SUPPLEMENT TO PRELIMINARY PROSPECTUS SUPPLEMENT DATED JUNE 18, 1996
The numerical data with respect to the Class X-2 Certificates set forth in the
table on Page S-70 under the heading "Pre-Tax Yield to Maturity (CBE) of the
Class X Certificates" has been inadvertently transposed with the numerical data
with respect to the Class X-2 Certificates set forth in the table on Page S-71
under the heading "Pre-Tax Yield to Maturity (CBE) of the Class X Certificates
(Prepayments Locked Out through LOP and YMP, then the following CPR)".
<PAGE>
SUBJECT TO COMPLETION, DATED JUNE 18, 1996
PROSPECTUS SUPPLEMENT (TO PROSPECTUS DATED JUNE 18, 1996)
$414,824,951 (APPROXIMATE)
MORTGAGE CAPITAL FUNDING, INC.
MULTIFAMILY/COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1996-MC1
--------------------
The Multifamily/Commercial Mortgage Pass-Through Certificates, Series
1996-MC1 (the "Certificates") will consist of 16 classes (each, a "Class") of
Certificates, designated as (i) the Class X-1 and Class X-2 Certificates
(collectively, the "Class X Certificates"); (ii) the Class A-1, Class A-2A and
Class A-2B Certificates (collectively, the "Class A Certificates"); (iii) the
Class B, Class C, Class D, Class E, Class F, Class G, Class H and Class J
Certificates (collectively with the Class X and Class A Certificates, the "REMIC
Regular Certificates"); and (iv) the Class R-I, Class R-II and Class R-III
Certificates
(continued on next page)
--------------------
THE OFFERED CERTIFICATES DO NOT REPRESENT AN INTEREST IN OR OBLIGATION OF
CITIBANK, N.A., CITICORP BANKING CORPORATION, MORTGAGE CAPITAL FUNDING, INC. OR
THEIR ULTIMATE PARENT, CITICORP, EXCEPT AS SET FORTH HEREIN. NEITHER THE OFFERED
CERTIFICATES NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE UNITED
STATES GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY
OTHER GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED
THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
PROSPECTIVE INVESTORS SHOULD REVIEW THE INFORMATION SET FORTH UNDER "RISK
FACTORS" BEGINNING ON PAGE S-24 IN THIS PROSPECTUS SUPPLEMENT AND THE
INFORMATION SET FORTH UNDER "RISK FACTORS" BEGINNING ON PAGE 17 IN THE
PROSPECTUS BEFORE PURCHASING ANY OF THE OFFERED CERTIFICATES.
<TABLE>
<CAPTION>
ASSUMED FINAL
INITIAL PASS-THROUGH DISTRIBUTION
CLASS CERTIFICATE BALANCE (1) RATE DATE (2)
- ----- ----------------------- ---- --------
<S> <C> <C> <C>
Class X-1 ........................ N/A(3) % (4) October 15, 2004
Class X-2 ........................ N/A(5) % (6) October 15, 2019
Class A-1 ........................ $ 29,966,951 % (7) October 15, 2004
Class A-2A ....................... $150,000,000 % July 15, 2005
Class A-2B ....................... $145,624,000 % February 15, 2006
Class B .......................... $ 14,470,000 % February 15, 2006
Class C .......................... $ 31,353,000 % April 15, 2006
Class D .......................... $ 19,294,000 % April 15, 2006
Class E .......................... $ 16,882,000 % May 15, 2006
Class F .......................... $ 7,235,000 % May 15, 2006
</TABLE>
(footnotes on next page)
-------------------
The Offered Certificates will be purchased by Citibank, N.A. and Goldman,
Sachs & Co. (together, in such capacity, the "Underwriters") from the Sponsor
and will be offered by the Underwriters from time to time to the public in
negotiated transactions or otherwise at varying prices to be determined at the
time of sale (which prices will include interest from the Delivery Date (as
defined below), in the case of the Class A-1 Certificates, and from the Cut-off
Date, in the case of the other Offered Certificates). Proceeds to the Sponsor
from the sale of the Offered Certificates will be an amount equal to % of the
initial aggregate Certificate Balance of the Offered Certificates, plus accrued
interest, before deducting expenses payable by the Sponsor. The Offered
Certificates are offered by the Underwriters, subject to prior sale, when, as
and if delivered to and accepted by the Underwriters and subject to their right
to reject orders in whole or in part. It is expected that delivery of the
Offered Certificates will be made in book-entry form through the Same-Day Funds
Settlement System of The Depository Trust Company ("DTC"), on or about July ,
1996 (the "Delivery Date"), against payment therefor in immediately available
funds.
CITIBANK [logo] GOLDMAN, SACHS & CO.
The Underwriters are acting as co-lead managers in connection with all
activities relating to this offering.
--------------------
The date of this Prospectus Supplement is June __, 1996
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED WITHOUT THE DELIVERY OF A FINAL PROSPECTUS SUPPLEMENT
AND ACCOMPANYING PROSPECTUS. THIS PROSPECTUS SUPPLEMENT SHALL NOT CONSTITUTE AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY
SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE
WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES
LAWS OF ANY SUCH STATE.
<PAGE>
(footnotes from previous page)
- ------------------------------
(1) Subject to a variance of plus or minus 5%.
(2) The "Assumed Final Distribution Date" with respect to any Class of Offered
Certificates is the Distribution Date on which the final distribution would
occur for such Class of Certificates based upon the assumption that no
Mortgage Loan is prepaid prior to its stated maturity and otherwise based
on the Maturity Assumptions (as described herein). The actual performance
and experience of the Mortgage Loans will likely differ from such
assumptions. See "Yield and Maturity Considerations" herein. The "Rated
Final Distribution Date" for each Class of Offered Certificates has been
set to June 15, 2028, which is the first Distribution Date that is at least
two years after the end of the remaining amortization schedule of the
Mortgage Loan with the longest remaining amortization schedule,
irrespective of its scheduled maturity.
(3) The Class X-1 Certificates will not have a Certificate Balance and will
accrue interest on a Notional Amount that is equal to the aggregate Stated
Principal Balance (as defined herein) of the Group 1 Loans outstanding from
time to time.
(4) Approximate initial Pass-Through Rate. For each Distribution Date
subsequent to the initial Distribution Date, up to and including the
Distribution Date in October 1996, the related Pass-Through Rate will equal
approximately __% per annum. Thereafter, the related Pass-Through Rate will
be variable and will, in general, equal the excess, if any, of the weighted
average of the Net Mortgage Rates (as defined herein) of the Group 1 Loans
from time to time, over the Pass-Through Rate applicable to the Class A-1
Certificates from time to time.
(5) The Class X-2 Certificates will not have a Certificate Balance and will
accrue interest on a Notional Amount that is equal to 99.9% of the
aggregate Stated Principal Balance of all the Mortgage Loans outstanding
from time to time.
(6) Approximate initial Pass-Through Rate. Subsequent to the initial
Distribution Date, the related Pass-Through Rate will be variable and will,
in general, equal the excess, if any, of (i) the weighted average of the
Net Mortgage Rates of the Group 1 Loans (in each case net of the applicable
Pass-Through Rate for the Class X-1 Certificates) and the Net Mortgage
Rates of the Group 2 Loans from time to time, over (ii) the weighted
average of the Pass-Through Rates applicable to the Class A, Class B, Class
C, Class D, Class E, Class F, Class G, Class H and Class J Certificates
from time to time.
(7) Initial Pass-Through Rate. The related Pass-Through Rate will remain at __%
per annum for each Distribution Date, up to and including the Distribution
Date in October, 1996. Thereafter the related Pass-Through Rate will be
variable, will reset every six months and will, in general, equal the
lesser of (i) the applicable value of Six-Month LIBOR plus ____% and (ii)
11.375% per annum.
--------------------
(continued from previous page)
(collectively, the "REMIC Residual Certificates"). Only the Class X, Class A,
Class B, Class C, Class D, Class E and Class F Certificates (collectively, the
"Offered Certificates") are offered hereby. The respective Classes of Offered
Certificates will be issued in the aggregate principal amounts (as to each
Class, a "Certificate Balance") and will accrue interest at the per annum rates
(as to each Class, a "Pass-Through Rate") set forth or otherwise described in
the table below.
The Certificates will represent in the aggregate the entire beneficial
ownership interest in a trust fund (the "Trust Fund") to be established by
Mortgage Capital Funding, Inc. (the "Sponsor"), which Trust Fund will consist
primarily of a segregated pool (the "Mortgage Pool") of 162 conventional, fixed
and adjustable rate, multifamily and commercial mortgage loans (the "Mortgage
Loans"). As of July 1, 1996 (the "Cut-off Date"), the Mortgage Loans will have
an aggregate principal balance, after taking into account all payments of
principal due on or before such date, whether or not received, of $482,357,812
(the "Initial Pool Balance"), subject to a variance of plus or minus 5%.
The Mortgage Pool consists of two separate sub-pools (each, a "Loan
Group"), designated as "Loan Group 1" (and the Mortgage Loans included therein,
the "Group 1 Loans") and "Loan Group 2" (and the Mortgage Loans included
therein, the "Group 2 Loans"), each of which is described more fully herein. In
general, the Group 1 Loans provide for mortgage interest rates that adjust
semi-annually based on Six-Month LIBOR (calculated as described herein), and the
Group 2 Loans provide for mortgage interest rates that are fixed for the
remaining terms thereof (or, in two cases, for mortgage interest rates that
adjust monthly based on One-Month LIBOR (calculated as described herein),
subject to floors of 9.750% and 9.875% per annum, respectively). As of the
Cut-off Date, the Group 1 Loans and the Group 2 Loans will have aggregate
principal balances, after taking into account all payments of principal due on
or before such date, whether or not received, of $29,966,951 and $452,390,861,
respectively, in each case subject to a variance of plus or minus 5%. The Class
X-1 and Class A-1 Certificates initially will correspond to and evidence
interests generally in Loan Group 1 (such Certificates, the "Group 1
Certificates"). The Class X-2, Class A-2A, Class A-2B, Class B, Class C, Class
D, Class E, Class F, Class G, Class H and Class J Certificates initially will
correspond to and evidence interests generally in Loan Group 2 (such
Certificates, the "Group 2 Certificates"; the Group 1 Certificates and the Group
2 Certificates, each a "Certificate Group").
One-hundred and fifty-two of the Mortgage Loans (the "Balloon Loans"),
which represent 96.8% of the Initial Pool Balance, provide for monthly payments
of principal based on amortization schedules significantly longer than the
remaining terms of such Mortgage Loans, thereby leaving substantial principal
amounts due and payable (each such payment, together with the corresponding
interest payment, a "Balloon Payment") on their respective maturity dates,
unless prepaid prior thereto. Ten of the Mortgage Loans, which represent 3.2% of
the Initial Pool Balance, are self-amortizing. Seventy-one of the Mortgage Loans
(the "Citibank Mortgage Loans"), which represent 58.2% of the Initial Pool
Balance, are currently held by Citibank, N.A. (in such capacity, the "Mortgage
Loan Seller"), a commonly controlled affiliate of the Sponsor, and were acquired
by the Mortgage Loan Seller from various unaffiliated banks, savings
institutions or other entities in the secondary market and/or originated
pursuant to various conduit programs. Eighty-six of the Mortgage Loans (the
"ContiTrade Mortgage Loans"), which represent 39.7% of the Initial Pool Balance,
are currently held by ContiTrade Services L.L.C. ("ContiTrade"), an indirectly
wholly-owned subsidiary of ContiFinancial Corporation, and were acquired by
ContiTrade from various unaffiliated banks, savings institutions or other
entities and/or originated pursuant to various conduit programs. Continental
Grain Company currently owns approximately 81% of ContiFinancial Corporations'
outstanding capital stock. Five of the Mortgage Loans (the "PNC Mortgage
Loans"), which represent 2.1% of the Initial Pool Balance, were originated and
are currently held by PNC Bank, National Association ("PNC Bank"). On or before
the Delivery Date, the Mortgage Loan Seller will acquire the ContiTrade Mortgage
Loans from ContiTrade and the PNC
S-2
<PAGE>
Mortgage Loans from PNC Bank and will, at the direction of the Sponsor, transfer
all of the Mortgage Loans, without recourse, to the Trustee for the benefit of
holders of the Certificates (the "Certificateholders") See "Description of the
Mortgage Pool" and "Risk Factors--The Mortgage Loans" herein.
Distributions of interest on and principal of the Certificates will be
made, to the extent of available funds, on the 15th day of each month or, if any
such 15th day is not a business day, then on the next succeeding business day,
beginning in August 1996 (each, a "Distribution Date"). As more fully described
herein, distributions allocable to interest accrued on each Class of the REMIC
Regular Certificates (the REMIC Residual Certificates will not accrue interest)
will be made on each Distribution Date based on the Pass-Through Rate then
applicable to such Class and the Certificate Balance or, in the case of each
Class of the Class X Certificates, the notional principal amount (the "Notional
Amount") of such Class outstanding immediately prior to such Distribution Date.
The initial Certificate Balance or Notional Amount, as the case may be, of each
Class of Offered Certificates is set forth or described on the cover page
hereof. Distributions allocable to principal of the respective Classes of
Certificates with Certificate Balances (the "Sequential Pay Certificates") will
be made in the amounts and in accordance with the priorities described herein
until the Certificate Balance of each such Class is reduced to zero. No Class of
Class X Certificates or REMIC Residual Certificates will have a Certificate
Balance or entitle the holders thereof to receive distributions of principal. As
more fully described herein, any prepayment premiums, penalties or fees
("Prepayment Premiums") actually collected on the Mortgage Loans will be
distributed among the respective Classes of Certificates in the amounts and in
accordance with the priorities described herein. See "Description of the
Certificates--Distributions" herein.
As and to the extent described herein, the Class B, Class C, Class D, Class
E, Class F, Class G, Class H, Class J and REMIC Residual Certificates
(collectively, the "Subordinate Certificates") will be subordinate to the Class
X and Class A Certificates (collectively, the "Senior Certificates"); the Class
C, Class D, Class E, Class F, Class G, Class H, Class J and REMIC Residual
Certificates will be subordinate to the Class B Certificates; the Class D, Class
E, Class F, Class G, Class H, Class J and REMIC Residual Certificates will be
subordinate to the Class C Certificates; the Class E, Class F, Class G,Class H,
Class J and REMIC Residual Certificates will be subordinate to the Class D
Certificates; the Class F, Class G, Class H, Class J and REMIC Residual
Certificates will be subordinate to the Class E Certificates; and the Class G,
Class H, Class J and REMIC Residual Certificates will be subordinate to the
Class F Certificates. See "Description of the Certificates--Distributions" and
"--Subordination; Allocation of Realized Losses and Certain Expenses" herein.
The yield to maturity of each Class of Offered Certificates will depend on,
among other things, the rate and timing of principal payments (including by
reason of prepayments, loan extensions, defaults and liquidations of the
Mortgage Loans) and losses on or in respect of the Mortgage Loans that result in
a reduction of the Certificate Balance or Notional Amount of such Class. THE
YIELD TO MATURITY OF THE CLASS X CERTIFICATES WILL BE HIGHLY SENSITIVE TO THE
RATE AND TIMING OF PRINCIPAL PAYMENTS (INCLUDING BY REASON OF PREPAYMENTS,
DEFAULTS AND LIQUIDATIONS) AND LOSSES ON OR IN RESPECT OF, IN THE CASE OF THE
CLASS X-1 CERTIFICATES, THE GROUP 1 LOANS AND, IN THE CASE OF THE CLASS X-2
CERTIFICATES, THE GROUP 2 LOANS (AND, TO A LESSER EXTENT, THE GROUP 1 LOANS),
AND INVESTORS IN THE CLASS X CERTIFICATES SHOULD FULLY CONSIDER THE ASSOCIATED
RISKS, INCLUDING THE RISK THAT AN EXTREMELY RAPID RATE OF AMORTIZATION AND
PREPAYMENT OF THE RELATED NOTIONAL AMOUNT COULD RESULT IN THE FAILURE OF SUCH
INVESTORS TO RECOUP THEIR INITIAL INVESTMENTS. The ratings of Standard & Poor's
Ratings Services, a Division of McGraw-Hill Companies, Inc., and Fitch Investors
Service, L.P. on the Offered Certificates, as specified herein, do not represent
any assessment of (i) the likelihood or frequency of principal prepayments on
the Mortgage Loans, (ii) the degree to which such prepayments might differ from
those originally anticipated or (iii) whether and to what extent Prepayment
Premiums will be received. Also, such ratings do not represent any assessment of
the yield to maturity that investors may experience or the possibility that the
Class X Certificateholders might not fully recover their investment in the event
of rapid prepayments of the Mortgage Loans (including both voluntary and
involuntary prepayments). See "Ratings" herein. Any delay in collection of a
Balloon Payment on any Mortgage Loan that would otherwise be distributable in
reduction of the Certificate Balance of a Class of Offered Certificates, whether
such delay is due to borrower default or to modification of the related Mortgage
Loan as described herein, will likely extend the weighted average life of such
Class of Offered Certificates. See "Risk Factors", "Description of the
Certificates--Distributions" and "Yield and Maturity Considerations" herein. See
also "Yield and Maturity Considerations" and "Risk Factors--Prepayments; Average
Life of Certificates; Yields" in the Prospectus.
As described herein, three separate "real estate mortgage investment
conduit" ("REMIC") elections will be made with respect to the Trust Fund for
federal income tax purposes (the REMICs formed thereby being herein referred to
as "REMIC I", "REMIC II" and "REMIC III", respectively). The Offered
Certificates will evidence "regular interests" in REMIC III. See "Certain
Federal Income Tax Consequences" herein and "Material Federal Income Tax
Consequences" in the Prospectus.
There is currently no secondary market for the Offered Certificates, and
there can be no assurance that such a market will develop or, if it does
develop, that it will continue. See "Risk Factors--Limited Liquidity" herein.
THE PROSPECTUS THAT ACCOMPANIES THIS PROSPECTUS SUPPLEMENT CONTAINS
IMPORTANT INFORMATION REGARDING THIS OFFERING THAT IS NOT CONTAINED HEREIN, AND
PROSPECTIVE INVESTORS ARE URGED TO READ BOTH THE PROSPECTUS AND THIS PROSPECTUS
SUPPLEMENT IN FULL TO OBTAIN MATERIAL INFORMATION CONCERNING THE OFFERED
CERTIFICATES. SALES OF THE OFFERED CERTIFICATES MAY NOT BE CONSUMMATED UNLESS
THE PURCHASER HAS RECEIVED BOTH THE PROSPECTUS AND THIS PROSPECTUS SUPPLEMENT.
S-3
<PAGE>
SUMMARY OF PROSPECTUS SUPPLEMENT
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus Supplement and in
the accompanying Prospectus. Certain capitalized terms used in this Summary may
be defined elsewhere in this Prospectus Supplement or in the Prospectus. An
"Index of Principal Definitions" is included at the end of both this Prospectus
Supplement and the Prospectus. Terms that are used but not defined in this
Prospectus Supplement will have the meanings specified in the Prospectus.
TITLE OF CERTIFICATES
AND DESIGNATION OF CLASSES .......... Mortgage Capital Funding, Inc.,
Multifamily/Commercial Mortgage
Pass-Through Certificates, Series
1996-MC1 (the "Certificates"), will
consist of 16 classes (each, a
"Class") of Certificates designated
as: (i) the Class X-1 and Class X-2
Certificates (collectively, the
"Class X Certificates"); (ii) the
Class A-1, Class A-2A and Class A-2B
Certificates (collectively, the
"Class A Certificates"); (iii) the
Class B, Class C, Class D, Class E,
Class F, Class G, Class H and Class J
Certificates (collectively with the
Class X and Class A Certificates, the
"REMIC Regular Certificates"); and
(iv) the Class R-I, Class R-II and
Class R-III Certificates
(collectively, the "REMIC Residual
Certificates"). Only the Class X,
Class A, Class B, Class C, Class D,
Class E and Class F Certificates
(collectively, the "Offered
Certificates") are offered hereby.
The Class G, Class H and Class J
Certificates and the REMIC Residual
Certificates (collectively, the
"Private Certificates") have not been
registered under the Securities Act
of 1933, as amended, and are not
offered hereby. Accordingly, to the
extent this Prospectus Supplement
contains information regarding the
terms of the Private Certificates,
such information is provided solely
because of its potential relevance to
a prospective purchaser of an Offered
Certificate.
SPONSOR ................................ Mortgage Capital Funding, Inc., a
Delaware corporation. The Sponsor is
a direct, wholly-owned subsidiary of
Citicorp Banking Corporation, which
is a direct, wholly-owned subsidiary
of Citicorp. The Sponsor is a
commonly controlled affiliate of
Citibank, N.A., which is the Mortgage
Loan Seller and co-lead Underwriter.
See "Mortgage Capital Funding, Inc."
in the Prospectus and "Method of
Distribution" herein. Neither the
Sponsor nor any of its affiliates has
insured or guaranteed the Offered
Certificates.
MASTER SERVICER GMAC ................... Commercial Mortgage Corporation, a
California corporation. See
"Servicing of the Mortgage Loans--The
Master Servicer" herein.
SPECIAL SERVICER ....................... Hanford Healy Asset Management Company,
a California general partnership. See
"Servicing of the Mortgage Loans--The
Special Servicer" herein.
TRUSTEE ................................ State Street Bank and Trust Company, a
trust company chartered under the
laws of the Commonwealth of
Massachusetts. See "Description of
the Certificates--The Trustee"
herein. The Trustee will also have
certain duties with respect to REMIC
administration (in such capacity, the
"REMIC Administrator").
MORTGAGE LOAN SELLER ................... Citibank, N.A., a national banking
association. See "Description of the
Mortgage Pool--The Mortgage Loan
Seller" herein.
CUT-OFF DATE ........................... July 1, 1996.
S-4
<PAGE>
DELIVERY DATE .......................... On or about July __, 1996.
RECORD DATE ............................ With respect to the Class A-1
Certificates and each Distribution
Date, the fifth day of the month in
which such Distribution Date occurs
or, if such day is not a business
day, the preceding business day. With
respect to each other Class of
Offered Certificates and each
Distribution Date, the last business
day of the calendar month immediately
preceding the month in which such
Distribution Date occurs.
DISTRIBUTION DATE ...................... The 15th day of each month or, if
any such 15th day is not a business
day, the next succeeding business
day, commencing in August 1996.
DETERMINATION DATE...................... Date The fifth day of each month or, if
any such fifth day is not a business
day, the immediately preceding
business day, commencing in August
1996.
P&I ADVANCE DATE ....................... The second business day preceding each
Distribution Date.
DUE PERIOD ............................. With respect to any Distribution Date,
the period that begins on the
second day of the calendar month
preceding the month in which such
Distribution Date occurs and ends on
the first day of the calendar month
in which such Distribution Date
occurs.
PREPAYMENT PERIOD ...................... With respect to any Distribution Date,
the period that begins immediately
following the Determination Date in
the calendar month preceding the
month in which such Distribution Date
occurs (or, in the case of the
initial Distribution Date, that
begins immediately following the
Cut-off Date) and ends on the
Determination Date in the calendar
month in which such Distribution Date
occurs.
COLLECTION PERIOD ...................... With respect to any Distribution Date,
the period that begins immediately
following the Determination Date in
the calendar month preceding the
month in which such Distribution Date
occurs (or, in the case of the
initial Distribution Date, that
begins immediately following the
Cut-off Date) and ends on the
Determination Date in the calendar
month in which such Distribution Date
occurs.
INTEREST ACCRUAL PERIOD ................ With respect to the Class A-1
Certificates and each Distribution
Date, the period that begins on the
15th day of the calendar month
preceding the month in which such
Distribution Date occurs (or, in the
case of the initial Distribution
Date, that begins on the Delivery
Date) and ends on the 14th day of the
calendar month in which such
Distribution Date occurs. With
respect to each other Class of
Offered Certificates and each
Distribution Date, the calendar month
immediately preceding the month in
which such Distribution Date occurs.
REGISTRATION AND DENOMINATIONS ......... The Offered Certificates will be issued
in book-entry format in denominations
of: (i) in the case of the Class X
Certificates, $5,000,000 notional
principal amount and in any whole
dollar denomination in excess
thereof; and (ii) in the case of the
other Offered Certificates, $100,000
actual principal amount and in any
whole dollar denomination in excess
thereof. Each Class of Offered
Certificates will be represented by
one or more Certificates registered
in the name of Cede & Co., as nominee
of The Depository Trust Company
("DTC"). No person acquiring an
interest in an Offered Certificate
(any such person, a "Certificate
Owner") will be entitled to receive a
fully registered physical certificate
(a "Definitive Certificate")
representing such interest, except
under the limited circumstances
S-5
<PAGE>
described herein and in the
Prospectus. See "Description of the
Certificates--Registration and
Denominations" herein and
"Description of the
Certificates--Book-Entry Registration
and Definitive Certificates" in the
Prospectus.
THE MORTGAGE POOL ...................... The Mortgage Pool will consist of 162
multifamily and commercial mortgage
loans (the "Mortgage Loans"), with an
aggregate Cut-off Date Balance of
$482,357,812 (the "Initial Pool
Balance"), subject to a variance of
plus or minus 5%. All numerical
information provided herein with
respect to the Mortgage Loans is
provided on an approximate basis. All
weighted average information provided
herein with respect to the Mortgage
Loans reflects weighting by related
Cut-off Date Balance. All percentages
of the Mortgage Pool, or of any
specified sub-group thereof, referred
to herein without further description
are approximate percentages by
aggregate Cut-off Date Balance. See
"Description of the Mortgage
Pool--Changes in Mortgage Pool
Characteristics" herein.
The "Cut-off Date Balance" of each
Mortgage Loan is the unpaid principal
balance thereof as of the Cut-off
Date, after application of all
payments of principal due on or
before such date, whether or not
received. The Cut-off Date Balances
of the Mortgage Loans will range from
$315,503 to $17,990,250, and the
average Cut-off Date Balance is
$2,977,517. The Cut-off Date Balances
of the Mortgage Loans have been
calculated assuming that no principal
prepayments are received thereon
during June, 1996.
