgage where the original has been transmitted
for recording, until such time as the original is returned by the public
recording office or (c) a copy of the Mortgage certified by the public
recording office in those instances where the original recorded Mortgage has
been lost. The Trustee will agree, for the benefit of the Owners, to review
each such file within 90 days after the Closing Date or related Subsequent
Transfer Date to ascertain that all required documents (or certified copies of
documents) have been executed and received.
The Originators are additionally required to cause to be prepared and
recorded, within 75 business days of the Closing Date or the related Subsequent
Transfer Date (or, if original recording information is unavailable, within
such later period as is permitted by the Pooling and Servicing Agreement)
assignments of the Mortgages from the Originators to the Trustee, in the
appropriate jurisdictions in which such recordation is necessary to perfect the
lien thereof as against creditors of or purchasers from the Originators;
provided, however, that such requirements may be waived to the extent that the
Sponsor delivers to the Trustee and the Class A-8 and Class A-9 Insurer an
acceptable
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opinion of counsel to the effect that the preparation and recordation of such
assignments in certain jurisdictions is not necessary to protect the Trust's
interest in the related Mortgage Loans.
SUBSEQUENT MORTGAGE LOANS
Pursuant to the Pooling and Servicing Agreement, following the Closing
Date, the Trust will be permitted to purchase the Subsequent Mortgage Loans
from time to time on or before January 16, 1998, subject to the availability of
Subsequent Mortgage Loans originated on or before such date by one or more
Originators, and acquired by the Sponsor from such Originator(s) for subsequent
sale to the Trust. The aggregate principal amount of Subsequent Mortgage Loans
which may be acquired by the Trust and assigned to Group I is the Group I
Original Pre-Funded Amount. The aggregate principal amount of Subsequent
Mortgage Loans which may be acquired by the Trust and assigned to Group II is
the Group II Original Pre-Funded Amount. In connection with each purchase of
Subsequent Mortgage Loans, the Trust will be required to pay to the Sponsor a
cash purchase price of 100% of the principal amount thereon from the applicable
Pre-Funded Amount held in the Pre-Funding Account. The Sponsor will designate
as a Subsequent Cut-Off Date the first day of the month in which Subsequent
Mortgage Loans will be conveyed to the Trust during the Funding Period. The
Trust may purchase the Subsequent Mortgage Loans only from the Sponsor or one
of its affiliates and not from any other person.
GOVERNING LAW
The Pooling and Servicing Agreement and each Offered Certificate will
be construed in accordance with and governed by the laws of the State of New
York applicable to agreements made and to be performed therein.
TERMINATION OF THE TRUST
The Pooling and Servicing Agreement will provide that the Trust will
terminate upon the earlier of (i) the payment to the Owners of all Offered
Certificates of all amounts required to be paid such Owners upon the later to
occur of (a) the final payment or other liquidation (or any advance made with
respect thereto) of the last Mortgage Loan or (b) the disposition of all
property acquired in respect of any Mortgage Loan remaining in the Trust
Estate, or (ii) any time when a Qualified Liquidation of the Trust Estate is
effected.
REPORTING REQUIREMENTS
On each Payment Date the Trustee is required to report in writing to
each Owner:
(i) the amount of the distribution with respect to the
each Class of Certificates (based on a Certificate in the original principal
amount of $1,000);
(ii) the amount of such distribution allocable to
principal on the related Mortgage Loans in each Mortgage Loan Group, separately
identifying the aggregate amount of any Prepayments or other recoveries of
principal included therein;
(iii) the amount of such distribution allocable to
interest on the related Mortgage Loans in each Mortgage Loan Group (based on a
Certificate in the original principal amount of $1,000);
(iv) the Interest Carry Forward Amount for each Class;
(v) the principal amount (or Notional Principal
Balance) of each Class of the Offered Certificates (based on a Certificate in
the original principal (or notional principal) amount of $1,000) which will be
outstanding after giving effect to any payment of principal on such Payment
Date;
(vi) the aggregate Principal Balance of all Mortgage
Loans and the aggregate Principal Balance of the Mortgage Loans in each
Mortgage Loan Group after giving effect to any payment of principal on such
Payment Date;
(vii) based upon information furnished by the Sponsor
such information as may be required by Section 6049(d)(7)(C) of the Code and
the regulations promulgated thereunder to assist the Owners in computing their
market discount;
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(viii) the total of any Substitution Amounts or Loan
Purchase Price amounts included in such distribution with respect to Mortgage
Loan Group;
(ix) the weighted average Coupon Rate of the Mortgage
Loans in each Mortgage Loan Group;
(x) whether a Group I Delinquency Trigger Event has
occurred;
(xi) the Group I Senior Enhancement percentage;
(xii) the Overcollateralization Amount for each Mortgage
Loan Group and the Certificate Principal Balance of each Class of the Offered
Certificates then outstanding after giving effect to any payment of principal
on such Payment Date;
(xiii) the amount of any Applied Realized Loss Amount,
Realized Loss Amortization Amount and Unpaid Realized Loss Amount for each
Class as of the close of such Payment Date; and
(xiv) whether a Group I Cumulative Realized Loss Trigger
Event has occurred.
Certain obligations of the Trustee to provide information to the
Owners are conditioned upon such information being received from the Master
Servicer.
In addition, on each Payment Date the Trustee will be required to
distribute to each Owner, together with the information described above, the
following information prepared by the Master Servicer and furnished to the
Trustee for such purpose and with respect to each Mortgage Loan Group;
(a) the number and aggregate Principal Balance of
Mortgage Loans (i) 30-59 days delinquent, (ii) 60-89 days delinquent and (iii)
90 or more days delinquent, as of the close of business on the last business
day of the calendar month next preceding the Payment Date and the number and
aggregate Principal Balances of the Mortgage Loans and related data;
(b) the number and aggregate Principal Balance of all
Mortgage Loans in foreclosure proceedings as of the close of business on the
last business day of the calendar month preceding such Payment Date;
(c) the number of Mortgagors and the aggregate
Principal Balance of the related Mortgagors involved in bankruptcy proceedings
as of the close of business on the last business day of the calendar month next
preceding such Payment Date;
(d) the existence and status of any Properties as to
which title has been taken in the name of, or on behalf of the Trustee, as of
the close of business of the last business day of the month next preceding the
Payment Date;
(e) the book value of any real estate acquired through
foreclosure or grant of a deed in lieu of foreclosure as of the close of
business on the last business day of the calendar month next preceding the
Payment Date;
(f) the amount of cumulative Realized Losses; and
(g) the aggregate Principal Balance of 60 + Day
Delinquent Loans.
TERMINATION OF THE TRUST
The Pooling and Servicing Agreement provides that the Trust will
terminate upon the payment to the Owners of all Certificates of all amounts
required to be paid to such Owners upon the last to occur of (a) the final
payment or other liquidation (or any advance made with respect thereto) of the
last Mortgage Loan, (b) the disposition of all property acquired in respect of
any Mortgage Loan remaining in the Trust Estate and (c) at any time when a
Qualified Liquidation of the Trust Estate is effected as described below. To
effect a termination pursuant to clause (c) above, the Owners of all
Certificates then outstanding will be required (i) unanimously to direct the
Trustee on behalf of the Trust to adopt a plan of complete liquidation, as
contemplated by Section
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860F(a)(4) of the Code and (ii) to furnish to the Trustee an opinion of counsel
experienced in federal income tax matters acceptable to the Trustee to the
effect that such liquidation constitutes a Qualified Liquidation.
OPTIONAL TERMINATION
By the Master Servicer. At its option, the Master Servicer acting
directly or through one or more affiliates may determine to purchase from the
Trust all of the Mortgage Loans and other property then held by the Trust, and
thereby effect early retirement of the Offered Certificates, on any Remittance
Date on and after the Clean-up Call Date.
