CWMBS INC
424B5, 2000-12-29
ASSET-BACKED SECURITIES
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<PAGE>   1
                                                Filed Pursuant to Rule 424(b)(5)
                                                Registration No. 333-72655

PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED NOVEMBER 13, 2000)

                                  $197,800,000
                                 (APPROXIMATE)

                                  CWMBS, INC.
                                   DEPOSITOR

                          Countrywide Home Loans Logo

                           SELLER AND MASTER SERVICER

                    CHL MORTGAGE PASS-THROUGH TRUST 2000-11
                                     ISSUER
           DISTRIBUTIONS PAYABLE MONTHLY, BEGINNING JANUARY 25, 2001
                            ------------------------

The following classes of certificates are being offered pursuant to this
prospectus supplement and the accompanying prospectus:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
                           INITIAL CLASS        PASS-THROUGH                               INITIAL CLASS        PASS-THROUGH
                        CERTIFICATE BALANCE         RATE                                CERTIFICATE BALANCE         RATE
------------------------------------------------------------------------------------------------------------------------------
<S>                     <C>                   <C>               <C>                     <C>                   <C>
 Class A-1                 $135,838,000            7.25%        Class X                             N/A           Variable
------------------------------------------------------------------------------------------------------------------------------
 Class A-2                 $ 17,697,000            7.25%        Class A-R                   $       100            7.25%
------------------------------------------------------------------------------------------------------------------------------
 Class A-3                 $ 17,614,900            7.25%        Class M                     $ 3,100,000            7.25%
------------------------------------------------------------------------------------------------------------------------------
 Class A-4                 $ 20,000,000            7.25%        Class B-1                   $ 2,000,000            7.25%
------------------------------------------------------------------------------------------------------------------------------
 Class PO                  $    350,000             N/A         Class B-2                   $ 1,200,000            7.25%
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
</TABLE>

------------------------
 CONSIDER CAREFULLY
 THE RISK FACTORS
 BEGINNING ON
 PAGE S-7 IN THIS
 PROSPECTUS
 SUPPLEMENT AND
 ON PAGE 5 IN THE
 PROSPECTUS.
------------------------

NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED THESE
SECURITIES OR DETERMINED THAT THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IS
ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
     Countrywide Securities Corporation will offer the Class A, Class M, Class
B-1 and Class B-2 Certificates to the public at varying prices to be determined
at the time of sale. The proceeds to the depositor from the sale of the offered
certificates are expected to be approximately $195,795,501, plus accrued
interest, before deducting expenses. The Class X and Class PO Certificates will
not be purchased by Countrywide Securities Corporation. They will be transferred
to the seller on or about December 29, 2000 as partial consideration for the
sale of the mortgage loans to the depositor. See "Method of Distribution."

                                   [CSC LOGO]

December 27, 2000
The Class PO Certificates are principal only certificates, and the Class X
                      Certificates are interest only notional amount
                      certificates. The pass-through rate for the Class X
                      Certificates is calculated as described under "Description
                      of the Certificates -- Interest."
The assets of the trust will consist primarily of a pool of 30-year conventional
                      fixed-rate mortgage loans secured by first liens on one-
                      to four-family residential properties.
<PAGE>   2

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
        PROSPECTUS SUPPLEMENT           PAGE
        ---------------------           ----
<S>                                     <C>
Summary...............................   S-3
Risk Factors..........................   S-7
The Mortgage Pool.....................  S-12
Servicing of Mortgage Loans...........  S-23
Description of the Certificates.......  S-27
Yield, Prepayment and Maturity
  Considerations......................  S-41
Credit Enhancement....................  S-50
Use of Proceeds.......................  S-52
Material Federal Income Tax
  Consequences........................  S-52
ERISA Considerations..................  S-54
Method of Distribution................  S-56
Legal Matters.........................  S-57
Ratings...............................  S-57
</TABLE>

<TABLE>
<CAPTION>
              PROSPECTUS                PAGE
              ----------                ----
<S>                                     <C>
Important Notice About Information in
  This Prospectus and Each
  Accompanying Prospectus
  Supplement..........................    4
Risk Factors..........................    5
The Trust Fund........................   13
Use of Proceeds.......................   24
The Depositor.........................   24
Mortgage Loan Program.................   24
Description of the Certificates.......   27
Credit Enhancement....................   40
Yield and Prepayment Considerations...   45
The Pooling and Servicing Agreement...   46
Certain Legal Aspects of the Mortgage
  Loans...............................   60
Material Federal Income Tax
  Consequences........................   68
State Tax Considerations..............   92
ERISA Considerations..................   93
Legal Investment......................   96
Method of Distribution................   97
Legal Matters.........................   98
Financial Information.................   98
Rating................................   98
Index to Defined Terms................   99
</TABLE>

                                       S-2
<PAGE>   3

                                    SUMMARY

-THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS DOCUMENT AND DOES NOT
 CONTAIN ALL OF THE INFORMATION THAT YOU NEED TO CONSIDER IN MAKING YOUR
 INVESTMENT DECISION. TO UNDERSTAND ALL OF THE TERMS OF AN OFFERING OF THE
 CERTIFICATES, READ CAREFULLY THIS ENTIRE DOCUMENT AND THE ACCOMPANYING
 PROSPECTUS.

                              OFFERED CERTIFICATES

CHL Mortgage Pass-Through Trust 2000-11 will issue thirteen classes of
certificates, ten of which are being offered by this prospectus supplement and
the accompanying prospectus. The assets of the trust that will support both the
offered certificates and other classes of certificates will consist, on the
closing date, of a pool of mortgage loans with a principal balance of
approximately $157,243,873 as of December 1, 2000 and certain other property and
assets described in this prospectus supplement. The mortgage loans will consist
primarily of 30-year conventional fixed-rate mortgage loans secured by first
liens on one-to four-family residential properties.

The following chart lists certain characteristics of the classes of the offered
certificates. The classes of certificates listed below will not be offered
unless they are assigned the following ratings by Fitch, Inc. ("Fitch") and by
Moody's Investors Service, Inc. ("Moody's").

<TABLE>
<CAPTION>
                        FITCH    MOODY'S
        CLASS           RATING   RATING            TYPE
        -----           ------   -------   --------------------
<S>                     <C>      <C>       <C>
Class A-1............    AAA       Aaa     Senior
Class A-2............    AAA       Aaa     Senior
Class A-3............    AAA       Aaa     Senior
Class A-4............    AAA       Aaa     Senior/NAS
Class PO.............    AAA       Aaa     Senior/Principal
                                           Only
Class X..............    AAA       Aaa     Senior/Notional
                                           Amount/Interest Only
Class A-R............    AAA      Aaa      Senior/Residual
Class M                  AA        *       Subordinate
Class B-1............    A         *       Subordinate
Class B-2............    BBB       *       Subordinate
</TABLE>

------------
* Moody's was not asked to rate these certificates.

A rating is not a recommendation to buy, sell or hold securities. These ratings
may be lowered or withdrawn at any time by either of the rating agencies.

See "Ratings."

See "Description of the Certificates -- General" and "-- Book-Entry
Certificates" in this prospectus supplement and "The Mortgage Pool" in this
prospectus supplement and "The Trust Fund -- The Mortgage Loans -- General" in
the prospectus.

CUT-OFF DATE

For any mortgage loan included in the mortgage pool on the closing date,
December 1, 2000. For any subsequent mortgage loan to be included in the
mortgage pool, the origination date for such subsequent mortgage loan.

CLOSING DATE

On or about December 29, 2000.

DEPOSITOR

CWMBS, Inc. is a limited purpose finance subsidiary of Countrywide Credit
Industries, Inc. Its address is 4500 Park Granada, Calabasas, California 91302,
and its telephone number is (818) 225-3300.

SELLER AND MASTER SERVICER

Countrywide Home Loans, Inc.

TRUSTEE

The Bank of New York.

                                       S-3
<PAGE>   4

FUNDING PERIOD

On the closing date, an amount equal to not more than approximately $42,756,127
will be deposited in a pre-funding account. During the funding period, which
commences on the closing date and ends January 31, 2001, amounts deposited in
the pre-funding account on the closing date are expected to be used to purchase
subsequent mortgage loans.

Neither the seller nor the depositor will exercise any discretion in the
selection of subsequent mortgage loans to be sold to the trust fund. The
selection will be made by a mechanical procedure on a first-in first-out basis.

Any amounts in the pre-funding account not used during the funding period to
purchase subsequent mortgage loans will be paid to the certificateholders as a
prepayment of principal on the February 2001 Distribution Date.

On the closing date, funds will be deposited in a capitalized interest account.
During the funding period, amounts deposited in the capitalized interest account
are expected to be used to fund certain shortfalls in interest distributions to
certificateholders attributable to the pre-funding feature of the trust.

See "The Mortgage Pool -- Pre-Funding" in this prospectus supplement.

DISTRIBUTION DATES

We will make distributions on the 25th day of each month. If the 25th day of a
month is not a business day, then we will make distributions on the next
business day. The first distribution is scheduled for January 25, 2001.

INTEREST PAYMENTS

Interest will accrue at the rate specified on the cover page or described in
this prospectus supplement on each interest bearing class of certificates on the
basis of a 360-day year divided into twelve 30-day months. The interest accrual
period for the interest bearing classes of certificates for any distribution
date will be the calendar month before the distribution date.

See "Description of the Certificates -- Interest."

PRINCIPAL PAYMENTS

Principal will be paid on each class of certificates entitled to receive
principal payments on each distribution date as described in this prospectus
supplement beginning at page S-31. On the distribution date following the end of
the funding period, distributions of principal on the offered certificates will
include any money remaining in the pre-funding account.

See "Description of the Certificates -- Principal" in this prospectus
supplement.

OPTIONAL TERMINATION

The master servicer may purchase all of the remaining assets of the trust after
the principal balance of the mortgage loans and real estate owned by the trust
declines below 10% of the principal balance of the mortgage loans as of the
initial cut-off date plus the amount deposited in the pre-funding account on the
closing date.

See "Description of the Certificates -- Optional Termination" in this prospectus
supplement.

                 COLLECTION ACCOUNT; PRIORITY OF DISTRIBUTIONS

On each distribution date amounts available in the trust to make distributions
on the certificates will be applied in the following order of priority:

(1) to interest on the interest bearing classes of senior certificates;

(2) to principal of the classes of senior certificates in the manner, order and
    priority described under "Description of the Certificates -- Principal";

(3) to any deferred amounts payable on the Class PO Certificates, as described
    under "Description of the Certificates -- Principal"; and

                                       S-4
<PAGE>   5

(4) to interest on and then principal of each class of subordinated
    certificates, in order of their numerical class designations, beginning with
    the Class M Certificates, as described under "Description of the
    Certificates -- Principal."

ADVANCES

The master servicer will make cash advances with respect to delinquent payments
of principal and interest on the mortgage loans to the extent the master
servicer reasonably believes that the cash advances can be repaid from future
payments on the mortgage loans. These cash advances are only intended to
maintain a regular flow of scheduled interest and principal payments on the
certificates and are not intended to guarantee or insure against losses.

See "Servicing of Mortgage Loans -- Advances" in this prospectus supplement.

                               CREDIT ENHANCEMENT

The issuance of senior certificates and subordinated certificates by the trust
is designed to increase the likelihood that senior certificateholders will
receive regular payments of interest and principal.

SUBORDINATION

The senior certificates will have a payment priority over the subordinated
certificates. Within the classes of subordinated certificates offered by this
prospectus supplement, the Class M Certificates will have payment priority over
the Class B-1 and B-2 Certificates, and the Class B-1 Certificates will have a
payment priority over the Class B-2 Certificates. The Class B-3, Class B-4 and
Class B-5 Certificates, which are not being offered to the public, are also
subordinated to all of the other certificates, in that order, with the Class B-5
Certificates having the lowest priority of payment.

Subordination is designed to provide the holders of certificates with a higher
payment priority with protection against most losses realized when the remaining
unpaid principal balance on a mortgage loan exceeds the amount of proceeds
recovered upon the liquidation of that mortgage loan. In general, this loss
protection is accomplished by allocating the realized losses among the
subordinated certificates, beginning with the subordinated certificates with the
lowest payment priority, before realized losses are allocated to the senior
certificates. However, some losses such as special hazard losses, bankruptcy
losses, and fraud losses in excess of the amounts set forth in this prospectus
supplement, are, in general, allocated pro rata to each class of certificates
(other than the Class X and Class PO Certificates) instead of first being
allocated to the subordinated certificates.

See "Description of the Certificates -- Allocation of Losses" and "Credit
Enhancement -- Subordination."

                                   TAX STATUS

The trust will elect to be treated, for federal income tax purposes, as a real
estate mortgage investment conduit. The classes of certificates that are
designated as the regular certificates will constitute regular interests in the
REMIC. The Class A-R Certificates will represent the sole class of residual
interests in the REMIC.

See "Material Federal Income Tax Consequences" in this prospectus supplement and
in the prospectus.

                              ERISA CONSIDERATIONS

The offered certificates (other than the Class PO, Class X and Class A-R
Certificates) may be purchased by a pension or other employee benefit plan
subject to the Employee Retirement Income Security Act of 1974 or Section 4975
of the Internal Revenue Code of 1986, so long as certain conditions are met.

                                       S-5
<PAGE>   6

See "ERISA Considerations" in this prospectus supplement and in the prospectus.

                                LEGAL INVESTMENT

At the end of the funding period, the senior certificates and the Class M
Certificates will be mortgage related securities for purposes of the Secondary
Mortgage Market Enhancement Act of 1984 as long as they are rated in one of the
two highest rating categories by at least one nationally recognized statistical
rating organization. The Class B-1 and Class B-2 Certificates will not be rated
in one of the two highest rating categories by a nationally recognized
statistical rating organization, and therefore, will not be mortgage related
securities for purposes of that Act.

See "Legal Investment" in the prospectus.

                                       S-6
<PAGE>   7

                                  RISK FACTORS

The following information, which you should carefully consider, identifies
significant sources of risk associated with an investment in the certificates.
You should also carefully consider the information under "Risk Factors"
beginning on page 5 in the prospectus.

YOUR YIELD WILL BE AFFECTED BY
PREPAYMENTS                        Borrowers may, at their option, prepay their
                                   mortgage loans in whole or in part at any
                                   time. We cannot predict the rate at which
                                   borrowers will repay their mortgage loans. A
                                   prepayment of a mortgage loan, however, will
                                   usually result in a prepayment on the
                                   certificates.

                                   The rate and timing of prepayment of the
                                   mortgage loans will affect the yields to
                                   maturity and weighted average lives of the
                                   certificates. Any reinvestment risks from
                                   faster or slower prepayments of mortgage
                                   loans will be borne entirely by the holders
                                   of the certificates.

                                   - If you purchase principal only certificates
                                     or you purchase your certificates at a
                                     discount and principal is repaid slower
                                     than you anticipate, then your yield may be
                                     lower than you anticipate.

                                   - If you purchase interest only certificates
                                     or you purchase your certificates at a
                                     premium and principal is repaid faster than
                                     you anticipate, then your yield may be
                                     lower than you anticipate.

                                   - If you purchase interest only certificates
                                     and principal is repaid faster than you
                                     anticipate, you may lose your initial
                                     investment.

                                   - Although none of the initial mortgage loans
                                     provide for prepayment penalties, certain
                                     of the subsequent mortgage loans may
                                     require the mortgagor to pay a penalty if
                                     the mortgagor prepays the mortgage loan
                                     during periods ranging from one year to
                                     five years after the mortgage loan was
                                     originated. A prepayment penalty may
                                     discourage a mortgagor from prepaying the
                                     mortgage loan during the applicable period.
                                     Prepayment penalties will not be available
                                     for distribution to the certificateholders.

                                   - In addition, the yields to maturity and
                                     weighted average life of the certificates
                                     will be affected by any prepayment
                                     resulting from the distribution of amounts
                                     (if any) on deposit in the pre-funding
                                     account after the end of the funding
                                     period. It is expected that the Class PO
                                     Certificates will receive a prepayment of
                                     principal after the end of the funding
                                     period.

                                       S-7
<PAGE>   8

                                   See "Yield, Prepayment and Maturity
                                   Considerations" for a description of factors
                                   that may influence the rate and timing of
                                   prepayments on the mortgage loans.

YOUR YIELD WILL BE AFFECTED BY
HOW
DISTRIBUTIONS ARE ALLOCATED TO
THE
CERTIFICATES                       The timing of principal payments on the
                                   certificates will be affected by a number of
                                   factors, including:

                                   - the extent of prepayments on the mortgage
                                     loans,

                                   - how payments of principal are allocated
                                     among the classes of certificates as
                                     specified on page S-31,

                                   - whether the master servicer exercises its
                                     right, in its sole discretion, to terminate
                                     the trust fund,

                                   - the rate and timing of payment defaults and
                                     losses on the mortgage loans,

                                   - repurchases of mortgage loans for material
                                     breaches of representations and warranties,
                                     and

                                   - the availability of subsequent mortgage
                                     loans.

                                   Since distributions on the certificates are
                                   dependent upon the payments on the mortgage
                                   loans, we cannot guarantee the amount of any
                                   particular payment or the amount of time that
                                   will elapse before the trust is terminated.

                                   See "Description of the
                                   Certificates -- Principal," and "-- Optional
                                   Termination" for a description of the manner
                                   in which principal will be paid to the
                                   certificates. See "The Mortgage
                                   Pool -- Assignment of the Mortgage Loans" for
                                   more information regarding the repurchase or
                                   substitution of mortgage loans.

CREDIT ENHANCEMENT MAY NOT BE
SUFFICIENT TO PROTECT SENIOR
CERTIFICATES FROM LOSSES           The certificates are not insured by any
                                   financial guaranty insurance policy. The
                                   subordination features are intended to
                                   enhance the likelihood that senior
                                   certificateholders will receive regular
                                   payments of interest and principal.

                                   SUBORDINATION.  Credit enhancement will be
                                   provided for the certificates, first, by the
                                   right of the holders of certificates to
                                   receive payments of principal before the
                                   classes subordinated to them and, second, by
                                   the allocation of realized losses, other than
                                   excess losses, to subordinated classes in the
                                   inverse order of their priority of payment.
                                   This form of credit enhancement uses
                                   collections on the mortgage loans otherwise
                                   payable to holders of subordinated classes to
                                   pay amounts due on more senior classes.
                                   Collections otherwise payable to subordinated
                                   classes comprise the sole source of funds
                                   from which this type of credit enhancement is
                                   provided.

                                       S-8
<PAGE>   9

                                   Except as described below, realized losses
                                   are allocated to the subordinated
                                   certificates in the reverse order of their
                                   priority of payment, beginning with the
                                   subordinated certificates then outstanding
                                   with the lowest payment priority, until the
                                   principal amount of each class of
                                   subordinated certificates has been reduced to
                                   zero. Accordingly, if the aggregate principal
                                   balance of each subordinated class were to be
                                   reduced to zero, delinquencies and defaults
                                   on the mortgage loans would reduce the amount
                                   of funds available for monthly distributions
                                   to holders of the senior certificates.
                                   Furthermore, the subordinated classes will
                                   provide only limited protection against some
                                   categories of losses such as special hazard
                                   losses, bankruptcy losses and fraud losses in
                                   excess of the amounts specified in this
                                   prospectus supplement. Any losses in excess
                                   of those amounts will be allocated pro rata
                                   to each class of certificates (other than the
                                   Class PO and Class X Certificates), even if
                                   the principal balance of each subordinated
                                   class has not been reduced to zero. Among the
                                   subordinated certificates, the Class M
                                   Certificates are the least subordinated, that
                                   is, they have the highest payment priority.
                                   Then come the Class B-1, Class B-2, Class
                                   B-3, Class B-4 and Class B-5 Certificates, in
                                   that order.

                                   See "Credit Enhancement -- Subordination."

POSSIBLE PREPAYMENT DUE TO
INABILITY TO ACQUIRE SUBSEQUENT
MORTGAGE LOANS                     The ability of the trust fund to acquire
                                   subsequent mortgage loans for inclusion in
                                   the trust fund depends on the ability of the
                                   seller to originate and acquire mortgage
                                   loans during the funding period that meet the
                                   eligibility criteria for subsequent mortgage
                                   loans as described in this prospectus
                                   supplement. The ability of the seller to
                                   originate and acquire eligible subsequent
                                   mortgage loans will be affected by a number
                                   of factors including prevailing interest
                                   rates, employment levels, the rate of
                                   inflation and economic conditions generally.

                                   If the full amount on deposit in the
                                   pre-funding account cannot be used for that
                                   purpose by the end of the funding period,
                                   those amounts remaining on deposit in that
                                   account will be distributed to the
                                   certificateholders as a prepayment of
                                   principal on the February 2001 distribution
                                   date. No assurance can be given as to the
                                   magnitude of any amount on deposit in the
                                   pre-funding account at the end of the funding
                                   period or the magnitude of the resulting
                                   prepayment, if any. In addition, the ability
                                   of the trust fund to acquire subsequent
                                   mortgage loans with particular
                                   characteristics

                                       S-9
<PAGE>   10

                                   will affect the size of the principal
                                   prepayment to the Class PO Certificates on
                                   the February 2001 distribution date. It is
                                   expected that there will be a principal
                                   prepayment to the Class PO Certificates on
                                   the February 2001 distribution date, but
                                   there can be no assurance given as to the
                                   magnitude of that prepayment.

CERTIFICATES MAY NOT BE
APPROPRIATE
FOR SOME INVESTORS                 The offered certificates may not be an
                                   appropriate investment for investors who do
                                   not have sufficient resources or expertise to
                                   evaluate the particular characteristics of
                                   each applicable class of offered
                                   certificates. This may be the case because,
                                   among other things:

                                   - The yield to maturity of offered
                                     certificates purchased at a price other
                                     than par will be sensitive to the uncertain
                                     rate and timing of principal prepayments on
                                     the mortgage loans;

                                   - The rate of principal distributions on and
                                     the weighted average lives of the offered
                                     certificates will be sensitive to the
                                     uncertain rate and timing of principal
                                     prepayments on the mortgage loans and the
                                     priority of principal distributions among
                                     the classes of certificates. Accordingly,
                                     the offered certificates may be an
                                     inappropriate investment if you require a
                                     distribution of a particular amount of
                                     principal on a specific date or an
                                     otherwise predictable stream of
                                     distributions;

                                   - You may not be able to reinvest
                                     distributions on an offered certificate
                                     (which, in general, are expected to be
                                     greater during periods of relatively low
                                     interest rates) at a rate at least as high
                                     as the pass-through rate applicable to your
                                     certificate; or

                                   - A secondary market for the offered
                                     certificates may not develop or provide
                                     certificateholders with liquidity of
                                     investment.

GEOGRAPHIC CONCENTRATION
INCREASES
RISK THAT CERTIFICATE YIELDS
COULD
BE IMPAIRED                        Up to 44.70% of the initial mortgage loans
                                   expected to be in the trust on the closing
                                   date will be secured by property in
                                   California. Property in California may be
                                   more susceptible than homes located in other
                                   parts of the country to some types of
                                   uninsurable hazards, such as earthquakes,
                                   floods, mudslides and other natural
                                   disasters. In addition,

                                   - Economic conditions in California (which
                                     may or may not affect real property values)
                                     may affect the ability of borrowers to
                                     repay their loans on time;

                                   - Declines in the California residential real
                                     estate market may reduce the values of
                                     properties located in California, which
                                     would result in an increase in the loan-to-
                                     value ratios; and

                                      S-10
<PAGE>   11

                                   - Any increase in the market value of
                                     properties located in California would
                                     reduce the loan-to-value ratios and could,
                                     therefore, make alternative sources of
                                     financing available to the borrowers at
                                     lower interest rates, which could result in
                                     an increased rate of prepayment of the
                                     mortgage loans.

YOU MAY HAVE DIFFICULTY
RESELLING
CERTIFICATES                       No market for any of the certificates will
                                   exist before they are issued. The underwriter
                                   intends to make a secondary market in the
                                   classes of certificates purchased by it, but
                                   will have no obligation to do so. We cannot
                                   assure you that a secondary market will
                                   develop or, if it develops, that it will
                                   continue. Consequently, you may not be able
                                   to sell your certificates readily or at
                                   prices that will enable you to realize your
                                   desired yield. The market values of the
                                   certificates are likely to fluctuate; these
                                   fluctuations may be significant and could
                                   result in significant losses to you.

                                   The secondary markets for mortgage backed
                                   securities have experienced periods of
                                   illiquidity and can be expected to do so in
                                   the future. Illiquidity can have a severely
                                   adverse effect on the prices of securities
                                   that are especially sensitive to prepayment,
                                   credit, or interest rate risk, or that have
                                   been structured to meet the investment
                                   requirements of limited categories of
                                   investors.

                                   See "Risk Factors -- Ability to Resell
                                   Certificates May Be Limited" in the
                                   prospectus.

SOME OF THE STATEMENTS CONTAINED IN OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS CONSIST OF FORWARD-LOOKING
STATEMENTS RELATING TO FUTURE ECONOMIC PERFORMANCE OR PROJECTIONS AND OTHER
FINANCIAL ITEMS. THESE STATEMENTS CAN BE IDENTIFIED BY THE USE OF
FORWARD-LOOKING WORDS SUCH AS "MAY," "WILL," "SHOULD," "EXPECTS," "BELIEVES,"
"ANTICIPATES," "ESTIMATES," OR OTHER COMPARABLE WORDS. FORWARD-LOOKING
STATEMENTS ARE SUBJECT TO A VARIETY OF RISKS AND UNCERTAINTIES THAT COULD CAUSE
ACTUAL RESULTS TO DIFFER FROM THE PROJECTED RESULTS. THOSE RISKS AND
UNCERTAINTIES INCLUDE, AMONG OTHERS, GENERAL ECONOMIC AND BUSINESS CONDITIONS,
REGULATORY INITIATIVES AND COMPLIANCE WITH GOVERNMENTAL REGULATIONS, CUSTOMER
PREFERENCES AND VARIOUS OTHER MATTERS, MANY OF WHICH ARE BEYOND OUR CONTROL.
BECAUSE WE CANNOT PREDICT THE FUTURE, WHAT ACTUALLY HAPPENS MAY BE VERY
DIFFERENT FROM WHAT WE PREDICT IN OUR FORWARD-LOOKING STATEMENTS.

                                      S-11
<PAGE>   12

                               THE MORTGAGE POOL

GENERAL

     Certain information with respect to the mortgage loans expected to be
included in the mortgage pool on the closing date (collectively these will be
referred to as "Initial Mortgage Loans") is set forth below. A detailed
description on Form 8-K (which is referred to as the "detailed description") of
the Initial Mortgage Loans actually delivered will be available to purchasers of
the offered certificates at or before, and will be filed with the Securities and
Exchange Commission within fifteen days after, the initial delivery of the
offered certificates. The detailed description will specify the aggregate of the
stated principal balances of the Initial Mortgage Loans as of the initial
cut-off date and will also include the following information regarding the
Initial Mortgage Loans:

     - the outstanding stated principal balances of the Initial Mortgage Loans
       as of the initial cut-off date,

     - the mortgage rates borne by the Initial Mortgage Loans,

     - the original loan-to-value ratios of the Initial Mortgage Loans,

     - the remaining terms to stated maturity of the Initial Mortgage Loans,

     - the type of properties securing the Initial Mortgage Loans,

     - the geographical distribution of the Initial Mortgage Loans by state,

     - the documentation program pursuant to which the Initial Mortgage Loans
       were originated,

     - the purpose for obtaining the Initial Mortgage Loan (i.e. purchase or
       refinance), and

     - the occupancy type of the Initial Mortgage Loans (based upon
       representations of the mortgagors at the time of origination).

     The depositor, CWMBS, Inc., will purchase the mortgage loans in the
mortgage pool from Countrywide Home Loans, Inc. ("Countrywide") pursuant to a
pooling and servicing agreement dated as of December 1, 2000 among Countrywide,
as seller and master servicer, the depositor and The Bank of New York, as
trustee, and will cause the mortgage loans to be assigned to the trustee for the
benefit of the holders of the certificates.

     Under the pooling and servicing agreement, the seller will make certain
representations, warranties and covenants to the depositor relating to, among
other things, the due execution and enforceability of the pooling and servicing
agreement and certain characteristics of the Initial Mortgage Loans and, subject
to the limitations described under "-- Assignment of the Mortgage Loans," will
be obligated to repurchase or substitute a similar mortgage loan for any
mortgage loan as to which there exists deficient documentation or as to which
there has been an uncured breach of any representation or warranty relating to
the characteristics of the mortgage loans that materially and adversely affects
the interests of the certificateholders in that mortgage loan. The seller will
represent and warrant to the depositor in the pooling and servicing agreement
that the Initial Mortgage Loans were selected from among the outstanding one- to
four-family mortgage loans in the seller's portfolio as to which the
representations and warranties set forth in the pooling and servicing agreement
can be made and that the selection was not made in a manner intended to affect
the interests of the certificateholders adversely. See "Mortgage Loan
Program -- Representations by Sellers; Repurchases" in the prospectus. Under the
pooling and servicing agreement, the depositor will assign all its right, title
and interest in the representations, warranties and covenants (including the
seller's repurchase or substitution obligation) to the trustee for the benefit
of the certificateholders. The depositor will make no representations or
warranties with respect to the mortgage loans and will have no obligation to
repurchase or substitute mortgage loans with deficient documentation or which
are otherwise defective. Countrywide is selling the mortgage loans without
recourse and will have no obligation with respect to the certificates in its
capacity as seller other than the repurchase or substitution obligation
described above. The obligations of Countrywide, as master servicer, with
respect to

                                      S-12
<PAGE>   13

the certificates are limited to the master servicer's contractual servicing
obligations under the pooling and servicing agreement.

     On the closing date, the trust fund will also include not more than
approximately $42,756,127 in an account (the "Pre-Funding Account") that will be
used to purchase additional mortgage loans (the "Subsequent Mortgage Loans").
The Subsequent Mortgage Loans will comply with the representations described in
"The Mortgage Pool -- Pre-Funding" in this prospectus supplement.

     As of the initial cut-off date, the aggregate of the Stated Principal
Balances of the Initial Mortgage Loans is expected to be approximately
$157,243,873, which is referred to as the initial cut-off date pool principal
balance. The Initial Mortgage Loans will provide for the amortization of the
amount financed over a series of substantially equal monthly payments. All of
the Initial Mortgage Loans will provide that payments are due on the first day
of each month (the "Due Date"). At origination, substantially all of the Initial
Mortgage Loans had stated terms to maturity of 30 years. Scheduled monthly
payments made by the mortgagors on the mortgage loans (referred to as scheduled
payments) either earlier or later than their scheduled Due Dates will not affect
the amortization schedule or the relative application of the payments to
principal and interest. The initial mortgage loans may be prepaid at any time
without penalty. Any prepayment penalties received on these mortgage loans will
not be distributed to certificateholders.

     It is expected that each Initial Mortgage Loan was originated on or after
June 21, 2000.

     The latest stated maturity date of any Initial Mortgage Loan is expected to
be January 1, 2031. The earliest stated maturity date of any Initial Mortgage
Loan is expected to be July 1, 2030.

     As of the initial cut-off date, no Initial Mortgage Loan will be delinquent
more than 30 days.

     It is expected that four Initial Mortgage Loans will be subject to a
buydown agreement. No Initial Mortgage Loan provides for deferred interest or
negative amortization.

     No Initial Mortgage Loan will have had a Loan-to-Value Ratio at origination
of more than approximately 95%. Generally, each mortgage loan with a
Loan-to-Value Ratio at origination of greater than 80% is covered by a primary
mortgage guaranty insurance policy issued by a mortgage insurance company
acceptable to Fannie Mae or Freddie Mac. The policy provides coverage in an
amount equal to a specified percentage times the sum of the remaining principal
balance of the related mortgage loan, the accrued interest on it and the related
foreclosure expenses. The specified coverage percentage is 12% for Loan-to-Value
Ratios between 80.01% and 85.00%, 25% for Loan-to-Value Ratios between 85.01%
and 90.00%, 30% for Loan-to-Value Ratios between 90.01% and 97.00% and 35% for
Loan-to-Value Ratios between 97.01% and 100%. However, under certain
circumstances, the specified coverage level may vary from the foregoing. With
respect to four mortgage loans expected to be included in the Initial Mortgage
Loans, the lender (rather than the borrower) acquired the primary mortgage
guaranty insurance and charged the related borrower an interest premium. Except
for these lender acquired mortgage insurance mortgage loans, no primary mortgage
guaranty insurance policy will be required with respect to any mortgage loan if
maintaining the policy is prohibited by applicable law or after the date on
which the related Loan-to-Value Ratio is 80% or less or, based on a new
appraisal, the principal balance of the mortgage loan represents 80% or less of
the new appraised value. The primary mortgage guaranty insurance policy will be
maintained for the life of the lender acquired mortgage insurance mortgage
loans, unless otherwise prohibited by law.

     The "Loan-to-Value Ratio" of a mortgage loan at any given time is a
fraction, expressed as a percentage, the numerator of which is the principal
balance of the related mortgage loan at the date of determination and the
denominator of which is

        - in the case of a purchase, the lesser of the selling price of the
          mortgaged property or its appraised value at the time of sale, or

        - in the case of a refinance, the appraised value of the mortgaged
          property at the time of the refinance, except in the case of a
          mortgage loan underwritten pursuant to Countrywide's Streamlined
          Documentation Program as described under "-- Underwriting Process."
                                      S-13
<PAGE>   14

With respect to mortgage loans originated pursuant to the Streamlined
Documentation Program

        - if the loan-to-value ratio at the time of the origination of the
          mortgage loan being refinanced was 90% or less, the "Loan-to-Value
          Ratio" will be the ratio of the principal amount of the mortgage loan
          outstanding at the date of determination divided by the appraised
          value of the related mortgaged property at the time of the origination
          of the mortgage loan being refinanced or

        - if the loan-to-value ratio at the time of the origination of the
          mortgage loan being refinanced was greater than 90%, then the
          "Loan-to-Value Ratio" will be the ratio of the principal amount of the
          mortgage loan outstanding at the date of determination divided by the
          appraised value as determined by a limited appraisal report at the
          time of the origination of the mortgage loan. See "-- Underwriting
          Process."

No assurance can be given that the value of any mortgaged property has remained
or will remain at the level that existed on the appraisal or sales date. If
residential real estate values generally or in a particular geographic area
decline, the Loan-to-Value Ratios might not be a reliable indicator of the rates
of delinquencies, foreclosures and losses that could occur with respect to the
mortgage loans.

     The following information sets forth certain characteristics of the
mortgage loans expected to be included in the final mortgage pool (the "Pool
Characteristics"). This information as well as other information in this
prospectus supplement describing the mortgage loans and the final mortgage pool
are approximate percentages based on the Stated Principal Balances of the
mortgage loans to be included in the final mortgage pool as of the relevant
Cut-off Date, with the characteristics for any Initial Mortgage Loan taken as of
the Initial Cut-off Date (as defined below) and the characteristics for any
Subsequent Mortgage Loan (as defined below) taken as of the applicable
Subsequent Cut-off Date.

           CHARACTERISTICS OF THE MORTGAGE LOANS IN THE MORTGAGE POOL

<TABLE>
<S>                                                           <C>
Number of Mortgage Loans....................................            516
Pool Principal Balance......................................        $200,000,000
Stated Principal Balance:
  Range.....................................................   $256,000 to $2,000,000
  Average...................................................          $387,300
Original Term to Stated Maturity............................         360 months
Weighted Average Remaining Term to Stated Maturity..........         359 months
Mortgage Rate:
  Range.....................................................      7.000% to 9.875%
  Weighted Average..........................................           8.179%
Aggregate PO Balance........................................   No more than $350,000
Original Loan-to Value Ratios:
  Range.....................................................      15.15% to 95.00%
  Weighted Average..........................................           75.50%
Original Loan-to Value Ratios over 80%......................    No more than 15.00%
State Distribution to Mortgaged Properties:
  Located in California.....................................    No more than 50.00%
  Located in Colorado.......................................     No more than 8.00%
  Located in Texas..........................................     No more than 6.00%
  Located in Washington.....................................     No more than 5.00%
  Located in New York.......................................     No more than 4.00%
</TABLE>

                                      S-14
<PAGE>   15
<TABLE>
<S>                                                           <C>
  Located in Michigan.......................................     No more than 4.00%
  (No other State or the District of Columbia will be more
     than 4.00%)
Occupancy Types:
  Primary Home..............................................      At least 94.00%
  Second Home...............................................     No more than 4.00%
  Investor Property.........................................     No more than 3.00%
Types of Mortgaged Properties:
  Single Family (includes PUDs).............................      At least 94.00%
  Condominiums..............................................     No more than 5.00%
  Two- to Four-Family Units.................................     No more than 2.00%
Purpose of Mortgage Loans:
  Purchase and Refinance (rate/term)........................      At least 82.00%
  Refinance (cash-out)......................................    No more than 18.00%
Documentation Program:
  Full/Alternative..........................................      At least 70.00%
  Reduced...................................................    No more than 28.00%
  CLUES Plus................................................     No more than 2.00%
  No Income/No Asset........................................     No more than 2.00%
  Streamline................................................     No more than 1.00%
</TABLE>

---------------
* Approximate. Actual amounts and percentages may vary up to a maximum of 5%
  (other than with respect to the Average Stated Principal Balance of the
  mortgage loans in the Mortgage Pool, which may vary up to a maximum of 10%)
  depending on the actual mortgage loans included in the Mortgage Pool at the
  end of the funding period.

ASSIGNMENT OF THE MORTGAGE LOANS

     Pursuant to the pooling and servicing agreement, the depositor on the
closing date will sell, transfer, assign, set over and otherwise convey without
recourse to the trustee in trust for the benefit of the certificateholders all
right, title and interest of the depositor in and to each Initial Mortgage Loan
and all right, title and interest in and to all other assets included in CHL
Mortgage Pass-Through Trust 2000-11, including all principal and interest
received on or with respect to the Initial Mortgage Loans, but not any principal
and interest due on or before the Initial Cut-off Date, and the Pre-Funded
Amount (as defined herein) deposited in the Pre-Funding Account on the Closing
Date (as defined herein).

     In connection with the transfer and assignment of a mortgage loan, the
depositor will deliver or cause to be delivered to the trustee, or a custodian
for the trustee, the mortgage file, which contains among other things, the
original mortgage note (and any modification or amendment to it) endorsed in
blank without recourse, except that the depositor may deliver or cause to be
delivered a lost note affidavit in lieu of any original mortgage note that has
been lost, the original instrument creating a first lien on the related
mortgaged property with evidence of recording indicated thereon, an assignment
in recordable form of the mortgage, the title policy with respect to the related
mortgaged property and, if applicable, all recorded intervening assignments of
the mortgage and any riders or modifications to the mortgage note and mortgage
(except for any documents not returned from the public recording office, which
will be delivered to the trustee as soon as the same is available to the
depositor). With respect to up to 50% of the Initial Mortgage Loans, the
depositor may deliver all or a portion of each related mortgage file to the
trustee not later than thirty days after the closing date and not later than
twenty-one days after the relevant Subsequent Transfer Date (as defined below)
with respect to up to 90% of the Subsequent Mortgage Loans conveyed on such
Subsequent Transfer Date. Assignments of the mortgage loans to the trustee (or

                                      S-15
<PAGE>   16

its nominee) will be recorded in the appropriate public office for real property
records, except in states such as California where, in the opinion of counsel,
recording is not required to protect the trustee's interests in the mortgage
loan against the claim of any subsequent transferee or any successor to or
creditor of the depositor or the seller.

     The trustee will review each mortgage file relating to the Initial Mortgage
Loans within 90 days of the closing date (or promptly after the trustee's
receipt of any document permitted to be delivered after the closing date) and
the documents relating to the Subsequent Mortgage Loans promptly after the
Trustee's receipt thereof after the related Subsequent Transfer Date as
described above, and if any document in a mortgage file is found to be missing
or defective in a material respect and the seller does not cure the defect
within 90 days of notice of the defect from the trustee (or within such longer
period not to exceed 720 days after the closing date as provided in the pooling
and servicing agreement in the case of missing documents not returned from the
public recording office), the seller will be obligated to repurchase the related
mortgage loan from the trust fund. Rather than repurchase the mortgage loan as
provided above, the seller may remove the mortgage loan (referred to as a
deleted mortgage loan) from the trust fund and substitute in its place another
mortgage loan (referred to as a replacement mortgage loan); however, such a
substitution is permitted only within two years of the closing date and may not
be made unless an opinion of counsel is provided to the trustee to the effect
that such a substitution will not disqualify the REMIC or result in a prohibited
transaction tax under the Code. Any replacement mortgage loan generally will, on
the date of substitution, among other characteristics set forth in the pooling
and servicing agreement,

     - have a principal balance, after deduction of all scheduled payments due
       in the month of substitution, not in excess of, and not more than 10%
       less than, the Stated Principal Balance of the deleted mortgage loan (the
       amount of any shortfall to be deposited by the seller in the Certificate
       Account and held for distribution to the certificateholders on the
       related Distribution Date (referred to as a "Substitution Adjustment
       Amount")),

     - have a mortgage rate not lower than, and not more than 1% per annum
       higher than, that of the deleted mortgage loan,

     - have a Loan-to-Value Ratio not higher than that of the deleted mortgage
       loan,

     - have a remaining term to maturity not greater than (and not more than one
       year less than) that of the deleted mortgage loan, and

     - comply with all of the representations and warranties set forth in the
       pooling and servicing agreement as of the date of substitution.

This cure, repurchase or substitution obligation constitutes the sole remedy
available to certificateholders or the trustee for omission of, or a material
defect in, a mortgage loan document.

     Notwithstanding the foregoing, in lieu of providing the duly executed
assignment of the Mortgage to the trustee and the original recorded assignment
or assignments of the Mortgage together with all interim recorded assignments of
such Mortgage, above, the depositor may at its discretion provide evidence that
the related mortgage is held through the MERS(R) System. In addition, the
mortgages for some or all of the mortgage loans in the trust fund that are not
already held through the MERS(R) System may, at the discretion of the master
servicer, in the future be held through the MERS(R) System. For any mortgage
held through the MERS(R) System, the mortgage is recorded in the name of
Mortgage Electronic Registration Systems, Inc., or MERS, as nominee for the
owner of the mortgage loan, and subsequent assignments of the mortgage were, or
in the future may be, at the discretion of the master servicer, registered
electronically through the MERS(R) System. For each of these mortgage loans,
MERS serves as mortgagee of record on the mortgage solely as a nominee in an
administrative capacity on behalf of the trustee, and does not have any interest
in the mortgage loan.

                                      S-16
<PAGE>   17

PRE-FUNDING

     On the Closing Date, an amount (the "Pre-Funded Amount") equal to the
excess of the aggregate of the Class Certificate Balances of the Certificates
over the balance of the Initial Mortgage Loans as of the initial cut-off date
(referred to as the "Initial Cut-off Date Pool Principal Balance") will be
deposited in the Pre-Funding Account established and maintained by the trustee
on behalf of the Certificateholders. The Pre-Funded Amount is not expected to
exceed approximately $42,756,127. Any investment income earned from amounts in
the Pre-Funding Account shall be paid to the depositor, and will not be
available for payments on the certificates. During the period from the Closing
Date to January 31, 2001 (the "Funding Period"), the depositor is expected to
purchase additional conventional first-lien, fixed-rate mortgage loans
originated by the seller ("Subsequent Mortgage Loans") from the seller and sell
such Subsequent Mortgage Loans to the trust fund as described below. The
purchase price for each Subsequent Mortgage Loan will equal the Stated Principal
Balance of such Subsequent Mortgage Loan as of the date of origination of such
Subsequent Mortgage Loan (unless such Subsequent Mortgage Loan was originated
prior to December 29, 2000 in which case, as of January 1, 2001) (the related
"Subsequent Cut-off Date") and will be paid from the Pre-Funding Account.
Accordingly, the purchase of Subsequent Mortgage Loans will decrease the amount
on deposit in the Pre-Funding Account and increase the Stated Principal Balance
of the Mortgage Pool.

     On the Closing Date, funds will be deposited in an account (referred to as
the "Capitalized Interest Account") established and maintained by the trustee on
behalf of the Certificateholders. The amount on deposit in the Capitalized
Interest Account, including any investment income earned thereon, will be used
by the trustee on the January and February 2001 Distribution Dates to fund
certain shortfalls in the interest collections attributable to the pre-funding
feature of the trust fund. Any amounts remaining in the Capitalized Interest
Account after making distributions of interest on the February 2001 Distribution
Date will be paid to the seller and will not thereafter be available for
distribution to Certificateholders.

     Amounts on deposit in the Pre-Funding Account and the Capitalized Interest
Account will be invested in Eligible Investments. The Pre-Funding Account and
the Capitalized Interest Account will not be assets of the REMIC.

     Pursuant to the Pooling and Servicing Agreement and a subsequent transfer
agreement (a "Subsequent Transfer Agreement") to be executed by the seller, the
depositor and the trustee, the conveyance of Subsequent Mortgage Loans may be
made on any business day during the Funding Period (a "Subsequent Transfer
Date"), subject to the fulfillment of certain conditions in the Pooling and
Servicing Agreement, including that:

     - the Subsequent Mortgage Loans conveyed on such Subsequent Transfer Date
       satisfy the same representations and warranties in the Pooling and
       Servicing Agreement applicable to all Mortgage Loans, and that, as of the
       Subsequent Cut-off Date:

        - the Subsequent Mortgage Loans conveyed on such Subsequent Transfer
          Date were selected in a manner reasonably believed not to be adverse
          to the interests of the Certificateholders,

        - the trustee receives an opinion of counsel with respect to the
          validity of the conveyance of the Subsequent Mortgage Loans conveyed
          on such Subsequent Transfer Date,

        - the Subsequent Mortgage Loan conveyed on such Subsequent Transfer Date
          were originated in accordance with the underwriting standards
          described below,

        - the aggregate of the PO Percentages of the Stated Principal Balance of
          all Subsequent Mortgage Loans shall be no greater than approximately
          $204,337,

        - the conveyance of the Subsequent Mortgage Loan on such Subsequent Date
          will not result in a reduction or withdrawal of any ratings assigned
          to the Offered Certificates, and

                                      S-17
<PAGE>   18

        - following the conveyance of the Subsequent Mortgage Loans on such
          Subsequent Transfer Date to the trust fund, the characteristics of the
          trust fund will conform to the "Characteristics of the Mortgage Loans
          in the Mortgage Pool" as set forth above.

     Neither the seller nor the depositor will exercise any discretion in the
selection of Subsequent Mortgage Loans conveyed to the trust fund. The selection
will be made with respect to loans that satisfy the eligibility criteria
described above using a mechanical procedure generally as follows. Mortgage
loans eligible for purchase will be aggregated by the date on which they were
funded. These mortgage loans will be purchased in date order up through the day
substantially all of the funds in the Pre-Funding Account are expended.
Purchases of Subsequent Mortgage Loans funded on the same day will be ordered
numerically by loan number. Acquisitions of Subsequent Mortgage Loans may occur
in one or more closings after the closing date.

UNDERWRITING PROCESS

GENERAL

     All mortgage loans must meet credit, appraisal and underwriting standards
acceptable to Countrywide. Countrywide's underwriting standards are applied in
accordance with applicable federal and state laws and regulations. Except as
otherwise provided in this prospectus supplement, the underwriting procedures
are consistent with those identified under "Mortgage Loan
Program -- Underwriting Process" in the prospectus.

     Sometimes the data used by Countrywide to complete the underwriting
analysis may be obtained by a third party, particularly for mortgage loans
originated through a loan correspondent or mortgage broker. In those instances,
the initial determination as to whether a mortgage loan complies with
Countrywide's underwriting guidelines may be made by an independent company
hired to perform underwriting services on behalf of Countrywide, the loan
correspondent or mortgage broker. In addition, Countrywide may acquire mortgage
loans from approved correspondent lenders under a program pursuant to which
Countrywide delegates to the correspondent the obligation to underwrite the
mortgage loans to Countrywide's standards. Under these circumstances, the
underwriting of a mortgage loan may not have been reviewed by Countrywide before
acquisition of the mortgage loan and the correspondent represents that
Countrywide's underwriting standards have been met. After purchasing mortgage
loans under those circumstances, Countrywide conducts a quality control review
of a sample of the mortgage loans. The number of loans reviewed in the quality
control process varies based on a variety of factors, including Countrywide's
prior experience with the correspondent lender and the results of the quality
control review process itself.

     Countrywide's underwriting standards are applied by or on behalf of
Countrywide to evaluate the prospective borrower's credit standing and repayment
ability and the value and adequacy of the mortgaged property as collateral.
Under those standards, a prospective borrower must generally demonstrate that
the ratio of the borrower's monthly housing expenses (including principal and
interest on the proposed mortgage loan and, as applicable, the related monthly
portion of property taxes, hazard insurance and mortgage insurance) to the
borrower's monthly gross income and the ratio of total monthly debt to the
monthly gross income (the "debt-to-income" ratios) are within acceptable limits.
If the prospective borrower has applied for an adjustable rate loan and the
Loan-to-Value Ratio is less than or equal to 75%, the interest component of the
monthly housing expense is calculated based on the initial loan interest rate;
if the Loan-to-Value Ratio exceeds 75%, the interest component of the monthly
housing expense calculation is based on the maximum possible interest rate
payable in the second year of the mortgage loan. The maximum acceptable
debt-to-income ratio, which is determined on a loan-by-loan basis varies
depending on a number of underwriting criteria, including the Loan-to-Value
Ratio, loan purpose, loan amount and credit history of the borrower. In addition
to meeting the debt-to-income ratio guidelines, each prospective borrower is
required to have sufficient cash resources to pay the down payment and closing
costs. Exceptions to Countrywide's underwriting guidelines may be made if
compensating factors are demonstrated by a prospective borrower.

                                      S-18
<PAGE>   19

     Countrywide may provide secondary financing to a mortgagor
contemporaneously with the origination of a mortgage loan, subject to the
following limitations: The Loan-to-Value Ratio of the senior (i.e., first) lien
may not exceed 80% and the combined Loan-to-Value Ratio may not exceed 100%.
Countrywide's underwriting guidelines do not prohibit or otherwise restrict a
mortgagor from obtaining secondary financing from lenders other than
Countrywide, whether at origination of the mortgage loan or thereafter.

     The nature of the information that a borrower is required to disclose and
whether the information is verified depends, in part, on the documentation
program used in the origination process. In general, under the Full
Documentation Loan Program (the "Full Documentation Program"), each prospective
borrower is required to complete an application which includes information with
respect to the applicant's assets, liabilities, income, credit history,
employment history and other personal information. Self-employed individuals are
generally required to submit their two most recent federal income tax returns.
Under the Full Documentation Program, the underwriter verifies the information
contained in the application relating to employment, income, assets or
mortgages.

     A prospective borrower may be eligible for a loan approval process that
limits or eliminates Countrywide's standard disclosure or verification
requirements or both. Countrywide offers the following documentation programs as
alternatives to its Full Documentation Program: an Alternative Documentation
Loan Program (the "Alternative Documentation Program"), a Reduced Documentation
Loan Program (the "Reduced Documentation Program"), a CLUES Plus Documentation
Loan Program (the "CLUES Plus Documentation Program"), a No Income/No Asset
Documentation Loan Program (the "No Income/No Asset Documentation Program") and
a Streamlined Documentation Loan Program (the "Streamlined Documentation
Program").

     Countrywide obtains a credit report relating to the applicant from a credit
reporting company. The credit report typically contains information relating to
such matters as credit history with local and national merchants and lenders,
installment debt payments and any record of defaults, bankruptcy, dispossession,
suits or judgments. All adverse information in the credit report is required to
be explained by the prospective borrower to the satisfaction of the lending
officer.

     Except with respect to its Streamlined Documentation Program, Countrywide
obtains appraisals from independent appraisers or appraisal services for
properties that are to secure mortgage loans. The appraisers inspect and
appraise the proposed mortgaged property and verify that the property is in
acceptable condition. Following each appraisal, the appraiser prepares a report
which includes a market data analysis based on recent sales of comparable homes
in the area and, when deemed appropriate, a replacement cost analysis based on
the current cost of constructing a similar home. All appraisals are required to
conform to Fannie Mae or Freddie Mac appraisal standards then in effect.

     Countrywide requires title insurance on all of its mortgage loans secured
by first liens on real property. Countrywide also requires that fire and
extended coverage casualty insurance be maintained on the mortgaged property in
an amount at least equal to the principal balance of the related single-family
mortgage loan or the replacement cost of the mortgaged property, whichever is
less.

     In addition to Countrywide's standard underwriting guidelines (the
"Standard Underwriting Guidelines"), which are consistent in many respects with
the guidelines applied to mortgage loans purchased by Fannie Mae and Freddie
Mac, Countrywide uses underwriting guidelines featuring expanded criteria (the
"Expanded Underwriting Guidelines"). The Standard Underwriting Guidelines and
the Expanded Underwriting Guidelines are described further under the next two
headings.

STANDARD UNDERWRITING GUIDELINES

     Countrywide's Standard Underwriting Guidelines generally allow
Loan-to-Value Ratios at origination of up to 95% for purchase money or rate and
term refinance mortgage loans with original principal balances of up to
$300,000, up to 90% for mortgage loans with original principal balances of up to
$400,000, up to 85% for mortgage loans with original principal balances of up to
$500,000, up to 80% for mortgage loans with original principal balances of up to
$650,000, up to 75% for mortgage loans with

                                      S-19
<PAGE>   20

original principal balances of up to $750,000 and up to 70% for mortgage loans
with original principal balances of up to $1,000,000.

     For cash out refinance mortgage loans with original principal balances of
up to $650,000, Countrywide's Standard Underwriting Guidelines generally allow
Loan-to-Value Ratios at origination of up to 75%. The maximum "cash-out" amount
permitted is $150,000 and is based in part on the original Loan-to-Value Ratio
of the related mortgage loan. As used in this prospectus supplement, a refinance
mortgage loan is classified as a cash-out refinance mortgage loan by Countrywide
if the borrower retains greater than 1.0% of the entire amount of the proceeds
from the refinancing of the existing loan.

     Under its Standard Underwriting Guidelines, Countrywide generally permits a
debt-to-income ratio based on the borrower's monthly housing expenses of up to
33% and a debt-to-income ratio based on the borrower's total monthly debt of up
to 38%.

     In connection with the Standard Underwriting Guidelines, Countrywide
originates or acquires mortgage loans under the Full Documentation Program, the
Alternative Documentation Program, the Reduced Documentation Program, the CLUES
Plus Documentation Program or the Streamlined Documentation Program.

     The Alternative Documentation Program permits a borrower to provide W-2
forms instead of tax returns covering the most recent two years, permits bank
statements in lieu of verification of deposits and permits alternative methods
of employment verification. Mortgage loans which have been originated under the
Alternative Documentation Program may be eligible for sale to Fannie Mae or
Freddie Mac.

     Under the Reduced Documentation Program, some underwriting documentation
concerning income and employment verification is waived. Countrywide obtains
from a prospective borrower either a verification of deposit or bank statements
for the two-month period immediately before the date of the mortgage loan
application or verbal verification of employment. Since information relating to
a prospective borrower's income and employment is not verified, the borrower's
debt-to-income ratios are calculated based on the information provided by the
borrower in the mortgage loan application. The maximum Loan-to-Value Ratio,
including secondary financing, ranges up to 70% maximum.

     The CLUES Plus Documentation Program permits the verification of employment
by alternative means, if necessary, including verbal verification of employment
or reviewing paycheck stubs covering the pay period immediately prior to the
date of the mortgage loan application. To verify the borrower's assets and the
sufficiency of the borrower's funds for closing, Countrywide obtains deposit or
bank account statements from each prospective borrower for the month immediately
prior to the date of the mortgage loan application. Under the CLUES Plus
Documentation Program, the maximum Loan-to-Value Ratio is 75% and property
values may be based on appraisals comprising only interior and exterior
inspections. Cash-out refinances and investor properties are not permitted under
the CLUES Plus Documentation Program.

     The Streamlined Documentation Program is available for borrowers who are
refinancing an existing Countrywide mortgage loan provided that, among other
things, the mortgage loan has not been more than 30 days delinquent in payment
during the previous twelve-month period. Under the Streamlined Documentation
Program, appraisals are obtained only if the loan being refinanced had a
Loan-to-Value Ratio at the time of origination in excess of 90%. In addition,
under the Streamlined Documentation Program, a credit report is obtained but
only a limited credit review is conducted, no income or asset verification is
required, and telephonic verification of employment is permitted. The maximum
Loan-to-Value Ratio under the Streamlined Documentation Program ranges up to
90%.

     It is expected that approximately 74.03% by principal balance of the
Initial Mortgage Loans in the initial mortgage pool will have been underwritten
pursuant to Countrywide's Standard Underwriting Guidelines.

                                      S-20
<PAGE>   21

EXPANDED UNDERWRITING GUIDELINES

     Mortgage loans which are underwritten pursuant to the Expanded Underwriting
Guidelines may have higher Loan-to-Value Ratios, higher loan amounts and
different documentation requirements than those associated with the Standard
Underwriting Guidelines. The Expanded Underwriting Guidelines also permit higher
debt-to-income ratios than mortgage loans underwritten pursuant to the Standard
Underwriting Guidelines.

     Countrywide's Expanded Underwriting Guidelines generally allow
Loan-to-Value Ratios at origination of up to 95% for purchase money or rate and
term refinance mortgage loans with original principal balances of up to
$300,000, up to 90% for mortgage loans with original principal balances of up to
$500,000, up to 80% for mortgage loans with original principal balances of up to
$650,000, up to 70% for mortgage loans with original principal balances of up to
$750,000, up to 65% for mortgage loans with original principal balances of up to
$1,000,000 and up to 70% for mortgage loans with original principal balances of
up to $1,500,000. Under certain circumstances, however, Countrywide's Expanded
Underwriting Guidelines allow for Loan-to-Value Ratios of up to 100% for
purchase money mortgage loans with original principal balances of up to
$350,000.

     For cash-out refinance mortgage loans with original principal balances of
up to $1,500,000, Countrywide's Expanded Underwriting Guidelines generally allow
Loan-to-Value Ratios at origination of up to 90%. The maximum "cash-out" amount
permitted is $400,000 and is based in part on the original Loan-to-Value Ratio
of the related mortgage loan.

     Under its Expanded Underwriting Guidelines, Countrywide generally permits a
debt-to-income ratio based on the borrower's monthly housing expenses of up to
36% and a debt-to-income ratio based on the borrower's total monthly debt of up
to 40%; provided, however, that if the Loan-to-Value Ratio exceeds 80%, the
maximum permitted debt-to-income ratios are 33% and 38%, respectively.

     In connection with the Expanded Underwriting Guidelines, Countrywide
originates or acquires mortgage loans under the Full Documentation Program, the
Alternative Documentation Program, the Reduced Documentation Loan Program and
the No Income/No Asset Documentation Program. The No Income/No Asset
Documentation Program is not available under the Standard Underwriting
Guidelines.

     The same documentation and verification requirements apply to mortgage
loans documented under the Alternative Documentation Program regardless of
whether the loan has been underwritten under the Expanded Underwriting
Guidelines or the Standard Underwriting Guidelines. However, under the
Alternative Documentation Program, mortgage loans that have been underwritten
pursuant to the Expanded Underwriting Guidelines may have higher loan balances
and Loan-to-Value Ratios than those permitted under the Standard Underwriting
Guidelines.

     Similarly, the same documentation and verification requirements apply to
mortgage loans documented under the Reduced Documentation Program regardless of
whether the loan has been underwritten under the Expanded Underwriting
Guidelines or the Standard Underwriting Guidelines. However, under the Reduced
Documentation Program, higher loan balances and Loan-to-Value Ratios are
permitted for mortgage loans underwritten pursuant to the Expanded Underwriting
Guidelines than those permitted under the Standard Underwriting Guidelines. The
maximum Loan-to-Value Ratio, including secondary financing, ranges up to 90%.
The borrower is not required to disclose any income information for some
mortgage loans originated under the Reduced Documentation Program, and
accordingly debt-to-income ratios are not calculated or included in the
underwriting analysis. The maximum Loan-to-Value Ratio, including secondary
financing, for those mortgage loans ranges up to 80%.

     Under the No Income/No Asset Documentation Program, no documentation
relating to a prospective borrower's income, employment or assets is required
and therefore debt-to-income ratios are not calculated or included in the
underwriting analysis, or if the documentation or calculations are included in a
mortgage loan file, they are not taken into account for purposes of the
underwriting analysis. This program is limited to borrowers with excellent
credit histories. Under the No Income/No Asset Documentation Program, the
maximum Loan-to-Value Ratio, including secondary financing, ranges up to 75%.
Mortgage loans
                                      S-21
<PAGE>   22

originated under the No Income/No Asset Documentation Program are generally
eligible for sale to Fannie Mae or Freddie Mac.

     It is expected that Initial Mortgage Loans originated under either the No
Income/No Asset Documentation Program or the Reduced Documentation Program
pursuant to which debt-to-income ratios are not calculated as described above
will comprise approximately 4.00% by principal balance of the initial mortgage
pool.

     Under the Expanded Underwriting Guidelines, Countrywide may also provide
mortgage loans to borrowers who are not U.S. citizens, including permanent and
non-permanent residents. The borrower is required to have a valid U.S. social
security number or a certificate of foreign status (IRS form W-8). The
borrower's income and assets must be verified under the Full Documentation
Program or the Alternative Documentation Program. The maximum Loan-to-Value
Ratio, including secondary financing, is 80%. It is expected that approximately
25.97% by principal balance of the Initial Mortgage Loans in the initial
mortgage pool will have been underwritten pursuant to Countrywide's Expanded
Underwriting Guidelines.

                                      S-22
<PAGE>   23

                          SERVICING OF MORTGAGE LOANS

GENERAL

     The master servicer will service the mortgage loans in accordance with the
terms set forth in the pooling and servicing agreement. The master servicer may
perform any of its obligations under the pooling and servicing agreement through
one or more subservicers. Notwithstanding any subservicing arrangement, the
master servicer will remain liable for its servicing duties and obligations
under the pooling and servicing agreement as if the master servicer alone were
servicing the mortgage loans.