Each Mortgage Loan is evidenced by a
promissory note (a "Mortgage Note")
and, except as otherwise described
below, is secured by a mortgage, deed
of trust or similar security
instrument (a "Mortgage") that
creates a first mortgage lien on a
fee simple (or, in four cases, a
leasehold) interest in real property
(a "Mortgaged Property") used for
commercial or multifamily purposes,
together with all buildings and
improvements and certain personal
property located thereon.
Seven separate sets of Mortgage Loans
(the "Cross-Collateralized Mortgage
Loans"), representing 3.0%, 1.9%,
0.8%, 0.8%, 0.7%, 0.5% and 0.2% of
the Initial Pool Balance,
respectively, are, solely as among
the Cross-Collateralized Mortgage
Loans in each such particular set,
cross-defaulted and
cross-collateralized with each other.
See "Description of the Mortgage
Pool--Cross-Collateralized Mortgage
Loans" herein and Annex A hereto.
Four of the Mortgage Loans,
representing 2.5%, 1.4%, 0.9% and
0.7%, respectively, of the Initial
Pool Balance, are, in each such case,
without regard to the
cross-collateralization described in
the previous paragraph, secured by
one or more Mortgages encumbering
multiple Mortgaged Properties. With
respect to each such Mortgage Loan,
the related Mortgaged Properties are
located in the same state and are of
the same property type. Accordingly,
the total number of Mortgage Loans
reflected herein is 162, while the
total number of Mortgaged Properties
reflected herein is 176.
In general, the Mortgage Loans
constitute nonrecourse obligations of
the related borrower and, upon any
such borrower's default in the
payment of any amount due under the
related Mortgage Loan, the holder
thereof
S-6
<PAGE>
may look only to the related
Mortgaged Property or Properties for
satisfaction of the borrower's
obligation. In addition, in those
cases where recourse to a borrower or
guarantor is permitted by the loan
documents, the Sponsor has not
undertaken an evaluation of the
financial condition of any such
person, and prospective investors
should thus consider all of the
Mortgage Loans to be nonrecourse.
None of the Mortgage Loans is insured
or guaranteed by the United States,
any governmental agency or
instrumentality or any private
mortgage insurer. See "Description of
the Mortgage Pool--General".
Set forth below are the number of
Mortgage Loans, and the approximate
percentage of the Initial Pool
Balance represented by such Mortgage
Loans, that are secured by Mortgaged
Properties located in the seven
states with the highest
concentrations:
PERCENTAGE OF
NUMBER OF INITIAL POOL
STATE MORTGAGE LOANS BALANCE
----- -------------- -------
New York ....... 25 13.8%
California ..... 18 13.4%
Florida ........ 15 8.4%
North Carolina . 13(1) 7.1%
Texas .......... 11 6.4%
Pennsylvania ... 5 6.1%
Virginia ....... 4(2) 6.1%
----------
(1) Fourteen Mortgaged Properties.
(2) Seven Mortgaged Properties.
The remaining Mortgaged Properties are
located throughout 26 other states,
with no more than 4.1% of the Initial
Pool Balance secured by Mortgaged
Properties located in any such other
state.
Set forth below are the number of
Mortgage Loans, and the approximate
percentage of the Initial Pool
Balance represented by such Mortgage
Loans, that are secured by Mortgaged
Properties operated for each
indicated purpose:
PERCENTAGE OF
NUMBER OF INITIAL POOL
PROPERTY TYPE MORTGAGE LOANS BALANCE(5)
------------- -------------- -------------
Multifamily ..... 81(1)(2) 45.3%
Retail .......... 33(3) 30.8%
Self-Storage .... 35(4) 14.3%
Nursing Facility 5 4.2%
Office .......... 3 1.9%
Industrial ...... 3 1.3%
Retail/Office ... 1 1.1%
Mobile Home Park 1 1.0%
----------
(1) Includes one Mortgaged Property
(securing a Mortgage Loan which
represents 0.3% of the Initial Pool
Balance) that constitutes a cooperative.
(2) Ninety-one Mortgaged Properties.
S-7
<PAGE>
(3) Thirty-four Mortgaged Properties.
(4) Thirty-eight Mortgaged Properties.
(5) The sum of the percentages in this
column does not equal 100.0% due to
rounding.
All of the Mortgage Loans provide for
scheduled payments of principal and
interest ("Monthly Payments") to be
due on the first day of each month
(as to each Mortgage Loan, the "Due
Date"), except that, in the case of
certain Mortgage Loans, the related
Balloon Payment (as defined below)
may be due on a day other than the
first day of the month (any
resulting "Balloon Payment Interest
Shortfalls" to be covered by the
Master Servicer out of its own
funds). See "Servicing of the
Mortgage Loans--Servicing and Other
Compensation and Payment of
Expenses" herein.
One-hundred and fifty-two of the
Mortgage Loans (the "Fixed-Rate
Loans"), representing 93.3% of the
Initial Pool Balance, bear interest
at a rate per annum (a "Mortgage
Rate") that is fixed for the
remaining term of the Mortgage
Loan. Ten of the Mortgage Loans
(the "ARM Loans"), representing
6.7% of the Initial Pool Balance,
accrue interest at Mortgage Rates
that are subject to adjustment on a
semi-annual (or, in two such cases,
a monthly) basis, in general, by
adding a specified percentage (a
"Gross Margin") to the value of a
base index (an "Index"), subject to
rounding conventions and specified
floors and caps. As of the Cut-off
Date, the Mortgage Rates for the
Mortgage Loans will range from
7.36% per annum to 10.875% per
annum, with a weighted average
Mortgage Rate of 8.69% per annum.
For purposes of calculating certain
distributions on the Certificates,
the Mortgage Pool has been divided
into two sub-pools (each, a "Loan
Group"), designated as "Loan Group
1" and "Loan Group 2",
respectively, based upon the
Mortgage Rates for the Mortgage
Loans.
Loan Group 1 consists of eight ARM
Loans (the "Group 1 Loans"), with
an aggregate Cut-off Date Balance
of $29,966,951 (the "Initial Group
1 Balance"), that provide for
semi-annual adjustments to their
respective Mortgage Rates in April
and October of each year, subject
to floors that range from 6.0% to
8.625% per annum. The Index for
each Group 1 Loan is Six-Month
LIBOR, calculated as described
under "Description of the Mortgage
Pool--Certain Terms and Conditions
of the Mortgage Loans--The ARM
Loans" herein. Each Group 1 Loan
has a Gross Margin of 2.75%. As of
the Cut-off Date, the Mortgage
Rates for the Group 1 Loans will
range from 8.0% to 8.625% per
annum, with a weighted average
Mortgage Rate of 8.21% per annum.
Loan Group 2 consists of the 152
Fixed-Rate Loans and the two
remaining ARM Loans (collectively,
the "Group 2 Loans") and has an
aggregate Cut-off Date Balance of
$452,390,861 (the "Initial Group 2
Balance"). The two ARM Loans in
Loan Group 2, which collectively
represent 0.5% of the Initial Pool
Balance, provide for monthly
adjustments to their Mortgage
Rates, subject to floors of 9.75%
and 9.875% per annum, respectively,
and caps of 13.75% and 13.875% per
annum, respectively. The Index for
such ARM Loans is One-Month LIBOR,
calculated as described under
"Description of the Mortgage
Pool--Certain Terms and Conditions
of the Mortgage Loans--The
S-8
<PAGE>
ARM Loans" herein. Each Group 2
Loan that is an ARM Loan has a
Gross Margin of 3.75%. As of the
Cut-off Date, the Mortgage Rates
for the Group 2 Loans will range
from 7.36% to 10.875% per annum,
with a weighted average Mortgage
Rate of 8.72% per annum.
No Mortgage Loan permits negative
amortization or the deferral of
accrued interest. See "Description
of the Mortgage Pool--Certain Terms
and Conditions of the Mortgage
Loans--Mortgage Rates; Calculations
of Interest".
One-hundred and fifty-two of the
Mortgage Loans (the "Balloon
Loans"), which represent 100% of
the Initial Group 1 Balance, 96.6%
of the Initial Group 2 Balance and
96.8% of the Initial Pool Balance,
provide for monthly payments of
principal based on amortization
schedules significantly longer than
the remaining terms of such
Mortgage Loans, thereby leaving
substantial principal amounts due
and payable (each such payment,
together with the corresponding
interest payment, a "Balloon
Payment") on their respective
maturity dates, unless prepaid
prior thereto. Ten of the Mortgage
Loans, which represent zero percent
of the Initial Group 1 Balance,
3.4% of the Initial Group 2 Balance
and 3.2% of the Initial Pool
Balance, are self-amortizing (the
"Self-Amortizing Loans").
As of the Cut-off Date, 161 Mortgage
Loans, which represent 100.0% of
the Initial Group 1 Balance, 97.3%
of the Initial Group 2 Balance and
97.4% of the Initial Pool Balance,
either (a) prohibit voluntary
principal prepayments, in whole or
in part, prior to a specified date
(a "Lock-Out Expiration Date") (76
Mortgage Loans, representing zero
percent of the Initial Group 1
Balance, 61.5% of the Initial
Group 2 Balance and 57.7% of the
Initial Pool Balance), which in no
such case occurs earlier than
February 1, 1997 or later than May
1, 2003, or (b) (without
duplication of clause (a) above)
require for a specified period that
any voluntary principal prepayment
be accompanied by a prepayment
premium, penalty or fee (a
"Prepayment Premium") (85 Mortgage
Loans, representing 100.0% of the
Initial Group 1 Balance, 35.7% of
the Initial Group 2 Balance and
39.7% of the Initial Pool Balance).
Of the 76 Mortgage Loans that, as
of the Cut-off Date, prohibit
voluntary principal prepayments, in
whole or in part, prior to a
Lock-Out Expiration Date, all of
such Mortgage Loans also require,
for a specified period following
the related Lock-Out Expiration
Date, that any voluntary principal
prepayment be accompanied by a
Prepayment Premium. Prepayment
Premiums on the Mortgage Loans are
generally calculated either as a
percentage (which declines over
time) of the principal amount
prepaid or on the basis of a yield
maintenance formula. The prepayment
terms of each of the Mortgage Loans
are more particularly described in
Annex A. See "Risk Factors--The
Mortgage Loans--Prepayment
Premiums" and "Description of the
Mortgage Pool--Certain Terms and
Conditions of the Mortgage
Loans--Prepayment Provisions"
herein.
As of the Cut-off Date, the Mortgage
Loans will have the following
additional characteristics: (i)
remaining terms to stated maturity
ranging from 42 months to 279
months and a weighted average
remaining term to stated maturity
of 110 months; (ii) remaining
amortization terms ranging from 113
months to 359 months and a
S-9
<PAGE>
weighted average remaining
amortization term of 311 months;
(iii) Cut-off Date LTV Ratios (that
is, in each case, a loan- to-value
ratio based upon (a) the Cut-off
Date Balance of the Mortgage Loan
and (b) the appraised value of the
related Mortgaged Property based
upon the most recent third-party
appraisal available to the Sponsor)
ranging from 36.0% to 78.8% and a
weighted average Cut-off Date LTV
Ratio of 68.4%; and (iv) 1995 Debt
Service Coverage Ratios (calculated
as more particularly described in
Annex A attached hereto) ranging
from 1.13x to 3.05x and a weighted
average 1995 Debt Service Coverage
Ratio of 1.52x.
As of the Cut-off Date, the Group 1
Loans will have the following
additional characteristics: (i)
remaining terms to stated maturity
ranging from 62 months to 99 months
and a weighted average remaining
term to stated maturity of 90
months; (ii) remaining amortization
terms ranging from 278 months to
341 months and a weighted average
remaining amortization term of 327
months; (iii) Cut-off Date LTV
Ratios ranging from 57.6% to 72.6%
and a weighted average Cut-off Date
LTV Ratio of 64.9%; and (iv) 1995
Debt Service Coverage Ratios
ranging from 1.39x to 1.81x and a
weighted average 1995 Debt Service
Coverage Ratio of 1.67x.
As of the Cut-off Date, the Group 2
Loans will have the following
additional characteristics: (i)
remaining terms to stated maturity
ranging from 42 months to 279
months and a weighted average
remaining term to stated maturity
of 111 months; (ii) remaining
amortization terms ranging from 113
months to 359 months and a weighted
average remaining amortization term
of 310 months; (iii) Cut-off Date
LTV Ratios ranging from 36.0% to
78.8% and a weighted average
Cut-off Date LTV Ratio of 68.6%;
and (iv) 1995 Debt Service Coverage
Ratios ranging from 1.13x to 3.05x
and a weighted average 1995 Debt
Service Coverage Ratio of 1.50x.
For more detailed statistical
information regarding Loan Group 1,
Loan Group 2 and the entire
Mortgage Pool, see Annex A hereto.
All of the Mortgage Loans were
originated during the years 1992 to
1996, except for one Mortgage Loan
that was originated prior to 1992
but was consolidated and restated
in 1992.
Seventy-one of the Mortgage Loans
(the "Citibank Mortgage Loans"),
which represent 58.2% of the
Initial Pool Balance, are currently
held by the Mortgage Loan Seller.
Eighty-six of the Mortgage Loans
(the "ContiTrade Mortgage Loans"),
which represent 39.7% of the
Initial Pool Balance, are currently
held by ContiTrade Services L.L.C.
("ContiTrade") and will be sold to
the Mortgage Loan Seller by
ContiTrade on or before the
Delivery Date. Five of the Mortgage
Loans (the "PNC Mortgage Loans"),
which represent 2.1% of the Initial
Pool Balance, were originated and
are currently held by PNC Bank,
National Association ("PNC Bank")
and will be sold to the Mortgage
Loan Seller by PNC Bank on or
before the Delivery Date. On or
before the Delivery Date (but after
the transfer of the ContiTrade
Mortgage Loans from ContiTrade to
the Mortgage Loan Seller and the
transfer of the PNC Mortgage Loans
from PNC Bank to the Mortgage Loan
Seller), the Mortgage Loan Seller
will, at the direction of the
Sponsor,
S-10
<PAGE>
transfer all of the Mortgage Loans,
without recourse, to the Trustee
for the benefit of holders of the
Certificates (the
"Certificateholders"). In
connection with such assignment,
the Mortgage Loan Seller will make
certain representations and
warranties regarding the
characteristics of the Mortgage
Loans and, as more particularly
described herein, will be obligated
to cure any material breach of any
such representation or warranty or
repurchase the affected Mortgage
Loan. Because Citibank, N.A., in
its capacity as Mortgage Loan
Seller, is selling the Mortgage
Loans without recourse, it will
have no obligations with respect to
the Offered Certificates other than
pursuant to such representations,
warranties and repurchase
obligations. The Sponsor will make
no representations or warranties
with respect to the Mortgage Loans
and will have no obligation to
repurchase or substitute for
Mortgage Loans with deficient
documentation or which are
otherwise defective. See
"Description of the Mortgage Pool"
and "Risk Factors--The Mortgage
Loans" herein and "Description of
the Trust Funds" and "Certain Legal
Aspects of Mortgage Loans" in the
Prospectus.
The Mortgage Loans will be serviced
and administered by the Master
Servicer and, if circumstances
require, the Special Servicer,
pursuant to the Pooling Agreement
(as defined below) and generally in
accordance with the discussion set
forth under "Servicing of the
Mortgage Loans" herein and
"Description of the Pooling
Agreements" in the Prospectus. The
compensation to be received by the
Master Servicer (including Master
Servicing Fees) and the Special
Servicer (including Special
Servicing Fees, Workout Fees and
Liquidation Fees) for their
services is described herein under
"Servicing of the Mortgage
Loans--Servicing and Other
Compensation; Payment of Expenses".
DESCRIPTION OF THE CERTIFICATES ........ The Certificates will be issued
pursuant to a Pooling and Servicing
Agreement, to be dated as of the
Cut-off Date (the "Pooling
Agreement"), among the Sponsor, the
Master Servicer, the Special
Servicer, the Trustee, the Mortgage
Loan Seller and the REMIC
Administrator and will represent in
the aggregate the entire beneficial
ownership interest in a trust fund
(the "Trust Fund") consisting of
the Mortgage Pool and certain
related assets.
A. CERTIFICATE BALANCES AND
NOTIONAL AMOUNTS .................. Upon initial issuance, the Class A-1,
Class A-2A, Class A-2B, Class B,
Class C, Class D, Class E and Class
F Certificates will have the
respective Certificate Balances set
forth on the cover page hereof (in
each case, subject to a variance of
plus or minus 5%).
Upon initial issuance, the Class G,
Class H and Class J Certificates
(collectively with the Class A,
Class B, Class C, Class D, Class E
and Class F Certificates, the
"Sequential Pay Certificates") will
have an aggregate Certificate
Balance of $67,532,861 (subject to
a variance of plus or minus 5%),
which represents the remaining
portion of the Initial Pool
Balance.
The "Certificate Balance" of any
Class of Sequential Pay
Certificates outstanding at any
time will be the then aggregate
stated principal amount thereof. On
each Distribution Date, the
Certificate Balance of each Class
of Sequential Pay Certificates will
be reduced by any
S-11
<PAGE>
distributions of principal actually
made on such Class of Certificates
on such Distribution Date and will
be further reduced by any losses on
or in respect of the Mortgage Loans
(referred to herein as "Realized
Losses") and by certain Trust Fund
expenses (referred to herein as
"Additional Trust Fund Expenses")
deemed allocated to such Class of
Certificates on such Distribution
Date. See "Description of the
Certificates--Distributions" and
"--Subordination; Allocation of
Realized Losses and Certain
Expenses" herein.
Neither Class of Class X Certificates
will have a Certificate Balance;
each such Class of Certificates
will instead represent the right to
receive distributions of interest
accrued as described herein on a
notional principal amount (a
"Notional Amount"). The Notional
Amount of the Class X-1
Certificates will equal the
aggregate Stated Principal Balance
(as defined herein) of the Group 1
Loans outstanding from time to
time. The Notional Amount of the
Class X-2 Certificates will equal
99.9% of the aggregate Stated
Principal Balance of all the
Mortgage Loans outstanding from
time to time. THE NOTIONAL AMOUNT
OF EACH CLASS OF CLASS X
CERTIFICATES IS USED SOLELY FOR THE
PURPOSE OF DETERMINING THE AMOUNT
OF INTEREST TO BE DISTRIBUTED ON
SUCH CLASS OF CERTIFICATES AND DOES
NOT REPRESENT THE RIGHT TO RECEIVE
ANY DISTRIBUTIONS OF PRINCIPAL.
No Class of REMIC Residual
Certificates will have a
Certificate Balance.
A Class of Offered Certificates will
be considered outstanding until its
Certificate Balance or Notional
Amount, as the case may be, is
reduced to zero; provided, however,
that reimbursements of any
previously allocated Realized
Losses and Additional Trust Fund
Expenses may thereafter be made
with respect thereto. See
"Description of the
Certificates--Certificate Balances
and Notional Amounts" herein.
B. PASS-THROUGH RATES ............... The Pass-Through Rate applicable to
the Class A-1 Certificates for each
Distribution Date, up to and
including the Distribution Date in
October 1996, will equal __% per
annum. The Pass-Through Rate
applicable to the Class A-1
Certificates for each subsequent
Distribution Date will, in general,
equal the lesser of (i) the
applicable value of Six-Month LIBOR
(which value shall be selected as
described herein), plus 0.__%, and
(ii) 11.375% per annum. The
Pass-Through Rate for the Class A-1
Certificates will be subject to
adjustment as of the commencement
of such Class of Certificates'
Interest Accrual Period for the
Distribution Date in November 1996,
and every six months thereafter.
The Pass-Through Rate applicable to
the Class X-1 Certificates for the
initial Distribution Date will
equal approximately __% per annum.
The Pass-Through Rate applicable to
the Class X-1 Certificates for each
Distribution Date subsequent to the
initial Distribution Date, up to
and including the Distribution Date
in October 1996, will equal
approximately __% per annum. The
Pass-Through Rate applicable to the
Class X-1 Certificates for each
subsequent Distribution Date will,
in general, equal the excess, if
any, of (i) the weighted average of
the Net Mortgage Rates in effect
for the Group 1 Loans as of the
first day of the related Due Period
(weighted on the basis of the
respective Stated Principal
Balances of such Mortgage Loans
immediately following the
S-12
<PAGE>
prior Distribution Date), over (ii)
the Pass-Through Rate for the Class
A-1 Certificates for such
Distribution Date.
The Pass-Through Rates applicable to
the Class A-2A, Class A-2B, Class
B, Class C, Class D, Class E and
Class F Certificates will, at all
times, be equal to __%, __%, __%,
__%, __%, __% and __% per annum,
respectively.
The Pass-Through Rate applicable to
the Class X-2 Certificates for the
initial Distribution Date will
equal approximately __% per annum.
The Pass-Through Rate applicable to
the Class X-2 Certificates for each
subsequent Distribution Date will,
in general, equal the excess, if
any, of (i) the weighted average of
the Net Mortgage Rates in effect
for the Group 1 Loans (in each
case, net of the Pass-Through Rate
applicable to the Class X-1
Certificates for such Distribution
Date) and the Net Mortgage Rates in
effect for the Group 2 Loans as of
the first day of the related Due
Period (weighted on the basis of
the respective Stated Principal
Balances of such Mortgage Loans
immediately following the prior
Distribution Date), over (ii) the
weighted average of the
Pass-Through Rates applicable to
the respective Classes of
Sequential Pay Certificates for
such Distribution Date (weighted on
the basis of the respective
Certificate Balances of such
Classes of Certificates immediately
prior to such Distribution Date).
The Pass-Through Rates applicable to
the Class G, Class H and Class J
Certificates will, at all times, be
equal to __%, __% and __%,
respectively.
The "Net Mortgage Rate" with respect
to any Mortgage Loan is a per annum
rate equal to the related Mortgage
Rate in effect from time to time,
minus the applicable Master
Servicing Fee Rate (which ranges on
a loan-by-loan basis from 0.14% per
annum to 2.005% per annum and the
weighted average of which is equal
to 0.224% per annum as of the
Cut-off Date). See "Servicing of
the Mortgage Loans--Servicing and
Other Compensation and Payment of
Expenses", "Description of the
Certificates--Pass-Through
___________ Rates" ___________ and
"--Distributions--Distributions of
Prepayment Premiums" herein.
C. THE CERTIFICATE GROUPS ............. The Class X-1 and Class A-1
Certificates initially will
correspond to and evidence
interests generally in Loan Group 1
(such Certificates, the "Group 1
Certificates"); and the Class X-2,
Class A-2A, Class A-2B, Class B,
Class C, Class D, Class E, Class F,
Class G, Class H and Class J
Certificates initially will
correspond to and evidence
interests generally in Loan Group 2
(such Certificates, the "Group 2
Certificates"; the Group 1
Certificates and the Group 2
Certificates, each a "Certificate
Group"). Distributions of principal
and interest on the Class A-1
Certificates and distributions of
interest on the Class X-1
Certificates, except as otherwise
provided herein, will initially be
based on principal and/or interest
due or collected, as the case may
be, on or with respect to the Group
1 Loans. Distributions of principal
and interest on the Class A-2A,
Class A-2B, Class B, Class C, Class
D, Class E, Class F, Class G, Class
H and Class J Certificates and
distributions of interest on the
Class X-2 Certificates, except as
otherwise provided herein, will
initially be based on principal
and/or interest due or collected,
as the case may be, on or with
respect to the
S-13
<PAGE>
Group 2 Loans. See "Description of
the Certificates--The Certificate
Groups" herein.
D. DISTRIBUTIONS OF INTEREST
AND PRINCIPAL ..................... The total of all payments or other
collections (or advances in lieu
thereof) on or in respect of the
Mortgage Loans (exclusive of
Prepayment Premiums) that are
available for distributions of
interest on and principal of the
Certificates on any Distribution
Date is herein referred to as the
"Available Distribution Amount" for
such date. See "Description of the
Certificates--Distributions--The
Available Distribution Amount"
herein.
On each Distribution Date, the
Trustee will apply the Available
Distribution Amount for such date
for the following purposes and in
the following order of priority:
(1) to pay interest to the
holders of the respective Classes
of Class A and Class X
Certificates, up to an amount
equal to, and pro rata as among
such Classes in accordance with,
all Distributable Certificate
Interest in respect of each such
Class of Certificates for such
Distribution Date;
(2) to pay principal: (a)
first to the holders of the Class
A-1 Certificates, second to the
holders of the Class A-2A
Certificates and third to the
holders of the Class A-2B
Certificates, in each case, up to
an amount equal to the lesser of
(i) the then outstanding
Certificate Balance of such Class
of Certificates and (ii) the
remaining Principal Distribution
Amount (as defined below) with
respect to Loan Group 1 for such
Distribution Date; and (b) first
to the holders of the Class A-2A
Certificates, second to the
holders of the Class A-2B
Certificates and third to the
holders of the Class A-1
Certificates, in each case, up to
an amount equal to the lesser of
(i) the then outstanding
Certificate Balance of such Class
of Certificates and (ii) the
remaining Principal Distribution
Amount with respect to Loan Group
2 for such Distribution Date;
payments pursuant to this clause
(2) in respect of the Principal
Distribution Amounts with respect
to the two Loan Groups to be made
pro rata based on the relative
sizes thereof;
(3) to reimburse the holders
of the respective Classes of
Class A Certificates, up to an
amount equal to, and pro rata as
among such Classes in accordance
with, the respective amounts of
Realized Losses and Additional
Trust Fund Expenses, if any,
previously deemed allocated to
such Classes of Certificates and
for which no reimbursement has
previously been paid; and
(4) to make payments on the
Subordinate Certificates as
contemplated below;
provided that, on each Distribution
Date after the aggregate
Certificate Balance of the
Subordinate Certificates has been
reduced to zero, and in any event
on the final Distribution Date in
connection with a termination of
the Trust Fund (see "Description of
the Certificates--Termination"
herein), the payments of principal
to be made out of the Available
Distribution Amount for such date,
as contemplated by clause (2)
above, will be made to the holders
of the respective Classes of Class
A Certificates, up to an amount
equal to,
S-14
<PAGE>
and pro rata as among such Classes
in accordance with, the respective
then outstanding Certificate
Balances of such Classes of
Certificates, and without regard to
the Principal Distribution Amounts
with respect to the two Loan Groups
for such date.