Termination Upon Loss of REMIC Status. Following a final
determination by the Internal Revenue Service or by a court of competent
jurisdiction, in either case from which no appeal is taken within the permitted
time for such appeal, or if any appeal is taken, following a final
determination of such appeal from which no further appeal can be taken, to the
effect that the Trust does not and will no longer qualify as a "REMIC" pursuant
to Section 860D of the Code (the "Final Determination"), at any time on or
after the date which is 30 calendar days following such Final Determination,
the Owners of a majority in Percentage Interests represented by the Offered
Certificates then Outstanding may direct the Trustee on behalf of the Trust to
adopt a plan of complete liquidation, as contemplated by Section 860F(a)(4) of
the Code.
THE CLASS A-8 AND CLASS A-9 INSURER
The information set forth in this section has been provided by Ambac
Assurance Corporation. No representation is made by the Underwriters, the
Sponsor, the Trustee, the Originators or any of their affiliates as to the
accuracy or completeness of any such information.
THE CLASS A-8 AND CLASS A-9 INSURER
The Class A-8 and Class A-9 Insurer is a Wisconsin-domiciled stock
insurance corporation regulated by the Office of the Commissioner of Insurance
of the State of Wisconsin, and licensed to do business in 50 states, the
District of Columbia, the Commonwealth of Puerto Rico and Guam. The Class A-8
and Class A-9 Insurer primarily insures newly-issued municipal and structured
finance obligations. The Class A-8 and Class A-9 Insurer is a wholly-owned
subsidiary of Ambac Financial Group, Inc. (formerly AMBAC Inc.), a 100%
publicly-held company. Moody's, Standard & Poor's and Fitch Investors Service,
L.P. have each assigned a triple-A claims-paying ability rating to the Class
A-8 and Class A-9 Insurer.
The consolidated financial statements of the Class A-8 and Class A-9
Insurer and its subsidiaries as of December 31, 1996 and December 31, 1995 and
for the three years ended December 31, 1996, prepared in accordance with
generally accepted accounting principles, included in the Current Report on
Form 8-K of AMBAC Inc. (which was filed with the Securities and Exchange
Commission (the "Commission") on March 12, 1997; Commission File No. 1- 10777)
and the consolidated financial statements of the Class A-8 and Class A-9
Insurer and its subsidiaries as of September 30, 1997 and for the periods
ending September 30, 1997 and September 30, 1996, included in the Quarterly
Report on Form 10-Q of Ambac Financial Group, Inc. (formerly AMBAC Inc.) for
the period ended September 30, 1997 (which was filed with the Commission on
November 14, 1997) are hereby incorporated by reference into this Prospectus
Supplement and shall be deemed to be a part hereof. Any statement contained in
documents incorporated herein by reference shall be modified or superseded for
the purposes of this Prospectus Supplement to the extent that a statement
contained herein by reference herein also modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus
Supplement.
All financial statements of the Class A-8 and Class A-9 Insurer and
its subsidiaries included in documents filed by Ambac Financial Group, Inc.
with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act subsequent to the date of this Prospectus Supplement and prior to
the termination of the offering of the Group II Certificates shall be deemed to
be incorporated by reference into this Prospectus Supplement and to be a part
hereof from the respective dates of filing such documents.
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The following table sets forth the capitalization of the Class A-8 and
Class A-9 Insurer as of December 31, 1994, December 31, 1995, December 31, 1996
and September 30, 1997, respectively, in conformity with generally accepted
accounting principles.
AMBAC ASSURANCE CORPORATION
CONSOLIDATED CAPITALIZATION TABLE
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
September 30,
December 31, 1994 December 31, 1995 December 31, 1996 1997 (unaudited)
----------------- ----------------- ------------------ ----------------
<S> <C> <C> <C> <C>
Unearned premiums . . . . . . . . $ 840 $906 $995 $1,047
Other liabilities . . . . . . . . 136 295 259 311
----------------- ----------------- ------------------ ----------------
Total Liabilities . . . . . . . . $ 976 $1,201 $1,254 $1,358
----------------- ----------------- ------------------ ----------------
Stockholder's equity:
Common stock . . . . . . . . . 82 82 82 82
Additional paid-in capital. . . 444 481 515 521
Unrealized gains (losses) on
investments, net of tax . . (46) 87 66 89
Retained earnings . . . . . . . . 782 907 992 1,130
----------------- ----------------- ------------------ ----------------
Total stockholder's equity. . . . $1,262 $1,557 $1,655 $1,822
----------------- ----------------- ------------------ ----------------
Total liabilities and
stockholder's equity . . . . . $2,238 $2,758 $2,909 $3,180
================= ================= ================== ================
</TABLE>
For additional financial information concerning the Class A-8 and
Class A-9 Insurer, see the audited financial statements of the Class A-8 and
Class A-9 Insurer incorporated by reference herein. Copies of the financial
statements of the Class A-8 and Class A-9 Insurer incorporated herein by
reference and copies of the Class A-8 and Class A-9 Insurer's annual statement
for the year ended December 31, 1996 prepared in accordance with statutory
accounting standards are available, without charge, from the Class A-8 and
Class A-9 Insurer. The address of the Class A-8 and Class A-9 Insurer's
administrative offices and its telephone number are One State Street Plaza,
17th Floor, New York, New York 10004 and (212) 668-0340.
The Class A-8 and Class A-9 Insurer makes no representation regarding
the Group II Certificates or the advisability of investing in the Group II
Certificates and makes no representations regarding, nor has it participated in
the preparation of, this Prospectus Supplement other than the information
supplied by the Class A-8 and Class A-9 Insurer and presented under this
heading "The Class A-8 and Class A-9 Insurer", the heading "The Class A-8 and
Class A-9 Insurance Policy" and in the financial statements incorporated herein
by reference.
THE CLASS A-8 AND CLASS A-9 INSURANCE POLICY
The Class A-8 and Class A-9 Insurer, in consideration of the payment
of the premium and subject to the terms of the Class A-8 and Class A-9
Insurance Policy, agrees unconditionally and irrevocably to pay to the Trustee
for the benefit of the Holders of the Insured Obligations, that portion of the
Insured Amounts which shall become Due for Payment but shall be unpaid by
reason of Nonpayment.
The Class A-8 and Class A-9 Insurer will make such payments to the
Trustee from its own funds on the later of (a) three Business Days following
delivery of the Notice to the Class A-8 and Class A-9 Insurer of Nonpayment or
(b) the Business Day on which the Insured Amounts are Due for Payment. The
Class A-8 and Class A-9 Insurer shall be subrogated to all the Holders' rights
to payment on the Insured Obligations to the extent of the insurance
disbursements so made. Once payments of the Insured Amounts have been made to
the Trustee, the Class A-8 and Class A-9 Insurer shall have no further
obligation in respect of such Insured Amounts. Payment of Insured Amounts
shall be made only at the time set forth in the Class A-8 and Class A-9
Insurance Policy and no accelerated payment of Insured Amounts shall be made
regardless of any acceleration of the Class A-8 or the Class A-9 Certificates,
unless such acceleration is at the sole option of the Class A-8 and Class A-9
Insurer.
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Notwithstanding the foregoing paragraph, the Class A-8 and Class A-9
Insurance Policy does not cover shortfalls, if any, attributable to the
liability of the Trust or the Trustee for withholding taxes, if any (including
interest and penalties in respect of any such liability), any prepayment
penalty or other accelerated payment which at any time may become due on or
with respect to any Insured Obligation, other than at the sole option of the
Class A-8 and Class A-9 Insurer, nor against any risk other than Nonpayment,
including failure of the Trustee to make any payment due the Holders of the
Insured Obligations.
The Class A-8 and Class A-9 Insurer will pay any Insured Payment that
is a Preference Amount on the Business Day following receipt on a Business Day
of a certified copy of the order requiring the return of a preference payment,
and such other documentation as is reasonably required by the Class A-8 and
Class A-9 Insurer, such documentation being in a form satisfactory to the Class
A-8 and Class A-9 Insurer, provided that if such documents are received after
12:00 noon New York City time on such Business Day, they will be deemed to be
received on the following Business Day.