THE MASTER SERVICER

     Countrywide Home Loans, Inc. ("Countrywide"), a New York corporation and a
subsidiary of Countrywide Credit Industries, Inc., will act as master servicer
for the mortgage loans pursuant to the pooling and servicing agreement.
Countrywide is engaged primarily in the mortgage banking business, and as such,
originates, purchases, sells and services mortgage loans. Countrywide originates
mortgage loans through a retail branch system and through mortgage loan brokers
and correspondents nationwide. Countrywide's mortgage loans are principally
first-lien, fixed or adjustable rate mortgage loans secured by single-family
residences.

     As of November 30, 2000, Countrywide provided servicing for approximately
$281.5 billion aggregate principal amount of mortgage loans, substantially all
of which are being serviced for unaffiliated persons.

     The principal executive offices of Countrywide are located at 4500 Park
Granada, Calabasas, California 91302.

     Countrywide initially services substantially all of the mortgage loans it
originates or acquires. In addition, Countrywide has purchased in bulk the
rights to service mortgage loans originated by other lenders. Servicing includes
collecting and remitting loan payments, accounting for principal and interest,
holding escrow (impound) funds for payment of taxes and insurance, making
inspections as required of the mortgaged premises, contacting delinquent
mortgagors, supervising foreclosures in the event of unremedied defaults and
generally administering the loans, for which Countrywide receives servicing
fees. Countrywide has in the past and may in the future sell to other mortgage
bankers a portion of its portfolio of loan servicing rights. In addition, see
"The Pooling and Servicing Agreement -- Evidence as to Compliance" in the
prospectus for a description of the annual servicing report and the report of
the independent public accountants required to be provided by Countrywide in its
capacity as master servicer under the pooling and servicing agreement.

                                      S-23
<PAGE>   24

MORTGAGE LOAN PRODUCTION

     The following table sets forth, by number and dollar amount of mortgage
loans, Countrywide's residential mortgage loan production for the periods
indicated.

<TABLE>
<CAPTION>
                                               YEAR ENDED FEBRUARY 28(29),
                               ------------------------------------------------------------      PERIOD ENDED
                                   1997            1998            1999            2000        NOVEMBER 30, 2000
                               ------------    ------------    ------------    ------------    -----------------
                                (DOLLAR AMOUNTS IN MILLIONS, EXCEPT AVERAGE LOAN BALANCE)
<S>                            <C>             <C>             <C>             <C>             <C>
FHA/VA Loans
     Number of Loans.........     143,587         162,328         190,654         130,996             30,931
     Volume of Loans.........   $13,657.1       $15,868.1       $19,138.0       $13,536.0         $  3,453.0
Conventional Loans
     Number of Loans.........     190,250         227,019         534,385         368,422             94,900
     Volume of Loans.........   $22,676.2       $29,886.8       $69,026.0       $45,687.0         $ 11,894.0
Other Loans
     Number of Loans.........      29,214          61,412          86,000         134,315             28,322
     Volume of Loans.........   $ 1,477.5       $ 3,016.8       $ 4,717.0       $ 7,517.0         $  2,365.0
Total Loans
     Number of Loans.........     363,051         450,759         811,039         633,733            154,153
     Volume of Loans.........   $37,810.8       $48,771.7       $92,881.0       $66,740.0         $ 17,712.0
Average Loan Balance.........   $ 104,000       $ 108,199       $ 114,521       $ 105,312         $114,899.0
</TABLE>

FORECLOSURE, DELINQUENCY AND LOSS EXPERIENCE

     Historically, a variety of factors, including the appreciation of real
estate values, have limited the master servicer's loss and delinquency
experience on its portfolio of serviced mortgage loans. There can be no
assurance that factors beyond the master servicer's control, such as national or
local economic conditions or downturns in the real estate markets of its lending
areas, will not result in increased rates of delinquencies and foreclosure
losses in the future.

     A general deterioration of the real estate market in regions where the
mortgaged properties are located may result in increases in delinquencies of
loans secured by real estate, slower absorption rates of real estate into the
market and lower sales prices for real estate. A general weakening of the
economy may result in decreases in the financial strength of borrowers and
decreases in the value of collateral serving as security for loans. If the real
estate market and economy were to decline, the master servicer may experience an
increase in delinquencies on the loans it services and higher net losses on
liquidated loans.

     The following table summarizes the delinquency, foreclosure and loss
experience, respectively, on the dates indicated, of all mortgage loans
originated or acquired by Countrywide, serviced or master serviced by the master
servicer and securitized by the depositor, excluding mortgage loans subserviced
for others. The delinquency, foreclosure and loss percentages may be affected by
the size and relative lack of seasoning of the servicing portfolio which
increased from approximately $8.671 billion at February 29, 1997, to
approximately $11.002 billion at February 28, 1998, to approximately $15.843
billion at February 28, 1999, to approximately $17.759 billion at February 29,
2000 and to approximately $18.295 at November 30, 2000. Accordingly, the
information should not be considered as a basis for assessing the likelihood,
amount or severity of delinquency or losses on the mortgage loans and no
assurances can be

                                      S-24
<PAGE>   25

given that the foreclosure, delinquency and loss experience presented in the
following table will be indicative of the actual experience on the mortgage
loans:

<TABLE>
<CAPTION>
                                            AT FEBRUARY 28(29),
                           -----------------------------------------------------     PERIOD ENDED
                              1997          1998          1999          2000       NOVEMBER 30, 2000
                           -----------   -----------   -----------   -----------   -----------------
<S>                        <C>           <C>           <C>           <C>           <C>
Delinquent Mortgage Loans
  and Pending
  Foreclosures at Period
  End:
     30-59 days..........         0.65%         1.08%         1.03%         1.37%           1.31%
     60-89 days..........         0.15          0.16          0.18          0.22            0.26
     90 days or more
       (excluding pending
       foreclosures).....         0.16          0.16          0.12          0.16            0.17
                           -----------   -----------   -----------   -----------       ---------
          Total of
         delinquencies...         0.96%         1.40%         1.33%         1.75%           1.74%
                           ===========   ===========   ===========   ===========       =========
Foreclosures pending.....         0.17%         0.17%         0.14%         0.16%           0.21%
                           ===========   ===========   ===========   ===========       =========
Total delinquencies and
  foreclosures pending...         1.13%         1.57%         1.47%         1.92%           1.95%
                           ===========   ===========   ===========   ===========       =========
Net Gains/(Losses) on
  liquidated loans(1)....  $(2,812,000)  $(2,662,000)  $(2,882,524)  $(3,076,240)      $(565,394)
Percentage of Net
  Gains/(Losses) on
  liquidated
  loans(1)(2)............       (0.032)%      (0.024)%      (0.018)%      (0.017)%        (0.003)%
Percentage of Net
  Gains/(Losses) on
  liquidated loans (based
  on average outstanding
  principal
  balance)(1)............       (0.033)%      (0.027)%      (0.021)%      (0.004)%        (0.003)%
</TABLE>

------------
(1) "Net Gains (Losses)" are actual gains or losses incurred on liquidated
    properties that are calculated as net liquidation proceeds less book value
    (excluding loan purchase premium or discount).

(2) Based upon the total principal balance of the mortgage loans outstanding on
    the last day of the indicated period.

     The following table summarizes the delinquency and foreclosure experience,
respectively, on the dates indicated, of all mortgage loans serviced or master
serviced by the master servicer, excluding mortgage loans subserviced for
others. The mortgage loans have a variety of underwriting, payment and other
characteristics, many of which differ from those of the mortgage loans, and no
assurances can be given that the delinquency and foreclosure experience
presented in the following table will be indicative of such actual experience of
the mortgage loans. The delinquency and foreclosure percentages may be affected
by the size and relative lack of seasoning of the servicing portfolio which
increased from approximately $158.6 billion at February 29, 1997, to
approximately $182.9 billion at February 28, 1998, to approximately

                                      S-25
<PAGE>   26

$215.5 billion at February 28, 1999, to approximately $249.9 billion at February
29, 2000 and to approximately $281.5 billion at November 30, 2000.

<TABLE>
<CAPTION>
                                                     AT FEBRUARY 28(29),
                                                 ----------------------------      PERIOD ENDED
                                                 1997    1998    1999    2000    NOVEMBER 30, 2000
                                                 ----    ----    ----    ----    -----------------
<S>                                              <C>     <C>     <C>     <C>     <C>
Delinquent Mortgage Loans and Pending
  Foreclosures at Period End(1):
     30-59 days................................  2.26%   2.68%   3.05%   3.40%           3.76%
     60-89 days................................  0.52    0.58    0.21    0.25            0.34
     90 days or more (excluding pending
       foreclosures)...........................  0.66    0.65    0.29    0.32            0.48
                                                 ----    ----    ----    ----         -------
          Total of delinquencies...............  3.44%   3.91%   3.55%   3.97%           4.58%
                                                 ====    ====    ====    ====         =======
Foreclosures pending...........................  0.71%   0.45%   0.31%   0.39%           0.43%
                                                 ====    ====    ====    ====         =======
Total delinquencies and foreclosures pending...  4.15%   4.36%   3.86%   4.36%           5.01%
                                                 ====    ====    ====    ====         =======
</TABLE>

SERVICING COMPENSATION AND PAYMENT OF EXPENSES

     The Expense Fees with respect to the mortgage pool are payable out of the
interest payments on each mortgage loan. The Expense Fees will be 0.259% per
annum of the Stated Principal Balance of each mortgage loan. The Expense Fees
consist of (a) servicing compensation payable to the master servicer in respect
of its master servicing activities and (b) fees payable to the trustee in
respect of its activities as trustee under the pooling and servicing agreement.
The master servicing fee will be 0.25% per annum of the Stated Principal Balance
of each mortgage loan. The master servicer is obligated to pay some but not all
ongoing expenses associated with the trust fund and incurred by the master
servicer in connection with its responsibilities under the pooling and servicing
agreement and those amounts will be paid by the master servicer out of the
master servicing fee. The amount of the master servicing fee is subject to
adjustment with respect to prepaid mortgage loans, as described under
"-- Adjustment to Master Servicing Fee in Connection with Prepaid Mortgage
Loans." The master servicer is also entitled to receive, as additional servicing
compensation, all late payment fees, prepayment penalties, assumption fees and
other similar charges and all reinvestment income earned on amounts on deposit
in the Certificate Account and Distribution Account. The net mortgage rate of a
mortgage loan is its mortgage rate (net of the interest premium charged by the
related lenders for the lender acquired mortgage insurance mortgage loans) less
the Expense Fees on the mortgage loan (expressed as a per annum percentage of
its Stated Principal Balance).

ADJUSTMENT TO MASTER SERVICING FEE IN CONNECTION WITH PREPAID MORTGAGE LOANS

     When a borrower prepays a mortgage loan between Due Dates, the borrower is
required to pay interest on the amount prepaid only to the date of prepayment
and not thereafter. Except with respect to the month of the cut-off date,
principal prepayments by borrowers received by the master servicer from the
first day through the fifteenth day of a calendar month will be distributed to
certificateholders on the Distribution Date in the same month in which the
prepayments are received and, accordingly, no shortfall in the amount of
interest to be distributed to certificateholders with respect to the prepaid
mortgage loans results. Conversely, principal prepayments by borrowers received
by the master servicer from the sixteenth day (or, in the case of the first
Distribution Date, from the Initial Cut-off Date) through the last day of a
calendar month will be distributed to certificateholders on the Distribution
Date in the month following the month of receipt and, accordingly, a shortfall
in the amount of interest to be distributed to certificateholders with respect
to the prepaid mortgage loans would result. Pursuant to the pooling and
servicing agreement, the master servicing fee for any month will be reduced, but
not by more than one-half of the master servicing fee, by an amount sufficient
to pass through to certificateholders the full amount of interest to which they
would be entitled for each prepaid mortgage loan on the related Distribution
Date. If shortfalls in interest as a result of prepayments in any Prepayment
Period exceed an

                                      S-26
<PAGE>   27

amount equal to one-half of the master servicing fee otherwise payable on the
related Distribution Date, the amount of interest available to be distributed to
certificateholders will be reduced by the amount of the excess. See "Description
of the Certificates -- Interest" in this prospectus supplement.

ADVANCES

     Subject to the following limitations, the master servicer will be required
to advance before each Distribution Date, from its own funds or funds in the
Certificate Account that do not constitute Available Funds for the Distribution
Date, an amount equal to the aggregate of payments of principal and interest on
the mortgage loans (net of the master servicing fee with respect to the related
mortgage loans) which were due on the related Due Date and which were delinquent
on the related Determination Date, together with an amount equivalent to
interest on each mortgage loan as to which the related mortgaged property has
been acquired by the trust fund through foreclosure or deed-in-lieu of
foreclosure. The "Determination Date" is the 22nd day of each month or, if that
day is not a business day, the preceding business day; provided that the
Determination Date in each month will be at least two business days before the
related Distribution Date.

     Advances are intended to maintain a regular flow of scheduled interest and
principal payments on the certificates rather than to guarantee or insure
against losses. The master servicer is obligated to make advances with respect
to delinquent payments of principal of or interest on each mortgage loan to the
extent that the advances are, in its reasonable judgment, recoverable from
future payments and collections or insurance payments or proceeds of liquidation
of the related mortgage loan. If the master servicer determines on any
Determination Date to make an advance, the advance will be included with the
distribution to certificateholders on the related Distribution Date. Any failure
by the master servicer to make a deposit in the Certificate Account as required
under the pooling and servicing agreement, including any failure to make an
advance, will constitute an Event of Default under the pooling and servicing
agreement if the failure remains unremedied for five days after written notice
of it. If the master servicer is terminated as a result of the occurrence of an
Event of Default, the trustee or the successor master servicer will be obligated
to make any advance, in accordance with the terms of the pooling and servicing
agreement.

                        DESCRIPTION OF THE CERTIFICATES

GENERAL

     The certificates will be issued pursuant to the pooling and servicing
agreement. The following summaries of the material terms pursuant to which the
certificates will be issued do not purport to be complete and are subject to,
and are qualified in their entirety by reference to, the provisions of the
pooling and servicing agreement. When particular provisions or terms used in the
pooling and servicing agreement are referred to, the actual provisions
(including definitions of terms) are incorporated by reference. The certificates
represent obligations of the trust only and do not represent an interest in or
obligation of CWMBS, Inc., Countrywide Home Loans, Inc. or any of their
affiliates.

     The Mortgage Pass-Through Certificates, Series 2000-11 will consist of the
Class A-1, Class A-2, Class A-3, Class A-4, Class PO, Class X and Class A-R
Certificates (all of which are together referred to as senior certificates) and
the Class M, Class B-1, Class B-2, Class B-3, Class B-4 and Class B-5
Certificates (all of which are together referred to as subordinated
certificates). Only the classes of certificates listed on the cover page are
offered by this prospectus supplement. The Class B-3, Class B-4 and Class B-5
Certificates are not offered by this prospectus supplement. Their Class
Certificate Balances are expected to be approximately $900,000, $600,000 and
$700,000, respectively, and their pass-through rates will be 7.25% per annum.
The classes of offered certificates will have the respective initial Class
Certificate Balances or initial Notional Amount and pass-through rates set forth
on the cover page or described in this prospectus supplement under "-- Interest"
below. The initial Class Certificate Balances may vary in the aggregate by plus
or minus 5%.

                                      S-27
<PAGE>   28

     The "Class Certificate Balance" of any class of certificates as of any
Distribution Date is the initial Class Certificate Balance of the class reduced
by the sum of

     - all amounts previously distributed to holders of certificates of the
       class as payments of principal,

     - the amount of Realized Losses (including Excess Losses) allocated to the
       class and

     - in the case of any class of subordinated certificates, any amounts
       allocated to the class in reduction of its Class Certificate Balance in
       respect of payments of Class PO Deferred Amounts, as described under
       "-- Allocation of Losses."

In addition, the Class Certificate Balance of the class of subordinated
certificates then outstanding with the highest numerical class designation will
be reduced if and to the extent that the aggregate of the Class Certificate
Balances of all classes of certificates, following all distributions and the
allocation of Realized Losses on a Distribution Date, exceeds the pool principal
balance as of the Due Date occurring in the month of the Distribution Date. The
Notional Amount Certificates do not have principal balances and are not entitled
to any distributions in respect of principal of the mortgage loans.

     The Notional Amount of the Class X Certificates for any Distribution Date
will be equal to the aggregate of the Stated Principal Balances of the
Non-Discount mortgage loans with respect to the Distribution Date. The Notional
Amount of the Class X Certificates as of the closing date is expected to be
approximately $182,227,172, based on assumptions with respect to the Subsequent
Mortgage Loans, and subject to adjustment, based on the actual Subsequent
Mortgage Loans.

     The senior certificates will have an initial aggregate principal balance of
approximately $191,500,000 and will evidence in the aggregate an initial
beneficial ownership interest of approximately 95.75% in the trust fund. The
Class Certificate Balance of the Class PO Certificates as of the closing date is
expected to be approximately $350,000 based on assumptions with respect to the
Subsequent Mortgage Loans. It is expected that there will be a principal
prepayment on the Class PO Certificates on the February 2001 Distribution Date
as a result of the actual characteristics of the Subsequent Mortgage Loans. The
Class M, Class B-1, Class B-2, Class B-3, Class B-4 and Class B-5 Certificates
will each evidence in the aggregate an initial beneficial ownership interest of
approximately 1.55%, 1.00%, 0.60%, 0.45%, 0.30% and 0.35%, respectively, in the
trust fund.

     The Class A-R, Class B-3, Class B-4 and Class B-5 Certificates will be
issued in fully registered certificated form. All of the remaining classes will
be represented by book-entry certificates. The book-entry certificates will be
issuable in book-entry form only. The Class A-R Certificates will be issued as a
single certificate in a denomination of $100.

BOOK-ENTRY CERTIFICATES

     The offered certificates, other than the Class A-R Certificates, will be
issued as book-entry certificates. Each class of book-entry certificates will be
issued as one or more certificates which equal the aggregate initial Class
Certificate Balance of each class of certificates and which will be held by a
depository, initially a nominee of The Depository Trust Company. Beneficial
interests in the book-entry certificates will be held indirectly by investors
through the book-entry facilities of the Depository, as described in this
prospectus supplement. Investors may hold the beneficial interests in the
book-entry certificates (other than the Class A-2 and Class A-3 Certificates) in
minimum denominations representing an original principal amount of $25,000 and
integral multiples of $1,000 in excess thereof. Investors may hold the
beneficial interests in the Class A-2 and Class A-3 Certificates in minimum
denominations representing an original principal amount of $1,000 and integral
multiples of $1,000 in excess thereof. One investor of each class of book-entry
certificates may hold a beneficial interest therein that is not an integral
multiple of $1,000. The depositor has been informed by the Depository that its
nominee will be CEDE & Co. Accordingly, CEDE is expected to be the holder of
record of the book-entry certificates. Except as described in the prospectus
under "Description of the Certificates -- Book-Entry Certificates," no
beneficial owner acquiring a book-entry certificate will be entitled to receive
a physical certificate representing the certificate.
                                      S-28
<PAGE>   29

     Unless and until definitive certificates are issued, it is anticipated that
the only certificateholder of the book-entry certificates will be CEDE, as
nominee of the depository. Beneficial owners of the book-entry certificates will
not be certificateholders, as that term is used in the pooling and servicing
agreement. Beneficial owners are only permitted to exercise the rights of
certificateholders indirectly through financial intermediaries and the
depository. Monthly and annual reports on the trust fund provided to CEDE, as
nominee of the depository, 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
depository accounts the book-entry certificates of the beneficial owners are
credited.

     For a description of the procedures generally applicable to the book-entry
certificates, see "Description of the Certificates -- Book-Entry Certificates"
in the prospectus.

     Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of certificates among participants of DTC, they are under no
obligation to perform or continue to perform such procedures and such procedures
may be discontinued at any time.

PAYMENTS ON MORTGAGE LOANS; ACCOUNTS

     On or before the closing date, the master servicer will establish an
account (the "Certificate Account"), which will be maintained in trust for the
benefit of the certificateholders. The master servicer will deposit or cause to
be deposited in the Certificate Account all amounts required to be deposited
therein, within two business days after receipt (or, on a daily basis, if the
long-term credit rating of the master servicer has been reduced below the rating
specified in the pooling and servicing agreement). Funds credited to the
Certificate Account may be invested for the benefit and at the risk of the
master servicer in permitted investments, as defined in the pooling and
servicing agreement, that are scheduled to mature on or before the business day
preceding the next Distribution Date. On or before the business day immediately
preceding each Distribution Date, the master servicer will withdraw from the
Certificate Account the amount of Available Funds and will deposit the Available
Funds in an account established and maintained with the trustee on behalf of the
certificateholders (the "Distribution Account"). Upon termination of the Funding
Period, the trustee shall deposit into the Distribution Account any amounts
remaining in the Pre-Funding Account for distributions to the
certificateholders.

DISTRIBUTIONS

     Distributions on the certificates will be made by the trustee on the 25th
day of each month or, if that day is not a business day, on the first business
day thereafter, commencing in January 2001 (each, a "Distribution Date"), to the
persons in whose names the certificates are registered at the close of business
on the last business day of the month preceding the month of the Distribution
Date.

     Distributions on each Distribution Date will be made by check mailed to the
address of the person entitled to it as it appears on the applicable certificate
register or, in the case of a certificateholder who holds 100% of a class of
certificates or who holds certificates with an aggregate initial certificate
balance of $1,000,000 or more or who holds an Interest Only Certificate and who
has so notified the trustee in writing in accordance with the pooling and
servicing agreement, by wire transfer in immediately available funds to the
account of the certificateholder at a bank or other depository institution
having appropriate wire transfer facilities; provided, however, that the final
distribution in retirement of the certificates will be made only upon
presentment and surrender of the certificates at the Corporate Trust Office of
the trustee.

PRIORITY OF DISTRIBUTIONS AMONG CERTIFICATES

     As more fully described in this prospectus supplement, distributions will
be made on each Distribution Date from Available Funds in the following order of
priority:

     - to interest on each interest bearing class of senior certificates, pro
       rata based on their respective interest distribution amounts;

                                      S-29
<PAGE>   30

     - to principal on the classes of senior certificates then entitled to
       receive distributions of principal, in the order and subject to the
       priorities set forth under "Description of the
       Certificates -- Principal," in each case in an aggregate amount up to the
       maximum amount of principal to be distributed on the classes on the
       Distribution Date;

     - to any Class PO Deferred Amounts with respect to the Class PO
       Certificates, but only from amounts that would otherwise be distributed
       on the Distribution Date as principal of the subordinated certificates;
       and

     - to interest on and then principal of each class of subordinated
       certificates, in the order of their numerical class designations,
       beginning with the Class M Certificates, in each case subject to the
       limitations set forth under "Description of the
       Certificates -- Principal."

     "Available Funds" for any Distribution Date will be equal to the sum of

     - all scheduled installments of interest (net of the related expense fees)
       and principal due on the Due Date in the month in which the Distribution
       Date occurs and received before the related Determination Date, together
       with any advances with respect to them;

     - all proceeds of any primary mortgage guaranty insurance policies and any
       other insurance policies with respect to the mortgage loans, to the
       extent the proceeds are not applied to the restoration of the related
       mortgaged property or released to the mortgagor in accordance with the
       master servicer's normal servicing procedures and all other cash amounts
       received and retained in connection with the liquidation of defaulted
       mortgage loans, by foreclosure or otherwise during the calendar month
       preceding the month of the Distribution Date (in each case, net of
       unreimbursed expenses incurred in connection with a liquidation or
       foreclosure and unreimbursed advances, if any);

     - all partial or full prepayments received during the related Prepayment
       Period;

     - amounts received with respect to the Distribution Date as the
       Substitution Adjustment Amount or purchase price in respect of a deleted
       mortgage loan or a mortgage loan repurchased by the seller or the master
       servicer as of the Distribution Date, reduced by amounts in reimbursement
       for advances previously made and other amounts as to which the master
       servicer is entitled to be reimbursed from the Certificate Account
       pursuant to the pooling and servicing agreement; and

     - for the January and February 2001 Distribution Dates, any amounts
       required pursuant to the pooling and servicing agreement to be deposited
       from the Capitalized Interest Account and for the February 2001
       Distribution Date, any amounts remaining in the Pre-Funding Account after
       the end of the Funding Period (net of any investment income therefrom).

INTEREST

     The classes of offered certificates will have the respective pass-through
rates set forth on the cover page hereof or described below.

     The pass-through rate for the Class X Certificates for any Distribution
Date will be equal to the excess of the average of the net mortgage rates of the
Non-Discount mortgage loans, weighted on the basis of their Stated Principal
Balances, over 7.25% per annum. The pass-through rate for the Class X
Certificates for the first Distribution Date is expected to be approximately
0.745% per annum based on assumptions with respect to the Subsequent Mortgage
Loans. The net mortgage rate for each mortgage loan is its mortgage rate (net of
the interest premium charged by the related lenders for the lender acquired
mortgage insurance mortgage loans) less the expense fee rate for the mortgage
loan.

     On each Distribution Date, to the extent of funds available therefor, each
interest bearing class of certificates will be entitled to receive an amount
allocable to interest for the related interest accrual period. This "Interest
Distribution Amount" for any interest bearing class will be equal to the sum of
(a) interest at the applicable pass-through rate on the related Class
Certificate Balance or Notional Amount, as the

                                      S-30
<PAGE>   31

case may be, and (b) the sum of the amounts, if any, by which the amount
described in clause (a) above on each prior Distribution Date exceeded the
amount actually distributed as interest on the prior Distribution Dates and not
subsequently distributed (which are called unpaid interest amounts). The Class
PO Certificates are Principal Only Certificates and will not bear interest.

     With respect to each Distribution Date, the interest accrual period for
each interest bearing class of certificates will be the calendar month preceding
the month of the Distribution Date.

     The interest entitlement described above for each class of certificates for
any Distribution Date will be reduced by the amount of "Net Interest Shortfalls"
for the Distribution Date. With respect to any Distribution Date, the "Net
Interest Shortfall" is equal to

     - any net prepayment interest shortfalls for the Distribution Date and

     - the amount of interest that would otherwise have been received with
       respect to any mortgage loan that was the subject of a Relief Act
       Reduction or a Special Hazard Loss, Fraud Loss, Debt Service Reduction or
       Deficient Valuation, after the exhaustion of the respective amounts of
       coverage provided by the subordinated certificates for those types of
       losses.

     A "Relief Act Reduction" is a reduction in the amount of the monthly
interest payment on a mortgage loan pursuant to the Soldiers' and Sailors' Civil
Relief Act of 1940. See "Legal Aspects of the Mortgage Loans -- Soldiers' and
Sailors' Civil Relief Act" in the prospectus. With respect to any Distribution
Date, a net prepayment interest shortfall is the amount by which the aggregate
of prepayment interest shortfalls during the portion of the Prepayment Period
occurring in the calendar month preceding the month of the Distribution Date
exceeds the aggregate amount payable on the Distribution Date by the master
servicer as described under "Servicing of Mortgage Loans -- Adjustment to Master
Servicing Fee in Connection with Prepaid Mortgage Loans." A prepayment interest
shortfall is the amount by which interest paid by a borrower in connection with
a prepayment of principal on a mortgage loan is less than one month's interest
at the related mortgage rate on the Stated Principal Balance of the mortgage
loan. Each class' pro rata share of the Net Interest Shortfalls will be based on
the amount of interest the class otherwise would have been entitled to receive
on the Distribution Date.

     Interest will be calculated and payable on the basis of a 360-day year
divided into twelve 30-day months.

     If on a particular Distribution Date, Available Funds in the Certificate
Account applied in the order described above under "-- Priority of Distributions
Among Certificates" are not sufficient to make a full distribution of the
interest entitlement on the certificates, interest will be distributed on each
class of certificates of equal priority based on the amount of interest it would
otherwise have been entitled to receive in the absence of the shortfall. Any
unpaid interest amount will be carried forward and added to the amount holders
of each class of certificates will be entitled to receive or accrete on the next
Distribution Date. A shortfall could occur, for example, if losses realized on
the mortgage loans were exceptionally high or were concentrated in a particular
month. Any unpaid interest amount so carried forward will not bear interest.

PRINCIPAL

     General. All payments and other amounts received in respect of principal of
the mortgage loans will be allocated between the Class PO Certificates, on the
one hand, and the senior certificates (other than the Notional Amount
Certificates and the Class PO Certificates) and the subordinated certificates,
on the other hand, in each case based on the applicable PO Percentage and the
applicable Non-PO Percentage, respectively, of those amounts.

     The Non-PO Percentage with respect to any mortgage loan with a net mortgage
rate less than 7.25% (each a "Discount mortgage loan") will be equal to the net
mortgage rate divided by 7.25%. The Non-PO Percentage with respect to any
mortgage loan with a net mortgage rate equal to or greater than 7.25% (each a
"Non-Discount mortgage loan") will be 100%. The PO Percentage with respect to
any Discount

                                      S-31
<PAGE>   32

mortgage loan will be equal to (7.25% minus the net mortgage rate) divided by
7.25%. The PO Percentage with respect to any Non-Discount mortgage loan will be
0%.

     Non-PO Formula Principal Amount. On each Distribution Date, the Non-PO
Formula Principal Amount will be distributed as principal of the senior
certificates (other than the Notional Amount Certificates and the Class PO
Certificates) in an amount up to the Senior Principal Distribution Amount and as
principal of the subordinated certificates, in an amount up to the Subordinated
Principal Distribution Amount.

     The "Non-PO Formula Principal Amount" for any Distribution Date will equal
the sum of the applicable Non-PO Percentage of

     (a) all monthly payments of principal due on each mortgage loan on the
         related Due Date,

     (b) the principal portion of the purchase price of each mortgage loan that
         was repurchased by the seller or another person pursuant to the pooling
         and servicing agreement as of the Distribution Date,

     (c) the Substitution Adjustment Amount in connection with any deleted
         mortgage loan received with respect to the Distribution Date,

     (d) any insurance proceeds or liquidation proceeds allocable to recoveries
         of principal of mortgage loans that are not yet Liquidated Mortgage
         Loans received during the calendar month preceding the month of the
         Distribution Date,

     (e) with respect to each mortgage loan that became a Liquidated Mortgage
         Loan during the calendar month preceding the month of the Distribution
         Date, the amount of the liquidation proceeds allocable to principal
         received with respect to the mortgage loan and

     (f) all partial and full principal prepayments by borrowers received during
         the related Prepayment Period.

     Senior Principal Distribution Amount. On each Distribution Date, the Non-PO
Formula Principal Amount, up to the amount of the Senior Principal Distribution
Amount for the Distribution Date, will be distributed as principal of the
following classes of senior certificates, in the following order of priority:

1. to the Class A-4 Certificates, the Priority Amount, until its Class
   Certificate Balance is reduced to zero;

2. to the Class A-R Certificates, until its Class Certificate Balance is reduced
   to zero;

3. sequentially, to the Class A-1, Class A-2 and Class A-3 Certificates, in that
   order, until their respective Class Certificate Balances are reduced to zero;
   and

4. to the Class A-4 Certificates, without regard to the Priority Amount, until
   its Class Certificate Balance is reduced to zero.

The capitalized terms used herein shall have the following meanings:

     Priority Amount for any Distribution Date will equal the sum of: (i) the
product of (A) Scheduled Principal Distribution Amounts, (B) the Shift
Percentage and (C) the Priority Percentage and (ii) the product of (A) the
Unscheduled Principal Distribution Amount, (B) the Prepayment Shift Percentage
and (C) the Priority Percentage.

     Scheduled Principal Distribution Amounts for any Distribution Date will
equal the Non-PO Percentage of all amounts described in clauses (a) through (d)
of the definition of "Non-PO Formula Principal Amount" for such Distribution
Date; provided, however, that if a Bankruptcy Loss that is an Excess Loss is
sustained with respect to a mortgage loan that is not a Liquidated Mortgage
Loan, the Scheduled Principal Distribution Amounts will be reduced on the
related Distribution Date by the applicable Non-PO Percentage of the principal
portion of such Bankruptcy Loss.

                                      S-32
<PAGE>   33

     Unscheduled Principal Distribution Amounts for any Distribution Date will
equal the sum of (i) with respect to each mortgage loan that became a Liquidated
Mortgage Loan during the calendar month preceding the month of such Distribution
Date, the Non-PO Percentage of the Liquidation Proceeds allocable to principal
received with respect to such mortgage loan and (ii) the applicable Non-PO
Percentage of the amount described in clause (f) of the definition of Non-PO
Formula Principal Amount for such Distribution Date.

     Priority Percentage for any Distribution Date will equal a fraction, the
numerator of which is the Class Certificate Balance of the Class A-4
Certificates immediately prior to such Distribution Date, and the denominator of
which is equal to the aggregate Class Certificate Balances of the certificates
(other than the Class PO Certificates) immediately prior to such Distribution
Date.

     Prepayment Shift Percentage for any Distribution Date occurring during the
five years beginning on the first Distribution Date will equal 0%. Thereafter,
the Prepayment Shift Percentage for any Distribution Date occurring on or after
the fifth anniversary of the first Distribution Date will be as follows: for any
Distribution Date in the first year thereafter, 30%; for any Distribution Date
in the second year thereafter, 40%; for any Distribution Date in the third year
thereafter, 60%; for any Distribution Date in the fourth year thereafter, 80%;
and for any Distribution Date thereafter, 100%.

     Shift Percentage: As to any Distribution Date occurring during the five
years beginning on the first Distribution Date, 0%. Thereafter, the Shift
Percentage for any Distribution Date occurring on or after the fifth anniversary
of the first Distribution Date will be 100%.

     Notwithstanding the foregoing, on each Distribution Date on and after the
Senior Credit Support Depletion Date, the Non-PO Formula Principal Amount will
be distributed, concurrently as principal of the classes of senior certificates
(other than the Class X and Class PO Certificates), pro rata, in accordance with
their respective Class Certificate Balances immediately before that Distribution
Date.

     "Prepayment Period" means the period from the sixteenth day of a calendar
month (or in the case of the first Distribution Date, from the cut-off date)
through the fifteenth day of the following calendar month.

     The "Senior Principal Distribution Amount" for any Distribution Date will
equal the sum of

     - the Senior Percentage of the applicable Non-PO Percentage of all amounts
       described in clauses (a) through (d) of the definition of "Non-PO Formula
       Principal Amount" for the Distribution Date,

     - for each Mortgage Loan that became a Liquidated Mortgage Loan during the
       calendar month preceding the month of the Distribution Date, the lesser
       of

      - the Senior Percentage of the applicable Non-PO Percentage of the Stated
        Principal Balance of the mortgage loan and

      - either

        - the Senior Prepayment Percentage of the applicable Non-PO Percentage
          of the amount of the liquidation proceeds allocable to principal
          received on the mortgage loan or

        - if an Excess Loss was sustained on the Liquidated Mortgage Loan during
          the preceding calendar month, the Senior Percentage of the applicable
          Non-PO Percentage of the amount of the liquidation proceeds allocable
          to principal received on the mortgage loan, and

     - the Senior Prepayment Percentage of the applicable Non-PO Percentage of
       amounts described in clause (f) of the definition of "Non-PO Formula
       Principal Amount" for the Distribution Date; and

     - the amount, if any, on deposit in the Pre-Funding Account at the end of
       the Funding Period not allocable to the Class PO Certificates;

provided, however, that if a Bankruptcy Loss that is an Excess Loss is sustained
on a mortgage loan that is not a Liquidated Mortgage Loan, the Senior Principal
Distribution Amount will be reduced on the related Distribution Date by the
Senior Percentage of the applicable Non-PO Percentage of the principal portion
of the Bankruptcy Loss.

                                      S-33
<PAGE>   34

     "Stated Principal Balance" means for any mortgage loan and Due Date, the
unpaid principal balance of the mortgage loan as of the Due Date, as specified
in its amortization schedule at the time (before any adjustment to the
amortization schedule for any moratorium or similar waiver or grace period),
after giving effect to any previous partial prepayments and liquidation proceeds
received and to the payment of principal due on the Due Date and irrespective of
any delinquency in payment by the related mortgagor. The pool principal balance
with respect to any Distribution Date equals the aggregate of the Stated
Principal Balances of the mortgage loans outstanding on the Due Date in the
month preceding the month of the Distribution Date.

     The "Senior Percentage" for any Distribution Date is the percentage
equivalent of a fraction the numerator of which is the aggregate of the Class
Certificate Balances of each class of senior certificates (other than the Class
PO Certificates) immediately before the Distribution Date and the denominator of
which is the aggregate of the Class Certificate Balances of all classes of
certificates, other than the Class PO Certificates, immediately before the
Distribution Date. The "Subordinated Percentage" for any Distribution Date will
be calculated as the difference between 100% and the Senior Percentage for the
Distribution Date.

     The "Senior Prepayment Percentage" for any Distribution Date occurring
during the five years beginning on the first Distribution Date will equal 100%.
Thereafter, the Senior Prepayment Percentage will be subject to gradual
reduction as described in the following paragraph. This disproportionate
allocation of unscheduled payments of principal will have the effect of
accelerating the amortization of the senior certificates (other than the Class
PO Certificates) which receive these unscheduled payments of principal while, in
the absence of Realized Losses, increasing the interest in the pool principal
balance evidenced by the subordinated certificates. Increasing the respective
interest of the subordinated certificates relative to that of the senior
certificates is intended to preserve the availability of the subordination
provided by the subordinated certificates. The "Subordinated Prepayment
Percentage" as of any Distribution Date will be calculated as the difference
between 100% and the Senior Prepayment Percentage.

     The Senior Prepayment Percentage for any Distribution Date occurring on or
after the fifth anniversary of the first Distribution Date will be as follows:
for any Distribution Date in the first year thereafter, the Senior Percentage
plus 70% of the Subordinated Percentage for the Distribution Date; for any
Distribution Date in the second year thereafter, the Senior Percentage plus 60%
of the Subordinated Percentage for the Distribution Date; for any Distribution
Date in the third year thereafter, the Senior Percentage plus 40% of the
Subordinated Percentage for the Distribution Date; for any Distribution Date in
the fourth year thereafter, the Senior Percentage plus 20% of the Subordinated
Percentage for the Distribution Date; and for any Distribution Date thereafter,
the Senior Percentage for the Distribution Date (unless on any Distribution Date
the Senior Percentage exceeds the initial Senior Percentage, in which case the
Senior Prepayment Percentage for the Distribution Date will once again equal
100%). Notwithstanding the foregoing, no decrease in the Senior Prepayment
Percentage will occur unless both of the step down conditions listed below are
satisfied:

     - the outstanding principal balance of all mortgage loans delinquent 60
       days or more (averaged over the preceding six month period), as a
       percentage of the aggregate principal balance of the subordinated
       certificates on the Distribution Date, does not equal or exceed 50%, and

     - cumulative Realized Losses on the mortgage loans do not exceed

      - for the Distribution Date on the fifth anniversary of the first
        Distribution Date, 30% of the aggregate of the principal balances of the
        subordinated certificates as of the cut-off date,

      - for the Distribution Date on the sixth anniversary of the first
        Distribution Date, 35% of the aggregate of the principal balances of the
        subordinated certificates as of the cut-off date,

      - for the Distribution Date on the seventh anniversary of the first
        Distribution Date, 40% of the aggregate of the principal balances of the
        subordinated certificates as of the cut-off date,

                                      S-34
<PAGE>   35

      - for the Distribution Date on the eighth anniversary of the first
        Distribution Date, 45% of the aggregate of the principal balances of the
        subordinated certificates as of the cut-off date, and

      - for the Distribution Date on the ninth anniversary of the first
        Distribution Date, 50% of the aggregate of the principal balances of the
        subordinated certificates as of the cut-off date.

     If on any Distribution Date the allocation to the class or classes of
senior certificates (other than the Class PO Certificates) then entitled to
distributions of principal of full and partial principal prepayments and other
amounts in the percentage required above would reduce the outstanding Class
Certificate Balance of the class or classes below zero, the distribution to the
class or classes of certificates of the Senior Prepayment Percentage of those
amounts for the Distribution Date will be limited to the percentage necessary to
reduce the related Class Certificate Balance(s) to zero.

     Subordinated Principal Distribution Amount. On each Distribution Date, to
the extent of Available Funds therefor, the Non-PO Formula Principal Amount, up
to the amount of the Subordinated Principal Distribution Amount for the
Distribution Date, will be distributed as principal of the subordinated
certificates. Except as provided in the next paragraph, each class of
subordinated certificates will be entitled to receive its pro rata share of the
Subordinated Principal Distribution Amount (based on its respective Class
Certificate Balance), in each case to the extent of the amount available from
Available Funds for distribution of principal. Distributions of principal of the
subordinated certificates will be made sequentially to the classes of
subordinated certificates in the order of their numerical class designations,
beginning with the Class M Certificates, until their respective Class
Certificate Balances are reduced to zero.

     With respect to each class of subordinated certificates, if on any
Distribution Date the sum of the related Class Subordination Percentages of the
class and all classes of subordinated certificates which have higher numerical
class designations than the class (the "Applicable Credit Support Percentage")
is less than the Applicable Credit Support Percentage for the class on the date
of issuance of the certificates (the "Original Applicable Credit Support
Percentage"), no distribution of partial principal prepayments and principal
prepayments in full will be made to any of those classes (the "Restricted
Classes") and the amount of partial principal prepayments and principal
prepayments in full otherwise distributable to the Restricted Classes will be
allocated among the remaining classes of subordinated certificates, pro rata,
based upon their respective Class Certificate Balances, and distributed in the
sequential order described above.

     The Class Subordination Percentage with respect to any Distribution Date
and each class of subordinated certificates, will equal the fraction (expressed
as a percentage) the numerator of which is the Class Certificate Balance of the
class of subordinated certificates immediately before the Distribution Date and
the denominator of which is the aggregate of the Class Certificate Balances of
all classes of certificates immediately before the Distribution Date.

     The approximate Original Applicable Credit Support Percentages for the
subordinated certificates on the date of issuance of the certificates are
expected to be as follows:

<TABLE>
<S>                                             <C>
Class M.......................................  4.25%
Class B-1.....................................  2.70%
Class B-2.....................................  1.70%
Class B-3.....................................  1.10%
Class B-4.....................................  0.65%
Class B-5.....................................  0.35%
</TABLE>

     For purposes of calculating the Applicable Credit Support Percentages of
the subordinated certificates, the Class M Certificates will be considered to
have a lower numerical class designation than each other class of subordinated
certificates.

                                      S-35
<PAGE>   36

     The Subordinated Principal Distribution Amount for any Distribution Date
will equal

     - the sum of

      - the Subordinated Percentage of the applicable Non-PO Percentage of all
        amounts described in clauses (a) through (d) of the definition of
        "Non-PO Formula Principal Amount" for the Distribution Date,

      - for each Mortgage Loan that became a Liquidated Mortgage Loan during the
        calendar month preceding the month of the Distribution Date, the
        applicable Non-PO Percentage of the liquidation proceeds allocable to
        principal received on the mortgage loan, after application of the
        amounts pursuant to the second bulleted item of the definition of Senior
        Principal Distribution Amount up to the Subordinated Percentage of the
        applicable Non-PO Percentage of the Stated Principal Balance of the
        mortgage loan and

      - the Subordinated Prepayment Percentage of the applicable Non-PO
        Percentage of the amounts described in clause (f) of the definition of
        "Non-PO Formula Principal Amount" for the Distribution Date

     - reduced by the amount of any payments in respect of Class PO Deferred
       Amounts on the related Distribution Date.

     Residual Certificates. The Class A-R Certificates will remain outstanding
for so long as the trust fund shall exist, whether or not they are receiving
current distributions of principal or interest. In addition to distributions of
interest and principal as described above, on each Distribution Date, the
holders of the Class A-R Certificates will be entitled to receive any Available
Funds remaining after payment of interest and principal on the senior
certificates and Class PO Deferred Amounts on the Class PO Certificates and
interest and principal on the subordinated certificates, as described above. It
is not anticipated that there will be any significant amounts remaining for that
distribution.

     Class PO Principal Distribution Amount. On each Distribution Date,
distributions of principal of the Class PO Certificates will be made in an
amount equal to the lesser of (x) the PO Formula Principal Amount for the
Distribution Date and (y) the product of

     - Available Funds remaining after distribution of interest on the senior
       certificates and

     - a fraction, the numerator of which is the PO Formula Principal Amount,
       and the denominator of which is the sum of the PO Formula Principal
       Amount and the Senior Principal Distribution Amount.

     If the Class PO Principal Distribution amount on a Distribution Date is
calculated as provided in clause (y) above, principal distributions to holders
of the senior certificates (other than the Class PO Certificates) will be in an
amount equal to the product of Available Funds remaining after distribution of
interest on the senior certificates and a fraction, the numerator of which is
the Senior Principal Distribution Amount and the denominator of which is the sum
of the Senior Principal Distribution Amount and the PO Formula Principal Amount.

     The "PO Formula Principal Amount" for any Distribution Date will equal the
sum of the applicable PO Percentage of

     - all monthly payments of principal due on each mortgage loan on the
       related Due Date,

     - the principal portion of the purchase price of each mortgage loan that
       was repurchased by the seller or another person pursuant to the pooling
       and servicing agreement as of the Distribution Date,

     - the Substitution Adjustment Amount in connection with any deleted
       mortgage loan received for the Distribution Date,

                                      S-36
<PAGE>   37

     - any insurance proceeds or liquidation proceeds allocable to recoveries of
       principal of mortgage loans that are not yet Liquidated Mortgage Loans
       received during the calendar month preceding the month of the
       Distribution Date,

     - for each mortgage loan that became a Liquidated Mortgage Loan during the
       calendar month preceding the month of the Distribution Date, the amount
       of liquidation proceeds allocable to principal received on the mortgage
       loan,

     - all partial and full principal prepayments by borrowers received during
       the related Prepayment Period, and

     - the amount if any, on deposit in the Pre-Funding Account at the end of
       the Funding Period that is allocable to the Class PO Certificates,

provided, however, that if a Bankruptcy Loss that is an Excess Loss is sustained
on a Discount Mortgage Loan that is not a Liquidated Mortgage Loan, the PO
Formula Principal Amount will be reduced on the related Distribution Date by the
applicable PO Percentage of the principal portion of the Bankruptcy Loss.

     In addition, on the Distribution Date in February 2001, the Class PO
Certificates will receive a prepayment in the amount equal to the excess of (x)
the Class PO Sublimit Amount over (y) the aggregate of the Class PO Percentage
of the Stated Principal Balance of the Subsequent Mortgage Loans included in the
Trust Fund at the end of the Funding Period. The "Class PO Sublimit" is a
portion of the amount deposited in the Pre-Funding Account on the closing date
which is equal to approximately $204,337.

ALLOCATION OF LOSSES

     On each Distribution Date, the applicable PO Percentage of any Realized
Loss, including any Excess Loss, on a Discount Mortgage Loan will be allocated
to the Class PO Certificates until their Class Certificate Balance is reduced to
zero. The amount of any Realized Loss, other than an Excess Loss, allocated on
or before the Senior Credit Support Depletion Date will be treated as a Class PO
Deferred Amount. To the extent funds are available on the Distribution Date or
on any future Distribution Date from amounts that would otherwise be allocable
to the Subordinated Principal Distribution Amount, Class PO Deferred Amounts
will be paid on the Class PO Certificates before distributions of principal on
the subordinated certificates. Any distribution of Available Funds in respect of
unpaid Class PO Deferred Amounts will not further reduce the Class Certificate
Balance of the Class PO Certificates. The Class PO Deferred Amounts will not
bear interest. The Class Certificate Balance of the class of subordinated
certificates then outstanding with the highest numerical class designation will
be reduced by the amount of any payments in respect of Class PO Deferred
Amounts. After the Senior Credit Support Depletion Date, no new Class PO
Deferred Amounts will be created.

     For purposes of allocating losses to the subordinated certificates, the
Class M Certificates will be considered to have a lower numerical class
designation than each other class of subordinated certificates.

     The Senior Credit Support Depletion Date is the date on which the Class
Certificate Balance of each class of subordinated certificates has been reduced
to zero.

     On each Distribution Date, the applicable Non-PO Percentage of any Realized
Loss, other than any Excess Loss, will be allocated first to the subordinated
certificates, in the reverse order of their numerical class designations
(beginning with the class of subordinated certificates then outstanding with the
highest numerical class designation), in each case until the Class Certificate
Balance of the respective class of certificates has been reduced to zero, and
then to the senior certificates (other than the Notional Amount Certificates and
the Class PO Certificates) pro rata, based upon their respective Class
Certificate Balances.

     On each Distribution Date, the applicable Non-PO Percentage of Excess
Losses will be allocated pro rata among the classes of senior certificates
(other than the Notional Amount Certificates and the

                                      S-37
<PAGE>   38

Class PO Certificates) and the subordinated certificates based upon their
respective Class Certificate Balances immediately prior to such Distribution
Date.

     Because principal distributions are paid to some classes of certificates
(other than the Class PO Certificates) before other classes of certificates,
holders of the certificates that are entitled to receive principal later bear a
greater risk of being allocated Realized Losses on the mortgage loans than
holders of classes that are entitled to receive principal earlier.

     In general, a "Realized Loss" means, for a Liquidated Mortgage Loan, the
amount by which the remaining unpaid principal balance of the mortgage loan
exceeds the amount of liquidation proceeds applied to the principal balance of
the related mortgage loan. "Excess Losses" are Special Hazard Losses in excess
of the Special Hazard Loss Coverage Amount, Bankruptcy Losses in excess of the
Bankruptcy Loss Coverage Amount and Fraud Losses in excess of the Fraud Loss
Coverage Amount. "Bankruptcy Losses" are losses that are incurred as a result of
Debt Service Reductions and Deficient Valuations. "Special Hazard Losses" are
Realized Losses in respect of Special Hazard mortgage loans. "Fraud Losses" are
losses sustained on a Liquidated Mortgage Loan by reason of a default arising
from fraud, dishonesty or misrepresentation. See "Credit
Enhancement -- Subordination of Certain Classes."

     A "Liquidated Mortgage Loan" is a defaulted mortgage loan as to which the
master servicer has determined that all recoverable liquidation and insurance
proceeds have been received. A "Special Hazard mortgage loan" is a Liquidated
Mortgage Loan as to which the ability to recover the full amount due thereunder
was substantially impaired by a hazard not insured against under a standard
hazard insurance policy of the type described in the prospectus under "Credit
Enhancement -- Special Hazard Insurance Policies." See "Credit
Enhancement -- Subordination of Certain Classes."

STRUCTURING ASSUMPTIONS

     Unless otherwise specified, the information in the tables in this
prospectus supplement has been prepared on the basis of the following assumed
characteristics of the mortgage loans and the following additional assumptions,
which combined are the structuring assumptions:

     - the mortgage pool consists of four mortgage loans (two initial mortgage
       loans and two subsequent mortgage loans) with the following
       characteristics:

<TABLE>
<CAPTION>
                                                    ORIGINAL      REMAINING
                                                      TERM          TERM
                                        NET        TO MATURITY   TO MATURITY
PRINCIPAL BALANCE  MORTGAGE RATE   MORTGAGE RATE   (IN MONTHS)   (IN MONTHS)
-----------------  -------------   -------------   -----------   -----------
<S>                <C>             <C>             <C>           <C>
INITIAL MORTGAGE LOANS
 $  7,396,706.19    7.3662258613%   7.1072258613%       360           360
 $118,354,180.28    8.2584182489%   7.9950992210%       360           360
SUBSEQUENT MORTGAGE LOANS
 $ 10,376,121.00    7.3662258613%   7.1072258613%       360           360
 $ 63,872,992.53    8.2540992210%   7.9950992210%       360           360
</TABLE>

     - the mortgage loans prepay at the specified constant percentages of the
       prepayment assumption,

     - no defaults in the payment by mortgagors of principal of and interest on
       the mortgage loans are experienced,

     - scheduled payments on the initial and subsequent mortgage loans are
       received on the first day of each month commencing in the calendar month
       following the closing date and are computed before giving effect to
       prepayments received on the last day of the prior month,

     - for the first distribution date, interest on the subsequent mortgage
       loans is assumed to be available for payment to the certificates at their
       respective net mortgage rates,

                                      S-38
<PAGE>   39

     - prepayments are allocated as described in this prospectus supplement
       without giving effect to loss and delinquency tests,

     - there are no Net Interest Shortfalls and prepayments represent
       prepayments in full of individual mortgage loans and are received on the
       last day of each month, commencing in the calendar month of the closing
       date,

     - the scheduled monthly payment for each mortgage loan has been calculated
       such that each mortgage loan will amortize in amounts sufficient to repay
       the current balance of the mortgage loan by its respective remaining term
       to maturity,

     - the initial Class Certificate Balance or Notional Amount, as applicable,
       of each class of certificates is as set forth on the cover page hereof or
       as described under "Description of the Certificates -- General."

     - interest accrues on each interest bearing class of certificates at the
       applicable interest rate set forth or described on the cover page hereof
       or as described in this prospectus supplement,

     - distributions in respect of the certificates are received in cash on the
       25th day of each month commencing in the calendar month following the
       closing date,

     - the closing date of the sale of the certificates is December 29, 2000,

     - the seller is not required to repurchase or substitute for any mortgage
       loan,

     - the master servicer does not exercise the option to repurchase the
       mortgage loans described under "-- Optional Purchase of Defaulted Loans"
       and "-- Optional Termination" and

     - no class of certificates becomes a Restricted Class.

Prepayments of mortgage loans commonly are measured relative to a prepayment
standard or model. The model used in this prospectus supplement is the Standard
Prepayment Assumption (the "Prepayment Assumption"), which represents an assumed
rate of prepayment each month of the then outstanding principal balance of a
pool of new mortgage loans. The Prepayment Assumption does not purport to be
either a historical description of the prepayment experience of any pool of
mortgage loans or a prediction of the anticipated rate of prepayment of any pool
of mortgage loans, including the mortgage loans. 100% of the Prepayment
Assumption assumes prepayment rates of 0.2% per annum of the then unpaid
principal balance of the pool of mortgage loans in the first month of the life
of the mortgage loans and an additional 0.2% per annum in each month thereafter
(for example, 0.4% per annum in the second month) until the 30th month.
Beginning in the 30th month and in each month thereafter during the life of the
mortgage loans, 100% of the Prepayment Assumption assumes a constant prepayment
rate of 6% per annum. Multiples may be calculated from this prepayment rate
sequence. For example, 250% of the Prepayment Assumption assumes prepayment
rates will be 0.50% per annum in month one, 1.00% per annum in month two, and
increasing by 0.50% in each succeeding month until reaching a rate of 15.0% per
annum in month 30 and remaining constant at 15.0% per annum thereafter. 0% of
the Prepayment Assumption assumes no prepayments. There is no assurance that
prepayments will occur at any of the Prepayment Assumption rate or at any other
constant rate.

     While it is assumed that each of the mortgage loans prepays at the
specified constant percentages of the Prepayment Assumption, this is not likely
to be the case. Moreover, discrepancies may exist between the characteristics of
the actual mortgage loans which will be delivered to the trustee and
characteristics of the mortgage loans used in preparing the tables.

OPTIONAL PURCHASE OF DEFAULTED LOANS

     The master servicer may, at its option, purchase from the trust fund any
mortgage loan which is delinquent in payment by 91 days or more. Any purchase
shall be at a price equal to 100% of the Stated Principal Balance of the
mortgage loan plus accrued interest on it at the applicable mortgage rate from
the

                                      S-39
<PAGE>   40

date through which interest was last paid by the related mortgagor or advanced
(and not reimbursed) to the first day of the month in which the amount is to be
distributed.

OPTIONAL TERMINATION

     The master servicer will have the right to repurchase all remaining
mortgage loans and foreclosed or otherwise repossessed properties in the
mortgage pool and thereby effect early retirement of the certificates, subject
to the pool principal balance of the mortgage loans and foreclosed or otherwise
repossessed properties at the time of repurchase being less than 10% of the sum
of the initial cut-off date pool principal balance and the Pre-Funded Amount on
the Closing Date. If the master servicer exercises the option, the purchase
price distributed with respect to each certificate will be 100% of its then
outstanding principal balance plus any Class PO Deferred Amounts in the case of
the Class PO Certificates and, in the case of an interest bearing certificate,
any unpaid accrued interest thereon at the applicable pass-through rate, in each
case subject to reduction as provided in the pooling and servicing agreement if
the purchase price is based in part on the appraised value of any foreclosed or
otherwise repossessed properties and the appraised value is less than the Stated
Principal Balance of the related mortgage loans. Distributions on the
certificates in respect of any optional termination will first be paid to the
senior certificates and then to the subordinated certificates. The proceeds from
any optional termination distribution may not be sufficient to distribute the
full amount to which each class of certificates is entitled if the purchase
price is based in part on the appraised value of any foreclosed or otherwise
repossessed property and the appraised value is less than the Stated Principal
Balance of the related mortgage loan.

THE TRUSTEE

     The Bank of New York will be the trustee under the pooling and servicing
agreement. The depositor and the master servicer may maintain other banking
relationships in the ordinary course of business with The Bank of New York.
Offered certificates may be surrendered at the Corporate Trust Office of the
trustee located at 101 Barclay Street, 12E, New York, New York 10286, Attention:
Corporate Trust Administration or at any other address the trustee designates
from time to time.

RESTRICTIONS ON TRANSFER OF THE CLASS A-R CERTIFICATES

     The Class A-R Certificates will be subject to the restrictions on transfer
described in the prospectus under "Material Federal Income Tax
Consequences -- REMIC Certificates -- Tax-Related Restrictions on Transfers of
Residual Certificates -- Disqualified Organizations," "-- Noneconomic Residual
Interests" and "-- Foreign Investors." The pooling and servicing agreement
provides that the Class A-R Certificates (in addition to other ERISA restricted
classes of certificates) may not be acquired by an ERISA Plan. See "ERISA
Considerations." Each Class A-R Certificate will contain a legend describing the
foregoing restrictions.

                                      S-40
<PAGE>   41

                 YIELD, PREPAYMENT AND MATURITY CONSIDERATIONS

GENERAL

     The effective yield to the holders of each interest bearing class of
certificates will be lower than the yield otherwise produced by the applicable
rate at which interest is passed through to the holders and the purchase price
of the certificates because monthly distributions will not be payable to the
holders until the 25th day (or, if that day is not a business day, the following
business day) of the month following the month in which interest accrues on the
mortgage loans (without any additional distribution of interest or earnings on
them for the delay).

     Delinquencies on the mortgage loans which are not advanced by or on behalf
of the master servicer (because amounts, if advanced, would be nonrecoverable),
will adversely affect the yield on the certificates. Because of the priority of
distributions, shortfalls resulting from delinquencies not so advanced will be
borne first by the subordinated certificates, in the reverse order of their
numerical class designations, and then by the senior certificates pro rata. If,
as a result of the shortfalls, the aggregate of the Class Certificate Balances
of all classes of certificates exceeds the pool principal balance, the Class
Certificate Balance of the class of subordinated certificates then outstanding
with the highest numerical class designation will be reduced by the amount of
the excess.

     Net Interest Shortfalls will adversely affect the yields on the classes of
offered certificates. In addition, although all losses initially will be borne
by the subordinated certificates, in the reverse order of their numerical class
designations (either directly or through distributions in respect of Class PO
Deferred Amounts on the Class PO Certificates), Excess Losses will be borne by
all classes of certificates (other than the Notional Amount Certificates) on a
pro rata basis. Moreover, since the Subordinated Principal Distribution Amount
for each Distribution Date will be reduced by the amount of any distributions on
the Distribution Date in respect of Class PO Deferred Amounts, the amount
distributable as principal on each Distribution Date to each class of
subordinated certificates then entitled to a distribution of principal will be
less than it otherwise would be in the absence of the Class PO Deferred Amounts.
As a result, the yields on the offered certificates will depend on the rate and
timing of Realized Losses, including Excess Losses. Excess Losses could occur at
a time when one or more classes of subordinated certificates are still
outstanding and otherwise available to absorb other types of Realized Losses.

     For purposes of allocating losses and shortfalls resulting from
delinquencies to the subordinated certificates, the Class M Certificates will be
considered to have a lower numerical class designation than each other class of
subordinated certificates.

PREPAYMENT CONSIDERATIONS AND RISKS

     The rate of principal payments on the offered certificates, the aggregate
amount of distributions on the offered certificates and the yield to maturity of
the offered certificates will be related to the rate and timing of payments of
principal on the mortgage loans. The rate of principal payments on the mortgage
loans will in turn be affected by the amortization schedules of the mortgage
loans and by the rate of principal prepayments, including for this purpose
prepayments resulting from refinancing, liquidations of the mortgage loans due
to defaults, casualties, condemnations and repurchases by the seller or master
servicer. Except for certain of the subsequent mortgage loans, which may have a
prepayment penalty if the related mortgagor prepays such mortgage loan during a
period ranging from one year to five years after origination, the mortgage loans
may be prepaid by the mortgagors at any time without a prepayment penalty.
Because certain of the mortgage loans may contain prepayment penalties, the rate
of principal prepayments may be less than the rate of principal payments for
mortgage loans that did not have prepayment penalties. The mortgage loans are
subject to the "due-on-sale" provisions included therein. See "The Mortgage
Pool."

     Prepayments, liquidations and purchases of the mortgage loans will result
in distributions on the offered certificates of principal amounts which would
otherwise be distributed over the remaining terms of the mortgage loans. This
includes any optional purchase by the master servicer of a defaulted mortgage
                                      S-41
<PAGE>   42

loans and any optional repurchase of the remaining mortgage loans in connection
with the termination of the trust fund, in each case as described in this
prospectus supplement. Since the rate of payment of principal of the mortgage
loans will depend on future events and a variety of factors, no assurance can be
given as to the rate of payment of principal of the mortgage loans or the rate
of principal prepayments. The extent to which the yield to maturity of a class
of offered certificates may vary from the anticipated yield will depend upon the
degree to which the offered certificate is purchased at a discount or premium,
and the degree to which the timing of payments thereon is sensitive to
prepayments, liquidations and purchases of the mortgage loans. Further, an
investor should consider the risk that, in the case of the Principal Only
Certificates and any other offered certificate purchased at a discount, a slower
than anticipated rate of principal payments (including prepayments) on the
mortgage loans could result in an actual yield to the investor that is lower
than the anticipated yield and, in the case of the Interest Only Certificates
and any other offered certificate purchased at a premium, a faster than
anticipated rate of principal payments could result in an actual yield to the
investor that is lower than the anticipated yield. Investors in the Interest
Only Certificates should carefully consider the risk that a rapid rate of
principal payments on the mortgage loans could result in the failure of the
investors to recover their initial investments.