On each Distribution Date, following
the above-described distributions
on the Class A and Class X
Certificates, the Trustee will
apply the remaining portion, if
any, of the Available Distribution
Amount for such date to make
payments to the holders of each of
the remaining Classes of Sequential
Pay Certificates, in alphabetical
order of Class designation, in each
case for the following purposes and
in the following order of priority
(i.e., payments under clauses (1),
(2) and (3) below, in that order,
to the holders of the Class B
Certificates, then payments under
clauses (1), (2) and (3) below, in
that order, to the holders of the
Class C Certificates, and in such
manner with respect to the Class D,
Class E, Class F, Class G, Class H
and Class J Certificates):
(1) to pay interest to the
holders of such Class of
Certificates, up to an amount
equal to all Distributable
Certificate Interest in respect
of such Class of Certificates for
such Distribution Date;
(2) if the Certificate
Balances of the Class A
Certificates and each other Class
of Sequential Pay Certificates,
if any, with an earlier
alphabetical Class designation
have been reduced to zero, to pay
principal to the holders of such
Class of Certificates, up to an
amount equal to the lesser of (a)
the then outstanding Certificate
Balance of such Class of
Certificates and (b) the
aggregate of the remaining
Principal Distribution Amounts
for both Loan Groups for such
Distribution Date; and
(3) to reimburse the holders
of such Class of Certificates, up
to an amount equal to all
Realized Losses and Additional
Trust Fund Expenses, if any,
previously deemed allocated to
such Class of Certificates and
for which no reimbursement has
previously been paid;
provided that, on the final
Distribution Date in connection
with a termination of the Trust
Fund, the payments of principal to
be made out of the Available
Distribution Amount for such date
as contemplated by clause (2) above
with respect to any Class of
Sequential Pay Certificates, will
be made to the holders of such
Class of Certificates, up to an
amount equal to the entire then
outstanding Certificate Balance of
such Class of Certificates, and
without regard to the Principal
Distribution Amounts with respect
to the two Loan Groups for such
date.
Any portion of the Available
Distribution Amount for any
Distribution Date that is not
otherwise payable to the holders of
REMIC Regular Certificates as
contemplated above, will be paid to
the holders of the REMIC Residual
Certificates.
S-15
<PAGE>
Reimbursement of previously allocated
Realized Losses and Additional
Trust Fund Expenses will not
constitute distributions of
principal for any purpose and will
not result in an additional
reduction in the Certificate
Balance of the Class of
Certificates in respect of which
any such reimbursement is made.
The "Distributable Certificate
Interest" in respect of any Class
of REMIC Regular Certificates for
any Distribution Date will
generally equal one month's
interest at the applicable
Pass-Through Rate accrued on the
Certificate Balance or Notional
Amount, as the case may be, of such
Class of Certificates outstanding
immediately prior to such
Distribution Date, reduced (to not
less than zero) by such Class of
Certificates' allocable share
(calculated as described herein) of
any Prepayment Interest Shortfalls
(as defined herein) incurred during
the related Prepayment Period, and
increased by any Class Interest
Shortfall in respect of such Class
of Certificates for such
Distribution Date. Distributable
Certificate Interest will be
calculated on the basis of a
360-day year consisting of twelve
30-day months. See "Description of
the Certificates--Distributions--
Distributable Certificate Interest"
and "Servicing of the Mortgage
Loans--Servicing and Other
Compensation and Payment of
Expenses" herein.
The "Class Interest Shortfall" with
respect to any Class of REMIC
Regular Certificates for any
Distribution Date will equal: (a)
in the case of the initial
Distribution Date, zero; and (b) in
the case of any subsequent
Distribution Date, the sum of (i)
the excess, if any, of (A) all
Distributable Certificate Interest
in respect of such Class of
Certificates for the immediately
preceding Distribution Date, over
(B) all distributions of interest
made with respect to such Class of
Certificates on the immediately
preceding Distribution Date, and
(ii) to the extent permitted by
applicable law, one month's
interest on any such excess at the
Pass-Through Rate applicable to
such Class of Certificates for the
current Distribution Date.
The "Principal Distribution Amount"
with respect to each Loan Group for
any Distribution Date, will, in
general, equal the aggregate of the
following:
(a) the principal portions of
all Scheduled Payments (other
than Balloon Payments) and any
Assumed Scheduled Payments due or
deemed due, as the case may be,
in respect of the Mortgage Loans
in such Loan Group for their
respective Due Dates occurring
during the related Due Period;
(b) all voluntary principal
prepayments received on the
Mortgage Loans in such Loan Group
during the related Prepayment
Period;
(c) with respect to any
Balloon Loan in such Loan Group
as to which the related stated
maturity date occurred during or
prior to the related Collection
Period, any payment of principal
(exclusive of any voluntary
principal prepayment and any
amount described in clause (d)
below) made by or on behalf of
the related borrower during the
related Collection Period, net of
any portion of such payment that
represents a recovery of the
principal portion of any
Scheduled Payment (other than a
Balloon Payment) due, or the
S-16
<PAGE>
principal portion of any
Assumed Scheduled Payment deemed
due, in respect of such Mortgage
Loan on a Due Date during or
prior to the related Due Period
and not previously recovered;
(d) the portion of all
Liquidation Proceeds,
Condemnation Proceeds and
Insurance Proceeds (each as
defined in the Prospectus) that
were received on the Mortgage
Loans in such Loan Group during
the related Prepayment Period and
that were identified and applied
by the Master Servicer as
recoveries of principal thereof,
in each case net of any portion
of such amounts that represents a
recovery of the principal portion
of any Scheduled Payment (other
than a Balloon Payment) due, or
the principal portion of any
Assumed Scheduled Payment deemed
due, in respect of the related
Mortgage Loan on a Due Date
during or prior to the related
Due Period and not previously
recovered; and
(e) if such Distribution Date
is subsequent to the initial
Distribution Date, the excess, if
any, of (i) the Principal
Distribution Amount for such Loan
Group for the immediately
preceding Distribution Date, over
(ii) the aggregate distributions
of principal made on the
Sequential Pay Certificates in
respect of such Principal
Distribution Amount on such
immediately preceding
Distribution Date.
The "Scheduled Payment" due on any
Mortgage Loan on any related Due
Date will, in general, be the
scheduled payment of principal
and/or interest due thereon on such
date (taking into account any
waiver, modification or amendment
of such Mortgage Loan).
An "Assumed Scheduled Payment" is an
amount deemed due in respect of:
(i) any Balloon Loan that is
delinquent in respect of its
Balloon Payment beyond the first
Determination Date that follows its
stated maturity date and as to
which no arrangements have been
agreed to for collection of the
delinquent amounts; or (ii) any
Mortgage Loan as to which the
related Mortgaged Property or
Properties have been acquired on
behalf of the Certificateholders
through foreclosure, deed in lieu
of foreclosure or otherwise (each
such property, upon acquisition, an
"REO Property"). The Assumed
Scheduled Payment deemed due on any
such Balloon Loan on its stated
maturity date and on each
successive Due Date that it remains
or is deemed to remain outstanding
shall equal the Scheduled Payment
that would have been due thereon on
such date if the related Balloon
Payment had not come due but rather
such Mortgage Loan had continued to
amortize in accordance with such
loan's amortization schedule, if
any, in effect immediately prior to
maturity. The Assumed Scheduled
Payment deemed due on any such
Mortgage Loan as to which the
related Mortgaged Property or
Properties have become REO Property
or Properties, on each Due Date for
so long as such REO Property or
Properties remain part of the Trust
Fund, shall equal the Scheduled
Payment (or, in the case of a
Balloon Loan described in the prior
sentence, the Assumed Scheduled
Payment) due on the last Due Date
prior to the acquisition of such
REO Property or Properties.
S-17
<PAGE>
E. DISTRIBUTION OF
PREPAYMENT PREMIUMS ............... Any Prepayment Premium actually
collected with respect to a Group 1
Loan during any particular
Prepayment Period will be
distributed to the holders of the
Class X-1 Certificates on the
related Distribution Date. Any
Prepayment Premium actually
collected with respect to a Group 2
Loan during any particular
Prepayment Period will, in general,
be distributed to the holders of
the respective Classes of the Group
2 Certificates in the amounts and
priorities described under
"Description of the Certificates--
Distributions--Distributions
of Prepayment Premiums" herein.
P&I ADVANCES ........................... Subject to a recoverability
determination as described herein,
and further subject to certain
limitations involving Mortgage
Loans as to which the related
Mortgaged Property has declined in
value as described herein, the
Master Servicer is required to make
advances (each, a "P&I Advance")
with respect to each Distribution
Date for the benefit of the
Certificateholders in an amount
generally equal to the aggregate of
all Scheduled Payments (other than
Balloon Payments) and any Assumed
Scheduled Payments, in each case
net of related Master Servicing
Fees and Workout Fees, that (a)
were due or deemed due, as the case
may be, in respect of the Mortgage
Loans during the related Due Period
and (b) were not paid by or on
behalf of the related borrowers as
of the close of business on the
last day of the related Collection
Period or otherwise collected as of
the close of business on the last
day of the related Prepayment
Period. If the Master Servicer
fails to make a required P&I
Advance, the Trustee will be
required to make such P&I Advance.
As more fully described herein, the
Master Servicer and the Trustee
will each be entitled to interest
on any P&I Advances made, and the
Master Servicer, the Special
Servicer and the Trustee will each
be entitled to interest on certain
servicing expenses incurred, by or
on behalf of it. Such interest will
accrue from the date any such P&I
Advance is made or such servicing
expense is incurred at a rate per
annum equal to the "prime rate" as
published in the "Money Rates"
section of The Wall Street Journal,
as such "prime rate" may change
from time to time (the
"Reimbursement Rate"), and will be
paid, either out of default
interest collected in respect of
the related Mortgage Loan, or
contemporaneously with the
reimbursement of such P&I Advance
or such servicing expense, out of
general collections on the Mortgage
Pool then held by the Master
Servicer. See "Description of the
Certificates--P&I Advances" and
"Servicing of the Mortgage
Loans--Servicing and Other
Compensation and Payment of
Expenses" herein and "Description
of the Certificates--Advances in
Respect of Delinquencies" and
"Description of the Pooling
Agreements--Certificate Account" in
the Prospectus.
SUBORDINATION; ALLOCATION OF
LOSSES AND CERTAIN EXPENSES ............ As and to the extent described
herein, the Class B, the Class C,
the Class D, the Class E, the Class
F and the Private Certificates
(collectively, the "Subordinate
Certificates") will, in the case of
each Class thereof, be subordinated
with respect to distributions of
interest and principal to the Class
A and Class X Certificates
(collectively, the "Senior
Certificates") and, further, to
each other Class of Subordinate
Certificates, if any, with an
earlier alphabetical Class
designation.
S-18
<PAGE>
If, following the distributions to be
made in respect of the Certificates
on any Distribution Date, the
aggregate Stated Principal Balance
of the Mortgage Pool that will be
outstanding immediately following
such Distribution Date is less than
the then aggregate Certificate
Balance of the Sequential Pay
Certificates, the Certificate
Balances of the Class J, Class H,
Class G, Class F, Class E, Class D,
Class C and Class B Certificates
will be reduced, sequentially in
that order, in the case of each
such Class until such deficit (or
the related Certificate Balance) is
reduced to zero (whichever occurs
first). If any portion of such
deficit remains at such time as the
Certificate Balances of such
Classes of Certificates are reduced
to zero, then, the respective
Certificate Balances of the Class
A-1, Class A-2A and Class A-2B
Certificates will be reduced, pro
rata in accordance with the
relative sizes of the remaining
Certificate Balances of such
Classes of Certificates, until such
deficit (or each such Certificate
Balance) is reduced to zero. Any
such deficit may be the result of
Realized Losses incurred in respect
of the Mortgage Loans and/or
Additional Trust Fund Expenses. The
foregoing reductions in the
Certificate Balances of the
Sequential Pay Certificates will be
deemed to constitute an allocation
of any such Realized Losses and
Additional Trust Fund Expenses.
TREATMENT OF REO PROPERTIES ............ Notwithstanding that any Mortgaged
Property may be acquired as part of
the Trust Fund through foreclosure,
deed in lieu of foreclosure or
otherwise, the related Mortgage
Loan will, for purposes of, among
other things, determining
distributions on, and allocations
of Realized Losses and Additional
Trust Fund Expenses to, the
Certificates, as well as
determining Master Servicing Fees,
Special Servicing Fees and
Trustee's Fees, generally be
treated as having remained
outstanding until each such REO
Property is liquidated. Among other
things, such Mortgage Loan will be
taken into account when determining
Pass-Through Rates and the
Principal Distribution Amount for
the related Loan Group. Operating
revenues and other proceeds derived
from each REO Property (after
application thereof to pay certain
costs and taxes, including certain
reimbursements payable to the
Master Servicer, the Special
Servicer and/or the Trustee,
incurred in connection with the
operation and disposition of such
REO Property) will be "applied" or
treated by the Master Servicer as
principal, interest and other
amounts "due" on the related
Mortgage Loan, and, subject to a
recoverability determination as
more fully described herein (see
"Description of the
Certificates--P&I Advances"), the
Master Servicer will make P&I
Advances in respect of such
Mortgage Loan, in all cases as if
such Mortgage Loan had remained
outstanding.
CONTROLLING CLASS ...................... The holder (or holders) of
Certificates representing a
majority interest in the
Controlling Class will have the
right, subject to certain
conditions described herein, to
replace the Special Servicer. The
"Controlling Class" will, in
general, be the most subordinate
Class of Sequential Pay
Certificates then outstanding whose
then Certificate Balance is at
least equal to 25% of the initial
Certificate Balance thereof. In
addition, as more particularly
described herein, any single holder
of Certificates representing a
majority interest in the
Controlling Class will have the
option of purchasing defaulted
Mortgage Loans from time to time at
the Purchase Price specified
herein. See "Servicing of the
Mortgage
S-19
<PAGE>
Loans--The Special Servicer" and
"--Sale of Defaulted Mortgage
Loans" herein.
EXTENSION ADVISER ...................... The holder or holders of Offered
Certificates with an aggregate
principal balance equal to more
than 50% of the aggregate
Certificate Balance from time to
time of all of the Offered
Certificates with Certificate
Balances (exclusive, if applicable,
of the Controlling Class and any
Class of Offered Certificates
subordinate thereto) will have the
right, subject to certain
conditions described herein, to
elect an adviser (the "Extension
Adviser") from whom the Special
Servicer will seek approval prior
to extending the maturity of any
Mortgage Loan beyond the third
anniversary of such Mortgage Loan's
stated maturity date. The Master
Servicer will act as the initial
Extension Advisor until removed or
replaced as described herein. See
"Servicing of Mortgage Loans--The
Extension Adviser" herein.
OPTIONAL TERMINATION ................... At its option, the Master Servicer or
any single holder (other than the
Sponsor or the Mortgage Loan
Seller) of Certificates
representing a majority interest in
the Controlling Class may purchase
all of the Mortgage Loans and REO
Properties, and thereby effect a
termination of the Trust Fund and
early retirement of the then
outstanding Certificates, on any
Distribution Date on which the
remaining aggregate Stated
Principal Balance of the Mortgage
Pool is less than 5.0% of the
Initial Pool Balance. See
"Description of the
Certificates--Termination" herein
and in the Prospectus.
CERTAIN FEDERAL INCOME TAX
CONSEQUENCES ......................... For federal income tax purposes,
three separate "real estate
mortgage investment conduit"
("REMIC") elections will be made
with respect to certain segregated
asset pools which make up the Trust
Fund, the resulting REMICs being
herein referred to as REMIC I,
REMIC II and REMIC III,
respectively. The assets of "REMIC
I" will include the Mortgage Loans,
any REO Properties acquired on
behalf of the Certificateholders
and the Certificate Account (as
defined in the Prospectus). For
federal income tax purposes, (i)
the separate, uncertificated
regular interests in REMIC I will
be the "regular interests" in REMIC
I and will constitute the assets of
REMIC II, (ii) the Class R-I
Certificates will be the sole class
of "residual interests" in REMIC I,
(iii) the separate, uncertificated
regular interests in REMIC II will
be the "regular interests" in REMIC
II and will constitute the assets
of REMIC III, (iv) the Class R-II
Certificates will be the sole class
of "residual interests" in REMIC
II, (v) the REMIC Regular
Certificates will be the "regular
interests" in, and generally will
be treated as debt obligations of,
REMIC III, and (vi) the Class R-III
Certificates will be the sole class
of "residual interests" in REMIC
III. See "Certain Federal Income
Tax Consequences--General" herein.
For federal income tax reporting
purposes, the Certificates will
not, and the Certificates will, be
treated as having been issued with
original issue discount. The
prepayment assumption that will be
used for purposes of computing the
accrual of original issue discount,
market discount and premium, if
any, for federal income tax
purposes will be equal to a CPR of
0% and that there are no extensions
of maturity for the Mortgage Loans.
However, no representation is made
S-20
<PAGE>
that the Mortgage Loans will not
prepay or that, if they do, they
will prepay at any particular rate.
If the method for computing original
issue discount described in the
Prospectus results in a negative
amount for any period, a
Certificateholder will be permitted
to offset such amount only against
the future original issue discount
(if any) from such Certificate. See
"Certain Federal Income Tax
Consequences" herein and "Material
Federal Income Tax
Consequences--REMICs--Taxation of
Owners of REMIC Regular
Certificates--Original Issue
Discount" in the Prospectus.
The Offered Certificates will be
treated as "qualifying real
property loans" within the meaning
of Section 593(d) of the Internal
Revenue Code of 1986 (the "Code")
and "real estate assets" within the
meaning of Section 856(c)(5)(A) of
the Code. In addition, interest
(including original issue discount)
on the Offered Certificates will be
interest described in Section
856(c)(3)(B) of the Code. However,
the Offered Certificates will
generally only be considered assets
described in Section 7701(a)(19)(C)
of the Code to the extent that the
Mortgage Loans are secured by
residential property and,
accordingly, an investment in the
Offered Certificates may not be
suitable for some thrift
institutions.
For further information regarding the
federal income tax consequences of
investing in the Offered
Certificates, see "Certain Federal
Income Tax Consequences" herein and
"Material Federal Income Tax
Consequences" in the Prospectus.
ERISA CONSIDERATIONS ................... A fiduciary of any employee benefit
plan or other retirement
arrangement subject to the Employee
Retirement Income Security Act of
1974, as amended ("ERISA"), or
Section 4975 of the Code (each such
plan or other retirement
arrangement, a "Plan") should
review carefully with its legal
advisors whether the purchase or
holding of Offered Certificates
could give rise to a transaction
that is prohibited or is not
otherwise permitted either under
ERISA or Section 4975 of the Code
or whether there exists any
statutory or administrative
exemption applicable to an
investment therein.
The U.S. Department of Labor has
issued to Citicorp an individual
prohibited transaction exemption,
Prohibited Transaction Exemption
90-88, and to Goldman, Sachs & Co.
an individual prohibited
transaction exemption, Prohibited
Transaction Exemption 89-88
(together, the "Exemptions"), which
generally exempt from the
application of certain of the
prohibited transaction provisions
of Section 406 of ERISA and the
excise taxes imposed on such
prohibited transactions by Section
4975(a) and (b) of the Code and
Section 502(i) of ERISA,
transactions relating to the
purchase, sale and holding of
pass-through certificates
underwritten by an underwriting
syndicate or selling group of which
Citibank, N.A., as an affiliate of
Citicorp, or Goldman, Sachs & Co.,
respectively, is a manager and the
servicing and operation of related
asset pools, provided that certain
conditions are satisfied. The
Sponsor expects that the Exemptions
will generally apply to the Senior
Certificates, but that they will
not apply to the Class B, Class C,
Class D, Class E and Class F
Certificates. AS A RESULT, NO
S-21
<PAGE>
TRANSFER OF A CLASS B, CLASS C,
CLASS D, CLASS E OR CLASS F
CERTIFICATE OR ANY INTEREST THEREIN
MAY BE MADE TO A PLAN OR TO ANY
PERSON WHO IS DIRECTLY OR
INDIRECTLY PURCHASING SUCH
CERTIFICATE OR INTEREST THEREIN ON
BEHALF OF, AS NAMED FIDUCIARY OF,
AS TRUSTEE OF, OR WITH ASSETS OF A
PLAN. SEE "ERISA CONSIDERATIONS"
HEREIN AND IN THE PROSPECTUS.
RATINGS ................................ It is a condition to their issuance
that the following Classes of
Certificates (collectively, the
"Rated Certificates") receive the
indicated credit ratings from
Standard & Poor's Ratings Services,
a Division of the McGraw-Hill
Companies, Inc. ("S&P") and Fitch
Investors Service, L.P. ("Fitch"
and, together with S&P, the "Rating
Agencies"):
CLASS S&P FITCH
----- --- -----
Class X-1 Not Rated "AAA"
Class X-2 Not Rated "AAA"
Class A-1 "AAA" "AAA"
Class A-2A "AAA" "AAA"
Class A-2B "AAA" "AAA"
Class B "AA+" "AAA"
Class C "A+" "AA-"
Class D "A-" "A"
Class E "BBB" "BBB"
Class F "BBB-" "BBB-"
Class G "BB" "BB"
Class H "B" "B"
The ratings of the Rated Certificates
address the timely payment thereon
of interest and, to the extent
applicable, the ultimate payment
thereon of principal on or before
the Rated Final Distribution Date.
The ratings of the Rated
Certificates do not, however,
address the tax attributes thereof
or of the Trust Fund. In addition,
the ratings on the Rated
Certificates do not represent any
assessment of (i) the likelihood or
frequency of principal prepayments
on the Mortgage Loans, (ii) the
degree to which such prepayments
might differ from those originally
anticipated or (iii) whether and to
what extent Prepayment Premiums
will be received. Also a security
rating does not represent any
assessment of the yield to maturity
that investors may experience or
the possibility that the Class X
Certificateholders might not fully
recover their investment in the
event of rapid prepayments of the
Mortgage Loans (including both
voluntary and involuntary
prepayments). See "Ratings" herein.
The ratings of the Rated
Certificates also do not address
certain other matters as described
under "Ratings" herein. There is no
assurance that any such rating will
not be lowered, qualified or
withdrawn by a Rating Agency, if,
in its judgment, circumstances so
warrant. There can be no assurance
whether any other rating agency
will rate any of the Certificates,
or if one does, what rating such
agency will assign. A security
rating is not a recommendation to
buy, sell or hold securities and
may be subject to revision or
withdrawal at any time
S-22
<PAGE>
by the assigning rating agency. See
"Ratings" herein and "Risk
Factors--Limited Nature of Credit
Ratings" in the Prospectus.
LEGAL INVESTMENT ....................... The Offered Certificates will not be
"mortgage related securities"
within the meaning of the Secondary
Mortgage Market Enhancement Act of
1984. As a result, the appropriate
characterization of the Offered
Certificates under various legal
investment restrictions, and thus
the ability of investors subject to
these restrictions to purchase the
Offered Certificates, may be
subject to significant
interpretative uncertainties.
Investors should consult their own
legal advisors to determine whether
and to what extent the Offered
Certificates constitute legal
investments for them. See "Legal
Investment" herein and in the
Prospectus.
S-23
<PAGE>
RISK FACTORS
Prospective purchasers of Offered Certificates should consider, among other
things, the following factors (as well as the factors set forth under "Risk
Factors" in the Prospectus) in connection with an investment therein.
THE CERTIFICATES
Limited Liquidity. There is currently no secondary market for the Offered
Certificates. The Sponsor has been advised by the Underwriters that they
presently intend to make a secondary market in the Offered Certificates;
however, neither Underwriter has any obligation to do so and any market making
activity may be discontinued at any time. There can be no assurance that a
secondary market for the Offered Certificates will develop or, if it does
develop, that it will provide holders of Offered Certificates with liquidity of
investment or that it will continue for the life of the Offered Certificates.
The Offered Certificates will not be listed on any securities exchange. See
"Risk Factors--Certain Factors Adversely Affecting Resale of the Offered
Certificates" in the Prospectus.
Certain Yield Considerations. The yield on any Offered Certificate will
depend on (a) the price at which such Certificate is purchased by an investor
and (b) the rate, timing and amount of distributions on such Certificate. The
rate, timing and amount of distributions on any Offered Certificate will, in
turn, depend on, among other things, (v) the Pass-Through Rate for such
Certificate, (w) the rate and timing of principal payments (including principal
prepayments) and other principal collections on or in respect of the Mortgage
Loans and the extent to which such amounts are to be applied or otherwise result
in a reduction of the Certificate Balance or Notional Amount of the Class of
Certificates to which such Certificate belongs, (x) the rate, timing and
severity of Realized Losses on or in respect of the Mortgage Loans and of
Additional Trust Fund Expenses and the extent to which such losses and expenses
result in a reduction of the Certificate Balance or Notional Amount of the Class
of Certificates to which such Certificate belongs, (y) the timing and severity
of any Prepayment Interest Shortfalls and the extent to which such shortfalls
are allocated in reduction of the Distributable Certificate Interest payable on
the Class of Certificates to which such Certificate belongs and (z) the extent
to which Prepayment Premiums are collected and, in turn, distributed on the
Class of Certificates to which such Certificate belongs. Except for the
Pass-Through Rates on the Class A-2A, Class A-2B, Class B, Class C, Class D,
Class E and Class F Certificates which are, in each case, fixed, it is
impossible to predict with certainty any of the factors described in clauses
(v), (w), (x), (y) and (z) of the preceding sentence. Accordingly, investors may
find it difficult to analyze the effect that such factors might have on the
yield to maturity of any Class of Offered Certificates. THE YIELD TO MATURITY OF
THE CLASS X CERTIFICATES WILL BE HIGHLY SENSITIVE TO THE RATE AND TIMING OF
PRINCIPAL PAYMENTS (INCLUDING BY REASON OF PREPAYMENTS, DEFAULTS AND
LIQUIDATIONS) ON OR IN RESPECT OF THE GROUP 1 LOANS, IN THE CASE OF THE CLASS
X-1 CERTIFICATES, AND THE GROUP 2 LOANS (AND, TO A LESSER EXTENT, THE GROUP 1
LOANS), IN THE CASE OF THE CLASS X-2 CERTIFICATES, AND INVESTORS IN THE CLASS X
CERTIFICATES SHOULD FULLY CONSIDER THE ASSOCIATED RISKS, INCLUDING THE RISK THAT
AN EXTREMELY RAPID RATE OF AMORTIZATION AND PREPAYMENT OF THE RELATED NOTIONAL
AMOUNT COULD RESULT IN THE FAILURE OF SUCH INVESTORS TO RECOUP THEIR INITIAL
INVESTMENTS. See "Description of the Mortgage Pool", "Description of the
Certificates--Distributions" and "--Subordination; Allocation of Losses and
Certain Expenses" and "Yield and Maturity Considerations" herein. See also
"Yield and Maturity Considerations" in the Prospectus.