Insured Payments due under the Class A-8 and Class A-9 Insurance
Policy unless otherwise stated therein will be disbursed by the Class A-8 and
Class A-9 Insurer to the Trustee on behalf of the Holders by wire transfer of
immediately available funds in the amount of the Insured Payment.
As used herein, the following terms shall have the following meanings:
"Deficiency Amount" means the excess, if any, of Required Payments
over the Net Available Distribution Amount for such Payment Date.
"Due for Payment" shall mean with respect to an Insured Amount, the
Payment Date on which Insured Amounts are due or, with respect to an Insured
Payment which is a Preference Amount, the business day on which the required
documentation referred to above has been received by the Class A-8 and Class
A-9 Insurer.
"Holder" shall mean any person who is the registered owner or
beneficial owner of any Insured Obligation.
"Insured Amounts" shall mean, with respect to any Payment Date, the
Deficiency Amount (including any amounts paid in respect of an Insufficiency
Amount) for such Payment Date.
"Insured Obligations" shall mean the Class A-8 Certificates and the
Class A-9 Certificates.
"Insured Payments" shall mean, the aggregate amount actually paid by
the Class A-8 and Class A-9 Insurer to the Trustee in respect of (i) Insured
Amounts for a Payment Date and (ii) Preference Amounts for any given Business
Day.
"Net Available Distribution Amount" means, with respect to any Payment
Date, the sum of (i) the amount on deposit in the Certificate Account on such
Payment Date with respect to Group II (including any such amounts transferred
from the Capitalized Interest Account and the Pre-Funding Account), minus the
Trustee's Fee with respect to Group II and minus the premium then due to the
Class A-8 and Class A-9 Insurer, plus (ii) any Monthly Excess Cashflow
available from Group I.
"Nonpayment" shall mean, with respect to any Distribution Date, a
Deficiency Amount owing in respect of such Distribution Date.
"Notice" means the notice sent in writing by telecopy, substantially
in the form of Exhibit A attached to the Certificate Insurance Policy, from the
Trustee specifying the Insured Amount which shall be due and owing on the
applicable Distribution Date.
"Preference Amount" means any payment of principal or interest on an
Insured Obligation which has become Due for Payment and which is made to a
Holder by or on behalf of the Trustee which has been deemed a preferential
transfer and theretofore recovered from its Holder pursuant to the United
States Bankruptcy Code in accordance with a final, nonappealable order of a
court of competent jurisdiction.
"Required Payments" shall mean, as of any Payment Date, the sum of (i)
the Class A-8 Current Interest and the Class A-9 Current Interest plus any
Class A-8 and Class A-9 Interest Carry-Forward Amount and (ii) any Applied
Realized Loss Amount with respect to Group II.
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Any notice under the Class A-8 and Class A-9 Insurance Policy may be
made at the address listed below for the Class A-8 and Class A-9 Insurer or
such other address as the Class A-8 and Class A-9 Insurer shall specify in
writing to the Trustee.
The notice address of the Class A-8 and Class A-9 Insurer is One State
Street Plaza, New York, New York 10004 Attention: General Counsel, or such
other address as the Class A-8 and Class A-9 Insurer shall specify to the
Trustee in writing. The Class A-8 and Class A-9 Insurance Policy is being
issued under and pursuant to, and shall be construed under, the laws of the
State of California, without giving effect to the conflict of laws principles
thereof.
THE INSURANCE PROVIDED BY THE CLASS A-8 AND CLASS A-9 INSURANCE POLICY
IS NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE SECURITY FUND SPECIFIED IN
ARTICLE 76 OF THE NEW YORK INSURANCE LAW.
CLAIMS ARISING UNDER THE CLASS A-8 AND CLASS A-9 INSURANCE POLICY
WOULD BE EXCLUDED FROM COVERAGE BY THE CALIFORNIA INSURANCE GUARANTY
ASSOCIATION ESTABLISHED PURSUANT TO THE LAWS OF CALIFORNIA.
The Class A-8 and Class A-9 Insurance Policy is not cancelable for any
reason. The premium on the Class A-8 and Class A-9 Insurance Policy is not
refundable for any reason.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion of certain of the material anticipated
federal income tax consequences of the purchase, ownership and disposition of
the Offered Certificates is to be considered only in connection with "Certain
Federal Income Tax Consequences" in the Prospectus. The discussion herein and
in the Prospectus is based upon laws, regulations, rulings and decisions now in
effect, all of which are subject to change. The discussion below and in the
Prospectus does not purport to deal with all federal tax consequences
applicable to all categories of investors, some of which may be subject to
special rules. Investors should consult their own tax advisors in determining
the federal, state, local and any other tax consequences to them of the
purchase, ownership and disposition of the Offered Certificates.
REMIC ELECTIONS
The Trustee will cause one or more REMIC elections to be made with
respect to certain specified assets of the Trust for federal income tax
purposes. Qualification as a REMIC requires ongoing compliance with certain
conditions. Dewey Ballantine LLP, special tax counsel, will advise that, in
its opinion, for federal income tax purposes, assuming the REMIC elections are
made and compliance with the Pooling and Servicing Agreement, the Trust will be
treated as a REMIC for federal income tax purposes. Each of the Group I
Certificates will be a "regular interest" in a REMIC, which will be treated as
a debt instrument of the Trust for federal income tax purposes. Each of the
Group II Certificates and the related rights to receive Supplemental Interest
Payments will be comprised of (i) a "regular interest" in a REMIC and (ii) the
right to receive Supplemental Interest Payments having the characteristics
described below.
For federal income tax purposes, regular interests in a REMIC are
treated as debt instruments issued by the REMIC on the date on which those
interests are created, and not as ownership interests in the REMIC or its
assets. Owners of Offered Certificates that otherwise report income under a
cash method of accounting will be required to report income with respect to
such Offered Certificates under an accrual method. The Offered Certificates
may be issued with "original issue discount" for federal income tax purposes.
The prepayment assumption that will be used in determining the rate of accrual
of original issue discount on the Offered Certificates is 115% of the
"Prepayment Assumption" for Group I and 25% CPR for Group II. See "Payment and
Yield Considerations -- Projected Prepayments and Yields for Offered
Certificates" herein. No representation is made that any of the Mortgage Loans
will prepay at such rates or any other rate. See "Payment and Yield
Considerations -- Projected Prepayments and Yields for Offered Certificates"
herein and "Certain Federal Income Tax Consequences -- Discount and Premium" in
the Prospectus.
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SPECIAL TAX ATTRIBUTES
The Offered Certificates possess certain special tax attributes by
virtue of the REMIC provisions of the Code. See "Certain Federal Income Tax
Consequences -- REMIC Securities -- Special Tax Attributes" in the Prospectus.
SUPPLEMENTAL INTEREST AMOUNTS
The Beneficial Owners of the Group II Certificates and the related
rights to receive Supplemental Interest Amounts will be treated for tax
purposes as owning two separate investments: (i) the respective Group II
Certificates without the right to receive Supplemental Interest Amounts and
(ii) the right to receive the Supplemental Interest Amounts. The Owners of the
respective Group II Certificates must allocate the purchase price of their
Certificates between these two investments based on their relative fair market
values. The purchase price allocated to the first investment will be the issue
price of the respective Group II Certificates for calculating accruals of
original issue discount. See "Certain Federal Income Tax Consequences --
Discount and Premium" in the Prospectus.
A Beneficial Owner of an Group II Certificate and the related rights
to receive Supplemental Interest Amounts will be treated for federal income tax
purposes as having entered into a notional principal contract on the date that
it purchases its Certificate. Treasury Regulations under Section 446 of the
Code relating to notional principal contracts (the "Notional Principal Contract
Regulations") provide that taxpayers, regardless of their method of accounting,
generally must recognize the ratable daily portion of a periodic payment for
the taxable year to which that portion relates. Any Supplemental Interest
Amounts will be periodic payments. Income with respect to periodic payments
under a notional principal contract for a taxable year should constitute
ordinary income. The purchase price allocated to the right to receive the
related Supplemental Interest Amounts will be treated as a nonperiodic payment
under the Notional Principal Contract Regulations. Such a nonperiodic payment
may be amortized using several methods, including the level payment method
described in the Notional Principal Contract Regulations.