     The rate of principal payments (including prepayments) on pools of mortgage
loans may vary significantly over time and may be influenced by a variety of
economic, geographic, social and other factors, including changes in mortgagors'
housing needs, job transfers, unemployment, mortgagors' net equity in the
mortgaged properties, servicing decisions, as well as the characteristics of the
mortgage loans included in the mortgage pool as described under "The Mortgage
Pool -- General" and "-- Underwriting Process." In addition, Countrywide's
Streamlined Documentation Program may affect the rate of prepayments on the
mortgage loans. In general, if prevailing interest rates were to fall
significantly below the mortgage rates on the mortgage loans, the mortgage loans
could be subject to higher prepayment rates than if prevailing interest rates
were to remain at or above the mortgage rates on the mortgage loans. Conversely,
if prevailing interest rates were to rise significantly, the rate of prepayments
on the mortgage loans would generally be expected to decrease. No assurances can
be given as to the rate of prepayments on the mortgage loans in stable or
changing interest rate environments. Furthermore, with respect to up to 50% of
the Initial Mortgage Loans and up to 90% of the Subsequent Mortgage Loans, the
depositor may deliver all or a portion of each related mortgage file to the
trustee after the closing date or the related Subsequent Transfer Date, as
applicable. Should the seller fail to deliver all or a portion of any mortgage
files to the depositor or other designee of the depositor or, at the depositor's
direction, to the trustee, within that period, the seller will be required to
use its best efforts to deliver a replacement mortgage loan for the related
delayed delivery mortgage loan or repurchase the related delayed delivery
mortgage loan. Any repurchases pursuant to this provision would also have the
effect of accelerating the rate of prepayments on the mortgage loans.

     As described under "Description of the Certificates -- Principal," the
Senior Prepayment Percentage of the applicable Non-PO Percentage of all
principal prepayments will be initially distributed to the classes of senior
certificates (other than the Class PO Certificates) then entitled to receive
principal prepayment distributions. This may result in all (or a
disproportionate percentage) of the principal prepayments being distributed to
holders of the classes of senior certificates and none (or less than their pro
rata share) of the principal prepayments being distributed to holders of the
subordinated certificates during the periods of time described in the definition
of "Senior Prepayment Percentage." The Class A-4 Certificates generally will not
receive principal distributions for the first five years after the Closing Date.

     The timing of changes in the rate of prepayments on the mortgage loans may
significantly affect an investor's actual yield to maturity, even if the average
rate of principal payments is consistent with an investor's expectation. In
general, the earlier a prepayment of principal on the mortgage loans, the
greater the effect on an investor's yield to maturity. The effect on an
investor's yield as a result of principal payments 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 may not be offset
by a subsequent like decrease (or increase) in the rate of principal payments.

                                      S-42
<PAGE>   43

     The tables in the "Yield, Prepayment and Maturity Considerations" section
indicate the sensitivity of the pre-tax corporate bond equivalent yields to
maturity of the illustrated classes of certificates to various constant
percentages of the Prepayment Assumption. The yields set forth in the tables
were calculated by determining the monthly discount rates that, when applied to
the assumed streams of cash flows to be paid on the applicable classes of
certificates, would cause the discounted present value of the assumed streams of
cash flows to equal the assumed aggregate purchase prices of the applicable
classes and converting the monthly rates to corporate bond equivalent rates.
Those calculations do not take into account variations that may occur in the
interest rates at which investors may be able to reinvest funds received by them
as distributions on the certificates and consequently do not purport to reflect
the return on any investment in any class of certificates when the reinvestment
rates are considered.

MANDATORY PREPAYMENT

     In the event that at the end of the Funding Period there are amounts on
deposit in the Pre-Funding Account, the holders of the senior certificates will
receive an additional distribution allocable to principal in an amount equal to
that amount on deposit in the Pre-Funding Account at that time.

SENSITIVITY OF THE CLASS X CERTIFICATES

     AS INDICATED IN THE FOLLOWING TABLE, THE YIELD TO INVESTORS IN THE CLASS X
CERTIFICATES WILL BE SENSITIVE TO THE RATE OF PRINCIPAL PAYMENTS (INCLUDING
PREPAYMENTS) OF THE NON-DISCOUNT MORTGAGE LOANS (PARTICULARLY THOSE WITH HIGH
NET MORTGAGE RATES), WHICH GENERALLY CAN BE PREPAID AT ANY TIME. ON THE BASIS OF
THE ASSUMPTIONS DESCRIBED UNDER THIS HEADING, THE YIELD TO MATURITY ON THE CLASS
X CERTIFICATES WOULD BE APPROXIMATELY 0% IF PREPAYMENTS WERE TO OCCUR AT A
CONSTANT RATE OF APPROXIMATELY 760% OF THE PREPAYMENT ASSUMPTION. IF THE ACTUAL
PREPAYMENT RATE OF THE NON-DISCOUNT MORTGAGE LOANS WERE TO EXCEED THE FOREGOING
LEVEL FOR AS LITTLE AS ONE MONTH WHILE EQUALING THE LEVEL FOR THE REMAINING
MONTHS, THE INVESTORS IN THE CLASS X CERTIFICATES WOULD NOT FULLY RECOUP THEIR
INITIAL INVESTMENTS.

     As described under "Description of the Certificates -- General," the
pass-through rate of the Class X Certificates in effect from time to time is
calculated by reference to the net mortgage rates of the Non-Discount mortgage
loans. The Non-Discount mortgage loans will have higher net mortgage rates (and
higher mortgage rates) than the other mortgage loans. In general, mortgage loans
with higher mortgage rates tend to prepay at higher rates than mortgage loans
with relatively lower mortgage rates in response to a given change in market
interest rates. As a result, the Non-Discount mortgage loans may prepay at
higher rates, thereby reducing the pass-through rate and Notional Amount of the
Class X Certificates.

     The information set forth in the following table has been prepared on the
basis of the structuring assumptions and on the assumption that the purchase
price of the Class X Certificates (expressed as a percentage of its initial
Notional Amount) is as follows:

<TABLE>
<CAPTION>
                           CLASS                              PRICE*
                           -----                              ------
<S>                                                           <C>
Class X.....................................................   2.05%
</TABLE>

------------
* The price does not include accrued interest. Accrued interest has been added
  to the price in calculating the yields in the following table.

             SENSITIVITY OF THE CLASS X CERTIFICATES TO PREPAYMENTS
                          (PRE-TAX YIELDS TO MATURITY)

<TABLE>
<CAPTION>
                                          PERCENTAGE OF PREPAYMENT ASSUMPTION
                                          ------------------------------------
                 CLASS                     0%     100%    250%    400%    500%
                 -----                    ----    ----    ----    ----    ----
<S>                                       <C>     <C>     <C>     <C>     <C>
Class X.................................  37.0%   32.3%   25.2%   17.9%   13.0%
</TABLE>

     It is unlikely that the Non-Discount mortgage loans will have the precise
characteristics described in this prospectus supplement or that the Non-Discount
mortgage loans will all prepay at the same rate until maturity or that all of
the Non-Discount mortgage loans will prepay at the same rate or time. As a
result
                                      S-43
<PAGE>   44

of these factors, the pre-tax yields on the Class X Certificates are likely to
differ from those shown in the table above, even if all of the Non-Discount
Mortgage Loans prepay at the indicated percentages of the Prepayment Assumption.
No representation is made as to the actual rate of principal payments on the
Non-Discount mortgage loans for any period or over the life of the Class X
Certificates or as to the yield on the Class X Certificates. Investors must make
their own decisions as to the appropriate prepayment assumptions to be used in
deciding whether to purchase the Class X Certificates.

SENSITIVITY OF THE PRINCIPAL ONLY CERTIFICATES

     THE CLASS PO CERTIFICATES WILL BE "PRINCIPAL ONLY" CERTIFICATES AND WILL
NOT BEAR INTEREST. AS INDICATED IN THE FOLLOWING TABLE, A LOWER THAN ANTICIPATED
RATE OF PRINCIPAL PAYMENTS (INCLUDING PREPAYMENTS) ON THE DISCOUNT MORTGAGE
LOANS WITH RESPECT TO THE CLASS PO CERTIFICATES WILL HAVE A NEGATIVE EFFECT ON
THE YIELD TO INVESTORS IN THE PRINCIPAL ONLY CERTIFICATES.

     As described above under "Description of the Certificates -- Principal,"
the Class PO principal distribution amount is calculated by reference to the
principal payments (including prepayments) on the Discount mortgage loans. The
Discount mortgage loans will have lower net mortgage rates (and lower mortgage
rates) than the other mortgage loans. In general, mortgage loans with higher
mortgage rates tend to prepay at higher rates than mortgage loans with
relatively lower mortgage rates in response to a given change in market interest
rates. As a result, the Discount mortgage loans may prepay at lower rates,
thereby reducing the rate of payment of principal and the resulting yield of the
Class PO Certificates.

     The information set forth in the following table has been prepared on the
basis of the structuring assumptions and on the assumption that the aggregate
purchase price of the Principal Only Certificates (expressed as a percentage of
its initial Class Certificate Balance) is as follows:

<TABLE>
<CAPTION>
                           CLASS                              PRICE
                           -----                              -----
<S>                                                           <C>
Class PO....................................................  65.0%
</TABLE>

         SENSITIVITY OF THE PRINCIPAL ONLY CERTIFICATES TO PREPAYMENTS
                          (PRE-TAX YIELDS TO MATURITY)

<TABLE>
<CAPTION>
                                           PERCENTAGE OF THE PREPAYMENT ASSUMPTION
                                           ----------------------------------------
                  CLASS                     0%     100%     250%     400%     500%
                  -----                    ----    -----    -----    -----    -----
<S>                                        <C>     <C>      <C>      <C>      <C>
Class PO.................................  2.2%     4.1%     7.5%    10.7%    12.7%
</TABLE>

     It is unlikely that the Discount mortgage loans will have the precise
characteristics described in this prospectus supplement or that the Discount
mortgage loans will all prepay at the same rate until maturity or that all of
the Discount mortgage loans will prepay at the same rate or time. As a result of
these factors, the pre-tax yield on the Principal Only Certificates is likely to
differ from those shown in the table above, even if all of the Discount mortgage
loans prepay at the indicated percentages of the Prepayment Assumption. No
representation is made as to the actual rate of principal payments on the
Discount mortgage loans for any period or over the life of the principal only
certificates or as to the yield on the principal only certificates. Investors
must make their own decisions as to the appropriate prepayment assumptions to be
used in deciding whether to purchase the Principal Only Certificates.

     In addition, the Class PO Certificates are likely to receive a prepayment
on the second Distribution Date from the Pre-Funding Account in respect of the
excess Class PO Sublimit. It is unlikely that the entire Class PO Sublimit will
be utilized in obtaining Subsequent Mortgage Loans. It is also possible that the
entire Class PO Sublimit will be distributed as a prepayment if none of the
Subsequent Mortgage Loans are Discount mortgage loans.

ADDITIONAL INFORMATION

     The depositor intends to file additional yield tables and other
computational materials with respect to one or more classes of offered
certificates with the Securities and Exchange Commission in a report on

                                      S-44
<PAGE>   45

Form 8-K. The tables and materials were prepared by the underwriter at the
request of prospective investors, based on assumptions provided by, and
satisfying their special requirements. The tables and assumptions may be based
on assumptions that differ from the structuring assumptions. Accordingly, the
tables and other materials may not be relevant to or appropriate for investors
other than those specifically requesting them.

WEIGHTED AVERAGE LIVES OF THE OFFERED CERTIFICATES

     The weighted average life of an offered certificate is determined by (a)
multiplying the amount of the net reduction, if any, of the Class Certificate
Balance of the Certificate on each Distribution Date by the number of years from
the date of issuance to the Distribution Date, (b) summing the results and (c)
dividing the sum by the aggregate amount of the net reductions in Class
Certificate Balance of the Certificate referred to in clause (a).

     For a discussion of the factors which may influence the rate of payments
(including prepayments) of the mortgage loans, see "-- Prepayment Considerations
and Risks" in this prospectus supplement and "Yield and Prepayment
Considerations" in the prospectus.

     In general, the weighted average lives of the offered certificates will be
shortened if the level of prepayments of principal of the mortgage loans
increases. However, the weighted average lives of the offered certificates will
depend upon a variety of other factors, including the timing of changes in the
rate of principal payments, the priority sequence of distributions of principal
of the classes of certificates. See "Description of the
Certificates -- Principal."

     The interaction of the foregoing factors may have different effects on
various classes of offered certificates and the effects on any class may vary at
different times during the life of the class. Accordingly, no assurance can be
given as to the weighted average life of any class of offered certificates.
Further, to the extent the prices of the offered certificates represent
discounts or premiums to their respective original Class Certificate Balances,
variability in the weighted average lives of the classes of offered certificates
will result in variability in the related yields to maturity. For an example of
how the weighted average lives of the classes of offered certificates may be
affected at various constant percentages of the Prepayment Assumption, see the
Decrement Tables under the next heading.

DECREMENT TABLES

     The following tables indicate the percentages of the initial Class
Certificate Balances of the classes of offered certificates (other than the
Class X Certificates) that would be outstanding after each of the dates shown at
various constant percentages of the Prepayment Assumption and the corresponding
weighted average lives of the classes. The tables have been prepared on the
basis of the structuring assumptions. It is not likely that the mortgage loans
will have the precise characteristics described in this prospectus supplement or
all of the mortgage loans will prepay at the constant percentages of the
Prepayment Assumption specified in the tables or at any other constant rate.
Moreover, the diverse remaining terms to maturity of the mortgage loans could
produce slower or faster principal distributions than indicated in the tables,
which have been prepared using the specified constant percentages of the
Prepayment Assumption, even if the remaining term to maturity of the mortgage
loans is consistent with the remaining terms to maturity of the mortgage loans
specified in the structuring assumptions.

                                      S-45
<PAGE>   46

           PERCENT OF INITIAL CLASS CERTIFICATE BALANCES OUTSTANDING*

<TABLE>
<CAPTION>
                                              CLASS A-1                          CLASS A-2
                                          PERCENTAGE OF THE                  PERCENTAGE OF THE
                                        PREPAYMENT ASSUMPTION              PREPAYMENT ASSUMPTION
                                   --------------------------------   --------------------------------
        DISTRIBUTION DATE           0%    100%   250%   400%   500%    0%    100%   250%   400%   500%
        -----------------          ----   ----   ----   ----   ----   ----   ----   ----   ----   ----
<S>                                <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>
Initial..........................   100   100    100    100    100     100    100   100    100    100
December 2001....................    99    97     94     91     89     100    100   100    100    100
December 2002....................    98    90     80     70     63     100    100   100    100    100
December 2003....................    96    81     61     42     31     100    100   100    100    100
December 2004....................    95    72     44     20      7     100    100   100    100    100
December 2005....................    93    64     29      4      0     100    100   100    100     27
December 2006....................    92    57     18      0      0     100    100   100     45      0
December 2007....................    90    50      9      0      0     100    100   100      0      0
December 2008....................    88    44      3      0      0     100    100   100      0      0
December 2009....................    86    38      0      0      0     100    100    81      0      0
December 2010....................    84    33      0      0      0     100    100    51      0      0
December 2011....................    82    29      0      0      0     100    100    26      0      0
December 2012....................    80    24      0      0      0     100    100     5      0      0
December 2013....................    77    20      0      0      0     100    100     0      0      0
December 2014....................    74    16      0      0      0     100    100     0      0      0
December 2015....................    71    12      0      0      0     100    100     0      0      0
December 2016....................    67     9      0      0      0     100    100     0      0      0
December 2017....................    64     5      0      0      0     100    100     0      0      0
December 2018....................    60     2      0      0      0     100    100     0      0      0
December 2019....................    55     0      0      0      0     100     93     0      0      0
December 2020....................    50     0      0      0      0     100     71     0      0      0
December 2021....................    45     0      0      0      0     100     50     0      0      0
December 2022....................    40     0      0      0      0     100     30     0      0      0
December 2023....................    34     0      0      0      0     100     11     0      0      0
December 2024....................    27     0      0      0      0     100      0     0      0      0
December 2025....................    20     0      0      0      0     100      0     0      0      0
December 2026....................    12     0      0      0      0     100      0     0      0      0
December 2027....................     4     0      0      0      0     100      0     0      0      0
December 2028....................     0     0      0      0      0      59      0     0      0      0
December 2029....................     0     0      0      0      0       0      0     0      0      0
December 2030....................     0     0      0      0      0       0      0     0      0      0
Weighted Average Life (in
  years)**.......................  18.4   8.0    3.9    2.8    2.4    28.1   21.1   10.2   6.0    4.8
</TABLE>

------------
 * Rounded to the nearest whole percentage.

** Determined as specified under "Weighted Average Lives of the Offered
   Certificates" herein.

                                      S-46
<PAGE>   47

           PERCENT OF INITIAL CLASS CERTIFICATE BALANCES OUTSTANDING*

<TABLE>
<CAPTION>
                                                 CLASS A-3                          CLASS A-4
                                             PERCENTAGE OF THE                  PERCENTAGE OF THE
                                           PREPAYMENT ASSUMPTION              PREPAYMENT ASSUMPTION
                                      --------------------------------   --------------------------------
                                       0%    100%   250%   400%   500%    0%    100%   250%   400%   500%
                                      ----   ----   ----   ----   ----   ----   ----   ----   ----   ----
<S>                                   <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>
Initial.............................   100    100    100   100    100     100   100    100    100    100
December 2001.......................   100    100    100   100    100     100   100    100    100    100
December 2002.......................   100    100    100   100    100     100   100    100    100    100
December 2003.......................   100    100    100   100    100     100   100    100    100    100
December 2004.......................   100    100    100   100    100     100   100    100    100    100
December 2005.......................   100    100    100   100    100     100   100    100    100    100
December 2006.......................   100    100    100   100     56      99    97     94     91     89
December 2007.......................   100    100    100    89     15      97    93     87     80     76
December 2008.......................   100    100    100    56      0      96    88     78     67     58
December 2009.......................   100    100    100    37      0      94    83     67     53     39
December 2010.......................   100    100    100    28      0      92    76     56     40     27
December 2011.......................   100    100    100    21      0      91    70     47     29     18
December 2012.......................   100    100    100    15      0      88    65     39     22     13
December 2013.......................   100    100     87    11      0      86    59     32     16      9
December 2014.......................   100    100     72     8      0      84    54     26     12      6
December 2015.......................   100    100     59     6      0      81    49     22      9      4
December 2016.......................   100    100     48     5      0      78    45     18      6      3
December 2017.......................   100    100     39     3      0      75    40     15      5      2
December 2018.......................   100    100     32     2      0      72    36     12      3      1
December 2019.......................   100    100     26     2      0      68    32     10      2      1
December 2020.......................   100    100     21     1      0      64    28      8      2      1
December 2021.......................   100    100     16     1      0      60    25      6      1      0
December 2022.......................   100    100     13     1      0      55    22      5      1      0
December 2023.......................   100    100     10     0      0      50    18      4      1      0
December 2024.......................   100     93      7     0      0      44    15      3      0      0
December 2025.......................   100     75      5     0      0      38    13      2      0      0
December 2026.......................   100     59      4     0      0      32    10      1      0      0
December 2027.......................   100     43      3     0      0      25     7      1      0      0
December 2028.......................   100     28      2     0      0      17     5      1      0      0
December 2029.......................    83     14      1     0      0       9     2      0      0      0
December 2030.......................     0      0      0     0      0       0     0      0      0      0
Weighted Average Life (in
  years)**..........................  29.4   26.7   17.0   9.4    6.3    21.5   15.9   11.8   9.9    9.0
</TABLE>

---------------
 * Rounded to the nearest whole percentage.

** Determined as specified under "Weighted Average Lives of the Offered
   Certificates" herein.

                                      S-47
<PAGE>   48

           PERCENT OF INITIAL CLASS CERTIFICATE BALANCES OUTSTANDING*

<TABLE>
<CAPTION>
                                             CLASS A-R                           CLASS PO
                                         PERCENTAGE OF THE                  PERCENTAGE OF THE
                                       PREPAYMENT ASSUMPTION              PREPAYMENT ASSUMPTION
                                  --------------------------------   --------------------------------
       DISTRIBUTION DATE           0%    100%   250%   400%   500%    0%    100%   250%   400%   500%
       -----------------          ----   ----   ----   ----   ----   ----   ----   ----   ----   ----
<S>                               <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>
Initial.........................   100    100    100    100    100    100    100    100    100    100
December 2001...................     0      0      0      0      0     99     98     96     94     93
December 2002...................     0      0      0      0      0     98     93     86     79     75
December 2003...................     0      0      0      0      0     97     87     73     60     53
December 2004...................     0      0      0      0      0     96     81     61     45     36
December 2005...................     0      0      0      0      0     94     75     51     34     25
December 2006...................     0      0      0      0      0     93     69     43     25     17
December 2007...................     0      0      0      0      0     92     64     36     19     12
December 2008...................     0      0      0      0      0     90     59     30     14      8
December 2009...................     0      0      0      0      0     88     55     25     11      6
December 2010...................     0      0      0      0      0     87     50     21      8      4
December 2011...................     0      0      0      0      0     85     46     17      6      3
December 2012...................     0      0      0      0      0     82     42     14      4      2
December 2013...................     0      0      0      0      0     80     39     12      3      1
December 2014...................     0      0      0      0      0     78     35     10      2      1
December 2015...................     0      0      0      0      0     75     32      8      2      1
December 2016...................     0      0      0      0      0     72     29      7      1      0
December 2017...................     0      0      0      0      0     69     26      5      1      0
December 2018...................     0      0      0      0      0     66     23      4      1      0
December 2019...................     0      0      0      0      0     62     21      3      0      0
December 2020...................     0      0      0      0      0     58     18      3      0      0
December 2021...................     0      0      0      0      0     54     16      2      0      0
December 2022...................     0      0      0      0      0     50     14      2      0      0
December 2023...................     0      0      0      0      0     45     12      1      0      0
December 2024...................     0      0      0      0      0     40     10      1      0      0
December 2025...................     0      0      0      0      0     35      8      1      0      0
December 2026...................     0      0      0      0      0     29      6      1      0      0
December 2027...................     0      0      0      0      0     22      5      0      0      0
December 2028...................     0      0      0      0      0     15      3      0      0      0
December 2029...................     0      0      0      0      0      8      1      0      0      0
December 2030...................     0      0      0      0      0      0      0      0      0      0
Weighted Average Life (in years)**...  0.1  0.1  0.1    0.1    0.1   20.1   11.7    6.7    4.6    3.9
</TABLE>

------------
 * Rounded to the nearest whole percentage.

** Determined as specified under "Weighted Average Lives of the Offered
   Certificates" herein.

                                      S-48
<PAGE>   49

           PERCENT OF INITIAL CLASS CERTIFICATE BALANCES OUTSTANDING*

<TABLE>
<CAPTION>
                                                                    CLASS M, CLASS B-1
                                                                      AND CLASS B-2
                                                                    PERCENTAGE OF THE
                                                                  PREPAYMENT ASSUMPTION
                                                             --------------------------------
                     DISTRIBUTION DATE                        0%    100%   250%   400%   500%
                     -----------------                       ----   ----   ----   ----   ----
<S>                                                          <C>    <C>    <C>    <C>    <C>
Initial....................................................   100    100    100    100    100
December 2001..............................................    99     99     99     99     99
December 2002..............................................    98     98     98     98     98
December 2003..............................................    97     97     97     97     97
December 2004..............................................    96     96     96     96     96
December 2005..............................................    95     95     95     95     95
December 2006..............................................    94     92     90     87     85
December 2007..............................................    93     89     83     77     72
December 2008..............................................    91     84     74     64     58
December 2009..............................................    90     79     64     51     43
December 2010..............................................    88     73     53     38     29
December 2011..............................................    86     67     44     28     20
December 2012..............................................    84     61     37     21     14
December 2013..............................................    82     56     30     15      9
December 2014..............................................    80     51     25     11      6
December 2015..............................................    77     47     21      8      4
December 2016..............................................    75     42     17      6      3
December 2017..............................................    72     38     14      4      2
December 2018..............................................    68     34     11      3      1
December 2019..............................................    65     31      9      2      1
December 2020..............................................    61     27      7      2      1
December 2021..............................................    57     24      6      1      0
December 2022..............................................    52     21      5      1      0
December 2023..............................................    48     18      3      1      0
December 2024..............................................    42     15      3      0      0
December 2025..............................................    37     12      2      0      0
December 2026..............................................    30      9      1      0      0
December 2027..............................................    24      7      1      0      0
December 2028..............................................    16      4      1      0      0
December 2029..............................................     9      2      0      0      0
December 2030..............................................     0      0      0      0      0
Weighted Average Life (in years)**.........................  20.6   15.2   11.4    9.6    8.9
</TABLE>

------------
 * Rounded to the nearest whole percentage.

** Determined as specified under "Weighted Average Lives of the Offered
   Certificates" herein.

LAST SCHEDULED DISTRIBUTION DATE

     The Last Scheduled Distribution Date for each class of offered certificates
is the Distribution Date in February 2031. Since the rate of distributions in
reduction of the Class Certificate Balance or Notional Amount of each class of
offered certificates will depend on the rate of payment (including prepayments)
of the mortgage loans, the Class Certificate Balance or Notional Amount of any
class could be reduced to zero significantly earlier or later than the Last
Scheduled Distribution Date. The rate of payments on the mortgage loans will
depend on their particular characteristics, as well as on prevailing interest
rates from time to time and other economic factors, and no assurance can be
given as to the actual payment experience of the mortgage loans. See "Yield,
Prepayment and Maturity Considerations -- Prepayment

                                      S-49
<PAGE>   50

Considerations and Risks" and "-- Weighted Average Lives of the Offered
Certificates" in this prospectus supplement and "Yield and Prepayment
Considerations" in the prospectus.

THE SUBORDINATED CERTIFICATES

     The weighted average life of, and the yield to maturity on, the
subordinated certificates, in increasing order of their numerical class
designation, will be progressively more sensitive to the rate and timing of
mortgagor defaults and the severity of ensuing losses on the mortgage loans. In
particular, the rate and timing of mortgagor defaults and the severity of
ensuing losses on the mortgage loans may be affected by the characteristics of
the mortgage loans included in the mortgage pool as described under "The
Mortgage Pool -- General" and "-- Underwriting Process." If the actual rate and
severity of losses on the mortgage loans is higher than those assumed by a
holder of a subordinated certificate, the actual yield to maturity of the
Certificate may be lower than the yield expected by the holder based on the
holder's assumptions. The timing of losses on mortgage loans will also affect an
investor's actual yield to maturity, even if the rate of defaults and severity
of losses over the life of the mortgage pool are consistent with an investor's
expectations. In general, the earlier a loss occurs, the greater the effect on
an investor's yield to maturity. Realized Losses on the mortgage loans will
reduce the Class Certificate Balances of the applicable class of subordinated
certificates to the extent of any losses allocated to it (as described under
"Description of the Certificates -- Allocation of Losses"), without the receipt
of cash attributable to the reduction. In addition, shortfalls in cash available
for distributions on the subordinated certificates will result in a reduction in
the Class Certificate Balance of the class of subordinated certificates then
outstanding with the highest numerical class designation if and to the extent
that the aggregate of the Class Certificate Balances of all classes of
certificates, following all distributions and the allocation of Realized Losses
on a Distribution Date, exceeds the pool principal balance as of the Due Date
occurring in the month of the Distribution Date. As a result of the reductions,
less interest will accrue on the class of subordinated certificates than
otherwise would be the case. The yield to maturity of the subordinated
certificates will also be affected by the disproportionate allocation of
principal prepayments to the senior certificates, Net Interest Shortfalls, other
cash shortfalls in Available Funds and distribution of funds to Class PO
certificateholders otherwise available for distribution on the subordinated
certificates to the extent of reimbursement for Class PO Deferred Amounts. See
"Description of the Certificates -- Allocation of Losses."

     If on any Distribution Date, the Applicable Credit Support Percentage for
any class of subordinated certificates is less than its Original Applicable
Credit Support Percentage, all partial principal prepayments and principal
prepayments in full available for distribution on the subordinated certificates
will be allocated solely to that class and all other classes of subordinated
certificates with lower numerical class designations, thereby accelerating their
amortization relative to that of the Restricted Classes and reducing the
weighted average lives of the classes of subordinated certificates receiving the
distributions. Accelerating the amortization of the classes of subordinated
certificates with lower numerical class designations relative to the other
classes of subordinated certificates is intended to preserve the availability of
the subordination provided by the other classes.

     For purposes of allocating losses and prepayments to the subordinated
certificates, the Class M Certificates will be considered to have a lower
numerical class designation than each other class of subordinated certificates.

                               CREDIT ENHANCEMENT

SUBORDINATION

     The rights of the holders of the subordinated certificates to receive
distributions with respect to the mortgage loans will be subordinated to the
rights of the holders of the senior certificates and the rights of the holders
of each class of subordinated certificates (other than the Class M Certificates)
to receive the distributions will be further subordinated to the rights of the
class or classes of subordinated certificates

                                      S-50
<PAGE>   51

with lower numerical class designations, in each case only to the extent
described in this prospectus supplement. The subordination of the subordinated
certificates to the senior certificates and the subordination of the classes of
subordinated certificates with higher numerical class designations to those with
lower numerical class designations is intended to increase the likelihood of
receipt, respectively, by the senior certificateholders and the holders of
subordinated certificates with lower numerical class designations of the maximum
amount to which they are entitled on any Distribution Date and to provide the
holders protection against Realized Losses, other than Excess Losses. In
addition, the subordinated certificates will provide limited protection against
Special Hazard Losses, Bankruptcy Losses and Fraud Losses up to the Special
Hazard Loss Coverage Amount, Bankruptcy Loss Coverage Amount and Fraud Loss
Coverage Amount, respectively, as described in the following paragraphs. The
applicable Non-PO Percentage of Realized Losses, other than Excess Losses, will
be allocated to the class of subordinated certificates then outstanding with the
highest numerical class designation. In addition, the Class Certificate Balance
of the class of subordinated certificates will be reduced by the amount of
distributions on the Class PO Certificates in reimbursement for Class PO
Deferred Amounts.

     For purposes of allocating losses to the subordinated certificates, the
Class M Certificates will be considered to have a lower numerical class
designation than each other class of subordinated certificates.

     The subordinated certificates will provide limited protection to the
classes of certificates of higher relative priority against

     - Special Hazard Losses in an initial amount expected to be up to
       approximately $2,400,000 (the "Special Hazard Loss Coverage Amount"),

     - Bankruptcy Losses in an initial amount expected to be up to approximately
       $50,000 (the "Bankruptcy Loss Coverage Amount") and

     - Fraud Losses in an initial amount expected to be up to approximately
       $4,000,000 (the "Fraud Loss Coverage Amount").

     The Special Hazard Loss Coverage Amount will be reduced, from time to time,
to be an amount equal on any Distribution Date to the lesser of

     - the Special Hazard Loss Coverage Amount as of the closing date less the
       amount, if any, of losses attributable to Special Hazard mortgage loans
       incurred since the closing date, or

     - the greatest of

        - 1% of the aggregate of the principal balances of the mortgage loans,

        - twice the principal balance of the largest mortgage loan and

        - the aggregate principal balances of the mortgage loans secured by
          mortgaged properties located in the single California postal zip code
          area having the highest aggregate principal balance of any zip code
          area.

All principal balances for the purpose of this definition will be calculated as
of the first day of the month before the month in which the Distribution Date
occurs after giving effect to scheduled installments of principal and interest
on the mortgage loans then due, whether or not paid.

     The Fraud Loss Coverage Amount will be reduced, from time to time, by the
amount of Fraud Losses allocated to the certificates. In addition, the Fraud
Loss Coverage Amount will be reduced on the fifth anniversary of the cut-off
date, to zero and on the first, second, third and fourth anniversaries of the
cut-off date, to an amount equal to the lesser of 1% of the then current pool
principal balance and the excess of the Fraud Loss Coverage Amount as of the
preceding anniversary of the cut-off date over the cumulative amount of Fraud
Losses allocated to the certificates since the preceding anniversary.

     The Bankruptcy Loss Coverage Amount will be reduced, from time to time, by
the amount of Bankruptcy Losses allocated to the certificates.

                                      S-51
<PAGE>   52

     The amount of coverage provided by the subordinated certificates for
Special Hazard Losses, Bankruptcy Losses and Fraud Losses may be cancelled or
reduced from time to time for each of the risks covered, provided that the then
current ratings of the certificates assigned by the rating agencies are not
adversely affected as a result. In addition, a reserve fund or other form of
credit enhancement may be substituted for the protection provided by the
subordinated certificates for Special Hazard Losses, Bankruptcy Losses and Fraud
Losses.

     A "Deficient Valuation" is a bankruptcy proceeding whereby the bankruptcy
court may establish the value of the mortgaged property at an amount less than
the then outstanding principal balance of the mortgage loan secured by the
mortgaged property or may reduce the outstanding principal balance of a mortgage
loan. In the case of a reduction in that value of the related mortgaged
property, the amount of the secured debt could be reduced to that value, and the
holder of the mortgage loan thus would become an unsecured creditor to the
extent the outstanding principal balance of the mortgage loan exceeds the value
so assigned to the mortgaged property by the bankruptcy court. In addition,
other modifications of the terms of a mortgage loan can result from a bankruptcy
proceeding, including the reduction (a "Debt Service Reduction") of the amount
of the monthly payment on the related mortgage loan. However, none of these
shall be considered a Debt Service Reduction or Deficient Valuation so long as
the master servicer is pursuing any other remedies that may be available with
respect to the related mortgage loan and either the mortgage loan has not
incurred payment default or scheduled monthly payments of principal and interest
are being advanced by the master servicer without giving effect to any Debt
Service Reduction or Deficient Valuation.

                                USE OF PROCEEDS

     We expect the proceeds to the depositor from the sale of the offered
certificates to be approximately $195,795,501, plus accrued interest, before
deducting issuance expenses payable by the depositor. The depositor will apply
the net proceeds of the sale of the certificates against the purchase price of
the Initial Mortgage Loans and to fund the Pre-Funding Account and the
Capitalized Interest Account.

                    MATERIAL FEDERAL INCOME TAX CONSEQUENCES

     For federal income tax purposes, an election will be made to treat the
trust fund (exclusive of the Capitalized Interest Account and the Pre-Funding
Account) as a REMIC. The Residual Certificates will constitute the sole class of
residual interests in the REMIC.

     All classes of the certificates except the Class A-R Certificates (the
"Regular Certificates," and the Class A-R Certificates, the "Residual
Certificates") will be treated as debt instruments issued by the REMIC for
federal income tax purposes. Income on the Regular Certificates must be reported
under an accrual method of accounting. Under the accrual method of accounting,
interest income may be required to be included in a holder's gross income in
advance of the holder's actual receipt of that interest income.

     The Principal Only Certificates will be treated for federal income tax
purposes as having been issued with an amount of Original Issue Discount ("OID")
equal to the difference between their principal balance and their issue price.
Although the tax treatment is not entirely certain, Notional Amount Certificates
will be treated as having been issued with OID for federal income tax purposes
equal to the excess of all expected payments of interest on the certificates
over their issue price. Although unclear, a holder of a Notional Amount
Certificate may be entitled to deduct a loss to the extent that its remaining
basis exceeds the maximum amount of future payments to which the
Certificateholder would be entitled if there were no further prepayments of the
mortgage loans. The remaining classes of Regular Certificates, depending on
their respective issue prices (as described in the prospectus under "Material
Federal Income Tax Consequences"), may be treated as having been issued with OID
for federal income tax purposes. For purposes of determining the amount and rate
of accrual of OID and market discount, the trust fund intends to assume that
there will be prepayments on the mortgage loans at a rate equal to 250% of the
Prepayment Assumption. No representation is made as to whether the mortgage
loans will prepay at the

                                      S-52
<PAGE>   53

foregoing rate or any other rate. See "Yield, Prepayment and Maturity
Considerations" and "Material Federal Income Tax Consequences" in the
prospectus. Computing accruals of OID in the manner described in the prospectus
may (depending on the actual rate of prepayments during the accrual period)
result in the accrual of negative amounts of OID on the certificates issued with
OID in an accrual period. Holders will be entitled to offset negative accruals
of OID only against future OID accrual on their certificates.

     If the holders of any Regular Certificates are treated as holding their
certificates at a premium, the holders are encouraged to consult their tax
advisors regarding the election to amortize bond premium and the method to be
employed. See "Material Federal Income Tax Consequences -- REMIC Certificates --
a. Regular Certificates" in the prospectus.

     As is described more fully under "Material Federal Income Tax Consequences"
in the prospectus, the offered certificates will represent qualifying assets
under Sections 856(c)(4)(A) and 7701(a)(19)(C) of the Code, and net interest
income attributable to the offered certificates will be "interest on obligations
secured by mortgages on real property" within the meaning of Section
856(c)(3)(B) of the Internal Revenue Code of 1986, as amended (the "Code"), to
the extent the assets of the trust fund are assets described in those sections.
The Regular Certificates will represent qualifying assets under Section
860G(a)(3) if acquired by a REMIC within the prescribed time periods of the
Code.

     The holders of the Residual Certificates must include the taxable income of
the REMIC in their federal taxable income. The resulting tax liability of the
holders may exceed cash distributions to them during certain periods. All or a
portion of the taxable income from a Residual Certificate recognized by a holder
may be treated as "excess inclusion" income, which with limited exceptions, is
subject to U.S. federal income tax.

     In computing alternative minimum taxable income, the special rule providing
that taxable income cannot be less than the sum of the taxpayer's excess
inclusions for the year does not apply. However, a taxpayer's alternative
minimum taxable income cannot be less than the sum of the taxpayer's excess
inclusions for the year. In addition, the amount of any alternative minimum tax
net operating loss is determined without regard to any excess inclusions.

     Purchasers of a Residual Certificate are encouraged to consider carefully
the tax consequences of an investment in Residual Certificates discussed in the
prospectus and consult their own tax advisors with respect to those
consequences. See "Material Federal Income Tax Consequences -- REMIC
Certificates -- b. Residual Certificates" in the prospectus. Specifically,
prospective holders of Residual Certificates should consult their tax advisors
regarding whether, at the time of acquisition, a Residual Certificate will be
treated as a "noneconomic" residual interest, a "non-significant value" residual
interest and a "tax avoidance potential" residual interest. See "Material
Federal Income Tax Consequences -- Tax-Related Restrictions on Transfer of
Residual Certificates -- Noneconomic Residual Certificates," "Material Federal
Income Tax Consequences -- b. Residual Certificates -- Mark to Market Rules,"
"-- Excess Inclusions" and "Material Federal Income Tax Consequences -- Tax
Related Restrictions on Transfers of Residual Certificates -- Foreign Investors"
in the prospectus. Additionally, for information regarding Prohibited
Transactions and Treatment of Realized Losses, see "Material Federal Income Tax
Consequences -- Prohibited Transactions and Other Taxes" and "-- REMIC
Certificates -- a. Regular Certificates -- Treatment of Realized Losses" in the
prospectus.

     In Revenue Procedure 2001-12, effective February 4, 2000 pending
finalization of the new regulations, the IRS has expanded the "safe harbor" for
transfers of noneconomic residual interests to include certain transfers to
domestic taxable corporations with large amounts of gross and net assets where
agreement is made that all future transfers will be to taxable domestic
corporations in transactions that qualify for one of the "safe harbor"
provisions. Eligibility for this safe harbor requires, among other things, that
the facts and circumstances known to the transferor at the time of transfer not
indicate to a reasonable person that the taxes with respect to the residual
interest will not be paid, with an unreasonably low cost for the transfer
specifically mentioned as negating eligibility.

                                      S-53
<PAGE>   54

                              ERISA CONSIDERATIONS

     Any fiduciary of an employee benefit or other plan or arrangement (such as
an individual retirement plan or Keogh plan) that is subject to the Employee
Retirement Income Security Act of 1974, as amended, or to Section 4975 of the
Code (a "Plan") that proposes to cause the Plan to acquire any of the offered
certificates is encouraged to consult with its counsel with respect to the
potential consequences of the Plan's acquisition and ownership of the
certificates under ERISA and Section 4975 of the Code. See "ERISA
Considerations" in the prospectus. Section 406 of ERISA prohibits "parties in
interest" with respect to an employee benefit plan subject to ERISA from
engaging in various different types of transactions involving the Plan and its
assets unless a statutory, regulatory or administrative exemption applies to the
transaction. Section 4975 of the Code imposes excise taxes on prohibited
transactions involving "disqualified persons" and Plans described under that
Section. ERISA authorizes the imposition of civil penalties for prohibited
transactions involving Plans not subject to the requirements of Section 4975 of
the Code.

     Some employee benefit plans, including governmental plans and some church
plans, are not subject to ERISA's requirements. Accordingly, assets of those
plans may be invested in the offered certificates without regard to the ERISA
considerations described in this prospectus supplement and in the prospectus,
subject to the provisions of other applicable federal and state law. Any of
those plans that is qualified and exempt from taxation under Sections 401(a) and
501(a) of the Code may nonetheless be subject to the prohibited transaction
rules set forth in Section 503 of the Code.

     Except as noted above, 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. A fiduciary that decides to
invest the assets of a Plan in the offered certificates should consider, among
other factors, the extreme sensitivity of the investment to the rate of
principal payments (including prepayments) on the mortgage loans.

     The U.S. Department of Labor has granted an administrative exemption to
Countrywide Securities Corporation (Prohibited Transaction Exemption 2000-55, as
amended, Exemption Application No. D-10863, 65 Fed. Reg. 67774 (2000)) (the
"Exemption") from some of the prohibited transaction rules of ERISA and the
related excise tax provisions of Section 4975 of the Code with respect to the
initial purchase, the holding and the subsequent resale by Plans of certificates
in pass-through trusts that consist of specified receivables, loans and other
obligations that meet the conditions and requirements of the Exemption. The
Exemption applies to mortgage loans such as the mortgage loans in the trust
fund. The Exemption was amended by Prohibited Transaction Exemption 2000-58,
Exemption Application No. D-10829, 65 Fed. Reg. 67765 (November 13, 2000) to
extend exemptive relief to subordinated certificates and certificates rated in
the four highest generic rating categories in certain designated transactions
when the conditions of the Exemption are met.

     For a general description of the Exemption and the conditions that must be
satisfied for the Exemption to apply, see "ERISA Considerations" in the
prospectus.

     The Exemption, as amended, extends exemptive relief to certain
mortgage-backed and asset-backed securities transactions that use pre-funding
accounts and that otherwise meet the requirements of the Exemption. Mortgage
loans or other secured obligations supporting payments to related
certificateholders, and having a value equal to no more than twenty-five (25)
percent of the total principal amount of the offered certificates, may be
transferred to the trust within a 90-day or three-month period following the
closing date (the "pre-funding period"), instead of being required to be either
identified or transferred on or before the closing date. The relief is available
when the following conditions are met:

          (1) The ratio of the amount allocated to the pre-funding account to
     the total principal amount of the offered certificates (the "pre-funding
     limit") must not exceed twenty-five (25) percent.

          (2) All obligations transferred after the closing date (the
     "subsequent obligations") must meet the same terms and conditions for
     eligibility as the original obligations used to create the trust, which
     terms and conditions have been approved by S&P, Moody's or Fitch (an
     "exemption rating agency").

                                      S-54
<PAGE>   55

          (3) The transfer of such additional obligations to the trust during
     the pre-funding period must not result in the certificates to be covered by
     the Exemption receiving a lower credit rating from an exemption rating
     agency upon termination of the pre-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 for all of the obligations in the trust at
     the end of the pre-funding period must not be more than 100 basis points
     lower than the average interest rate for the obligations transferred to the
     trust on the closing date.

          (5) In order to insure that the characteristics of the additional
     obligations are substantially similar to the original contracts which were
     transferred to the trust:

             (i) the characteristics of the additional obligations must be
        monitored by an insurer or other credit support provider that is
        independent of the depositor; or

             (ii) an independent accountant retained by the depositor must
        provide the depositor with a letter (with copies provided to each
        exemption rating agency rating the certificates, the related underwriter
        and the related trustee) stating whether or not the characteristics of
        the additional obligations conform to the characteristics described in
        the related prospectus or 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 obligations transferred to the trust as of the closing date.

          (6) The pre-funding period must end 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 the pre-funding account and/or capitalized
     interest account used in connection with the pre-funding may be invested
     only in certain permitted investments ("permitted investments").

          (8) The related prospectus or prospectus supplement must describe:

             (i) the pre-funding account and/or capitalized interest account
        used in connection with the pre-funding account;

             (ii) the duration of the pre-funding period;

             (iii) the percentage and/or dollar amount of the pre-funding limit
        for the trust; and

             (iv) that the amounts remaining in the pre-funding account at the
        end of the pre-funding period will be remitted to certificateholders as
        repayments of principal.

          (9) The related agreement must describe the permitted investments for
     the pre-funding account and/or capitalized interest account and, if not
     disclosed in the related prospectus or prospectus supplement the terms and
     conditions for eligibility of additional obligations.

     It is expected that the Exemption will apply to the acquisition and holding
by Plans of the offered certificates (other than the Class X, Class PO and Class
A-R Certificates) and that all conditions of the Exemption other than those
within the control of the investors will be met. In addition, as of the date
hereof, there is no single mortgagor that is the obligor on five percent (5%) of
the mortgage loans included in the trust fund by aggregate unamortized principal
balance of the assets of the trust fund.

     The rating of a certificate may change. If the rating of a certificate
declines below BBB-, the certificate will no longer be eligible for relief under
the Exemption, and consequently may not be purchased by or sold to a Plan
(although a Plan that had purchased the certificate when it had an
investment-grade rating would not be required by the Exemption to dispose of
it).

                                      S-55
<PAGE>   56

     BECAUSE THE CLASS PO AND CLASS X CERTIFICATES ARE NOT BEING PURCHASED BY
ANY UNDERWRITER TO WHOM AN EXEMPTION SIMILAR TO THE EXEMPTION HAS BEEN GRANTED,
THOSE CLASSES OF CERTIFICATES DO NOT CURRENTLY MEET THE REQUIREMENTS OF THE
EXEMPTION OR ANY COMPARABLE INDIVIDUAL ADMINISTRATIVE EXEMPTION GRANTED TO ANY
UNDERWRITER. CONSEQUENTLY, THE CLASS PO AND CLASS X CERTIFICATES MAY BE
TRANSFERRED ONLY IF THE CONDITIONS IN THE FIRST OR THIRD BULLET POINTS IN THE
NEXT PARAGRAPH ARE MET.

     BECAUSE THE CHARACTERISTICS OF THE CLASS A-R CERTIFICATES MAY NOT MEET THE
REQUIREMENTS OF PROHIBITED TRANSACTION CLASS EXEMPTION 83-1 ("PTE 83-1"), THE
EXEMPTION, OR ANY OTHER ISSUED EXEMPTION UNDER ERISA, A PLAN MAY HAVE ENGAGED IN
A PROHIBITED TRANSACTION OR INCUR EXCISE TAXES OR CIVIL PENALTIES IF IT
PURCHASES AND HOLDS CLASS A-R CERTIFICATES. CONSEQUENTLY, TRANSFERS OF THE CLASS
A-R CERTIFICATES WILL NOT BE REGISTERED BY THE TRUSTEE UNLESS THE TRUSTEE
RECEIVES:

     - A REPRESENTATION FROM THE TRANSFEREE OF THE CERTIFICATE, ACCEPTABLE TO
       AND IN FORM AND SUBSTANCE SATISFACTORY TO THE TRUSTEE, THAT THE
       TRANSFEREE IS NOT A PLAN, OR A PERSON ACTING ON BEHALF OF A PLAN OR USING
       A PLAN'S ASSETS TO EFFECT THE TRANSFER;

     - IF THE PURCHASER IS AN INSURANCE COMPANY, A REPRESENTATION THAT THE
       PURCHASER IS AN INSURANCE COMPANY WHICH IS PURCHASING THE CERTIFICATES
       WITH FUNDS CONTAINED IN AN "INSURANCE COMPANY GENERAL ACCOUNT" (AS
       DEFINED IN SECTION V(E) OF PROHIBITED TRANSACTION CLASS EXEMPTION 95-60
       ("PTE 95-60")) AND THAT THE PURCHASE AND HOLDING OF THE CERTIFICATES ARE
       COVERED UNDER SECTIONS I AND III OF PTE 95-60; OR

     - AN OPINION OF COUNSEL SATISFACTORY TO THE TRUSTEE THAT THE PURCHASE AND
       HOLDING OF THE CERTIFICATE BY A PLAN, OR ANY PERSON ACTING ON BEHALF OF A
       PLAN OR USING A PLAN'S ASSETS, WILL NOT RESULT IN THE ASSETS OF THE TRUST
       FUND BEING DEEMED TO BE "PLAN ASSETS" AND SUBJECT TO THE PROHIBITED
       TRANSACTION REQUIREMENTS OF ERISA AND THE CODE AND WILL NOT SUBJECT THE
       TRUSTEE TO ANY OBLIGATION IN ADDITION TO THOSE UNDERTAKEN IN THE POOLING
       AND SERVICING AGREEMENT.

     Prospective Plan investors are encouraged to consult with their legal
advisors concerning the impact of ERISA and the Code, the applicability of the
Exemption and PTE 83-1 described in the prospectus, the possible treatment of
the assets of the trust as "plan assets," and the potential consequences in
their specific circumstances, before making an investment in any of the offered
certificates. Moreover, each Plan fiduciary is encouraged to determine whether,
under the general fiduciary standards of investment prudence and
diversification, an investment in any of the offered 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.

                             METHOD OF DISTRIBUTION

     Subject to the terms and conditions set forth in the underwriting agreement
between the depositor and Countrywide Securities Corporation, an affiliate of
the depositor, the seller and the master servicer ("CSC"), the depositor has
agreed to sell the offered certificates, other than the Class PO and Class X
Certificates, to CSC and CSC has agreed to purchase from the depositor the
senior certificates, other than the Class PO and Class X Certificates, and the
Class M, Class B-1 and Class B-2 Certificates (the "underwritten certificates").
Distribution of the underwritten certificates will be made by CSC from time to
time in negotiated transactions or otherwise at varying prices to be determined
at the time of sale. In connection with the sale of the underwritten
certificates, CSC may be deemed to have received compensation from the depositor
in the form of underwriting discounts.

     The depositor has agreed to indemnify CSC against, or make contributions to
CSC with respect to, liabilities, customarily indemnified against, including
liabilities under the Securities Act of 1933, as amended.

     The Class PO and Class X Certificates may be offered by the seller or the
depositor from time to time directly or through underwriters or agents (either
of which may include CSC) in one or more negotiated transactions, or otherwise,
at varying prices to be determined at the time of sale, in one or more

                                      S-56
<PAGE>   57

separate transactions at prices to be negotiated at the time of each sale. Any
underwriters or agents that participate in the distribution of the Class PO and
Class X Certificates may be deemed to be "underwriters" within the meaning of
the Securities Act of 1933 and any profit on the sale of those Certificates by
them and any discounts, commissions, concessions or other compensation received
by any of them may be deemed to be underwriting discounts and commissions under
the Securities Act.

                                 LEGAL MATTERS

     The validity of the certificates, including their material federal income
tax consequences, will be passed upon for the depositor by Brown & Wood LLP, New
York, New York. Stroock & Stroock & Lavan LLP, New York, New York, will pass
upon certain legal matters on behalf of the underwriter.

                                    RATINGS

     It is a condition to the issuance of the senior certificates that they be
rated AAA by Fitch, Inc. ("Fitch") and Aaa by Moody's Investors Service, Inc.
("Moody's"). It is a condition to the issuance of the Class M, Class B-1 and
Class B-2 Certificates that they be rated at least AA, A, and BBB, respectively,
by Fitch.

     The ratings assigned by Moody's to mortgage pass-through certificates
address the likelihood of the receipt of all distributions on the mortgage loans
by the related certificateholders under the agreements pursuant to which the
certificates are issued. Moody's ratings take into consideration the credit
quality of the related mortgage pool, including any credit support providers,
structural and legal aspects associated with the certificates, and the extent to
which the payment stream on the mortgage pool is adequate to make the payments
required by the certificates. The rating assigned by Moody's to the Class A-R
Certificates only address the return of its Class Certificate Balance and
interest thereon at its Pass-Through Rate.

     The ratings of Fitch on mortgage pass-through certificates address the
likelihood of the receipt by certificateholders of all distributions to which
such certificateholders are entitled. Fitch's rating opinions address the
structural and legal aspects associated with the certificates, including the
nature of the underlying mortgage loans. Fitch's ratings on pass-through
certificates do not represent any assessment of the likelihood or rate of
principal payments and consequently any adverse effect the timing of such
prepayments could have on an investor's anticipated yield. Further, the rating
on the Class X Certificates does not address whether investors will recoup their
initial investment. The rating assigned by Fitch to the Class PO Certificates
only addresses the return of its class Certificate Balance. The rating assigned
by Fitch to the Class A-R Certificates only address the return of its Class
Certificate Balance and interest thereon at its Pass-Through Rate.

     The ratings of the rating agencies do not address the possibility that, as
a result of principal prepayments, certificateholders may receive a lower than
anticipated yield.

     The security ratings assigned to the offered 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 rating agencies.

     The depositor has not requested a rating of the offered certificates by any
rating agency other than the rating agencies; there can be no assurance,
however, as to whether any other rating agency will rate the offered
certificates or, if it does, what rating would be assigned by the other rating
agency. The rating assigned by the other rating agency to the offered
certificates could be lower than the respective ratings assigned by the rating
agencies.

                                      S-57
<PAGE>   58

PROSPECTUS

                                  CWMBS, INC.
                                   DEPOSITOR

                       MORTGAGE PASS-THROUGH CERTIFICATES
                              (ISSUABLE IN SERIES)

PLEASE CAREFULLY
CONSIDER OUR
DISCUSSION OF SOME OF
THE RISKS OF
INVESTING IN THE
CERTIFICATES UNDER
"RISK FACTORS"
BEGINNING ON PAGE 5.

THE CERTIFICATES

CWMBS, Inc. will sell the certificates pursuant to a prospectus supplement. The
certificates will be grouped into one or more series, each having its own
distinct designation. Each series will be issued in one or more classes and each
class will evidence beneficial ownership of a specified portion of future
payments on the assets in the trust fund that the series relates to. A
prospectus supplement for a series will specify all of the terms of the series
and of each of the classes in the series.

OFFERS OF CERTIFICATES

The certificates may be offered through several different methods, including
offerings through underwriters.

                            ------------------------

THE SEC AND STATE SECURITIES REGULATORS HAVE NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

November 13, 2000
THE TRUSTS
Each trust will be established to hold assets in its trust fund transferred to
                       it by CWMBS, Inc. The assets in each trust fund will be
                       specified in the prospectus supplement for the particular
                       trust and will generally consist of:
- first lien mortgage loans secured by one- to four-family residential
  properties or participations in that type of loan,
- mortgage pass-through securities issued or guaranteed by Ginnie Mae, Fannie
  Mae, or Freddie Mac, or
- private mortgage-backed securities backed by first lien mortgage loans secured
  by one- to four-family residential properties or participations in that type
  of loan.
<PAGE>   59

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                      PAGE
                                      ----
<S>                                   <C>
Important Notice About Information
  In This Prospectus and Each
  Accompanying Prospectus
  Supplement........................    4
Risk Factors........................    5
  Limited Source of Payments -- No
     Recourse to Sellers, Depositor
     or Servicer....................    5
  Credit Enhancement May Not Be
     Sufficient To Protect You From
     Losses.........................    6
  Losses on Balloon Payment
     Mortgages Are Borne By You.....    6
  Nature of Mortgages...............    7
  You Could Be Adversely Affected By
     Violations of Environmental
     Laws...........................    9
  Ratings of the Certificates Does
     Not Assure Their Payment.......    9
  Book-Entry Registration...........   10
  Bankruptcy or Insolvency May
     Affect the Timing and Amount of
     Distributions on the
     Certificates...................   11
The Trust Fund......................   13
  The Mortgage Loans -- General.....   14
  Agency Securities.................   16
  Private Mortgage-Backed
     Securities.....................   21
  Substitution of Mortgage Assets...   23
  Available Information.............   23
  Incorporation of Certain Documents
     by Reference...................   23
Use of Proceeds.....................   24
The Depositor.......................   24
Mortgage Loan Program...............   24
  Underwriting Process..............   24
  Qualifications of Sellers.........   25
  Representations by Sellers;
     Repurchases....................   25
Description of the Certificates.....   27
  General...........................   28
  Distributions on Certificates.....   29
  Advances..........................   31
  Reports to Certificateholders.....   32
  Categories of Classes of
     Certificates...................   33
  Indices Applicable to Floating
     Rate and Inverse Floating Rate
     Classes........................   35
  Book-Entry Certificates...........   38
Credit Enhancement..................   40
</TABLE>

<TABLE>
<CAPTION>
                                      PAGE
                                      ----
<S>                                   <C>
  General...........................   40
  Subordination.....................   40
  Mortgage Pool Insurance
     Policies.......................   41
  Special Hazard Insurance
     Policies.......................   42
  Bankruptcy Bonds..................   43
  Reserve Fund......................   43
  Cross Support.....................   44
  Insurance Policies, Surety Bonds
     and Guaranties.................   44
  Over-Collateralization............   44
Yield and Prepayment
  Considerations....................   45
The Pooling and Servicing
  Agreement.........................   46
  Assignment of Mortgage Assets.....   46
  Payments on Mortgage Assets;
     Deposits to Certificate
     Account........................   48
  Collection Procedures.............   50
  Hazard Insurance..................   51
  Realization Upon Defaulted
     Mortgage Loans.................   52
  Servicing and Other Compensation
     and Payment of Expenses........   55
  Evidence as to Compliance.........   56
  List of Certificateholders........   56
  Certain Matters Regarding the
     Master Servicer and the
     Depositor......................   57
  Events of Default.................   57
  Rights Upon Event of Default......   58
  Amendment.........................   59
  Termination; Optional
     Termination....................   60
  The Trustee.......................   60
Certain Legal Aspects of the
  Mortgage Loans....................   60
  General...........................   60
  Foreclosure and Repossession......   61
  Rights of Redemption..............   63
  Anti-Deficiency Legislation and
     Other Limitations on Lenders...   64
  Environmental Risks...............   64
  Due-on-Sale Clauses...............   66
  Prepayment Charges................   66
  Applicability of Usury Laws.......   66
  Soldiers' and Sailors' Civil
     Relief Act.....................   66
Material Federal Income Tax
  Consequences......................   68
  General...........................   68
  Non-REMIC Certificates............   68
</TABLE>

                                        2
<PAGE>   60

<TABLE>
<CAPTION>
                                      PAGE
                                      ----
<S>                                   <C>
  REMIC Certificates................   76
  Prohibited Transactions and Other
     Taxes..........................   89
  Liquidation and Termination.......   90
  Administrative Matters............   90
  Tax-Exempt Investors..............   90
  Non-U.S. Persons..................   90
  Tax-Related Restrictions on
     Transfers of Residual
     Certificates...................   91
</TABLE>

<TABLE>
<CAPTION>
                                      PAGE
                                      ----
<S>                                   <C>
State Tax Considerations............   92
ERISA Considerations................   93
Legal Investment....................   96
Method of Distribution..............   97
Legal Matters.......................   98
Financial Information...............   98
Rating..............................   98
Index to Defined Terms..............   99
</TABLE>

                                        3
<PAGE>   61

             IMPORTANT NOTICE ABOUT INFORMATION IN THIS PROSPECTUS
                  AND EACH ACCOMPANYING PROSPECTUS SUPPLEMENT

     Information about each series of certificates is contained in two separate
documents:

     - this prospectus, which provides general information, some of which may
       not apply to a particular series; and

     - the accompanying prospectus supplement for a particular series, which
       describes the specific terms of the certificates of that series.

The prospectus supplement will contain information about a particular series
that supplements the information contained in this prospectus, and you should
rely on that supplementary information in the prospectus supplement.

     You should rely only on the information in this prospectus and the
accompanying prospectus supplement. We have not authorized anyone to provide you
with information that is different from that contained in this prospectus and
the accompanying prospectus supplement.

                            ------------------------

     If you require additional information, the mailing address of our principal
executive offices is CWMBS, Inc., 4500 Park Granada, Calabasas, California 91302
and the telephone number is (818) 225-3000. For other means of acquiring
additional information about us or a series of securities, see "The Trust
Fund -- Incorporation of Certain Documents by Reference" beginning on page 23.

                                        4
<PAGE>   62

                                  RISK FACTORS

You should carefully consider the following information since it identifies
significant risks associated with an investment in the certificates.

LIMITED SOURCE OF PAYMENTS -- NO
RECOURSE TO SELLERS, DEPOSITOR
OR
SERVICER                           The applicable prospectus supplement may
                                   provide that certificates will be payable
                                   from other trust funds in addition to their
                                   associated trust fund, but if it does not,
                                   they will be payable solely from their
                                   associated trust fund. If the trust fund does
                                   not have sufficient assets to distribute the
                                   full amount due to you as a
                                   certificateholder, your yield will be
                                   impaired, and perhaps even the return of your
                                   principal may be impaired, without your
                                   having recourse to anyone else. Furthermore,
                                   at the times specified in the applicable
                                   prospectus supplement, certain assets of the
                                   trust fund may be released and paid out to
                                   other people, such as the depositor, a
                                   servicer, a credit enhancement provider, or
                                   any other person entitled to payments from
                                   the trust fund. Those assets will no longer
                                   be available to make payments to you. Those
                                   payments are generally made after other
                                   specified payments that may be set forth in
                                   the applicable prospectus supplement have
                                   been made.

                                   You will not have any recourse against the
                                   depositor or any servicer if you do not
                                   receive a required distribution on the
                                   certificates. Nor will you have recourse
                                   against the assets of the trust fund of any
                                   other series of certificates.

                                   The certificates will not represent an
                                   interest in the depositor, any servicer, any
                                   seller to the depositor, or any one else
                                   except the trust fund. The only obligation of
                                   the depositor to a trust fund comes from
                                   certain representations and warranties made
                                   by it about assets transferred to the trust
                                   fund. If these representations and warranties
                                   turn out to be untrue, the depositor may be
                                   required to repurchase some of the
                                   transferred assets. CWMBS, Inc., which is the
                                   depositor, does not have significant assets
                                   and is unlikely to have significant assets in
                                   the future. So if the depositor were required
                                   to repurchase a loan because of a breach of a
                                   representation, its only sources of funds for
                                   the repurchase would be:

                                       - funds obtained from enforcing a
                                         corresponding obligation of a seller or
                                         originator of the loan, or

                                       - funds from a reserve fund or similar
                                         credit enhancement established to pay
                                         for loan repurchases.