Potential Conflicts of Interest. As described herein, the Special Servicer
will have considerable latitude in determining whether to liquidate or modify
defaulted Mortgage Loans. See "Servicing of the Mortgage Loans--Modifications,
Waivers, Amendments and Consents" and "--The Extension Adviser" herein. Subject
to the conditions described herein, the holder of a majority interest in the
Controlling Class can replace the existing Special Servicer and substitute
itself or an affiliate as the successor. The "Controlling Class" will, in
general, be the most subordinate Class of Sequential Pay Certificates then
outstanding whose then Certificate Balance is at least equal to 25% of its
initial Certificate Balance. Investors in the Offered Certificates should
consider that, although the Special Servicer will be obligated to act in
accordance with the terms of the Pooling Agreement and will be governed by the
servicing standard described herein, it may have interests when dealing with
defaulted Mortgage Loans that are in conflict with those of holders of the
Offered Certificates.
THE MORTGAGE LOANS
Nature of the Mortgaged Properties. The Mortgaged Properties consist solely
of multifamily rental (except in the case of one Mortgaged Property that is a
cooperative property) and commercial properties. Lending on the security of
income-producing properties is generally viewed as exposing a lender to a
greater risk of loss than lending
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on the security of one- to four-family residences. Multifamily and commercial
real estate lending typically involves larger loans, and repayment is typically
dependent upon the successful operation of the related real estate project.
Income from and the market value of the Mortgaged Properties would be adversely
affected if space in the Mortgaged Properties could not be leased, if tenants
were unable to meet their obligations or if for any other reason rental payments
could not be collected. Successful operation of an income-producing real estate
project is dependent upon, among other things, economic conditions generally and
in the area of such project, the degree to which such project competes with
other projects in the area, operating costs and the performance of the
management agent, if any. In some cases, that operation may also be affected by
circumstances outside the control of the borrower or lender, such as the quality
or stability of the surrounding neighborhood, the development of competing
projects or businesses, maintenance expenses (including energy costs), the
imposition of rent control or stabilization laws (in the case of multifamily
rental properties) and changes in the tax laws. If the cash flow from a
particular property is reduced (for example, if leases are not obtained or
renewed, if tenant defaults or rental rates decline or, in the case of a
property occupied by its owner, if the owner's business declines), the
borrower's ability to repay the loan may be impaired and the resale value of the
particular property may decline. See "Description of the Mortgage
Pool--Additional Mortgage Loan Information--Tenant Matters" herein.
Lending on the security of commercial properties, which represent security
for 53.6% of the Initial Pool Balance, is generally perceived as involving
greater risk than lending on the security of multifamily residential properties,
and certain types of commercial properties are exposed to particular risks. For
instance, shopping centers and retail stores (including combination
retail/office facilities), which represent security for 31.9% of the Initial
Pool Balance, are directly affected by the strength of retail sales generally.
The retailing industry is currently undergoing consolidation due to many
factors, including growth in discount retailing and mail order merchandisers. If
the sales by tenants in the Mortgaged Properties that contain retail space were
to decline, the rents that are based on a percentage of revenues may decline and
tenants may be unable to pay the fixed portion of their rents or other occupancy
costs. In addition, anchor tenants in shopping centers traditionally have been a
major factor in the public's perception of a shopping center. The failure of an
anchor tenant to renew its lease, the termination of an anchor tenant's lease,
the bankruptcy or economic decline of an anchor tenant, or the cessation of the
business of an anchor tenant (notwithstanding its continued payment of rent) can
have a material negative effect on the economic viability of a shopping center
property. The failure of any anchor tenant to operate from its premises may give
certain other tenants at the same premises the right to terminate or reduce
rents under their leases.
Management. The successful operation of a real estate project is dependent
on the performance and viability of the property manager of such project. The
property manager is responsible for responding to changes in the local market,
planning and implementing the rental structure, including establishing levels of
rent payments, and ensuring that maintenance and capital improvements can be
carried out in a timely fashion. Accordingly, by controlling costs, providing
appropriate service to tenants and seeing to the maintenance of improvements,
sound property management can improve cash flow, reduce vacancy, leasing and
repair costs and preserve building value. On the other hand, management errors
can, in some cases, impair the long term viability of a real estate project.
Fourteen groups of Mortgage Loans (representing, in aggregate, 24.0% of the
Initial Pool Balance) have the same or related management. No group of Mortgage
Loans with the same or related management represents more than 4.1% of the
Initial Pool Balance.
Risks Particular to Multifamily Properties. In the case of multifamily
lending in particular, adverse economic conditions, either local or national,
may limit the amount of rent that can be charged and may result in a reduction
in timely rent payments or a reduction in occupancy levels. Occupancy and rent
levels may also be affected by construction of additional housing units, local
military base closings and national and local politics, including current or
future rent stabilization and rent control laws and agreements. In addition, the
level of mortgage interest rates may encourage tenants to purchase single-family
housing. Further, the cost of operating a multifamily property may increase,
including the costs of utilities and the costs of required capital expenditures.
All of these conditions and events may increase the possibility that a borrower
may be unable to meet its obligations under its Mortgage Loan.
Risks Particular to Self-Storage Facilities. Self-storage properties are
considered vulnerable to competition because both acquisition costs and
break-even occupancy are relatively low. The conversion of self-storage
facilities to alternative uses would generally require substantial capital
expenditures. Thus, if the operation of any of the self-storage Mortgaged
Properties becomes unprofitable due to decreased demand, competition, age of
improvements or other factors such that the borrower becomes unable to meet its
obligations on the related Mortgage
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Loan, the liquidation value of that self-storage Mortgaged Property may be
substantially less, relative to the amount owing on the Mortgage Loan, than
would be the case if the self-storage Mortgaged Property were readily adaptable
to other uses. Tenant privacy, anonymity and efficient access may heighten
environmental risks. The environmental assessments discussed herein did not
include an inspection of the contents of the self-storage units included in the
self-storage Mortgaged Properties and there is no assurance that all of the
units included in the self-storage Mortgaged Properties are free from hazardous
substances or other pollutants or contaminants or will remain so in the future;
however, substantially all of the lease agreements used in connection with such
Mortgaged Properties prohibit the storage of hazardous substances, pollutants or
contaminants.
Risks Particular to Retail and Office Properties. With respect to Mortgage
Loans secured by retail properties or office buildings, in addition to risks
generally associated with real estate, such Mortgage Loans are also affected
significantly by adverse changes in consumer spending patterns, local
competitive conditions (such as the supply of retail or office space or the
existence or construction of new competitive shopping centers, shopping malls or
office buildings), alternative forms of retailing (such as direct mail and video
shopping networks which reduce the need for retail space by retail companies),
the quality and philosophy of management, the attractiveness of the properties
to tenants and their customers or clients, the public perception of the safety
of customers at shopping malls and shopping centers, and the need to make major
repairs or improvements to satisfy the needs of major tenants. In addition,
significant tenants at a retail property play an important part in generating
customer traffic and making a retail property a desirable location for other
tenants at such property.
Retail properties may be adversely affected if a significant tenant ceases
operations at such locations (which may occur on account of a voluntary decision
not to renew a lease, bankruptcy or insolvency of such tenant, such tenant's
general cessation of business activities or for other reasons). Certain tenants
at retail properties may be entitled to terminate their leases if an anchor
tenant ceases operations at such property. In such cases, there can be no
assurance that any such anchor tenants will continue to occupy space in the
related shopping centers.
Risks Particular to Nursing Home Properties. Nursing home facilities
typically receive a substantial portion of their revenues from government
reimbursement programs, primarily Medicaid and Medicare. Medicaid and Medicare
are subject to statutory and regulatory changes, retroactive rate adjustments,
administrative rulings, policy interpretations, delays by fiscal intermediaries
and government funding restrictions, all of which can adversely affect revenues
from operation. Moreover, governmental payors have employed cost-containment
measures that limit payments to health care providers and there are currently
under consideration various proposals for national health care relief that could
further limit these payments. In addition, providers of long-term nursing care
and other medical services are highly regulated by federal, state and local law
and are subject to, among other things, federal and state licensing
requirements, facility inspections, rate setting, reimbursement policies, and
laws relating to the adequacy of medical care, distribution of pharmaceuticals,
equipment, personnel, operating policies and maintenance of and additions to
facilities and services, any or all of which factors can increase the cost of
operation, limit growth and, in extreme cases, require or result in suspension
or cessation of operations.
Under applicable federal and state laws and regulations, Medicare and
Medicaid reimbursements are generally not permitted to be made to any person
other than the provider who actually furnished the related medical goods and
services. Accordingly, in the event of foreclosure on a Mortgaged Property that
is operated as a nursing home facility, none of the Trustee, the Special
Servicer or a subsequent lessee or operator of the Mortgaged Property would
generally be entitled to obtain from federal or state governments any
outstanding reimbursement payments relating to services furnished at the
respective Mortgaged Properties prior to such foreclosure. Furthermore, in the
event of foreclosure, there can be no assurance that the Trustee (or Special
Servicer) or purchaser in a foreclosure sale would be entitled to the rights
under any required licenses and regulatory approvals and such party may have to
apply in its own right for such licenses and approvals. There can be no
assurance that a new license could be obtained or that a new approval would be
granted. In addition, nursing home facilities are generally "special purpose"
properties that could not be readily converted to general residential, retail or
office use, and transfers of nursing homes and other health care related
facilities are subject to regulatory approvals under state, and in some cases
federal, law not required for transfers of other types of commercial operations
and other types of real estate, all of which may adversely affect the
liquidation value.
Risks Particular to Industrial Properties. Industrial properties may be
adversely affected by reduced demand for industrial space occasioned by a
decline in a particular industry segment, and an industrial property that suited
the
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particular needs of its original tenant may be difficult to relet to another
tenant or may become functionally obsolete relative to newer properties.
Risks Particular to Ground Leases. Four Mortgage Loans representing 2.5% of
the Initial Pool Balance, are secured by first mortgage liens on the borrower's
leasehold interest in the related Mortgaged Property. The related ground leases
do not expire until at least ten years after the stated maturity of the related
Mortgage Loans; and the related borrower's estate, which is encumbered by the
leasehold mortgage, is not likely to be altered or terminated during the term of
the related Mortgage Loan, provided that the ground lessor recognizes any
non-disturbance rights of the borrower. With respect to three of such Mortgage
Loans, the related ground lessor has subordinated its interest in the Mortgaged
Property to the interest of the holder of the related Mortgages. With respect to
one of such Mortgage Loans, the related ground lessor has granted the holder of
the Mortgage the right to cure any default or breach by the lessee. See "Certain
Legal Aspects of Mortgage Loans--Foreclosure--Leasehold Risks" in the
Prospectus.
Risks of Subordinate Financing. Two of the Mortgaged Properties,
representing security for Mortgage Loans which represent 1.5% of the Initial
Pool Balance, are encumbered by subordinated debt. In each such case, the holder
of the subordinate debt has agreed not to foreclose for so long as the related
Mortgage Loan is outstanding and the Trust Fund is not pursuing a foreclosure
action. All of the Mortgage Loans either prohibit the related borrower from
encumbering the Mortgaged Property with additional secured debt or require the
prior consent of the holder of the first lien prior to so encumbering such
property. Other than as indicated above, the Sponsor is unable to confirm if any
other secured subordinate financing currently encumbers any Mortgaged Property.
Limited Recourse. The Mortgage Loans generally are nonrecourse obligations
of the borrowers. In those cases where recourse to a borrower or guarantor is
permitted by the loan documents, the Sponsor has not undertaken any evaluation
of the financial condition of any such person. Accordingly, prospective
investors should consider all of the Mortgage Loans to be nonrecourse loans as
to which recourse in the case of default will be limited to the related
Mortgaged Property or Properties securing such Mortgage Loan. In the case of
nonrecourse loans, in the event of a default under such loan, recourse generally
may be had only against the specific property and other assets that have been
pledged to secure the loan. Consequently, payment on each Mortgage Loan prior to
maturity is dependent primarily on the sufficiency of the net operating income
of the related Mortgaged Property or Properties, and at maturity (whether at
scheduled maturity or, in the event of a default under the related Mortgage
Loan, upon the acceleration of such maturity) upon the then market value of the
related Mortgaged Property or the ability of the related borrower to refinance
the Mortgaged Property. Neither the Certificates nor the Mortgage Loans are
insured or guaranteed by any governmental entity, by any private mortgage
insurer, or by the Sponsor, the Mortgage Loan Seller, ContiTrade, PNC Bank, any
originator, the Master Servicer, the Special Servicer, the Trustee, the REMIC
Administrator, any of their respective affiliates or, in general, by any other
person. However, as more fully described under "Description of the Mortgage
Pool--Representations and Warranties; Repurchases" herein, the Mortgage Loan
Seller will be obligated to repurchase a Mortgage Loan if certain of its
representations and warranties concerning such Mortgage Loan are materially
breached.
Environmental Law Considerations. Under various federal, state and local
environmental laws, ordinances and regulations, a current or previous owner or
operator of real property may be liable for the costs of removal or remediation
of hazardous or toxic substances on, under, adjacent to or in such property.
Such laws often impose liability whether or not the owner or operator knew of,
or was responsible for, the presence of such hazardous or toxic substances on
any property. The cost of any required remediation and the owner's liability
therefor as to any property is generally not limited under such enactments and
could exceed the value of the property and/or the aggregate assets of the owner.
In addition, the presence of hazardous or toxic substances at a property, or the
failure to properly remediate adverse environmental circumstances and/or
conditions on such property, may adversely affect the owner's or operator's
ability to borrow using such property as collateral in connection with a
refinancing or otherwise. Persons who arrange for the disposal or treatment of
hazardous or toxic substances may also be liable for the costs of removal or
remediation of such substances at the disposal or treatment facility. Certain
laws impose liability for release of asbestos into the air and third parties may
seek recovery from owners or operators of real properties for personal injury
associated with exposure to asbestos.
Under some environmental laws, such as the federal Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended
("CERCLA"), as well as certain state laws, a secured lender (such as the Trust
Fund) may be liable, as an "owner" or "operator", for the costs of responding to
a release or threat of a release of hazardous substances on or from a borrower's
property, if agents or employees of a lender are deemed to have
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participated in the management of the borrower, regardless of whether a previous
owner caused the environmental damage. The Trust Fund's potential exposure to
liability for cleanup costs pursuant to CERCLA may increase if the Trust Fund
actually takes possession of a borrower's property, or control of its day-to-day
operations, as for example through the appointment of a receiver.
An environmental site assessment (or an update of a previously conducted
assessment) was performed at each of the Mortgaged Properties on or after
January 1, 1994, which assessments or updates were conducted consistent with
industry-wide standards. No assessment revealed any material adverse
environmental condition or circumstance at any Mortgaged Property, except in
those cases in which an operations and maintenance plan, periodic monitoring of
nearby properties or the establishment of an escrow reserve to cover the
estimated cost of remediation was recommended, which recommendations are
consistent with industry wide practices, and which recommended actions have been
or are expected to be implemented. In addition, with respect to one Mortgage
Loan, which represents 0.6% of the Initial Pool Balance, the related Mortgaged
Property has been contaminated with certain gasoline-related chemicals from an
above-ground storage tank, the responsible tenant has agreed in writing to pay
the cost of the required remediation. There can be no assurance that all
environmental conditions and risks have been identified in such environmental
assessments.
The information contained herein is based on the environmental assessments
and has not been independently verified by the Sponsor, ContiTrade, PNC, the
Mortgage Loan Seller, the Underwriters, the Master Servicer, the Special
Servicer, the Trustee, the REMIC Administrator, or by any of their respective
affiliates.
The Pooling Agreement requires that the Special Servicer obtain an
environmental site assessment of a Mortgaged Property prior to acquiring title
thereto or assuming its operation. Such requirement effectively precludes
enforcement of the security for the related Mortgage Loan until a satisfactory
environmental site assessment is obtained (or until any required remedial action
is taken), but will decrease the likelihood that the Trust Fund will become
liable for a material adverse environmental condition at the Mortgaged Property.
However, there can be no assurance that the requirements of the Pooling
Agreement will effectively insulate the Trust Fund from potential liability for
a materially adverse environmental condition at any Mortgaged Property. See
"Servicing of the Mortgage Loans" herein and "Description of the Pooling
Agreements--Realization Upon Defaulted Mortgage Loans", "Risk
Factors--Environmental Risks" and "Certain Legal Aspects of Mortgage
Loans--Environmental Risks" in the Prospectus.
Limitations on Enforceability of Cross-Collateralization. The Mortgage Pool
includes seven sets of Cross-Collateralized Mortgage Loans as described under
"Description of the Mortgage Pool--Cross-Collateralized Mortgage Loans" herein.
These arrangements seek to reduce the risk that the inability of one or more of
the Mortgaged Properties securing any such set of Cross-Collateralized Mortgage
Loans to generate net operating income sufficient to pay debt service will
result in defaults and ultimate losses. However, the Cross-Collateralized
Mortgage Loans constituting one such set are secured by mortgage liens on
Mortgaged Properties located in North Carolina and South Carolina. Because of
various state laws governing foreclosure or the exercise of a power of sale and
because, in general, foreclosure actions are brought in state court, and the
courts of one state cannot exercise jurisdiction over property in another state,
it may be necessary upon a default under any such Mortgage Loan to foreclose on
the related Mortgaged Properties in a particular order rather than
simultaneously in order to ensure that the lien of the related Mortgages is not
impaired or released.
Geographic Concentration. Twenty-five of the Mortgage Loans, which
represent 13.8% of the Initial Pool Balance, are secured by liens on Mortgaged
Properties located in New York; eighteen of the Mortgage Loans, which represent
13.4% of the Initial Pool Balance, are secured by liens on Mortgaged Properties
located in California; fifteen of the Mortgage Loans, which represent 8.4% of
the Initial Pool Balance, are secured by liens on Mortgaged Properties located
in Florida; thirteen of the Mortgage Loans, which represent 7.1% of the Initial
Pool Balance, are secured by liens on Mortgaged Properties located in North
Carolina; eleven of the Mortgage Loans, which represent 6.4% of the Initial Pool
Balance, are secured by liens on Mortgaged Properties located in Texas; five of
the Mortgage Loans, which represent 6.1% of the Initial Pool Balance, are
secured by liens on Mortgaged Properties located in Pennsylvania; and four of
the Mortgage Loans, which represent 5.7% of the Initial Pool Balance, are
secured by liens on Mortgaged Properties located in Virginia. In general, a
concentration of Mortgaged Properties in a particular state or region increases
the exposure of the Mortgage Pool to any adverse economic or other developments
that may occur in such state or region.
Related Parties. Certain borrowers are affiliated or under common control
with one another (although no group of affiliated borrowers are obligors on
Mortgage Loans representing more than 3.0% of the Initial Pool
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Balance). In addition, tenants in certain Mortgaged Properties also may be
tenants in other Mortgaged Properties, and certain tenants may be owned by
affiliates of the borrowers or otherwise related to or affiliated with a
borrower. In such circumstances, any adverse circumstances relating to a
borrower or tenant or a respective affiliate and affecting one of the related
Mortgage Loans or Mortgaged Properties could arise in connection with the other
related Mortgage Loans or Mortgaged Properties. In particular, the bankruptcy or
insolvency of any such borrower or tenants or respective affiliates could have
an adverse effect on the operation of all of the related Mortgaged Properties
and on the ability of such related Mortgaged Properties to produce sufficient
cash flow to make required payments on the related Mortgage Loans. For example,
if a person that owns or directly or indirectly controls several Mortgaged
Properties experiences financial difficulty at one Mortgaged Property, it could
defer maintenance at one or more other Mortgaged Properties in order to satisfy
current expenses with respect to the Mortgaged Property experiencing financial
difficulty, or it could attempt to avert foreclosure by filing a bankruptcy
petition that might have the effect of interrupting Monthly Payments for an
indefinite period on all the related Mortgage Loans. See "Certain Legal Aspects
of Mortgage Loans--Bankruptcy Laws" in the Prospectus. In general, except as
described below, the particular groups of affiliated borrowers described above
have been structured in a manner that is intended to avoid a bankruptcy
proceeding relating to any such borrower in the event a substantial equity owner
of such borrower were to become insolvent or subject to bankruptcy proceedings
and to avoid the consolidation of the assets of the borrower with those of such
equity owner under such circumstances. However, there can be no assurance that
such arrangements will be successful or that any borrower will not become
insolvent or subject to bankruptcy proceedings. With respect to one group of
Mortgage Loans, which represent 2.49% of the Initial Pool Balance, the borrowers
have not been so structured, but the borrowers have entered into an
intercreditor agreement that contains debt service coverage ratio and
loan-to-value ratio covenants which operate, if not met, to trigger an event of
default under the related Mortgage Loan and all other Mortgage Loans of such
borrower and/or related party borrowers. In addition, a number of the borrowers
are limited or general partnerships. Under certain circumstances, the bankruptcy
of the general partner in a partnership may result in the dissolution of such
partnership. The dissolution of a borrower partnership, the winding-up of its
affairs and the distribution of its assets could result in an acceleration of
its payment obligations under the related Mortgage Loan.
Other Concentrations. Fifty-five of the Mortgage Loans have Cut-off Date
Balances that are higher than the average Cut-off Date Balance. The largest
single Mortgage Loan has a Cut-off Date Balance that represents approximately
3.7% of the Initial Pool Balance, and the ten largest Mortgage Loans have
Cut-off Date Balances that represent in the aggregate approximately 23.6% of the
Initial Pool Balance. In general, concentrations in a mortgage pool of loans
with larger than average balances can result in losses that are more severe,
relative to the size of the pool, than would be the case if the aggregate
balance of such pool were more evenly distributed.
Risk of Changes in Concentrations. If and as payments in respect of
principal (including any Principal Prepayments, liquidations and the principal
portion of the repurchase prices for any Mortgage Loans repurchased due to
breaches of representations or defaults) are received with respect to the
Mortgage Loans, the remaining Mortgage Loans as a group may exhibit increased
concentration with respect to the type of properties, property characteristics,
number of borrowers and affiliated borrowers and geographic location. Because
principal on the Sequential Pay Certificates is payable in sequential order,
such Classes that have a lower priority with respect to the payment of principal
are relatively more likely to be exposed to any risks associated with changes in
concentrations of loan or property characteristics.
Balloon Payments. One-hundred and fifty-two of the Mortgage Loans, which
represent 96.8% of the Initial Pool Balance, are Balloon Loans which will have
substantial payments (that is, Balloon Payments) due at their stated maturities
unless previously prepaid. Mortgage Loans with Balloon Payments involve a
greater risk to the lender than self-amortizing loans, because the ability of a
borrower to make a Balloon Payment typically will depend upon its ability either
to refinance the loan or to sell the related Mortgaged Property at a price
sufficient to permit the borrower to make the Balloon Payment. The ability of a
borrower to accomplish either of these goals will be affected by a number of
factors occurring at the time of attempted sale or refinancing, including the
level of available mortgage rates, the fair market value of the property, the
borrower's equity in the related property, the financial condition of the
borrower and operating history of the property, tax laws, prevailing economic
conditions and the availability of credit for multifamily or commercial
properties, as the case may be. See "Description of Mortgage Pool--Certain Terms
and Conditions of the Mortgage Loans" and "--Additional Mortgage Loan
Information" herein and "Risk Factors--Balloon Payments" in the Prospectus.
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In order to maximize recoveries on defaulted Mortgage Loans, the Pooling
Agreement enables the Special Servicer to extend, modify or otherwise deal with
Mortgage Loans that are in material default or as to which a payment default
(including the failure to make a Balloon Payment) is reasonably foreseeable;
subject, however, to the limitations described under "Servicing of the Mortgage
Loans--Modifications, Waivers, Amendments and Consents" and "--The Extension
Adviser" herein. There can be no assurance, however, that any such extension or
modification will increase the present value of recoveries in a given case. Any
delay in collection of a Balloon Payment that would otherwise be distributable
in respect of a Class of Offered Certificates, whether such delay is due to
borrower default or to modification of the related Mortgage Loan by the Special
Servicer, will likely extend the weighted average life of such Class of Offered
Certificates. See "Yield and Maturity Considerations" here in and in the
Prospectus.
Prepayment Premiums. Most of the Mortgage Loans require, for a specified
period following the related date of origination or, if applicable, the related
Lock-out Expiration Date, that any voluntary principal prepayment be accompanied
by a Prepayment Premium. Prepayment Premiums are generally calculated either as
a percentage (which declines over time) of the principal amount prepaid or on
the basis of a yield maintenance formula. See "Description of the Mortgage
Pool--Certain Terms and Conditions of the Mortgage Loans--Prepayment Provisions"
herein.
As more fully described herein, any Prepayment Premiums actually collected
on the Mortgage Loans will be distributed to the holders of the Class or Classes
of Certificates entitled thereto as described under "Description of the
Certificates--Distributions--Prepayment Premiums" herein. The Sponsor, however,
makes no representation as to the collectability of any Prepayment Premium.