The right to receive the Supplemental Interest Amounts will not
constitute: (i) a "real estate asset" within the meaning of section
858(c)(5)(A) of the Internal Revenue Code (the "Code") if held by a real estate
investment trust; (ii) a "qualified mortgage" within the meaning of section
860G(a)(3) of the Code or a "permitted investment" within the meaning of
section 860G(a)(5) of the code if held by a REMIC; or (iii) assets described in
section 7701(a)(19)(C)(xi) of the Code if held by a thrift. Moreover, other
special rules may apply to certain investors, including dealers in securities
and dealers in notional principal contracts.
If the Master Servicer, acting directly or through a permitted
designee, exercises its right to an Optional Termination, the Supplemental
Interest Amount may not be paid in full.
TAXATION OF FOREIGN INVESTORS
In general, foreign investors will not be subject to U.S. withholding
on income from the Supplemental Interest Amounts. See "Certain Federal Income
Tax Consequences -- Foreign Investors -- Grantor Trust Securities and REMIC
Regular Securities" in the Prospectus.
ERISA CONSIDERATIONS
CLASS A CERTIFICATES
Section 406 of ERISA and Section 4975 of the Code prohibit a pension,
profit sharing or other employee benefit plan (the "Plans") from engaging in
certain transactions involving "plan assets" with persons that are "parties in
interest" under ERISA or "disqualified persons" under the Code with respect to
the Plan unless a statutory or administrative exemption applies to the
transaction. ERISA also imposes certain duties on persons who are fiduciaries
of Plans subject to ERISA. A violation of these "prohibited transaction" rules
may generate excise tax and other liabilities under ERISA and the Code for such
persons. In addition, investments by Plans are subject to ERISA's general
fiduciary requirements, including the requirement of investment prudence and
diversification and the requirement that a Plan's investments be made in
accordance with the documents governing the Plan.
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The United States Department of Labor (the "DOL") has issued a
regulation (the "Plan Asset Regulation") describing what constitutes the assets
of a Plan when the Plan acquires an equity interest in another entity. The
Plan Asset Regulation states that, unless an exception described in the
regulation is applicable, the underlying assets of a corporation, partnership
or trust in which a Plan makes an equity investment will be considered, for
purposes of ERISA, to be assets of the investing Plan. Pursuant to the Plan
Asset Regulation, if the assets of the Trust were deemed to be plan assets by
reason of a Plan's investment in any Offered Certificates, such plan assets
would include an undivided interest in any assets held in such Trust.
Therefore, in the absence of an exemption, the purchase, sale or holding of any
Offered Certificate by a Plan (including certain individual retirement
arrangements) subject to Section 406 of ERISA or Section 4975 of the Code might
result in prohibited transactions and the imposition of excise taxes and civil
penalties.
The DOL has issued to the Underwriters individual prohibited
transaction exemptions, (the "Exemptions"), which generally exempt from the
application of the prohibited transaction provisions of Section 406(a), Section
406(b)(1), Section 406(b)(2) and Section 407(a) of ERISA and the excise taxes
imposed pursuant to Sections 4975(a) and (b) of the Code, certain
transactions with respect to the initial purchase, the holding and the
subsequent resale by Plans of certificates in pass-through trusts that consist
of certain receivables, loans and other obligations that meet the conditions
and requirements of the Exemptions. The loans covered by the Exemptions
include mortgage loans such as the Mortgage Loans.
Among the conditions that must be satisfied for the Exemptions to
apply are the following:
(1) the acquisition of the certificates by a Plan is on terms
(including the price for the certificates) that are at least
as favorable to the Plan as they would be in an arm's-length
transaction with an unrelated party;
(2) the rights and interests evidenced by the certificates
acquired by the Plan are not subordinated to the rights and
interests evidenced by other certificates of the trust;
(3) the certificates acquired by the Plan have received a rating
at the time of such acquisition that is one of the three
highest generic rating categories from either Standard &
Poor's, Moody's, Duff & Phelps Credit Rating Co. ("D&P") or
Fitch;
(4) the Trustee is not an affiliate of any other member of the
Restricted Group (as defined below);
(5) the sum of all payments made to and retained by the
Underwriters in connection with the distribution of the
certificates represents not more than reasonable compensation
for underwriting the certificates; the sum of all payments
made to and retained by the Originator and the Sponsor
pursuant to the assignment of the loans to the Trust Estate
represents not more than the fair market value of such loans;
the sum of all payments made to and retained by any Master
Servicer represents not more than reasonable compensation for
such person's services under the Pooling and Servicing
Agreement and reimbursement of such person's reasonable
expenses in connection therewith; and
(6) the Plan investing in the certificates is an "accredited
investor" as defined in Rule 501(a)(1) of Regulation D of
the Commission under the Securities Act of 1933.
The Trust Estate must also meet the following requirements:
(i) the corpus of the Trust Estate must consist solely of assets
of the type that have been included in other investment pools;
(ii) certificates in such other investment pools must have been
rated in one of the three highest rating categories of Standard & Poor's,
Moody's, Fitch or D&P (the "Rating Agencies") for at least one year prior to the
Plan's acquisition of certificates; and
(iii) certificates evidencing interests in such other investment
pools must have been purchased by investors other than Plans for at least one
year prior to the Plan's acquisition of certificates.
S-97
<PAGE> 98
Moreover, the Exemptions provide relief from certain
self-dealing/conflict of interest prohibited transactions that may occur when
the Plan fiduciary causes a Plan to acquire certificates in a trust in which
the fiduciary (or its affiliate) is an obligor on the receivables held in the
trust; provided that, among other requirements, (i) in the case of an
acquisition in connection with the initial issuance of certificates, at least
fifty percent of each class of certificates in which Plans have invested is
acquired by persons independent of the Restricted Group and at least fifty
percent of the aggregate interest in the trust is acquired by persons
independent of the Restricted Group; (ii) such fiduciary (or its affiliate) is
an obligor with respect to five percent or less of the fair market value of the
obligations contained in the trust; (iii) the Plan's investment in
certificates of any class does not exceed twenty-five percent of all of the
certificates of that class outstanding at the time of the acquisition; and (iv)
immediately after the acquisition, no more than twenty-five percent of the
assets of the Plan with respect to which such person is a fiduciary are
invested in certificates representing an interest in one or more trusts
containing assets sold or serviced by the same entity. The Exemptions do not
apply to Plans sponsored by the Sponsor, the Underwriters, the Trustee, the
Master Servicer, any other servicer, any obligor with respect to Mortgage Loans
included in the Trust Estate constituting more than five percent of the
aggregate unamortized principal balance of the assets in the Trust Estate, or
any affiliate of such parties (the "Restricted Group").