                                        5
<PAGE>   63

                                   The only obligations of the master servicer
                                   to a trust fund (other than its master
                                   servicing obligations) comes from certain
                                   representations and warranties made by it in
                                   connection with its loan servicing
                                   activities. If these representations and
                                   warranties turn out to be untrue, the master
                                   servicer may be required to repurchase some
                                   of the loans. However, the master servicer
                                   may not have the financial ability to make
                                   the required repurchase.

                                   The only obligations to a trust fund of a
                                   seller of loans to the depositor comes from
                                   certain representations and warranties made
                                   by it in connection with its sale of the
                                   loans and certain document delivery
                                   requirements. If these representations and
                                   warranties turn out to be untrue, or the
                                   seller fails to deliver required documents,
                                   it may be required to repurchase some of the
                                   loans. However, the seller may not have the
                                   financial ability to make the required
                                   repurchase.

CREDIT ENHANCEMENT MAY NOT BE
SUFFICIENT TO PROTECT YOU FROM
LOSSES                             Credit enhancement is intended to reduce the
                                   effect of loan losses. But credit
                                   enhancements may benefit only some classes of
                                   a series of certificates and the amount of
                                   any credit enhancement will be limited as
                                   described in the applicable prospectus
                                   supplement. Furthermore, the amount of a
                                   credit enhancement may decline over time
                                   pursuant to a schedule or formula or
                                   otherwise, and could be depleted from
                                   payments or for other reasons before the
                                   certificates covered by the credit
                                   enhancement are paid in full. In addition, a
                                   credit enhancement may not cover all
                                   potential sources of loss. For example, a
                                   credit enhancement may or may not cover fraud
                                   or negligence by a loan originator or other
                                   parties. Also, the trustee may be permitted
                                   to reduce, substitute for, or even eliminate
                                   all or a portion of a credit enhancement so
                                   long as the rating agencies that have rated
                                   the certificates at the request of the
                                   depositor indicate that that would not cause
                                   them to change adversely their rating of the
                                   certificates. Consequently,
                                   certificateholders may suffer losses even
                                   though a credit enhancement exists and its
                                   provider does not default.

LOSSES ON BALLOON PAYMENT
MORTGAGES ARE BORNE BY YOU         Some of the underlying loans may not be fully
amortizing over their terms to maturity and, thus, will require substantial
                                   principal payments (that is, balloon
                                   payments) at their stated maturity. Loans
                                   with balloon payments involve a greater
                                   degree of risk than fully amortizing loans
                                   because typically the borrower must be able
                                   to refinance the loan or sell the property to
                                   make the balloon payment at maturity. The
                                   ability of a borrower to do this will depend
                                   on such factors as

                                        6
<PAGE>   64

                                   mortgage rates at the time of sale or
                                   refinancing, the borrower's equity in the
                                   property, the relative strength of the local
                                   housing market, the financial condition of
                                   the borrower, and tax laws. Losses on these
                                   loans that are not otherwise covered by a
                                   credit enhancement will be borne by the
                                   holders of one or more classes of
                                   certificates.

NATURE OF MORTGAGES
  Declines in Property Values
  May
  Adversely Affect You             The value of the properties underlying the
                                   loans held in the trust fund may decline over
                                   time. Among the factors that could adversely
                                   affect the value of the properties are:

                                       - an overall decline in the residential
                                         real estate market in the areas in
                                         which they are located,

                                       - a decline in their general condition
                                         from the failure of borrowers to
                                         maintain their property adequately, and

                                       - natural disasters that are not covered
                                         by insurance, such as earthquakes and
                                         floods.

                                   If property values decline, the actual rates
                                   of delinquencies, foreclosures, and losses on
                                   all underlying loans could be higher than
                                   those currently experienced in the mortgage
                                   lending industry in general. These losses, to
                                   the extent not otherwise covered by a credit
                                   enhancement, will be borne by the holder of
                                   one or more classes of certificates.

  Delays in Liquidation May
   Adversely Affect You            Even if the properties underlying the loans
                                   held in the trust fund provide adequate
                                   security for the loans, substantial delays
                                   could occur before defaulted loans are
                                   liquidated and their proceeds are forwarded
                                   to investors. Property foreclosure actions
                                   are regulated by state statutes and rules and
                                   are subject to many of the delays and
                                   expenses of other lawsuits if defenses or
                                   counterclaims are made, sometimes requiring
                                   several years to complete. Furthermore, in
                                   some states if the proceeds of the
                                   foreclosure are insufficient to repay the
                                   loan, the borrower is not liable for the
                                   deficit. Thus, if a borrower defaults, these
                                   restrictions may impede the trust's ability
                                   to dispose of the property and obtain
                                   sufficient proceeds to repay the loan in
                                   full. In addition, the servicer will be
                                   entitled to deduct from liquidation proceeds
                                   all expenses reasonably incurred in
                                   attempting to recover on the defaulted loan,
                                   including legal fees and costs, real estate
                                   taxes, and property maintenance and
                                   preservation expenses.

                                        7
<PAGE>   65

  Disproportionate Effect of
   Liquidation Expenses May
   Adversely Affect You            Liquidation expenses of defaulted loans
                                   generally do not vary directly with the
                                   outstanding principal balance of the loan at
                                   the time of default. Therefore, if a servicer
                                   takes the same steps for a defaulted loan
                                   having a small remaining principal balance as
                                   it does for a defaulted loan having a large
                                   remaining principal balance, the amount
                                   realized after expenses is smaller as a
                                   percentage of the outstanding principal
                                   balance of the small loan than it is for the
                                   defaulted loan having a large remaining
                                   principal balance.

  Consumer Protection Laws May
   Adversely Affect You            State laws generally regulate interest rates
                                   and other charges, require certain
                                   disclosures, and require licensing of
                                   mortgage loan originators and servicers. In
                                   addition, most states have other laws and
                                   public policies for the protection of
                                   consumers that prohibit unfair and deceptive
                                   practices in the origination, servicing, and
                                   collection of mortgage loans. Depending on
                                   the particular law and the specific facts
                                   involved, violations may limit the ability to
                                   collect all or part of the principal or
                                   interest on the underlying loans held in the
                                   trust fund. In some cases, the borrower may
                                   even be entitled to a refund of amounts
                                   previously paid.

                                   The loans held in the trust fund may also be
                                   subject to certain federal laws, including:

                                       - the Federal Truth in Lending Act and
                                         its regulations, which require
                                         disclosures to the borrowers regarding
                                         the terms of any mortgage loan;

                                       - the Equal Credit Opportunity Act and
                                         its regulations, which prohibit
                                         discrimination in the extension of
                                         credit on the basis of age, race,
                                         color, sex, religion, marital status,
                                         national origin, receipt of public
                                         assistance, or the exercise of any
                                         right under the Consumer Credit
                                         Protection Act; and

                                       - the Fair Credit Reporting Act, which
                                         regulates the use and reporting of
                                         information related to the borrowers
                                         credit experience.

                                   Some violations of these federal laws may
                                   limit the ability to collect the principal or
                                   interest on the loans held in the trust fund,
                                   and in addition could subject the trust fund
                                   to damages and administrative enforcement.
                                   Losses on loans from the application of those
                                   laws that are not otherwise covered by a
                                   credit enhancement will be borne by the
                                   holders of one or more classes of
                                   certificates.

                                        8
<PAGE>   66

YOU COULD BE ADVERSELY AFFECTED
BY
VIOLATIONS OF ENVIRONMENTAL LAWS   Federal, state, and local laws and
                                   regulations impose a wide range of
                                   requirements on activities that may affect
                                   the environment, health, and safety. In
                                   certain circumstances, these laws and
                                   regulations impose obligations on owners or
                                   operators of residential properties such as
                                   those that secure the loans held in the trust
                                   fund. Failure to comply with these laws and
                                   regulations can result in fines and penalties
                                   that could be assessed against the trust as
                                   owner of the related property.

                                   In some states, a lien on the property due to
                                   contamination has priority over the lien of
                                   an existing mortgage. Also, a mortgage lender
                                   may be held liable as an "owner" or
                                   "operator" for costs associated with the
                                   release of petroleum from an underground
                                   storage tank under certain circumstances. If
                                   the trust is considered the owner or operator
                                   of a property, it will suffer losses as a
                                   result of any liability imposed for
                                   environmental hazards on the property.

RATINGS OF THE CERTIFICATES DOES
NOT ASSURE THEIR PAYMENT           Any class of certificates issued under this
                                   prospectus and the accompanying prospectus
                                   supplement will be rated in one of the four
                                   highest rating categories of at least one
                                   nationally recognized rating agency. A rating
                                   is based on the adequacy of the value of the
                                   trust assets and any credit enhancement for
                                   that class, and reflects the rating agency's
                                   assessment of how likely it is that holders
                                   of the class of certificates will receive the
                                   payments to which they are entitled. A rating
                                   does not constitute an assessment of how
                                   likely it is that principal prepayments on
                                   the underlying loans will be made, the degree
                                   to which the rate of prepayments might differ
                                   from that originally anticipated, or the
                                   likelihood that the certificates will be
                                   redeemed early. A rating is not a
                                   recommendation to purchase, hold, or sell
                                   certificates because it does not address the
                                   market price of the certificates or the
                                   suitability of the certificates for any
                                   particular investor.

                                   A rating may not remain in effect for any
                                   given period of time and the rating agency
                                   could lower or withdraw the rating entirely
                                   in the future. For example, the rating agency
                                   could lower or withdraw its rating due to:

                                       - a decrease in the adequacy of the value
                                         of the trust assets or any related
                                         credit enhancement,

                                       - an adverse change in the financial or
                                         other condition of a credit enhancement
                                         provider, or

                                       - a change in the rating of the credit
                                         enhancement provider's long-term debt.

                                        9
<PAGE>   67

                                   The amount, type, and nature of credit
                                   enhancement established for a class of
                                   certificates will be determined on the basis
                                   of criteria established by each rating agency
                                   rating classes of the certificates. These
                                   criteria are sometimes based upon an
                                   actuarial analysis of the behavior of similar
                                   loans in a larger group. That analysis is
                                   often the basis upon which each rating agency
                                   determines the amount of credit enhancement
                                   required for a class. The historical data
                                   supporting any actuarial analysis may not
                                   accurately reflect future experience, and the
                                   data derived from a large pool of similar
                                   loans may not accurately predict the
                                   delinquency, foreclosure, or loss experience
                                   of any particular pool of mortgage loans.
                                   Mortgaged properties may not retain their
                                   values. If residential real estate markets
                                   experience an overall decline in property
                                   values such that the outstanding principal
                                   balances of the loans held in a particular
                                   trust fund and any secondary financing on the
                                   related mortgaged properties become equal to
                                   or greater than the value of the mortgaged
                                   properties, the rates of delinquencies,
                                   foreclosures, and losses could be higher than
                                   those now generally experienced in the
                                   mortgage lending industry. In addition,
                                   adverse economic conditions may affect timely
                                   payment by mortgagors on their loans whether
                                   or not the conditions affect real property
                                   values and, accordingly, the rates of
                                   delinquencies, foreclosures, and losses in
                                   any trust fund. Losses from this that are not
                                   covered by a credit enhancement will be
                                   borne, at least in part, by the holders of
                                   one or more classes of certificates.

BOOK-ENTRY REGISTRATION
  Limit on Liquidity               Certificates issued in book-entry form may
                                   have only limited liquidity in the resale
                                   market, since investors may be unwilling to
                                   purchase certificates for which they cannot
                                   obtain physical instruments.

  Limit on Ability to Transfer
orPledge                           Transactions in book-entry certificates can
                                   be effected only through The Depository Trust
                                   Company, its participating organizations, its
                                   indirect participants, and certain banks.
                                   Therefore, your ability to transfer or pledge
                                   certificates issued in book-entry form may be
                                   limited.

  Delays in Distributions          You may experience some delay in the receipt
                                   of distributions on book-entry certificates
                                   since the distributions will be forwarded by
                                   the trustee to The Depository Trust Company
                                   for it to credit the accounts of its
                                   participants. In turn, these participants
                                   will then credit the distributions to your
                                   account either directly or indirectly through
                                   indirect participants.

                                       10
<PAGE>   68

BANKRUPTCY OR INSOLVENCY MAY
AFFECT
THE TIMING AND AMOUNT OF
DISTRIBUTIONS ON THE
CERTIFICATES                       The seller and the depositor will treat the
                                   transfer of the loans held in the trust fund
                                   by the seller to the depositor as a sale for
                                   accounting purposes. The depositor and the
                                   trust fund will treat the transfer of the
                                   loans from the depositor to the trust fund as
                                   a sale for accounting purposes. If these
                                   characterizations are correct, then if the
                                   seller were to become bankrupt, the loans
                                   would not be part of the seller's bankruptcy
                                   estate and would not be available to the
                                   seller's creditors. On the other hand, if the
                                   seller becomes bankrupt, its bankruptcy
                                   trustee or one of its creditors may attempt
                                   to recharacterize the sale of the loans as a
                                   borrowing by the seller, secured by a pledge
                                   of the loans. Presenting this position to a
                                   bankruptcy court could prevent timely
                                   payments on the certificates and even reduce
                                   the payments on the certificates. Similarly,
                                   if the characterizations of the transfers as
                                   sales are correct, then if the depositor were
                                   to become bankrupt, the loans would not be
                                   part of the depositor's bankruptcy estate and
                                   would not be available to the depositor's
                                   creditors. On the other hand, if the
                                   depositor becomes bankrupt, its bankruptcy
                                   trustee or one of its creditors may attempt
                                   to recharacterize the sale of the loans as a
                                   borrowing by the depositor, secured by a
                                   pledge of the loans. Presenting this position
                                   to a bankruptcy court could prevent timely
                                   payments on the certificates and even reduce
                                   the payments on the certificates.

                                   If the master servicer becomes bankrupt, the
                                   bankruptcy trustee may have the power to
                                   prevent the appointment of a successor master
                                   servicer. The period during which cash
                                   collections may be commingled with the master
                                   servicer's own funds before each distribution
                                   date for certificates will be specified in
                                   the applicable prospectus supplement. If the
                                   master servicer becomes bankrupt and cash
                                   collections have been commingled with the
                                   master servicer's own funds for at least ten
                                   days, the trust fund will likely not have a
                                   perfected interest in those collections. In
                                   this case the trust might be an unsecured
                                   creditor of the master servicer as to the
                                   commingled funds and could recover only its
                                   share as a general creditor, which might be
                                   nothing. Collections commingled less than ten
                                   days but still in an account of the master
                                   servicer might also be included in the
                                   bankruptcy estate of the master servicer even
                                   though the trust may have a perfected
                                   security interest in them. Their inclusion in
                                   the bankruptcy estate of the master servicer
                                   may result in delays in payment and failure
                                   to pay amounts due on the certificates.

                                       11
<PAGE>   69

                                   Federal and state statutory provisions
                                   affording protection or relief to distressed
                                   borrowers may affect the ability of the
                                   secured mortgage lender to realize upon its
                                   security in other situations as well. For
                                   example, in a proceeding under the federal
                                   Bankruptcy Code, a lender may not foreclose
                                   on a mortgaged property without the
                                   permission of the bankruptcy court. And in
                                   certain instances a bankruptcy court may
                                   allow a borrower to reduce the monthly
                                   payments, change the rate of interest, and
                                   alter the mortgage loan repayment schedule
                                   for under collateralized mortgage loans. The
                                   effect of these types of proceedings can be
                                   to cause delays in receiving payments on the
                                   loans underlying certificates and even to
                                   reduce the aggregate amount of payments on
                                   the loans underlying certificates.

                                   Certain capitalized terms are used in this
                                   prospectus to assist you in understanding the
                                   terms of the certificates. The capitalized
                                   terms used in this prospectus are defined on
                                   the pages indicated under the caption "Index
                                   to Defined Terms" on page 99.

                                       12
<PAGE>   70

                                THE TRUST FUND*

     This prospectus relates to Mortgage Pass-Through Certificates, which may be
sold from time to time in one or more series by the depositor, CWMBS, Inc., on
terms determined at the time of sale and described in this prospectus and the
related prospectus supplement. Each series will be issued under a separate
pooling and servicing agreement to be entered into with respect to each series.
The certificates of a series will evidence beneficial ownership of a trust fund.
The trust fund for a series of certificates will include certain mortgage
related assets (the "Mortgage Assets") consisting of

     - a pool of first lien mortgage loans (or participation interests in them)
       secured by one- to four-family residential properties,

     - mortgage pass-through securities (the "Agency Securities") issued or
       guaranteed by Ginnie Mae, Fannie Mae or Freddie Mac or

     - other mortgage pass-through certificates or collateralized mortgage
       obligations (the "Private Mortgage-Backed Securities") evidencing an
       interest in, or secured by, mortgage loans of the type that would
       otherwise be eligible to be mortgage loans.

The Mortgage Assets will be acquired by the depositor, either directly or
indirectly, from one or more institutions, which may be affiliates of the
depositor, and conveyed by the depositor to the related trust fund. The trustee
for each series of certificates will be specified in the related prospectus
supplement. See "The Pooling and Servicing Agreement" for a description of the
trustee's rights and obligations. The entity or entities named as master
servicer in the related prospectus supplement, which may be an affiliate of the
depositor. See "The Pooling and Servicing Agreement -- Certain Matters Regarding
the Master Servicer and the Depositor." The mortgage loans will be secured by
first mortgage liens on one- to four-family residential properties and, if so
specified in the related prospectus supplement, may include cooperative
apartment loans secured by security interests in shares issued by private,
nonprofit, cooperative housing corporations and in the related proprietary
leases or occupancy agreements granting exclusive rights to occupy specific
dwelling units in the cooperatives' buildings. In addition, the Mortgage Assets
of the related trust fund may include mortgage participation certificates
evidencing interests in mortgage loans. The mortgage loans may be conventional
loans (i.e., loans that are not insured or guaranteed by any governmental
agency), insured by the FHA or partially guaranteed by the VA as specified in
the related prospectus supplement. All or a portion of the mortgage loans in a
mortgage pool may be insured by FHA insurance and may be partially guaranteed by
the VA.

     The certificates will be entitled to payment from the assets of the related
trust fund or other assets pledged for the benefit of the holders of the
certificates as specified in the related prospectus supplement and will not be
entitled to payments in respect of the assets of any other trust fund
established by the depositor. The applicable prospectus supplement may specify
the Mortgage Assets that a trust fund will consist of, but if it does not, the
Mortgage Assets of any trust fund will consist of mortgage loans, Agency
Securities or Private Mortgage-Backed Securities but not a combination of them.
Mortgage loans acquired by the depositor will have been originated in accordance
with the underwriting criteria specified below under "Mortgage Loan
Program -- Underwriting Standards" or as otherwise described in a related
prospectus supplement.

     The following is a brief description of the Mortgage Assets expected to be
included in the trust funds. If specific information about the Mortgage Assets
is not known at the time the related series of certificates initially is
offered, more general information of the nature described below will be provided
in the related

---------------

* Whenever the terms mortgage pool and certificates are used in this prospectus,
  those terms will be considered to apply, unless the context indicates
  otherwise, to one specific mortgage pool and the certificates representing
  certain undivided interests in a single trust fund consisting primarily of the
  Mortgage Assets in the mortgage pool. Similarly, the term pass-through rate
  will refer to the pass- through rate borne by the certificate of one specific
  series and the term trust fund will refer to one specific trust fund.
                                       13
<PAGE>   71

prospectus supplement, and specific information will be set forth in a report on
Form 8-K to be filed with the SEC within fifteen days after the initial issuance
of the certificates. A maximum of 5% of the Mortgage Assets as they will be
constituted at the time that the applicable detailed description of Mortgage
Assets is filed will deviate in any material respect from the Mortgage Asset
pool characteristics described in the related prospectus supplement, other than
the aggregate number or amount of mortgage loans. A schedule of the Mortgage
Assets relating to the series will be attached to the pooling and servicing
agreement delivered to the trustee upon delivery of the certificates.

THE MORTGAGE LOANS -- GENERAL

     The real property that secures repayment of the mortgage loans is referred
to collectively as mortgaged properties. The mortgaged properties will be
located in any one of the fifty states, the District of Columbia, Guam, Puerto
Rico or any other territory of the United States. Mortgage loans with certain
Loan-to-Value Ratios or certain principal balances or both may be covered wholly
or partially by primary mortgage guaranty insurance policies. The existence,
extent and duration of coverage will be described in the applicable prospectus
supplement.

     The applicable prospectus supplement may specify the day on which monthly
payments on the mortgage loans in a mortgage pool will be due, but if it does
not, all of the mortgage loans in a mortgage pool will have monthly payments due
on the first day of each month. The payment terms of the mortgage loans to be
included in a trust fund will be described in the related prospectus supplement
and may include any of the following features or combination thereof or other
features described in the related prospectus supplement:

     - Interest may be payable at a fixed rate, a rate adjustable from time to
       time in relation to an index (which will be specified in the related
       prospectus supplement), a rate that is fixed for a period of time or
       under certain circumstances and is followed by an adjustable rate, a rate
       that otherwise varies from time to time, or a rate that is convertible
       from an adjustable rate to a fixed rate. Changes to an adjustable rate
       may be subject to periodic limitations, maximum rates, minimum rates or a
       combination of the limitations. Accrued interest may be deferred and
       added to the principal of a loan for the periods and under the
       circumstances as may be specified in the related prospectus supplement.

     - Principal may be payable on a level debt service basis to fully amortize
       the mortgage loan over its term, may be calculated on the basis of an
       assumed amortization schedule that is significantly longer than the
       original term to maturity or on an interest rate that is different from
       the interest rate specified in its mortgage note or may not be amortized
       during all or a portion of the original term. Payment of all or a
       substantial portion of the principal may be due on maturity, called
       balloon payments. Principal may include interest that has been deferred
       and added to the principal balance of the mortgage loan.

     - Monthly payments of principal and interest may be fixed for the life of
       the mortgage loan, may increase over a specified period of time or may
       change from period to period. The terms of a mortgage loan may include
       limits on periodic increases or decreases in the amount of monthly
       payments and may include maximum or minimum amounts of monthly payments.

     - The mortgage loans generally may be prepaid at any time without the
       payment of any prepayment fee. If so specified in the related prospectus
       supplement, some prepayments of principal may be subject to a prepayment
       fee, which may be fixed for the life of the mortgage loan or may decline
       over time, and may be prohibited for the life of the mortgage loan or for
       certain periods, which are called lockout periods. Certain mortgage loans
       may permit prepayments after expiration of the applicable lockout period
       and may require the payment of a prepayment fee in connection with any
       subsequent prepayment. Other mortgage loans may permit prepayments
       without payment of a fee unless the prepayment occurs during specified
       time periods. The loans may include "due-on-sale" clauses that permit the
       mortgagee to demand payment of the entire mortgage loan in connection

                                       14
<PAGE>   72

       with the sale or certain transfers of the related mortgaged property.
       Other mortgage loans may be assumable by persons meeting the then
       applicable underwriting standards of the seller.

     A trust fund may contain buydown loans that include provisions whereby a
third party partially subsidizes the monthly payments of the obligors on the
mortgage loans during the early years of the mortgage loans, the difference to
be made up from a buydown fund contributed by the third party at the time of
origination of the mortgage loan. A buydown fund will be in an amount equal
either to the discounted value or full aggregate amount of future payment
subsidies. Thereafter, buydown funds are applied to the applicable mortgage loan
upon receipt by the master servicer of the mortgagor's portion of the monthly
payment on the mortgage loan. The master servicer administers the buydown fund
to ensure that the monthly allocation from the buydown fund combined with the
monthly payment received from the mortgagor equals the scheduled monthly payment
on the applicable mortgage loan. The underlying assumption of buydown plans is
that the income of the mortgagor will increase during the buydown period as a
result of normal increases in compensation and inflation, so that the mortgagor
will be able to meet the full mortgage payments at the end of the buydown
period. To the extent that this assumption as to increased income is not
fulfilled, the possibility of defaults on buydown loans is increased. The
related prospectus supplement will contain information with respect to any
Buydown Loan concerning limitations on the interest rate paid by the mortgagor
initially, on annual increases in the interest rate and on the length of the
buydown period.

     Each prospectus supplement will contain information, as of the date of the
prospectus supplement and to the extent then specifically known to the
depositor, with respect to the mortgage loans contained in the related mortgage
pool, including

     - the aggregate outstanding principal balance and the average outstanding
       principal balance of the mortgage loans as of the first day of the month
       of issuance of the related series of certificates or another date
       specified in the related prospectus supplement called a cut-off date,

     - the type of property securing the mortgage loans (e.g., separate
       residential properties, individual units in condominium apartment
       buildings or in buildings owned by cooperatives, vacation and second
       homes),

     - the original terms to maturity of the mortgage loans,

     - the largest principal balance and the smallest principal balance of any
       of the mortgage loans,

     - the earliest origination date and latest maturity date of any of the
       mortgage loans,

     - the aggregate principal balance of mortgage loans having Loan-to-Value
       Ratios at origination exceeding 80%,

     - the maximum and minimum per annum mortgage rates and

     - the geographical distribution of the mortgage loans. If specific
       information respecting the mortgage loans is not known to the depositor
       at the time the related certificates are initially offered, more general
       information of the nature described above will be provided in the
       detailed description of Mortgage Assets.

     The "Loan-to-Value Ratio" of a mortgage loan at any given time is the
fraction, expressed as a percentage, the numerator of which is the original
principal balance of the related mortgage loan and the denominator of which is
the collateral value of the related mortgaged property. The applicable
prospectus supplement may specify how the collateral value of a mortgaged
property will be calculated, but if it does not, the collateral value of a
mortgaged property is the lesser of the sales price for the property and the
appraised value determined in an appraisal obtained by the originator at
origination of the mortgage loan.

     No assurance can be given that values of the mortgaged properties have
remained or will remain at their levels on the dates of origination of the
related mortgage loans. If the residential real estate market should experience
an overall decline in property values such that the outstanding principal
balances of the mortgage loans, and any secondary financing on the mortgaged
properties, in a particular mortgage pool
                                       15
<PAGE>   73

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 now generally experienced in the mortgage lending industry. In addition,
adverse economic conditions and other factors (which may or may not affect real
property values) may affect the timely payment by mortgagors of scheduled
payments of principal and interest on the mortgage loans and, accordingly, the
actual rates of delinquencies, foreclosures and losses with respect to any
mortgage pool. To the extent that the losses are not covered by subordination
provisions or alternative arrangements, the losses will be borne, at least in
part, by the holders of the certificates of the related series.

     The depositor will cause the mortgage loans comprising each mortgage pool
to be assigned to the trustee named in the related prospectus supplement for the
benefit of the certificateholders of the related series. The master servicer
named in the related prospectus supplement will service the mortgage loans,
either directly or through sub-servicers, pursuant to the pooling and servicing
agreement, and will receive a fee for its services. See "Mortgage Loan Program"
and "The Pooling and Servicing Agreement." With respect to mortgage loans
serviced by the master servicer through a sub-servicer, the master servicer will
remain liable for its servicing obligations under the related pooling and
servicing agreement as if the master servicer alone were servicing the mortgage
loans.

     The applicable prospectus supplement may provide for additional obligations
of the depositor, but if it does not, the only obligations of the depositor with
respect to a series of certificates will be to obtain certain representations
and warranties from the sellers and to assign to the trustee for the series of
certificates the depositor's rights with respect to the representations and
warranties. See "The Pooling and Servicing Agreement -- Assignment of Mortgage
Assets." The obligations of the master servicer with respect to the mortgage
loans will consist principally of its contractual servicing obligations under
the related pooling and servicing agreement (including its obligation to enforce
the obligations of the sub-servicers or sellers, or both, as more fully
described under "Mortgage Loan Program -- Representations by Sellers;
Repurchases" and its obligation to make cash advances upon delinquencies in
payments on or with respect to the mortgage loans in the amounts described under
"Description of the Certificates -- Advances." The obligations of the master
servicer to make advances may be subject to limitations, to the extent provided
in this prospectus and in the related prospectus supplement. The master servicer
may also be a seller in which case a breach of its obligations in one capacity
will not constitute a breach of its obligations in the other capacity.

     The mortgage loans will consist of mortgage loans, deeds of trust or
participations or other beneficial interests therein, secured by first liens on
one- to four-family residential properties and, if so specified in the related
prospectus supplement, may include cooperative apartment loans secured by
security interests in shares issued by private, non-profit, cooperative housing
corporations and in the related proprietary leases or occupancy agreements
granting exclusive rights to occupy specific dwelling units in the cooperatives'
buildings. In addition, Mortgage Assets of the related trust fund may include
mortgage participation certificates evidencing interests in mortgage loans.
These loans may be conventional loans (i.e., loans that are not insured or
guaranteed by any governmental agency) or loans insured by the FHA or partially
guaranteed by the VA, as specified in the related prospectus supplement. The
mortgaged properties relating to mortgage loans will consist of detached or
semi-detached one-family dwelling units, two- to four-family dwelling units,
townhouses, rowhouses, individual condominium units, individual units in planned
unit developments and certain other dwelling units. The mortgaged properties may
include vacation and second homes, investment properties and leasehold
interests. In the case of leasehold interests, the applicable prospectus
supplement may specify that the term of the leasehold may be less than five
years beyond the scheduled maturity of the mortgage loan, but if it does not,
the term of the leasehold will exceed the scheduled maturity of the mortgage
loan by at least five years.

AGENCY SECURITIES

     Government National Mortgage Association. Ginnie Mae is a wholly-owned
corporate instrumentality of the United States with the United States Department
of Housing and Urban Development. Section 306(g) of Title II of the National
Housing Act of 1934, as amended, authorizes Ginnie Mae to
                                       16
<PAGE>   74

guarantee the timely payment of the principal of and interest on certificates
that represent an interest in a pool of mortgage loans insured by the FHA under
the National Housing Act of 1934 or Title V of the Housing Act of 1949, or
partially guaranteed by the VA under the Servicemen's Readjustment Act of 1944,
as amended, or Chapter 37 of Title 38, United States Code.

     Section 306(g) of the National Housing Act of 1934 provides that "the full
faith and credit of the United States is pledged to the payment of all amounts
which may be required to be paid under any guaranty under this subsection." In
order to meet its obligations under that guaranty, Ginnie Mae may, under Section
306(d) of the National Housing Act of 1934, borrow from the United States
Treasury in an unlimited amount which is at any time sufficient to enable Ginnie
Mae to perform its obligations under its guarantee.

     Ginnie Mae Certificates. Each Ginnie Mae certificate held in a trust fund
will be a "fully modified pass-through" mortgage backed certificate issued and
serviced by a Ginnie Mae issuer approved by Ginnie Mae or by Fannie Mae as a
seller-servicer of FHA loans or VA loans. The Ginnie Mae certificates may be
issued under either the Ginnie Mae I program or the Ginnie Mae II program. The
mortgage loans underlying the Ginnie Mae certificates will consist of FHA loans
or VA loans. Each mortgage loan is secured by a one-to four-family or
multifamily residential property. Ginnie Mae will approve the issuance of each
Ginnie Mae certificate in accordance with a guaranty agreement between Ginnie
Mae and the Ginnie Mae issuer. Pursuant to its guaranty agreement, a Ginnie Mae
issuer will be required to advance its own funds in order to make timely
payments of all amounts due on each Ginnie Mae certificate if the payments
received by the Ginnie Mae issuer on the FHA loans or VA loans underlying each
Ginnie Mae certificate are less than the amounts due on each Ginnie Mae
certificate.

     The full and timely payment of principal of and interest on each Ginnie Mae
certificate will be guaranteed by Ginnie Mae, which obligation is backed by the
full faith and credit of the United States. Each Ginnie Mae certificate will
have an original maturity of not more than 30 years (but may have original
maturities of substantially less than 30 years). Each Ginnie Mae certificate
will be based on and backed by a pool of FHA loans or VA loans secured by one to
four-family residential properties and will provide for the payment by or on
behalf of the Ginnie Mae issuer to the registered holder of the Ginnie Mae
certificate of scheduled monthly payments of principal and interest equal to the
registered holder's proportionate interest in the aggregate amount of the
monthly principal and interest payment on each FHA loan or VA loan underlying
the Ginnie Mae certificate, less the applicable servicing and guaranty fee,
which together equal the difference between the interest on the FHA loan or VA
loan and the pass-through rate on the Ginnie Mae certificate. In addition, each
payment will include proportionate pass-through payments of any prepayments of
principal on the FHA loans or VA loans underlying the Ginnie Mae certificate and
liquidation proceeds upon a foreclosure or other disposition of the FHA loans or
VA loans.

     If a Ginnie Mae issuer is unable to make the payments on a Ginnie Mae
certificate as it becomes due, it must promptly notify Ginnie Mae and request
Ginnie Mae to make the payment. Upon notification and request, Ginnie Mae will
make the payments directly to the registered holder of the Ginnie Mae
certificate. If no payment is made by a Ginnie Mae issuer and the Ginnie Mae
issuer fails to notify and request Ginnie Mae to make the payment, the holder of
the Ginnie Mae certificate will have recourse only against Ginnie Mae to obtain
the payment. The trustee or its nominee, as registered holder of the Ginnie Mae
certificates held in a trust fund, will have the right to proceed directly
against Ginnie Mae under the terms of the guaranty agreements relating to the
Ginnie Mae certificates for any amounts that are not paid when due.

     All mortgage loans underlying a particular Ginnie Mae I certificate must
have the same interest rate over the term of the loan, except in pools of
mortgage loans secured by manufactured homes. The interest rate on the Ginnie
Mae I certificate will equal the interest rate on the mortgage loans included in
the pool of mortgage loans underlying the Ginnie Mae I certificate, less
one-half percentage point per annum of the unpaid principal balance of the
mortgage loans.

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<PAGE>   75

     Mortgage loans underlying a particular Ginnie Mae II certificate may have
per annum interest rates that vary from each other by up to one percentage
point. The interest rate on each Ginnie Mae II certificate will be between one
half percentage point and one and one-half percentage points lower than the
highest interest rate on the mortgage loans included in the pool of mortgage
loans underlying the Ginnie Mae II certificate, except for pools of mortgage
loans secured by manufactured homes.

     Regular monthly installment payments on each Ginnie Mae certificate held in
a trust fund will be comprised of interest due as specified on the Ginnie Mae
certificate plus the scheduled principal payments on the FHA loans or VA loans
underlying the Ginnie Mae certificate due on the first day of the month in which
the scheduled monthly installments on the Ginnie Mae certificate are due. The
regular monthly installments on each Ginnie Mae certificate are required to be
paid to the trustee as registered holder by the 15th day of each month in the
case of a Ginnie Mae I certificate and are required to be mailed to the trustee
by the 20th day of each month in the case of a Ginnie Mae II certificate. Any
principal prepayments on any FHA loans or VA loans underlying a Ginnie Mae
certificate held in a trust fund or any other early recovery of principal on the
loans will be passed through to the trustee as the registered holder of the
Ginnie Mae certificate.

     Ginnie Mae certificates may be backed by graduated payment mortgage loans
or by buydown loans for which funds will have been provided (and deposited into
escrow accounts) for application to the payment of a portion of the borrowers'
monthly payments during the early years of the mortgage loan. Payments due the
registered holders of Ginnie Mae certificates backed by pools containing buydown
loans will be computed in the same manner as payments derived from other Ginnie
Mae certificates and will include amounts to be collected from both the borrower
and the related escrow account. The graduated payment mortgage loans will
provide for graduated interest payments that, during the early years of the
mortgage loans, will be less than the amount of stated interest on the mortgage
loans. The interest not so paid will be added to the principal of the graduated
payment mortgage loans and, together with interest on them, will be paid in
subsequent years. The obligations of Ginnie Mae and of a Ginnie Mae issuer will
be the same irrespective of whether the Ginnie Mae certificates are backed by
graduated payment mortgage loans or buydown loans. No statistics comparable to
the FHA's prepayment experience on level payment, non-buydown mortgage loans are
available for graduated payment or buydown loans. Ginnie Mae certificates
related to a series of certificates may be held in book-entry form.

     The Ginnie Mae certificates included in a trust fund, and the related
underlying mortgage loans, may have characteristics and terms different from
those described above. Any different characteristics and terms will be described
in the related prospectus supplement.

     Federal Home Loan Mortgage Corporation. Freddie Mac is a corporate
instrumentality of the United States created pursuant to Title III of the
Emergency Home Finance Act of 1970, as amended. The common stock of Freddie Mac
is owned by the Federal Home Loan Banks and its preferred stock is owned by
stockholders of the Federal Home Loan Banks. Freddie Mac was established
primarily to increase the availability of mortgage credit to finance urgently
needed housing. It seeks to provide an enhanced degree of liquidity for
residential mortgage investments primarily by assisting in the development of
secondary markets for conventional mortgages. The principal activity of Freddie
Mac currently consists of the purchase of first lien conventional mortgage loans
or participation interests in mortgage loans and the sale of the mortgage loans
or participations so purchased in the form of mortgage securities, primarily
mortgage participation certificates issued and either guaranteed as to timely
payment of interest or guaranteed as to timely payment of interest and ultimate
payment of principal by Freddie Mac. Freddie Mac is confined to purchasing, so
far as practicable, mortgage loans that it deems to be of such quality, type and
class as to meet generally the purchase standards imposed by private
institutional mortgage investors.

     Freddie Mac Certificates. Each Freddie Mac certificate represents an
undivided interest in a pool of mortgage loans that may consist of first lien
conventional loans, FHA loans or VA loans. Freddie Mac certificates are sold
under the terms of a Mortgage Participation Certificate Agreement. A Freddie Mac
certificate may be issued under either Freddie Mac's Cash Program or Guarantor
Program.

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<PAGE>   76

     Mortgage loans underlying the Freddie Mac certificates held by a trust fund
will consist of mortgage loans with original terms to maturity of between 10 and
40 years. Each mortgage loan must meet the applicable standards set forth in the
Emergency Home Finance Act of 1970. A Freddie Mac certificate group may include
whole loans, participation interests in whole loans and undivided interests in
whole loans and participations comprising another Freddie Mac certificate group.
Under the Guarantor Program, a Freddie Mac certificate group may include only
whole loans or participation interests in whole loans.

     Freddie Mac guarantees to each registered holder of a Freddie Mac
certificate the timely payment of interest on the underlying mortgage loans to
the extent of the applicable certificate interest rate on the registered
holder's pro rata share of the unpaid principal balance outstanding on the
underlying mortgage loans in the Freddie Mac certificate group represented by
the Freddie Mac certificate, whether or not received. Freddie Mac also
guarantees to each registered holder of a Freddie Mac certificate collection by
the holder of all principal on the underlying mortgage loans, without any offset
or deduction, to the extent of the holder's pro rata share of it, but does not,
except if and to the extent specified in the related prospectus supplement for a
series of certificates, guarantee the timely payment of scheduled principal.
Under Freddie Mac's Gold PC Program, Freddie Mac guarantees the timely payment
of principal based on the difference between the pool factor published in the
month preceding the month of distribution and the pool factor published in the
month of distribution. Pursuant to its guaranties, Freddie Mac indemnifies
holders of Freddie Mac certificates against any diminution in principal from
charges for property repairs, maintenance and foreclosure. Freddie Mac may remit
the amount due on account of its guaranty of collection of principal at any time
after default on an underlying mortgage loan, but not later than 30 days
following foreclosure sale, 30 days following payment of the claim by any
mortgage insurer or 30 days following the expiration of any right of redemption,
whichever occurs later, but in any event no later than one year after demand has
been made upon the mortgagor for accelerated payment of principal. In taking
actions regarding the collection of principal after default on the mortgage
loans underlying Freddie Mac certificates, including the timing of demand for
acceleration, Freddie Mac reserves the right to exercise its judgment with
respect to the mortgage loans in the same manner as for mortgage loans that it
has purchased but not sold. The length of time necessary for Freddie Mac to
determine that a mortgage loan should be accelerated varies with the particular
circumstances of each mortgagor, and Freddie Mac has not adopted standards which
require that the demand be made within any specified period.

     Freddie Mac certificates are not guaranteed by the United States or by any
Federal Home Loan Bank and do not constitute debts or obligations of the United
States or any Federal Home Loan Bank. The obligations of Freddie Mac under its
guaranty are obligations solely of Freddie Mac and are not backed by, or
entitled to, the full faith and credit of the United States. If Freddie Mac were
unable to satisfy its obligations, distributions to holders of Freddie Mac
certificates would consist solely of payments and other recoveries on the
underlying mortgage loans and, accordingly, monthly distributions to holders of
Freddie Mac certificates would be affected by delinquent payments and defaults
on the mortgage loans.

     Registered holders of Freddie Mac certificates are entitled to receive
their monthly pro rata share of all principal payments on the underlying
mortgage loans received by Freddie Mac, including any scheduled principal
payments, full and partial prepayments of principal and principal received by
Freddie Mac by virtue of condemnation, insurance, liquidation or foreclosure,
and repurchases of the mortgage loans by Freddie Mac or their seller. Freddie
Mac is required to remit each registered Freddie Mac certificateholder's pro
rata share of principal payments on the underlying mortgage loans, interest at
the Freddie Mac pass-through rate and any other sums such as prepayment fees,
within 60 days of the date on which the payments are deemed to have been
received by Freddie Mac.

     Under Freddie Mac's Cash Program, there is no limitation on the amount by
which interest rates on the mortgage loans underlying a Freddie Mac certificate
may exceed the pass-through rate on the Freddie Mac certificate. Under that
program, Freddie Mac purchases groups of whole mortgage loans from sellers at
specified percentages of their unpaid principal balances, adjusted for accrued
or prepaid interest, which when applied to the interest rate of the mortgage
loans and participations purchased results in the yield required by Freddie Mac.
The required yield, which includes a minimum servicing fee retained by the
servicer, is calculated using the outstanding principal balance. The range of
interest rates on the mortgage
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<PAGE>   77

loans and participations in a Freddie Mac certificate group under the Cash
Program will vary since mortgage loans and participations are purchased and
assigned to a Freddie Mac certificate group based upon their yield to Freddie
Mac rather than on the interest rate on the underlying mortgage loans. Under
Freddie Mac's Guarantor Program, the pass-through rate on a Freddie Mac
certificate is established based upon the lowest interest rate on the underlying
mortgage loans, minus a minimum servicing fee and the amount of Freddie Mac's
management and guaranty income as agreed upon between the seller and Freddie
Mac.

     Freddie Mac certificates duly presented for registration of ownership on or
before the last business day of a month are registered effective as of the first
day of the month. The first remittance to a registered holder of a Freddie Mac
certificate will be distributed so as to be received normally by the 15th day of
the second month following the month in which the purchaser became a registered
holder of the Freddie Mac certificate. Thereafter, the remittance will be
distributed monthly to the registered holder so as to be received normally by
the 15th day of each month. The Federal Reserve Bank of New York maintains
book-entry accounts for Freddie Mac certificates sold by Freddie Mac on or after
January 2, 1985, and makes payments of principal and interest each month to
their registered holders in accordance with the holders' instructions.

     Federal National Mortgage Association. Fannie Mae is a federally chartered
and privately owned corporation organized and existing under the Federal
National Mortgage Association Charter Act, as amended. Fannie Mae was originally
established in 1938 as a United States government agency to provide supplemental
liquidity to the mortgage market and was transformed into a stockholder owned
and privately-managed corporation by legislation enacted in 1968.

     Fannie Mae provides funds to the mortgage market primarily by purchasing
mortgage loans from lenders, thereby replenishing their funds for additional
lending. Fannie Mae acquires funds to purchase mortgage loans from many capital
market investors that may not ordinarily invest in mortgages, thereby expanding
the total amount of funds available for housing. Operating nationwide, Fannie
Mae helps to redistribute mortgage funds from capital-surplus to capital-short
areas.

     Fannie Mae Certificates.  These are guaranteed mortgage pass-through
certificates issued and guaranteed as to timely payment of principal and
interest by Fannie Mae representing fractional undivided interests in a pool of
mortgage loans formed by Fannie Mae. Each mortgage loan must meet the applicable
standards of the Fannie Mae purchase program. Mortgage loans comprising a pool
are either provided by Fannie Mae from its own portfolio or purchased pursuant
to the criteria of the Fannie Mae purchase program.

     Mortgage loans underlying Fannie Mae certificates held by a trust fund will
consist of conventional mortgage loans, FHA loans or VA loans. Original
maturities of substantially all of the conventional, level payment mortgage
loans underlying a Fannie Mae certificate are expected to be between either 8 to
15 years or 20 to 40 years. The original maturities of substantially all of the
fixed rate, level payment FHA loans or VA loans are expected to be 30 years.
Mortgage loans underlying a Fannie Mae certificate may have annual interest
rates that vary by as much as two percentage points from each other. The rate of
interest payable on a Fannie Mae certificate is equal to the lowest interest
rate of any mortgage loan in the related pool, less a specified minimum annual
percentage representing servicing compensation and Fannie Mae's guaranty fee.
Under a regular servicing option, the annual interest rates on the mortgage
loans underlying a Fannie Mae certificate will be between 50 basis points and
250 basis points greater than is its annual pass through rate. Under this option
the mortgagee or each other servicer assumes the entire risk of foreclosure
losses. Under a special servicing option, the annual interest rates on the
mortgage loans underlying a Fannie Mae certificate will generally be between 55
basis points and 255 basis points greater than the annual Fannie Mae certificate
pass-through rate. Under this option Fannie Mae assumes the entire risk for
foreclosure losses. If specified in the related prospectus supplement, Fannie
Mae certificates may be backed by adjustable rate mortgages.

     Fannie Mae guarantees to each registered holder of a Fannie Mae certificate
that it will distribute amounts representing the holder's proportionate share of
scheduled principal and interest payments at the
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<PAGE>   78

applicable pass through rate provided for by the Fannie Mae certificate on the
underlying mortgage loans, whether or not received, and the holder's
proportionate share of the full principal amount of any foreclosed or other
finally liquidated mortgage loan, whether or not the principal amount is
actually recovered. The obligations of Fannie Mae under its guaranties are
obligations solely of Fannie Mae and are not backed by, or entitled to, the full
faith and credit of the United States. Although the Secretary of the Treasury of
the United States has discretionary authority to lend Fannie Mae up to $2.25
billion outstanding at any time, neither the United States nor any of its
agencies is obligated to finance Fannie Mae's operations or to assist Fannie Mae
in any other manner. If Fannie Mae were unable to satisfy its obligations,
distributions to holders of Fannie Mae certificates would consist solely of
payments and other recoveries on the underlying mortgage loans and, accordingly,
monthly distributions to holders of Fannie Mae certificates would be affected by
delinquent payments and defaults on the mortgage loans.

     Except for Fannie Mae certificates backed by pools containing graduated
payment mortgage loans or mortgage loans secured by multifamily projects, Fannie
Mae certificates evidencing interests in pools of mortgage loans formed on or
after May 1, 1985 are available in book-entry form only. Distributions of
principal and interest on each Fannie Mae certificate will be made by Fannie Mae
on the 25th day of each month to the persons in whose name the Fannie Mae
certificate is entered in the books of the Federal Reserve Banks or registered
on the Fannie Mae certificate register as of the close of business on the last
day of the preceding month. Distributions on Fannie Mae certificates issued in
book-entry form will be made by wire. Distributions on fully registered Fannie
Mae certificates will be made by check.

     The Fannie Mae certificates included in a trust fund, and the related
underlying mortgage loans, may have characteristics and terms different from
those described above. Any different characteristics and terms will be described
in the related prospectus supplement.

     Stripped Mortgage-Backed Securities. Agency Securities may consist of one
or more stripped mortgage-backed securities, each as described in this
prospectus and in the related prospectus supplement. Each Agency Security will
represent an undivided interest in all or part of either the principal
distributions (but not the interest distributions) or the interest distributions
(but not the principal distributions), or in some specified portion of the
principal and interest distributions (but not all the distributions) on certain
Freddie Mac, Fannie Mae or Ginnie Mae certificates. The underlying securities
will be held under a trust agreement by Freddie Mac, Fannie Mae or Ginnie Mae,
each as trustee, or by another trustee named in the related prospectus
supplement. The applicable prospectus supplement may specify that Freddie Mac,
Fannie Mae or Ginnie Mae will not guarantee each stripped Agency Security to the
same extent it guarantees the underlying securities backing the stripped Agency
Security, but if it does not, then Freddie Mac, Fannie Mae or Ginnie Mae will
guarantee each stripped Agency Security to the same extent it guarantees the
underlying securities backing the stripped Agency Security.

     Other Agency Securities.  If specified in the related prospectus
supplement, a trust fund may include other mortgage pass-through certificates
issued or guaranteed by Ginnie Mae, Fannie Mae or Freddie Mac. The
characteristics of those mortgage pass-through certificates will be described in
the prospectus supplement. If so specified, a combination of different types of
Agency Securities may be held in a trust fund.

PRIVATE MORTGAGE-BACKED SECURITIES

     Private Mortgage-Backed Securities may consist of mortgage pass-through
certificates or participation certificates evidencing an undivided interest in a
pool of mortgage loans or collateralized mortgage obligations secured by
mortgage loans. Private Mortgage-Backed Securities may include stripped
mortgage-backed securities representing an undivided interest in all or a part
of either the principal distributions (but not the interest distributions) or
the interest distributions (but not the principal distributions) or in some
specified portion of the principal and interest distributions (but not all the
distributions) on certain mortgage loans. Private Mortgage-Backed Securities
will have been issued pursuant to a pooling and servicing agreement, an
indenture or similar agreement. The applicable prospectus supplement may provide
that the seller/servicer of the underlying mortgage loans will not have

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<PAGE>   79

entered into a pooling and servicing agreement with a private trustee, but if it
does not, the seller/servicer of the underlying mortgage loans will have entered
into the pooling and servicing agreement with a private trustee. The private
trustee or its agent, or a custodian, will possess the mortgage loans underlying
the Private Mortgage-Backed Security. Mortgage loans underlying a Private
Mortgage-Backed Security will be serviced by a private servicer directly or by
one or more subservicers who may be subject to the supervision of the private
servicer.

     The issuer of the Private Mortgage-Backed Securities will be a financial
institution or other entity engaged generally in the business of mortgage
lending, a public agency or instrumentality of a state, local or federal
government, or a limited purpose corporation organized for the purpose of, among
other things, establishing trusts and acquiring and selling housing loans to the
trusts and selling beneficial interests in the trusts. If so specified in the
related prospectus supplement, the issuer of Private Mortgage-Backed Securities
may be an affiliate of the depositor. The obligations of the issuer of Private
Mortgage-Backed Securities will generally be limited to certain representations
and warranties with respect to the assets conveyed by it to the related trust
fund. The issuer of Private Mortgage-Backed Securities will not have guaranteed
any of the assets conveyed to the related trust fund or any of the Private
Mortgage-Backed Securities issued under the pooling and servicing agreement.
Additionally, although the mortgage loans underlying the Private Mortgage-Backed
Securities may be guaranteed by an agency or instrumentality of the United
States, the Private Mortgage-Backed Securities themselves will not be so
guaranteed.

     Distributions of principal and interest will be made on the Private
Mortgage-Backed Securities on the dates specified in the related prospectus
supplement. The Private Mortgage-Backed Securities may be entitled to receive
nominal or no principal distributions or nominal or no interest distributions.
Principal and interest distributions will be made on the Private Mortgage-Backed
Securities by the private trustee or the private servicer. The issuer of Private
Mortgage-Backed Securities or the private servicer may have the right to
repurchase assets underlying the Private Mortgage-Backed Securities after a
certain date or under other circumstances specified in the related prospectus
supplement.

     The mortgage loans underlying the Private Mortgage-Backed Securities may
consist of fixed rate, level payment, fully amortizing loans or graduated
payment mortgage loans, buydown loans, adjustable rate mortgage loans or loans
having balloon or other special payment features. The mortgage loans may be
secured by single family property or multifamily property or by an assignment of
the proprietary lease or occupancy agreement relating to a specific dwelling
within a cooperative and the related shares issued by the cooperative.

     The prospectus supplement for a series for which the trust fund includes
Private Mortgage-Backed Securities will specify

     - the aggregate approximate principal amount and type of the Private
       Mortgage-Backed Securities to be included in the trust fund;

     - certain characteristics of the mortgage loans that comprise the
       underlying assets for the Private Mortgage-Backed Securities including

      - the payment features of the mortgage loans,

      - the approximate aggregate principal balance, if known, of underlying
        mortgage loans insured or guaranteed by a governmental entity,

      - the servicing fee or range of servicing fees with respect to the
        mortgage loans and

      - the minimum and maximum stated maturities of the underlying mortgage
        loans at origination;

     - the maximum original term-to-stated maturity of the Private
       Mortgage-Backed Securities;

     - the weighted average term-to stated maturity of the Private
       Mortgage-Backed Securities;

     - the pass-through or certificate rate of the Private Mortgage-Backed
       Securities;

     - the weighted average pass-through or certificate rate of the Private
       Mortgage-Backed Securities;
                                       22
<PAGE>   80

     - the issuer of Private Mortgage-Backed Securities, the private servicer
       (if other than the issuer of Private Mortgage-Backed Securities) and the
       private trustee for the Private Mortgage-Backed Securities;

     - certain characteristics of credit support, if any, the as reserve funds,
       insurance policies, surety bonds, letters of credit or guaranties
       relating to the mortgage loans underlying the Private Mortgage-Backed
       Securities or to the Private Mortgage-Backed Securities themselves;

     - the terms on which the underlying mortgage loans for the Private
       Mortgage-Backed Securities may, or are required to, be purchased before
       their stated maturity or the stated maturity of the Private
       Mortgage-Backed Securities; and

     - the terms on which mortgage loans may be substituted for those originally
       underlying the Private Mortgage-Backed Securities.

     Private Mortgage-Backed Securities included in the trust fund for a series
of certificates that were issued by an issuer of Private Mortgage-Backed
Securities that is not affiliated with the depositor must be acquired in bona
fide secondary market transactions or either have been previously registered
under the Securities Act of 1933 or have been held for at least the holding
period required to be eligible for sale under Rule 144(k) under the Securities
Act of 1933.

SUBSTITUTION OF MORTGAGE ASSETS

     Substitution of Mortgage Assets will be permitted upon breaches of
representations and warranties with respect to any original Mortgage Asset or if
the documentation with respect to any Mortgage Asset is determined by the
trustee to be incomplete. The period during which the substitution will be
permitted generally will be indicated in the related prospectus supplement. The
related prospectus supplement will describe any other conditions upon which
Mortgage Assets may be substituted for Mortgage Assets initially included in the
trust fund.

AVAILABLE INFORMATION

     The depositor has filed with the SEC a Registration Statement under the
Securities Act of 1933, as amended, covering the certificates. This prospectus,
which forms a part of the Registration Statement, and the prospectus supplement
relating to each series of certificates contain summaries of the material terms
of the documents referred to in this prospectus and in the prospectus
supplement, but do not contain all of the information in the Registration
Statement pursuant to the rules and regulations of the SEC. For further
information, reference is made to the Registration Statement and its exhibits.
The Registration Statement and exhibits can be inspected and copied at
prescribed rates at the public reference facilities maintained by the SEC at its
Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549, and at
its Regional Offices located as follows: Chicago Regional Office, 500 West
Madison Street, Chicago, Illinois 60661; and New York Regional Office, Seven
World Trade Center, New York, New York 10048. You may obtain information on the
operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The
SEC maintains an Internet Web site that contains reports, information statements
and other information regarding the registrants that file electronically with
the SEC, including the depositor. The address of that Internet Web site is
http://www.sec.gov.

     This prospectus and any applicable prospectus supplement do not constitute
an offer to sell or a solicitation of an offer to buy any securities other than
the certificates offered by this prospectus and the prospectus supplement nor an
offer of the certificates to any person in any state or other jurisdiction in
which the offer would be unlawful.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

     All documents filed for the trust fund referred to in the accompanying
prospectus supplement after the date of this prospectus and before the end of
the related offering with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Securities Exchange Act of 1934, as amended, are incorporated
                                       23
<PAGE>   81

by reference in this prospectus and are a part of this prospectus from the date
of their filing. Any statement contained in a document incorporated by reference
in this prospectus is modified or superseded for all purposes of this prospectus
to the extent that a statement contained in this prospectus (or in the
accompanying prospectus supplement) or in any other subsequently filed document
that also is incorporated by reference differs from that statement. Any
statement so modified or superseded shall not, except as so modified or
superseded, constitute a part of this prospectus.

     The trustee on behalf of any trust fund will provide without charge to each
person to whom this prospectus is delivered, on the person's written or oral
request, a copy of any or all of the documents referred to above that have been
or may be incorporated by reference in this prospectus (not including exhibits
to the information that is incorporated by reference unless the exhibits are
specifically incorporated by reference into the information that this prospectus
incorporates). Requests should be directed to the corporate trust office of the
trustee specified in the accompanying prospectus supplement.

                                USE OF PROCEEDS

     The net proceeds to be received from the sale of the certificates will be
applied by the depositor to the purchase of Mortgage Assets or will be used by
the depositor for general corporate purposes. The depositor expects to sell
certificates in series from time to time, but the timing and amount of offerings
of certificates will depend on a number of factors, including the volume of
Mortgage Assets acquired by the depositor, prevailing interest rates,
availability of funds and general market conditions.

                                 THE DEPOSITOR

     CWMBS, Inc., a Delaware corporation, was organized on May 27, 1993 for the
limited purpose of acquiring, owning and transferring Mortgage Assets and
selling interests in them or bonds secured by them. The depositor is a
subsidiary of Countrywide Credit Industries, Inc., a Delaware corporation. The
depositor maintains its principal office at 4500 Park Granada, Calabasas,
California 91302. Its telephone number is (818) 225-3000.

     Neither the depositor nor any of the depositor's affiliates will ensure or
guarantee distributions on the certificates of any series.

                             MORTGAGE LOAN PROGRAM

     The mortgage loans will have been purchased by the depositor, either
directly or through affiliates, from sellers. The applicable prospectus
supplement may specify the mortgage loans acquired by the depositor will have
been originated the under different criteria than the servicer's underwriting
criteria, but if it does not, the mortgage loans acquired by the depositor will
have been originated in accordance with the underwriting criteria specified
under "Underwriting Process."

UNDERWRITING PROCESS

     Underwriting standards are applied by or on behalf of a lender to evaluate
the borrower's credit standing and repayment ability, and the value and adequacy
of the mortgaged property as collateral. In general, a prospective borrower
applying for a mortgage loan is required to fill out a detailed application
designed to provide to the underwriting officer pertinent credit information. As
part of the description of the borrower's financial condition, the borrower
generally is required to provide a current list of assets and liabilities and a
statement of income and expenses, as well as an authorization to apply for a
credit report which summarizes the borrower's credit history with local
merchants and lenders and any record of bankruptcy. In most cases, an employment
verification is obtained from an independent source, typically the borrower's
employer. The verification reports the length of employment with that
organization, the borrower's current salary and whether it is expected that the
borrower will continue employment in the future. If a prospective borrower is
self-employed, the borrower may be required to submit copies of signed

                                       24
<PAGE>   82

tax returns. The borrower may also be required to authorize verification of
deposits at financial institutions where the borrower has demand or savings
accounts.

     In determining the adequacy of the mortgaged property as collateral, an
appraisal is made of each property considered for financing. The appraiser is
required to inspect the property and verify that it is in good repair and that
construction, if new, has been completed. The appraisal is based on the market
value of comparable homes, the estimated rental income (if considered applicable
by the appraiser) and the cost of replacing the home.

     Once all applicable employment, credit and property information is
received, a determination generally is made as to whether the prospective
borrower has sufficient monthly income available to meet monthly housing
expenses and other financial obligations and monthly living expenses and to meet
the borrower's monthly obligations on the proposed mortgage loan (generally
determined on the basis of the monthly payments due in the year of origination)
and other expenses related to the mortgaged property such as property taxes and
hazard insurance). The underwriting standards applied by sellers, particularly
with respect to the level of loan documentation and the mortgagor's income and
credit history, may be varied in appropriate cases where factors as low
Loan-to-Value Ratios or other favorable credit factors exist.

     In the case of a mortgage loan secured by a leasehold interest in real
property, the title to which is held by a third party lessor, the seller will
represent and warrant, among other things, that the remaining term of the lease
and any sublease is at least as long as the remaining term on the loan agreement
or promissory note for the mortgage loan.

     Certain of the types of mortgage loans that may be included in a trust fund
are recently developed and may involve additional uncertainties not present in
traditional types of loans. For example, certain of the mortgage loans may
provide for escalating or variable payments by the mortgagor. These types of
mortgage loans are underwritten on the basis of a judgment that the mortgagors
have the ability to make the monthly payments required initially. In some
instances, however, a mortgagor's income may not be sufficient to permit
continued loan payments as the payments increase. These types of mortgage loans
may also be underwritten primarily on the basis of Loan-to-Value Ratios or other
favorable credit factors.

QUALIFICATIONS OF SELLERS

     Each seller must be an institution experienced in originating and servicing
mortgage loans of the type contained in the related mortgage pool and must
maintain satisfactory facilities to originate and service those mortgage loans.

REPRESENTATIONS BY SELLERS; REPURCHASES

     Each seller will have made representations and warranties in respect of the
mortgage loans sold by it and evidenced by a series of certificates. The
applicable prospectus supplement may specify the different representations and
warranties, but if it does not, the representations and warranties will
generally include, among other things:

     - that title insurance (or in the case of mortgaged properties located in
       areas where title insurance policies are generally not available, an
       attorney's certificate of title) and any required hazard insurance policy
       and primary mortgage insurance policy were effective at the origination
       of each mortgage loan other than cooperative loans, and that each policy
       (or certificate of title as applicable) remained in effect on the date of
       purchase of the mortgage loan from the seller by or on behalf of the
       depositor;

     - that the seller had good title to each mortgage loan and the mortgage
       loan was subject to no valid offsets, defenses, counterclaims or rights
       of rescission except to the extent that any buydown agreement described
       in this prospectus may forgive certain indebtedness of a mortgagor;

                                       25
<PAGE>   83

     - that each mortgage loan constituted a valid first lien on, or a first
       perfected security interest with respect to, the mortgaged property
       (subject only to permissible title insurance exceptions, if applicable,
       and certain other exceptions described in the pooling and servicing
       agreement);

     - that there were no delinquent tax or assessment liens against the
       mortgaged property; and

     - that each mortgage loan was made in compliance with, and is enforceable
       under, all applicable local, state and federal laws and regulations in
       all material respects.