The Master Servicer or the Special Servicer may waive the payment of any
Prepayment Premium otherwise due under the terms of any Mortgage Loan in
connection with a prepayment thereof.
The enforceability, under the laws of a number of states, of provisions
similar to the provisions of the Mortgage Loans providing for the payment of a
Prepayment Premium upon an involuntary prepayment is unclear. No assurance can
be given that, at any time that any Prepayment Premium is required to be made in
connection with an involuntary prepayment, the obligation to pay such Prepayment
Premium will be enforceable under applicable law or, if enforceable, the
foreclosure proceeds will be sufficient to make such payment. Liquidation
Proceeds recovered in respect of any defaulted Mortgage Loan will, in general,
be applied to cover outstanding servicing expenses and unpaid principal and
interest prior to being applied to cover any Prepayment Premium due in
connection with the liquidation of such Mortgage Loan. See "Certain Legal
Aspects of Mortgage Loans--Default Interest and Limitations on Prepayments" in
the Prospectus.
No Prepayment Premium will be payable in connection with any repurchase of
a Mortgage Loan by the Mortgage Loan Seller for a material breach of
representation or warranty on the part of the Mortgage Loan Seller or any
failure to deliver documentation relating thereto, nor will any Prepayment
Premium be payable in connection with the purchase of all of the Mortgage Loans
and any REO Properties by the Master Servicer or a Certificateholder in
connection with the termination of the Trust Fund or in connection with the
purchase of defaulted Mortgage Loans by the Master Servicer, Special Servicer or
any single holder of a majority interest in the Controlling Class. See
"Description of the Mortgage Pool--Assignment of the Mortgage Loans;
Repurchases" and "--Representations and Warranties; Repurchases" and
"Description of the Certificates--Termination" herein.
Limited Information. The information set forth in this Prospectus
Supplement with respect to the Mortgage Loans is derived principally from (i) a
review of the available credit and legal files relating to the Mortgage Loans,
(ii) inspections of the Mortgaged Properties undertaken by or on behalf of the
Mortgage Loan Seller, (iii) unaudited operating statements for the Mortgaged
Properties supplied by the borrowers and/or (iv) information supplied by
entities from which the Mortgage Loan Seller acquired, or which currently
service, certain of the Mortgage Loans. Furthermore, in those cases where the
Mortgage Loan Seller acquired a Mortgage Loan from ContiTrade that was not
originated on behalf of ContiTrade or acquired such Mortgage Loan from another
unaffiliated entity, neither the Mortgage Loan Seller nor the Sponsor has
generally examined the books and records of such entity, and neither the
Mortgage Loan Seller nor the Sponsor has had access to all personnel of such
entity who might be knowledgeable about such Mortgage Loan; accordingly, in
those cases, available information does not permit the Sponsor to determine
fully the origination, credit appraisal and underwriting practices of the
originators of such Mortgage Loans or the manner in which such Mortgage Loans
were serviced prior to their acquisition by the Mortgage Loan Seller. In
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addition, while seasoning to the degree that has been experienced by some of the
Mortgage Loans would generally be considered to reduce the likelihood of
defaults, the fact that such Mortgage Loans are not newly-originated means that
the related borrowers, in certain such cases, are not required, or cannot
practicably be compelled, to provide the Mortgage Loan Seller with all of the
information that a lender would typically obtain from a borrower in connection
with the origination of such loan; accordingly, information contained herein
with respect to several of the Mortgage Loans is not as complete as would be the
case if those loans had been newly originated.
DESCRIPTION OF THE MORTGAGE POOL
GENERAL
The Mortgage Pool will consist of 162 multifamily and commercial mortgage
loans (the "Mortgage Loans") with an aggregate Cut-off Date Balance of
$482,357,812 (the "Initial Pool Balance"), subject to a variance of plus or
minus 5%. See "Description of the Trust Funds" and "Certain Legal Aspects of
Mortgage Loans" in the Prospectus. The "Cut-off Date Balance" of each Mortgage
Loan is the unpaid principal balance thereof as of July 1, 1996 (the "Cut-off
Date"), after application of all payments of principal due on or before such
date, whether or not received. The Cut-off Date Balances of the Mortgage Loans
have been calculated assuming that no principal payments are received during
June 1996. All numerical information provided herein with respect to the
Mortgage Loans is provided on an approximate basis. All weighted average
information provided herein with respect to the Mortgage Loans reflects
weighting by related Cut-off Date Balance. All percentages of the Mortgage Pool,
or of any specified sub-group thereof, referred to herein without further
description are approximate percentages by aggregate Cut-off Date Balance.
Except as otherwise described below, each Mortgage Loan is evidenced by a
promissory note (a "Mortgage Note") and secured by a mortgage, deed of trust or
other similar security instrument (a "Mortgage") that creates a first mortgage
lien on a fee simple (or, in four cases, a leasehold) interest in real property
(a "Mortgaged Property"), improved by (i) an apartment building or complex
consisting of five or more rental (or, in one case, cooperatively owned) units
or a mobile home park (a "Multifamily Mortgaged Property"; and any Mortgage Loan
secured thereby, a "Multifamily Loan") (82 Mortgage Loans, representing 46.4% of
the Initial Pool Balance), or (ii) a retail shopping mall or center, a
self-storage facility, a nursing facility, an office building or complex,
industrial buildings or a combination retail/office complex (a "Commercial
Mortgaged Property"; and any Mortgage Loan secured thereby, a "Commercial Loan")
(80 Mortgage Loans which represent 53.6% of the Initial Pool Balance).
Seven separate sets of Mortgage Loans (the "Cross-Collateralized Mortgage
Loans"), representing 3.0%, 1.9%, 0.8%, 0.8%, 0.7%, 0.5% and 0.2% of the Initial
Pool Balance, respectively, are, solely as among the Cross-Collateralized
Mortgage Loans in each such particular set, cross-defaulted and
cross-collateralized with each other. See "--Cross-Collateralized Mortgage
Loans" below and Annex A hereto.
Four of the Mortgage Loans, representing 2.5%, 1.4%, 0.9% and 0.7% of the
Initial Pool Balance, are, in each such case, without regard to the
cross-collateralization described in the previous paragraph, secured by one or
more Mortgages encumbering multiple Mortgaged Properties. Accordingly, the total
number of Mortgage Loans reflected herein is 162, while the total number of
Mortgaged Properties reflected herein is 176.
In general, the Mortgage Loans constitute nonrecourse obligations of the
related borrower and, upon any such borrower's default in the payment of any
amount due under the related Mortgage Loan, the holder thereof may look only to
the related Mortgaged Property or Properties, for satisfaction of the borrower's
obligation. In addition, in those cases where recourse to a borrower or
guarantor is permitted by the loan documents, the Sponsor has not undertaken an
evaluation of the financial condition of any such person, and prospective
investors should thus consider all of the Mortgage Loans to be nonrecourse. None
of the Mortgage Loans is insured or guaranteed by the United States, any
governmental entity or instrumentality, or any private mortgage insurer. See
"Risk Factors--The Mortgage Loans--Limited Recourse" herein.
Twenty-five of the Mortgage Loans, which represent 13.8% of the Initial
Pool Balance, are secured by liens on Mortgaged Properties located in New York,
and eighteen of the Mortgage Loans, which represent 13.4% of the Initial Pool
Balance, are secured by liens on Mortgaged Properties located in California. See
"--Certain Legal Aspects of Mortgage Loans Under New York and California Law"
below. The remaining Mortgaged Properties are located throughout thirty-one
other states, with no more than 8.4% of the Initial Pool Balance secured by
Mortgaged Properties located in any such other state.
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Seventy-one of the Mortgage Loans (the "Citibank Mortgage Loans"), which
represent 58.2% of the Initial Pool Balance, are currently held by Citibank,
N.A. (in such capacity, the "Mortgage Loan Seller"), a commonly controlled
affiliate of the Sponsor and were acquired by the Mortgage Loan Seller from
various unaffiliated banks, savings institutions and other entities in the
secondary market and/or acquired pursuant to various conduit programs.
Eighty-six of the Mortgage Loans (the "ContiTrade Mortgage Loans"), which
represent 39.7% of the Initial Pool Balance, are currently held by ContiTrade
Services L.L.C. ("ContiTrade"), an indirectly wholly-owned subsidiary of
ContiFinancial Corporation. Continental Grain Company currently owns
approximately 81% of ContiFinancial Corporation's outstanding capital stock. The
ContiTrade Mortgage Loans were acquired by ContiTrade from First Security
Commercial Mortgage, L.P. ("First Security"), Parallel Capital Corporation
("Parallel Capital", and together with First Security, the "ContiTrade Mortgage
Loan Originators") or third parties in the secondary market or pursuant to
ContiTrade's conduit program. The Mortgage Loans that ContiTrade acquired from
First Security and Parallel Capital were originated by the respective ContiTrade
Mortgage Loan Originator. Five of the Mortgage Loans (the "PNC Mortgage Loans"),
which represent 2.1% of the Initial Pool Balance, were originated and are
currently held by PNC Bank, National Association ("PNC"). The ContiTrade
Mortgage Loans and the PNC Mortgage Loans will be sold to the Mortgage Loan
Seller by ContiTrade and PNC, respectively, on or before the Delivery Date. On
or before the Delivery Date (but after the transfer of the ContiTrade Mortgage
Loans and the PNC Mortgage Loans to the Mortgage Loan Seller), the Mortgage Loan
Seller will, at the direction of the Sponsor, transfer all of the Mortgage
Loans, without recourse, to the Trustee for the benefit of the
Certificateholders. See "--The Mortgage Loan Seller" and "--Assignment of the
Mortgage Loans; Repurchase" below.
CERTAIN TERMS AND CONDITIONS OF THE MORTGAGE LOANS
Due Dates. All of the Mortgage Loans provide for scheduled payments of
principal and/or interest ("Monthly Payments") to be due on the first day of
each month (as to each Mortgage Loan, the "Due Date"), except that, in the case
of certain Mortgage Loans, the related Balloon Payment (as defined below) may be
due on a day other than the first day of the month. In general, all of the
Mortgage Loans provide for a grace period of not more than ten days.
Mortgage Rates; Calculations of Interest. All of the Mortgage Loans accrue
interest on the basis of a 360-day year consisting of twelve 30-day months.
One-hundred and fifty-two of the Mortgage Loans (the "Fixed-Rate Loans"),
representing 93.3% of the Initial Pool Balance, bear interest at a rate per
annum (a "Mortgage Rate") that is fixed for the remaining term of the Mortgage
Loan. Ten of the Mortgage Loans (the "ARM Loans"), representing 6.7% of the
Initial Pool Balance, accrue interest at Mortgage Rates that are subject to
adjustment on a semi-annual (or, in two such cases, a monthly) basis following
the Cut-off Date generally by adding a specified percentage (a "Gross Margin")
to the value of a base index (an "Index"), subject to rounding conventions and
specified minimum and maximum Mortgage Rates.
For purposes of calculating distributions on the Certificates, the Mortgage
Pool has been divided into two sub-pools (each, a "Loan Group"), designated as
"Loan Group 1" and "Loan Group 2", respectively, based upon the Mortgage Rates
for the Mortgage Loans. Loan Group 1, which has an aggregate Cut-off Date
Balance of $29,966,951 (the "Initial Group 1 Balance"), consists of the eight
ARM Loans that provide for semi-annual adjustments to their respective Mortgage
Rates. Loan Group 2, which has an aggregate Cut-off Date Balance of $452,390,861
(the "Initial Group 2 Balance"), consists of the Fixed-Rate Loans and the two
ARM Loans that provide for monthly adjustments to their respective Mortgage
Rates. As of the Cut-off Date, the Mortgage Rates of the Mortgage Loans will
range from 7.36% to 10.875% per annum, and the weighted average Mortgage Rate of
the Mortgage Loans will be 8.69% per annum; the Mortgage Rates of the Group 1
Loans will range from 8.0% to 8.625% per annum, and the weighted average
Mortgage Rate of such Mortgage Loans will be 8.21% per annum; and the Mortgage
Rates of the Group 2 Loans will range from 7.36% to 10.875% per annum, and the
weighted average Mortgage Rate of such Mortgage Loans will be 8.72% per annum.
The ARM Loans. The ARM Loans are subject to minimum and maximum lifetime
Mortgage Rates, in each case as described herein. The eight ARM Loans
constituting Loan Group 1 represent 6.2% of the Initial Pool Balance and provide
that Mortgage Rate adjustments may occur semi-annually in April and October, and
the two ARM Loans included in Loan Group 2 represent 0.5% of the Initial Pool
Balance and provide that interest rate adjustments may occur monthly. Any date
on which the Mortgage Rate for any ARM Loan is subject to adjustment is herein
referred to as a "Mortgage Rate Adjustment Date" for such Mortgage Loan.
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Five of the ARM Loans in Loan Group 1 have minimum lifetime Mortgage Rates
of 6.0% per annum, and the remaining three ARM Loans in Loan Group 1 have
minimum lifetime Mortgage Rates of 6.375%, 7.8125% and 8.625% per annum,
respectively. The two ARM Loans in Loan Group 2 have minimum lifetime Mortgage
Rates of 9.75% and 9.875% per annum, respectively.
Five of the ARM Loans in Loan Group 1 have maximum lifetime Mortgage Rates
of 11.75% per annum, and the remaining three ARM Loans in Loan Group 1 have
maximum lifetime Mortgage Rates of 12.5625%, 12.625% and 12.875% per annum,
respectively. The two ARM Loans in Loan Group 2 have maximum lifetime Mortgage
Rates of 13.75% and 13.875% per annum, respectively.
The Monthly Payments on each ARM Loan are subject to adjustment in response
to changes in the related Mortgage Rate to an amount that would amortize fully
the principal balance of the Mortgage Loan over its then remaining amortization
term and pay one month's interest thereon at the applicable Mortgage Rate.
Each Group 1 Loan has a Gross Margin of 2.75% per annum and each of the two
ARM Loans in Loan Group 2 has a Gross Margin of 3.75% per annum. The weighted
average Gross Margin of all of the ARM Loans is 2.82% per annum.
The Loan Group 1 Loans are subject to interest rate adjustment based on
Six-Month LIBOR, as calculated below. With respect to five of the ARM Loans in
Loan Group 1 (the "Six-Month LIBOR Formula 1 Loans"), "Six-Month LIBOR" is
determined on each LIBOR Determination Date by reference to the offered
quotations appearing on the display page designated as "LIBO" on the Reuters
Monitor Money Rates Service or such other page as may replace the LIBO page (the
"Reuters Screen LIBO Page") for six-month United States dollar deposits in the
London interbank market, as of 11:00 a.m. (London time) on such LIBOR
Determination Date. If on any LIBOR Determination Date two or more such offered
quotations appear on the Reuters Screen LIBO page, Six-Month LIBOR for the
immediately succeeding LIBOR Reference Period will be equal to the arithmetic
mean of such offered quotations (rounded upwards, if necessary, to the nearest
whole multiple of 1/16%). If on any LIBOR Determination Date fewer than two such
offered quotations appear on the Reuters Screen LIBO Page, Six-Month LIBOR for
the immediately succeeding LIBOR Reference Period will be equal to the
arithmetic mean of the quotations offered by the Reference Banks for six-month
United States dollar deposits in the London Interbank Market, as of 11:00 a.m.
(London time) on such LIBOR Determination Date (rounded upwards, if necessary,
to the nearest whole multiple of 1/16%); provided, however, that (i) if only one
Reference Bank offers such a quotation, Six-Month LIBOR for the immediately
succeeding LIBOR Reference Period will be equal to that quotation (rounded
upwards, if necessary, to the nearest whole multiple of 1/16%), or (ii) if no
Reference Banks offer such a quotation, Six-Month LIBOR for the immediately
succeeding LIBOR Reference Period will be Six-Month LIBOR as determined on the
previous LIBOR Determination Date. The foregoing calculation of Six-Month LIBOR
is herein referred to as "Six-Month LIBOR Formula 1".
With respect to the other three ARM Loans in Loan Group 1, "Six-Month
LIBOR" is determined on each LIBOR Determination Date and is equal to the rate
of interest per annum (determined on a 360 day, actual days elapsed basis)
offered by the principal office of Citibank, N.A. in London to prime banks in
the London inter market at 10:00 a.m. (London time) on such LIBOR Determination
Date as the rate per annum at which such principal office of Citibank, N.A. in
London would be willing to make a deposit with such prime banks in an amount
equal to $1,000,000 during such LIBOR Reference Period.
A "LIBOR Determination Date" is the day that is two LIBOR Business Days
prior to the first day of each LIBOR Reference Period. A "LIBOR Reference
Period" is each successive six-month calendar period, commencing on the first
day of April and October of each year and ending on the day preceding the next
LIBOR Reference Period. "Reference Banks" are leading banks engaged in
transactions in Eurodollar deposits in the international Eurocurrency market
with an established place of business in London. A "LIBOR Business Day" is each
day on which commercial banks are open for domestic and international business
(including dealings in U.S. Dollar deposits) in London and New York City.
The two ARM Loans in Loan Group 2 are subject to interest rate adjustment
based on the average of the interbank offered rates for one-month United States
dollar deposits in the London market.
Amortization of Principal. One-hundred and fifty-two of the Mortgage Loans
(the "Balloon Loans"), which represent 96.8% of the Initial Pool Balance,
provide for monthly payments of principal based on amortization
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schedules significantly longer than their remaining terms, thereby leaving
substantial principal amounts due and payable (each such payment, together with
the corresponding interest payment, a "Balloon Payment") on their respective
maturity dates, unless previously prepaid. Ten of the Mortgage Loans, which
represent 3.2% of the Initial Pool Balance, are self-amortizing (the
"Self-Amortizing Loans"). The original term to stated maturity of each Mortgage
Loan was between 6 and 25 years. The original amortization schedules of the
Mortgage Loans ranged from 12 to 30 years. As of the Cut-off Date, the remaining
terms to stated maturity of the Mortgage Loans will range from 42 months to 279
months, and the weighted average remaining term to stated maturity of the
Mortgage Loans will be 110 months; the remaining terms to stated maturity of the
Group 1 Loans will range from 62 months to 99 months, and the weighted average
remaining term to stated maturity of such Mortgage Loans will be 90 months; and
the remaining terms to stated maturity of the Group 2 Loans will range from 42
months to 279 months, and the weighted average remaining term to stated maturity
of such Mortgage Loans will be 111 months. As of the Cut-off Date, the remaining
amortization terms of the Mortgage Loans will range from 113 months to 359
months, and the weighted average remaining amortization term of the Mortgage
Loans will be 311 months; the remaining amortization terms of the Group 1 Loans
will range from 278 months to 341 months, and the weighted average remaining
amortization term of such Mortgage Loans will be 327 months; and the remaining
amortization terms of the Group 2 Loans will range from 113 months to 359
months, and the weighted average remaining amortization term of such Mortgage
Loans will be 310 months. See "Risk Factors--The Mortgage Loans--Balloon
Payments" herein. No Mortgage Loan permits negative amortization or the deferral
of accrued interest.
Prepayment Provisions. As of the Cut-off Date, 161 Mortgage Loans, which
represent 100.0% of the Initial Loan Group 1 Balance, 97.3% of the Initial Loan
Group 2 Balance and 97.4% of the Initial Pool Balance, either (a) prohibit
voluntary principal prepayments in whole or in part, prior to a specified date
(each, a "Lock-Out Expiration Date") (76 Mortgage Loans, which represent zero
percent of the Initial Loan Group 1 Balance, 61.5% of the Initial Loan Group 2
Balance and 57.7% of the Initial Pool Balance), which in no such case occurs
earlier than February 1, 1997 or later than May 1, 2003, or (b) (without
duplication of clause (a) above) require for a specified period that any
voluntary principal prepayment be accompanied by an additional premium, penalty,
or fee (a "Prepayment Premium") (85 Mortgage Loans, which represent 100.0% of
the Initial Loan Group 1 Balance, 35.7% of the Initial Loan Group 2 Balance and
39.7% of the Initial Pool Balance). Of the 76 Mortgage Loans that, as of the
Cut-off Date, prohibit voluntary principal prepayments in whole or in part,
prior to a Lock-Out Expiration Date, all of such Mortgage Loans also require,
for a specified period following the related Lock-Out Expiration Date that any
voluntary principal prepayment be accompanied by a Prepayment Premium.
Prepayment Premiums are generally calculated either as a percentage (which
declines over time) of the principal amount prepaid or on the basis of a yield
maintenance formula. The prepayment terms of each of the Mortgage Loans are more
particularly described in Annex A hereto.
As more fully described herein, Prepayment Premiums actually collected on
the Mortgage Loans will be distributed to the respective Classes of
Certificateholders in the amounts and priorities described under "Description of
the Certificates--Distributions--Prepayment Premiums" herein. The Master
Servicer or the Special Servicer will be permitted, in accordance with the
servicing standard described herein under "Servicing of the Mortgage
Loans--General", to modify, waive or amend any requirement that a principal
prepayment on a Mortgage Loan be accompanied by a Prepayment Premium. The
Sponsor makes no representation as to the enforceability of the provision of any
Mortgage Loan requiring the payment of a Prepayment Premium, or of the
collectability of any Prepayment Premium. See "Risk Factors--The Mortgage
Loans--Prepayment Premiums" herein and "Certain Legal Aspects of Mortgage
Loans--Default Interest and Limitations on Prepayments" in the Prospectus.
Cross-Collateralized Mortgage Loans. Seven separate sets of Group 2 Loans
(the "Cross-Collateralized Mortgage Loans") representing 3.0%, 1.9%, 0.8%, 0.8%,
0.7%, 0.5% and 0.2% of the Initial Pool Balance, respectively, are, solely as
among the Cross-Collateralized Mortgage Loans in each such particular set,
cross-defaulted and cross-collateralized with each other.
With respect to the seven such sets of Cross-Collateralized Mortgage Loans,
the aggregate principal amount of each Mortgage Loan is evidenced by a separate
Mortgage Note and secured by a separate Mortgage, which Mortgage contains
provisions creating the cross-collateralization and cross-default. With respect
to two sets of Cross-Collateralized Mortgage Loans, representing 1.9% and 0.7%
of the Initial Pool Balance, respectively, the borrower may release a Mortgaged
Property from the lien of the related Mortgage upon payment of a release price
as specified in the related loan documentation; and, with respect to one set of
Cross-Collateralized Mortgage Loans,
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representing 0.8% of the Initial Pool Balance, the borrower may release a
Mortgaged Property from the lien of the related Mortgage upon payment of a
release price as specified in the related loan documentation if the Debt Service
Coverage Ratio equals or exceeds 1.6x. See Annex A hereto for information
regarding the Cross-Collateralized Mortgage Loans and see "Risk Factors--The
Mortgage Loans--Limitations on Enforceability of Cross-Collateralization"
herein.
Four of the Mortgage Loans, representing 2.5%, 1.4%, 0.9% and 0.7%,
respectively, of the Initial Pool Balance, are, in each such case, without
regard to the cross-collateralization described in the previous paragraph,
secured by one or more Mortgages encumbering multiple Mortgaged Properties. With
respect to each such set of Mortgage Loans, the related Mortgaged Properties are
located in the same state and are of the same property type. The Mortgage Loan
documentation with respect to one of such Mortgage Loans permits the borrower to
release a Mortgaged Property from the lien of the related Mortgage upon payment
of a release price as specified in the related Mortgage Note. Accordingly, the
total number of Mortgage Loans reflected herein is 162, while the total number
of Mortgaged Properties reflected herein is 176.
"Due-on-Sale" and "Due-on-Encumbrance" Provisions. All of the Mortgage
Loans contain both "due-on-sale" and "due-on-encumbrance" clauses that in each
case, subject to limited exception, permit the holder of the Mortgage to
accelerate the maturity of the related Mortgage Loan if the borrower sells or
otherwise transfers or encumbers the related Mortgaged Property or prohibit the
borrower from doing so without the consent of the holder of the Mortgage. See
"--Additional Mortgage Loan Information--Subordinate Financing" herein. The
Master Servicer or the Special Servicer, as applicable, will determine, in a
manner consistent with the servicing standard described herein under "Servicing
of the Mortgage Loans--General", whether to exercise any right the holder of any
Mortgage may have under any such clause to accelerate payment of the related
Mortgage Loan upon, or to withhold its consent to, any transfer or further
encumbrance of the related Mortgaged Property; provided, however, that neither
the Master Servicer nor the Special Servicer shall waive any right it has, or
grant any consent that it may otherwise withhold, under any related
"due-on-encumbrance" clause until it has received written confirmation from each
Rating Agency that such action would not result in the downgrade, qualification
or withdrawal of the rating then assigned by any Rating Agency to any Class of
Certificates. See "Description of the Pooling Agreements--Due-on-Sale and
Due-on-Encumbrance Provisions" and "Certain Legal Aspects of Mortgage
Loans--Due-on-Sale and Due-on-Encumbrance" in the Prospectus.
ADDITIONAL MORTGAGE LOAN INFORMATION
For a detailed presentation of certain characteristics of the Mortgage
Loans and Mortgaged Properties, on an individual basis, see Annex A hereto.
Certain capitalized terms that appear herein are defined in Annex A.
Delinquencies. As of the Cut-off Date, no Mortgage Loan was more than 30
days delinquent in respect of any Monthly Payment.