On July 21, 1997, the DOL published in the Federal Register amendments
to the Exemptions ("PTE 97-34"), which extend exemptive relief to certain
mortgage-backed and asset-backed securities transactions using pre-funding
accounts for trusts issuing pass-through certificates. With respect to the
Certificates, PTE 97-34 generally allows Mortgage Loans supporting payments to
Owners of Certificates, and having a value equal to no more than 25% of the
total principal amount of the Certificates being offered by the Trust, to be
transferred to the Trust within a funding period no longer than 90 days or
three months following the Closing Date instead of requiring that all such
Mortgage Loans be either identified or transferred on or before the Closing
Date. The relief will apply to the purchase, sale and holding of the
Certificates, provided that the following general conditions are met:
(1) the ratio of the amount allocated to the Pre-Funding Account
to the total principal amount of the Certificates being offered ("Pre-Funding
Limit") does not exceed 25%;
(2) all Subsequent Mortgage Loans meet the same terms and
conditions for eligibility as the original Mortgage Loans used to create the
Trust, which terms and conditions have been approved by the Rating Agencies;
(3) the transfer of such Subsequent Mortgage Loans to the Trust
during the Funding Period does not result in the Certificates to be covered by
the Exemptions receiving a lower credit rating from a Rating Agency upon
termination of the Funding Period than the rating that was obtained at the time
of the initial issuance of the Certificates by the Trust;
(4) solely as a result of the use of pre-funding, the weighted
average annual percentage interest rate (the "Average Interest Rate") for all
of the Mortgage Loans and Subsequent Mortgage Loans in the Trust at the end of
the Funding Period is not more than 100 basis points lower than the Average
Interest Rate for the Mortgage Loans which were transferred to the Trust on the
Closing Date;
(5) either:
(i) the characteristics of the Subsequent Mortgage Loans are
monitored by an insurer or other credit support provider
which is independent of the Sponsor; or
(ii) an independent accountant retained by the Depositor
provides the Sponsor with a letter (with copies provided
to the Rating Agencies, the Underwriter and the Trustee)
stating whether or not the characteristics of the
Subsequent Mortgage Loans conform to the characteristics
described in the Prospectus Supplement and/or Pooling and
Servicing Agreement. In preparing such letter, the
independent accountant must use the same type of
procedures as were applicable to the Mortgage Loans which
were transferred to the Trust as of the Closing Date;
(6) the Funding Period ends no later than three months or 90 days
after the Closing Date or earlier in certain circumstances if the Pre-Funding
Account falls below the minimum level specified in the Pooling and Servicing
Agreement or an event of default occurs;
(7) amounts transferred to any Pre-Funding Account and/or
Capitalized Interest Account used in connection with the pre-funding may be
invested only in investments which are permitted by the Rating Agencies and:
(i) are direct obligations of, or obligations fully guaranteed
as to timely payment of principal and interest by, the
United States or any agency or instrumentality thereof
(provided that such obligations are backed by the full
faith and credit of the United States); or
S-98
<PAGE> 99
(ii) have been rated (or the obligor has been rated) in one of
the three highest generic rating categories by such Rating
Agency;
(8) the Prospectus or Prospectus Supplement describes;
(i) any Pre-Funding Account and/or Capitalized Interest
Account;
(ii) the duration of the Funding Period;
(iii) the percentage and/or dollar amount of the Pre-Funding
Limit for the Funding Period that will be remitted to
Owners of Certificates as repayments of principal; and
(iv) that the amounts remaining in the Pre-Funding Account at
the end of the Funding Period will be remitted to Owners
of Certificates as repayments of principal; and
(9) the Pooling and Servicing Agreement describes the permitted
investments for the Pre-Funding Account and/or Capitalized Interest Account
and, if not disclosed in the Prospectus or Prospectus Supplement, the terms and
conditions for eligibility of Subsequent Mortgage Loans.
As of the date hereof, there is no single Mortgage Loan included in
the Trust Estate that constitutes more than five percent of the aggregate
unamortized principal balance of the assets of the Trust Estate. Before
purchasing a Class A Certificate based on the Exemptions, as amended by PTE
97-34 (and, in the case of the Group II Certificates, an administrative
exemption with respect to Supplemental Interest Amounts), a fiduciary of a Plan
should itself confirm (1) that such Class A Certificate constitutes a
"certificate" for purposes of the Exemptions and (2) that the conditions and
other requirements set forth in the Exemptions would be satisfied.
Prospective Plan investors in the Class A Certificates should consult
with their legal advisors concerning the impact of ERISA and the Code, the
applicability of the Exemptions, as amended by PTE 97-34, and the potential
consequences in their specific circumstances, prior to making an investment in
the Class A Certificates. Moreover, each Plan fiduciary should determine
whether under the general fiduciary standards of investment procedure and
diversification an investment in the Class A Certificates is appropriate for
the Plan, taking into account the overall investment policy of the Plan and the
composition of the Plan's investment portfolio.
In addition to the matters described above, purchasers of a Class A
Certificate that are insurance companies should consult with their counsel with
respect to the recent United States Supreme Court case interpreting the
fiduciary responsibility rules of ERISA, John Hancock Mutual Life Insurance Co.
v. Harris Trust and Savings Bank, 114 S.Ct. 517 (1993). In John Hancock, the
Supreme Court ruled that assets held in an insurance company's general account
may be deemed to be "plan assets" for ERISA purposes under certain
circumstances. Prospective purchasers using insurance company general account
assets should determine whether the decision affects their ability to make
purchases of the Offered Certificates.
Any person purchasing an Group II Certificate and the related right to
receive Supplemental Interest Amounts will have acquired, for purposes of ERISA
and for federal income tax purposes, such an Group II Certificate without the
right to receive the Supplemental Interest Amounts, together with the right to
receive the Supplemental Interest Amounts. The Exemptions do not apply to the
acquisition, holding or resale of the right to receive the Supplemental
Interest Amounts. Accordingly, the acquisition of the right to receive the
Supplemental Interest Amounts by a Plan could result in a prohibited
transaction unless another administrative exemption to ERISA's prohibited
transaction rules is applicable. One or more alternative exemptions may be
available with respect to certain prohibited transaction rules of ERISA that
might apply in connection with the initial purchase, holding and resale of the
right to receive the Supplemental Interest Amounts, including, but not limited
to: (i) Prohibited Transaction Class Exemption ("PTCE") 91-38, regarding
investments by bank collective investment funds; (ii) PTCE 90-1, regarding
investments by insurance company pooled separate accounts; (iii) PTCE 84-14,
regarding transactions negotiated by qualified professional asset managers; or
(iv) PTCE 75-1, Part II, regarding principal transactions by broker-dealers
(the "Principal Transactions Exemption"). It is believed that the conditions
of the Principal Transactions Exemption will be met with respect to the
acquisition of a right to receive the Supplemental Interest Amounts by a Plan,
so long as the related Underwriter is not a fiduciary with respect to the Plan
(and is not a party in interest with respect to the Plan by reason of being a
participating employer or affiliate thereof).
S-99
<PAGE> 100
SUBORDINATE CERTIFICATES
The Exemptions, as amended by PTE 97-34, do not apply to the initial
purchase, the holding or the subsequent resale of the Mezzanine Certificates
and Class B-1 Certificates because such Certificates are subordinate to certain
other Classes of the Certificates. Accordingly, Plans may not purchase the
Subordinate Certificates, except that any insurance company may purchase such
Certificates with assets of its general account if the exemptive relief granted
by the DOL for transactions involving insurance company general accounts in
Prohibited Transaction Exemption 95-60, 60 Fed. Reg. 35925 (July 12, 1995) is
available with respect to such investment. Any insurance company proposing to
purchase such Certificates for its general account should consider whether such
relief would be available.
RATINGS
It is a condition of issuance of the Offered Certificates that each
Class of the Offered Certificates receive ratings from Moody's Investors
Service, Inc. ("Moody's") and Standard & Poor's Ratings Group ("Standard &
Poor's") as set forth below:
<TABLE>
<CAPTION>
Moody's Standard &
Class Rating Poor's Rating
----- ------ -------------
<S> <C> <C>
Class A-1 Aaa AAA
Class A-2 Aaa AAA
Class A-3 Aaa AAA
Class A-4 Aaa AAA
Class A-5 Aaa AAA
Class A-6 Aaa AAA
Class A-7 Aaa AAA
Class A-IO Aaa AAAr
Class A-8 Aaa AAA
Class A-9 Aaa AAA
Class M-1 Aa2 AA
Class M-2 A2 A
Class B-1 Baa2 BBB
</TABLE>
Explanations of the significance of such ratings may be obtained from
Moody's, 99 Church Street, New York, New York 10007 and Standard & Poor's, 25
Broadway, New York, New York 10006. Such ratings will be the views only of such
rating agencies. There is no assurance that such ratings will continue for any
period of time or that such ratings will not be revised or withdrawn. Any such
revision or withdrawal of such ratings may have an adverse effect on the market
price of the Offered Certificates. A security rating is not a recommendation
to buy, sell or hold securities.