     In addition, if any required payment on a mortgage loan was more than 31
days delinquent at any time during the twelve months before the cut-off date,
the related prospectus supplement shall so indicate.

     As to any mortgage loan insured by the FHA or partially guaranteed by the
VA, the seller will represent that it has complied with underwriting policies of
the FHA or the VA, as the case may be.

     As indicated in the related pooling and servicing agreement, the
representations and warranties of a seller in respect of a mortgage loan will be
made as of the date of initial issuance of the series of certificates, the
related cut-off date, the date on which the seller sold the mortgage loan to the
depositor or one of its affiliates, or the date of origination of the related
mortgage loan, as the case may be. If representations and warranties are made as
of a date other than the closing date or cut-off date, a substantial period of
time may have elapsed between the other date and the date of initial issuance of
the series of certificates evidencing an interest in the mortgage loan. Since
the representations and warranties of a seller do not address events that may
occur following the sale of a mortgage loan by the seller or following the
origination of the mortgage loan, as the case may be, its repurchase obligation
will not arise if the relevant event that would otherwise have given rise to a
repurchase obligation with respect to a mortgage loan occurs after the date of
sale of the mortgage loan by the seller to the depositor or its affiliates or
after the origination of the mortgage loan, as the case may be. In addition,
certain representations, including the condition of the related mortgaged
property, will be limited to the extent the seller has knowledge and the seller
will be under no obligation to investigate the substance of the representation.
However, the depositor will not include any mortgage loan in the trust fund for
any series of certificates if anything has come to the depositor's attention
that would cause it to believe that the representations and warranties of a
seller will not be accurate and complete in all material respects in respect of
the mortgage loan as of the date of initial issuance of the related series of
certificates. If the master servicer is also a seller of mortgage loans with
respect to a particular series, the representations will be in addition to the
representations and warranties made by the master servicer in its capacity as
the master servicer.

     The trustee, if the master servicer is the seller, or the master servicer
will promptly notify the relevant seller of any breach of any representation or
warranty made by it in respect of a mortgage loan that materially and adversely
affects the interests of the certificateholders in the mortgage loan. The
applicable prospectus supplement may specify that the seller has a different
repurchase obligation, but if it does not, then if the seller cannot cure the
breach within 90 days after notice from the master servicer or the trustee, as
the case may be, then the seller will be obligated to repurchase the mortgage
loan from the trust fund at a price equal to 100% of the outstanding principal
balance of the mortgage as of the date of the repurchase plus accrued interest
on it to the first day of the month in which the purchase price is to be
distributed at the mortgage rate, less any unreimbursed advances or amount
payable as related servicing compensation if the seller is the master servicer
with respect to the mortgage loan. If an election is to be made to treat a trust
fund or designated portions of it as a "real estate mortgage investment conduit"
as defined in the Internal Revenue Code of 1986, as amended (the "Code"), the
master servicer or a holder of the related residual certificate will be
obligated to pay any prohibited transaction tax that may arise in connection
with the repurchase. The applicable prospectus supplement may contain different
reimbursement options, but if it does not, the master servicer will be entitled
to reimbursement for that payment from the assets of the related trust fund or
from any holder of the related residual certificate. See "Description of the
Certificates -- General" and in the related prospectus supplement. Except in
those cases in which the master servicer is the seller, the master servicer will
be required under the applicable pooling and servicing agreement to enforce this
obligation for the benefit of the trustee and the
                                       26
<PAGE>   84

certificateholders, following the practices it would employ in its good faith
business judgment were it the owner of the mortgage loan. This repurchase
obligation will constitute the sole remedy available to certificateholders or
the trustee for a breach of representation by a seller.

     Neither the depositor nor the master servicer will be obligated to purchase
a mortgage loan if a seller defaults on its obligation to do so, and no
assurance can be given that sellers will carry out their respective repurchase
obligations with respect to mortgage loans. However, to the extent that a breach
of a representation and warranty of a seller may also constitute a breach of a
representation made by the master servicer, the master servicer may have a
repurchase obligation as described under "The Pooling and Servicing
Agreement -- Assignment of Mortgage Assets."

                        DESCRIPTION OF THE CERTIFICATES

     The prospectus supplement relating to the certificates of each series to be
offered under this prospectus will, among other things, set forth for the
certificates, as appropriate:

     - a description of the class or classes of certificates and the rate at
       which interest will be passed through to holders of each class of
       certificates entitled to interest or the method of determining the amount
       of interest, if any, to be passed through to each class;

     - the initial aggregate certificate balance of each class of certificates
       included in the series, the dates on which distributions on the
       certificates will be made and, if applicable, the initial and final
       scheduled distribution dates for each class;

     - information as to the assets comprising the trust fund, including the
       general characteristics of the Mortgage Assets included in the trust fund
       and, if applicable, the insurance, surety bonds, guaranties, letters of
       credit or other instruments or agreements included in the trust fund, and
       the amount and source of any reserve fund;

     - the circumstances, if any, under which the trust fund may be subject to
       early termination;

     - the method used to calculate the amount of principal to be distributed
       with respect to each class of certificates;

     - the order of application of distributions to each of the classes within
       the series, whether sequential, pro rata, or otherwise;

     - the distribution dates with respect to the series;

     - additional information with respect to the plan of distribution of the
       certificates;

     - whether one or more REMIC elections will be made and designation of the
       regular interests and residual interests;

     - the aggregate original percentage ownership interest in the trust fund to
       be evidenced by each class of certificates;

     - information as to the nature and extent of subordination with respect to
       any class of certificates that is subordinate in right of payment to any
       other class; and

     - information as to the seller, the master servicer and the trustee.

     Each series of certificates will be issued pursuant to an pooling and
servicing agreement, dated as of the related cut-off date, among the depositor,
the master servicer and the trustee for the benefit of the holders of the
certificates of the series. The provisions of each pooling and servicing
agreement will vary depending upon the nature of the certificates to be issued
thereunder and the nature of the related trust fund. A form of an pooling and
servicing agreement is an exhibit to the Registration Statement of which this
prospectus is a part.

                                       27
<PAGE>   85

     The prospectus supplement for a series of certificates will describe any
provision of the pooling and servicing agreement relating to the series that
materially differs from its description contained in this prospectus. The
summaries do not purport to be complete and are subject to, and are qualified in
their entirety by reference to, all of the provisions of the pooling and
servicing agreement for each series of certificates and the applicable
prospectus supplement. The depositor will provide a copy of the pooling and
servicing agreement (without exhibits) relating to any series without charge
upon written request of a holder of record of a certificate of the series
addressed to CWMBS, Inc., 4500 Park Granada, Calabasas, California 91302,
Attention: Secretary. The following summaries describe material provisions that
may appear in each pooling and servicing agreement.

GENERAL

     The certificates of each series will be issued in either fully registered
or book-entry form in the authorized denominations specified in the related
prospectus supplement, will evidence specified beneficial ownership interests in
the related trust fund created pursuant to the related pooling and servicing
agreement and will not be entitled to payments in respect of the assets included
in any other trust fund established by the depositor. The applicable prospectus
supplement may provide for guarantees by a governmental entity or other person,
but if it does not, the Mortgage Assets will not be insured or guaranteed by any
governmental entity or other person. Each trust fund will consist of, to the
extent provided in the related pooling and servicing agreement,

     - the Mortgage Assets that from time to time are subject to the related
       pooling and servicing agreement (exclusive of any amounts specified in
       the related prospectus supplement as a retained interest);

     - the assets required to be deposited in the related Certificate Account
       from time to time;

     - property that secured a mortgage loan and that is acquired on behalf of
       the certificateholders by foreclosure or deed in lieu of foreclosure; and

     - any primary mortgage insurance policies, FHA insurance and VA guaranties,
       and any other insurance policies or other forms of credit enhancement
       required to be maintained pursuant to the related pooling and servicing
       agreement.

     If so specified in the related prospectus supplement, a trust fund may also
include one or more of the following: reinvestment income on payments received
on the Mortgage Assets, a reserve fund, a mortgage pool insurance policy, a
special hazard insurance policy, a bankruptcy bond, one or more letters of
credit, a surety bond, guaranties or similar instruments or other agreements.

     Each series of certificates will be issued in one or more classes. Each
class of certificates of a series will evidence beneficial ownership of a
specified percentage or portion of future interest payments and a specified
percentage or portion of future principal payments on the Mortgage Assets in the
related trust fund. These specified percentages may be 0%. A series of
certificates may include one or more classes that are senior in right to payment
to one or more other classes of certificates of the series. Certain series or
classes of certificates may be covered by insurance policies, surety bonds or
other forms of credit enhancement, in each case as described in this prospectus
and in the related prospectus supplement. One or more classes of certificates of
a series may be entitled to receive distributions of principal, interest or any
combination of principal and interest. Distributions on one or more classes of a
series of certificates may be made before one or more other classes, after the
occurrence of specified events, in accordance with a schedule or formula, on the
basis of collections from designated portions of the Mortgage Assets in the
related trust fund, or on a different basis, in each case as specified in the
related prospectus supplement. The timing and amounts of the distributions may
vary among classes or over time as specified in the related prospectus
supplement.

     Distributions of either or both of principal and interest on the related
certificates will be made by the trustee on each distribution date (i.e.,
monthly, quarterly, semi-annually or at other intervals and on the dates
specified in the prospectus supplement) in proportion to the percentages
specified in the related
                                       28
<PAGE>   86

prospectus supplement. Distributions will be made to the persons in whose names
the certificates are registered at the close of business on the dates specified
in the related prospectus supplement. Distributions will be made by check or
money order mailed to the persons entitled to them at the address appearing in
the certificates register maintained for holders of certificates or, if
specified in the related prospectus supplement, in the case of certificates that
are of a certain minimum denomination, upon written request by the
certificateholder, by wire transfer or by another means described in the
prospectus supplement; provided, however, that the final distribution in
retirement of the certificates will be made only upon presentation and surrender
of the certificates at the office or agency of the trustee or other person
specified in the notice to certificateholders of the final distribution.

     The certificates will be freely transferable and exchangeable at the
corporate trust office of the trustee as set forth in the related prospectus
supplement. No service charge will be made for any registration of exchange or
transfer of certificates of any series, but the trustee may require payment of a
sum sufficient to cover any related tax or other governmental charge.

     Under current law the purchase and holding by or on behalf of any employee
benefit plan or other retirement arrangement subject to provisions of the
Employee Retirement Income Security Act of 1974, as amended, or the Code of
certain classes of certificates may result in "prohibited transactions" within
the meaning of ERISA and the Code. See "ERISA Considerations." Retirement
arrangements subject to these provisions include individual retirement accounts
and annuities, Keogh plans and collective investment funds in which the plans,
accounts or arrangements are invested. The applicable prospectus supplement may
specify other conditions under which transfers of this type would be permitted,
but if it does not, transfer of the certificates will not be registered unless
the transferee represents that it is not, and is not purchasing on behalf of, a
plan, account or other retirement arrangement or provides an opinion of counsel
satisfactory to the trustee and the depositor that the purchase of the
certificates by or on behalf of a plan, account or other retirement arrangement
is permissible under applicable law and will not subject the trustee, the master
servicer or the depositor to any obligation or liability in addition to those
undertaken in the pooling and servicing agreement.

     As to each series, an election may be made to treat the related trust fund
or designated portions of it as a real estate mortgage investment conduit or
REMIC as defined in the Code. The related prospectus supplement will specify
whether a REMIC election is to be made. Alternatively, the pooling and servicing
agreement for a series may provide that a REMIC election may be made at the
discretion of the depositor or the master servicer and may be made only if
certain conditions are satisfied. The terms applicable to the making of a REMIC
election, as well as any material federal income tax consequences to
certificateholders not described in this prospectus, will be set forth in the
related prospectus supplement. If a REMIC an election is made with respect to a
series, one of the classes will be designated as evidencing the sole class of
residual interests in the related REMIC, as defined in the Code. All other
classes of certificates in the series will constitute regular interests in the
related REMIC, as defined in the Code. As to each series with respect to which a
REMIC election is to be made, the master servicer or a holder of the related
residual certificate will be obligated to take all actions required to comply
with applicable laws and regulations and will be obligated to pay any prohibited
transaction taxes. The applicable prospectus supplement may restrict the master
servicer's reimbursement rights, but if it does not, the master servicer will be
entitled to reimbursement for that payment from the assets of the trust fund or
from any holder of the related residual certificate.

DISTRIBUTIONS ON CERTIFICATES

     General. In general, the method of determining the amount of distributions
on a particular series of certificates will depend on the type of credit
support, if any, that is used with respect to the series. See "Credit
Enhancement" and in the related prospectus supplement. Various methods that may
be used to determine the amount of distributions on the certificates of a
particular series. The prospectus supplement for each series of certificates
will describe the method to be used in determining the amount of distributions
on the certificates of its series.

                                       29
<PAGE>   87

     Distributions allocable to principal of and interest on the certificates
will be made by the trustee out of, and only to the extent of, funds in the
related Certificate Account, including any funds transferred from any reserve
fund. As between certificates of different classes and as between distributions
of principal (and, if applicable, between distributions of principal prepayments
and scheduled payments of principal) and interest, distributions made on any
distribution date will be applied as specified in the related prospectus
supplement. The applicable prospectus supplement may provide for payment
distinctions within classes, but if it does not, distributions to any class of
certificates will be made pro rata to all certificateholders of that class.

     Available Funds. All distributions on the certificates of each series on
each distribution date will be made from the Available Funds, in accordance with
the terms described in the related prospectus supplement and specified in the
pooling and servicing agreement. The applicable prospectus supplement may define
Available Funds with reference to different accounts or different amounts, but
if it does not, "Available Funds" for each distribution date will generally
equal the amount on deposit in the related Certificate Account on the
distribution date (net of related fees and expenses payable by the related trust
fund) other than amounts to be held in the Certificate Account for distribution
on future distribution dates.

     Distributions of Interest. Interest will accrue on the aggregate original
balance of the certificates (or, in the case of certificates entitled only to
distributions allocable to interest, the aggregate notional amount) of each
class of certificates (the initial "Class Certificate Balance") entitled to
interest at the pass-through rate (which may be a fixed rate or a rate
adjustable as specified in the prospectus supplement) from the date and for the
periods specified in the prospectus supplement. To the extent funds are
available therefor, interest accrued during each specified period on each class
of certificates entitled to interest (other than a class of certificates that
provides for interest that accrues, but is not currently payable) will be
distributable on the distribution dates specified in the related prospectus
supplement until the Class Certificate Balance of the class has been distributed
in full or, in the case of certificates entitled only to distributions allocable
to interest, until the aggregate notional amount of the certificates is reduced
to zero or for the period of time designated in the related prospectus
supplement. The original certificate balance of each certificate will equal the
aggregate distributions allocable to principal to which the certificate is
entitled. The applicable prospectus supplement may specify some other basis for
these distributions, but if it does not, distributions allocable to interest on
each certificate that is not entitled to distributions allocable to principal
will be calculated based on the notional amount of the certificate. The notional
amount of a certificate will not evidence an interest in or entitlement to
distributions allocable to principal but will be used solely for convenience in
expressing the calculation of interest and for certain other purposes.

     With respect to any class of accrual certificates, any interest that has
accrued but is not paid on a given distribution date will be added to the Class
Certificate Balance of the class of certificates on that distribution date. The
applicable prospectus supplement may specify some other basis for these
distributions, but if it does not, distributions of interest on each class of
accrual certificates will commence only after the occurrence of the events
specified in the prospectus supplement and, before that time, the beneficial
ownership interest of the class of accrual certificates in the trust fund, as
reflected in the Class Certificate Balance of the class of accrual certificates,
will increase on each distribution date by the amount of interest that accrued
on the class of accrual certificates during the preceding interest accrual
period but that was not required to be distributed to the class on the
distribution date. The class of accrual certificates will thereafter accrue
interest on its outstanding Class Certificate Balance as so adjusted.

     Distributions of Principal. The related prospectus supplement will specify
the method by which the amount of principal to be distributed on the
certificates on each distribution date will be calculated and the manner in
which that amount will be allocated among the classes of certificates entitled
to distributions of principal. The Class Certificate Balance of any class of
certificates entitled to distributions of principal will be the original Class
Certificate Balance of the class of certificates specified in the prospectus
supplement, reduced by all distributions reported to the holders of the
certificates as allocable to principal and in the case of accrual certificates,
unless otherwise specified in the related prospectus
                                       30
<PAGE>   88

supplement, increased by all interest accrued but not then distributable on the
accrual certificates and in the case of adjustable rate certificates, unless
otherwise specified in the related prospectus supplement, subject to the effect
of negative amortization. The related prospectus supplement will specify the
method by which the amount of principal to be distributed on the certificates on
each distribution date will be calculated and the manner in which that amount
will be allocated among the classes of certificates entitled to distributions of
principal.

     A series of certificates may include one or more classes of senior
certificates and one or more classes of subordinate certificates. If so provided
in the related prospectus supplement, one or more classes of senior certificates
will be entitled to receive all or a disproportionate percentage of the payments
of principal that are received from borrowers in advance of their scheduled due
dates and are not accompanied by amounts representing scheduled interest due
after the month of the payments in the percentages and under the circumstances
or for the periods specified in the prospectus supplement. Any disproportionate
allocation of these principal prepayments to senior certificates will have the
effect of accelerating the amortization of the senior certificates while
increasing the interests evidenced by the subordinated certificates in the trust
fund. Increasing the interests of the subordinated certificates relative to that
of the senior certificates is intended to preserve the availability of the
subordination provided by the subordinated certificates. See "Credit Enhancement
-- Subordination" and "Credit Enhancement -- Subordination of the Subordinated
Certificates" in the related prospectus supplement.

     Unscheduled Distributions.  If specified in the related prospectus
supplement, the certificates will be subject to receipt of distributions before
the next scheduled distribution date. If applicable, the trustee will be
required to make unscheduled distributions on the day and in the amount
specified in the related prospectus supplement if, due to substantial payments
of principal (including principal prepayments) on the Mortgage Assets, the
trustee or the master servicer determines that the funds available or
anticipated to be available from the Certificate Account and, if applicable, any
reserve fund, may be insufficient to make required distributions on the
certificates on the distribution date. The applicable prospectus supplement may
specify some other basis for these distributions, but if it does not, the amount
of the unscheduled distribution that is allocable to principal will not exceed
the amount that would otherwise have been required to be distributed as
principal on the certificates on the next distribution date. The applicable
prospectus supplement may provide that unscheduled distributions will not
include interest or that interest will be computed on a different basis, but if
it does not, all unscheduled distributions will include interest at the
applicable pass-through rate on the amount of the unscheduled distribution
allocable to principal for the period and to the date specified in the
prospectus supplement.

ADVANCES

     To the extent provided in the related prospectus supplement, the master
servicer will be required to advance on or before each distribution date (from
its own funds, funds advanced by sub-servicers or funds held in the Certificate
Account for future distributions to certificateholders), an amount equal to the
aggregate of payments of principal and interest that were delinquent on the
related Determination Date, subject to the master servicer's determination that
the advances will be recoverable out of late payments by obligors on the
Mortgage Assets, liquidation proceeds, insurance proceeds not used to restore
the property or otherwise. In the case of cooperative loans, the master servicer
also will be required to advance any unpaid maintenance fees and other charges
under the related proprietary leases as specified in the related prospectus
supplement.

     In making advances, the master servicer will endeavor to maintain a regular
flow of scheduled interest and principal payments to certificateholders, rather
than to guarantee or insure against losses. If advances are made by the master
servicer from cash being held for future distribution to certificateholders, the
master servicer will replace the funds on or before any future distribution date
to the extent that funds in the applicable Certificate Account on the
distribution date would be less than the amount required to be available for
distributions to certificateholders on the Distribution Date. Any advances will
be reimbursable to the master servicer out of recoveries on the specific
Mortgage Assets with respect to which the advances were made (e.g., late
payments made by the related obligors, any related insurance proceeds,
                                       31
<PAGE>   89

liquidation proceeds or proceeds of any mortgage loan repurchased by the
depositor, a sub-servicer or a seller pursuant to the related pooling and
servicing agreement). In addition, advances by the master servicer or
sub-servicer also will be reimbursable to the master servicer or a sub-servicer
from cash otherwise distributable to certificateholders to the extent that the
master servicer determines that the advances previously made are not ultimately
recoverable as described in the preceding sentence. The master servicer also
will be obligated to make advances, to the extent recoverable out of insurance
proceeds not used to restore the property, liquidation proceeds or otherwise,
for certain taxes and insurance premiums not paid by mortgagors on a timely
basis. Funds so advanced are reimbursable to the master servicer to the extent
permitted by the pooling and servicing agreement. If specified in the related
prospectus supplement, the obligations of the master servicer to make advances
may be supported by a cash advance reserve fund, a surety bond or other
arrangement, in each case as described in the prospectus supplement.

REPORTS TO CERTIFICATEHOLDERS

     The applicable prospectus supplement may specify different items to be
reported, but if it does not, before or concurrently with each distribution on a
distribution date the master servicer or the trustee will furnish to each
certificateholder of record of the related series a statement setting forth, to
the extent applicable to the series of certificates, among other things:

     - the amount of the distribution allocable to principal, separately
       identifying the aggregate amount of any principal prepayments and, if so
       specified in the related prospectus supplement, prepayment penalties;

     - the amount of the distribution allocable to interest;

     - the amount of any advance;

     - the aggregate amount otherwise allocable to the subordinated
       certificateholders on the distribution date and the aggregate amount
       withdrawn from the reserve fund, if any, that is included in the amounts
       distributed to the certificateholders;

     - the Class Certificate Balance or notional amount of each class of the
       related series after giving effect to the distribution of principal on
       the distribution date;

     - the percentage of principal payments on the Mortgage Assets (excluding
       prepayments), if any, which each class will be entitled to receive on the
       following distribution date;

     - the percentage of principal prepayments with respect to the Mortgage
       Assets, if any, which each class will be entitled to receive on the
       following distribution date;

     - the related amount of the servicing compensation retained or withdrawn
       from the Certificate Account by the master servicer, and the amount of
       additional servicing compensation received by the master servicer
       attributable to penalties, fees, excess liquidation proceeds and other
       similar charges and items;

     - the number and aggregate principal balances of mortgage loans (A)
       delinquent exclusive of mortgage loans in foreclosure) 1 to 30 days, 31
       to 60 days, 61 to 90 days and 91 or more days and (B) in foreclosure and
       delinquent 1 to 30 days, 31 to 60 days, 61 to 90 days and 91 or more
       days, as of the close of business on the last day of the calendar month
       preceding the distribution date;

     - the book value of any real estate acquired through foreclosure or grant
       of a deed in lieu of foreclosure;

     - the pass-through rate, if adjusted from the date of the last statement,
       of a class expected to be applicable to the next distribution to the
       class;

     - if applicable, the amount remaining in the reserve fund at the close of
       business on the distribution date;

                                       32
<PAGE>   90

     - the pass-through rate as of the day before the preceding distribution
       date; and

     - any amounts remaining under letters of credit, pool policies or other
       forms of credit enhancement.

     Where applicable, any amount set forth above may be expressed as a dollar
amount per single certificate of the relevant class having the percentage
interest specified in the related prospectus supplement. The report to
certificateholders for any series of certificates may include additional or
other information of a similar nature to that specified above.

     In addition, within a reasonable period of time after the end of each
calendar year, the master servicer or the trustee will mail to each
certificateholder of record at any time during the calendar year a report as to
the aggregate of amounts reported pursuant to the first two items for the
calendar year or, if the person was a certificateholder of record during a
portion of the calendar year, for the applicable portion of the year and other
customary information deemed appropriate for certificateholders to prepare their
tax returns.

CATEGORIES OF CLASSES OF CERTIFICATES

     In general, classes of pass-through certificates fall into different
categories. The following chart identifies and generally defines the more
typical categories. The prospectus supplement for a series of certificates may
identify the classes which comprise the series by reference to the following
categories.

<TABLE>
<S>                             <C>
CATEGORIES OF CLASSES                                    DEFINITION
                                                      PRINCIPAL TYPES
Accretion Directed............  A class that receives principal payments from the accreted
                                interest from specified accrual classes. An accretion
                                directed class also may receive principal payments from
                                principal paid on the underlying Mortgage Assets or other
                                assets of the trust fund for the related series.
Component Certificates........  A class consisting of "components." The components of a
                                class of component certificates may have different principal
                                and interest payment characteristics but together constitute
                                a single class. Each component of a class of component
                                certificates may be identified as falling into one or more
                                of the categories in this chart.
Notional Amount
Certificates..................  A class having no principal balance and bearing interest on
                                the related notional amount. The notional amount is used for
                                purposes of the determination of interest distributions.
Planned Principal Class or
  PACs........................  A class that is designed to receive principal payments using
                                a predetermined principal balance schedule derived by
                                assuming two constant prepayment rates for the underlying
                                Mortgage Assets. These two rates are the endpoints for the
                                "structuring range" for the planned principal class. The
                                planned principal classes in any series of certificates may
                                be subdivided into different categories (e.g., primary
                                planned principal classes, secondary planned principal
                                classes and so forth) having different effective structuring
                                ranges and different principal payment priorities. The
                                structuring range for the secondary planned principal class
                                of a series of certificates will be narrower than that for
                                the primary planned principal class of the series.
</TABLE>

                                       33
<PAGE>   91
<TABLE>
<S>                             <C>
Scheduled Principal Class.....  A class that is designed to receive principal payments using
                                a predetermined principal balance schedule but is not
                                designated as a planned principal class or targeted
                                principal class. In many cases, the schedule is derived by
                                assuming two constant prepayment rates for the underlying
                                Mortgage Assets. These two rates are the endpoints for the
                                "structuring range" for the scheduled principal class.
Sequential Pay................  Classes that receive principal payments in a prescribed
                                sequence, that do not have predetermined principal balance
                                schedules and that under all circumstances receive payments
                                of principal continuously from the first distribution date
                                on which they receive principal until they are retired. A
                                single class that receives principal payments before or
                                after all other classes in the same series of certificates
                                may be identified as a sequential pay class.
Strip.........................  A class that receives a constant proportion, or "strip," of
                                the principal payments on the underlying Mortgage Assets or
                                other assets of the trust fund.
Support Class (also sometimes
  referred to as "companion
  classes")...................  A class that receives principal payments on any distribution
                                date only if scheduled payments have been made on specified
                                planned principal classes, targeted principal classes or
                                scheduled principal classes.
Targeted Principal Class or
  TACs........................  A class that is designed to receive principal payments using
                                a predetermined principal balance schedule derived by
                                assuming a single constant prepayment rate for the
                                underlying Mortgage Assets.

                                                       INTEREST TYPES
Fixed Rate....................  A class with an interest rate that is fixed throughout the
                                life of the class.
Floating Rate.................  A class with an interest rate that resets periodically based
                                upon a designated index and that varies directly with
                                changes in the index.
Inverse Floating Rate.........  A class with an interest rate that resets periodically based
                                upon a designated index and that varies inversely with
                                changes in the index.
Variable Rate.................  A class with an interest rate that resets periodically and
                                is calculated by reference to the rate or rates of interest
                                applicable to specified assets or instruments (e.g., the
                                mortgage rates borne by the underlying mortgage loans).
Interest Only.................  A class that receives some or all of the interest payments
                                made on the underlying Mortgage Assets or other assets of
                                the trust fund and little or no principal. Interest only
                                classes have either a nominal principal balance or a
                                notional amount. A nominal principal balance represents
                                actual principal that will be paid on the class. It is
                                referred to as nominal since it is extremely small compared
                                to other classes. A notional amount is the amount used as a
                                reference to calculate the amount of interest due on an
                                interest only class that is not entitled to any
                                distributions of principal.
Principal Only................  A class that does not bear interest and is entitled to
                                receive only distributions of principal.
</TABLE>

                                       34
<PAGE>   92
<TABLE>
<S>                             <C>
Partial Accrual...............  A class that accretes a portion of the amount of accrued
                                interest on it, which amount will be added to the principal
                                balance of the class on each applicable distribution date,
                                with the remainder of the accrued interest to be distributed
                                currently as interest on the class. The accretion may
                                continue until a specified event has occurred or until the
                                partial accrual class is retired.
Accrual.......................  A class that accretes the amount of accrued interest
                                otherwise distributable on the class, which amount will be
                                added as principal to the principal balance of the class on
                                each applicable distribution date. The accretion may
                                continue until some specified event has occurred or until
                                the accrual class is retired.
</TABLE>

INDICES APPLICABLE TO FLOATING RATE AND INVERSE FLOATING RATE CLASSES

LIBOR

     The applicable prospectus supplement may specify some other basis for
determining LIBOR, but if it does not, on the LIBOR determination date (as
defined in the related prospectus supplement) for each class of certificates of
a series for which the applicable interest rate is determined by reference to an
index denominated as LIBOR, the person designated in the related pooling and
servicing agreement as the calculation agent will determine LIBOR in accordance
with one of the two methods described below (which method will be specified in
the related prospectus supplement):

LIBO Method

     If using this method to calculate LIBOR, the calculation agent will
determine LIBOR by reference to the quotations, as set forth on the Reuters
Screen LIBO Page, offered by the principal London office of each of the
designated reference banks meeting the criteria set forth in this prospectus for
making one-month United States dollar deposits in leading banks in the London
Interbank market, as of 11:00 a.m. (London time) on the LIBOR determination
date. In lieu of relying on the quotations for those reference banks that appear
at the time on the Reuters Screen LIBO Page, the calculation agent will request
each of the reference banks to provide the offered quotations at the time.

     Under this method LIBOR will be established by the calculation agent on
each LIBOR determination date as follows:

          (a) If on any LIBOR determination date two or more reference banks
     provide offered quotations, LIBOR for the next interest accrual period
     shall be the arithmetic mean of the offered quotations (rounded upwards if
     necessary to the nearest whole multiple of 1/32%).

          (b) If on any LIBOR determination date only one or none of the
     reference banks provides offered quotations, LIBOR for the next interest
     accrual period shall be whichever is the higher of

        - LIBOR as determined on the previous LIBOR determination date or

        - the reserve interest rate.

     The reserve interest rate shall be the rate per annum which the calculation
     agent determines to be either

        - the arithmetic mean (rounded upwards if necessary to the nearest whole
          multiple of 1/32%) of the one-month United States dollar lending rates
          that New York City banks selected by the calculation agent are
          quoting, on the relevant LIBOR determination date, to the principal
          London offices of at least two of the reference banks to which the
          quotations are, in the opinion of the calculation agent being so made,
          or

                                       35
<PAGE>   93

        - if the calculation agent cannot determine the arithmetic mean, the
          lowest one-month United States dollar lending rate which New York City
          banks selected by the calculation agent are quoting on the LIBOR
          determination date to leading European banks.

          (c) If on any LIBOR determination date for a class specified in the
     related prospectus supplement, the calculation agent is required but is
     unable to determine the reserve interest rate in the manner provided in
     paragraph (b) above, LIBOR for the next interest accrual period shall be
     LIBOR as determined on the preceding LIBOR determination date, or, in the
     case of the first LIBOR determination date, LIBOR shall be considered to be
     the per annum rate specified as such in the related prospectus supplement.

     Each reference bank shall be a leading bank engaged in transactions in
Eurodollar deposits in the international Eurocurrency market; shall not control,
be controlled by, or be under common control with the calculation agent; and
shall have an established place of business in London. If reference bank should
be unwilling or unable to act as such or if appointment of a reference bank is
terminated, another leading bank meeting the criteria specified above will be
appointed.

BBA Method

     If using this method of determining LIBOR, the calculation agent will
determine LIBOR on the basis of the British Bankers' Association "Interest
Settlement Rate" for one-month deposits in United States dollars as found on
Telerate page 3750 as of 11:00 a.m. London time on each LIBOR determination
date. Interest Settlement Rates currently are based on rates quoted by eight
British Bankers' Association designated banks as being, in the view of the
banks, the offered rate at which deposits are being quoted to prime banks in the
London interbank market. The Interest Settlement Rates are calculated by
eliminating the two highest rates and the two lowest rates, averaging the four
remaining rates, carrying the result (expressed as a percentage) out to six
decimal places, and rounding to five decimal places.

     If on any LIBOR determination date, the calculation agent is unable to
calculate LIBOR in accordance with the method set forth in the immediately
preceding paragraph, LIBOR for the next interest accrual period shall be
calculated in accordance with the LIBOR method described under "LIBO Method."

     The establishment of LIBOR on each LIBOR determination date by the
calculation agent and its calculation of the rate of interest for the applicable
classes for the related interest accrual period shall (in the absence of
manifest error) be final and binding.

COFI

     The Eleventh District Cost of Funds Index is designed to represent the
monthly weighted average cost of funds for savings institutions in Arizona,
California and Nevada that are member institutions of the Eleventh Federal Home
Loan Bank District (the "Eleventh District"). The Eleventh District Cost of
Funds Index for a particular month reflects the interest costs paid on all types
of funds held by Eleventh District member institutions and is calculated by
dividing the cost of funds by the average of the total amount of those funds
outstanding at the end of that month and of the prior month and annualizing and
adjusting the result to reflect the actual number of days in the particular
month. If necessary, before these calculations are made, the component figures
are adjusted by the Federal Home Loan Bank of San Francisco ("FHLBSF") to
neutralize the effect of events such as member institutions leaving the Eleventh
District or acquiring institutions outside the Eleventh District. The Eleventh
District Cost of Funds Index is weighted to reflect the relative amount of each
type of funds held at the end of the relevant month. The major components of
funds of Eleventh District member institutions are: savings deposits, time
deposits, FHLBSF advances, repurchase agreements and all other borrowings.
Because the component funds represent a variety of maturities whose costs may
react in different ways to changing conditions, the Eleventh District Cost of
Funds Index does not necessarily reflect current market rates.

                                       36
<PAGE>   94

     A number of factors affect the performance of the Eleventh District Cost of
Funds Index, which may cause it to move in a manner different from indices tied
to specific interest rates, such as United States Treasury Bills or LIBOR.
Because the liabilities upon which the Eleventh District Cost of Funds Index is
based were issued at various times under various market conditions and with
various maturities, the Eleventh District Cost of Funds Index may not
necessarily reflect the prevailing market interest rates on new liabilities of
similar maturities. Moreover, as stated above, the Eleventh District Cost of
Funds Index is designed to represent the average cost of funds for Eleventh
District savings institutions for the month before the month in which it is due
to be published. Additionally, the Eleventh District Cost of Funds Index may not
necessarily move in the same direction as market interest rates at all times,
since as longer term deposits or borrowings mature and are renewed at prevailing
market interest rates, the Eleventh District Cost of Funds Index is influenced
by the differential between the prior and the new rates on those deposits or
borrowings. In addition, movements of the Eleventh District Cost of Funds Index,
as compared to other indices tied to specific interest rates, may be affected by
changes instituted by the FHLBSF in the method used to calculate the Eleventh
District Cost of Funds Index.

     The FHLBSF publishes the Eleventh District Cost of Funds Index in its
monthly Information Bulletin. Any individual may request regular receipt by mail
of Information Bulletins by writing the Federal Home Loan Bank of San Francisco,
P.O. Box 7948, 600 California Street, San Francisco, California 94120, or by
calling (415) 616-1000. The Eleventh District Cost of Funds Index may also be
obtained by calling the FHLBSF at (415) 616-2600.

     The FHLBSF has stated in its Information Bulletin that the Eleventh
District Cost of Funds Index for a month "will be announced on or near the last
working day" of the following month and also has stated that it "cannot
guarantee the announcement" of the index on an exact date. So long as the index
for a month is announced on or before the tenth day of the second following
month, the interest rate for each class of certificates of a series for which
the applicable interest rate is determined by reference to an index denominated
as COFI for the interest accrual period commencing in the second following month
will be based on the Eleventh District Cost of Funds Index for the second
preceding month. If publication is delayed beyond the tenth day, the interest
rate will be based on the Eleventh District Cost of Funds Index for the third
preceding month.

     The applicable prospectus supplement may specify some other basis for
determining COFI, but if it does not, then if on the tenth day of the month in
which any interest accrual period commences for a class of COFI certificates the
most recently published Eleventh District Cost of Funds Index relates to a month
before the third preceding month, the index for the current interest accrual
period and for each succeeding interest accrual period will, except as described
in the next to last sentence of this paragraph, be based on the National Monthly
Median Cost of Funds Ratio to SAIF-Insured Institutions (the "National Cost of
Funds Index") published by the Office of Thrift Supervision (the "OTS") for the
third preceding month (or the fourth preceding month if the National Cost of
Funds Index for the third preceding month has not been published on the tenth
day of an interest accrual period). Information on the National Cost of Funds
Index may be obtained by writing the OTS at 1700 G Street, N.W., Washington,
D.C. 20552 or calling (202) 906-6677, and the current National Cost of Funds
Index may be obtained by calling (202) 906-6988. If on the tenth day of the
month in which an interest accrual period commences the most recently published
National Cost of Funds Index relates to a month before the fourth preceding
month, the applicable index for the interest accrual period and each succeeding
interest accrual period will be based on LIBOR, as determined by the calculation
agent in accordance with the pooling and servicing agreement relating to the
series of certificates. A change of index from the Eleventh District Cost of
Funds Index to an alternative index will result in a change in the index level
and could increase its volatility, particularly if LIBOR is the alternative
index.

     The establishment of COFI by the calculation agent and its calculation of
the rates of interest for the applicable classes for the related interest
accrual period shall (in the absence of manifest error) be final and binding.

                                       37
<PAGE>   95

Treasury Index

     The applicable prospectus supplement may specify some other basis for
determining and defining the Treasury index, but if it does not, on the Treasury
index determination date for each class of certificates of a series for which
the applicable interest rate is determined by reference to an index denominated
as a Treasury index, the calculation agent will ascertain the Treasury index for
Treasury securities of the maturity and for the period (or, if applicable, date)
specified in the related prospectus supplement. The Treasury index for any
period means the average of the yield for each business day during the specified
period (and for any date means the yield for the date), expressed as a per annum
percentage rate, on U.S. Treasury securities adjusted to the "constant maturity"
specified in the prospectus supplement or if no "constant maturity" is so
specified, U.S. Treasury securities trading on the secondary market having the
maturity specified in the prospectus supplement, in each case as published by
the Federal Reserve Board in its Statistical Release No. H.15 (519). Statistical
Release No. H.15 (519) is published on Monday or Tuesday of each week and may be
obtained by writing or calling the Publications Department at the Board of
Governors of the Federal Reserve System, 21st and C Streets, Washington, D.C.
20551 (202) 452-3244. If the calculation agent has not yet received Statistical
Release No. H.15 (519) for a week, then it will use the Statistical Release from
the preceding week.

     Yields on U.S. Treasury securities at "constant maturity" are derived from
the U.S. Treasury's daily yield curve. This curve, which relates the yield on a
security to its time to maturity, is based on the closing market bid yields on
actively traded Treasury securities in the over-the-counter market. These market
yields are calculated from composites of quotations reported by five leading
U.S. Government securities dealers to the Federal Reserve Bank of New York. This
method provides a yield for a given maturity even if no security with that exact
maturity is outstanding. If the Treasury index is no longer published, a new
index based upon comparable data and methodology will be designated in
accordance with the pooling and servicing agreement relating to the particular
series of certificates. The calculation agent's determination of the Treasury
index, and its calculation of the rates of interest for the applicable classes
for the related interest accrual period shall (in the absence of manifest error)
be final and binding.

Prime Rate

     The applicable prospectus supplement may specify some other basis for
determining and defining the prime rate, but if it does not, on the prime rate
determination date for each class of certificates of a series for which the
applicable interest rate is determined by reference to an index denominated as
the prime rate, the calculation agent will ascertain the prime rate for the
related interest accrual period. The prime rate for an interest accrual period
will be the "prime rate" as published in the "Money Rates" section of The Wall
Street Journal on the related prime rate determination date, or if not so
published, the "prime rate" as published in a newspaper of general circulation
selected by the calculation agent in its sole discretion. If a prime rate range
is given, then the average of the range will be used. If the prime rate is no
longer published, a new index based upon comparable data and methodology will be
designated in accordance with the pooling and servicing agreement relating to
the particular series of certificates. The calculation agent's determination of
the prime rate and its calculation of the rates of interest for the related
interest accrual period shall (in the absence of manifest error) be final and
binding.

BOOK-ENTRY CERTIFICATES

     If so specified in the related prospectus supplement, one or more classes
of the certificates of any series may be initially issued through the book-entry
facilities of The Depository Trust Company. Each class of book-entry
certificates of a series will be issued in one or more certificates which equal
the aggregate initial Class Certificate Balance of each class and which will be
held by a nominee of the depository. The applicable prospectus supplement may
specify other procedures for book-entry certificates, but if it does not, the
following generally describes the procedures that will be applicable to any
class of book-entry certificates.

                                       38
<PAGE>   96

     Beneficial interests in the book-entry certificates of a series will be
held indirectly by investors through the book-entry facilities of the
depository, as described in this prospectus. Accordingly, the depository or its
nominee is expected to be the holder of record of the book-entry certificates.
Except as described below, no person acquiring a beneficial interest in a
book-entry certificate will be entitled to receive a physical certificate
representing the certificate.

     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 that maintains the beneficial owner's account for that
purpose. In turn, the financial intermediary's ownership of a book-entry
certificate will be recorded on the records of the depository (or of a
participating firm that acts as agent for the financial intermediary, whose
interest will in true be recorded on the records of the depository, if the
beneficial owner's financial intermediary is not a depository participant).
Therefore, the beneficial owner must rely on the foregoing procedures to
evidence its beneficial ownership of a book-entry certificate. Beneficial
ownership of a book-entry certificate may only be transferred by compliance with
the procedures of the financial intermediaries and depository participants.

     In accordance with its normal procedures, the depository is expected to
record the positions held by each depository 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 the depository and
depository participants as in effect from time to time.

     Distributions on the book-entry certificates will be made on each
distribution date by the trustee to the depository. The depository will be
responsible for crediting the amount of the payments to the accounts of the
applicable depository participants in accordance with the depository's normal
procedures. Each depository participant will be responsible for disbursing the
payments to the beneficial owners of the book-entry certificates that it
represents and to each financial intermediary for which it acts as agent. Each
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 payments will be
forwarded by the trustee to the depository or its nominee, as the case may be,
as holder of record of the book-entry certificates. Because the depository can
act only 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
the book-entry certificates, may be limited due to the lack of physical
certificates for the book-entry certificates. In addition, issuance of the
book-entry certificates in book-entry form may reduce the liquidity of the
certificates in the secondary market since some potential investors may be
unwilling to purchase certificates for which they cannot obtain physical
certificates.

     Until definitive certificates are issued, it is anticipated that the only
"certificateholder" of the book-entry certificates will be the depository or its
nominee. Beneficial owners of the book-entry certificates will not be
certificateholders, as that term will be used in the pooling and servicing
agreement relating to the series of certificates. Beneficial owners are only
permitted to exercise the rights of certificateholders indirectly through
financial intermediaries and the depository. Monthly and annual reports on the
related trust fund provided to the depository or its nominee, as the case may
be, as holder of record of the book-entry certificates, 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 depository accounts the book-entry certificates of the
beneficial owners are credited.

     Until definitive certificates are issued, the depository will take any
action permitted to be taken by the holders of the book-entry certificates of a
particular series under the related pooling and servicing agreement only at the
direction of one or more financial intermediaries to whose depository accounts
the book-entry certificates are credited to the extent that the actions are
taken on behalf of financial intermediaries whose holdings include the
book-entry certificates.

                                       39
<PAGE>   97

     The applicable prospectus supplement may when and for what reasons
definitive certificates may be issued, but if it does not, definitive
certificates will be issued to beneficial owners of book-entry certificates, or
their nominees, rather than to the depository, only if the depository or the
depositor advises the trustee in writing that the depository is no longer
willing, qualified or able to discharge properly its responsibilities as nominee
and depository with respect to the book-entry certificates and the depositor or
the trustee is unable to locate a qualified successor; the depositor, at its
sole option, elects to terminate the book-entry system through the depository;
or after the occurrence of an event of default, beneficial owners of
certificates representing not less than 51% of the aggregate percentage
interests evidenced by each class of certificates of the related series issued
as book-entry certificates advise the trustee and the depository through the
financial intermediaries in writing that the continuation of a book-entry system
through the depository (or a successor to it) is no longer in the best interests
of the beneficial owners.

     Upon the occurrence of any of the events described in the preceding
paragraph, the trustee will be required to notify all beneficial owners of the
occurrence of the event and the availability of definitive certificates. Upon
surrender by the depository of the global certificate or certificates
representing the book-entry certificates and instructions for re-registration,
the trustee will issue the definitive certificates, and thereafter the trustee
will recognize the holders of the definitive certificates as certificateholders
under the pooling and servicing agreement relating to the series of
certificates.

                               CREDIT ENHANCEMENT

GENERAL

     Credit enhancement may be provided for one or more classes of a series of
certificates or with respect to the Mortgage Assets in the related trust fund.
Credit enhancement may be in the form of a limited financial guaranty policy
issued by an entity named in the related prospectus supplement, the
subordination of one or more classes of the certificates of the series, the
establishment of one or more reserve funds, the use of a cross-support feature,
use of a mortgage pool insurance policy, bankruptcy bond, special hazard
insurance policy, surety bond, letter of credit, guaranteed investment contract
or other method of credit enhancement described in the related prospectus
supplement, or any combination of them. Credit enhancement may not provide
protection against all risks of loss or guarantee repayment of the entire
principal balance of the certificates and interest on them. If losses occur
which exceed the amount covered by credit enhancement or which are not covered
by the credit enhancement, certificateholders will bear their allocable share of
any deficiencies.

SUBORDINATION

     If so specified in the related prospectus supplement, the rights of holders
of one or more classes of subordinated certificates will be subordinate to the
rights of holders of one or more other classes of senior certificates of the
series to distributions of scheduled principal, principal prepayments, interest
or any combination of them that otherwise would have been payable to holders of
subordinated certificates under the circumstances and to the extent specified in
the related prospectus supplement. If specified in the related prospectus
supplement, delays in receipt of scheduled payments on the Mortgage Assets and
losses with respect to the Mortgage Assets will be borne first by the various
classes of subordinated certificates and thereafter by the various classes of
senior certificates, in each case under the circumstances and subject to the
limitations specified in the related prospectus supplement. The aggregate
distributions of delinquent payments on the Mortgage Assets over the lives of
the certificates or at any time, the aggregate losses on Mortgage Assets which
must be borne by the subordinated certificates by virtue of subordination and
the amount of the distributions otherwise distributable to the subordinated
certificateholders that will be distributable to senior certificateholders on
any distribution date may be limited as specified in the related prospectus
supplement. If aggregate distributions of delinquent payments on the Mortgage
Assets or aggregate losses on the Mortgage Assets were to exceed the amount
specified in the related prospectus supplement, senior certificateholders would
experience losses on the certificates.

                                       40
<PAGE>   98

     If specified in the related prospectus supplement, various classes of
senior certificates and subordinated certificates may themselves be subordinate
in their right to receive certain distributions to other classes of senior and
subordinated certificates, respectively, through a cross support mechanism or
otherwise.

     As between classes of senior certificates and as between classes of
subordinated certificates, distributions may be allocated among the classes in
the order of their scheduled final distribution dates, in accordance with a
schedule or formula, in relation to the occurrence of events, or otherwise, in
each case as specified in the related prospectus supplement. As between classes
of subordinated certificates, payments to senior certificateholders on account
of delinquencies or losses and payments to the reserve fund will be allocated as
specified in the related prospectus supplement.

MORTGAGE POOL INSURANCE POLICIES

     If specified in the related prospectus supplement relating to a mortgage
pool, a separate mortgage pool insurance policy will be obtained for the
mortgage pool and issued by the insurer named in the prospectus supplement. Each
mortgage pool insurance policy will, subject to policy limitations, cover loss
from default in payment on mortgage loans in the mortgage pool in an amount
equal to a percentage specified in the prospectus supplement of the aggregate
principal balance of the mortgage loans on the cut-off date that are not covered
as to their entire outstanding principal balances by primary mortgage insurance
policies. As more fully described below, the master servicer will present claims
under the insurance to the pool insurer on behalf of itself, the trustee and the
certificateholders. The mortgage pool insurance policies, however, are not
blanket policies against loss, since claims under them may be made only for
particular defaulted mortgage loans and only upon satisfaction of conditions
precedent in the policy. The applicable prospectus supplement may specify that
mortgage pool insurance will cover the failure to pay or the denial of a claim
under a primary mortgage insurance policy, but if it does not, the mortgage pool
insurance policies will not cover losses due to a failure to pay or denial of a
claim under a primary mortgage insurance policy.

     In general, each mortgage pool insurance policy will provide that no claims
may be validly presented unless

     - any required primary mortgage insurance policy is in effect for the
       defaulted mortgage loan and a claim under it has been submitted and
       settled;

     - hazard insurance on the related mortgaged property has been kept in force
       and real estate taxes and other protection and preservation expenses have
       been paid;

     - if there has been physical loss or damage to the mortgaged property, it
       has been restored to its physical condition (reasonable wear and tear
       excepted) at the time of issuance of the policy; and

     - the insured has acquired good and merchantable title to the mortgaged
       property free and clear of liens except certain permitted encumbrances.

     Upon satisfaction of these conditions, the pool insurer will have the
option either to purchase the mortgaged property at a price equal to the
principal balance of the related mortgage loan plus accrued and unpaid interest
at the mortgage rate to the date of the purchase and certain expenses incurred
by the master servicer on behalf of the trustee and certificateholders or to pay
the amount by which the sum of the principal balance of the defaulted mortgage
loan plus accrued and unpaid interest at the mortgage rate to the date of
payment of the claim and the aforementioned expenses exceeds the proceeds
received from an approved sale of the mortgaged property, in either case net of
certain amounts paid or assumed to have been paid under the related primary
mortgage insurance policy. If any mortgaged property is damaged, and proceeds,
if any, from the related hazard insurance policy or a special hazard insurance
policy or policies maintained for a series are insufficient to restore the
damaged property to a condition sufficient to permit recovery under the mortgage
pool insurance policy, the master servicer will not be required to expend its
own funds to restore the damaged property unless it determines that the
restoration will increase the proceeds to certificateholders on liquidation of
the mortgage loan after reimbursement of the master
                                       41
<PAGE>   99

servicer for its expenses and the expenses will be recoverable by it through
proceeds of the sale of the mortgaged property or proceeds of the related
mortgage pool insurance policy or any related primary mortgage insurance policy.

     The applicable prospectus supplement may specify that mortgage pool
insurance will cover various origination and servicing defaults, but if it does
not, then no mortgage pool insurance policy will insure (and many primary
mortgage insurance policies do not insure) against loss sustained from a default
arising from, among other things, fraud or negligence in the origination or
servicing of a mortgage loan, including misrepresentation by the mortgagor, the
originator or persons involved in its origination, or failure to construct a
mortgaged property in accordance with plans and specifications. A failure of
coverage for one of these reasons might result in a breach of the related
seller's representations and, in that case, might result in an obligation on the
part of the seller to repurchase the defaulted mortgage loan if the breach
cannot be cured by the seller. No mortgage pool insurance policy will cover (and
many primary mortgage insurance policies do not cover) a claim with respect to a
defaulted mortgage loan occurring when the servicer of the mortgage loan, at the
time of default or thereafter, was not approved by the applicable insurer.

     The original amount of coverage under each mortgage pool insurance policy
will be maintained to the extent provided in the related prospectus supplement
and may be reduced over the life of the related certificates by the aggregate
dollar amount of claims paid less the aggregate of the net amounts realized by
the pool insurer upon disposition of all foreclosed properties. The applicable
prospectus supplement may provide that the claims paid will be net of master
servicer expenses and accrued interest, but if it does not, then the amount of
claims paid will include certain expenses incurred by the master servicer as
well as accrued interest on delinquent mortgage loans to the date of payment of
the claim. Accordingly, if aggregate net claims paid under any mortgage pool
insurance policy reach the original policy limit, coverage under that mortgage
pool insurance policy will be exhausted and any further losses will be borne by
the certificateholders.

SPECIAL HAZARD INSURANCE POLICIES

     If specified in the related prospectus supplement, a separate special
hazard insurance policy will be obtained for the mortgage pool and will be
issued by the insurer named in the prospectus supplement. Each special hazard
insurance policy will, subject to policy limitations, protect holders of the
related certificates from loss caused by the application of the coinsurance
clause contained in hazard insurance policies and loss from damage to mortgaged
properties caused by certain hazards not insured against under the standard form
of hazard insurance policy in the states where the mortgaged properties are
located or under a flood insurance policy if the mortgaged property is located
in a federally designated flood area. Some of the losses covered include
earthquakes and, to a limited extent, tidal waves and related water damage or as
otherwise specified in the related prospectus supplement. See "The Pooling and
Servicing Agreement -- Hazard Insurance." No special hazard insurance policy
will cover losses from fraud or conversion by the trustee or master servicer,
war, insurrection, civil war, certain governmental action, errors in design,
faulty workmanship or materials (except under certain circumstances), nuclear or
chemical reaction, flood (if the mortgaged property is located in a federally
designated flood area), nuclear or chemical contamination and certain other
risks. The amount of coverage under any special hazard insurance policy will be
specified in the related prospectus supplement. Each special hazard insurance
policy will provide that no claim may be paid unless hazard and, if applicable,
flood insurance on the property securing the mortgage loan have been kept in
force and other protection and preservation expenses have been paid.

     The applicable prospectus supplement may provide for other payment
coverage, but if it does not, then, subject to these limitations, each special
hazard insurance policy will provide that where there has been damage to
property securing a foreclosed mortgage loan (title to which has been acquired
by the insured) and to the extent the damage is not covered by the hazard
insurance policy or flood insurance policy, if any, maintained by the mortgagor
or the master servicer, the special hazard insurer will pay the lesser of the
cost of repair or replacement of the property or, upon transfer of the property
to the special
                                       42
<PAGE>   100

hazard insurer, the unpaid principal balance of the mortgage loan at the time of
acquisition of the property by foreclosure or deed in lieu of foreclosure, plus
accrued interest to the date of claim settlement and certain expenses incurred
by the master servicer with respect to the property. If the unpaid principal
balance of a mortgage loan plus accrued interest and certain expenses is paid by
the special hazard insurer, the amount of further coverage under the related
special hazard insurance policy will be reduced by that amount less any net
proceeds from the sale of the property. Any amount paid to repair the property
will further reduce coverage by that amount. So long as a mortgage pool
insurance policy remains in effect, the payment by the special hazard insurer of
the cost of repair or of the unpaid principal balance of the related mortgage
loan plus accrued interest and certain expenses will not affect the total
insurance proceeds paid to certificateholders, but will affect the relative
amounts of coverage remaining under the related special hazard insurance policy
and mortgage pool insurance policy.

     To the extent specified in the prospectus supplement, the master servicer
may deposit cash, an irrevocable letter of credit, or any other instrument
acceptable to each nationally recognized rating agency rating the certificates
of the related series at the request of the depositor in a special trust account
to provide protection in lieu of or in addition to that provided by a special
hazard insurance policy. The amount of any special hazard insurance policy or of
the deposit to the special trust account relating to the certificates may be
reduced so long as the reduction will not result in a downgrading of the rating
of the certificates by a rating agency rating certificates at the request of the
depositor.

BANKRUPTCY BONDS

     If specified in the related prospectus supplement, a bankruptcy bond to
cover losses resulting from proceedings under the federal Bankruptcy Code with
respect to a mortgage loan will be issued by an insurer named in the prospectus
supplement. Each bankruptcy bond will cover, to the extent specified in the
related prospectus supplement, certain losses resulting from a reduction by a
bankruptcy court of scheduled payments of principal and interest on a mortgage
loan or a reduction by the court of the principal amount of a mortgage loan and
will cover certain unpaid interest on the amount of a principal reduction from
the date of the filing of a bankruptcy petition. The required amount of coverage
under each bankruptcy bond will be set forth in the related prospectus
supplement. Coverage under a bankruptcy bond may be cancelled or reduced by the
master servicer if the cancellation or reduction would not adversely affect the
then current rating or ratings of the related certificates. See "Certain Legal
Aspects of the Mortgage Loans -- Anti-Deficiency Legislation and Other
Limitations on Lenders."

     To the extent specified in the prospectus supplement, the master servicer
may deposit cash, an irrevocable letter of credit or any other instrument
acceptable to each nationally recognized rating agency rating the certificates
of the related series at the request of the depositor in a special trust account
to provide protection in lieu of or in addition to that provided by a bankruptcy
bond. The amount of any bankruptcy bond or of the deposit to the special trust
account relating to the certificates may be reduced so long as the reduction
will not result in a downgrading of the rating of the certificates by a rating
agency rating certificates at the request of the depositor.

RESERVE FUND

     If so specified in the related prospectus supplement, credit support with
respect to a series of certificates may be provided by one or more reserve funds
held by the trustee, in trust, for the series of certificates. The related
prospectus supplement will specify whether or not a reserve fund will be
included in the trust fund for a series.

     The reserve fund for a series will be funded by a deposit of cash, U.S.
Treasury securities or instruments evidencing ownership of principal or interest
payments on U.S. Treasury securities, letters of credit, demand notes,
certificates of deposit, or a combination of them in an aggregate amount
specified in the related prospectus supplement; by the deposit from time to time
of amounts specified in the related prospectus supplement to which the
subordinated certificateholders, if any, would otherwise be entitled; or in any
other manner specified in the related prospectus supplement.

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<PAGE>   101

     Any amounts on deposit in the reserve fund and the proceeds of any other
instrument deposited in it upon maturity will be held in cash or will be
invested in permitted investments. The applicable prospectus supplement may
specify a different definition of permitted investments, but if it does not,
then permitted investments will include obligations of the United States and
specified agencies of the United States, certificates of deposit, specified
commercial paper, time deposits and bankers acceptances sold by eligible
commercial banks, and specified repurchase agreements for United States
government securities with eligible commercial banks. If a letter of credit is
deposited with the trustee, the letter of credit will be irrevocable. Generally,
any deposited instrument will name the trustee, in its capacity as trustee for
the certificateholders, as beneficiary and will be issued by an entity
acceptable to each rating agency that rates the certificates at the request of
the depositor. Additional information about the instruments deposited in the
reserve funds will be set forth in the related prospectus supplement.

     Any amounts so deposited and payments on instruments so deposited will be
available for withdrawal from the reserve fund for distribution to the
certificateholders for the purposes, in the manner and at the times specified in
the related prospectus supplement.

CROSS SUPPORT

     If specified in the related prospectus supplement, the beneficial ownership
of separate groups of assets included in a trust fund may be evidenced by
separate classes of the related series of certificates. In that case, credit
support may be provided by a cross support feature that requires that
distributions be made on certificates evidencing a beneficial ownership interest
in other asset groups within the same trust fund. The related prospectus
supplement for a series that includes a cross support feature will describe the
manner and conditions for applying the cross support feature.

     If specified in the related prospectus supplement, the coverage provided by
one or more forms of credit support may apply concurrently to two or more
related trust funds. If applicable, the related prospectus supplement will
identify the trust funds to which the credit support relates and the manner of
determining the amount of the coverage provided by it and of the application of
the coverage to the identified trust funds.

INSURANCE POLICIES, SURETY BONDS AND GUARANTIES

     If so provided in the prospectus supplement for a series of certificates,
deficiencies in amounts otherwise payable on the certificates or certain of
their classes will be covered by insurance policies or surety bonds provided by
one or more insurance companies or sureties. These instruments may cover timely
distributions of interest or full distributions of principal or both on the
basis of a schedule of principal distributions set forth in or determined in the
manner specified in the related prospectus supplement. In addition, if specified
in the related prospectus supplement, a trust fund may also include bankruptcy
bonds, special hazard insurance policies, other insurance or guaranties for the
purpose of maintaining timely payments or providing additional protection
against losses on the assets included in the trust fund, paying administrative
expenses, or establishing a minimum reinvestment rate on the payments made on
the assets or principal payment rate on the assets. These arrangements may
include agreements under which certificateholders are entitled to receive
amounts deposited in various accounts held by the trustee on the terms specified
in the prospectus supplement.

OVER-COLLATERALIZATION

     If so provided in the prospectus supplement for a series of certificates, a
portion of the interest payment on each Loan may be applied as an additional
distribution of principal to reduce the principal balance of a particular class
or classes of certificates and, thus, accelerate the rate of payment of
principal on the class or classes of certificates. Reducing the principal
balance of the certificates without a corresponding reduction in the principal
balance of the underlying Mortgage Assets will result in over-
collateralization.

                                       44
<PAGE>   102

                      YIELD AND PREPAYMENT CONSIDERATIONS

     The yields to maturity and weighted average lives of the certificates will
be affected primarily by the amount and timing of principal payments received on
or in respect of the Mortgage Assets included in the related trust fund. The
original terms to maturity of the underlying mortgage loans of the Mortgage
Assets in a given mortgage pool will vary depending upon the type of mortgage
loans included in it, and each prospectus supplement will contain information
about the type and maturities of the mortgage loans. The applicable prospectus
supplement may indicate that some mortgage loans provide for prepayment
penalties, but if it does not, then the mortgage loans may be prepaid without
penalty in full or in part at any time. The prepayment experience on the
underlying mortgage loans of the Mortgage Assets will affect the life of the
related series of certificates.

     A number of factors may affect the prepayment experience of mortgage loans,
including homeowner mobility, economic conditions, the presence and
enforceability of due-on-sale clauses, mortgage market interest rates and the
availability of mortgage funds.

     The applicable prospectus supplement may indicate that some conventional
mortgage loans do not have due-on-sale provisions, but if it does not, then all
conventional mortgage loans will contain due-on-sale provisions permitting the
mortgagee to accelerate the maturity of the loan upon sale or specified
transfers by the mortgagor of the underlying mortgaged property. Mortgage loans
insured by the FHA and mortgage loans partially guaranteed by the VA are
assumable with the consent of the FHA and the VA, respectively. Thus, the rate
of prepayments on those mortgage loans may be lower than that on conventional
mortgage loans bearing comparable interest rates. The master servicer generally
will enforce any due-on-sale or due-on-encumbrance clause, to the extent it has
knowledge of the conveyance or further encumbrance or the proposed conveyance or
proposed further encumbrance of the mortgaged property and reasonably believes
that it is entitled to do so under applicable law. However, the master servicer
will not take any enforcement action that would impair or threaten to impair any
recovery under any related insurance policy. See "The Pooling and Servicing
Agreement -- Collection Procedures" and "Certain Legal Aspects of the Mortgage
Loans" for a description of certain provisions of each pooling and servicing
agreement and certain legal developments that may affect the prepayment
experience on the mortgage loans.