Tenant Matters. Thirty-three Mortgaged Properties, which represent security
for 28.5% of the Initial Pool Balance, are leased in large part to one or more
Major Tenants (as defined in Annex A attached hereto) or are wholly or in large
part owner-occupied. Four companies are Major Tenants or Anchor Tenants with
respect to more than one Mortgage Loan, with such groups of Mortgage Loans
representing 4.6%, 1.9%, 1.1% and 0.7% of the Initial Pool Balance. With respect
to one Mortgage Loan, which represents 0.2% of the Initial Pool Balance, the
sole tenant has vacated the premises; however, the borrower is current with
respect to its payments under the related Mortgage Note, principals of the
borrower have personally guaranteed the borrower's payments under the related
Mortgage Note and the originator of such Mortgage Loan has guaranteed twelve
months of the borrower's payments under the related Mortgage Note. With respect
to a second Mortgage Loan, which represents 0.3% of the Initial Pool Balance,
the sole tenant has filed a petition under Chapter 11 of the U.S. Bankruptcy
Code; however, the former parent company has guaranteed the tenant's lease
payments in an amount that equals approximately 94% of the borrower's payments
under the Mortgage Note until July 31, 2000) (the maturity date of the Mortgage
Loan is October 1, 2005). The Sponsor believes that the below-market lease
rental rate and the tenant's prior performance at the Mortgaged Property may
make it unlikely that the tenant would not ratify the lease contract. No
assurance can be given that as a result of the filing of the bankruptcy petition
that the borrower will continue to make timely payments under the related
Mortgage Note.
Ground Leases. Four Mortgage Loans, which represent 2.5% of the Initial
Pool Balance, are secured by first mortgage liens on the applicable borrower's
leasehold interest in the related Mortgaged Property. The related ground
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leases do not expire until at least ten years after the stated maturity of the
related Mortgage Loans and the borrower's estate, which is encumbered by the
leasehold mortgage, is not likely to be altered or terminated during the term of
the related Mortgage Loan, provided that the ground lessor recognizes any
non-disturbance rights of the borrower. With respect to three of such Mortgage
Loans, the related ground lessor has subordinated its interest in the Mortgaged
Property to the interest of the holder of the related Mortgage Loan. With
respect to one of such Mortgage Loans, the related ground lessor has granted the
holder of the Mortgage Loan the right to cure any default or breach by the
lessee. See "Certain Legal Aspects--Foreclosure--Leasehold Risks" in the
Prospectus.
Subordinate Financing. Two of the Mortgaged Properties, which represent
security for 1.5% of the Initial Pool Balance, are encumbered by subordinated
debt. In each of such cases, the holder of the subordinate debt has agreed not
to foreclose for so long as the related Mortgage Loan is outstanding, and the
Trust Fund is not pursuing a foreclosure action. All of the Mortgage Loans
either prohibit the related borrower from encumbering the Mortgaged Property
with additional secured debt or require the lender's prior consent prior to so
encumbering such property. Other than as indicated above, the Sponsor is unable
to confirm if any other subordinate financing currently encumbers any Mortgaged
Property and no assurance can be given that subordinate financing will not exist
as to any Mortgaged Property in the future. See "Risk Factors--The Mortgage
Loans--Risks of Subordinate Financing".
The existence of subordinated indebtedness may increase the difficulty of
refinancing the related Mortgage Loan at maturity and the possibility that
reduced cash flow could result in deferred maintenance. Also, in the event that
the holder of the subordinated debt has filed for bankruptcy or been placed in
involuntary receivership, foreclosing on the Mortgaged Property could be
delayed. See "Risk Factors--The Mortgage Loans--Risks of Subordinate Financing"
and "Certain Legal Aspects of Mortgage Loans--Subordinate Financing" in the
Prospectus.
With respect to one Mortgage Loan secured by a Multifamily Mortgaged
Property, which represents 1.6% of the Initial Pool Balance, a recent site
inspection by the Mortgage Loan Seller indicated that items of deferred
maintenance may exist at the Mortgaged Property and that the Mortgaged Property
has experienced a notable deterioration in tenant quality. Such circumstances
may materially and adversely affect the property's ability to attract tenants.
While the borrower is current with respect to its payments under the Mortgage
Note, no assurance can be given that the borrower will continue to make timely
payments.
CERTAIN UNDERWRITING MATTERS
Environmental Assessments. All of the Mortgaged Properties were subject to
"Phase I" environmental assessments or an update of a previously conducted
assessment, which assessments or updates were conducted consistent with
industry-wide standards, on or after January 1, 1994 in connection with the
origination, or the Mortgage Loan Seller's acquisition, of the related Mortgage
Loans. No such assessment revealed any material adverse environmental condition
or circumstance at any Mortgaged Property, except in those cases in which an
operations and maintenance plan, periodic monitoring of nearby properties or the
establishment of an escrow reserve to cover the estimated cost of remediation
was recommended, which recommendations are consistent with industry wide
practices, and which recommended actions have been or are expected to be
implemented. In addition, with respect to one Mortgage Loan, which represents
0.6% of the Initial Pool Balance, the related Mortgaged Property has been
contaminated with certain gasoline-related chemicals from an above-ground
storage tank and the responsible tenant has agreed in writing to pay the cost of
the required remediation.
The information contained herein is based on the environmental assessments
and has not been independently verified by the Sponsor, the Master Servicer, the
Special Servicer, the Trustee, or by any of their respective affiliates.
Property Condition Assessments. Inspections of all of the Mortgaged
Properties (or updates of previously conducted inspections) were conducted by
licensed engineers prior either to origination of the related Mortgage Loan or
following origination but prior to the Delivery Date. Such inspections were
generally commissioned to inspect the exterior walls, roofing, interior
construction, mechanical and electrical systems and general condition of the
site, buildings and other improvements located at a Mortgaged Property. With
respect to certain of the Mortgage Loans, the resulting reports indicated a
variety of deferred maintenance items and recommended capital improvements. The
estimated cost of the necessary repairs or replacements at a Mortgaged Property
was included in the related property condition assessment. In some instances,
cash reserves were established to fund such deferred maintenance or replacement
items.
Appraisals and Market Studies. An appraisal of each of the related
Mortgaged Properties was performed (or an existing appraisal updated) on or
after June 1, 1993 in conjunction with the origination, or the Mortgage Loan
Seller's
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acquisition, of each Mortgage Loan, by an independent MAI or state-certified
appraiser to establish that the appraised value of the related Mortgaged
Property or Properties exceeded the original principal balance of the Mortgage
Loan (or, in the case of a set of related Cross-Collateralized Mortgage Loans,
the aggregate original principal balance of such set). Each such appraisal
conforms to the appraisal guidelines set forth in Title XI of the Federal
Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA").
In general, such appraisals represent the analysis and opinions of the
respective appraisers at or before the time made, have not been updated
following origination and are not guarantees of, and may not be indicative of,
present or future value. There can be no assurance that another appraiser would
not have arrived at a different valuation, even if such appraiser used the same
general approach to and same method of appraising the property. In addition,
appraisals seek to establish the amount a typically motivated buyer would pay a
typically motivated seller. Such amount could be significantly higher than the
amount obtained from the sale of a Mortgaged Property under a distress or
liquidation sale.
None of the Sponsor, the Underwriters or any of their respective affiliates
nor any other entity has prepared or obtained a separate independent appraisal
or reappraisal.
Zoning and Building Code Compliance. The Mortgage Loan Seller has attempted
to establish that the use and operation of the Mortgaged Properties were in
compliance in all material respects with all applicable zoning, land-use,
environmental, building, fire and health ordinances, rules, regulations and
orders applicable to the related Mortgaged Properties. Evidence of such
compliance may have been in the form of legal opinions, certifications from
government officials and/or representations by the related borrower contained in
the related Mortgage Loan documents. Certain violations may exist, but the
Mortgage Loan Seller does not consider them to be material. In many cases, the
use, operation and/or structure of the related Mortgaged Property constitutes a
permitted nonconforming use and/or structure, which may not be rebuilt to its
current state in the event of a material casualty event; however,it is expected
that insurance proceeds would be available for application to the related
Mortgage Loan if such were to occur.
Hazard, Liability and Other Insurance. The Mortgages generally require that
each Mortgaged Property be insured by a hazard insurance policy in an amount at
least equal to the lesser of the outstanding principal balance of the related
Mortgage Loan and 100% of the full insurable replacement cost of the
improvements located on the related Mortgaged Property, and if applicable, the
related hazard insurance policy contains appropriate endorsements to avoid the
application of co-insurance and does not permit reduction in insurance proceeds
for depreciation or, in the case of certain of the Mortgage Loans, in amounts
which are customarily required by institutional lenders. In addition, if any
portion of a Mortgaged Property securing any Mortgage Loan was, at the time of
the origination of such Mortgage Loan, in an area identified in the Federal
Register by the Flood Emergency Management Agency as having special flood
hazards, and flood insurance was available, a flood insurance policy meeting any
requirements of the then current guidelines of the Federal Insurance
Administration is in effect with a generally acceptable insurance carrier, in an
amount representing coverage not less than the least of (1) the outstanding
principal balance of such Mortgage Loan, (2) the full insurable value of such
Mortgaged Property, (3) the maximum amount of insurance available under the
National Flood Insurance Act of 1968, as amended and (4) 100% of the replacement
cost of the improvements located on the related Mortgaged Property. In general,
the standard form of hazard insurance policy covers physical damage to, or
destruction of, the improvements on the Mortgaged Property by fire, lightning,
explosion, smoke, windstorm and hail, riot or strike and civil commotion,
subject to the conditions and exclusions set forth in each policy.
Each Mortgage generally also requires the related borrower to maintain
comprehensive general liability insurance against claims for personal and bodily
injury, death or property damage occurring on, in or about the related Mortgaged
Property in an amount not less than that specified in the related Mortgage.
Each Mortgage generally further requires the related borrower to maintain
business interruption insurance in an amount not less than 100% of the projected
rental income from the related Mortgaged Property for not less than six months.
In addition to the foregoing and to certain other policies required to be
maintained by each borrower pursuant to the related Mortgage, each Mortgage
generally further requires the borrower thereunder to maintain insurance
covering the major components of the central heating, air conditioning and
ventilating systems, boilers, other pressure vessels, high pressure piping and
machinery, elevators and escalators, if any, and any other similar equipment
installed in the improvements against physical damage thereto and loss of
occupancy and use of the
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improvements arising out of an accident or breakdown of such equipment, in an
amount at least equal to the full replacement cost of the building(s) housing
the equipment or, in the case of certain of the Mortgage Loans, in amounts which
are customarily required by institutional lenders.
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS UNDER NEW YORK AND CALIFORNIA LAW
General. As of the Cut-off Date, twenty-five of the Mortgage Loans, which
represent 13.8% of the Initial Pool Balance, are secured by liens on Mortgaged
Properties located in New York, and eighteen of the Mortgage Loans, which
represent 13.4% of the Initial Pool Balance, are secured by liens on Mortgaged
Properties located in California. The following discussion contains general
summaries of certain legal aspects of loans secured by income-producing
properties in New York and California. The summaries do not purport to be
complete nor do the summaries reflect the laws of any other state. The summaries
relate only to the topics covered and are qualified in their entirety by
reference to the applicable state laws being discussed. See also "Certain Legal
Aspects of Mortgage Loans" in the Prospectus.
New York. The Mortgage Loans relating to the Mortgaged Properties located
in New York will be secured by a Mortgage which provides for both judicial
foreclosure and non-judicial foreclosure. In practice, however, non-judicial
foreclosure has fallen into almost total disuse due to various procedural and
practical shortcomings, including very complex and technical procedural
requirements and the inability to obtain the appointment of a receiver.
Upon a default and after the expiration of applicable grace and notice
periods, a mortgagee may commence a judicial foreclosure by filing a complaint
in the county where the mortgaged property is located and by serving a summons
and complaint on the borrower and all defendants named therein. All persons and
entities having an interest in the mortgaged property must be named defendants
in the complaint. Once a foreclosure action is commenced, it is the practice in
New York to file a lis pendens or notice of pendency in the office of the county
clerk for the county in which the mortgaged property is located. Any person or
entity acquiring an interest in the mortgaged property after the filing of the
lis pendens is bound by the foreclosure.
In most instances, the court having jurisdiction over the foreclosure
proceeding will appoint a referee to compute the sums due to the mortgagee and
to file an oath and report therewith. Once the oath and report is filed, the
mortgagee will apply for a judgment of foreclosure and sale.
Upon the entry of a judgment of foreclosure and sale in favor of the
mortgagee, and upon compliance with certain notice and publication requirements,
the mortgaged property will be sold to the highest bidder at a public auction
held in the county where the mortgaged property is located. The auction is
usually conducted by the referee. At any time prior to the close of the bidding
at the auction, the borrower may redeem the mortgaged property by paying the
mortgagee the full amount of the judgment of foreclosure and sale. The borrower
is not permitted to redeem the mortgaged property after the close of the
auction.
In the event that the proceeds received by the mortgagee at the auction are
less than the amount required to be paid pursuant to the judgment of foreclosure
and sale, and provided the loan documents so permit, the mortgagee will be
entitled to submit a motion for a deficiency judgment within 90 days after the
delivery of the deed to the purchaser at the auction. A motion for deficiency
judgment may only be submitted if the complaint commencing the foreclosure
action and the judgment of foreclosure and sale comply with certain
requirements. The amount of the deficiency is calculated by subtracting the
greater of (i) the sale price received at the auction or (ii) the fair market
value of the mortgaged property on the date of the auction from the amount of
the total debt owed to the mortgagee.
California. Provided the deed of trust contains a private power of sale,
California law permits the beneficiary of a deed of trust (the lender) to
foreclose non-judicially or judicially upon a default by the trustor (the
property owner). If the deed of trust does not contain a private power of sale,
then the beneficiary may only foreclose judicially. The commencement of a
judicial foreclosure does not prevent a lender from foreclosing non-judicially,
or vice versa.
Most beneficiaries choose non-judicial foreclosure, because the process may
typically be completed within a much shorter time frame than judicial
foreclosure. However, a beneficiary is barred from obtaining a deficiency
judgment after a non-judicial foreclosure.
Non-judicial Foreclosure. A non-judicial foreclosure is conducted by the
trustee under the deed of trust and involves a public sale similar to an
auction. The trustee initiates a non-judicial foreclosure proceeding by
recording a Notice of Default and Election to Sell ("NOD") in the real property
records. Unless there are delays caused by the
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filing of a bankruptcy petition, the issuance of an injunction or any other
postponements ordered by a court, a non-judicial foreclosure may be completed in
as few as 111 days after the NOD is recorded.
California law permits the trustor and any junior lienholders to reinstate
any monetary obligations secured by the foreclosing beneficiary's deed of trust
by paying the amount in default and certain other amounts prescribed by statute,
such as trustee's fees, attorneys' fees and other costs of enforcement, no later
than five business days before the date of the trustee's sale. Thus, if the
beneficiary declares the entire principal amount of the indebtedness to be due
because of the failure to pay an interest installment or some other amount, the
trustor is permitted to pay only the delinquent payment and the other amounts
prescribed by statute to prevent the trustee's sale. Upon payment of these
amounts, the balance of the loan is reinstated. The trustor and any junior
lienholders do not have any reinstatement rights with respect to nonmonetary
defaults; however, a nonjudicial foreclosure for nonmonetary defaults may be
subject to equitable limitations or the reluctance of a trustee to conduct the
nonjudicial foreclosure sale. During the last five business days before the
sale, the trustor must pay the beneficiary the full amount of all obligations
due and owing to the beneficiary to prevent the trustee's sale.
The beneficiary may make a credit bid at the sale. All other bids must be
backed by cash or certain types of cash equivalents. The property is sold to the
party who makes the highest bid. Upon payment of the bid amount, the trustee
delivers a trustee's deed to the successful bidder.
Neither the trustor nor any junior lienholders have a right to redeem the
property following a non-judicial foreclosure sale. The beneficiary may not
obtain a deficiency judgment against the trustor in the event that the sales
proceeds from the trustee's sale are insufficient to satisfy the indebtedness.
Judicial Foreclosure. The beneficiary commences a judicial foreclosure by
filing a complaint after a default by the trustor. The beneficiary must name the
trustor and all junior lienholders as defendants in order for their interests in
the property to be extinguished by the foreclosure sale. The trustor can
reinstate a monetary obligation at any time before an entry of judgment by
paying the beneficiary the amount in default, its attorney's fees and costs and
expenses of enforcement.
Upon an entry of judgment in favor of the beneficiary and after the
expiration of certain notice periods, the property may be sold by the county
sheriff or a court-appointed receiver. At any time prior to the foreclosure
sale, the trustor may redeem the property by paying the beneficiary the full
amount of the judgment.
Only the beneficiary may make a credit bid at the sale. The property is
sold to the party who makes the highest bid. The party conducting the sale will
issue a deed to the successful bidder after payment of the purchase price and
the expiration of the applicable redemption period. The trustor is entitled to
maintain possession of the property during the applicable redemption period.
The trustor has a right to redeem the property after a judicial foreclosure
sale,unless the beneficiary waived its right to a deficiency judgment or the
beneficiary was prohibited from seeking a deficiency judgment, in which case no
post sale right of redemption exists. If the trustor has a right to redeem the
property, the period during which the property may be redeemed is three months
from the date of sale if the proceeds of the sale were sufficient to satisfy the
debt, or one year if the proceeds were insufficient to satisfy the debt. Junior
lienholders do not have a right to redeem the property unless the junior lien
was created before July 1, 1983.
If the beneficiary desires a deficiency judgment and is not otherwise
prohibited from obtaining one, the beneficiary must file an application with the
court within three months of the foreclosure sale. A deficiency judgment may not
exceed the difference between the indebtedness and the fair value of the
property, as determined by the court.
California's "One-Action" Rule. In addition to the anti-deficiency rules
discussed above, a beneficiary's ability to enforce an obligation secured by
real property is subject to California's "one-action" rule. Among other things,
the one-action rule provides that any suit by a beneficiary to enforce any
obligation secured by real property must include an action for judicial
foreclosure. In that respect, the one-action rule requires the beneficiary to
exhaust the collateral before seeking a judgment against the trustor or
otherwise proceeding against property of the trustor that is not pledged as
security for the indebtedness. A non-judicial foreclosure proceeding is not an
"action" for purposes of the one-action rule.
A beneficiary who violates the one-action rule may be deemed to have waived
its security for the indebtedness and, in some cases, may be prevented from
collecting the indebtedness altogether.
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THE MORTGAGE LOAN SELLER
The Mortgage Loan Seller was originally organized on June 16, 1812, and now
is a national banking association organized under the National Bank Act of 1864.
The Mortgage Loan Seller is a wholly-owned indirect subsidiary of Citicorp (a
Delaware corporation). The Mortgage Loan Seller is Citicorp's principal
subsidiary. As of March 31, 1996, the total assets of the Mortgage Loan Seller
and its consolidated subsidiaries represented approximately 81% of the total
assets of Citicorp and its consolidated subsidiaries. The Mortgage Loan Seller
is a commercial bank offering a wide range of banking and trust services to its
customers in the New York City metropolitan area and, through its subsidiaries
and affiliates, in various parts of the United States and around the world.
The Consolidated Balance Sheets of the Mortgage Loan Seller as of December
31, 1995 and as of December 31, 1994 are set forth in the Annual Report and Form
10-K of Citicorp and its subsidiaries for the year ended December 31, 1995 and
as of March 31, 1996 and are set forth in the Financial Review and Form 10-Q for
the quarter ended March 31, 1996. Consolidated Balance Sheets of the Mortgage
Loan Seller subsequent to March 31, 1996 will be included in the Form 10-Q's
(quarterly) and Form 10-K's (annually) subsequently filed by Citicorp with the
Securities and Exchange Commission (the "SEC"), which will be filed not later
than 45 days after the end of the calendar quarter or 90 days after the end of
the calendar year to which the report relates. For further information regarding
Citibank, reference is made to the March 1996 10-Q and to any subsequent reports
on Forms 10-K, 10-Q or 8-K filed by Citicorp with the SEC, which are
incorporated herein by reference. All such reports are available from the SEC,
450 Fifth Street, NW, Washington, D.C. 20549 at prescribed rates.
The information set forth herein concerning the Mortgage Loan Seller has
been provided by the Mortgage Loan Seller, and the Sponsor makes no
representation or warranty as to the accuracy or completeness of such
information.
ASSIGNMENT OF THE MORTGAGE LOANS; REPURCHASES
On or prior to the Delivery Date, at the direction of the Sponsor, the
Mortgage Loan Seller will transfer the Mortgage Loans, without recourse, to the
Trustee for the benefit of the Certificateholders. In connection with such
assignment, the Mortgage Loan Seller will be required to deliver the following
documents, among others, to the Trustee with respect to each Mortgage Loan: (a)
the original Mortgage Note, endorsed (without recourse) to the order of Trustee;
(b) the original or a copy of the related Mortgages, together with originals or
copies of any intervening assignments of such documents, in each case with
evidence of recording thereon; (c) the original or a copy of any related
assignments of rents and leases (if such item is a document separate from the
Mortgage), together with originals or copies of any intervening assignments of
such documents, in each case with evidence of recording thereon; (d) an
assignment of each related Mortgage in favor of the Trustee, in recordable form;
(e) an assignment of any related assignment(s) of rents and leases (if such item
is a document separate from the Mortgage) in favor of the Trustee, in recordable
form; (f) an original or copy of the related lender's title insurance policy
(or, if a title insurance policy has not yet been issued, a commitment for title
insurance "marked-up" at the closing of such Mortgage Loan); (g) if still
effective and in the possession of the Mortgage Loan Seller, a copy of any
related UCC-1 financing statement, together with any related continuation
statements and UCC-2 or UCC-3 assignments; and (h) in the case of four Mortgage
Loans, the related ground lease.
The Trustee will be required to review the documents delivered thereto by
the Mortgage Loan Seller with respect to each Mortgage Loan within a specified
period following such delivery, and the Trustee will hold the related documents
in trust. If it is found during the course of such review or at any other time
that any of the above-described documents was not delivered with respect to any
Mortgage Loan or that any such document is defective, and in either case such
omission or defect materially and adversely affects the value of the related
Mortgage Loan or the interests of Certificateholders therein, and if the
Mortgage Loan Seller cannot deliver the document or cure the defect within a
period of 120 days following its receipt of notice of such omission or defect,
then, except as otherwise provided below, the Mortgage Loan Seller will be
obligated to repurchase (or cause an affiliate to purchase) the affected
Mortgage Loan within such 120-day period at a price (the "Purchase Price")
generally equal to the unpaid principal balance of such Mortgage Loan together
with any accrued but unpaid interest thereon, and any servicing expenses and
advances that are reimbursable to the Master Servicer, the Special Servicer or
the Trustee. This cure/repurchase obligation will constitute the sole remedy
available to the Certificateholders for any failure on the part of the Mortgage
Loan Seller to deliver any of the above-described documents with respect to any
Mortgage Loan or for any defect in any such document, and neither the Sponsor
nor any of its other affiliates will be obligated to repurchase the affected
Mortgage Loan if the Mortgage Loan Seller defaults on its obligation to do so.
Notwithstanding the foregoing, if any of the
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above-described documents is not delivered with respect to any Mortgage Loan
because it has been submitted for recording, and neither such document nor a
copy thereof, in either case with evidence of recording thereon, can be obtained
because of delays on the part of the applicable recording office, then the
Mortgage Loan Seller will not be required to repurchase (or cause an affiliate
to purchase) the affected Mortgage Loan on the basis of such missing document so
long as it continues in good faith to obtain such document or such copy.
The Pooling Agreement will require the Master Servicer to cause within a
specified number of days following the Delivery Date the assignments in favor of
the Trustee with respect to each Mortgage Loan described in clauses (d) and (e)
of the second preceding paragraph to be submitted for recording in the real
property records of the appropriate jurisdictions. See "Description of the
Pooling Agreements--Assignment of Mortgage Loans; Repurchases" in the
Prospectus.
REPRESENTATIONS AND WARRANTIES; REPURCHASES
In the Pooling Agreement, the Mortgage Loan Seller will be required to
represent and warrant with respect to each Mortgage Loan as of the Delivery Date
or as of such other date specifically provided in the related representation or
warranty, among other things, substantially to the effect that: (i) the
information set forth in the schedule of Mortgage Loans (the "Mortgage Loan
Schedule") attached to the Pooling Agreement (which will contain a limited
portion of the information set forth in Annex A) is true and correct in all
material respects as of the Cut-off Date; (ii) the Mortgage for each Mortgage
Loan is a valid first lien on the related Mortgaged Property subject only to (A)
the lien of current real estate taxes and assessments not yet due and payable,
(B) covenants, conditions and restrictions, rights of way, easements and other
matters of public record, and (C) exceptions and exclusions specifically
referred to in the related lender's title insurance policy (the exceptions set
forth in the foregoing clauses (A), (B) and (C) collectively, "Permitted
Encumbrances"); (iii) immediately prior to the transfer thereof to the Trustee,
the Mortgage Loan Seller had good and marketable title to, and was the sole
owner and holder of, each Mortgage Loan and had full right and authority to
sell, assign and transfer each Mortgage Loan; (iv) the Mortgage and Mortgage
Note for each Mortgage Loan and all other documents to which the related
borrower is a party and which evidence or secure such Mortgage Loan, are the
legal, valid and binding obligations of the related borrower (subject to any
non-recourse provisions contained in any of the foregoing agreements and any
applicable state anti-deficiency legislation), enforceable in accordance with
their respective terms, except as such enforcement may be limited by bankruptcy,
insolvency, reorganization, receivership, moratorium or other laws relating to
or affecting the rights of creditors generally and by general principles of
equity regardless of whether such enforcement is considered in a proceeding in
equity or at law; (v) no Mortgage Loan was, as of the Cut-off Date, 30 days or
more delinquent in respect of any Monthly Payment, without giving effect to any
applicable grace period; (vi) there is no valid offset, defense or counterclaim
to any Mortgage Loan; (vii) the Mortgage Loan Seller has not waived any material
default, breach, violation or event of acceleration existing under any Mortgage
or Mortgage Note; (viii) the Mortgage Loan Seller has not received actual notice
that (a) there is any proceeding pending or threatened for the total or partial
condemnation of any Mortgaged Property that materially and adversely affects the
value of such Mortgaged Property, or (b) there is any material damage at any
Mortgaged Property; (ix) all insurance coverage required under the Mortgage for
each Mortgage Loan is in full force and effect with respect to the related
Mortgaged Property; (x) at origination and as of the Delivery Date, each
Mortgage Loan complied in all material respects with all requirements of federal
and state law, including those requirements pertaining to usury, relating to the
origination of such Mortgage Loan; (xi) since January 1, 1994, one or more
environmental site assessments (or an update of a previously conducted
assessment) has been performed with respect to each Mortgaged Property and the
Mortgage Loan Seller, having made no independent inquiry other than reviewing or
employing an environmental consultant to perform the assessments referenced
herein, has no knowledge of any material and adverse environmental condition or
circumstance affecting such Mortgaged Property that was not disclosed in the
related report(s), and the statements set forth above under the caption
"Environmental Assessments" are true and correct; (xii) the lien of each
Mortgage is insured by a title insurance policy issued by a nationally
recognized title insurance company that insures the originator, its successors
and assigns, as to the first priority lien of such Mortgage in the original
principal amount of the related Mortgage Loan after all advances of principal,
subject only to Permitted Encumbrances (or, if a title insurance policy has not
yet been issued in respect of any Mortgage Loan, a policy meeting the foregoing
description is evidenced by a commitment for title insurance "marked-up" at the
closing of such loan); (xiii) the proceeds of each Mortgage Loan have been fully
disbursed, and there is no requirement for future advances thereunder; (xiv) the
terms of the Mortgage Note and the Mortgage for each Mortgage Loan have not been
impaired, waived, altered or modified in any material respect, except as
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specifically set forth in the related Mortgage File; (xv) there are no
delinquent taxes, ground rents, water charges, sewer rents, insurance premiums,
assessments, including assessments payable in future installments, or other
similar outstanding charges affecting the related Mortgaged Property; and (xvi)
except for the Mortgaged Properties securing four of the Mortgage Loans, which
consist of leasehold estates, each Mortgaged Property consists of a fee simple
estate in real property.