The "r" of the "AAAr" rating of the Class A-IO Certificates by
Standard & Poor's is attached to highlight derivative, hydrid, and certain
other obligations that Standard & Poor's believes may experience high
volatility or high variability in expected returns due to non-credit risks.
Examples of such obligations are: securities whose principal or interest return
is indexed to equities, commodities, or currencies; certain swap and options;
and interest only and principal only mortgage securities. The absence of an
"r" symbol should not be taken as an indication that an obligation will exhibit
no volatility or variability in total return.
The Class A-8 and Class A-9 Insurer does not guarantee the payment of,
nor do the ratings assigned to the Group II Certificates address the likelihood
of the payment of any Supplemental Interest Amounts.
The ratings of Moody's on home equity pass-through certificates
address the likelihood of the receipt by the Owners of all distributions to
which such Owners are entitled. Moody's rating opinions address the structural
and legal issues and tax-related aspects associated with the Certificates,
including the nature of the underlying home equity loans and the credit quality
of the credit support provider, if any. Moody's ratings on pass-through
certificates
S-100
<PAGE> 101
do not represent any assessment of the likelihood that principal prepayments
may differ from those originally anticipated.
Such ratings do not address the possibility that, as a result of
principal prepayments, certificateholders may receive a lower than anticipated
yield.
The ratings of the Certificates should be evaluated independently from
similar ratings on other types of securities. A security rating is not a
recommendation to buy, sell or hold securities and may be subject to revision
or withdrawal at any time by the assigning rating agency.
The Sponsor has not requested a rating of the Offered Certificates
offered hereby by any rating agency other than Moody's and Standard & Poor's
and the Sponsor has not provided information relating to the Offered
Certificates or the Mortgage Loans to any rating agency other than Moody's and
Standard & Poor's. There can be no assurance as to whether any other rating
agency will rate the Offered Certificates offered hereby or, if another rating
agency rates such Offered Certificates, what rating would be assigned to such
Offered Certificates by such rating agency. Any such unsolicited rating
assigned by another rating agency to the Offered Certificates offered hereby
may be lower than the rating assigned to such Offered Certificates by Moody's
and Standard & Poor's.
LEGAL INVESTMENT CONSIDERATIONS
No class of the Offered Certificates will constitute "mortgage related
securities" for purposes of SMMEA.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, dated December 4, 1997 (the "Underwriting Agreement"), the Sponsor
has agreed to cause the Trust to sell the Offered Certificates to the
Underwriters and the Underwriters have agreed to purchase the Offered
Certificates.
In the Underwriting Agreement, the Underwriters have agreed, subject
to the terms and conditions set forth therein, to purchase the entire principal
amount of each class of Offered Certificates in the amounts with respect to
each Underwriter as set forth below:
Class A-1 Certificates
<TABLE>
<CAPTION>
Underwriters Principal Amount
------------ ----------------
<S> <C>
Lehman Brothers Inc. $ 36,512,000
J.P. Morgan Securities, Inc. $ 36,509,000
Morgan Stanley & Co. Incorporated $ 36,509,000
Prudential Securities Incorporated $ 36,509,000
</TABLE>
Class A-2 Certificates
<TABLE>
<CAPTION>
Underwriters Principal Amount
------------ ----------------
<S> <C>
Lehman Brothers Inc. $ 45,581,000
J.P. Morgan Securities, Inc. $ 22,789,000
Morgan Stanley & Co. Incorporated $ 0
Prudential Securities Incorporated $ 22,789,000
</TABLE>
S-101
<PAGE> 102
Class A-3 Certificates
<TABLE>
<CAPTION>
Underwriters Principal Amount
------------ ----------------
<S> <C>
Lehman Brothers Inc. $ 8,397,000
J.P. Morgan Securities, Inc. $ 8,394,000
Morgan Stanley & Co. Incorporated $ 8,394,000
Prudential Securities Incorporated $ 8,394,000
</TABLE>
Class A-4 Certificates
<TABLE>
<CAPTION>
Underwriters Principal Amount
------------ ----------------
<S> <C>
Lehman Brothers Inc. $ 14,960,000
J.P. Morgan Securities, Inc. $ 14,959,000
Morgan Stanley & Co. Incorporated $ 14,959,000
Prudential Securities Incorporated $ 14,959,000
</TABLE>
Class A-5 Certificates
<TABLE>
<CAPTION>
Underwriters Principal Amount
------------ ----------------
<S> <C>
Lehman Brothers Inc. $ 3,901,000
J.P. Morgan Securities, Inc. $ 3,900,000
Morgan Stanley & Co. Incorporated $ 3,900,000
Prudential Securities Incorporated $ 3,900,000
</TABLE>
Class A-6 Certificates
<TABLE>
<CAPTION>
Underwriters Principal Amount
------------ ----------------
<S> <C>
Lehman Brothers Inc. $ 10,322,000
J.P. Morgan Securities, Inc. $ 10,321,000
Morgan Stanley & Co. Incorporated $ 10,321,000
Prudential Securities Incorporated $ 10,321,000
</TABLE>
Class A-7 Certificates
<TABLE>
<CAPTION>
Underwriters Principal Amount
------------ ----------------
<S> <C>
Lehman Brothers Inc. $ 2,530,000
J.P. Morgan Securities, Inc. $ 12,500,000
Morgan Stanley & Co. Incorporated $ 22,470,000
Prudential Securities Incorporated $ 12,500,000
</TABLE>
Class A-IO Certificates
<TABLE>
<CAPTION>
Underwriters Principal Amount
------------ ----------------
<S> <C> <C>
Lehman Brothers Inc. $ 0*
</TABLE>
* No principal payments are distributed with respect to the Class A-IO
Certificates. Interest will be distributed and calculated on the
basis of the Notional Principal Balance of the Class A-7 Certificates.
Lehman Brothers Inc. is the sole underwriter with respect to the
Class A-IO Certificates.
Class A-8 Certificates
<TABLE>
<CAPTION>
Underwriters Principal Amount
------------ ----------------
<S> <C>
Lehman Brothers Inc. $ 24,500,000
J.P. Morgan Securities, Inc. $ 24,500,000
Morgan Stanley & Co. Incorporated $ 24,500,000
Prudential Securities Incorporated $ 24,500,000
</TABLE>
S-102
<PAGE> 103
Class A-9 Certificates
<TABLE>
<CAPTION>
Underwriters Principal Amount
------------ ----------------
<S> <C>
Lehman Brothers Inc. $ 75,500,000
J.P. Morgan Securities, Inc. $ 75,500,000
Morgan Stanley & Co. Incorporated $ 75,500,000
Prudential Securities Incorporated $ 75,500,000
</TABLE>
Class M-1 Certificates
<TABLE>
<CAPTION>
Underwriters Principal Amount
------------ ----------------
<S> <C>
Lehman Brothers Inc. $ 4,375,000
J.P. Morgan Securities, Inc. $ 4,375,000
Morgan Stanley & Co. Incorporated $ 4,375,000
Prudential Securities Incorporated $ 4,375,000
</TABLE>
Class M-2 Certificates
<TABLE>
<CAPTION>
Underwriters Principal Amount
------------ ----------------
<S> <C>
Lehman Brothers Inc. $ 7,500,000
J.P. Morgan Securities, Inc. $ 7,500,000
Morgan Stanley & Co. Incorporated $ 7,500,000
Prudential Securities Incorporated $ 7,500,000
</TABLE>
Class B-1 Certificates
<TABLE>
<CAPTION>
Underwriters Principal Amount
------------ ----------------
<S> <C>
Lehman Brothers Inc. $ 3,750,000
J.P. Morgan Securities, Inc. $ 3,750,000
Morgan Stanley & Co. Incorporated $ 3,750,000
Prudential Securities Incorporated $ 3,750,000
</TABLE>
The Underwriters have agreed to reimburse the Sponsor for certain
expenses in connection with the issuance and distribution of the Offered
Certificates.