     The rate of prepayments of conventional mortgage loans has fluctuated
significantly in recent years. In general, if prevailing rates fall
significantly below the mortgage rates borne by the mortgage loans, the mortgage
loans are likely to be subject to higher prepayment rates than if prevailing
interest rates remain at or above those mortgage rates. Conversely, if
prevailing interest rates rise appreciably above the mortgage rates borne by the
mortgage loans, the mortgage loans are likely to experience a lower prepayment
rate than if prevailing rates remain at or below those mortgage rates. However,
there can be no assurance that this will be the case.

     When a full prepayment is made on a mortgage loan, the mortgagor is charged
interest on the principal amount of the mortgage loan prepaid only for the
number of days in the month actually elapsed up to the date of the prepayment
rather than for a full month. Thus, in most instances, the effect of prepayments
in full will be to reduce the amount of interest passed through in the following
month to certificateholders. Partial prepayments in a given month may be applied
to the outstanding principal balances of the mortgage loans so prepaid in the
month of receipt or the month following receipt. In the latter case, partial
prepayments will not reduce the amount of interest passed through in the month.

     Interest payable on the certificates on any given distribution date will
include all interest accrued during their related interest accrual period. The
interest accrual period for the certificates of each series will be specified in
the applicable prospectus supplement. If the interest accrual period ends two or
more days before the related distribution date, your effective yield will be
less than it would be if the interest accrual period ended the day before the
distribution date, and your effective yield at par would be less than the
indicated coupon rate.

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<PAGE>   103

     Under specified circumstances, the master servicer or the holders of the
residual interests in a REMIC may have the option to purchase the assets of a
trust fund thereby effecting earlier retirement of the related series of
certificates. See "The Pooling and Servicing Agreement -- Termination; Optional
Termination."

     Factors other than those identified in this prospectus and in the related
prospectus supplement could significantly affect principal prepayments at any
time and over the lives of the certificates. The relative contribution of the
various factors affecting prepayment may also vary from time to time. There can
be no assurance as to the rate of payment of principal of the Mortgage Assets at
any time or over the lives of the certificates.

     The prospectus supplement relating to a series of certificates will discuss
in greater detail the effect of the rate and timing of principal payments
(including principal prepayments), delinquencies and losses on the yield,
weighted average lives and maturities of the certificates.

                      THE POOLING AND SERVICING AGREEMENT

     The following is a summary of the material provisions of the pooling and
servicing agreement which are not described elsewhere in this prospectus. Where
particular provisions or terms used in the pooling and servicing agreement are
referred to, the provisions or terms are as specified in the related pooling and
servicing agreement.

ASSIGNMENT OF MORTGAGE ASSETS

     Assignment of the Mortgage Loans. At the time of issuance of the
certificates of a series, the depositor will cause the mortgage loans comprising
the related trust fund to be assigned to the trustee, together with all
principal and interest received by or on behalf of the depositor on or with
respect to the mortgage loans after the cut-off date, other than principal and
interest due on or before the cut-off date and other than any retained interest
specified in the related prospectus supplement. The trustee will, concurrently
with the assignment, deliver the certificates to the depositor in exchange for
the mortgage loans. Each mortgage loan will be identified in a schedule
appearing as an exhibit to the related pooling and servicing agreement. The
schedule will include information as to the outstanding principal balance of
each mortgage loan after application of payments due on the cut-off date, as
well as information regarding the mortgage rate, the current scheduled monthly
payment of principal and interest, the maturity of the loan, the Loan-to-Value
Ratio at origination and other specified information.

     In addition, the depositor will deliver or cause to be delivered to the
trustee (or to the custodian) for each mortgage loan

     - the mortgage note endorsed without recourse in blank or to the order of
       the trustee, except that the depositor may deliver or cause to be
       delivered a lost note affidavit in lieu of any original mortgage note
       that has been lost,

     - the mortgage, deed of trust or similar instrument with evidence of
       recording indicated on it (except for any mortgage not returned from the
       public recording office, in which case the depositor will deliver or
       cause to be delivered a copy of the mortgage together with a certificate
       that the original of the mortgage was delivered to the recording office
       or some other arrangement will be provided for),

     - an assignment of the mortgage to the trustee in recordable form and

     - any other security documents specified in the related prospectus
       supplement or the related pooling and servicing agreement.

The applicable prospectus supplement may provide other arrangements for assuring
the priority of the assignments, but if it does not, then the depositor will
promptly cause the assignments of the related loans to be recorded in the
appropriate public office for real property records, except in states in which
in the

                                       46
<PAGE>   104

opinion of counsel recording is not required to protect the trustee's interest
in the loans against the claim of any subsequent transferee or any successor to
or creditor of the depositor or the originator of the loans.

     With respect to any mortgage loans that are cooperative loans, the
depositor will cause to be delivered to the trustee

     - the related original cooperative note endorsed without recourse in blank
       or to the order of the trustee (or, to the extent the related pooling and
       servicing agreement so provides, a lost note affidavit),

     - the original security agreement,

     - the proprietary lease or occupancy agreement,

     - the recognition agreement,

     - an executed financing agreement and

     - the relevant stock certificate, related blank stock powers and any other
       document specified in the related prospectus supplement.

     The depositor will cause to be filed in the appropriate office an
assignment and a financing statement evidencing the trustee's security interest
in each cooperative loan.

     The trustee (or the custodian) will review the mortgage loan documents
within the time period specified in the related prospectus supplement after
receipt of them, and the trustee will hold the documents in trust for the
benefit of the certificateholders. Generally, if the document is found to be
missing or defective in any material respect, the trustee (or the custodian)
will notify the master servicer and the depositor, and the master servicer will
notify the related seller. If the seller cannot cure the omission or defect
within the time period specified in the related prospectus supplement after
receipt of the notice, the seller will be obligated to purchase the related
mortgage loan from the trustee at the purchase price or, if so specified in the
related prospectus supplement, replace the mortgage loan with another mortgage
loan that meets specified requirements. There can be no assurance that a seller
will fulfill this purchase obligation. Although the master servicer may be
obligated to enforce the obligation to the extent described under "Mortgage Loan
Program -- Representations by Sellers; Repurchases," neither the master servicer
nor the depositor will be obligated to purchase the mortgage loan if the seller
defaults on its purchase obligation, unless the breach also constitutes a breach
of the representations or warranties of the master servicer or the depositor.
The applicable prospectus supplement may provide other remedies but if it does
not, then this purchase obligation constitutes the sole remedy available to the
certificateholders or the trustee for omission of, or a material defect in, a
constituent document.

     The trustee will be authorized to appoint a custodian pursuant to a
custodial agreement to maintain possession of and, if applicable, to review the
documents relating to the mortgage loans as agent of the trustee.

     Notwithstanding these provisions, unless the related prospectus supplement
otherwise provides, no mortgage loan will be purchased from a trust fund for
which a REMIC election is to be made if the purchase would result in a
prohibited transaction tax under the Code.

     Assignment of Agency Securities. The depositor will cause the Agency
Securities to be registered in the name of the trustee or its nominee, and the
trustee concurrently will execute, countersign and deliver the certificates.
Each Agency Security will be identified in a schedule appearing as an exhibit to
the pooling and servicing agreement, which will specify as to each Agency
Security the original principal amount and outstanding principal balance as of
the cut-off date, the annual pass-through rate and the maturity date.

     Assignment of Private Mortgage-Backed Securities. The depositor will cause
the Private Mortgage-Backed Securities to be registered in the name of the
trustee. The trustee (or the custodian) will have possession of any certificated
Private Mortgage-Backed Securities. Generally, the trustee will not be in

                                       47
<PAGE>   105

possession of or be assignee of record of any underlying assets for a Private
Mortgage-Backed Security. See "The Trust Fund -- Private Mortgage-Backed
Securities." Each Private Mortgage-Backed Security will be identified in a
schedule appearing as an exhibit to the related pooling and servicing agreement
which will specify the original principal amount, outstanding principal balance
as of the cut-off date, annual pass-through rate or interest rate and maturity
date and other specified pertinent information for each Private Mortgage-Backed
Security conveyed to the trustee.

PAYMENTS ON MORTGAGE ASSETS; DEPOSITS TO CERTIFICATE ACCOUNT

     The master servicer will establish and maintain or cause to be established
and maintained for the related trust fund a separate account or accounts for the
collection of payments on the related Mortgage Assets in the trust fund (the
"Certificate Account"). The applicable prospectus supplement may provide for
other requirements for the Certificate Account, but if it does not, then the
Certificate Account must be either

     - maintained with a depository institution the short-term unsecured debt
       obligations of which are rated in the highest short-term rating category
       by the nationally recognized statistical rating organizations that rated
       one or more classes of the related series of certificates at the request
       of the depositor, or in the case of a depository institution that is the
       principal subsidiary of a holding company, the short-term debt
       obligations of the holding company are so rated,

     - an account or accounts the deposits in which are insured by the FDIC or
       SAIF to the limits established by the FDIC or the SAIF, and the uninsured
       deposits in which are otherwise secured such that, as evidenced by an
       opinion of counsel, the certificateholders have a claim with respect to
       the funds in the Certificate Account or a perfected first priority
       security interest against any collateral securing the funds that is
       superior to the claims of any other depositors or general creditors of
       the depository institution with which the Certificate Account is
       maintained,

     - a trust account or accounts maintained with the trust department of a
       federal or a state chartered depository institution or trust company,
       acting in a fiduciary capacity or

     - an account or accounts otherwise acceptable to each rating agency that
       rated one or more classes of the related series of certificates at the
       request of the depositor.

The collateral eligible to secure amounts in the Certificate Account is limited
to defined permitted investments. A Certificate Account may be maintained as an
interest bearing account or the funds held in it may be invested pending each
succeeding distribution date in defined permitted investments. To the extent
provided in the related prospectus supplement, the master servicer or its
designee will be entitled to receive the interest or other income earned on
funds in the Certificate Account as additional compensation and will be
obligated to deposit in the Certificate Account the amount of any loss
immediately as realized. The Certificate Account may be maintained with the
master servicer or with a depository institution that is an affiliate of the
master servicer, provided it meets the standards set forth above.

     The master servicer will deposit or cause to be deposited in the
Certificate Account for each trust fund on a daily basis, to the extent
applicable and unless the related pooling and servicing agreement provides for a
different deposit arrangement, the following payments and collections received
or advances made by or on behalf of it after the cut-off date (other than
payments due on or before the cut-off date and exclusive of any amounts
representing any retained interest specified in the related prospectus
supplement):

     - all payments on account of principal, including principal prepayments
       and, if specified in the related prospectus supplement, prepayment
       penalties, on the mortgage loans;

     - all payments on account of interest on the mortgage loans, net of
       applicable servicing compensation;

     - all proceeds (net of unreimbursed payments of property taxes, insurance
       premiums and similar items ("Insured Expenses") incurred, and
       unreimbursed advances made, by the master servicer) of the hazard
       insurance policies and any primary mortgage insurance policies, to the
       extent the
                                       48
<PAGE>   106

       proceeds are not applied to the restoration of the property or released
       to the mortgagor in accordance with the master servicer's normal
       servicing procedures and all other cash amounts (net of unreimbursed
       expenses incurred in connection with liquidation or foreclosure and
       unreimbursed advances, if any) received and retained in connection with
       the liquidation of defaulted mortgage loans, by foreclosure or otherwise,
       together with any net proceeds received on a monthly basis with respect
       to any properties acquired on behalf of the certificateholders by
       foreclosure or deed in lieu of foreclosure;

     - all proceeds of any mortgage loan or property in respect thereof
       purchased by the master servicer, the depositor or any seller as
       described under "Mortgage Loan Program -- Representations by Sellers;
       Repurchases" or "The Pooling and Servicing Agreement -- Assignment of
       Mortgage Assets" above and all proceeds of any mortgage loan repurchased
       as described under "The Pooling and Servicing Agreement -- Termination;
       Optional Termination";

     - all payments required to be deposited in the Certificate Account with
       respect to any deductible clause in any blanket insurance policy
       described under "-- Hazard Insurance";

     - any amount required to be deposited by the master servicer in connection
       with losses realized on investments for the benefit of the master
       servicer of funds held in the Certificate Account and, to the extent
       specified in the related prospectus supplement, any payments required to
       be made by the master servicer in connection with prepayment interest
       shortfalls; and

     - all other amounts required to be deposited in the Certificate Account
       pursuant to the pooling and servicing agreement.

     The master servicer (or the depositor, as applicable) may from time to time
direct the institution that maintains the Certificate Account to withdraw funds
from the Certificate Account for the following purposes:

     - to pay to the master servicer the servicing fees described in the related
       prospectus supplement, the master servicing fees (subject to reduction)
       and, as additional servicing compensation, earnings on or investment
       income with respect to funds in the amounts in the Certificate Account
       credited thereto;

     - to reimburse the master servicer for advances, the right of reimbursement
       with respect to any mortgage loan being limited to amounts received that
       represent late recoveries of payments of principal and interest on the
       mortgage loan (or insurance proceeds or liquidation proceeds from the
       mortgage loan) with respect to which the advance was made;

     - to reimburse the master servicer for any advances previously made that
       the master servicer has determined to be nonrecoverable;

     - to reimburse the master servicer from insurance proceeds not used to
       restore the property for expenses incurred by the master servicer and
       covered by the related insurance policies;

     - to reimburse the master servicer for unpaid master servicing fees and
       unreimbursed out-of-pocket costs and expenses incurred by the master
       servicer in the performance of its servicing obligations, the right of
       reimbursement being limited to amounts received representing late
       recoveries of the payments for which the advances were made;

     - to pay to the master servicer, with respect to each mortgage loan or
       property acquired in respect thereof that has been purchased by the
       master servicer pursuant to the pooling and servicing agreement, all
       amounts received on them and not taken into account in determining the
       principal balance of the repurchased mortgage loan;

     - to reimburse the master servicer or the depositor for expenses incurred
       and reimbursable pursuant to the pooling and servicing agreement;

                                       49
<PAGE>   107

     - to withdraw any amount deposited in the Certificate Account that was not
       required to be deposited in it; and

     - to clear and terminate the Certificate Account upon termination of the
       pooling and servicing agreement.

     In addition, the pooling and servicing agreement will generally provide
that on or before the business day preceding each distribution date, the master
servicer shall withdraw from the Certificate Account the amount of Available
Funds, to the extent on deposit, for deposit in an account maintained by the
trustee for the related series of certificates.

COLLECTION PROCEDURES

     The master servicer, directly or through one or more sub-servicers, will
make reasonable efforts to collect all payments called for under the mortgage
loans and will, consistent with each pooling and servicing agreement and any
mortgage pool insurance policy, primary mortgage insurance policy, FHA
insurance, VA guaranty and bankruptcy bond or alternative arrangements, follow
the collection procedures it customarily follows for mortgage loans that are
comparable to the mortgage loans. Consistent with the above, the master servicer
may, in its discretion, waive any assumption fee, late payment or other charge
in connection with a mortgage loan and arrange with a mortgagor a schedule for
the liquidation of delinquencies running for no more than 125 days after the
applicable due date for each payment to the extent not inconsistent with the
coverage of the mortgage loan by a mortgage pool insurance policy, primary
mortgage insurance policy, FHA insurance, VA guaranty or bankruptcy bond or
alternative arrangements, if applicable. To the extent the master servicer is
obligated to make or to cause to be made advances, the obligation will remain
during any period of such an arrangement.

     The applicable prospectus supplement may provide for other alternatives
regarding due-on-sale clauses, but if it does not, then in any case in which
property securing a conventional mortgage loan has been, or is about to be,
conveyed by the mortgagor, the master servicer will, to the extent it has
knowledge of the conveyance or proposed conveyance, exercise or cause to be
exercised its rights to accelerate the maturity of the mortgage loan under any
due-on-sale clause applicable to it, but only if permitted by applicable law and
the exercise will not impair or threaten to impair any recovery under any
related primary mortgage insurance policy. If these conditions are not met or if
the master servicer reasonably believes it is unable under applicable law to
enforce the due-on-sale clause or if the mortgage loan is insured by the FHA or
partially guaranteed by the VA, the master servicer will enter into or cause to
be entered into an assumption and modification agreement with the person to whom
the property has been or is about to be conveyed, pursuant to which that person
becomes liable for repayment of the mortgage loan and, to the extent permitted
by applicable law, the mortgagor also remains liable on it. Any fee collected by
or on behalf of the master servicer for entering into an assumption agreement
will be retained by or on behalf of the master servicer as additional servicing
compensation. See "Certain Legal Aspects of the Mortgage Loans -- Due-on-Sale
Clauses." The terms of the related mortgage loan may not be changed in
connection with an assumption.

     Any prospective purchaser of a cooperative apartment will generally have to
obtain the approval of the board of directors of the relevant cooperative before
purchasing the shares and acquiring rights under the related proprietary lease
or occupancy agreement. See "Certain Legal Aspects of the Mortgage Loans." This
approval is usually based on the purchaser's income and net worth and numerous
other factors. Although the cooperative's approval is unlikely to be
unreasonably withheld or delayed, the necessity of acquiring the approval could
limit the number of potential purchasers for those shares and otherwise limit
the trust fund's ability to sell and realize the value of shares securing a
cooperative loan.

     In general, a "tenant-stockholder" (as defined in Code Section 216(b)(2))
of a corporation that qualifies as a "cooperative housing corporation" within
the meaning of Code Section 216(b)(1) is allowed a deduction for amounts paid or
accrued within his taxable year to the corporation representing his
proportionate share of certain interest expenses and certain real estate taxes
allowable as a deduction under Code Section 216(a) to the corporation under Code
Sections 163 and 164. In order for a corporation to
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<PAGE>   108

qualify under Code Section 216(b)(1) for its taxable year in which the items are
allowable as a deduction to the corporation, the Section requires, among other
things, that at least 80% of the gross income of the corporation be derived from
its tenant-stockholders (as defined in Code Section 216(b)(2)). By virtue of
this requirement, the status of a corporation for purposes of Code Section
216(b)(1) must be determined on a year-to-year basis. Consequently, there can be
no assurance that cooperatives relating to the cooperative loans will qualify
under Section 216(b)(1) for any particular year. If a cooperative fails to
qualify for one or more years, the value of the collateral securing any related
cooperative loans could be significantly impaired because no deduction would be
allowable to tenant-stockholders under Code Section 216(a) with respect to those
years. In view of the significance of the tax benefits accorded tenant-
stockholders of a corporation that qualifies under Code Section 216(b)(1), the
likelihood that a failure to qualify would be permitted to continue over a
period of years appears remote.

HAZARD INSURANCE

     The master servicer will require the mortgagor on each mortgage loan to
maintain a hazard insurance policy providing for no less than the coverage of
the standard form of fire insurance policy with extended coverage customary for
the type of mortgaged property in the state in which the mortgaged property is
located. The coverage will be in an amount that is at least equal to the lesser
of

     - the maximum insurable value of the improvements securing the mortgage
       loan or

     - the greater of

      - the outstanding principal balance of the mortgage loan and

      - an amount such that the proceeds of the policy shall be sufficient to
        prevent the mortgagor or the mortgagee from becoming a co-insurer.

All amounts collected by the master servicer under any hazard policy (except for
amounts to be applied to the restoration or repair of the mortgaged property or
released to the mortgagor in accordance with the master servicer's normal
servicing procedures) will be deposited in the related Certificate Account. If
the master servicer maintains a blanket policy insuring against hazard losses on
all the mortgage loans comprising part of a trust fund, it will have satisfied
its obligation relating to the maintenance of hazard insurance. The blanket
policy may contain a deductible clause, in which case the master servicer will
be required to deposit from its own funds into the related Certificate Account
the amounts that would have been deposited therein but for the clause.

     In general, the standard form of fire and extended coverage policy covers
physical damage to or destruction of the improvements securing a mortgage loan
by fire, lightning, explosion, smoke, windstorm and hail, riot, strike and civil
commotion, subject to the conditions and exclusions particularized in each
policy. Although the policies relating to the mortgage loans may have been
underwritten by different insurers under different state laws in accordance with
different applicable forms and therefore may not contain identical terms, their
basic terms are dictated by the respective state laws, and most policies
typically do not cover any physical damage resulting from war, revolution,
governmental actions, floods and other water-related causes, earth movement
(including earthquakes, landslides and mud flows), nuclear reactions, wet or dry
rot, vermin, rodents, insects or domestic animals, theft and, in certain cases,
vandalism. This list is merely indicative of certain kinds of uninsured risks
and is not all inclusive. If the mortgaged property securing a mortgage loan is
located in a federally designated special flood area at the time of origination,
the master servicer will require the mortgagor to obtain and maintain flood
insurance.

     The hazard insurance policies covering properties securing the mortgage
loans typically contain a clause that in effect requires the insured at all
times to carry insurance of a specified percentage (generally 80% to 90%) of the
full replacement value of the insured property in order to recover the full
amount of any partial loss. If the insured's coverage falls below this specified
percentage, then the insurer's liability upon partial loss will not exceed the
larger of the actual cash value (generally defined as replacement cost at the
time and place of loss, less physical depreciation) of the improvements damaged
or destroyed and the proportion of the loss that the amount of insurance carried
bears to the specified percentage of the full
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<PAGE>   109

replacement cost of the improvements. Since the amount of hazard insurance the
master servicer may cause to be maintained on the improvements securing the
mortgage loans declines as the principal balances owing on them decrease, and
since improved real estate generally has appreciated in value over time in the
past, the effect of this requirement upon partial loss may be that hazard
insurance proceeds will be insufficient to fully restore the damaged property.
If specified in the related prospectus supplement, a special hazard insurance
policy will be obtained to insure against certain of the uninsured risks
described above. See "Credit Enhancement -- Special Hazard Insurance Policies"
and "Credit Enhancements -- Insurance -- Special Hazard Insurance Policy" in the
related prospectus supplement.

     The master servicer will not require that a standard hazard or flood
insurance policy be maintained on the cooperative dwelling relating to any
cooperative loan. Generally, the cooperative itself is responsible for
maintenance of hazard insurance for the property owned by the cooperative and
the tenant-stockholders of that cooperative do not maintain individual hazard
insurance policies. To the extent, however, that a cooperative and the related
borrower on a cooperative loan do not maintain insurance or do not maintain
adequate coverage or any insurance proceeds are not applied to the restoration
of damaged property, any damage to the borrower's cooperative dwelling or the
cooperative's building could significantly reduce the value of the collateral
securing the cooperative loan.

REALIZATION UPON DEFAULTED MORTGAGE LOANS

     Primary Mortgage Insurance Policies. The master servicer will maintain or
cause to be maintained, as the case may be, in effect, to the extent specified
in the related prospectus supplement, a primary mortgage insurance policy with
regard to each mortgage loan for which coverage is required. The master servicer
will not cancel or refuse to renew any primary mortgage insurance policy in
effect at the time of the initial issuance of a series of certificates that is
required to be kept in force under the applicable pooling and servicing
agreement unless the replacement primary mortgage insurance policy for the
cancelled or nonrenewed policy is maintained with an insurer whose claims-paying
ability is sufficient to maintain the current rating of the classes of
certificates of the series that have been rated.

     Although the terms of primary mortgage insurance vary, the amount of a
claim for benefits under a primary mortgage insurance policy covering a mortgage
loan will consist of the insured percentage of the unpaid principal amount of
the covered mortgage loan and accrued and unpaid interest on it and
reimbursement of certain expenses, less all rents or other payments collected or
received by the insured (other than the proceeds of hazard insurance) that are
derived from or in any way related to the mortgaged property, hazard insurance
proceeds in excess of the amount required to restore the mortgaged property and
which have not been applied to the payment of the mortgage loan, amounts
expended but not approved by the issuer of the related primary mortgage
insurance policy, claim payments previously made by the primary insurer and
unpaid premiums.

     Primary mortgage insurance policies reimburse certain losses sustained from
defaults in payments by borrowers. Primary mortgage insurance policies will not
insure against, and exclude from coverage, a loss sustained from a default
arising from or involving certain matters, including fraud or negligence in
origination or servicing of the mortgage loans, including misrepresentation by
the originator, mortgagor or other persons involved in the origination of the
mortgage loan; failure to construct the mortgaged property subject to the
mortgage loan in accordance with specified plans; physical damage to the
mortgaged property; and the related sub-servicer not being approved as a
servicer by the primary insurer.

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<PAGE>   110

     Recoveries Under A Primary Mortgage Insurance Policy. As conditions
precedent to the filing of or payment of a claim under a primary mortgage
insurance policy covering a mortgage loan, the insured will be required to

     - advance or discharge

        - all hazard insurance policy premiums and as necessary and approved in
          advance by the primary insurer, real estate property taxes, all
          expenses required to maintain the related mortgaged property in at
          least as good a condition as existed at the effective date of the
          primary mortgage insurance policy, ordinary wear and tear excepted,
          mortgaged property sales expenses, any specified outstanding liens on
          the mortgaged property and foreclosure costs, including court costs
          and reasonable attorneys' fees;

     - upon any physical loss or damage to the mortgaged property, have the
       mortgaged property restored and repaired to at least as good a condition
       as existed at the effective date of the primary mortgage insurance
       policy, ordinary wear and tear excepted; and

     - tender to the primary insurer good and merchantable title to and
       possession of the mortgaged property.

     The master servicer, on behalf of itself, the trustee and the
certificateholders, will present claims to the insurer under each primary
mortgage insurance policy, and will take any reasonable steps consistent with
its practices regarding comparable mortgage loans and necessary to receive
payment or to permit recovery under the policy with respect to defaulted
mortgage loans. As set forth above, all collections by or on behalf of the
master servicer under any primary mortgage insurance policy and, when the
mortgaged property has not been restored, the hazard insurance policy, are to be
deposited in the Certificate Account, subject to withdrawal as heretofore
described.

     If the mortgaged property securing a defaulted mortgage loan is damaged and
proceeds, if any, from the related hazard insurance policy are insufficient to
restore the damaged mortgaged property to a condition sufficient to permit
recovery under the related primary mortgage insurance policy, if any, the master
servicer is not required to expend its own funds to restore the damaged
mortgaged property unless it determines that the restoration will increase the
proceeds to certificateholders on liquidation of the mortgage loan after
reimbursement of the master servicer for its expenses and that the expenses will
be recoverable by it from related insurance proceeds or liquidation proceeds.

     If recovery on a defaulted mortgage loan under any related primary mortgage
insurance policy is not available for the reasons set forth in the preceding
paragraph, or if the defaulted mortgage loan is not covered by a primary
mortgage insurance policy, the master servicer will be obligated to follow or
cause to be followed the normal practices and procedures that it deems
appropriate to realize upon the defaulted mortgage loan. If the proceeds of any
liquidation of the mortgaged property securing the defaulted mortgage loan are
less than the principal balance of the mortgage loan plus interest accrued on it
that is payable to certificateholders, the trust fund will realize a loss in the
amount of the difference plus the aggregate of expenses incurred by the master
servicer in connection with the proceedings that are reimbursable under the
pooling and servicing agreement. In the unlikely event that the proceedings
result in a total recovery which is, after reimbursement to the master servicer
of its expenses, in excess of the principal balance of the mortgage loan plus
interest accrued on it that is payable to certificateholders, the master
servicer will be entitled to withdraw or retain from the Certificate Account
amounts representing its normal servicing compensation with respect to the
mortgage loan and, unless otherwise specified in the related prospectus
supplement, amounts representing the balance of the excess, exclusive of any
amount required by law to be forwarded to the related mortgagor, as additional
servicing compensation.

     If the master servicer or its designee recovers insurance proceeds not used
to restore the property which, when added to any related liquidation proceeds
and after deduction of certain expenses reimbursable to the master servicer,
exceed the principal balance of a mortgage loan plus interest accrued thereon
that is payable to certificateholders, the master servicer will be entitled to
withdraw or retain from the Certificate Account amounts representing its normal
servicing compensation with respect to the
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<PAGE>   111

mortgage loan. If the master servicer has expended its own funds to restore the
damaged mortgaged property and the funds have not been reimbursed under the
related hazard insurance policy, it will be entitled to withdraw from the
Certificate Account out of related liquidation proceeds or insurance proceeds an
amount equal to the expenses incurred by it, in which event the trust fund may
realize a loss up to the amount so charged. Since insurance proceeds cannot
exceed deficiency claims and certain expenses incurred by the master servicer,
no insurance payment or recovery will result in a recovery to the trust fund
that exceeds the principal balance of the defaulted mortgage loan together with
accrued interest on it. See "Credit Enhancement" in this prospectus and in the
related prospectus supplement.

     Unless the related pooling and servicing agreement provides for a different
application of liquidation proceeds, the proceeds from any liquidation of a
mortgage loan will be applied in the following order of priority:

          first, to reimburse the master servicer for any unreimbursed expenses
     incurred by it to restore the related mortgaged property and any
     unreimbursed servicing compensation payable to the master servicer with
     respect to the mortgage loan;

          second, to reimburse the master servicer for any unreimbursed advances
     with respect to the mortgage loan;

          third, to accrued and unpaid interest (to the extent no advance has
     been made for the amount) on the mortgage loan;

          and fourth, as a recovery of principal of the mortgage loan.

     FHA Insurance; VA Guaranties. Mortgage loans designated in the related
prospectus supplement as insured by the FHA will be insured by the FHA as
authorized under the United States National Housing Act of 1934 of 1937, as
amended. Those mortgage loans will be insured under various FHA programs
including the standard FHA 203(b) program to finance the acquisition of one-to
four-family housing units and the FHA 245 graduated payment mortgage program.
These programs generally limit the principal amount and interest rates of the
mortgage loans insured. Mortgage loans insured by the FHA generally require a
minimum down payment of approximately 5% of the original principal amount of the
loan. No FHA-insured mortgage loans relating to a series may have an interest
rate or original principal amount exceeding the applicable FHA limits at the
time of origination of the loan.

     The insurance premiums for mortgage loans insured by the FHA are collected
by lenders approved by the HUD or by the master servicer or any sub-servicers
and are paid to the FHA. The regulations governing FHA single-family mortgage
insurance programs provide that insurance benefits are payable either upon
foreclosure (or other acquisition of possession) and conveyance of the mortgaged
premises to HUD or upon assignment of the defaulted mortgage loan to HUD. With
respect to a defaulted FHA-insured mortgage loan, the master servicer or any
sub-servicer is limited in its ability to initiate foreclosure proceedings. When
it is determined, either by the master servicer or any sub-servicer or HUD, that
default was caused by circumstances beyond the mortgagor's control, the master
servicer or any sub-servicer is expected to make an effort to avoid foreclosure
by entering, if feasible, into one of a number of available forms of forbearance
plans with the mortgagor. These plans may involve the reduction or suspension of
regular mortgage payments for a specified period, with the payments to be made
up on or before the maturity date of the mortgage, or the recasting of payments
due under the mortgage up to or beyond the maturity date. In addition, when a
default caused by circumstances beyond the mortgagor's control is accompanied by
certain other criteria, HUD may provide relief by making payments to the master
servicer or any sub-servicer in partial or full satisfaction of amounts due
'under the mortgage loan (which payments are to be repaid by the mortgagor to
HUD) or by accepting assignment of the loan from the master servicer or any
sub-servicer. With certain exceptions, at least three full monthly installments
must be due and unpaid under the mortgage loan and HUD must have rejected any
request for relief from the mortgagor before the master servicer or any
sub-servicer may initiate foreclosure proceedings.

     HUD has the option, in most cases, to pay insurance claims in cash or in
debentures issued by HUD. Currently, claims are being paid in cash, and claims
have not been paid in debentures since 1965. HUD
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<PAGE>   112

debentures issued in satisfaction of FHA insurance claims bear interest at the
applicable HUD debentures interest rate. The master servicer of any sub-servicer
of each FHA-insured mortgage loan will be obligated to purchase the debenture
issued in satisfaction of the mortgage loan upon default for an amount equal to
the principal amount of the debenture.

     The amount of insurance benefits generally paid by the FHA is equal to the
entire unpaid principal amount of the defaulted mortgage loan adjusted to
reimburse the master servicer or sub-servicer for certain costs and expenses and
to deduct certain amounts received or retained by the master servicer or
sub-servicer after default. When entitlement to insurance benefits results from
foreclosure (or other acquisition of possession) and conveyance to HUD, the
master servicer or sub-servicer is compensated for no more than two-thirds of
its foreclosure costs, and is compensated for accrued and unpaid interest but in
general only to the extent it was allowed pursuant to a forbearance plan
approved by HUD. When entitlement to insurance benefits results from assignment
of the mortgage loan to HUD, the insurance payment includes full compensation
for interest accrued and unpaid to the assignment date. The insurance payment
itself, upon foreclosure of an FHA-insured mortgage loan, bears interest from a
date 30 days after the mortgagor's first uncorrected failure to perform any
obligation to make any payment due under the mortgage loan and, upon assignment,
from the date of assignment to the date of payment of the claim, in each case at
the same interest rate as the applicable HUD debenture interest rate as
described above.

     Mortgage loans designated in the related prospectus supplement as
guaranteed by the VA will be partially guaranteed by the VA under the
Serviceman's Readjustment Act of 1944, as amended. The Serviceman's Readjustment
Act of 1944, as amended, permits a veteran (or in certain instances the spouse
of a veteran) to obtain a mortgage loan guaranty by the VA covering mortgage
financing of the purchase of a one- to four-family dwelling unit at interest
rates permitted by the VA. The program has no mortgage loan limits, requires no
down payment from the purchaser and permits the guarantee of mortgage loans of
up to 30 years' duration. However, no mortgage loan guaranteed by the VA will
have an original principal amount greater than five times the partial VA
guaranty for the mortgage loan.

     The maximum guaranty that may be issued by the VA under a VA guaranteed
mortgage loan depends upon the original principal amount of the mortgage loan,
as further described in 38 United States Code Section 3703(a), as amended. As of
February 1996, the maximum guaranty that may be issued by the VA under a VA
guaranteed mortgage loan of more than $144,000 is the lesser of 25% of the
original principal amount of the mortgage loan and $50,750. The liability on the
guaranty is reduced or increased pro rata with any reduction or increase in the
amount of indebtedness, but in no event will the amount payable on the guaranty
exceed the amount of the original guaranty. The VA may, at its option and
without regard to the guaranty, make full payment to a mortgage holder of
unsatisfied indebtedness on a mortgage upon its assignment to the VA.

     With respect to a defaulted VA guaranteed mortgage loan, the master
servicer or sub-servicer is, absent exceptional circumstances, authorized to
announce its intention to foreclose only when the default has continued for
three months. Generally, a claim for the guaranty is submitted after liquidation
of the mortgaged property.

     The amount payable under the guaranty will be the percentage of the
VA-insured mortgage loan originally guaranteed applied to indebtedness
outstanding as of the applicable date of computation specified in the VA
regulations. Payments under the guaranty will be equal to the unpaid principal
amount of the loan, interest accrued on the unpaid balance of the loan to the
appropriate date of computation and limited expenses of the mortgagee, but in
each case only to the extent that the amounts have not been recovered through
liquidation of the mortgaged property. The amount payable under the guaranty may
in no event exceed the amount of the original guaranty.

SERVICING AND OTHER COMPENSATION AND PAYMENT OF EXPENSES

     The principal servicing compensation to be paid to the master servicer in
respect of its master servicing activities for each series of certificates will
be equal to the percentage per annum described in the related prospectus
supplement (which may vary under certain circumstances) of the outstanding
principal
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<PAGE>   113

balance of each mortgage loan, and the compensation will be retained by it from
collections of interest on the mortgage loan in the related trust fund. As
compensation for its servicing duties, a sub-servicer or, if there is no
sub-servicer, the master servicer will be entitled to a monthly servicing fee as
described in the related prospectus supplement. In addition, generally the
master servicer or a sub-servicer will retain all prepayment charges, assumption
fees and late payment charges, to the extent collected from mortgagors, and any
benefit that may accrue as a result of the investment of funds in the applicable
Certificate Account.

     The master servicer will, to the extent provided in the related pooling and
servicing agreement, pay or cause to be paid certain ongoing expenses associated
with each trust fund and incurred by it in connection with its responsibilities
under the related pooling and servicing agreement, including, without
limitation, payment of the fees and disbursements of the trustee, any custodian
appointed by the trustee, the certificate registrar and any paying agent, and
payment of expenses incurred in enforcing the obligations of sub-servicers and
sellers. The master servicer will be entitled to reimbursement of expenses
incurred in enforcing the obligations of sub-servicers and sellers under certain
limited circumstances. In addition, as indicated in the preceding section, the
master servicer will be entitled to reimbursement for certain expenses incurred
by it in connection with any defaulted mortgage loan as to which it has
determined that all recoverable liquidation proceeds and insurance proceeds have
been received (a "Liquidated Mortgage"), and in connection with the restoration
of mortgaged properties, the right of reimbursement being before the rights of
certificateholders to receive any related liquidation proceeds (including
insurance proceeds).

EVIDENCE AS TO COMPLIANCE

     Each pooling and servicing agreement will provide that on or before a
specified date in each year, a firm of independent public accountants will
furnish a statement to the trustee to the effect that, on the basis of the
examination by the firm conducted substantially in compliance with the Uniform
Single Attestation Program for Mortgage Bankers or the Audit Program for
Mortgages serviced for Freddie Mac, the servicing by or on behalf of the master
servicer of mortgage loans, Private Mortgage-Backed Securities or Agency
Securities, under pooling and servicing agreements substantially similar to each
other (including the related pooling and servicing agreement) was conducted in
compliance with those agreements except for any significant exceptions or errors
in records that, in the opinion of the firm, the Audit Program for Mortgages
serviced for Freddie Mac or the Uniform Single Attestation Program for Mortgage
Bankers requires it to report. In rendering its statement the firm may rely, as
to matters relating to the direct servicing of mortgage loans, Private
Mortgage-Backed Securities or Agency Securities by sub-servicers, upon
comparable statements for examinations conducted substantially in compliance
with the Uniform Single Attestation Program for Mortgage Bankers or the Audit
Program for Mortgages serviced for Freddie Mac (rendered within one year of the
statement) of firms of independent public accountants with respect to the
related sub-servicer.

     Each pooling and servicing agreement will also provide for delivery to the
trustee, on or before a specified date in each year, of an annual statement
signed by two officers of the master servicer to the effect that the master
servicer has fulfilled its obligations under the pooling and servicing agreement
throughout the preceding year.

     Copies of the annual accountants' statement and the statement of officers
of the master servicer may be obtained by certificateholders of the related
series without charge upon written request to the master servicer at the address
set forth in the related prospectus supplement.

LIST OF CERTIFICATEHOLDERS

     Each pooling and servicing agreement will provide that three or more
holders of certificates of any series may, by written request to the trustee,
obtain access to the list of all certificateholders maintained by the trustee
for the purpose of communicating with other certificateholders with respect to
their rights under the pooling and servicing agreement and the certificates.

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<PAGE>   114

CERTAIN MATTERS REGARDING THE MASTER SERVICER AND THE DEPOSITOR

     The master servicer under each pooling and servicing agreement will be
named in the related prospectus supplement. The entity serving as master
servicer may be an affiliate of the depositor and may have other business
relationships with the depositor or the depositor's affiliates.

     Each pooling and servicing agreement will provide that the master servicer
may not resign from its obligations and duties under the pooling and servicing
agreement except upon a determination that the performance by it of its duties
under the pooling and servicing agreement is no longer permissible under
applicable law. No resignation will become effective until the trustee or a
successor servicer has assumed the master servicer's obligations and duties
under the pooling and servicing agreement.

     Each pooling and servicing agreement will further provide that neither the
master servicer, the depositor nor any director, officer, employee, or agent of
the master servicer or the depositor will be under any liability to the related
trust fund or certificateholders for any action taken or for refraining from the
taking of any action in good faith pursuant to the pooling and servicing
agreement, or for errors in judgment. However, neither the master servicer, the
depositor nor any director, officer, employee, or agent of the master servicer
or the depositor will be protected against any liability that would otherwise be
imposed for willful misfeasance, bad faith or negligence in the performance of
duties under the pooling and servicing agreement or for reckless disregard of
obligations and duties under the pooling and servicing agreement. Each pooling
and servicing agreement will further provide that the master servicer, the
depositor and any director, officer, employee or agent of the master servicer or
the depositor will be entitled to indemnification by the related trust fund and
will be held harmless against any loss, liability or expense incurred in
connection with any legal action relating to the pooling and servicing agreement
or the certificates, other than any loss, liability or expense related to any
specific Mortgage Asset or Mortgage Assets (except any loss, liability or
expense otherwise reimbursable pursuant to the pooling and servicing agreement)
and any loss, liability or expense incurred for willful misfeasance, bad faith
or negligence in the performance of duties under the pooling and servicing
agreement or for reckless disregard of obligations and duties under the pooling
and servicing agreement. In addition, each pooling and servicing agreement will
provide that neither the master servicer nor the depositor will be under any
obligation to appear in, prosecute or defend any legal action that is not
incidental to its respective responsibilities under the pooling and servicing
agreement and that in its opinion may involve it in any expense or liability.
The master servicer or the depositor may, however, in its discretion undertake
any action that it deems appropriate with respect to the pooling and servicing
agreement and the rights and duties of the parties to the pooling and servicing
agreement and the interests of the certificateholders under the pooling and
servicing agreement. In that event, the legal expenses and costs of the action
and any liability resulting from it will be expenses, costs and liabilities of
the trust fund, and the master servicer or the depositor, as the case may be,
will be entitled to be reimbursed for them out of funds otherwise distributable
to certificateholders.

     Any person into which the master servicer may be merged or consolidated, or
any person resulting from any merger or consolidation to which the master
servicer is a party, or any person succeeding to the business of the master
servicer, will be the successor of the master servicer under each pooling and
servicing agreement, provided that the person is qualified to sell mortgage
loans to, and service mortgage loans on behalf of, Fannie Mae or Freddie Mac and
further provided that the merger, consolidation or succession does not adversely
affect the then current rating or ratings of the class or classes of
certificates of any series that have been rated.

EVENTS OF DEFAULT

     The applicable prospectus supplement may provide for other events of
default, but if it does not, then events of default under each pooling and
servicing agreement will consist of

     - any failure by the master servicer to deposit in the Certificate Account
       or remit to the trustee any payment which continues unremedied for five
       days after the giving of written notice of the failure to the master
       servicer by the trustee or the depositor, or to the master servicer and
       the trustee by
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<PAGE>   115

       the holders of certificates having not less than 25% of the voting rights
       evidenced by the certificates;

     - any failure by the master servicer to observe or perform in any material
       respect any of its other covenants or agreements in the pooling and
       servicing agreement which failure materially affects the rights of
       certificateholders that continues unremedied for sixty days after the
       giving of written notice of the failure to the master servicer by the
       trustee or the depositor, or to the master servicer and the trustee by
       the holders of certificates of any class evidencing not less than 25% of
       the voting rights evidenced by the certificate; and

     - certain events of insolvency, readjustment of debt, marshalling of assets
       and liabilities or similar proceeding and certain actions by or on behalf
       of the master servicer indicating its insolvency, reorganization or
       inability to pay its obligations.

"Voting rights" are the portion of voting rights of all of the certificates that
is allocated to any certificate pursuant to the terms of the pooling and
servicing agreement.

     If specified in the related prospectus supplement, the pooling and
servicing agreement will permit the trustee to sell the Mortgage Assets and the
other assets of the trust fund if payments on them are insufficient to make
payments required in the pooling and servicing agreement. The assets of the
trust fund will be sold only under the circumstances and in the manner specified
in the related prospectus supplement.

RIGHTS UPON EVENT OF DEFAULT

     So long as an event of default under an pooling and servicing agreement
remains unremedied, the depositor or the trustee may, and at the direction of
holders of certificates having not less than 66 2/3% of the voting rights and
under any other circumstances specified in the pooling and servicing agreement,
the trustee shall, terminate all of the rights and obligations of the master
servicer under the pooling and servicing agreement relating to the trust fund
and in the Mortgage Assets, whereupon the trustee will succeed to all of the
responsibilities, duties and liabilities of the master servicer under the
pooling and servicing agreement, including, if specified in the related
prospectus supplement, the obligation to make advances, and will be entitled to
similar compensation arrangements. If the trustee is unwilling or unable so to
act, it may appoint, or petition a court of competent jurisdiction for the
appointment of, a mortgage loan servicing institution with a net worth of at
least $10,000,000 to act as successor to the master servicer under the pooling
and servicing agreement. Pending appointment, the trustee is obligated to act as
master servicer. The trustee and any successor may agree upon the servicing
compensation to be paid to the successor servicer, which may not be greater than
the compensation payable to the master servicer under the pooling and servicing
agreement.

     No certificateholder, solely by virtue of its status as a
certificateholder, will have any right under any pooling and servicing agreement
to institute any proceeding with respect to the pooling and servicing agreement,
unless the holder previously has given to the trustee written notice of default
and unless the holders of any class of certificates of the series evidencing not
less than 25% of the voting rights have requested the trustee in writing to
institute a proceeding in its own name as trustee and have offered to the
trustee reasonable indemnity, and the trustee for 60 days has neglected or
refused to institute the proceeding.

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<PAGE>   116

AMENDMENT

     The applicable prospectus supplement may specify other amendment
provisions, but if it does not, then each pooling and servicing agreement may be
amended by the depositor, the master servicer and the trustee, without the
consent of any of the certificateholders,

          (a) to cure any ambiguity or mistake;

          (b) to correct any defective provision therein or to supplement any
     provision in the pooling and servicing agreement that may be inconsistent
     with any other provision in it;

          (c) to add to the duties of the depositor, the seller or the master
     servicer;

          (d) to add any other provisions with respect to matters or questions
     arising under the pooling and servicing agreement; or

          (e) to modify, alter, amend, add to or rescind any of the terms or
     provisions contained in the pooling and servicing agreement.

However, no action pursuant to clauses (d) or (e) may, as evidenced by an
opinion of counsel, adversely affect in any material respect the interests of
any certificateholder. But no opinion of counsel will be required if the person
requesting the amendment obtains a letter from each rating agency requested to
rate the class or classes of certificates of the series stating that the
amendment will not result in the downgrading or withdrawal of the respective
ratings then assigned to the certificates.

     In addition, to the extent provided in the related pooling and servicing
agreement, an pooling and servicing agreement may be amended without the consent
of any of the certificateholders to change the manner in which the Certificate
Account is maintained, if the change does not adversely affect the then current
rating of the class or classes of certificates of the series that have been
rated at the request of the depositor. Moreover, the related pooling and
servicing agreement may be amended to modify, eliminate or add to any of its
provisions to the extent necessary to maintain the qualification of the related
trust fund as a REMIC or to avoid or minimize the risk of imposition of any tax
on the REMIC, if a REMIC election is made with respect to the trust fund, or to
comply with any other requirements of the Code, if the trustee has received an
opinion of counsel to the effect that the action is necessary or helpful to
maintain the qualification, avoid or minimize that risk or comply with those
requirements, as applicable.

     The applicable prospectus supplement may specify other amendment
provisions, but if it does not, then each pooling and servicing agreement may
also be amended by the depositor, the master servicer and the trustee with the
consent of holders of certificates of the series evidencing a majority in
interest of each class affected thereby for the purpose of adding any provisions
to or changing in any manner or eliminating any of the provisions of the pooling
and servicing agreement or of modifying in any manner the rights of the holders
of the related certificates. However, no amendment may

          (a) reduce in any manner the amount of, or delay the timing of,
     payments received on Mortgage Assets that are required to be distributed on
     any certificate without the consent of the holder of the certificate,

          (b) adversely affect in any material respect the interests of the
     holders of any class of certificates in a manner other than as described in
     (a), without the consent of the holders of certificates of the class
     evidencing, as to the class, percentage interests aggregating 66%, or

          (c) reduce the aforesaid percentage of certificates of any class of
     holders that is required to consent to the amendment without the consent of
     the holders of all certificates of the class covered by the pooling and
     servicing agreement then outstanding.

If a REMIC election is made with respect to a trust fund, the trustee will not
be entitled to consent to an amendment to the related pooling and servicing
agreement without having first received an opinion of counsel to the effect that
the amendment will not cause the trust fund to fail to qualify as a REMIC.

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TERMINATION; OPTIONAL TERMINATION

     Generally, the obligations created by each pooling and servicing agreement
for each series of certificates will terminate upon the payment to the related
certificateholders of all amounts held in the Certificate Account or by the
master servicer and required to be paid to them pursuant to the pooling and
servicing agreement following the later of

     - the final payment or other liquidation of the last of the Mortgage Assets
       subject to it or the disposition of all property acquired upon
       foreclosure of the Mortgage Assets remaining in the trust fund and

     - the purchase by the master servicer or, if REMIC treatment has been
       elected and if specified in the related prospectus supplement, by the
       holder of the residual interest in the REMIC (see "Material Federal
       Income Tax Consequences" in this prospectus and in the related prospectus
       supplement), from the related trust fund of all of the remaining Mortgage
       Assets and all property acquired in respect of the Mortgage Assets.

     Any purchase of Mortgage Assets and property acquired in respect of
Mortgage Assets evidenced by a series of certificates will be made at the option
of the master servicer or the party specified in the related prospectus
supplement, including the holder of the REMIC residual interest, at a price, and
in accordance with the procedures, specified in the related prospectus
supplement. The exercise of that right will effect early retirement of the
certificates of that series, but the right of the master servicer or the other
party or, if applicable, the holder of the REMIC residual interest, to so
purchase is subject to the principal balance of the related Mortgage Assets
being less than the percentage specified in the related prospectus supplement of
the aggregate principal balance of the Mortgage Assets at the cut-off date for
the series. The foregoing is subject to the provision that if a REMIC election
is made with respect to a trust fund, any repurchase pursuant to the second
bulleted item above will be made only in connection with a "qualified
liquidation" of the REMIC within the meaning of Section 860F(a)(4) of the Code.

THE TRUSTEE

     The trustee under each pooling and servicing agreement will be named in the
applicable prospectus supplement. The commercial bank or trust company serving
as trustee may have normal banking relationships with the depositor, the master
servicer and any of their respective affiliates.

                  CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS

     The following discussion contains summaries, which are general in nature,
of certain legal matters relating to the mortgage loans. Because the legal
aspects are governed primarily by applicable state law (which laws may differ
substantially), the summaries do not purport to be complete or to reflect the
laws of any particular state or to encompass the laws of all states in which the
security for the mortgage loans is situated.

GENERAL

     The mortgage loans will be secured by deeds of trust, mortgages, security
deeds or deeds to secure debt, depending upon the prevailing practice in the
state in which the property subject to the loan is located. Deeds of trust are
used almost exclusively in California instead of mortgages. A mortgage creates a
lien upon the real property encumbered by the mortgage, which lien is generally
not before the lien for real estate taxes and assessments. Priority between
mortgages depends on their terms and generally on the order of recording with a
state or county office. There are two parties to a mortgage, the mortgagor, who
is the borrower and owner of the mortgaged property, and the mortgagee, who is
the lender. Under the mortgage instrument, the mortgagor delivers to the
mortgagee a note or bond and the mortgage. Although a deed of trust is similar
to a mortgage, a deed of trust formally has three parties, the borrower-property
owner called the trustor (similar to a mortgagor), a lender (similar to a
mortgagee) called the beneficiary, and a third-party grantee called the trustee.
Under a deed of trust, the borrower grants the property,
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irrevocably until the debt is paid, in trust, generally with a power of sale, to
the trustee to secure payment of the obligation. A security deed and a deed to
secure debt are special types of deeds which indicate on their face that they
are granted to secure an underlying debt. By executing a security deed or deed
to secure debt, the grantor conveys title to, as opposed to merely creating a
lien upon, the subject property to the grantee until the underlying debt is
repaid. The trustee's authority under a deed of trust, the mortgagee's authority
under a mortgage and the grantee's authority under a security deed or deed to
secure debt are governed by law and, with respect to some deeds of trust, the
directions of the beneficiary.

     Cooperatives. Certain of the mortgage loans may be cooperative loans. The
cooperative owns all the real property that comprises the project, including the
land, separate dwelling units and all common areas. The cooperative is directly
responsible for project management and, in most cases, payment of real estate
taxes and hazard and liability insurance. If there is a blanket mortgage on the
cooperative or underlying land or both, as is generally the case, the
cooperative, as project mortgagor, is also responsible for meeting these
mortgage obligations. A blanket mortgage is ordinarily incurred by the
cooperative in connection with the construction or purchase of the cooperative's
apartment building. The interest of the occupant under proprietary leases or
occupancy agreements to which that cooperative is a party are generally
subordinate to the interest of the holder of the blanket mortgage in that
building. If the cooperative is unable to meet the payment obligations arising
under its blanket mortgage, the mortgagee holding the blanket mortgage could
foreclose on that mortgage and terminate all subordinate proprietary leases and
occupancy agreements. In addition, the blanket mortgage on a cooperative may
provide financing in the form of a mortgage that does not fully amortize with a
significant portion of principal being due in one lump sum at final maturity.
The inability of the cooperative to refinance this mortgage and its consequent
inability to make the final payment could lead to foreclosure by the mortgagee
providing the financing. A foreclosure in either event by the holder of the
blanket mortgage could eliminate or significantly diminish the value of any
collateral held by the lender who financed the purchase by an individual tenant-
stockholder of cooperative shares or, in the case of a trust fund including
cooperative loans, the collateral securing the cooperative loans.

     The cooperative is owned by tenant-stockholders who, through ownership of
stock, shares or membership certificates in the corporation, receive proprietary
leases or occupancy agreements which confer exclusive rights to occupy specific
units. Generally, a tenant-stockholder of a cooperative must make a monthly
payment to the cooperative representing the tenant-stockholder's pro rata share
of the cooperative's payments for its blanket mortgage, real property taxes,
maintenance expenses and other capital or ordinary expenses. An ownership
interest in a cooperative and accompanying rights is financed through a
cooperative share loan evidenced by a promissory note and secured by a security
interest in the occupancy agreement or proprietary lease and in the related
cooperative shares. The lender takes possession of the share certificate and a
counterpart of the proprietary lease or occupancy agreement, and a financing
statement covering the proprietary lease or occupancy agreement and the
cooperative shares is filed in the appropriate state and local offices to
perfect the lender's interest in its collateral. Subject to the limitations
discussed below, upon default of the tenant-stockholder, the lender may sue for
judgment on the promissory note, dispose of the collateral at a public or
private sale or otherwise proceed against the collateral or tenant-stockholder
as an individual as provided in the security agreement covering the assignment
of the proprietary lease or occupancy agreement and the pledge of cooperative
shares.

FORECLOSURE AND REPOSSESSION

     Deed of Trust. Foreclosure of a deed of trust is generally accomplished by
a non-judicial sale under a specific provision in the deed of trust which
authorizes the trustee to sell the property at public auction upon any default
by the borrower under the terms of the note or deed of trust. In certain states,
foreclosure also may be accomplished by judicial action in the manner provided
for foreclosure of mortgages. In some states, such as California, the trustee
must record a notice of default and send a copy to the borrower-trustor and to
any person who has recorded a request for a copy of any notice of default and
notice of sale. In addition, the trustee must provide notice in some states to
any other individual having an interest of record in the real property,
including any junior lien holders. If the deed of trust is

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not reinstated within any applicable cure period, a notice of sale must be
posted in a public place and, in most states, including California, published
for a specified period of time in one or more newspapers. In addition, these
notice provisions require that a copy of the notice of sale be posted on the
property and sent to all parties having an interest of record in the property.
In California, the entire process from recording a notice of default to a
non-judicial sale usually takes four to five months.

     In some states, including California, the borrower-trustor has the right to
reinstate the loan at any time following default until shortly before the
trustee's sale. In general, the borrower, or any other person having a junior
encumbrance on the real estate, may, during a reinstatement period, cure the
default by paying the entire amount in arrears plus the costs and expenses
incurred in enforcing the obligation. Certain state laws control the amount of
foreclosure expenses and costs, including attorney's fees, which may be
recoverable by a lender.

     Mortgages. Foreclosure of a mortgage is generally accomplished by judicial
action. The action is initiated by the service of legal pleadings upon all
parties having an interest in the real property. Delays in completion of the
foreclosure may occasionally result from difficulties in locating necessary
parties. Judicial foreclosure proceedings are often not contested by any of the
parties. When the mortgagee's right to foreclosure is contested, the legal
proceedings necessary to resolve the issue can be time consuming. After the
completion of a judicial foreclosure proceeding, the court generally issues a
judgment of foreclosure and appoints a referee or other court officer to conduct
the sale of the property. In general, the borrower, or any other person having a
junior encumbrance on the real estate, may, during a statutorily prescribed
reinstatement period, cure a monetary default by paying the entire amount in
arrears plus other designated costs and expenses incurred in enforcing the
obligation. Generally, state law controls the amount of foreclosure expenses and
costs, including attorney's fees, which may be recovered by a lender. After the
reinstatement period has expired without the default having been cured, the
borrower or junior lienholder no longer has the right to reinstate the loan and
must pay the loan in full to prevent the scheduled foreclosure sale. If the deed
of trust is not reinstated, a notice of sale must be posted in a public place
and, in most states, published for a specific period of time in one or more
newspapers. In addition, some state laws require that a copy of the notice of
sale be posted on the property and sent to all parties having an interest in the
real property.

     Although foreclosure sales are typically public sales, frequently no third
party purchaser bids in excess of the lender's lien because of the difficulty of
determining the exact status of title to the property, the possible
deterioration of the property during the foreclosure proceedings and a
requirement that the purchaser pay for the property in cash or by cashier's
check. Thus the foreclosing lender often purchases the property from the trustee
or referee for an amount equal to the principal amount outstanding under the
loan, accrued and unpaid interest and the expenses of foreclosure. Thereafter,
the lender will assume the burden of ownership, including obtaining hazard
insurance and making repairs at its own expense necessary to render the property
suitable for sale. The lender will commonly obtain the services of a real estate
broker and pay the broker's commission in connection with the sale of the
property. Depending upon market conditions, the ultimate proceeds of the sale of
the property may not equal the lender's investment in the property.

     Courts have imposed general equitable principles upon foreclosure, which
are generally designed to mitigate the legal consequences to the borrower of the
borrower's defaults under the loan documents. Some courts have been faced with
the issue of whether federal or state constitutional provisions reflecting due
process concerns for fair notice require that borrowers under deeds of trust
receive notice longer than that prescribed by statute. For the most part, these
cases have upheld the notice provisions as being reasonable or have found that
the sale by a trustee under a deed of trust does not involve sufficient state
action to afford constitutional protection to the borrower.

     Cooperative Loans. The cooperative shares owned by the tenant-stockholder
and pledged to the lender are, in almost all cases, subject to restrictions on
transfer as set forth in the cooperative's certificate of incorporation and
bylaws, as well as the proprietary lease or occupancy agreement, and may be
cancelled by the cooperative for failure by the tenant-stockholder to pay rent
or other obligations or

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charges owed by the tenant-stockholder, including mechanics' liens against the
cooperative apartment building incurred by the tenant-stockholder. The
proprietary lease or occupancy agreement generally permits the cooperative to
terminate the lease or agreement if an obligor fails to make payments or
defaults in the performance of covenants required under it. Typically, the
lender and the cooperative enter into a recognition agreement, which establishes
the rights and obligations of both parties upon a default by the
tenant-stockholder on its obligations under the proprietary lease or occupancy
agreement. A default by the tenant-stockholder under the proprietary lease or
occupancy agreement will usually constitute a default under the security
agreement between the lender and the tenant-stockholder.

     The recognition agreement generally provides that, if the
tenant-stockholder has defaulted under the proprietary lease or occupancy
agreement, the cooperative will take no action to terminate the lease or
agreement until the lender has been provided with an opportunity to cure the
default. The recognition agreement typically provides that if the proprietary
lease or occupancy agreement is terminated, the cooperative will recognize the
lender's lien against proceeds from the sale of the cooperative apartment,
subject, however, to the cooperative's right to sums due under the proprietary
lease or occupancy agreement. The total amount owed to the cooperative by the
tenant-stockholder, which the lender generally cannot restrict and does not
monitor, could reduce the value of the collateral below the outstanding
principal balance of the cooperative loan and accrued and unpaid interest on it.

     Recognition agreements also provide that upon foreclosure of a cooperative
loan, the lender must obtain the approval or consent of the cooperative as
required by the proprietary lease before transferring the cooperative shares or
assigning the proprietary lease. Generally, the lender is not limited in any
rights it may have to dispossess the tenant-stockholders.

     In some states, foreclosure on the cooperative shares is accomplished by a
sale in accordance with the provisions of Article 9 of the UCC and the security
agreement relating to those shares. Article 9 of the UCC requires that a sale be
conducted in a "commercially reasonable" manner. Whether a foreclosure sale has
been conducted in a "commercially reasonable" manner will depend on the facts in
each case. In determining commercial reasonableness, a court will look to the
notice given the debtor and the method, manner, time, place and terms of the
foreclosure. Generally, a sale conducted according to the usual practice of
banks selling similar collateral will be considered reasonably conducted.

     Article 9 of the UCC provides that the proceeds of the sale will be applied
first to pay the costs and expenses of the sale and then to satisfy the
indebtedness secured by the lender's security interest. The recognition
agreement, however, generally provides that the lender's right to reimbursement
is subject to the right of the cooperative to receive sums due under the
proprietary lease or occupancy agreement. If there are proceeds remaining, the
lender must account to the tenant-stockholder for the surplus. Conversely, if a
portion of the indebtedness remains unpaid, the tenant-stockholder is generally
responsible for the deficiency. See "Anti-Deficiency Legislation and Other
Limitations on Lenders."

     In the case of foreclosure on a building converted from a rental building
to a building owned by a cooperative under a non-eviction plan, some states
require that a purchaser at a foreclosure sale take the property subject to rent
control and rent stabilization laws that apply to certain tenants who elected to
remain in the building but who did not purchase shares in the cooperative when
the building was so converted.