If the Mortgage Loan Seller discovers or is notified of a breach of any of
the foregoing representations and warranties, which breach materially and
adversely affects the value of any Mortgage Loan or the interests of
Certificateholders therein, and if the Mortgage Loan Seller cannot cure such
breach within a period of 120 days following its discovery or receipt of notice
of such breach, then the Mortgage Loan Seller will be obligated to repurchase
(or cause an affiliate to purchase) the affected Mortgage Loan within such
120-day period at the applicable Purchase Price.
The foregoing cure/repurchase obligation will constitute the sole remedy
available to the Certificateholders for any breach of any of the foregoing
representations and warranties, and neither the Sponsor nor any of its other
affiliates will be obligated to repurchase any affected Mortgage Loan in
connection with a breach of such representations and warranties if the Mortgage
Loan Seller defaults on its obligation to do so. The Mortgage Loan Seller will
be the sole Warranting Party (as defined in the Prospectus) in respect of the
Mortgage Loans. See "Description of the Pooling Agreements--Representations and
Warranties; Repurchases" in the Prospectus.
CHANGES IN MORTGAGE POOL CHARACTERISTICS
The description in this Prospectus Supplement of the Mortgage Pool and the
Mortgaged Properties is based upon the Mortgage Pool as expected to be
constituted at the time the Offered Certificates are issued, as adjusted for the
scheduled principal payments due on the Mortgage Loans on or before the Cut-off
Date. Prior to the issuance of the Offered Certificates, a Mortgage Loan may be
removed from the Mortgage Pool if the Sponsor deems such removal necessary or
appropriate or if it is prepaid. A limited number of other mortgage loans may be
included in the Mortgage Pool prior to the issuance of the Offered Certificates,
unless including such Mortgage Loans would materially alter the characteristics
of the Mortgage Pool as described herein. The Sponsor believes that the
information set forth herein will be representative of the characteristics of
the Mortgage Pool as it will be constituted at the time the Offered Certificates
are issued, although the range of Mortgage Rates and maturities, as well as the
other characteristics of the Mortgage Loans described herein, may vary.
A Current Report on Form 8-K (the "Form 8-K") will be available to
purchasers of the Offered Certificates on or shortly after the Delivery Date and
will be filed, together with the Pooling Agreement, with the SEC within fifteen
days after the initial issuance of the Offered Certificates. In the event
Mortgage Loans are removed from or added to the Mortgage Pool as set forth in
the preceding paragraph, such removal or addition will be noted in the Form 8-K.
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SERVICING OF THE MORTGAGE LOANS
GENERAL
The Master Servicer and the Special Servicer, either directly or through
sub-servicers, will each be required to service and administer the Mortgage
Loans for which it is responsible, in the best interests and for the benefit of
the Certificateholders, in accordance with any and all applicable laws, the
terms of the Pooling Agreement, related insurance policies and the respective
Mortgage Loans and, to the extent consistent with the foregoing, the following
standard (the "Servicing Standard"): the higher of (1) the same care, skill and
diligence with which prudent institutional commercial mortgage lenders and loan
servicers service comparable mortgage loans and (2) the same care, skill,
prudence and diligence with which the Master Servicer or Special Servicer, as
the case may be, generally services comparable mortgage loans owned by it, and
with a view to the timely collection of all scheduled payments of principal and
interest under the Mortgage Loans or, if a Mortgage Loan comes into and
continues in default and no satisfactory arrangements can be made for the
collection of the delinquent payments, to the maximization of the recovery on
the Mortgage Loan to Certificateholders on a present value basis, but without
regard to (i) any relationship that the Master Servicer or the Special Servicer,
as the case may be, or any affiliate thereof may have with the related borrower;
(ii) the ownership of any Certificate by the Master Servicer or the Special
Servicer, as the case may be, or any affiliate thereof; (iii) the Master
Servicer's obligation to make Advances (as defined herein); (iv) the Special
Servicer's obligation to make (or instruct the Master Servicer to make)
Servicing Advances (as defined herein); and (v) the Master Servicer's or the
Special Servicer's, as the case may be, right to receive compensation for its
services under the Pooling Agreement or with respect to any particular
transaction.
In general, the Master Servicer will be responsible for the servicing and
administration of all the Mortgage Loans as to which no Servicing Transfer Event
(as defined herein) has occurred and all Corrected Mortgage Loans (as defined
herein), and the Special Servicer will be obligated to service and administer
each Mortgage Loan (other than a Corrected Mortgage Loan) as to which a
Servicing Transfer Event has occurred (each, a "Specially Serviced Mortgage
Loan") and each Mortgaged Property acquired in respect of a defaulted Mortgage
Loan on behalf of the Certificateholders through foreclosure, deed-in-lieu of
foreclosure or otherwise (upon acquisition, an "REO Property"). A "Servicing
Transfer Event" with respect to any Mortgage Loan consists of any of the
following events: (i) the related borrower has failed to make when due any
Balloon Payment, which failure has continued unremedied for 30 days; (ii) the
related borrower has failed to make when due any Monthly Payment (other than a
Balloon Payment) or any other payment required under the related Mortgage Note
or the related Mortgage, which failure continues unremedied for 60 days; (iii)
the Master Servicer has determined in its good faith and reasonable judgment,
that a default in the making a Monthly Payment or any other payment required
under the related Mortgage Note or the related Mortgage is likely to occur
within 30 days and is likely to remain unremedied for at least 60 days or, in
the case of a Balloon Payment, for at least 30 days; (iv) there shall have
occurred a default under the related loan documents, other than as described in
clause (i) or (ii) above, that materially impairs the value of the related
Mortgaged Property as security for the Mortgage Loan or otherwise materially and
adversely affects the interests of Certificateholders, which default has
continued unremedied for the applicable grace period under the terms of the
Mortgage Loan (or, if no grace period is specified, 60 days); (v) a decree or
order of a court or agency or supervisory authority having jurisdiction in the
premises in an involuntary case under any present or future federal or state
bankruptcy, insolvency or similar law or the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of debt, marshalling of
assets and liabilities or similar proceedings, or for the winding-up or
liquidation of its affairs, shall have been entered against the related borrower
and such decree or order shall have remained in force undischarged or unstayed
for a period of 60 days; (vi) the related borrower shall have consented to the
appointment of a conservator or receiver or liquidator in any insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings of or relating to such borrower or of or relating to all or
substantially all of its property; (vii) the related borrower shall have
admitted in writing its inability to pay its debts generally as they become due,
filed a petition to take advantage of any applicable insolvency or
reorganization statute, made an assignment for the benefit of its creditors, or
voluntarily suspended payment of its obligations; and (viii) the Master Servicer
shall have received notice of the commencement of foreclosure or similar
proceedings with respect to the related Mortgaged Property. The Master Servicer
shall continue to collect information and prepare all reports to the Trustee
required under the Pooling Agreement with respect to any Specially Serviced
Mortgage Loans and REO Properties, and further to render incidental services
with respect to any Specially Serviced Mortgage Loans and REO Properties as are
specifically provided for in the Pooling Agreement. Neither the Master Servicer
nor the Special Servicer shall have any responsibility for the performance by
the other of its duties under the Pooling Agreement.
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A Mortgage Loan will cease to be a Specially Serviced Mortgage Loan (and
will become a "Corrected Mortgage Loan" as to which the Master Servicer will
re-assume servicing responsibilities) at such time as such of the following as
are applicable occur with respect to the circumstances identified above that
caused the Mortgage Loan to be characterized as a Specially Serviced Mortgage
Loan (and provided that no other Servicing Transfer Event then exists):
(w) with respect to the circumstances described in clauses (i) and
(ii) of the preceding paragraph, the related borrower has made three
consecutive full and timely Monthly Payments under the terms of such
Mortgage Loan (as such terms may be changed or modified in connection with
a bankruptcy or similar proceeding involving the related borrower or by
reason of a modification, waiver or amendment granted or agreed to by the
Special Servicer);
(x) with respect to the circumstances described in clauses (iii), (v),
(vi) and (vii) of the preceding paragraph, such circumstances cease to
exist in the reasonable good faith judgment of the Special Servicer;
(y) with respect to the circumstances described in clause (iv) of the
preceding paragraph, such default is cured; and
(z) with respect to the circumstances described in clause (viii) of
the preceding paragraph, such proceedings are terminated.
The Master Servicer and Special Servicer will each be required to service
and administer the respective groups of related Cross-Collateralized Mortgage
Loans as a single Mortgage Loan as and when it deems necessary and appropriate,
consistent with the Servicing Standard. If any Cross-Collateralized Mortgage
Loan becomes a Specially Serviced Mortgage Loan, then each other Mortgage Loan
that is cross-collateralized with it shall also become a Specially Serviced
Mortgage Loan. Similarly, no Cross-Collateralized Mortgage Loan shall
subsequently become a Corrected Mortgage Loan, unless and until all Servicing
Transfer Events in respect of each other Mortgage Loan that is
cross-collateralized with it, are remediated or otherwise addressed as
contemplated above.
Set forth below is a description of certain pertinent provisions of the
Pooling Agreement relating to the servicing of the Mortgage Loans. Reference is
also made to the Prospectus, in particular to the section captioned "Description
of the Pooling Agreements", for important information in addition to that set
forth herein regarding the terms and conditions of the Pooling Agreement as such
terms and conditions relate to the rights and obligations of the Master Servicer
and the Special Servicer thereunder.
THE MASTER SERVICER
The following information has been provided by GMAC Commercial Mortgage
Corporation, a California corporation (the "Master Servicer"). None of the
Sponsor, the Underwriters, the Trustee, the REMIC Administrator, the Special
Servicer or any of their respective affiliates takes any responsibility therefor
or makes any representation or warranty as to the accuracy or completeness
thereof.
The principal servicing offices of the Master Servicer are located at 650
Dresher Road, Horsham, Pennsylvania 19044. As of May 31, 1996, the Master
Servicer had a net worth of approximately $36.7 million and was the servicer of
a portfolio of multifamily and commercial mortgage loans, secured by properties
located in 50 states and totalling approximately $18.3 billion in aggregate
outstanding principal amounts.
THE SPECIAL SERVICER
The following information has been provided by Hanford Healy Asset
Management Company, a California general partnership (the "Special Servicer").
None of the Sponsor, the Underwriters, the Trustee, the REMIC Administrator, the
Master Servicer or any of their respective affiliates takes any responsibility
therefor or makes any representation or warranty as to the accuracy or
completeness of such information.
The Special Servicer is a privately owned company whose principal
headquarters offices are located in San Francisco, California. The Special
Servicer is part of The Hanford/Healy Companies, a diversified real estate
services firm which provides real estate asset management, valuation, consulting
and research services to a broad range of clients, including investment banks,
commercial banks, insurance companies, pension funds and their advisers, and
governmental agencies. The Hanford/Healy Companies and their affiliates employ
over 100 real estate personnel,
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including more than 50 dedicated to asset management activities. In
addition to its San Francisco headquarters office, the Hanford/Healy Companies
have offices in Newport Beach, California; Portland, Oregon; Phoenix, Arizona;
and Tampa, Florida. Since inception, the Special Servicer has managed commercial
mortgage loan and real estate portfolios in excess of $4 billion throughout 35
states and the District of Columbia and currently manages assets with an
aggregate book value of approximately $1.4 billion.
Notwithstanding the discussion in the Prospectus under "Description of the
Pooling Agreements--Evidence as to Compliance", the Special Servicer will
deliver an annual accountants' report only if, and in such form as may be,
required by the Rating Agencies.
SUB-SERVICERS
The Master Servicer and Special Servicer may each delegate its servicing
obligations in respect of the Mortgage Loans serviced thereby to one or more
third-party servicers (each, a "Sub-Servicer"); provided that the Master
Servicer or Special Servicer, as the case may be, will remain obligated under
the Pooling Agreement for such delegated duties. Each sub-servicing agreement
between the Master Servicer or Special Servicer, as the case may be, and a
Sub-Servicer (each, a "Sub-Servicing Agreement") must provide that, if for any
reason the Master Servicer or Special Servicer, as the case may be, is no longer
acting in such capacity, the Trustee or any successor to such Master Servicer or
Special Servicer may assume such party's rights and obligations under such
Sub-Servicing Agreement or may terminate such Sub-Servicer without paying any
fee. The Master Servicer and Special Servicer will each be required to monitor
the performance of Sub-Servicers retained by it.
The Master Servicer and Special Servicer will each be solely liable for all
fees owed by it to any Sub-Servicer retained thereby, irrespective of whether
its compensation pursuant to the Pooling Agreement is sufficient to pay such
fees. Each Sub-Servicer retained thereby will be reimbursed by the Master
Servicer or Special Servicer, as the case may be, for certain expenditures which
it makes, generally to the same extent the Master Servicer or Special Servicer
would be reimbursed under the Pooling Agreement. See "--Servicing and Other
Compensation and Payment of Expenses" herein.
SERVICING AND OTHER COMPENSATION AND PAYMENT OF EXPENSES
The principal compensation to be paid to the Master Servicer in respect of
its master servicing activities will be the Master Servicing Fee. The "Master
Servicing Fee" will be payable monthly on a loan-by-loan basis from amounts
received in respect of interest on each Mortgage Loan (including Specially
Serviced Mortgage Loans and Mortgage Loans as to which the related Mortgaged
Property has become an REO Property), will accrue at the applicable Master
Servicing Fee Rate and will be computed on the basis of the same principal
amount and for the same period respecting which any related interest payment on
the related Mortgage Loan is computed. The "Master Servicing Fee Rate" will
range from 0.14% to 2.005% per annum, on a loan by loan basis, with a weighted
average Master Servicing Fee Rate of 0.224% per annum as of the Cut-off Date.
The Master Servicing Fee Rate with respect to each Mortgage Loan is set forth in
Annex A hereto. As additional servicing compensation, the Master Servicer will
be entitled to retain all assumption and modification fees, late payment
charges, charges for beneficiary statements or demands, amounts collected for
checks returned for insufficient funds and any similar fees, in each case to the
extent actually paid by a borrower with respect to a Mortgage Loan that is not a
Specially Serviced Mortgage Loan. The Master Servicer will also be entitled to:
(a) Prepayment Interest Excesses and Balloon Payment Interest Excesses (each
described below) collected on the Mortgage Loans; and (b) any default interest
actually collected on the Mortgage Loans, but only to the extent that (i) such
default interest is allocable to the period (not to exceed 60 days) when the
related Mortgage Loan did not constitute a Specially Serviced Mortgage Loan or
REO Property and (ii) such default interest is not allocable to pay any portion
of a Workout Fee or Liquidation Fee (each as defined below) payable to the
Special Servicer with respect to the related Mortgage Loan or to cover interest
payable to the Master Servicer, the Special Servicer or the Trustee with respect
to any Advances made in respect of the related Mortgage Loan. In addition, the
Master Servicer will be authorized to invest or direct the investment of funds
held in any and all accounts maintained by it or the Trustee that constitute
part of the Certificate Account, in certain government securities and other
investment grade obligations specified in the Pooling Agreement ("Permitted
Investments"), and the Master Servicer will be entitled to retain any interest
or other income earned on such funds, but will be required to cover any losses
from its own funds without any right to reimbursement.
If a borrower prepays a Mortgage Loan, in whole or in part, after the Due
Date but before the Determination Date in any calendar month, the amount of
interest (net of related Master Servicing Fees) accrued on such prepayment from
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such Due Date to, but not including, the date of prepayment (or any later date
through which interest accrues) will, to the extent actually collected,
constitute a "Prepayment Interest Excess". Conversely, if a borrower prepays a
Mortgage Loan, in whole or in part, after the Determination Date in any calendar
month and does not pay interest on such prepayment through the end of such
calendar month, then the shortfall in a full month's interest (net of related
Master Servicing Fees) on such prepayment will constitute a "Prepayment Interest
Shortfall". Similarly, if the Due Date for any Balloon Payment occurs after the
first day of, but before the Determination Date in, any calendar month, the
amount of interest (net of related Master Servicing Fees) accrued on the related
Balloon Loan from the beginning of such month to the maturity date will, to the
extent actually collected in connection with the payment of such Balloon Payment
on or before such Determination Date, constitute a "Balloon Payment Interest
Excess". Conversely, if the Due Date for any Balloon Payment occurs after the
Determination Date in any calendar month, the amount of interest (net of related
Master Servicing Fees) that would have accrued on the related Balloon Loan from
the stated maturity date through the end of such calendar month will, to the
extent not paid by the borrower, constitute a "Balloon Payment Interest
Shortfall". Prepayment Interest Excesses and Balloon Payment Interest Excesses
collected on the Mortgage Loans will be retained by the Master Servicer as
additional servicing compensation. The Master Servicer will cover, out of its
own funds, any Balloon Payment Interest Shortfalls incurred with respect to the
Mortgage Loans. The Master Servicer will not so cover Prepayment Interest
Shortfalls incurred with respect to the Mortgage Loans. Any such Prepayment
Interest Shortfalls will be allocated among the respective classes of REMIC
Regular Certificates, in reduction of Distributable Certificate Interest, as
described herein.
The principal compensation to be paid to the Special Servicer in respect of
its special servicing activities will be the Standby Fee, the Special Servicing
Fee and the Workout Fee. The "Standby Fee" will accrue with respect to each
Mortgage Loan (including a Specially Serviced Mortgage Loan and a Mortgage Loan
as to which the related Mortgaged Property has become an REO Property) in the
same manner as the Master Servicing Fee (but at a rate of .005% per annum), and
will be payable by the Master Servicer out of its Master Servicing Fees with
respect to such Mortgage Loan. The "Special Servicing Fee" will accrue with
respect to each Specially Serviced Mortgage Loan and each Mortgage Loan as to
which the related Mortgaged Property has become an REO Property, at a rate equal
to 0.250% per annum (the "Special Servicing Fee Rate") on the basis of the same
principal amount and for the same period respecting which any related interest
payment due or deemed due on such Mortgage Loan is computed, and will be payable
monthly from general collections on the Mortgage Loans and any REO Properties
held by the Master Servicer from time to time. A "Workout Fee" will in general
be payable with respect to each Corrected Mortgage Loan. As to each Corrected
Mortgage Loan, the Workout Fee will be payable out of, and will be calculated by
application of a "Workout Fee Rate" of 1.0% to, each collection of interest and
principal (including scheduled payments, prepayments, Balloon Payments and
payments at maturity) received on such Mortgage Loan for so long as it remains a
Corrected Mortgage Loan. The Workout Fee with respect to any Corrected Mortgage
Loan will cease to be payable if such loan again becomes a Specially Serviced
Mortgage Loan or if the related Mortgaged Property becomes an REO Property;
provided that a new Workout Fee will become payable if and when such Mortgage
Loan again becomes a Corrected Mortgage Loan. If the Special Servicer is
terminated (other than for cause) or resigns, it shall retain the right to
receive any and all Workout Fees payable with respect to Mortgage Loans that
became Corrected Mortgage Loans during the period that it acted as Special
Servicer and were still such at the time of such termination or resignation (and
the successor Special Servicer shall not be entitled to any portion of such
Workout Fees), in each case until the Workout Fee for any such loan ceases to be
payable in accordance with the preceding sentence. A "Liquidation Fee" will be
payable with respect to each Specially Serviced Mortgage Loan as to which the
Special Servicer obtains a full or discounted payoff with respect thereto from
the related borrower and, except as otherwise described below,with respect to
any Specially Serviced Mortgage Loan or REO Property as to which the Special
Services receives any Liquidation Proceeds. As to each such Specially Serviced
Mortgage Loan and REO Property, the Liquidation Fee will be payable from, and
will be calculated by application of a "Liquidation Fee Rate" of 1.0% to, the
related payment or proceeds. Notwithstanding anything to the contrary described
above, no Liquidation Fee will be payable based on, or out of, Liquidation
Proceeds received in connection with the repurchase of any Mortgage Loan by the
Mortgage Loan Seller for a breach of representation or warranty or for defective
or deficient Mortgage Loan documentation so long as such repurchase occurs
within 120 days of the Mortgage Loan Seller's notice or discovery of such
breach, defect or deficiency, the purchase of any Specially Serviced Mortgage
Loan or REO Property by the Master Servicer or the Special Servicer or the
purchase of all of the Mortgage Loans and REO Properties by the Master Servicer
or any holder of a majority interest in the Controlling Class in connection with
the termination of the Trust Fund. If, however, Liquidation Proceeds are
received with respect to any Corrected
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Mortgage Loan and the Special Servicer is properly entitled to a Workout Fee,
such Workout Fee will be payable based on and out of the portion of such
Liquidation Proceeds that constitute principal and/or interest. The Special
Servicer will be entitled to additional servicing compensation in the form of
late payment charges, assumption fees and modification fees received on or with
respect to Specially Serviced Mortgage Loans. The Special Servicer will also be
entitled to any default interest actually collected on the Mortgage Loans, but
only to the extent that (i) such default interest is not allocable to pay any
portion of a Workout Fee or Liquidation Fee payable to the Special Servicer with
respect to the related Mortgage Loan or to cover interest payable to the Master
Servicer, the Special Servicer or the Trustee with respect to any Advances made
in respect of the related Mortgage Loan and (ii) such default interest is not
otherwise payable to the Master Servicer as additional servicing compensation.
In addition, the Special Servicer will be authorized to invest or direct the
investment of funds held in any accounts maintained by it that constitute part
of the Certificate Account, in Permitted Investments, and the Special Servicer
will be entitled to retain any interest or other income earned on such funds,
but will be required to cover any losses from its own funds without any right to
reimbursement.
The Master Servicer and the Special Servicer will, in general, each be
required to pay its overhead and any general and administrative expenses
incurred by it in connection with its servicing activities under the Pooling
Agreement, including the fees of any Sub-Servicers retained by it, and will not
be entitled to reimbursement therefor except as expressly provided in the
Pooling Agreement. In general, customary, reasonable and necessary "out of
pocket" costs and expenses required to be incurred by the Master Servicer or
Special Servicer in connection with the servicing of a Mortgage Loan after a
default, delinquency or other unanticipated event, or in connection with the
administration of any REO Property, will constitute "Servicing Advances"
(Servicing Advances and P&I Advances, collectively, "Advances") and, in all
cases, will be reimbursable from future payments and other collections,
including in the form of Insurance Proceeds, Condemnation Proceeds and
Liquidation Proceeds, on or in respect of the related Mortgage Loan or REO
Property ("Related Proceeds"). Notwithstanding the foregoing, the Master
Servicer and the Special Servicer will each be permitted to pay, or to direct
the payment of, certain servicing expenses directly out of the Certificate
Account and at times without regard to the relationship between the expense and
the funds from which it is being paid (including in connection with the
remediation of any adverse environmental circumstance or condition at a
Mortgaged Property or an REO Property). In addition, the Special Servicer may
from time to time require the Master Servicer to reimburse it for any Servicing
Advance made thereby (in which case, such Servicing Advance will be deemed to
have been made by the Master Servicer). Furthermore, if the Special Servicer is
required under the Pooling Agreement to make any Servicing Advance but does not
desire to do so, the Special Servicer may, in its sole discretion, request that
the Master Servicer make such Advance, such request to be made in writing and in
a timely manner that does not adversely affect the interests of any
Certificateholder; provided, however, that the Special Servicer will have an
obligation to make any such Servicing Advance that is necessary to avoid (i) a
penalty, (ii) material harm to a Mortgaged Property or (iii) any other material
adverse consequence to the Trust Fund (an "Emergency Advance"). The Master
Servicer shall make any such Servicing Advance (other than an Emergency Advance)
that it is requested by the Special Servicer to so make within ten (10) days of
the Master Servicer's receipt of such request. The Special Servicer shall be
relieved of any obligations with respect to an Advance that it requests the
Master Servicer to make (regardless of whether or not the Master Servicer makes
that Advance), other than an Emergency Advance.
If the Master Servicer or Special Servicer is required under the Pooling
Agreement to make a Servicing Advance, but neither does so within 15 days after
such Servicing Advance is required to be made, then the Trustee will, if it has
actual knowledge of such failure, be required to give the defaulting party
notice of such failure and, if such failure continues for three more days, the
Trustee will be required to make such Servicing Advance.
The Master Servicer, the Special Servicer and the Trustee will be obligated
to make Servicing Advances only to the extent that such Servicing Advances are,
in the reasonable good faith judgment of the Master Servicer, the Special
Servicer or the Trustee, as the case may be, ultimately recoverable from Related
Proceeds.