The Underwriters have informed the Sponsor that they propose to offer
the Offered Certificates for sale from time to time in one or more negotiated
transactions, or otherwise, at varying prices to be determined, in each case,
at the time of the related sale. The Underwriters may effect such transactions
by selling the Offered Certificates to or through dealers, and such dealers may
receive compensation in the form of underwriting discounts, concessions or
commissions from the Underwriters. In connection with the sale of the Offered
Certificates, the Underwriters may be deemed to have received compensation from
the Sponsor in the form of underwriting compensation. The Underwriters and any
dealers that participate with the Underwriters in the distribution of the
Offered Certificates may be deemed to be underwriters and any commissions
received by them and any profit on the resale of the Offered Certificates by
them may be deemed to be underwriting discounts and commissions under the 1933
Act.
Advanta Mortgage Conduit Services, Inc. has agreed to indemnify the
Underwriters against certain liabilities including liabilities under the 1933
Act.
In connection with this offering and in compliance with applicable law
and industry practice, the Underwriters may overallot or effect transactions
which stabilize, maintain or otherwise affect the market price of the Offered
Certificates at a level above that which might otherwise prevail in the open
market, including stabilizing bids, effecting syndicate covering transactions
or imposing penalty bids. A stabilizing bid means the placing of any bid, or
the effecting of any purchase, for the purpose of pegging, fixing or
maintaining the price of a security. A syndicate covering transaction means
the placing of any bid on behalf of the underwriting syndicate or the effecting
of any purchase to reduce a short position created in connection with the
offering. A penalty bid means an arrangement that permits Lehman Brothers
Inc., as managing underwriter, to reclaim a selling concession from a syndicate
member in connection with the offering when Offered Certificates originally
sold by the syndicate
S-103
<PAGE> 104
member are purchased in syndicate covering transactions. The Underwriters are
not required to engage in any of these activities. Any such activities, if
commenced, may be discontinued at any time.
The Sponsor has been advised by the Underwriters that the Underwriters
presently intend to make a market in the Offered Certificates, as permitted by
applicable laws and regulations. The Underwriters are not obligated, however,
to make a market in the Offered Certificates and such market-making may be
discontinued at any time at the sole discretion of the Underwriters.
Accordingly, no assurance can be given as to the liquidity of any trading
markets for the Offered Certificates.
EXPERTS
The consolidated financial statements of Ambac Assurance Corporation,
as of December 31, 1996 and 1995 and for each of the years in the three-year
period ended December 31, 1996, are incorporated by reference herein and in the
registration statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated by reference herein, and
upon the authority of such firm as experts in accounting and auditing.
CERTAIN LEGAL MATTERS
Certain legal matters relating to the validity of the issuance of the Offered
Certificates will be passed upon for the Sponsor and the Underwriters by Dewey
Ballantine LLP, New York, New York.
S-104
<PAGE> 105
INDEX OF PRINCIPAL DEFINED TERMS
<TABLE>
<S> <C>
1933 Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2, 103
Accrual Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Actuarial Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Advanta Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Affiliated Originators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Aggregate Certificate Principal Balance . . . . . . . . . . . . . . . . . . . . . 7
Applied Realized Loss Amount . . . . . . . . . . . . . . . . . . . . . . . . 23, 85
Appraised Values . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Average Amount Outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Average Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
Beneficial Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Book-Entry Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10, 83
CEDEL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
CEDEL Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Certificate Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Certificate Principal Balance . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Class . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Class A Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Class A Principal Distribution Amount . . . . . . . . . . . . . . . . . . . . . . 13
Class A-1 Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Class A-1 Formula Pass-Through Rate . . . . . . . . . . . . . . . . . . . . . . . 5
Class A-1 Pass-Through Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Class A-2 Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Class A-3 Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Class A-4 Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Class A-5 Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Class A-6 Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Class A-7 Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Class A-7 Lockout Distribution Amount . . . . . . . . . . . . . . . . . . . . . . 19
Class A-7 Lockout Percentage . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Class A-7 Lockout Pro Rata Distribution Amount . . . . . . . . . . . . . . . . . 19
Class A-8 and Class A-9 Insurance Policy . . . . . . . . . . . . . . . . 2, 27, 87
Class A-8 Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Class A-8 Formula Pass-Through Rate . . . . . . . . . . . . . . . . . . . . . . . 5
Class A-8 Pass-Through Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Class A-8 Principal Percentage . . . . . . . . . . . . . . . . . . . . . . . 16, 82
Class A-8 Supplemental Interest Amount . . . . . . . . . . . . . . . . . . . . . 6
Class A-9 Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Class A-9 Formula Pass-Through Rate . . . . . . . . . . . . . . . . . . . . . . . 6
Class A-9 Pass-Through Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Class A-9 Principal Percentage . . . . . . . . . . . . . . . . . . . . . . . 16, 82
Class A-9 Supplemental Interest Amount . . . . . . . . . . . . . . . . . . . . . 6
Class A-IO Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Class B-1 Applied Realized Loss Amount . . . . . . . . . . . . . . . . . . . . . 87
Class B-1 Certificate Principal Balance . . . . . . . . . . . . . . . . . . . . . 88
Class B-1 Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Class B-1 Principal Distribution Amount . . . . . . . . . . . . . . . . . . . . . 20
Class B-1 Realized Loss Amortization Amount . . . . . . . . . . . . . . . . . . . 88
Class Distribution Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Class M-1 Applied Realized Loss Amount . . . . . . . . . . . . . . . . . . . . . 88
Class M-1 Certificate Principal Balance . . . . . . . . . . . . . . . . . . . . . 88
</TABLE>
S-105
<PAGE> 106
<TABLE>
<S> <C>
Class M-1 Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Class M-1 Principal Distribution Amount . . . . . . . . . . . . . . . . . . . . . 20
Class M-1 Realized Loss Amortization Amount . . . . . . . . . . . . . . . . . . . 88
Class M-2 Applied Realized Loss Amount . . . . . . . . . . . . . . . . . . . . . 88
Class M-2 Certificate Principal Balance . . . . . . . . . . . . . . . . . . . . . 88
Class M-2 Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Class M-2 Principal Distribution Amount . . . . . . . . . . . . . . . . . . . . . 20
Class M-2 Realized Loss Amortization Amount . . . . . . . . . . . . . . . . . . . 88
Class R Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Clean-up Call Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
CMT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Coastal Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
COFI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2, 92
Compensating Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Cooperative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Coupon Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Cumulative Realized Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Current Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
D&P . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Deficiency Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Delinquency Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
DOL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
DTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
DTC Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Due for Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93, 94
Euroclear . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Euroclear Operator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Euroclear Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
European Depositaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Exemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Extra Principal Distribution Amount . . . . . . . . . . . . . . . . . . . . . . . 13
FDIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
FFI Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37, 38
Final Determination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
Final Scheduled Payment Dates . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Financial Intermediary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Fleet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
FNMA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Foreclosure Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Funding Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
G&P Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Gross Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Group I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4, 40
Group I Available Funds Cap Rate . . . . . . . . . . . . . . . . . . . . . . . . 6
Group I Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Group I Cumulative Realized Loss Trigger Event . . . . . . . . . . . . . . . . . 20
Group I Delinquency Trigger Event . . . . . . . . . . . . . . . . . . . . . . . . 20
Group I Original Pool Balance . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Group I Original Pre-Funded Amount . . . . . . . . . . . . . . . . . . . . . . . 8
Group I Pre-Funded Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Group I Senior Enhancement Percentage . . . . . . . . . . . . . . . . . . . . . . 21
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Group I Senior Specified Enhancement Percentage . . . . . . . . . . . . . . . . . 21
Group I Statistic Calculation Pool . . . . . . . . . . . . . . . . . . . . . . . 7
Group II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4, 40
Group II Available Funds Cap Rate . . . . . . . . . . . . . . . . . . . . . . . . 6
Group II Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Group II Original Pre-Funded Amount . . . . . . . . . . . . . . . . . . . . . . . 8