RIGHTS OF REDEMPTION

     In some states after a sale pursuant to a deed of trust or foreclosure of a
mortgage, the borrower and certain foreclosed junior lienors are given a
statutory period in which to redeem the property from the foreclosure sale. In
certain other states, including California, this right of redemption applies
only to sales following judicial foreclosure, and not to sales pursuant to a
non-judicial power of sale. In most states where the right of redemption is
available, statutory redemption may occur upon payment of the foreclosure
purchase price, accrued interest and taxes. In some states, the right to redeem
is an equitable right. The effect of a right of redemption is to diminish the
ability of the lender to sell the foreclosed property. The exercise of a right
of redemption would defeat the title of any purchaser at a foreclosure
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sale, or of any purchaser from the lender after judicial foreclosure or sale
under a deed of trust. Consequently, the practical effect of the redemption
right is to force the lender to retain the property and pay the expenses of
ownership until the redemption period has run.

ANTI-DEFICIENCY LEGISLATION AND OTHER LIMITATIONS ON LENDERS

     Certain states have imposed statutory restrictions that limit the remedies
of a beneficiary under a deed of trust or a mortgagee under a mortgage. In some
states, including California, statutes limit the right of the beneficiary or
mortgagee to obtain a deficiency judgment against the borrower following
foreclosure or a sale under a deed of trust. A deficiency judgment is a personal
judgment against the borrower equal in most cases to the difference between the
amount due to the lender and the current fair market value of the property at
the time of the foreclosure sale. As a result of these prohibitions, it is
anticipated that in most instances the master servicer will utilize the
non-judicial foreclosure remedy and will not seek deficiency judgments against
defaulting mortgagors.

     Some state statutes may require the beneficiary or mortgagee to exhaust the
security afforded under a deed of trust or mortgage by foreclosure in an attempt
to satisfy the full debt before bringing a personal action against the borrower.
In certain other states, the lender has the option of bringing a personal action
against the borrower on the debt without first exhausting that security.
However, in some of these states, following judgment on a personal action, the
lender may be considered to have elected a remedy and may be precluded from
exercising other remedies with respect to the security. Consequently, the
practical effect of the election requirement, when applicable, is that lenders
will usually proceed first against the security rather than bringing a personal
action against the borrower.

     In some states, exceptions to the anti-deficiency statutes are provided for
in certain instances where the value of the lender's security has been impaired
by acts or omissions of the borrower, for example, upon waste of the property.

     In addition to anti-deficiency and related legislation, numerous other
federal and state statutory provisions, including the federal bankruptcy laws,
the federal Soldiers' and Sailors' Civil Relief Act of 1940 and state laws
affording relief to debtors, may interfere with or affect the ability of the
secured mortgage lender to realize on its security. For example, in a proceeding
under the federal Bankruptcy Code, a lender may not foreclose on a mortgaged
property without the permission of the bankruptcy court. And in certain
instances a bankruptcy court may allow a borrower to reduce the monthly
payments, change the rate of interest, and alter the mortgage loan repayment
schedule for under collateralized mortgage loans. The effect of these types of
proceedings can be to cause delays in receiving payments on the loans underlying
certificates and even to reduce the aggregate amount of payments on the loans
underlying certificates.

     The federal tax laws provide priority to certain tax liens over the lien of
a mortgage or secured party. Numerous federal and state consumer protection laws
impose substantive requirements upon mortgage lenders in connection with the
origination, servicing and enforcement of mortgage loans. These laws include the
federal Truth-in-Lending Act, Real Estate Settlement Procedures Act, Equal
Credit Opportunity Act, Fair Credit Billing Act, Fair Credit Reporting Act and
related statutes and regulations. These federal and state laws impose specific
statutory liabilities on lenders who fail to comply with the provisions of the
law. In some cases, this liability may affect assignees of the loans or
contracts.

     Generally, Article 9 of the UCC governs foreclosure on cooperative shares
and the related proprietary lease or occupancy agreement. Some courts have
interpreted section 9-504 of the UCC to prohibit a deficiency award unless the
creditor establishes that the sale of the collateral (which, in the case of a
cooperative loan, would be the shares of the cooperative and the related
proprietary lease or occupancy agreement) was conducted in a commercially
reasonable manner.

ENVIRONMENTAL RISKS

     Real property pledged as security to a lender may be subject to unforeseen
environmental risks. Under the laws of certain states, contamination of a
property may give rise to a lien on the property to assure the

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payment of the costs of clean-up. In several states that lien has priority over
the lien of an existing mortgage on the property. In addition, under the federal
Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA"), the EPA may impose a lien on property where the EPA has incurred
clean-up costs. However, a CERCLA lien is subordinate to pre-existing, perfected
security interests.

     Under the laws of some states, and under CERCLA, it is conceivable that a
secured lender may be held liable as an "owner" or "operator" for the costs of
addressing releases or threatened releases of hazardous substances at a
mortgaged property, even though the environmental damage or threat was caused by
a prior or current owner or operator. CERCLA imposes liability for the costs on
any and all "responsible parties," including owners or operators. However,
CERCLA excludes from the definition of "owner or operator" a secured creditor
who holds indicia of ownership primarily to protect its security interest but
does not "participate in the management" of the property. Thus, if a lender's
activities begin to encroach on the actual management of a contaminated facility
or property, the lender may incur liability as an "owner or operator" under
CERCLA. Similarly, if a lender forecloses and takes title to a contaminated
facility or property, the lender may incur CERCLA liability in various
circumstances, including when it holds the facility or property as an investment
(including leasing the facility or property to a third party), or fails to
market the property in a timely fashion.

     Whether actions taken by a lender would constitute participation in the
management of a property causing the lender to lose the protection of the
secured creditor exclusion has been a matter of judicial interpretation of the
statutory language, and court decisions have historically been inconsistent. In
United States v. Fleet Factors Corp. (1990), the United States Court of Appeals
for the Eleventh Circuit suggested that the mere capacity of the lender to
influence a borrower's decisions regarding disposal of hazardous substances was
sufficient participation in the management of the borrower's business to deny
the protection of the secured creditor exclusion to the lender, regardless of
whether the lender actually exercised influence. Other judicial decisions did
not interpret the secured creditor exclusion as narrowly as did the Eleventh
Circuit.

     This ambiguity appears to have been resolved by the enactment of the Asset
Conservation, Lender Liability and Deposit Insurance Protection Act of 1996 (the
"Asset Conservation Act"), which took effect on September 30, 1996. The Asset
Conservation Act provides that to be deemed to have participated in the
management of a secured property, a lender must actually participate in the
operational affairs of the property or of the borrower. The Asset Conservation
Act also provides that participation in the management of the property does not
include "merely having the capacity to influence, or unexercised right to
control" operations. Rather, a lender will lose the protection of the secured
creditor exclusion only if it exercises decision-making control over the
borrower's environmental compliance and hazardous substance handling and
disposal practices, or assumes day-to-day management of all operational
functions of the secured property.

     If a lender is or becomes liable, it can bring an action for contribution
against any other "responsible parties," including a previous owner or operator,
who created the environmental hazard, but those persons or entities may be
bankrupt or otherwise judgment proof. The costs associated with environmental
cleanup may be substantial. It is conceivable that the costs arising from the
circumstances set forth above would result in a loss to certificateholders.

     CERCLA does not apply to petroleum products, and the secured creditor
exclusion does not govern liability for cleanup costs under federal laws other
than CERCLA, in particular Subtitle I of the federal Resource Conservation and
Recovery Act ("RCRA"), which regulates underground petroleum storage tanks
(except heating oil tanks). The EPA has adopted a lender liability rule for
underground storage tanks under Subtitle I of RCRA. Under that rule, a holder of
a security interest in an underground storage tank or real property containing
an underground storage tank is not considered an operator of the underground
storage tank as long as petroleum is not added to, stored in or dispensed from
the tank. Moreover, under the Asset Conservation Act, the protections accorded
to lenders under CERCLA are also accorded to holders of security interests in
underground petroleum storage tanks. It should be noted,

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however, that liability for cleanup of petroleum contamination may be governed
by state law, which may not provide for any specific protection for secured
creditors.

     Except as otherwise specified in the applicable prospectus supplement, at
the time the mortgage loans were originated, no environmental assessment or a
very limited environmental assessment of the Mortgage Properties was conducted.

DUE-ON-SALE CLAUSES

     Generally, each conventional mortgage loan will contain a due-on-sale
clause which will generally provide that if the mortgagor or obligor sells,
transfers or conveys the mortgaged property, the loan may be accelerated by the
mortgagee. In recent years, court decisions and legislative actions have placed
substantial restriction on the right of lenders to enforce these clauses in many
states. For instance, the California Supreme Court in August 1978 held that
due-on-sale clauses were generally unenforceable. However, the Garn-St Germain
Depository Institutions Act of 1982 (the "Garn-St Germain Act"), subject to
specified exceptions, preempts state constitutional, statutory and case law
prohibiting the enforcement of due-on-sale clauses. As to loans secured by an
owner-occupied residence, the Garn-St Germain Act sets forth nine specific
instances in which a mortgagee covered by the Garn-St Germain Act may not
exercise its rights under a due-on-sale clause, notwithstanding the fact that a
transfer of the property may have occurred. The inability to enforce a
due-on-sale clause may result in transfer of the related mortgaged property to
an uncreditworthy person, which could increase the likelihood of default or may
result in a mortgage bearing an interest rate below the current market rate
being assumed by a new home buyer, which may affect the average life of the
mortgage loans and the number of mortgage loans which may extend to maturity.

PREPAYMENT CHARGES

     Under certain state laws, prepayment charges may not be imposed after a
certain period of time following the origination of mortgage loans with respect
to prepayments on loans secured by liens encumbering owner-occupied residential
properties. Since many of the mortgaged properties will be owner-occupied, it is
anticipated that prepayment charges may not be imposed on many of the mortgage
loans. The absence of this a restraint on prepayment, particularly with respect
to fixed rate mortgage loans having higher mortgage rates, may increase the
likelihood of refinancing or other early retirement of the loans or contracts.

APPLICABILITY OF USURY LAWS

     Title V of the depository Institutions Deregulation and Monetary Control
Act of 1980, enacted in March 1980 ("Title V"), provides that state usury
limitations shall not apply to certain types of residential first mortgage loans
originated by certain lenders after March 31, 1980. The Office of Thrift
Supervision, as successor to the Federal Home Loan Bank Board, is authorized to
issue rules and regulations and to publish interpretations governing
implementation of Title V. The statute authorized the states to reimpose
interest rate limits by adopting, before April 1, 1983, a law or constitutional
provision that expressly rejects an application of the federal law. In addition,
even where Title V is not so rejected, any state is authorized by the law to
adopt a provision limiting discount points or other charges on mortgage loans
covered by Title V. Certain states have taken action to reimpose interest rate
limits or to limit discount points or other charges, or both.

SOLDIERS' AND SAILORS' CIVIL RELIEF ACT

     Generally, under the terms of the Soldiers' and Sailors' Civil Relief Act
of 1940, as amended (the "Relief Act"), a borrower who enters military service
after the origination of the borrower's mortgage loan (including a borrower who
is a member of the National Guard or is in reserve status at the time of the
origination of the mortgage loan and is later called to active duty) may not be
charged interest above an annual rate of 6% during the period of the borrower's
active duty status, unless a court orders otherwise

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upon application of the lender. It is possible that this interest rate
limitation could have an effect, for an indeterminate period of time, on the
ability of the master servicer to collect full amounts of interest on some of
the mortgage loans. Unless the applicable prospectus supplement provides a
special feature for a particular trust fund, any shortfall in interest
collections resulting from the application of the Relief Act could result in
losses to the holders of the certificates. In addition, the Relief Act imposes
limitations which would impair the ability of the master servicer to foreclose
on an affected mortgage loan during the borrower's period of active duty status.
Thus, if an affected mortgage loan goes into default, there may be delays and
losses occasioned by the inability to realize upon the mortgaged property in a
timely fashion.

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                    MATERIAL FEDERAL INCOME TAX CONSEQUENCES

     The following discussion is the opinion of Brown & Wood LLP, counsel to the
depositor, as to the material federal income tax consequences of the purchase,
ownership, and disposition of certificates. The opinion of Brown & Wood LLP is
based on laws, regulations, administrative rulings, and judicial decisions now
in effect, all of which are subject to change either prospectively or
retroactively. The following discussion does not describe aspects of federal tax
law that are unique to insurance companies, securities dealers and investors who
hold certificates as part of a straddle within the meaning of Section 1092 of
the Internal Revenue Code of 1986, as amended. Prospective investors are
encouraged to consult their tax advisors regarding the federal, state, local,
and any other tax consequences to them of the purchase, ownership, and
disposition of certificates.

GENERAL

     The federal income tax consequences to certificateholders will vary
depending on whether an election is made to treat the trust fund relating to a
particular series of certificates as a REMIC under the Code. The prospectus
supplement for each series of certificates will specify whether a REMIC election
will be made.

NON-REMIC CERTIFICATES

     If a REMIC election is not made, the trust fund will not be classified as
an association taxable as a corporation and that each trust fund will be
classified as a grantor trust under subpart E, Part I of subchapter J of chapter
1 of subtitle A of the Internal Revenue Code of 1986 (the "Code" referred to in
this section unless otherwise indicated). In this case, owners of certificates
will be treated for federal income tax purposes as owners of a portion of the
trust fund's assets as described below. Brown & Wood LLP will issue an opinion
confirming the above-stated conclusions for each trust fund for which no REMIC
election is made.

  A. SINGLE CLASS OF CERTIFICATES

     Characterization. The trust fund may be created with one class of
certificates. In this case, each certificateholder will be treated as the owner
of a pro rata undivided interest in the interest and principal portions of the
trust fund represented by the certificates and will be considered the equitable
owner of a pro rata undivided interest in each of the mortgage loans in the
Pool. Any amounts received by a certificateholder in lieu of amounts due with
respect to any mortgage loans because of a default or delinquency in payment
will be treated for federal income tax purposes as having the same character as
the payments they replace.

     Each certificateholder will be required to report on its federal income tax
return in accordance with its method of accounting its pro rata share of the
entire income from the mortgage loans in the trust fund represented by
certificates, including interest, original issue discount ("OID"), if any,
prepayment fees, assumption fees, any gain recognized upon an assumption and
late payment charges received by the master servicer. Under Code Sections 162 or
212 each certificateholder will be entitled to deduct its pro rata share of
servicing fees, prepayment fees, assumption fees, any loss recognized upon an
assumption and late payment charges retained by the master servicer, provided
that the amounts are reasonable compensation for services rendered to the trust
fund. Certificateholders that are individuals, estates or trusts will be
entitled to deduct their share of expenses only to the extent expenses of the
trust fund plus their other miscellaneous itemized deductions (as defined in the
Code) exceed two percent of their adjusted gross income. A certificateholder
using the cash method of accounting must take into account its pro rata share of
income and deductions as and when collected by or paid to the master servicer. A
certificateholder using an accrual method of accounting must take into account
its pro rata share of income as it accrues, or when received if the income is
received before it accrues, and must take into account its pro rata share of
deductions as they accrue. If the servicing fees paid to the master servicer are
deemed to exceed reasonable servicing compensation, the amount of any excess
could be considered as an ownership interest

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retained by the master servicer (or any person to whom the master servicer
assigned for value all or a portion of the servicing fees) in a portion of the
interest payments on the mortgage loans. The mortgage loans would then be
subject to the "coupon stripping" rules of the Code discussed below.

     Generally, as to each series of certificates:

     - a certificate owned by a "domestic building and loan association" within
       the meaning of Code Section 7701(a)(19) representing principal and
       interest payments on mortgage loans will be considered to represent
       "loans . . . secured by an interest in real property which
       is . . . residential property" within the meaning of Code Section
       7701(a)(19)(C)(v), to the extent that the mortgage loans represented by
       that certificate are of a type described in that Code section;

     - a certificate owned by a real estate investment trust representing an
       interest in mortgage loans will be considered to represent "real estate
       assets" within the meaning of Code Section 856(c)(4)(A), and interest
       income on the mortgage loans will be considered "interest on obligations
       secured by mortgages on real property" within the meaning of Code Section
       856(c)(3)(B), to the extent that the mortgage loans represented by that
       certificate are of a type described in that Code section; and

     - a certificate owned by a REMIC will represent an "obligation . . . which
       is principally secured, directly or indirectly, by an interest in real
       property" within the meaning of Code Section 860G(a)(3).

     Buydown Loans. Certain trust funds may hold buydown loans. These loans can
be secured not only by a mortgage on real property but also by a pledged account
that is drawn upon to subsidize the mortgagor's monthly mortgage payments for a
limited period of time. So long as the loan value of the real property at least
equals the amount of the loan, then for purposes of the above-described
requirements, the mortgage loan will be treated as fully secured by real
property. If the loan value of the real property is less than the amount of the
loan, then, a certificateholder could be required to treat the loan as one
secured by an interest in real property only to the extent of the loan value of
the real property. The related prospectus supplement for any series of
certificates will specify whether apportionment would be required.

     Premium. The price paid for a certificate by a holder will be allocated to
the holder's undivided interest in each mortgage loan based on each mortgage
loan's relative fair market value, so that the holder's undivided interest in
each mortgage loan will have its own tax basis. A certificateholder that
acquires an interest in mortgage loans at a premium may elect, under Code
Section 171, to amortize the premium under a constant interest method, provided
that the underlying mortgage loans with respect to the mortgage loans were
originated after September 27, 1985. Premium allocable to mortgage loans
originated on or before September 27, 1985 should be allocated among the
principal payments on the mortgage loans and allowed as an ordinary deduction as
principal payments are made. Amortizable bond premium will be treated as an
offset to interest income on the certificate. The basis for the certificate will
be reduced to the extent that amortizable premium is applied to offset interest
payments. It is not clear whether a reasonable prepayment assumption should be
used in computing amortization of premium allowable under Code Section 171.
However, recent changes to the Code require the use of a prepayment assumption
to accrue original issue discount on pools of receivables the yield on which may
be affected by prepayments for tax years beginning after August 5, 1997 and
prior legislative history indicated that if a prepayment assumption applied to
an instrument for purposes of the OID rules, that prepayment assumption should
be applied in amortizing bond premium.

     If a premium is not subject to amortization using a reasonable prepayment
assumption, the holder of a certificate acquired at a premium should recognize a
loss if a mortgage loan (or an underlying mortgage loan) prepays in full, equal
to the difference between the portion of the prepaid principal amount of the
mortgage loan (or underlying mortgage loan) that is allocable to the certificate
and the portion of the adjusted basis of the certificate that is allocable to
the mortgage loan (or underlying mortgage loan). If a reasonable prepayment
assumption is used to amortize premium, it appears that any loss would be
available, if at all, only if prepayments have occurred at a rate faster than
the reasonable assumed prepayment rate. It is not clear whether any other
adjustments would be required to reflect differences

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between an assumed prepayment rate and the actual rate of prepayments. In
addition, under recent legislation, amounts received on the redemption of an
obligation issued by a natural person are considered received in exchange for
the obligation if the debt obligation is purchased or issued after June 8, 1997
(i.e., treated the same as obligations issued by corporations). This change
could affect the character of any loss (e.g., cause the loss to be treated as
capital if the assets are held as capital assets by the taxpayer).

     On December 30, 1997 the IRS issued final regulations (the "Amortizable
Bond Premium Regulations") dealing with amortizable bond premium. These
regulations specifically do not apply to prepayable debt instruments subject to
Code Section 1272(a)(6). Absent further guidance from the IRS, the trustee
intends to account for amortizable bond premium in the manner described above.
Prospective purchasers of the certificates are encouraged to consult their tax
advisors regarding the possible application of the Amortizable Bond Premium
Regulations.

     Original Issue Discount. The IRS has stated in published rulings that, in
circumstances similar to those described in this prospectus, the special rules
of the Code relating to "original issue discount" (currently Code Sections 1271
through 1273 and 1275) will be applicable to a certificateholder's interest in
those mortgage loans meeting the conditions necessary for these sections to
apply. OID generally must be reported as ordinary gross income as it accrues
under a constant interest method. See "-- Multiple Classes of
Certificates -- Certificates Representing Interests in Loans Other Than ARM
Loans."

     Market Discount. A certificateholder that acquires an undivided interest in
mortgage loans may be subject to the market discount rules of Code Sections 1276
through 1278 to the extent an undivided interest in a mortgage loan is
considered to have been purchased at a "market discount." The amount of market
discount is equal to the excess of the portion of the principal amount of the
mortgage loan allocable to the holder's undivided interest in the mortgage loans
over the holder's tax basis in the undivided interest. Market discount with
respect to a certificate will be considered to be zero if the amount allocable
to the certificate is less than 0.25% of the certificate's stated redemption
price at maturity multiplied by the weighted average maturity remaining after
the date of purchase. Treasury regulations implementing the market discount
rules have not yet been issued; therefore, investors are advised to consult
their own tax advisors regarding the application of these rules and the
advisability of making any of the elections allowed under Code Sections 1276
through 1278.

     The Code provides that any principal payment (whether a scheduled payment
or a prepayment) or any gain on disposition of a market discount bond acquired
by the taxpayer after October 22, 1986, shall be treated as ordinary income to
the extent that it does not exceed the accrued market discount at the time of
the payment. The amount of accrued market discount for purposes of determining
the tax treatment of subsequent principal payments or dispositions of the market
discount bond is to be reduced by the amount so treated as ordinary income.

     The Code also grants the Treasury Department authority to issue regulations
providing for the computation of accrued market discount on debt instruments,
the principal of which is payable in more than one installment. Although the
Treasury Department has not yet issued regulations, rules described in the
relevant legislative history describes how market discount should be accrued on
instruments bearing market discount. According to the legislative history, the
holder of a market discount bond may elect to accrue market discount either on
the basis of a constant interest rate or according to one of the following
methods. If a certificate is issued with OID, the amount of market discount that
accrues during any accrual period would be equal to the product of the total
remaining market discount and a fraction, the numerator of which is the OID
accruing during the period and the denominator of which is the total remaining
OID at the beginning of the accrual period. For certificates issued without OID,
the amount of market discount that accrues during a period is equal to the
product of the total remaining market discount and a fraction, the numerator of
which is the amount of stated interest paid during the accrual period and the
denominator of which is the total amount of stated interest remaining to be paid
at the beginning of the accrual period. For purposes of calculating market
discount under any of these methods in the case of instruments that provide for
payments that may be accelerated due to prepayments of other obligations
securing the instruments, the same prepayment assumption applicable to
calculating the accrual

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of OID will apply. Recent legislation expands the required use of a prepayment
assumption for purposes of calculating OID for tax years beginning after August
5, 1997 to pools of receivables the yield on which may be affected due to
prepayments and previous legislative history states Congress intends that if a
prepayment assumption would be used to calculate OID it should also be used to
accrue marked discount. Because the regulations described above have not been
issued, it is impossible to predict what effect those regulations might have on
the tax treatment of a certificate purchased at a discount or premium in the
secondary market.

     A holder who acquired a certificate at a market discount also may be
required to defer, until the maturity date of the certificate or its earlier
disposition in a taxable transaction, the deduction of a portion of the amount
of interest that the holder paid or accrued during the taxable year on
indebtedness incurred or maintained to purchase or carry the certificate in
excess of the aggregate amount of interest (including OID) includible in the
holder's gross income for the taxable year with respect to the certificate. The
amount of the net interest expense deferred in a taxable year may not exceed the
amount of market discount accrued on the certificate for the days during the
taxable year on which the holder held the certificate and, in general, would be
deductible when the market discount is includible in income. The amount of any
remaining deferred deduction is to be taken into account in the taxable year in
which the certificate matures or is disposed of in a taxable transaction. In the
case of a disposition in which gain or loss is not recognized in whole or in
part, any remaining deferred deduction will be allowed to the extent of gain
recognized on the disposition. This deferral rule does not apply if the
certificateholder elects to include the market discount in income currently as
it accrues on all market discount obligations acquired by the certificateholder
in that taxable year or thereafter.

     Election to Treat All Interest as OID. The OID Regulations permit a
certificateholder to elect to accrue all interest, discount (including de
minimis market or original issue discount) and premium in income as interest,
based on a constant yield method for certificates acquired on or after April 4,
1994. If an election to treat all interest as OID were to be made with respect
to a certificate with market discount, the certificateholder would be deemed to
have made an election to include in income currently market discount with
respect to all other debt instruments having market discount that the
certificateholder acquires during the year of the election or thereafter.
Similarly, a certificateholder that makes this election for a certificate that
is acquired at a premium will be deemed to have made an election to amortize
bond premium with respect to all debt instruments having amortizable bond
premium that the certificateholder owns or acquires. See "-- Single Class of
Certificates -- Premium." The election to accrue interest, discount and premium
on a constant yield method with respect to a certificate cannot be revoked
without the consent of the IRS.

 B. MULTIPLE CLASSES OF CERTIFICATES

     1. Stripped Bonds and Stripped Coupons

     Pursuant to Code Section 1286, the separation of ownership of the right to
receive some or all of the interest payments on an obligation from ownership of
the right to receive some or all of the principal payments results in the
creation of "stripped bonds" with respect to principal payments and "stripped
coupons" with respect to interest payments. For purposes of Code Sections 1271
through 1288, Code Section 1286 treats a stripped bond or a stripped coupon as
an obligation issued on the date that the stripped interest is created. If a
trust fund is created with two classes of certificates, one class of
certificates may represent the right to principal and interest, or principal
only, on all or a portion of the mortgage loans (the "Stripped Bond
Certificates"), while the second class of certificates may represent the right
to some or all of the interest on the same mortgage loans (the "Stripped Coupon
Certificates").

     Servicing fees in excess of reasonable servicing fees ("excess servicing")
will be treated under the stripped bond rules. If the excess servicing fee is
less than 100 basis points (i.e., 1% interest on the mortgage loan principal
balance) or the certificates are initially sold with a de minimis discount
(which amount may be calculated without a prepayment assumption), any non-de
minimis discount arising from a subsequent transfer of the certificates should
be treated as market discount. The IRS appears to require

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that reasonable servicing fees be calculated on a mortgage loan by mortgage loan
basis, which could result in some mortgage loans being treated as having more
than 100 basis points of interest stripped off. See "-- Non-REMIC Certificates"
and "Multiple Classes of Senior Certificates -- Stripped Bonds and Stripped
Coupons."

     Although current authority is not entirely clear, a Stripped Bond
Certificate should be treated as an interest in mortgage loans issued on the day
the certificate is purchased for purposes of calculating any OID. Generally, if
the discount on a mortgage loan is larger than a de minimis amount (as
calculated for purposes of the OID rules) a purchaser of the certificate will be
required to accrue the discount under the OID rules of the Code. See
"-- Non-REMIC Certificates" and "-- Single Class of Certificates -- Original
Issue Discount." However, a purchaser of a Stripped Bond Certificate will be
required to account for any discount on the mortgage loans as market discount
rather than OID if either the amount of OID with respect to the mortgage loan is
treated as zero under the OID de minimis rule when the certificate was stripped
or no more than 100 basis points (including any amount of servicing fees in
excess of reasonable servicing fees) is stripped off of the trust fund's
mortgage loans.

     The precise tax treatment of Stripped Coupon Certificates is substantially
uncertain. The Code could be read literally to require that OID computations be
made for each payment from each mortgage loan. However, based on the recent IRS
guidance, it appears that all payments from a mortgage loan underlying a
Stripped Coupon Certificate should be treated as a single installment obligation
subject to the OID rules of the Code, in which case, all payments from the
mortgage loan would be included in the mortgage loan's stated redemption price
at maturity for purposes of calculating income on the Stripped Coupon
Certificate under the OID rules of the Code.

     Based on current authority it is unclear under what circumstances, if any,
the prepayment of mortgage loans will give rise to a loss to the holder of a
Stripped Bond Certificate purchased at a premium or a Stripped Coupon
Certificate. If the certificate is treated as a single instrument (rather than
an interest in discrete mortgage loans) and the effect of prepayments is taken
into account in computing yield with respect to the certificate, it appears that
no loss will be available as a result of any particular prepayment unless
prepayments occur at a rate faster than the assumed prepayment rate. However, if
a certificate is treated as an interest in discrete mortgage loans, or if no
prepayment assumption is used, then when a mortgage loan is prepaid, any
certificate so treated should be able to recognize a loss equal to the portion
of the unrecovered premium of the certificate that is allocable to the mortgage
loan. In addition, amounts received in redemption for debt instruments issued by
natural persons purchased or issued after June 8, 1997 are treated as received
in exchange therefore (i.e., treated the same as obligations issued by
corporations). This change could affect the character of any loss.

     Holders of Stripped Bond Certificates and Stripped Coupon Certificates are
encouraged to consult with their own tax advisors regarding the proper treatment
of these certificates for federal income tax purposes.

     2. Certificates Representing Interests in Loans Other Than ARM Loans

     The original issue discount rules of Code Sections 1271 through 1275 will
be applicable to mortgages of corporations originated after May 27, 1969,
mortgages of noncorporate mortgagors (other than individuals) originated after
July 1, 1982, and mortgages of individuals originated after March 2, 1984. Under
the OID Regulations, original issue discount could arise by the charging of
points by the originator of the mortgage in an amount greater than the statutory
de minimis exception, including a payment of points that is currently deductible
by the borrower under applicable Code provisions, or under certain
circumstances, by the presence of 'teaser" rates (i.e., the initial rates on the
mortgage loans are lower than subsequent rates on the mortgage loans) on the
mortgage loans.

     OID on each certificate must be included in the owner's ordinary income for
federal income tax purposes as it accrues, in accordance with a constant
interest method that takes into account the compounding of interest, in advance
of receipt of the cash attributable to the income. The amount of OID required to
be included in an owner's income in any taxable year with respect to a
certificate representing
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an interest in mortgage loans other than mortgage loans with interest rates that
adjust periodically ("ARM Loans") likely will be computed as described under
"-- Accrual of Original Issue Discount." The following discussion is based in
part on Treasury regulations issued on January 27, 1994, and amended on June 11,
1996, under Code Sections 1271 through 1273 and 1275 (the "OID Regulations") and
in part on the provisions of the Tax Reform Act of 1986 (the "1986 Act"). The
OID Regulations generally are effective for debt instruments issued on or after
April 4, 1994, but may be relied upon as authority with respect to debt
instruments issued after December 21, 1992. Alternatively, proposed Treasury
regulations issued December 21, 1992 may be treated as authority for debt
instruments issued after December 21, 1992 and before April 4, 1994, and
proposed Treasury regulations issued in 1986 and 1991 may be treated as
authority for instruments issued before December 21, 1992. In applying these
dates, the issued date of the mortgage loans should be used, or, in the case of
Stripped Bond Certificates or Stripped Coupon Certificates, the date the
certificates are acquired. The holder of a certificate should be aware, however,
that neither the proposed OID Regulations nor the OID Regulations adequately
address certain issues relevant to prepayable securities.

     Under the Code, the mortgage loans underlying the certificates will be
treated as having been issued on the date they were originated with an amount of
OID equal to the excess of the mortgage loan's stated redemption price at
maturity over its issue price. The issue price of a mortgage loan is generally
the amount lent to the mortgagee, which may be adjusted to take into account
certain loan origination fees. The stated redemption price at maturity of a
mortgage loan is the sum of all payments to be made on the mortgage loan other
than payments that are treated as qualified stated interest payments. The
accrual of this OID, as described under "-- Accrual of Original Issue Discount,"
will, unless otherwise specified in the related prospectus supplement, utilize
the original yield to maturity of the certificates calculated based on a
reasonable assumed prepayment rate for the mortgage loans underlying the
certificates (the "Prepayment Assumption"), and will take into account events
that occur during the calculation period. The Prepayment Assumption will be
determined in the manner prescribed by regulations that have not yet been
issued. The legislative history of the 1986 Act (the "Legislative History")
provides, however, that the regulations will require that the Prepayment
Assumption be the prepayment assumption that is used in determining the offering
price of the certificate. No representation is made that any certificate will
prepay at the Prepayment Assumption or at any other rate. The prepayment
assumption contained in the Code literally only applies to debt instruments
collateralized by other debt instruments that are subject to prepayment rather
than direct ownership interests in debt instruments, and, in tax years beginning
after August 5, 1997, to pools of receivables the yield on which may be affected
by prepayments of receivables such as those the certificates represent. However,
no other legal authority provides guidance with regard to the proper method for
accruing OID on obligations that are subject to prepayment, and, until further
guidance is issued, the master servicer intends to calculate and report OID
under the method described in "-- Accrual of Original Issue Discount."

     Accrual of Original Issue Discount. Generally, the owner of a certificate
must include in gross income the sum of the "daily portions," as defined below,
of the OID on any certificate for each day on which it owns the certificate,
including the date of purchase but excluding the date of disposition. In the
case of an original owner, the daily portions of OID with respect to each
component generally will be determined as set forth under the OID Regulations. A
calculation will be made by the master servicer or other entity specified in the
related prospectus supplement of the portion of OID that accrues during each
successive monthly accrual period (or shorter period from the date of original
issue) that ends on the day in the calendar year corresponding to each of the
distribution dates on the certificates (or the day before each date). This will
be done, in the case of each full month accrual period, by adding the present
value at the end of the accrual period (determined by using as a discount factor
the original yield to maturity of the respective component under the Prepayment
Assumption) of all remaining payments to be received under the Prepayment
Assumption on the respective component and any payments received during the same
accrual period, and subtracting from that total the "adjusted issue price" of
the respective component at the beginning of the same accrual period. The
adjusted issue price of a certificate at the beginning of the first accrual
period is its issue price; the adjusted issue price of a certificate at the
beginning of a subsequent accrual period is the adjusted issue price at the
beginning of the immediately
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preceding accrual period plus the amount of OID allocable to that accrual period
reduced by the amount of any payment made at the end of or during that accrual
period. The OID accruing during the accrual period will then be divided by the
number of days in the period to determine the daily portion of OID for each day
in the period. With respect to an initial accrual period shorter than a full
monthly accrual period, the daily portions of OID must be determined according
to an appropriate allocation under any reasonable method.

     Original issue discount generally must be reported as ordinary gross income
as it accrues under a constant interest method that takes into account the
compounding of interest as it accrues rather than when received. However, the
amount of original issue discount includible in the income of a holder of an
obligation is reduced when the obligation is acquired after its initial issuance
at a price greater than the sum of the original issue price and the previously
accrued original issue discount, less prior payments of principal. Accordingly,
if mortgage loans acquired by a certificateholder are purchased at a price equal
to the then unpaid principal amount of those mortgage loans, no original issue
discount attributable to the difference between the issue price and the original
principal amount of those mortgage loans (e.g., due to points) will be
includible by the holder. Other original issue discount on the mortgage loans
(e.g., that arising from a "teaser" rate) would still need to be accrued.

     3. Certificates Representing Interests in ARM Loans

     The OID Regulations do not address the treatment of instruments, such as
the certificates, which represent interests in ARM Loans. Additionally, the IRS
has not issued guidance under the Code's coupon stripping rules with respect to
instruments that represent interests in ARM Loans. In the absence of any
authority, the master servicer will report OID on certificates attributable to
ARM Loans ("Stripped ARM Obligations") to holders in a manner it believes is
consistent with the rules described under the heading "-- Certificates
Representing Interests in Loans Other Than ARM Loans" and with the OID
Regulations. As such, for purposes of projecting the remaining payments and the
projected yield, the assumed rate payable on the ARM Loans will be the fixed
rate equivalent on the issue date. Application of these rules may require
inclusion of income on a Stripped ARM Obligation in advance of the receipt of
cash attributable to the income. Further, the addition of interest deferred due
to negative amortization ("Deferred Interest") to the principal balance of an
ARM Loan may require the inclusion of the interest deferred due to negative
amortization in the income of the certificateholder when it accrues.
Furthermore, the addition of Deferred Interest to the certificate's principal
balance will result in additional income (including possibly OID income) to the
certificateholder over the remaining life of the certificates.

     Because the treatment of Stripped ARM Obligations is uncertain, investors
are encouraged to consult their tax advisors regarding how income will be
includible with respect to the certificates.

  C. SALE OR EXCHANGE OF A CERTIFICATE

     Sale or exchange of a certificate before its maturity will result in gain
or loss equal to the difference, if any, between the amount received and the
owner's adjusted basis in the certificate. The adjusted basis of a certificate
generally will equal the seller's purchase price for the certificate, increased
by the OID included in the seller's gross income with respect to the
certificate, and reduced by principal payments on the certificate previously
received by the seller. The gain or loss will be capital gain or loss to an
owner for which a certificate is a "capital asset" within the meaning of Code
Section 1221, and will be long-term or short-term depending on whether the
certificate has been owned for the long-term capital gain holding period
(currently more than one year).

     The certificates will be "evidences of indebtedness" within the meaning of
Code Section 582(c)(1), so that gain or loss recognized from the sale of a
certificate by a bank or a thrift institution to which that section applies will
be ordinary income or loss.

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  D. NON-U.S. PERSONS

     Generally, to the extent that a certificate evidences ownership in
underlying mortgage loans that were issued on or before July 18, 1984, interest
or OID paid by the person required to withhold tax under Code Section 1441 or
1442 to an owner that is not a U.S. Person or a certificateholder holding on
behalf of an owner that is not a U.S. Person will be subject to federal income
tax, collected by withholding, at a rate of 30% or any lower rate provided for
interest by an applicable tax treaty. Accrued OID recognized by the owner on the
sale or exchange of a certificate also will be subject to federal income tax at
the same rate. Generally, accrued OID payments would not be subject to
withholding to the extent that a certificate evidences ownership in mortgage
loans issued after July 18, 1984, by natural persons if the certificateholder
complies with certain identification requirements (including delivery of a
statement, signed by the certificateholder under penalties of perjury,
certifying that the certificateholder is not a U.S. Person and providing the
name and address of the certificateholder). Additional restrictions apply to
mortgage loans where the mortgagor is not a natural person in order to qualify
for the exemption from withholding. Any foreclosure property owned by the trust
could be treated as a U.S. real property interest owned by certificateholders.

     As used in this prospectus, a "U.S. Person" means

     - a citizen or resident of the United States,

     - a corporation or a partnership (including an entity treated as a
       corporation or partnership for U.S. federal income tax purposes)
       organized in or created under the laws of the United States or any State
       thereof or the District of Columbia (unless in the case of a partnership
       Treasury Regulations provide otherwise),

     - an estate, the income of which from sources outside the United States is
       includible in gross income for federal income tax purposes regardless of
       its connection with the conduct of a trade or business within the United
       States, or

     - a trust if a court within the United States is able to exercise primary
       supervision over the administration of the trust and one or more United
       States persons have authority to control all substantial decisions of the
       trust.

In addition, U.S. Persons would include certain trusts that can elect to be
treated as U.S. Persons. A "Non-U.S. Person" is a person other than a U.S.
Person.

     Interest paid (or accrued) on the mortgage loans to a certificateholder who
is a non-U.S. Person will be considered "portfolio interest," and generally will
not be subject to United States federal income tax and withholding tax,
provided, that the interest is not effectively connected with the conduct of a
trade or business within the United States by the non-U.S. Person, and the
non-U.S. Person provides the trust or other person who is otherwise required to
withhold U.S. tax with respect to the mortgage loans with an appropriate
statement (on Form W-8 or other similar form), signed under penalties of
perjury, certifying that the beneficial owner of the mortgage loan is a foreign
person and providing that non-U.S. person's name and address. If an interest in
a mortgage loan is held through a securities clearing organization or certain
other financial institutions, the organization or institution may provide the
relevant signed statement to the withholding agent. In that case, however, the
signed statement must be accompanied by a Form W-8 or substitute form provided
by the non-U.S. Person that owns that interest in the mortgage loan. If interest
does not constitute portfolio interest, then it will be subject to U.S. federal
income and withholding tax at a rate of 30%, unless reduced or eliminated
pursuant to an applicable tax treaty and the non-U.S. Person provides the trust,
or an organization or financial institution described above, with an appropriate
statement (e.g., a Form 1001), signed under penalties of perjury, to that
effect.

     Final regulations dealing with backup withholding and information reporting
on income paid to foreign person and related matters (the "New Withholding
Regulations") were published in the Federal Register on October 14, 1997. In
general, the New Withholding Regulations do not significantly alter the
substantive withholding and information reporting requirements, but do unify
current certification

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procedures and forms and clarify reliance standards. The New Withholding
Regulations generally will be effective for payments made after December 31,
1999, subject to certain transition rules. The discussion set forth above does
not take the New Withholding Regulations into account. Prospective Non-U.S.
Persons who own interests in mortgage loans are strongly urged to consult their
own tax advisor with respect to the New Withholding Regulations.

  E. INFORMATION REPORTING AND BACKUP WITHHOLDING

     The master servicer will furnish or make available, within a reasonable
time after the end of each calendar year, to each person who was a
certificateholder at any time during the year, the information deemed
appropriate to assist certificateholders in preparing their federal income tax
returns, or to enable holders to make any information available to beneficial
owners or financial intermediaries that hold certificates as nominees on behalf
of beneficial owners. If a holder, beneficial owner, financial intermediary or
other recipient of a payment on behalf of a beneficial owner fails to supply a
certified taxpayer identification number or if the Secretary of the Treasury
determines that the person has not reported all interest and dividend income
required to be shown on its federal income tax return, 31% backup withholding
may be required with respect to any payments. Any amounts deducted and withheld
from a distribution to a recipient would be allowed as a credit against a
recipient"s federal income tax liability.

REMIC CERTIFICATES

     The trust fund relating to a series of certificates may elect to be treated
as a REMIC. Qualification as a REMIC requires ongoing compliance with certain
conditions. Although a REMIC is not generally subject to federal income tax
(see, however "-- Residual Certificates" and "-- Prohibited Transactions"), if a
trust fund with respect to which a REMIC election is made fails to comply with
one or more of the ongoing requirements of the Code for REMIC status during any
taxable year, including the implementation of restrictions on the purchase and
transfer of the residual interests in a REMIC as described under "Residual
Certificates," the Code provides that a trust fund will not be treated as a
REMIC for that year and thereafter. In that event, the entity may be taxable as
a separate corporation, and the related certificates (the "REMIC Certificates")
may not be accorded the status or given the tax treatment described below. While
the Code authorizes the Treasury Department to issue regulations providing
relief upon an inadvertent termination of the status of a trust fund as a REMIC,
no such regulations have been issued. Any relief, moreover, may be accompanied
by sanctions, such as the imposition of a corporate tax on all or a portion of
the REMIC's income for the period in which the requirements for REMIC status are
not satisfied. Assuming compliance with all provisions of the related pooling
and servicing agreement, each trust fund that elects REMIC status will qualify
as a REMIC, and the related certificates will be considered to be regular
interests ("Regular Certificates") or residual interests ("Residual
Certificates") in the REMIC. The related prospectus supplement for each series
of certificates will indicate whether the trust fund will make a REMIC election
and whether a class of certificates will be treated as a regular or residual
interest in the REMIC. With respect to each trust fund for which a REMIC
election is to be made, Brown & Wood LLP will issue an opinion confirming the
conclusions expressed above concerning the status of the trust fund as a REMIC
and the status of the certificates as representing regular or residual interests
in a REMIC.

     In general, with respect to each series of certificates for which a REMIC
election is made, certificates held by a thrift institution taxed as a "domestic
building and loan association" will constitute assets described in Code Section
7701(a)(19)(C); certificates held by a real estate investment trust will
constitute "real estate assets" within the meaning of Code Section 856(c)(4)(A);
and interest on certificates held by a real estate investment trust will be
considered "interest on obligations secured by mortgages on real property"
within the meaning of Code Section 856(c)(3)(B). If less than 95% of the REMIC's
assets are assets qualifying under any of these Code sections, the certificates
will be qualifying assets only to the extent that the REMIC's assets are
qualifying assets. In addition, payments on mortgage loans held pending
distribution on the REMIC Certificates will be considered to be real estate
assets for purposes of Code Section 856(c).

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     In some instances the mortgage loans may not be treated entirely as assets
described in the foregoing sections. See, in this regard, the discussion of
buydown loans contained in "-- Non-REMIC Certificates -- Single Class of
Certificates." REMIC Certificates held by a real estate investment trust will
not constitute "Government Securities" within the meaning of Code Section
856(c)(4)(A), and REMIC Certificates held by a regulated investment company will
not constitute "Government Securities" within the meaning of Code Section
851(b)(4)(A)(ii). REMIC Certificates held by certain financial institutions will
constitute "evidences of indebtedness" within the meaning of Code Section
582(c)(1).

     A "qualified mortgage" for REMIC purposes is any obligation (including
certificates of participation in an obligation) that is principally secured by
an interest in real property and that is transferred to the REMIC within a
prescribed time period in exchange for regular or residual interests in the
REMIC. The REMIC Regulations provide that manufactured housing or mobile homes
(not including recreational vehicles, campers or similar vehicles) that are
"single family residences" under Code Section 25(e)(10) will qualify as real
property without regard to state law classifications. Under Code Section
25(e)(10), a single family residence includes any manufactured home that has a
minimum of 400 square feet of living space and a minimum width in excess of 102
inches and that is of a kind customarily used at a fixed location.

     Tiered REMIC Structures.  For certain series of certificates, two or more
separate elections may be made to treat designated portions of the related trust
fund as REMICs (respectively, the "Subsidiary REMIC or REMICs" and the "Master
REMIC") for federal income tax purposes. Upon the issuance of such a series of
certificates, assuming compliance with all provisions of the related pooling and
servicing agreement, the Master REMIC as well as each Subsidiary REMIC will each
qualify as a REMIC, and the REMIC Certificates issued by the Master REMIC and
each Subsidiary REMIC, respectively, will be considered to evidence ownership of
Regular Certificates or Residual Certificates in the related REMIC within the
meaning of the REMIC provisions. With respect to each trust fund for which more
than one REMIC election is to be made, Brown & Wood LLP will issue an opinion
confirming the conclusions expressed above concerning the status of the Master
REMIC and each Subsidiary REMIC as a REMIC and the status of the certificates as
regular or residual interests in a REMIC.

     Only REMIC Certificates, other than the residual interest in any Subsidiary
REMIC, issued by the Master REMIC will be offered under this prospectus. All
Subsidiary REMICs and the Master REMIC will be treated as one REMIC solely for
purposes of determining whether the REMIC Certificates will be "real estate
assets" within the meaning of Section 856(c)(4)(A) of the Code; "loans secured
by an interest in real property" under Section 7701(a)(19)(C) of the Code; and
whether the income on the certificates is interest described in Section
856(c)(3)(B) of the Code.

  A. REGULAR CERTIFICATES

     General. Except as otherwise stated in this discussion, Regular
Certificates will be treated for federal income tax purposes as debt instruments
issued by the REMIC and not as ownership interests in the REMIC or its assets.
Moreover, holders of Regular Certificates that otherwise report income under a
cash method of accounting will be required to report income with respect to
Regular Certificates under an accrual method.

     Original Issue Discount and Premium. The Regular Certificates may be issued
with OID. Generally, OID, if any, will equal the difference between the "stated
redemption price at maturity" of a Regular Certificate and its "issue price."
Holders of any class of certificates issued with OID will be required to include
OID in gross income for federal income tax purposes as it accrues, in accordance
with a constant interest method based on the compounding of interest as it
accrues rather than in accordance with receipt of the interest payments. The
following discussion is based in part on the OID Regulations and in part on the
provisions of the 1986 Act. The OID Regulations generally are effective for debt
instruments issued on or after April 4, 1994. Holders of Regular Certificates
(the "Regular Certificateholders") should be aware, however, that the OID
Regulations do not adequately address certain issues relevant to prepayable
securities, such as the Regular Certificates.

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     Rules governing OID are set forth in Code Sections 1271 through 1273 and
1275. These rules require that the amount and rate of accrual of OID be
calculated based on the Prepayment Assumption and the anticipated reinvestment
rate, if any, relating to the Regular Certificates and prescribe a method for
adjusting the amount and rate of accrual of the discount where the actual
prepayment rate differs from the Prepayment Assumption. Under the Code, the
Prepayment Assumption must be determined in the manner prescribed by
regulations, which regulations have not yet been issued. The Legislative History
provides, however, that Congress intended the regulations to require that the
Prepayment Assumption be the prepayment assumption that is used in determining
the initial offering price of the Regular Certificates. The prospectus
supplement for each series of Regular Certificates will specify the Prepayment
Assumption to be used for the purpose of determining the amount and rate of
accrual of OID. No representation is made that the Regular Certificates will
prepay at the Prepayment Assumption or at any other rate.

     The IRS issued final regulations (the "Contingent Regulations") in June
1996 governing the calculation of OID on instruments having contingent interest
payments. The Contingent Regulations specifically do not apply for purposes of
calculating OID on debt instruments subject to Code Section 1272(a)(6), such as
the Regular Certificates. Additionally, the OID Regulations do not contain
provisions specifically interpreting Code Section 1272(a)(6). The trustee
intends to base its computations on Code Section 1272(a)(6) and the OID
Regulations as described in this prospectus. However, because no regulatory
guidance currently exists under Code Section 1272(a)(6), there can be no
assurance that this methodology represents the correct manner of calculating
OID.

     In general, each Regular Certificate will be treated as a single
installment obligation issued with an amount of OID equal to the excess of its
"stated redemption price at maturity" over its issue price. The issue price of a
Regular Certificate is the first price at which a substantial amount of Regular
Certificates of that class are first sold to the public (excluding bond houses,
brokers, underwriters or wholesalers). The issue price of a Regular Certificate
also includes the amount paid by an initial certificateholder for accrued
interest that relates to a period before the issue date of the Regular
Certificate. The stated redemption price at maturity of a Regular Certificate
includes the original principal amount of the Regular Certificate, but generally
will not include distributions of interest that constitute "qualified stated
interest." Qualified stated interest generally means interest unconditionally
payable at intervals of one year or less at a single fixed rate or qualified
variable rate (as described below) during the entire term of the Regular
Certificate. Interest is payable at a single fixed rate only if the rate
appropriately takes into account the length of the interval between payments.
Distributions of interest on Regular Certificates with respect to which Deferred
Interest will accrue will not constitute qualified stated interest payments, and
the stated redemption price at maturity of the Regular Certificates includes all
distributions of interest as well as principal thereon.

     Where the interval between the issue date and the first distribution date
on a Regular Certificate is longer than the interval between subsequent
distribution dates, the greater of any original issue discount disregarding the
rate in the first period and any interest foregone during the first period is
treated as the amount by which the stated redemption price of the certificate
exceeds its issue price for purposes of the de minimis rule described below. The
OID Regulations suggest that all or a portion of the interest on a long first
period Regular Certificate that is issued with non-de minimis OID will be
treated as OID. Where the interval between the issue date and the first
distribution date on a Regular Certificate is shorter than the interval between
subsequent distribution dates, interest due on the first distribution date in
excess of the amount that accrued during the first period would be added to the
certificates stated redemption price at maturity. Regular Certificateholders
should consult their own tax advisors to determine the issue price and stated
redemption price at maturity of a Regular Certificate. Additionally, it is
possible that the IRS could assert that the stated pass-through rate of interest
on the Regular Certificates is not unconditionally payable because late payments
or nonpayments on the mortgage loans are not penalized nor are there reasonable
remedies in place to compel payment on the mortgage loans. That position, if
successful, would require all holders of Regular Certificates to accrue income
on the certificates under the OID Regulations.

     Under the de minimis rule, OID on a Regular Certificate will be considered
to be zero if it is less than 0.25% of the stated redemption price at maturity
of the Regular Certificate multiplied by the
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weighted average maturity of the Regular Certificate. For this purpose, the
weighted average maturity of the Regular Certificate is computed as the sum of
the amounts determined by multiplying the number of full years (i.e., rounding
down partial years) from the issue date until each distribution in reduction of
stated redemption price at maturity is scheduled to be made by a fraction, the
numerator of which is the amount of each distribution included in the stated
redemption price at maturity of the Regular Certificate and the denominator of
which is the stated redemption price at maturity of the Regular Certificate.
Although currently unclear, it appears that the schedule of these distributions
should be determined in accordance with the Prepayment Assumption. The
Prepayment Assumption with respect to a series of Regular Certificates will be
set forth in the related prospectus supplement. Holders generally must report de
minimis OID pro rata as principal payments are received, and income will be
capital gain if the Regular Certificate is held as a capital asset. However,
accrual method holders may elect to accrue all de minimis OID as well as market
discount under a constant interest method.

     The prospectus supplement with respect to a trust fund may provide for
certain Regular Certificates to be issued at prices significantly exceeding
their principal amounts or based on notional principal balances (the
"Super-Premium Certificates"). The income tax treatment of Super-Premium
Certificates is not entirely certain. For information reporting purposes, the
trust fund intends to take the position that the stated redemption price at
maturity of Super-Premium Certificates is the sum of all payments to be made on
these Regular Certificates determined under the Prepayment Assumption, with the
result that these Regular Certificates would be issued with OID. The calculation
of income in this manner could result in negative original issue discount (which
delays future accruals of OID rather than being immediately deductible) when
prepayments on the mortgage loans exceed those estimated under the Prepayment
Assumption. As discussed above, the Contingent Regulations specifically do not
apply to prepayable debt instruments subject to Code Section 1272(a)(6), such as
the Regular Certificates. However, if the Super-Premium Certificates were
treated as contingent payment obligations, it is unclear how holders of those
certificates would report income or recover their basis. In the alternative, the
IRS could assert that the stated redemption price at maturity of Super-Premium
Certificates should be limited to their principal amount (subject to the
discussion under "-- Accrued Interest Certificates"), so that the Regular
Certificates would be considered for federal income tax purposes to be issued at
a premium. If this position were to prevail, the rules described under
"-- Regular Certificates -- Premium" would apply. It is unclear when a loss may
be claimed for any unrecovered basis for a Super-Premium Certificate. It is
possible that a holder of a Super-Premium Certificate may only claim a loss when
its remaining basis exceeds the maximum amount of future payments, assuming no
further prepayments or when the final payment is received with respect to the
Super-Premium Certificate. Absent further guidance, the trustee intends to treat
the Super-Premium Certificates as described in this prospectus.

     Under the REMIC Regulations, if the issue price of a Regular Certificate
(other than those based on a notional amount) does not exceed 125% of its actual
principal amount, the interest rate is not considered disproportionately high.
Accordingly, the Regular Certificate generally should not be treated as a Super-
Premium Certificate and the rules described under "-- Regular
Certificates -- Premium" should apply. However, it is possible that certificates
issued at a premium, even if the premium is less than 25% of the certificate's
actual principal balance, will be required to amortize the premium under an
original issue discount method or contingent interest method even though no
election under Code section 171 is made to amortize the premium.

     Generally, a Regular Certificateholder must include in gross income the
"daily portions," as determined below, of the OID that accrues on a Regular
Certificate for each day a certificateholder holds the Regular Certificate,
including the purchase date but excluding the disposition date. The daily
portions of OID are determined by allocating to each day in an accrual period
the ratable portion of OID allocable to the accrual period. Accrual periods may
be of any length and may vary in length over the term of the Regular
Certificates, provided that each accrual period is not longer than one year,
begins or ends on a

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distribution date (except for the first accrual period which begins on the issue
date) and begins on the day after the preceding accrual period ends. This will
be done, in the case of each full accrual period, by

     - adding

      - The present value at the end of the accrual period (determined by using
        as a discount factor the original yield to maturity of the Regular
        Certificates as calculated under the Prepayment Assumption) of all
        remaining payments to be received on the Regular Certificates under the
        Prepayment Assumption and

      - any payments included in the stated redemption price at maturity
        received during the same accrual period, and

     - subtracting from that total the adjusted issue price of the Regular
       Certificates at the beginning of the same accrual period.

The adjusted issue price of a Regular Certificate at the beginning of the first
accrual period is its issue price; the adjusted issue price of a Regular
Certificate at the beginning of a subsequent accrual period is the adjusted
issue price at the beginning of the immediately preceding accrual period plus
the amount of OID allocable to that accrual period and reduced by the amount of
any payment other than a payment of qualified stated interest made at the end of
or during that accrual period. The OID accrued during an accrual period will
then be divided by the number of days in the period to determine the daily
portion of OID for each day in the accrual period. The calculation of OID under
the method described above will cause the accrual of OID to either increase or
decrease (but never below zero) in a given accrual period to reflect the fact
that prepayments are occurring faster or slower than under the Prepayment
Assumption. With respect to an initial accrual period shorter than a full
accrual period, the daily portions of OID may be determined according to an
appropriate allocation under any reasonable method.

     A subsequent purchaser of a Regular Certificate issued with OID who
purchases the Regular Certificate at a cost less than the remaining stated
redemption price at maturity will also be required to include in gross income
the sum of the daily portions of OID on that Regular Certificate. In computing
the daily portions of OID for a subsequent purchaser of a Regular Certificate
(as well as an initial purchaser that purchases at a price higher than the
adjusted issue price but less than the stated redemption price at maturity),
however, the daily portion is reduced by the amount that would be the daily
portion for the day (computed in accordance with the rules set forth above)
multiplied by a fraction, the numerator of which is the amount, if any, by which
the price paid by the holder for that Regular Certificate exceeds the following
amount:

     - the sum of the issue price plus the aggregate amount of OID that would
       have been includible in the gross income of an original Regular
       Certificateholder (who purchased the Regular Certificate at its issue
       price), less

     - any prior payments included in the stated redemption price at maturity,
       and the denominator of which is the sum of the daily portions for that
       Regular Certificate for all days beginning on the date after the purchase
       date and ending on the maturity date computed under the Prepayment
       Assumption.

A holder who pays an acquisition premium instead may elect to accrue OID by
treating the purchase as a purchase at original issue.

     Variable Rate Regular Certificates. Regular Certificates may provide for
interest based on a variable rate. Interest is treated as payable at a variable
rate and not as contingent interest if, generally, the issue price does not
exceed the original principal balance by more than a specified amount and the
interest compounds or is payable at least annually at current values of certain
objective rates matured by or based on lending rates for newly borrowed funds.
For a debt instrument issued after August 13, 1996, an objective rate is a rate
(other than a qualified floating rate) that is determined using a single fixed
formula and that is based on objective financial or economic information. The
variable interest generally will be

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qualified stated interest to the extent it is unconditionally payable at least
annually and, to the extent successive variable rates are used, interest is not
significantly accelerated or deferred.

     The amount of OID with respect to a Regular Certificate bearing a variable
rate of interest will accrue in the manner described under "-- Original Issue
Discount and Premium" by assuming generally that the index used for the variable
rate will remain fixed throughout the term of the certificate. Appropriate
adjustments are made for the actual variable rate.

     Although unclear at present, the depositor intends to treat Regular
Certificates bearing an interest rate that is a weighted average of the net
interest rates on mortgage loans as variable rate certificates. In such case,
the weighted average rate used to compute the initial pass-through rate on the
Regular Certificates will be deemed to be the index in effect through the life
of the Regular Certificates. It is possible, however, that the IRS may treat
some or all of the interest on Regular Certificates with a weighted average rate
as taxable under the rules relating to obligations providing for contingent
payments. This treatment may effect the timing of income accruals on the Regular
Certificates. Additionally, if some or all of the mortgage loans are subject to
"teaser rates" (i.e., the initial rates on the mortgage loans are less than
subsequent rates on the mortgage loans) the interest paid on some or all of the
Regular Certificates may be subject to accrual using a constant yield method
notwithstanding the fact that these certificates may not have been issued with
"true" non-de minimis original issue discount.

     Election to Treat All Interest as OID. The OID Regulations permit a
certificateholder to elect to accrue all interest, discount (including de
minimus market or original issue discount) and premium in income as interest,
based on a constant yield method for certificates acquired on or after April 4,
1994. If such an election were to be made with respect to a Regular Certificate
with market discount, a certificateholder would be deemed to have made an
election to include in income currently market discount with respect to all
other debt instruments having market discount that the certificateholder
acquires during the year of the election or thereafter. Similarly, a
certificateholder that makes this election for a certificate that is acquired at
a premium will be deemed to have made an election to amortize bond premium with
respect to all debt instruments having amortizable bond premium that the
certificateholder owns or acquires. See "-- Regular Certificates -- Premium."
The election to accrue interest, discount and premium on a constant yield method
with respect to a certificate cannot be revoked without the consent of the IRS.

     Market Discount. A purchaser of a Regular Certificate may also be subject
to the market discount provisions of Code Sections 1276 through 1278. Under
these provisions and the OID Regulations, "market discount" equals the excess,
if any, of a Regular Certificate's stated principal amount or, in the case of a
Regular Certificate with OID, the adjusted issue price (determined for this
purpose as if the purchaser had purchased the Regular Certificate from an
original holder) over the price for the Regular Certificate paid by the
purchaser. A certificateholder that purchases a Regular Certificate at a market
discount will recognize income upon receipt of each distribution representing
stated redemption price. In particular, under Section 1276 of the Code a holder
generally will be required to allocate each principal distribution first to
accrued market discount not previously included in income, and to recognize
ordinary income to that extent. A certificateholder may elect to include market
discount in income currently as it accrues rather than including it on a
deferred basis in accordance with the foregoing. If made, the election will
apply to all market discount bonds acquired by the electing certificateholder on
or after the first day of the first taxable year to which the election applies.

     Market discount with respect to a Regular Certificate will be considered to
be zero if the amount allocable to the Regular Certificate is less than 0.25% of
the Regular Certificate's stated redemption price at maturity multiplied by the
Regular Certificate's weighted average maturity remaining after the date of
purchase. If market discount on a Regular Certificate is considered to be zero
under this rule, the actual amount of market discount must be allocated to the
remaining principal payments on the Regular Certificate, and gain equal to the
allocated amount will be recognized when the corresponding principal payment is
made. Treasury regulations implementing the market discount rules have not yet
been issued;

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therefore, investors should consult their own tax advisors regarding the
application of these rules and the advisability of making any of the elections
allowed under Code Sections 1276 through 1278.

     The Code provides that any principal payment (whether a scheduled payment
or a prepayment) or any gain on disposition of a market discount bond acquired
by the taxpayer after October 22, 1986, shall be treated as ordinary income to
the extent that it does not exceed the accrued market discount at the time of
the payment. The amount of accrued market discount for purposes of determining
the tax treatment of subsequent principal payments or dispositions of the market
discount bond is to be reduced by the amount so treated as ordinary income.

     The Code also grants authority to the Treasury Department to issue
regulations providing for the computation of accrued market discount on debt
instruments, the principal of which is payable in more than one installment.
Until regulations are issued by the Treasury, rules described in the Legislative
History will apply. Under those rules, the holder of a market discount bond may
elect to accrue market discount either on the basis of a constant interest rate
or according to one of the following methods. For Regular Certificates issued
with OID, the amount of market discount that accrues during a period is equal to
the product of the total remaining market discount and a fraction, the numerator
of which is the OID accruing during the period and the denominator of which is
the total remaining OID at the beginning of the period. For Regular Certificates
issued without OID, the amount of market discount that accrues during a period
is equal to the product of the total remaining market discount and a fraction,
the numerator of which is the amount of stated interest paid during the accrual
period and the denominator of which is the total amount of stated interest
remaining to be paid at the beginning of the period. For purposes of calculating
market discount under any of the above methods in the case of instruments (such
as the Regular Certificates) that provide for payments that may be accelerated
due to prepayments of other obligations securing the instruments, the same
Prepayment Assumption applicable to calculating the accrual of OID will apply.

     A holder of a Regular Certificate that acquires the Regular Certificate at
a market discount also may be required to defer, until the maturity date of the
Regular Certificate or its earlier disposition in a taxable transaction, the
deduction of a portion of the amount of interest that the holder paid or accrued
during the taxable year on indebtedness incurred or maintained to purchase or
carry the Regular Certificate in excess of the aggregate amount of interest
(including OID) includible in the holder's gross income for the taxable year
with respect to the Regular Certificate. The amount of the net interest expense
deferred in a taxable year may not exceed the amount of market discount accrued
on the Regular Certificate for the days during the taxable year on which the
holder held the Regular Certificate and, in general, would be deductible when
the market discount is includible in income. The amount of any remaining
deferred deduction is to be taken into account in the taxable year in which the
Regular Certificate matures or is disposed of in a taxable transaction. In the
case of a disposition in which gain or loss is not recognized in whole or in
part, any remaining deferred deduction will be allowed to the extent of gain
recognized on the disposition. This deferral rule does not apply if the Regular
Certificateholder elects to include the market discount in income currently as
it accrues on all market discount obligations acquired by the Regular
Certificateholder in that taxable year or thereafter.

     Premium. A purchaser of a Regular Certificate that purchases the Regular
Certificate at a cost (not including accrued qualified stated interest) greater
than its remaining stated redemption price at maturity will be considered to
have purchased the Regular Certificate at a premium and may elect to amortize
the premium under a constant yield method. It is not clear whether the
Prepayment Assumption would be taken into account in determining the life of the
Regular Certificate for this purpose. The Amortizable Bond Premium Regulations
described above specifically do not apply to prepayable debt instruments subject
to Code Section 1272(a)(6) such as the Regular Certificates. Absent further
guidance from the IRS, the trustee intends to account for amortizable bond
premium in the manner described in this prospectus. However, the Legislative
History states that the same rules that apply to accrual of market discount
(which rules require use of a Prepayment Assumption in accruing market discount
with respect to Regular Certificates without regard to whether the certificates
have OID) will also apply in amortizing bond premium under Code Section 171. The
Code provides that amortizable bond premium will be
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allocated among the interest payments on the Regular Certificates and will be
applied as an offset against the interest payment. Prospective purchasers of the
Regular Certificates should consult their tax advisors regarding the possible
application of the Amortizable Bond Premium Regulations.

     On December 30, 1997 the IRS issued final Amortizable Bond Premium
Regulations. These regulations specifically do not apply to prepayable debt
instruments subject to Code Section 1272(a)(6). Absent further guidance from the
IRS, the trustee intends to account for amortizable bond premium in the manner
described above. Prospective purchasers of the certificates should consult their
tax advisors regarding the possible application of the Amortizable Bond Premium
Regulations.

     Deferred Interest. Certain classes of Regular Certificates will provide for
the accrual of Deferred Interest with respect to one or more ARM Loans. Any
Deferred Interest that accrues with respect to a class of Regular Certificates
will constitute income to the holders of the certificates before the time
distributions of cash with respect to the Deferred Interest are made. It is
unclear, under the OID Regulations, whether any of the interest on the
certificates will constitute qualified stated interest or whether all or a
portion of the interest payable on the certificates must be included in the
stated redemption price at maturity of the certificates and accounted for as OID
(which could accelerate the inclusion). Interest on Regular Certificates must in
any event be accounted for under an accrual method by the holders of the
certificates and, therefore, applying the latter analysis may result only in a
slight difference in the timing of the inclusion in income of interest on the
Regular Certificates.

     Effects of Defaults and Delinquencies. Certain series of certificates may
contain one or more classes of subordinated certificates, and in the event there
are defaults or delinquencies on the mortgage loans, amounts that would
otherwise be distributed on the subordinated certificates may instead be
distributed on the certificates. Subordinated certificateholders nevertheless
will be required to report income with respect to their certificates under an
accrual method without giving effect to delays and reductions in distributions
on the subordinated certificates attributable to defaults and delinquencies on
the mortgage loans, except to the extent that it can be established that the
amounts are uncollectible. As a result, the amount of income reported by a
subordinated certificateholder in any period could significantly exceed the
amount of cash distributed to the holder in that period. The holder will
eventually be allowed a loss (or will be allowed to report a lesser amount of
income) to the extent that the aggregate amount of distributions on the
subordinated certificate is reduced as a result of defaults and delinquencies on
the mortgage loans. However, the timing and characterization of any losses or
reductions in income are uncertain, and, accordingly, subordinated
certificateholders are urged to consult their own tax advisors on this point.

     Sale, Exchange or Redemption. If a Regular Certificate is sold, exchanged,
redeemed or retired, the seller will recognize gain or loss equal to the
difference between the amount realized on the sale, exchange, redemption, or
retirement and the seller's adjusted basis in the Regular Certificate. The
adjusted basis generally will equal the cost of the Regular Certificate to the
seller, increased by any OID and market discount included in the seller's gross
income with respect to the Regular Certificate, and reduced (but not below zero)
by payments included in the stated redemption price at maturity previously
received by the seller and by any amortized premium. Similarly, a holder who
receives a payment that is part of the stated redemption price at maturity of a
Regular Certificate will recognize gain equal to the excess, if any, of the
amount of the payment over the holder's adjusted basis in the Regular
Certificate. A Regular Certificateholder who receives a final payment that is
less than the holder's adjusted basis in the Regular Certificate will generally
recognize a loss. Except as provided in the following paragraph and as provided
under "Market Discount," any gain or loss will be capital gain or loss, provided
that the Regular Certificate is held as a "capital asset" (generally, property
held for investment) within the meaning of Code Section 1221.

     Gain from the sale or other disposition of a Regular Certificate that might
otherwise be capital gain will be treated as ordinary income to the extent that
the gain does not exceed the excess, if any, of the amount that would have been
includible in the holder's income with respect to the Regular Certificate had
income accrued on it at a rate equal to 110% of the AFR as defined in Code
Section 1274(d) determined

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as of the date of purchase of the Regular Certificate, over the amount actually
includible in the holder's income.

     The Regular Certificates will be "evidences of indebtedness" within the
meaning of Code Section 582(c)(1), so that gain or loss recognized from the sale
of a Regular Certificate by a bank or a thrift institution to which this section
applies will be ordinary income or loss.

     The Regular Certificate information reports will include a statement of the
adjusted issue price of the Regular Certificate at the beginning of each accrual
period. In addition, the reports will include information necessary to compute
the accrual of any market discount that may arise upon secondary trading of
Regular Certificates. Because exact computation of the accrual of market
discount on a constant yield method would require information relating to the
holder's purchase price which the REMIC may not have, it appears that the
information reports will only require information pertaining to the appropriate
proportionate method of accruing market discount.

     Accrued Interest Certificates. Certain of the Regular Certificates
("Payment Lag Certificates") may provide for payments of interest based on a
period that corresponds to the interval between distribution dates but that ends
before each distribution date. The period between the Closing Date for Payment
Lag Certificates and their first distribution date may or may not exceed that
interval. Purchasers of Payment Lag Certificates for which the period between
the Closing Date and the first distribution date does not exceed that interval
could pay upon purchase of the Regular Certificates accrued interest in excess
of the accrued interest that would be paid if the interest paid on the
distribution date were interest accrued from distribution date to distribution
date. If a portion of the initial purchase price of a Regular Certificate is
allocable to interest that has accrued before the issue date ("pre-issuance
accrued interest") and the Regular Certificate provides for a payment of stated
interest on the first payment date (and the first payment date is within one
year of the issue date) that equals or exceeds the amount of the pre-issuance
accrued interest, then the Regular Certificates issue price may be computed by
subtracting from the issue price the amount of pre-issuance accrued interest,
rather than as an amount payable on the Regular Certificate. However, it is
unclear under this method how the OID Regulations treat interest on Payment Lag
Certificates. Therefore, in the case of a Payment Lag Certificate, the trust
fund intends to include accrued interest in the issue price and report interest
payments made on the first distribution date as interest to the extent the
payments represent interest for the number of days that the certificateholder
has held the Payment Lag Certificate during the first accrual period.

     Investors are encouraged to consult their own tax advisors concerning the
treatment for federal income tax purposes of Payment Lag Certificates.

     Non-Interest Expenses of the REMIC. Under the temporary Treasury
regulations, if the REMIC is considered to be a "single-class REMIC," a portion
of the REMIC's servicing, administrative and other non-interest expenses will be
allocated as a separate item to those Regular Certificateholders that are
"pass-through interest holders." certificateholders that are pass-through
interest holders should consult their own tax advisors about the impact of these
rules on an investment in the Regular Certificates. See "Pass-Through of
Non-Interest Expenses of the REMIC under Residual Certificates."

     Treatment of Realized Losses. Although not entirely clear, it appears that
holders of Regular Certificates that are corporations should in general be
allowed to deduct as an ordinary loss any loss sustained during the taxable year
on account of the certificates becoming wholly or partially worthless, and that,
in general, holders of certificates that are not corporations should be allowed
to deduct as a short-term capital loss any loss sustained during the taxable
year on account of the certificates becoming wholly worthless. Although the
matter is unclear, non-corporate holders of certificates may be allowed a bad
debt deduction at the time that the principal balance of a certificate is
reduced to reflect realized losses resulting from any liquidated mortgage loans.
The Internal Revenue Service, however, could take the position that
non-corporate holders will be allowed a bad debt deduction to reflect realized
losses only after all mortgage loans remaining in the related trust fund have
been liquidated or the certificates of the related series have been otherwise
retired. Potential investors and Holders of the certificates are urged to
consult their own tax advisors regarding the appropriate timing, amount and
character of any loss sustained with
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respect to their certificates, including any loss resulting from the failure to
recover previously accrued interest or discount income.

     Non-U.S. Persons. Generally, payments of interest (including any payment
with respect to accrued OID) on the Regular Certificates to a Regular
Certificateholder who is not a U.S. Person and is not engaged in a trade or
business within the United States will not be subject to federal withholding tax
if the Regular Certificateholder complies with certain identification
requirements (including delivery of a statement, signed by the Regular
Certificateholder under penalties of perjury, certifying that the Regular
Certificateholder is a foreign person and providing the name and address of the
Regular Certificateholder). If a Regular Certificateholder is not exempt from
withholding, distributions of interest, including distributions in respect of
accrued OID, the holder may be subject to a 30% withholding tax, subject to
reduction under any applicable tax treaty.

     Further, it appears that a Regular Certificate would not be included in the
estate of a non-resident alien individual and would not be subject to United
States estate taxes. However, Certificateholders who are non-resident alien
individuals are encouraged to consult their tax advisors concerning this
question.

     It is recommended that Regular Certificateholders who are not U.S. Persons
and persons related to them not acquire any Residual Certificates, and holders
of Residual Certificates (the "Residual Certificateholder") and persons related
to Residual Certificateholders not acquire any Regular Certificates without
consulting their tax advisors as to the possible adverse tax consequences of
doing so.

     As previously mentioned, the New Withholding Regulations were published in
the Federal Register on October 14, 1997 and generally will be effective for
payments made after December 31, 1999, subject to certain transition rules. The
discussion set forth above does not take the New Withholding Regulations into
account. Prospective Non-U.S. Persons who own Regular Certificates are urged to
consult their own tax advisor with respect to the New Withholding Regulations.

     Information Reporting and Backup Withholding.  The master servicer will
furnish or make available, within a reasonable time after the end of each
calendar year, to each person who was a Regular Certificateholder at any time
during the year, any information deemed appropriate to assist Regular
Certificateholders in preparing their federal income tax returns, or to enable
holders to make the information available to beneficial owners or financial
intermediaries that hold the Regular Certificates on behalf of beneficial
owners. If a holder, beneficial owner, financial intermediary or other recipient
of a payment on behalf of a beneficial owner fails to supply a certified
taxpayer identification number or if the Secretary of the Treasury determines
that the person has not reported all interest and dividend income required to be
shown on its federal income tax return, 31% backup withholding may be required
with respect to any payments. Any amounts deducted and withheld from a
distribution to a recipient would be allowed as a credit against a recipient's
federal income tax liability. In addition, prospective investors are encouraged
to consult their tax advisors with respect to the New Withholding Regulations.

  B. RESIDUAL CERTIFICATES

     Allocation of the Income of the REMIC to the Residual Certificates. The
REMIC will not be subject to federal income tax except with respect to income
from prohibited transactions and certain other transactions. See "-- Prohibited
Transactions and Other Taxes." Instead, each original holder of a Residual
Certificate will report on its federal income tax return, as ordinary income,
its share of the taxable income of the REMIC for each day during the taxable
year on which it owns any Residual Certificates. The taxable income of the REMIC
for each day will be determined by allocating the taxable income of the REMIC
for each calendar quarter ratably to each day in the quarter. An original
holder's share of the taxable income of the REMIC for each day will be based on
the portion of the outstanding Residual Certificates that the holder owns on
that day. The taxable income of the REMIC will be determined under an accrual
method and will be taxable to the holders of Residual Certificates without
regard to the timing or amounts of cash distributions by the REMIC. Ordinary
income derived from Residual Certificates will be "portfolio income" for
purposes of the taxation of taxpayers subject to the limitations on the
deductibility of "passive losses." As residual interests, the Residual
Certificates will be
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subject to tax rules, described below, that differ from those that would apply
if the Residual Certificates were treated for federal income tax purposes as
direct ownership interests in the certificates or as debt instruments issued by
the REMIC.

     A Residual Certificateholder may be required to include taxable income from
the Residual Certificate in excess of the cash distributed. For example, a
structure where principal distributions are made serially on regular interests
(that is, a fast-pay, slow-pay structure) may generate that sort of mismatching
of income and cash distributions (that is, "phantom income"). This mismatching
may be caused by the use of certain required tax accounting methods by the
REMIC, variations in the prepayment rate of the underlying mortgage loans and
certain other factors. Depending upon the structure of a particular transaction,
the aforementioned factors may significantly reduce the after-tax yield of a
Residual Certificate to a Residual Certificateholder. Investors should consult
their own tax advisors concerning the federal income tax treatment of a Residual
Certificate and the impact of the tax treatment on the after-tax yield of a
Residual Certificate.

     A subsequent Residual Certificateholder also will report on its federal
income tax return amounts representing a daily share of the taxable income of
the REMIC for each day that the Residual Certificateholder owns the Residual
Certificate. Those daily amounts generally would equal the amounts that would
have been reported for the same days by an original Residual Certificateholder,
as described above. The Legislative History indicates that certain adjustments
may be appropriate to reduce (or increase) the income of a subsequent holder of
a Residual Certificate that purchased the Residual Certificate at a price
greater than (or less than) the adjusted basis the Residual Certificate would
have in the hands of an original Residual Certificateholder. See "-- Sale or
Exchange of Residual Certificates." It is not clear, however, whether these
adjustments will in fact be permitted or required and, if so, how they would be
made. The REMIC Regulations do not provide for these adjustments.

     Taxable Income of the REMIC Attributable to Residual Interests. The taxable
income of the REMIC will reflect a netting of the income from the mortgage loans
and the REMIC's other assets and the deductions allowed to the REMIC for
interest and OID on the Regular Certificates and, except as described under
"-- Regular Certificates -- Non-Interest Expenses of the REMIC," other expenses.
REMIC taxable income is generally determined in the same manner as the taxable
income of an individual using the accrual method of accounting, except that the
limitations on deductibility of investment interest expense and expenses for the
production of income do not apply, all bad loans will be deductible as business
bad debts, and the limitation on the deductibility of interest and expenses
related to tax-exempt income is more restrictive than with respect to
individual. The REMIC's gross income includes interest, original issue discount
income, and market discount income, if any, on the mortgage loans, as well as,
income earned from temporary investments on reverse assets, reduced by the
amortization of any premium on the mortgage loans. In addition, a Residual
Certificateholder will recognize additional income due to the allocation of
realized losses to the Regular Certificates due to defaults, delinquencies and
realized losses on the mortgage loans. The timing of the inclusion of the income
by Residual Certificateholders may differ from the time the actual loss is
allocated to the Regular Certificates. The REMIC's deductions include interest
and original issue discount expense on the Regular Certificates, servicing fees
on the mortgage loans, other administrative expenses of the REMIC and realized
losses on the mortgage loans. The requirement that Residual Certificateholders
report their pro rata share of taxable income or net loss of the REMIC will
continue until there are no certificates of any class of the related series
outstanding.

     For purposes of determining its taxable income, the REMIC will have an
initial aggregate tax basis in its assets equal to the sum of the issue prices
of the Regular Certificates and the Residual Certificates (or, if a class of
certificates is not sold initially, its fair market value). The aggregate basis
will be allocated among the mortgage loans and other assets of the REMIC in
proportion to their respective fair market value. A mortgage loan will be deemed
to have been acquired with discount or premium to the extent that the REMIC's
basis therein is less than or greater than its principal balance, respectively.
Any discount (whether market discount or OID) will be includible in the income
of the REMIC as it accrues, in advance of receipt of the cash attributable to
this income, under a method similar to the method described
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above for accruing OID on the Regular Certificates. The REMIC expects to elect
under Code Section 171 to amortize any premium on the mortgage loans. Premium on
any mortgage loan to which the election applies would be amortized under a
constant yield method. It is not clear whether the yield of a mortgage loan
would be calculated for this purpose based on scheduled payments or taking
account of the Prepayment Assumption. Additionally, the election would not apply
to the yield with respect to any underlying mortgage loan originated on or
before September 27, 1985. Instead, premium with respect to that mortgage loan
would be allocated among the principal payments thereon and would be deductible
by the REMIC as those payments become due.

     The REMIC will be allowed a deduction for interest and OID on the Regular
Certificates. The amount and method of accrual of OID will be calculated for
this purpose in the same manner as described above with respect to Regular
Certificates except that the 0.25% per annum de minimis rule and adjustments for
subsequent holders described therein will not apply.

     A Residual Certificateholder will not be permitted to amortize the cost of
the Residual Certificate as an offset to its share of the REMIC's taxable
income. However, that taxable income will not include cash received by the REMIC
that represents a recovery of the REMIC's basis in its assets, and, as described
above, the issue price of the Residual Certificates will be added to the issue
price of the Regular Certificates in determining the REMIC's initial basis in
its assets. See "-- Sale or Exchange of Residual Certificates." For a discussion
of possible adjustments to income of a subsequent holder of a Residual
Certificate to reflect any difference between the actual cost of the Residual
Certificate to the holder and the adjusted basis the Residual Certificate would
have in the hands of an original Residual Certificateholder, see "-- Allocation
of the Income of the REMIC to the Residual Certificates."

     Net Losses of the REMIC. The REMIC will have a net loss for any calendar
quarter in which its deductions exceed its gross income. The net loss would be
allocated among the Residual Certificateholders in the same manner as the
REMIC's taxable income. The net loss allocable to any Residual Certificate will
not be deductible by the holder to the extent that the net loss exceeds the
holder's adjusted basis in the Residual Certificate. Any net loss that is not
currently deductible due to this limitation may only be used by the Residual
Certificateholder to offset its share of the REMIC's taxable income in future
periods (but not otherwise). The ability of Residual Certificateholders that are
individuals or closely held corporations to deduct net losses may be subject to
additional limitations under the Code.

     Mark to Market Rules. A Residual Certificate acquired after January 3, 1995
cannot be marked-to-market.

     Pass-Through of Non-Interest Expenses of the REMIC. As a general rule, all
of the fees and expenses of a REMIC will be taken into account by holders of the
Residual Certificates. In the case of a single class REMIC, however, the
expenses and a matching amount of additional income will be allocated, under
temporary Treasury regulations, among the Regular Certificateholders and the
Residual Certificateholders on a daily basis in proportion to the relative
amounts of income accruing to each certificateholder on that day. In general
terms, a single class REMIC is one that either would qualify, under existing
Treasury regulations, as a grantor trust if it were not a REMIC (treating all
interests as ownership interests, even if they would be classified as debt for
federal income tax purposes) or is similar to a grantor trust and is structured
with the principal purpose of avoiding the single class REMIC rules. The
applicable prospectus supplement may apportion expenses to the Regular
Certificates, but if it does not, then the expenses of the REMIC will be
allocated to holders of the related Residual Certificates in their entirety and
not to holders of the related Regular Certificates.

     In the case of individuals (or trusts, estates or other persons that
compute their income in the same manner as individuals) who own an interest in a
Regular Certificate or a Residual Certificate directly or through a pass-through
interest holder that is required to pass miscellaneous itemized deductions
through to its owners or beneficiaries (e.g. a partnership, an S corporation or
a grantor trust), the trust expenses will be deductible under Code Section 67
only to the extent that those expenses, plus other "miscellaneous itemized
deductions" of the individual, exceed 2% of the individual's adjusted gross
income. In addition, Code Section 68 provides that the amount of itemized
deductions otherwise allowable for an individual
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whose adjusted gross income exceeds a certain amount (the "Applicable Amount")
will be reduced by the lesser of 3% of the excess of the individual's adjusted
gross income over the Applicable Amount or 80% of the amount of itemized
deductions otherwise allowable for the taxable year. The amount of additional
taxable income recognized by Residual Certificateholders who are subject to the
limitations of either Code Section 67 or Code Section 68 may be substantial.
Further, holders (other than corporations) subject to the alternative minimum
tax may not deduct miscellaneous itemized deductions in determining their
alternative minimum taxable income. The REMIC is required to report to each
pass-through interest holder and to the IRS the holder's allocable share, if
any, of the REMIC's non-interest expenses. The term "pass-through interest
holder" generally refers to individuals, entities taxed as individuals and
certain pass-through entities, but does not include real estate investment
trusts. Residual Certificateholders that are pass-through interest holders are
encouraged to consult their own tax advisors about the impact of these rules on
an investment in the Residual Certificates.

     Excess Inclusions. A portion of the income on a Residual Certificate
(referred to in the Code as an "excess inclusion") for any calendar quarter
generally will be subject to federal income tax in all events. Thus, for
example, an excess inclusion may not be offset by any unrelated losses,
deductions or loss carryovers of a Residual Certificateholder; will be treated
as "unrelated business taxable income" within the meaning of Code Section 512 if
the Residual Certificateholder is a pension fund or any other organization that
is subject to tax only on its unrelated business taxable income (see
"-- Tax-Exempt Investors"); and is not eligible for any reduction in the rate of
withholding tax in the case of a Residual Certificateholder that is a foreign
investor. See "-- Non-U.S. Persons." An exception to the excess inclusion rules
that applied to thrifts holding certain residuals was repealed by the Small
Business Tax Act of 1996.

     Except as discussed in the following paragraph, with respect to any
Residual Certificateholder, the excess inclusions for any calendar quarter is
the excess, if any, of the income of the Residual Certificateholder for that
calendar quarter from its Residual Certificate over the sum of the "daily
accruals" for all days during the calendar quarter on which the Residual
Certificateholder holds the Residual Certificate. For this purpose, the daily
accruals with respect to a Residual Certificate are determined by allocating to
each day in the calendar quarter its ratable portion of the product of the
"adjusted issue price" of the Residual Certificate at the beginning of the
calendar quarter and 120 percent of the "Federal long-term rate" in effect at
the time the Residual Certificate is issued. For this purpose, the "adjusted
issue price" of a Residual Certificate at the beginning of any calendar quarter
equals the issue price of the Residual Certificate, increased by the amount of
daily accruals for all prior quarters, and decreased (but not below zero) by the
aggregate amount of payments made on the Residual Certificate before the
beginning of the same quarter. The "federal long-term rate" is an average of
current yields on Treasury securities with a remaining term of greater than nine
years, computed and published monthly by the IRS.

     In the case of any Residual Certificates held by a real estate investment
trust, the aggregate excess inclusions with respect to the Residual
Certificates, reduced (but not below zero) by the real estate investment trust
taxable income (within the meaning of Code Section 857(b)(2), excluding any net
capital gain), will be allocated among the shareholders of the trust in
proportion to the dividends received by the shareholders from the trust, and any
amount so allocated will be treated as an excess inclusion with respect to a
Residual Certificate as if held directly by the shareholder. Regulated
investment companies, common trust funds and certain cooperatives are subject to
similar rules.

     Payments. Any distribution made on a Residual Certificate to a Residual
Certificateholder will be treated as a non-taxable return of capital to the
extent it does not exceed the Residual Certificateholder's adjusted basis in the
Residual Certificate. To the extent a distribution exceeds the adjusted basis,
it will be treated as gain from the sale of the Residual Certificate.

     Sale or Exchange of Residual Certificates. If a Residual Certificate is
sold or exchanged, the seller will generally recognize gain or loss equal to the
difference between the amount realized on the sale or exchange and its adjusted
basis in the Residual Certificate (except that the recognition of loss may be

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limited under the "wash sale" rules). A holder's adjusted basis in a Residual
Certificate generally equals the cost of the Residual Certificate to the
Residual Certificateholder, increased by the taxable income of the REMIC that
was included in the income of the Residual Certificateholder with respect to the
Residual Certificate, and decreased (but not below zero) by the net losses that
have been allowed as deductions to the Residual Certificateholder with respect
to the Residual Certificate and by the distributions received thereon by the
Residual Certificateholder. In general, the gain or loss will be capital gain or
loss provided the Residual Certificate is held as a capital asset. However,
Residual Certificates will be "evidences of indebtedness" within the meaning of
Code Section 582(c)(1), so that gain or loss recognized from sale of a Residual
Certificate by a bank or thrift institution to which that section applies would
be ordinary income or loss.

     Except as provided in Treasury regulations yet to be issued, if the seller
of a Residual Certificate reacquires the Residual Certificate, or acquires any
other Residual Certificate, any residual interest in another REMIC or similar
interest in a "taxable mortgage pool" (as defined in Code Section 7701(i))
during the period beginning six months before, and ending six months after, the
date of the sale, the sale will be subject to the "wash sale" rules of Code
Section 1091. In that event, any loss realized by the Residual Certificateholder
on the sale will not be deductible, but, instead, will increase the Residual
Certificateholder's adjusted basis in the newly acquired asset.

PROHIBITED TRANSACTIONS AND OTHER TAXES

     The Code imposes a tax on REMICs equal to 100 percent of the net income
derived from "prohibited transactions" (the "Prohibited Transactions Tax") and
prohibits deducting any loss with respect to prohibited transactions. In
general, subject to certain specified exceptions, a prohibited transaction means
the disposition of a mortgage loan, the receipt of income from a source other
than a mortgage loan or certain other permitted investments, the receipt of
compensation for services, or gain from the disposition of an asset purchased
with the payments on the mortgage loans for temporary investment pending
distribution on the certificates. It is not anticipated that the trust fund for
any series of certificates will engage in any prohibited transactions in which
it would recognize a material amount of net income.

     In addition, certain contributions to a trust fund as to which an election
has been made to treat the trust fund as a REMIC made after the day on which the
trust fund issues all of its interest could result in the imposition of a tax on
the trust fund equal to 100% of the value of the contributed property (the
"Contributions Tax"). No trust fund for any series of certificates will accept
contributions that would subject it to a Contributions Tax.

     In addition, a trust fund as to which an election has been made to treat
the trust fund as a REMIC may also be subject to federal income tax at the
highest corporate rate on "net income from foreclosure property," determined by
reference to the rules applicable to real estate investment trusts. "Net income
from foreclosure property" generally means income from foreclosure property
other than qualifying income for a real estate investment trust.

     Where any Prohibited Transactions Tax, Contributions Tax, tax on net income
from foreclosure property or state or local income or franchise tax that may be
imposed on a REMIC relating to any series of certificates results from

     - a breach of the related master servicer's, trustee's or seller's
       obligations under the related pooling and servicing agreement for the
       series, the tax will be borne by the master servicer, trustee or seller,
       as the case may be, out of its own funds or

     - the seller's obligation to repurchase a mortgage loan, the tax will be
       borne by the seller.

If the master servicer, trustee or seller, as the case may be, fails to pay or
is not required to pay the tax as provided above, the tax will be payable out of
the trust fund for the series and will result in a reduction in amounts
available to be distributed to the certificateholders of the series.

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LIQUIDATION AND TERMINATION

     If the REMIC adopts a plan of complete liquidation, within the meaning of
Code Section 860F(a)(4)(A)(i), which may be accomplished by designating in the
REMIC's final tax return a date on which the adoption is deemed to occur, and
sells all of its assets (other than cash) within a 90-day period beginning on
that date, the REMIC will not be subject to any Prohibited Transactions Tax,
provided that the REMIC credits or distributes in liquidation all of the sale
proceeds plus its cash (other than the amounts retained to meet claims) to
holders of Regular and Residual Certificates within the 90-day period.

     The REMIC will terminate shortly following the retirement of the Regular
Certificates. If a Residual Certificateholder's adjusted basis in the Residual
Certificate exceeds the amount of cash distributed to the Residual
Certificateholder in final liquidation of its interest, then it would appear
that the Residual Certificateholder would be entitled to a loss equal to the
amount of the excess. It is unclear whether the loss, if allowed, will be a
capital loss or an ordinary loss.

ADMINISTRATIVE MATTERS

     Solely for the purpose of the administrative provisions of the Code, the
REMIC generally will be treated as a partnership and the Residual
Certificateholders will be treated as the partners if there is more than one
holder of the Residual Certificate. Certain information will be furnished
quarterly to each Residual Certificateholder who held a Residual Certificate on
any day in the previous calendar quarter.

     Each Residual Certificateholder is required to treat items on its return
consistently with their treatment on the REMIC's return, unless the Residual
Certificateholder either files a statement identifying the inconsistency or
establishes that the inconsistency resulted from incorrect information received
from the REMIC. The IRS may assert a deficiency resulting from a failure to
comply with the consistency requirement without instituting an administrative
proceeding at the REMIC level. The REMIC does not intend to register as a tax
shelter pursuant to Code Section 6111 because it is not anticipated that the
REMIC will have a net loss for any of the first five taxable years of its
existence. Any person that holds a Residual Certificate as a nominee for another
person may be required to furnish the REMIC, in a manner to be provided in
Treasury regulations, with the name and address of the person and other
information.

TAX-EXEMPT INVESTORS

     Any Residual Certificateholder that is a pension fund or other entity that
is subject to federal income taxation only on its "unrelated business taxable
income" within the meaning of Code Section 512 will be subject to the tax on
that portion of the distributions received on a Residual Certificate that is
considered an excess inclusion. See "-- Residual Certificates -- Excess
Inclusions."

NON-U.S. PERSONS

     Amounts paid to Residual Certificateholders who are not U.S. persons (see
"-- Regular Certificates -- Non-U.S. Persons") are treated as interest for
purposes of the 30% (or lower treaty rate) United States withholding tax.
Amounts distributed to holders of Residual Certificates should qualify as
"portfolio interest," subject to the conditions described in "-- Regular
Certificates," but only to the extent that the underlying mortgage loans were
originated after July 18, 1984. Furthermore, the rate of withholding on any
income on a Residual Certificate that is excess inclusion income will not be
subject to reduction under any applicable tax treaties. See "-- Residual
Certificates -- Excess Inclusions." If the portfolio interest exemption is
unavailable, the amount will be subject to United States withholding tax when
paid or otherwise distributed (or when the Residual Certificate is disposed of)
under rules similar to those for withholding upon disposition of debt
instruments that have OID. The Code, however, grants the Treasury Department
authority to issue regulations requiring that those amounts be taken into
account earlier than otherwise provided where necessary to prevent avoidance of
tax (for example, where the Residual Certificates do not have significant
value). See "-- Residual Certificates -- Excess Inclusions." If the amounts paid
to Residual Certificateholders that are not U.S. persons are effectively
connected with their
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conduct of a trade or business within the United States, the 30% (or lower
treaty rate) withholding will not apply. Instead, the amounts paid to the
non-U.S. Person will be subject to U.S. federal income taxation at regular
graduated rates. For special restrictions on the transfer of Residual
Certificates, see "-- Tax-Related Restrictions on Transfers of Residual
Certificates."

TAX-RELATED RESTRICTIONS ON TRANSFERS OF RESIDUAL CERTIFICATES

     Disqualified Organizations. An entity may not qualify as a REMIC unless
there are reasonable arrangements designed to ensure that residual interests in
the entity are not held by "disqualified organizations." Further, a tax is
imposed on the transfer of a residual interest in a REMIC to a "disqualified
organization." The amount of the tax equals the product of an amount (as
determined under the REMIC Regulations) equal to the present value of the total
anticipated "excess inclusions" with respect to the interest for periods after
the transfer and the highest marginal federal income tax rate applicable to
corporations. The tax is imposed on the transferor unless the transfer is
through an agent (including a broker or other middleman) for a disqualified
organization, in which event the tax is imposed on the agent. The person
otherwise liable for the tax shall be relieved of liability for the tax if the
transferee furnished to it an affidavit that the transferee is not a
disqualified organization and, at the time of the transfer, the person does not
have actual knowledge that the affidavit is false. A "disqualified organization"
means the United States, any State, possession or political subdivision of the
United States, any foreign government, any international organization or any
agency or instrumentality of any of the foregoing entities (provided that the
term does not include an instrumentality if all its activities are subject to
tax and, except for Freddie Mac, a majority of its board of directors is not
selected by a governmental agency), any organization (other than certain farmers
cooperatives) generally exempt from federal income taxes unless the organization
is subject to the tax on "unrelated business taxable income" and a rural
electric or telephone cooperative.

     A tax is imposed on a "pass-through entity" holding a residual interest in
a REMIC if at any time during the taxable year of the pass-through entity a
disqualified organization is the record holder of an interest in the entity. The
amount of the tax is equal to the product of the amount of excess inclusions for
the taxable year allocable to the interest held by the disqualified organization
and the highest marginal federal income tax rate applicable to corporations. The
pass-through entity otherwise liable for the tax, for any period during which
the disqualified organization is the record holder of an interest in the entity,
will be relieved of liability for the tax if the record holder furnishes to the
entity an affidavit that the record holder is not a disqualified organization
and, for the applicable period, the pass-through entity does not have actual
knowledge that the affidavit is false. For this purpose, a "pass-through entity"
means a regulated investment company, real estate investment trust, or common
trust fund; a partnership, trust, or estate; and certain cooperatives. Except as
may be provided in Treasury regulations not yet issued, any person holding an
interest in a pass-through entity as a nominee for another will, with respect to
the interest, be treated as a pass-through entity. The tax on pass-through
entities is generally effective for periods after March 31, 1988, except that in
the case of regulated investment companies, real estate investment trusts,
common trust funds and publicly-traded partnerships the tax shall apply only to
taxable years of the entities beginning after December 31, 1988. Under the
Taxpayer Relief Act of 1997, large partnerships (generally with 250 or more
partners) will be taxable on excess inclusion income as if all partners were
disqualified organizations.

     To comply with these rules, the pooling and servicing agreement will
provide that no record or beneficial ownership interest in a Residual
Certificate may be purchased, transferred or sold, directly or indirectly,
without the express written consent of the master servicer. The master servicer
will grant consent to a proposed transfer only if it receives an affidavit from
the proposed transferee to the effect that it is not a disqualified organization
and is not acquiring the Residual Certificate as a nominee or agent for a
disqualified organization and a covenant by the proposed transferee to the
effect that the proposed transferee agrees to be bound by and to abide by the
transfer restrictions applicable to the Residual Certificate.

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<PAGE>   149

     Noneconomic Residual Certificates. The REMIC Regulations disregard, for
federal income tax purposes, any transfer of a Noneconomic Residual Certificate
to a "U.S. Person," as defined in the following section of this discussion,
unless no significant purpose of the transfer is to enable the transferor to
impede the assessment or collection of tax. In general, the definition of a U.S.
Person is the same as provided under "Certain Federal Income Tax
Consequences -- Non-REMIC Certificates -- Non-U.S. Persons," except that
entities or individuals that would otherwise be treated as Non-U.S. Persons, may
be considered U.S. Persons for this purpose if their income from the residual is
subject to tax under Code Section 871(b) or Code Section 882 (income effectively
connected with a U.S. trade or business). A Noneconomic Residual Certificate is
any Residual Certificate (including a Residual Certificate with a positive value
at issuance) unless, at the time of transfer, taking into account the Prepayment
Assumption and any required or permitted clean up calls or required liquidation
provided for in the REMIC's organizational documents, the present value of the
expected future distributions on the Residual Certificate at least equals the
product of the present value of the anticipated excess inclusions and the
highest corporate income tax rate in effect for the year in which the transfer
occurs and the transferor reasonably expects that the transferee will receive
distributions from the REMIC at or after the time at which taxes accrue on the
anticipated excess inclusions in an amount sufficient to satisfy the accrued
taxes. A significant purpose to impede the assessment or collection of tax
exists if the transferor, at the time of the transfer, either knew or should
have known that the transferee would be unwilling or unable to pay taxes due on
its share of the taxable income of the REMIC. A transferor is presumed not to
have that knowledge if the transferor conducted a reasonable investigation of
the transferee and the transferee acknowledges to the transferor that the
residual interest may generate tax liabilities in excess of the cash flow and
the transferee represents that it intends to pay the taxes associated with the
residual interest as they become due. If a transfer of a Noneconomic Residual
Certificate is disregarded, the transferor would continue to be treated as the
owner of the Residual Certificate and would continue to be subject to tax on its
allocable portion of the net income of the REMIC.

     Foreign Investors. The REMIC Regulations provide that the transfer of a
Residual Certificate that has a "tax avoidance potential" to a "foreign person"
will be disregarded for federal income tax purposes. This rule appears to apply
to a transferee who is not a U.S. Person unless the transferee's income in
respect of the Residual Certificate is effectively connected with the conduct of
a United States trade or business. A Residual Certificate is deemed to have a
tax avoidance potential unless, at the time of transfer, the transferor
reasonably expects that the REMIC will distribute to the transferee amounts that
will equal at least 30 percent of each excess inclusion, and that the amounts
will be distributed at or after the time the excess inclusion accrues and not
later than the end of the calendar year following the year of accrual. If the
non-U.S. Person transfers the Residual Certificate to a U.S. Person, the
transfer will be disregarded, and the foreign transferor will continue to be
treated as the owner, if the transfer has the effect of allowing the transferor
to avoid tax on accrued excess inclusions. The provisions in the REMIC
Regulations regarding transfers of Residual Certificates that have tax avoidance
potential to foreign persons are effective for all transfers after June 30,
1992. The pooling and servicing agreement will provide that no record or
beneficial ownership interest in a Residual Certificate may be transferred,
directly or indirectly, to a non-U.S. Person unless the person provides the
trustee with a duly completed I.R.S. Form 4224 and the trustee consents to the
transfer in writing.

     Any attempted transfer or pledge in violation of the transfer restrictions
shall be absolutely null and void and shall vest no rights in any purported
transferee. Investors in Residual Certificates are encouraged to consult their
own tax advisors with respect to transfers of the Residual Certificates and
pass-through entities are encouraged to consult their own tax advisors with
respect to any tax which may be imposed on a pass-through entity.

                            STATE TAX CONSIDERATIONS

     In addition to the federal income tax consequences described in "Certain
Federal Income Tax Considerations," potential investors are encouraged to
consider the state and local income tax consequences of the acquisition,
ownership, and disposition of the certificates. State and local income tax
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<PAGE>   150

law may differ substantially from the corresponding federal law, and this
discussion does not purport to describe any aspect of the income tax laws of any
state or locality. Therefore, potential investors are encouraged to consult
their own tax advisors with respect to the various tax consequences of
investments in the certificates.

                              ERISA CONSIDERATIONS

     The following describes certain considerations under ERISA and the Code,
which apply only to certificates of a series that are not divided into
subclasses. If certificates are divided into subclasses, the related prospectus
supplement will contain information concerning considerations relating to ERISA
and the Code that are applicable to them.

     ERISA imposes requirements on employee benefit plans subject to ERISA (and
the Code imposes requirements on certain other retirement plans and
arrangements, including individual retirement accounts and annuities, Keogh
plans and collective investment funds and separate accounts in which the plans,
accounts or arrangements are invested) (collectively "Plans") and on persons who
bear specified relationships to Plans ("Parties in Interest") or are fiduciaries
with respect to Plans. Generally, ERISA applies to investments made by Plans.
Among other things, ERISA requires that the assets of Plans be held in trust and
that the trustee, or other duly authorized fiduciary, have exclusive authority
and discretion to manage and control the assets of the Plans. ERISA also imposes
certain duties on persons who are fiduciaries of Plans. Under ERISA, any person
who exercises any authority or control respecting the management or disposition
of the assets of a Plan is considered to be a fiduciary of the Plan (subject to
certain exceptions not here relevant). Certain employee benefit plans, such as
governmental plans (as defined in ERISA Section 3(32)) and, if no election has
been made under Section 410(d) of the Code, church plans (as defined in ERISA
Section 3(33)), are not subject to ERISA requirements. Accordingly, assets of
those plans may be invested in certificates without regard to the described
ERISA considerations, subject to the provisions of applicable state law.
However, any of those plans that are qualified and exempt from taxation under
Code Sections 401(a) and 501(a) are subject to the prohibited transaction rules
set forth in Code Section 503.

     On November 13, 1986, the United States Department of Labor issued final
regulations concerning the definition of what constitutes the assets of a Plan.
(Labor Reg. Section 2510.3-101.) Under this regulation, the underlying assets
and properties of corporations, partnerships and certain other entities in which
a Plan makes an "equity" investment could be deemed for purposes of ERISA to be
assets of the investing Plan in certain circumstances. However, the regulation
provides that, generally, the assets of a corporation or partnership in which a
Plan invests will not be deemed for purposes of ERISA to be assets of the Plan
if the equity interest acquired by the investing Plan is a publicly-offered
security. A publicly-offered security, as defined in Labor Reg. Section
2510.3-101, is a security that is widely held, freely transferable and
registered under the Securities Exchange Act of 1934, as amended.

     In addition to the imposition of general fiduciary standards of investment
prudence and diversification, ERISA and the Code prohibit a broad range of
transactions involving Plan assets of a Plan and Parties in Interest with
respect to the Plan and impose additional prohibitions where Parties in Interest
are fiduciaries with respect to the Plan. Because the mortgage loans may be
deemed Plan assets of each Plan that purchases certificates, an investment in
the certificates by a Plan might be a prohibited transaction under ERISA
Sections 406 and 407 and subject to an excise tax under Code Section 4975 unless
a statutory, regulatory or administrative exemption applies.

     In Prohibited Transaction Exemption 83-1 ("PTE 83-1"), the DOL exempted
from ERISA's prohibited transaction rules and from the excise tax imposed under
Code Section 4975 certain transactions relating to the operation of residential
mortgage pool investment trusts and the purchase, sale and holding of "mortgage
pool pass-through certificates" in the initial issuance of the certificates. PTE
83-1 permits, subject to certain conditions, transactions that might otherwise
be prohibited between Plans and Parties in Interest with respect to those Plans
related to the origination, maintenance and termination of mortgage pools
consisting of mortgage loans secured by first or second mortgages or deeds of
trust on single-family
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residential property, and the acquisition and holding of certain mortgage pool
pass-through certificates representing an interest in those mortgage pools by
Plans. If the general conditions of PTE 83-1 are satisfied, investments by a
Plan in certificates that represent interests in a mortgage pool consisting of
mortgage loans representing loans for single family homes ("Single Family
Certificates") will be exempt from the prohibitions of ERISA Sections 406(a) and
407 (relating generally to transactions with Parties in Interest who are not
fiduciaries) if the Plan purchases the Single Family Certificates at no more
than fair market value and will be exempt from the prohibitions of ERISA
Sections 406(b)(1) and (2) (relating generally to transactions with fiduciaries)
if, in addition, the purchase is approved by an independent fiduciary, no sales
commission is paid to the pool sponsor, the Plan does not purchase more than
twenty-five percent (25%) of all Single Family Certificates and at least fifty
percent (50%) of all Single Family Certificates are purchased by persons
independent of the pool sponsor or pool trustee. PTE 83-1 does not provide an
exemption for transactions involving subordinated certificates. Accordingly, no
transfer of a subordinated certificate generally may be made to a Plan.

     The discussion in this and the next paragraph applies only to Single Family
Certificates. The depositor believes that, for purposes of PTE 83-1, the term
"mortgage pass-through certificate" would include: (1) certificates issued in a
series consisting of only a single class of certificates; and (2) senior
certificates issued in a series in which there is only one class of senior
certificates; provided that the certificates in the case of clause (1), or the
senior certificates in the case of clause (2), evidence the beneficial ownership
of both a specified percentage (greater than zero percent) of future interest
payments and a specified percentage (greater than zero percent) of future
principal payments on the mortgage loans. It is not clear whether a class of
certificates that evidences the beneficial ownership of a specified percentage
of interest payments only or principal payments only, or of a notional amount of
either principal or interest payments, would be a "mortgage pass-through
certificate" for purposes of PTE 83-1.

     PTE 83-1 sets forth three general conditions that must be satisfied for any
transaction to be eligible for exemption:

     - the maintenance of a system of insurance or other protection for the
       pooled mortgage loans and property securing the loans and for
       indemnifying certificateholders against reductions in pass-through
       payments due to property damage or defaults in loan payments in an amount
       not less than the greater of one percent of the aggregate principal
       balance of all covered pooled mortgage loans or the principal balance of
       the largest covered pooled mortgage loan;

     - the existence of a pool trustee who is not an affiliate of the pool
       sponsor; and

     - a limitation on the amount of the payment retained by the pool sponsor,
       together with other funds inuring to its benefit, to not more than
       adequate consideration for selling the mortgage loans plus reasonable
       compensation for services provided by the pool sponsor to the mortgage
       pool.

     The depositor believes that the first general condition referred to above
will be satisfied with respect to the certificates in a series issued without a
subordination feature, or the senior certificates only in a series issued with a
subordination feature, provided that the subordination and reserve fund,
subordination by shifting of interests, the pool insurance or other form of
credit enhancement described in this prospectus (that subordination, pool
insurance or other form of credit enhancement being the system of insurance or
other protection referred to above) with respect to a series of certificates is
maintained in an amount not less than the greater of one percent of the
aggregate principal balance of the mortgage loans or the principal balance of
the largest mortgage loan. See "Description of the Certificates." In the absence
of a ruling that the system of insurance or other protection with respect to a
series of certificates satisfies the first general condition referred to above,
there can be no assurance that these features will be so viewed by the DOL. The
trustee will not be affiliated with the depositor.

     Each Plan fiduciary who is responsible for making the investment decisions
whether to purchase or commit to purchase and to hold Single Family Certificates
must make its own determination as to whether the first and third general
conditions, and the specific conditions described briefly in the preceding
paragraph, of PTE 83-1 have been satisfied, or as to the availability of any
other prohibited transaction

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exemptions. Each Plan fiduciary should also determine whether, under the general
fiduciary standards of investment prudence and diversification, an investment in
the 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.

     The DOL has granted to certain underwriters individual administrative
exemptions (the "Underwriter Exemptions") from certain of the prohibited
transaction rules of ERISA and the related excise tax provisions of Section 4975
of the Code with respect to the initial purchase, the holding and the subsequent
resale by Plans of securities, including certificates issued by entities that
hold investment pools consisting of certain receivables, loans and other
obligations (an "issuer") and the servicing, operation and management of such
entities, provided the conditions and requirements of the Underwriter Exemptions
are met.

     While each Underwriter Exemption is an individual exemption separately
granted to a specific underwriter, the terms and conditions which generally
apply to the Underwriter Exemptions are substantially the following:

     - the acquisition of the securities by a Plan is on terms (including the
       price for the securities) that are at least as favorable to the Plan as
       they would be in an arm's length transaction with an unrelated party;

     - the rights and interest evidenced by the securities acquired by the Plan
       are not subordinated to the rights and interests evidenced by other
       securities of the issuer, unless the entity holds only certain types of
       assets such as mortgages on real property (a "Designated Transaction");

     - the securities acquired by the Plan have received a rating at the time of
       acquisition that is one of the three highest generic rating categories
       (four, in a Designated Transaction) from Standard & Poor's Ratings Group,
       a division of McGraw-Hill Companies, Inc., Moody's Investors Service,
       Inc. or Fitch, Inc. (each, a "Rating Agency");

     - the trustee is not an affiliate of any other member of the Restricted
       Group, as defined below;

     - the sum of all payments made to and retained by the underwriters in
       connection with the distribution of the securities represents not more
       than reasonable compensation for underwriting the securities; the sum of
       all payments made to and retained by the seller pursuant to the
       assignment of the loans to the issuer represents not more than the fair
       market value of the loans; the sum of all payments made to and retained
       by the master servicer and any other servicer represents not more than
       reasonable compensation for its services under the agreement pursuant to
       which the loans are pooled and reimbursements of its reasonable expenses
       in connection therewith;

     - the Plan investing in the securities is an "accredited investor" as
       defined in Rule 501(a)(1) of Regulation D of the SEC under the Securities
       Act of 1933, as amended; and

     - for certain types of issuers, the documents establishing the issuer and
       governing the transaction must contain certain provisions intended to
       protect the assets of the issuer from creditors of the seller.

     The issuer must also meet the following requirements:

     - the investment pool must consist solely of assets of the type that have
       been included in other investment pools;

     - securities in other investment pools must have been rated in one of the
       three highest rating categories (four, in a Designated Transaction) of
       S&P, Moody's or Fitch for at least one year before the Plan's acquisition
       of securities; and

     - securities evidencing interests in the other investment pools must have
       been purchased by investors other than Plans for at least one year before
       any Plan's acquisition of securities.

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<PAGE>   153

     Moreover, the Underwriter Exemptions generally provide relief from certain
self-dealing and conflict of interest prohibited transactions that may occur
when the Plan fiduciary causes a Plan to acquire securities of an issuer holding
receivables as to which the fiduciary (or its affiliate) is an obligor provided
that, among other requirements:

     - in the case of an acquisition in connection with the initial issuance of
       securities, at least fifty percent (50%) of each class of securities in
       which Plans have invested is acquired by persons independent of the
       Restricted Group;

     - the fiduciary (or its affiliate) is an obligor with respect to five
       percent (5%) or less of the fair market value of the obligations
       contained in the investment pool;

     - the Plan's investment in securities of any class does not exceed
       twenty-five percent (25%) of all of the securities of that class
       outstanding at the time of the acquisition; and

     - immediately after the acquisition, no more than twenty-five percent (25%)
       of the assets of any Plan with respect to which the person is a fiduciary
       is invested in securities representing an interest in one or more issuers
       containing assets sold or serviced by the same entity.

     The Underwriter Exemptions do not apply to Plans sponsored by the seller,
the related Underwriter, the trustee, the master servicer, any servicer, any
insurer with respect to the mortgage loans, any obligor with respect to mortgage
loans included in the investment pool constituting more than five percent (5%)
of the aggregate unamortized principal balance of the assets in the investment
pool, or any affiliate of those parties (the "Restricted Group").

     The Underwriter Exemptions provides exemptive relief to specified
mortgage-backed and asset-backed securities transactions using pre-funded
accounts and that otherwise meet the requirements of the Underwriter Exemptions.
Mortgage loans or other secured receivables (the "obligations") supporting
payments to securityholders, and having a value equal to no more than
twenty-five percent (25%) of the total principal amount of the securities being
offered by the user, may be transferred to the issuer within a 90-day or
three-month period following the closing date (the "Pre-Funding Period"),
instead of being either identified or transferred on or before the closing date.
The relief is available when certain conditions are met.

     The rating of a security may change. If the rating of a security declines
below the lowest permitted level, the security will no longer be eligible for
relief under the Underwriter Exemptions, and consequently may not be purchased
by or sold to a Plan (although a Plan that had purchased the security when it
had a permitted rating would not be required by the Underwriter Exemptions to
dispose of it).

     The prospectus supplement for each series of securities will indicate the
classes of securities, if any, offered thereby as to which it is expected that
an Underwriter Exemption will apply.

     Any Plan fiduciary that proposes to cause a Plan to purchase certificates
is encouraged to consult with its counsel concerning the impact of ERISA and the
Code, the applicability of PTE 83-1, the availability and applicability of any
Underwriter Exemption or any other exemptions from the prohibited transaction
provisions of ERISA and the Code and the potential consequences in their
specific circumstances, before making the investment. Moreover, each Plan
fiduciary should determine whether under the general fiduciary standards of
investment prudence and diversification an investment in the 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.

                                LEGAL INVESTMENT

     The prospectus supplement for each series of certificates will specify
which, if any, of the classes of certificates offered by it will constitute
"mortgage related securities" for purposes of the Secondary Mortgage Market
Enhancement Act of 1984 ("SMMEA"). Classes of certificates that qualify as
"mortgage related securities" will be legal investments for those investors
whose authorized investments are subject to state regulation, to the same extent
as, under applicable law, obligations issued by or guaranteed as to principal
and interest by the United States constitute legal investments for them. Those
investors are persons, trusts, corporations, partnerships, associations,
business trusts and business entities (including depository institutions, life
insurance companies and pension funds) created pursuant to or existing under the
laws of the United States or of any state (including the District of Columbia
and Puerto

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<PAGE>   154

Rico). Under SMMEA, if a state enacts legislation before October 4, 1991
specifically limiting the legal investment authority of those entities with
respect to "mortgage related securities," the certificates will constitute legal
investments for entities subject to the legislation only to the extent provided
in it. Approximately twenty-one states adopted limiting legislation before the
October 4, 1991 deadline.

     SMMEA also amended the legal investment authority of federally-chartered
depository institutions as follows: federal savings and loan associations and
federal savings banks may invest in, sell or otherwise deal in certificates
without limitations as to the percentage of their assets represented by them,
federal credit unions may invest in mortgage related securities, and national
banks may purchase certificates for their own account without regard to the
limitations generally applicable to investment securities set forth in 12 U.S.C.
24 (Seventh), subject in each case to regulations that the applicable federal
authority may prescribe. In this connection, federal credit unions should review
the National Credit Union Administration Letter to Credit Unions No. 96, as
modified by Letter to Credit Unions No. 108, which includes guidelines to assist
federal credit unions in making investment decisions for mortgage related
securities, and the its regulation "Investment and Deposit Activities" (12
C.F.R. Part 703), (whether or not the class of certificates under consideration
for purchase constitutes a "mortgage related security").

     All depository institutions considering an investment in the certificates
(whether or not the class of certificates under consideration for purchase
constitutes a "mortgage related security" should review the Federal Financial
Institutions Examination Council's Supervisory Policy Statement on Securities
Activities (to the extent adopted by their respective regulators), setting
forth, in relevant part, certain securities trading and sales practices deemed
unsuitable for an institution's investment portfolio, and guidelines for (and
restrictions on) investing in mortgage derivative products, including "mortgage
related securities" that are "high-risk mortgage securities" as defined in the
policy statement. According to the policy statement, "high-risk mortgage
securities" include securities such as certificates not entitled to
distributions allocated to principal or interest, or subordinated certificates.
Under the policy statement, each depository institution must determine, before
purchase (and at stated intervals thereafter), whether a particular mortgage
derivative product is a "high-risk mortgage security," and whether the purchase
(or retention) of such a product would be consistent with the policy statement.

     The foregoing does not take into consideration the applicability of
statutes, rules, regulations, orders, guidelines, or agreements generally
governing investments made by a particular investor, including "prudent
investor" provisions, percentage-of-assets limits and provisions that may
restrict or prohibit investment in securities that are not "interest bearing" or
"income paying."

     There may be other restrictions on the ability of certain investors,
including depository institutions, either to purchase certificates or to
purchase certificates representing more than a specified percentage of the
investor's assets. Investors are encouraged to consult their own legal advisors
in determining whether and to what extent the certificates constitute legal
investments for them.

                             METHOD OF DISTRIBUTION

     Certificates are being offered hereby in series from time to time (each
series evidencing a separate trust fund) through any of the following methods:

     - by negotiated firm commitment underwriting and public reoffering by
       underwriters;

     - by agency placements through one or more placement agents primarily with
       institutional investors and dealers; and

     - by placement directly by the depositor with institutional investors.

     A prospectus supplement will be prepared for each series which will
describe the method of offering being used for that series and will set forth
the identity of any of its underwriters and either the price at which the series
is being offered, the nature and amount of any underwriting discounts or
additional compensation to the underwriters and the proceeds of the offering to
the depositor, or the method by which the price at which the underwriters will
sell the certificates will be determined. Each prospectus

                                       97
<PAGE>   155

supplement for an underwritten offering will also contain information regarding
the nature of the underwriters obligations, any material relationship between
the depositor and any underwriter and, where appropriate, information regarding
any discounts or concessions to be allowed or reallowed to dealers or others and
any arrangements to stabilize the market for the certificates so offered. In
firm commitment underwritten offerings, the underwriters will be obligated to
purchase all of the certificates of the series if any certificates are
purchased. Certificates may be acquired by the underwriters for their own
accounts and may be resold from time to time in one or more transactions,
including negotiated transactions, at a fixed public offering price or at
varying prices determined at the time of sale.

     This prospectus, together with the related prospectus supplement, may be
used by Countrywide Securities Corporation, an affiliate of CWMBS, Inc., in
connection with offers and sales related to market making transactions in the
certificates in which Countrywide Securities Corporation acts as principal.
Countrywide Securities Corporation may also act as agent in those transactions.
Sales in those transactions will be made at prices related to prevailing prices
at the time of sale.

     Underwriters and agents may be entitled under agreements entered into with
the depositor to indemnification by the depositor against certain civil
liabilities, including liabilities under the Securities Act of 1933, as amended,
or to contribution with respect to payments which the underwriters or agents may
be required to make in respect thereof.

     If a series is offered other than through underwriters, the prospectus
supplement relating to it will contain information regarding the nature of the
offering and any agreements to be entered into between the depositor and
purchasers of certificates of the series.

                                 LEGAL MATTERS

     The validity of the certificates, including certain federal income tax
consequences with respect to the certificates, will be passed upon for the
depositor by Brown & Wood LLP, One World Trade Center, New York, New York 10048.

                             FINANCIAL INFORMATION

     A new trust fund will be formed for each series of certificates and no
trust fund will engage in any business activities or have any assets or
obligations before the issuance of the related series of certificates.
Accordingly, no financial statements for any trust fund will be included in this
prospectus or in the related prospectus supplement.

                                     RATING

     It is a condition to the issuance of the certificates of each series
offered by this prospectus and by the prospectus supplement that they shall have
been rated in one of the four highest rating categories by the nationally
recognized statistical rating agency or agencies specified in the related
prospectus supplement.

     Ratings on mortgage pass-through certificates address the likelihood of
receipt by certificateholders of all distributions on the underlying mortgage
loans. These ratings address the structural, legal and issuer-related aspects
associated with the certificates, the nature of the underlying mortgage loans
and the credit quality of the credit enhancer or guarantor, if any. Ratings on
mortgage pass-through certificates do not represent any assessment of the
likelihood of principal prepayments by mortgagors or of the degree by which the
prepayments might differ from those originally anticipated. As a result,
certificateholders might suffer a lower than anticipated yield, and, in
addition, holders of stripped pass-through certificates in extreme cases might
fail to recoup their underlying investments.

     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
organization. Each security rating should be evaluated independently of any
other security rating.

                                       98
<PAGE>   156

                             INDEX TO DEFINED TERMS

<TABLE>
<S>                                   <C>
1986 Act............................      70
Agency Securities...................      14
Amortizable Bond Premium
  Regulations.......................      68
Applicable Amount...................      85
ARM Loans...........................      70
Asset Conservation Act..............      63
CERCLA..............................      63
Certificate Account.................      47
Class Certificate Balance...........      30
Code................................  27, 66
Contingent Regulations..............      75
Contributions Tax...................      86
Deferred Interest...................      72
Eleventh District...................      36
excess inclusion....................      85
FHLBSF..............................      36
Garn-St Germain Act.................      64
Insured Expenses....................      48
Legislative History.................      71
Liquidated Mortgage.................      55
Loan-to-Value Ratio.................      16
Master REMIC........................      74
Mortgage Assets.....................      14
National Cost of Funds Index........      37
New Withholding Regulations.........      73
Non-U.S. Person.....................      73
OID.................................      66
OID Regulations.....................      70
OTS.................................      37
Parties in Interest.................      90
Payment Lag Certificates............      81
Plans...............................      90
pre-issuance accrued interest.......      81
Prepayment Assumption...............      71
Private Mortgage-Backed
  Securities........................      14
Prohibited Transactions Tax.........      86
PTE 83-1............................      90
RCRA................................      64
Regular Certificateholders..........      75
Regular Certificates................      74
Relief Act..........................      65
REMIC Certificates..................      74
REMICs..............................      74
Residual Certificateholder..........      82
Residual Certificates...............      74
Restricted Group....................      93
Single Family Certificates..........      90
SMMEA...............................      93
Stripped ARM Obligations............      72
Stripped Bond Certificates..........      69
Stripped Coupon Certificates........      69
Subsidiary REMIC....................      74
Super-Premium Certificates..........      76
Title V.............................      64
U.S. Person.........................      72
Underwriter Exemptions..............      91
</TABLE>

                                       99
<PAGE>   157

                    CHL MORTGAGE PASS-THROUGH TRUST 2000-11

                                     ISSUER

                                  CWMBS, INC.
                                   DEPOSITOR

                          COUNTRYWIDE HOME LOANS LOGO

                           SELLER AND MASTER SERVICER

                                  $197,800,000
                                 (APPROXIMATE)

               MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2000-11

                         ------------------------------
                             PROSPECTUS SUPPLEMENT
                         ------------------------------

                                   [CSC LOGO]

     You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the accompanying prospectus. We have
not authorized any to provide you with different information.

     We are not offering the Series 2000-11 Mortgage Pass-Through Certificates
in any state where the offer is not permitted.

     Dealers will deliver a prospectus supplement and prospectus when acting as
underwriters of the Series 2000-11 Mortgage Pass-Through Certificates and with
respect to their unsold allotments or subscriptions. In addition, all dealers
selling the Series 2000-11 Mortgage Pass-Through Certificates will be required
to deliver a prospectus supplement and prospectus until March 27, 2001.

                               December 27, 2000


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