Group II Statistic Calculation Pool . . . . . . . . . . . . . . . . . . . . . . . 7
Groups . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Holder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Initial Cut-Off Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2, 4
Initial Mortgage Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Insured Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93, 94
Insured Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93, 94
Insured Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26, 86, 94
Interest Amount Available . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Interest Carry Forward Amount . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Interest Determination Date . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Interest Remittance Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Junior Lien Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
LIBOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Liquidated Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14, 22
Master Transfer Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
MCA Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
McGuire Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Mezzanine Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Monthly Excess Cashflow Amount . . . . . . . . . . . . . . . . . . . . . . . . . 12
Monthly Excess Interest Amount . . . . . . . . . . . . . . . . . . . . . . . 23, 85
Monthly Remittance Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Moody's . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31, 100
Mortgage Loan File . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Mortgage Loan Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Mortgage Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Mortgagor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Net Available Distribution Amount . . . . . . . . . . . . . . . . . . 27, 28, 87, 94
Net Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Nonpayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93, 94
Nonrecoverable Delinquency Advance . . . . . . . . . . . . . . . . . . . . . . . 29
Nonrecoverable Servicing Advance . . . . . . . . . . . . . . . . . . . . . . . . 30
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93, 94
Notional Principal Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Notional Principal Contract Regulations . . . . . . . . . . . . . . . . . . . . . 96
Offered Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Optional Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Original Pre-Funded Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Overcollateralization Amount . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Overcollateralization Deficiency . . . . . . . . . . . . . . . . . . . . . . . . 14
Overcollateralization Release Amount . . . . . . . . . . . . . . . . . . . . . . 14
Owned and Managed Servicing Portfolio . . . . . . . . . . . . . . . . . . . . . . 38
Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
</TABLE>
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Pass-Through Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Payment Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Percentage Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Plan Asset Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Pooling and Servicing Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 2
Preference Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11, 94
Pre-Funded Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Pre-Funding Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Pre-Funding Limit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98, 99
Premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
prepayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Prepayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Prepayment Assumption . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58, 95
Principal Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Principal Distribution Amount . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Principal Remittance Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Principal Transactions Exemption . . . . . . . . . . . . . . . . . . . . . . . . 99
PTCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
PTE 97-34 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98, 99
Rating Agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Realized Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22, 84
Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Reference Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Register . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Registrar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
regular interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31, 95
Relevant Depositary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Remittance Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Remittance Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15, 77
Required Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
residual interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Restricted Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Schedule of Mortgage Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Six-Month LIBOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SMMEA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Standard & Poor's . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31, 100
Statistic Calculation Pools . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Stepdown Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Subordinate Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Subsequent Cut-Off Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Subsequent Mortgage Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Subsequent Transfer Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Substitution Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Targeted Overcollateralization Amount . . . . . . . . . . . . . . . . . . . . 15, 24
Terms and Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Third-Party Servicing Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . 38
Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Trust Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2, 4
Trustee's Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Unaffiliated Originators . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
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Underwriters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Underwriting Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
Unpaid Realized Loss Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Weighted average life . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
</TABLE>
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<S> <C>
No dealer, salesperson or other person has
been authorized to give any information or to make $900,000,000
any representations not contained in this (APPROXIMATE)
Prospectus Supplement and the Prospectus and, if ADVANTA MORTGAGE LOAN
given or made, such information or representations TRUST 1997-4
must not be relied upon as having been authorized
by the Sponsor or by the Underwriters. This
Prospectus Supplement and the Prospectus do not
constitute an offer to sell, or a solicitation of $146,039,000 ADJUSTABLE RATE CLASS A-1 GROUP I CERTIFICATES
an offer to buy, the securities offered hereby to $91,159,000 6.53% CLASS A-2 GROUP I CERTIFICATES
anyone in any jurisdiction in which the person $33,579,000 6.55% CLASS A-3 GROUP I CERTIFICATES
making such offer or solicitation is not qualified $59,837,000 6.66% CLASS A-4 GROUP I CERTIFICATES
to do so to anyone to whom it is unlawful to make $15,601,000 6.72% CLASS A-5 GROUP I CERTIFICATES
any such offer or solicitation. Neither the $41,285,000 7.10% CLASS A-6 GROUP I CERTIFICATES
delivery of this Prospectus Supplement nor any sale $50,000,000 6.63% CLASS A-7 GROUP I CERTIFICATES
made hereunder shall, under any circumstances, 5.00% CLASS A-IO GROUP I CERTIFICATES *
create an implication that information herein or $ 98,000,000 ADJUSTABLE RATE CLASS A-8 GROUP II CERTIFICATES
therein is correct as of any time since the date of $302,000,000 ADJUSTABLE RATE CLASS A-9 GROUP II CERTIFICATES
this Prospectus Supplement or the Prospectus. $ 17,500,000 7.04% CLASS M-1 GROUP I CERTIFICATES
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------------ $ 15,000,000 7.54% CLASS B-1 GROUP I CERTIFICATES
TABLE OF CONTENTS
PAGE
----
PROSPECTUS SUPPLEMENT
Available Information . . . . . . . . . . . . . S-
Reports to the Certificateholders . . . . . . . S-
Summary . . . . . . . . . . . . . . . . . . . . S-
Risk Factors . . . . . . . . . . . . . . . . . S- MORTGAGE LOAN
The Portfolio of Mortgage Loans . . . . . . . . S- ASSET-BACKED CERTIFICATES
The Mortgage Loan Pool . . . . . . . . . . . . S- SERIES 1997-4
Prepayment and Yield Considerations . . . . . . S-
Use of Proceeds . . . . . . . . . . . . . . . . S-
The Sponsor and the Master Servicer . . . . . . S-
Description of the Certificates . . . . . . . . S-
Credit Enhancement . . . . . . . . . . . . . . S- ----------------
The Pooling and Servicing Agreement . . . . . . S- PROSPECTUS SUPPLEMENT
The Class A-8 and Class A-9 Insurer . . . . . . S- ----------------
The Class A-8 and Class A-9 Insurance Policy . S-
Certain Federal Income Tax Consequences . . . . S-
ERISA Considerations . . . . . . . . . . . . . S-
Ratings . . . . . . . . . . . . . . . . . . . . S- LEHMAN BROTHERS
Legal Investment Considerations . . . . . . . S-
Underwriting . . . . . . . . . . . . . . . . . S- J.P. MORGAN & CO.
Experts . . . . . . . . . . . . . . . . . . . . S-
Certain Legal Matters . . . . . . . . . . . . . S- MORGAN STANLEY DEAN WITTER
Index of Principal Defined Terms . . . . . . S-
PRUDENTIAL SECURITIES
PROSPECTUS Incorporated
Summary of Prospectus . . . . . . . . . . . . . 4
Risk Factors . . . . . . . . . . . . . . . . . 13
The Trusts . . . . . . . . . . . . . . . . . . 18 December 4, 1997
The Mortgage Pools . . . . . . . . . . . . . . 25
Mortgage Loan Program . . . . . . . . . . . . . 27
Description of the Securities . . . . . . . . . 34
Subordination . . . . . . . . . . . . . . . . . 49
Description of Credit Enhancement . . . . . . . 50
Hazard Insurance; Claims Thereunder . . . . . . 55
The Sponsor and the Transferor . . . . . . . . 56
The Master Servicer . . . . . . . . . . . . . . 56
The Pooling and Servicing Agreement . . . . . . 56
Yield Considerations . . . . . . . . . . . . . 62
Maturity and Prepayment Considerations . . . . 64
Certain Legal Aspects of Mortgage Loans and
Related Matters . . . . . . . . . . . . . . . 65
Certain Federal Income Tax Consequences . . . . 72
ERISA Considerations . . . . . . . . . . . . . 84
Legal Investment Matters . . . . . . . . . . . 87
Use of Proceeds . . . . . . . . . . . . . . . . 88
Methods of Distribution . . . . . . . . . . . . 88
Legal Matters . . . . . . . . . . . . . . . . . 89
Financial Information . . . . . . . . . . . . . 89
Additional Information . . . . . . . . . . . . 89
Index of Principal Definitions . . . . . . . . 90
Global Clearance. Settlement and Tax
Documentation Procedures . . . . . . . Annex I
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