As and to the extent described herein, the Master Servicer, the Special
Servicer and the Trustee are each entitled to receive interest on Servicing
Advances made thereby. See "Description of the Pooling Agreements--Certificate
Account" and "--Servicing Compensation and Payment of Expenses" in the
Prospectus and "Description of the Certificates--P&I Advances" herein.
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THE EXTENSION ADVISER
Election of the Extension Adviser. The holder or holders of Offered
Certificates with an aggregate principal balance equal to more than 50% of the
aggregate Certificate Balance of all the Offered Certificates with Certificate
Balances (exclusive, if applicable, of the Controlling Class (as defined below)
and any Class of Offered Certificates subordinate to the Controlling Class) will
be entitled to elect (i) an adviser (the "Extension Adviser") from whom the
Special Servicer will seek approval as described below and/or (ii) replace an
existing Extension Adviser. Upon (i) the receipt by the Trustee of written
requests for an election of an Extension Adviser from the holders of Offered
Certificates with an aggregate principal balance representing more than 50% of
the aggregate Certificate Balance of all the Offered Certificates with
Certificate Balances (exclusive, if applicable, of the Controlling Class and any
Class of Offered Certificates subordinate to the Controlling Class), or (ii) the
resignation or removal of the person acting as Extension Adviser, an election of
an Extension Adviser will be held commencing as soon as practicable thereafter.
Any Extension Adviser may be removed at any time by the written vote of holders
of Offered Certificates with an aggregate principal balance representing more
than 50% of the aggregate Certificate Balance of all the Offered Certificates
with Certificate Balances (exclusive, if applicable, of the Controlling Class
and any Class of Offered Certificates subordinate to the Controlling Class). The
Master Servicer will act as the initial Extension Adviser until removed or
replaced as described above.
Duties of the Extension Adviser. If any person or entity has been elected
and is serving as Extension Adviser, then the Special Servicer will not be
permitted to grant any extension of the maturity of a Specially Serviced
Mortgage Loan beyond the third anniversary of such loan's stated maturity date
if such Extension Adviser has objected to such action in writing within ten days
of its receiving from the Special Servicer written notice thereof and sufficient
information to make an informed decision (provided that if such written
objection has not been received by the Special Servicer within such ten-day
period, then such Extension Adviser's approval will be deemed to have been
given). In addition, the Extension Adviser will confirm to its reasonable
satisfaction that all conditions precedent to granting any such extension have
been satisfied. See "--Modifications, Waivers and Amendments" below.
Limitation on Liability of Extension Adviser. The Extension Adviser will be
acting solely as representative of the interests of the Certificateholders
entitled to vote in the election thereof, and will have no liability to the
Trust Fund or the Certificateholders for any action taken, or for refraining
from the taking of any action, in good faith pursuant to the Pooling Agreement,
or for errors in judgment. By its acceptance of a Certificate, each
Certificateholder confirms its understanding that the Extension Adviser may take
actions that favor the interests of one or more Classes of the Certificates over
other Classes of the Certificates, and that the Extension Adviser may have
special relationships and interests that conflict with those of holders of some
Classes of the Certificates and agrees to take no action against the Extension
Adviser or any of its officers, directors, employees, principals or agents as a
result of such a special relationship or conflict.
Limitation on Liability of the Master Servicer and the Special Servicer.
The Master Servicer and the Special Servicer will be entitled to the same
limitations on liability when acting in accordance with a direction or approval
or refraining from acting in accordance with a direction or objection of the
Extension Adviser as it would if such direction, approval or objection, as the
case may be, were an express term of the Pooling Agreement.
Compensation of the Extension Adviser. The Pooling and Servicing Agreement
will not provide for any compensation to be paid to the Extension Adviser out of
the Trust Fund.
MODIFICATIONS, WAIVERS, AMENDMENTS AND CONSENTS
The Master Servicer and the Special Servicer each may, consistent with the
Servicing Standard, agree to any modification, waiver or amendment of any term
of, forgive interest on and principal of, capitalize interest on, permit the
release, addition or substitution of collateral securing, and/or permit the
release of the borrower on or any guarantor of any Mortgage Loan it is required
to service and administer, without the consent of the Trustee or, except as
contemplated by clause (ii) below, any Certificateholder, subject, however, to
each of the following limitations, conditions and restrictions:
(i) with limited exception, the Master Servicer may not agree to any
modification, waiver or amendment of any term of, or take any of the other
above referenced actions with respect to, any Mortgage Loan it is required
to service and administer that would affect the amount or timing of any
related payment of principal, interest or other amount payable thereunder
or, in the Master Servicer's good faith and reasonable judgment, would
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materially impair the security for such Mortgage Loan or reduce the
likelihood of timely payment of amounts due thereon; however, the Special
Servicer may agree to any modification, waiver or amendment of any term of,
or take any of the other above referenced actions with respect to, a
Specially Serviced Mortgage Loan that would have any such effect, but only
if a material default on such Mortgage Loan has occurred or, in the Special
Servicer's reasonable and good faith judgment, a default in respect of
payment on such Mortgage Loan is reasonably foreseeable, and such
modification, waiver, amendment or other action is reasonably likely to
produce a greater recovery to Certificateholders on a present value basis
than would liquidation;
(ii) if any person or entity has been selected and is serving as
Extension Adviser, the Special Servicer may not extend the date on which
any Balloon Payment is scheduled to be due on any Specially Serviced
Mortgage Loan beyond the third anniversary of such loan's stated maturity
date unless such Extension Adviser has approved or is deemed to have
approved such extension;
(iii) neither the Master Servicer nor the Special Servicer shall make
or permit any modification, waiver or amendment of any term of, or take any
of the other above referenced actions with respect to, any Mortgage Loan
that would (A) cause any of REMIC I, REMIC II or REMIC III to fail to
qualify as a REMIC under the Code or, except as otherwise described under
"--REO Properties" below, result in the imposition of any tax on
"prohibited transactions" or "contributions" after the startup date of any
such REMIC under the REMIC Provisions or (B) cause any Mortgage Loan to
cease to be a "qualified mortgage" within the meaning of Section 860G(a)(3)
of the Code (neither the Master Servicer nor the Special Servicer shall be
liable for judgments as regards decisions made under this subsection which
were made in good faith and, unless it would constitute bad faith or gross
negligence to do so, each of the Master Servicer and the Special Servicer
may rely on opinions of counsel in making such decisions);
(iv) neither the Master Servicer nor the Special Servicer shall permit
any borrower to add or substitute any collateral for an outstanding
Mortgage Loan, which collateral constitutes real property, unless the
Master Servicer or the Special Servicer, as the case may be, shall have
first determined in accordance with the Servicing Standard, based upon a
Phase I environmental assessment (and such additional environmental testing
as the Master Servicer or Special Servicer, as the case may be, deems
necessary and appropriate), that such additional or substitute collateral
is in compliance with applicable environmental laws and regulations and
that there are no circumstances or conditions present with respect to such
new collateral relating to the use, management or disposal of any hazardous
materials for which investigation, testing, monitoring, containment,
clean-up or remediation would be required under any then applicable
environmental laws and/or regulations; and
(v) with limited exceptions, neither the Master Servicer nor the
Special Servicer shall release or substitute any collateral securing an
outstanding Mortgage Loan;
provided that (x) the limitations, conditions and restrictions set forth in
clauses (i) through (v) above will not apply to any modification of any term of
any Mortgage Loan that is required under the terms of such Mortgage Loan in
effect on the Delivery Date or that is solely within the control of the related
borrower, and (y) notwithstanding clauses (i) through (v) above, neither the
Master Servicer nor the Special Servicer will be required to oppose the
confirmation of a plan in any bankruptcy or similar proceeding involving a
borrower if in their reasonable and good faith judgment such opposition would
not ultimately prevent the confirmation of such plan or one substantially
similar.
SALE OF DEFAULTED MORTGAGE LOANS
The Pooling Agreement grants to the Master Servicer, the Special Servicer
and any holder of Certificates evidencing a majority interest in the Controlling
Class a right to purchase from the Trust Fund certain defaulted Mortgage Loans
in the priority described below. If the Special Servicer has determined, in its
good faith and reasonable judgment, that any defaulted Mortgage Loan will become
subject of a foreclosure, the Special Servicer will be required to promptly so
notify in writing the Trustee and the Master Servicer, and the Trustee will be
required, within 10 days after receipt of such notice, to notify any holder of
Certificates evidencing a majority interest in the Controlling Class. Such
Certificateholder may, at its option, purchase from the Trust Fund, at a price
equal to the applicable Purchase Price, any such defaulted Mortgage Loan. If
such Certificateholder has not purchased such defaulted Mortgage Loan within 15
days of its having received notice in respect thereof, either the Special
Servicer or the Master Servicer, in that order, may, at its option, purchase
such defaulted Mortgage Loan from the Trust Fund, at a price equal to the
applicable Purchase Price.
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The Special Servicer may offer to sell any such defaulted Mortgage Loan not
otherwise purchased pursuant to the prior paragraph, if and when the Special
Servicer determines, consistent with the Servicing Standard, that such a sale
would be in the best economic interests of the Trust Fund. Such offer is to be
made in a commercially reasonable manner for a period of not less than 10 days.
Unless the Special Servicer determines that acceptance of any offer would not be
in the best economic interests of the Trust Fund, the Special Servicer shall
accept the highest cash offer received from any person that constitutes a fair
price for such Mortgage Loan. Any such sale may be for less than the Purchase
Price. See also "Description of the Pooling Agreements--Realization Upon
Defaulted Mortgage Loans" in the Prospectus.
REO PROPERTIES
If title to any Mortgaged Property is acquired by the Special Servicer on
behalf of the Certificateholders, the Special Servicer, on behalf of such
holders, will be required to sell the Mortgaged Property within two years of
acquisition, unless (i) the Internal Revenue Service grants an extension of time
to sell such property (an "REO Extension") or (ii) the Special Servicer obtains
an opinion of independent counsel generally to the effect that the holding of
the property for more than two years after its acquisition will not result in
the imposition of a tax on the Trust Fund or cause REMIC I, REMIC II or REMIC
III to fail to qualify as a REMIC under the Code. Subject to the foregoing, the
Special Servicer will generally be required to solicit bids for any Mortgaged
Property so acquired in such a manner as will be reasonably likely to realize a
fair price for such property. The Special Servicer may retain an independent
contractor to operate and manage any REO Property; however, the retention of an
independent contractor will not relieve the Special Servicer of its obligations
with respect to such REO Property.
In general, the Special Servicer will be obligated to operate and manage
any Mortgaged Property acquired as REO Property in a manner that would, to the
extent commercially feasible, maximize the Trust Fund's net after-tax proceeds
from such property. After the Special Servicer reviews the operation of such
property and consults with the REMIC Administrator to determine the REMIC
Administrator's federal income tax reporting position with respect to income it
is anticipated that the Trust Fund would derive from such property, the Special
Servicer could determine that it would not be commercially feasible to manage
and operate such property in a manner that would avoid the imposition of a tax
on "net income from foreclosure property" within the meaning of the REMIC
Provisions or a tax on "prohibited transactions" under Section 860F of the Code
(either such tax referred to herein as an "REO Tax"). To the extent that income
the Trust Fund receives from an REO Property is subject to a tax on (i) "net
income from foreclosure property", such income would be subject to federal tax
at the highest marginal corporate tax rate (currently 35%) and (ii) "prohibited
transactions", such income would be subject to federal tax at a 100% rate. The
determination as to whether income from an REO Property would be subject to an
REO Tax will depend on the specific facts and circumstances relating to the
management and operation of each REO Property. Generally, income from an REO
Property that is directly operated by the Special Servicer would be apportioned
and classified as "service" or "non-service" income. The "service" portion of
such income could be subject to federal tax either at the highest marginal
corporate tax rate or at the 100% rate on "prohibited transactions", and the
"non-service" portion of such income could be subject to federal tax at the
highest marginal corporate tax rate or, although it appears unlikely, at the
100% rate applicable to "prohibited transactions". Any REO Tax imposed on the
Trust Fund's income from an REO Property would reduce the amount available for
distribution to Certificateholders. Certificateholders are advised to consult
their own tax advisors regarding the possible imposition of REO Taxes in
connection with the operation of commercial REO Properties by REMICs.
INSPECTIONS; COLLECTION OF OPERATING INFORMATION
The Master Servicer is required to perform physical inspections of each
Mortgaged Property at least once every two years (or, if the related Mortgage
Loan has a then-current balance greater than $5,000,000, at least once every
year). In addition, the Special Servicer, subject to statutory limitations or
limitations set forth in the related loan documents, is required to perform a
physical inspection of each Mortgaged Property as soon as practicable after
servicing of the related Mortgage Loan is transferred thereto. The Special
Servicer and the Master Servicer will each be required to prepare a written
report of each such inspection performed thereby describing the condition of the
Mortgaged Property.
With respect to each Mortgage Loan that requires the borrower to deliver
annual operating statements with respect to the related Mortgaged Porperty, the
Master Servicer or the Special Servicer, depending on which is
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obligated to service such Mortgage Loan, is also required to make reasonable
efforts to collect and review such statements. However, there can be no
assurance that any operating statements required to be delivered will in fact be
delivered, nor is the Master Servicer or the Special Servicer likely to have any
practical means of compelling such delivery in the case of an otherwise
performing Mortgage Loan.
TERMINATION OF THE SPECIAL SERVICER
The holder or holders of a majority interest in the Controlling Class may
at any time replace any Special Servicer. Such holder(s) shall designate a
replacement to so serve by the delivery to the Trustee of a written notice
stating such designation. The Trustee shall, promptly after receiving any such
notice, so notify the Rating Agencies. If the designated replacement is
acceptable to the Trustee, which approval may not be unreasonably withheld, the
designated replacement shall become the Special Servicer as of the date the
Trustee shall have received: (i) written confirmation from both Rating Agencies
stating that if the designated replacement were to serve as Special Servicer
under the Pooling Agreement, the then current rating or ratings of one or more
Classes of the Certificates would not be qualified, downgraded or withdrawn as a
result thereof; (ii) a written acceptance of all obligations of the Special
Servicer, executed by the designated replacement; and (iii) an opinion of
counsel to the effect that the designation of such replacement to serve as
Special Servicer is in compliance with the Pooling Agreement. The existing
Special Servicer shall be deemed to have resigned simultaneously with such
designated replacement's becoming the Special Servicer under the Pooling
Agreement.
The "Controlling Class" will be the most subordinate Class of Sequential
Pay Certificates outstanding (the Class A-1, Class A-2A and Class A-2B
Certificates being treated as a single Class for this purpose) that has a
Certificate Balance at least equal to 25% of its initial Certificate Balance
(or, if no Class of Sequential Pay Certificates has a Certificate Balance at
least equal to 25% of its initial Certificate Balance, then the "Controlling
Class" will be the Class of Sequential Pay Certificates with the largest
Certificate Balance then outstanding).
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DESCRIPTION OF THE CERTIFICATES
GENERAL
The Sponsor's Multifamily/Commercial Mortgage Pass-Through Certificates,
Series 1996-MC1 (the "Certificates") will be issued pursuant to a Pooling and
Servicing Agreement, to be dated as of the Cut-off Date (the "Pooling
Agreement"), among the Sponsor, the Master Servicer, the Special Servicer, the
Trustee, the Mortgage Loan Seller and the REMIC Administrator, and will
represent in the aggregate the entire beneficial ownership interest in a trust
fund (the "Trust Fund") that includes: (i) the Mortgage Loans and all payments
under and proceeds of the Mortgage Loans received after the Cut-off Date
(exclusive of payments of principal, interest and other amounts due thereon on
or before the Cut-off Date); (ii) any REO Properties; and (iii) such funds or
assets as from time to time are deposited in the Certificate Account (see
"Description of the Pooling Agreements--Certificate Account" in the Prospectus).
The Certificates will consist of 16 classes (each, a "Class") to be
designated as: (i) the Class X-1 Certificates and the Class X-2 Certificates
(collectively, the "Class X Certificates"); (ii) the Class A-1 Certificates, the
Class A-2A Certificates and the Class A-2B Certificates (collectively, the
"Class A Certificates"); (iii) the Class B Certificates, the Class C
Certificates, the Class D Certificates, the Class E Certificates, the Class F
Certificates, the Class G Certificates, the Class H Certificates and the Class J
Certificates (collectively with the Class X and Class A Certificates, the "REMIC
Regular Certificates"); and (iv) the Class R-I Certificates, the Class R-II
Certificates and the Class R-III Certificates (collectively, the "REMIC Residual
Certificates"). Only the Class X, Class A, Class B, Class C, Class D, Class E
and Class F Certificates (collectively, the "Offered Certificates") are offered
hereby.
The Class G, Class H and Class J Certificates and the REMIC Residual
Certificates (collectively, the "Private Certificates") have not been registered
under the Securities Act and are not offered hereby. Accordingly, to the extent
this Prospectus Supplement contains information regarding the terms of the
Private Certificates, such information is provided solely because of its
potential relevance to a prospective purchaser of an Offered Certificate.
REGISTRATION AND DENOMINATIONS
The Offered Certificates will be issued in book-entry format in
denominations of: (i) in the case of the Class X Certificates, $5,000,000
notional principal amount and in any whole dollar denomination in excess
thereof; and (ii) in the case of the other Offered Certificates, $100,000 actual
principal amount and in any whole dollar denomination in excess thereof.
Each Class of Offered Certificates will initially be represented by one or
more Certificates registered in the name of the nominee of The Depository Trust
Company ("DTC"). The Sponsor has been informed by DTC that DTC's nominee will be
Cede & Co. No beneficial owner of an Offered Certificate (each, a "Certificate
Owner") will be entitled to receive a fully registered physical certificate (a
"Definitive Certificate") representing its interest in such Class, except under
the limited circumstances described in the Prospectus under "Description of the
Certificates--Book-Entry Registration and Definitive Certificates". Unless and
until Definitive Certificates are issued in respect of the Offered Certificates,
beneficial ownership interests in each such Class of Certificates will be
maintained and transferred on the book-entry records of DTC and its
participating organizations (its "Participants"), and all references to actions
by holders of each such Class of Certificates will refer to actions taken by DTC
upon instructions received from the related Certificate Owners through its
Participants in accordance with DTC procedures, and all references herein to
payments, notices, reports and statements to holders of each such Class of
Certificates will refer to payments, notices, reports and statements to DTC or
Cede & Co., as the registered holder thereof, for distribution to the related
Certificate Owners through its Participants in accordance with DTC procedures.
The form of such payments and transfers may result in certain delays in receipt
of payments by an investor and may restrict an investor's ability to pledge its
securities. See "Description of the Certificates--Book-Entry Registration and
Definitive Certificates" and "Risk Factors--Book-Entry Registration" in the
Prospectus.
The Trustee will initially serve as registrar (in such capacity, the
"Certificate Registrar") for purposes of recording and otherwise providing for
the registration of the Offered Certificates and, if and to the extent
Definitive Certificates are issued in respect thereof, of transfers and
exchanges of the Offered Certificates.
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CERTIFICATE BALANCES AND NOTIONAL AMOUNTS
Upon initial issuance, the Class A-1, Class A-2A, Class A-2B, Class B,
Class C, Class D, Class E, Class F, Class G, Class H and Class J Certificates
(collectively, the "Sequential Pay Certificates") will have the following
Certificate Balances (in each case, subject to a variance of plus or minus 5%):
INITIAL PERCENT OF PERCENT OF
CLASS CERTIFICATE BALANCE INITIAL POOL BALANCE CREDIT SUPPORT
----- ------------------- -------------------- --------------
Class A-1 $ 29,966,951
Class A-2A $150,000,000
Class A-2B $145,624,000
Class B $ 14,470,000
Class C $ 31,353,000
Class D $ 19,294,000
Class E $ 16,882,000
Class F $ 7,235,000
Class G $ 32,559,000
Class H $ 18,088,000
Class J $ 16,885,861
The "Certificate Balance" of any Class of Sequential Pay Certificates
outstanding at any time will be the then aggregate stated principal amount
thereof. On each Distribution Date, the Certificate Balance of each Class of
Sequential Pay Certificates will be reduced by any distributions of principal
actually made on such Class of Certificates on such Distribution Date, and will
be further reduced by any Realized Losses and Additional Trust Fund Expenses
deemed allocated to such Class of Certificates on such Distribution Date. See
"--Distributions" and "--Subordination; Allocation of Realized Losses and
Certain Expenses" below.
Neither Class of Class X Certificates will have a Certificate Balance. Each
Class of Class X Certificates will represent the right to receive distributions
of interest accrued as described herein on a notional principal amount (a
"Notional Amount"). The Notional Amount of the Class X-1 Certificates will equal
the aggregate Stated Principal Balance of the Group 1 Loans outstanding from
time to time. The Class X-1 Certificates will have an initial Notional Amount of
$29,966,951 (subject to a variance of plus or minus 5%). The Notional Amount of
the Class X-2 Certificates will equal 99.9% of the aggregate Stated Principal
Balance of all the Mortgage Loans outstanding from time to time. The Class X-2
Certificates will have an initial Notional Amount of $481,875,454 (subject to a
variance of plus or minus 5%).
The "Stated Principal Balance" of each Mortgage Loan will generally equal
the Cut-off Date Balance thereof, reduced (to not less than zero) on each
Distribution Date by (i) any payments or other collections (or advances in lieu
thereof) of principal of such Mortgage Loan that have been or, if they had not
been applied to cover Additional Trust Fund Expenses, would have been
distributed on the Certificates on such date, and (ii) the principal portion of
any Realized Loss incurred in respect of or allocable to such Mortgage Loan
during the related Prepayment Period.
A Class of Offered Certificates will be considered to be outstanding until
its Certificate Balance or Notional Amount, as the case may be, is reduced to
zero.
PASS-THROUGH RATES
The Pass-Through Rate applicable to the Class A-1 Certificates: (a) for
each Distribution Date up to and including the Distribution Date in October
1996, will equal approximately _____% per annum; and (b) for each subsequent
Distribution Date, will, in general, equal the lesser of (i) the applicable
value of Six-Month LIBOR, plus 0.____% and (ii) 11.375% per annum. For purposes
of the foregoing, the "applicable value of Six-Month LIBOR" will be, with
respect to any Distribution Date, the value thereof calculated in accordance
with Six-Month LIBOR Formula 1 on the most recent LIBOR Determination Date for
the Six-Month LIBOR Formula 1 Loans that precedes
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the commencement of the Interest Accrual Period for the Class A-1 Certificates
for such Distribution Date. The Pass-Through Rate for the Class A-1 Certificates
will be subject to adjustment as of the commencement of such Class of
Certificates' Interest Accrual Period for the Distribution Date in November
1996, and every six months thereafter.
The Pass-Through Rate applicable to the Class X-1 Certificates: (a) for the
initial Distribution Date, will equal approximately ___% per annum; (b) for each
Distribution Date subsequent to the initial Distribution Date, up to and
including the Distribution Date in October 1996, will equal approximately __%
per annum; and (c) for each subsequent Distribution Date, will, in general,
equal the excess, if any, of (i) the weighted average of the Net Mortgage Rates
in effect for the Group 1 Loans as of the first day of the related Due Period
(weighted on the basis of the respective Stated Principal Balances of such
Mortgage Loans immediately following the prior Distribution Date), over (ii) the
Pass-Through Rate for the Class A-1 Certificates for such Distribution Date.
The Pass-Through Rates applicable to the Class A-2A, Class A-2B, Class B,
Class C, Class D, Class E and Class F Certificates will, at all times, be equal
to ___%, ___%, ___%, ___%, ___%, __-% and ___% per annum, respectively.
The Pass-Through Rate applicable to the Class X-2 Certificates: (a) for the
initial Distribution Date, will equal approximately ___% per annum; and (b) for
each subsequent Distribution Date, will, in general, equal the excess, if any,
of (i) the weighted average of the Net Mortgage Rates in effect for the Group 1
Loans (in each case, net of the Pass-Through Rate applicable to the Class X-1
Certificates for such Distribution Date) and the Net Mortgage Rates in effect
for the Group 2 Loans as of the first day of the related Due Period (weighted on
the basis of the respective Stated Principal Balances of such Mortgage Loans
immediately following the prior Distribution Date), over (ii) the weighted
average of the Pass-Through Rates applicable to the respective Classes of
Sequential Pay Certificates for such Distribution Date (weighted on the basis of
the respective Certificate Balances of such Classes of Certificates immediately
prior to such Distribution Date).
The Pass-Through Rates applicable to the Class G, Class H and Class J
Certificates will, at all times, be equal to ___%, ___% and ___%, respectively.
The "Net Mortgage Rate" with respect to any Mortgage Loan is a per annum
rate equal to the related Mortgage Rate in effect from time to time, minus the
applicable Master Servicing Fee Rate. See "Servicing of the Mortgage
Loans--Servicing and Other Compensation and Payment of Expenses" herein.
The Due Period with respect to any Distribution Date is the period that
begins on the second day of the calendar month preceding the month in which such
Distribution Date occurs and ends on the first day of the calendar month in
which such Distribution Date occurs.
THE CERTIFICATE GROUPS
The Class X-1 and Class A-1 Certificates initially will correspond to and
evidence interests solely in Loan Group 1 (such Certificates, the "Group 1
Certificates"); and the Class X-2, Class A-2A, Class A-2B, Class B, Class C,
Class D, Class E, Class F, Class G, Class H and Class J Certificates initially
will correspond to and evidence interests solely in Loan Group 2 (such
Certificates, the "Group 2 Certificates"; the Group 1 Certificates and the Group
2 Certificates, each a "Certificate Group"). Distributions of principal and
interest on the Class A-1 Certificates and distributions of interest on the
Class X-1 Certificates, except as otherwise provided herein, will initially be
based on principal and/or interest due or collected, as the case may be, on or
with respect to the Group 1 Loans. Distributions of principal and interest on
the Class A-2A, Class A-2B, Class B, Class C, Class D, Class E, Class F, Class
G, Class H and Class J Certificates and distributions of interest on the Class
X-2 Certificates, except as otherwise provided herein, will initially be based
on principal and/or interest due or collected, as the case may be, on or with
respect to the Group 2 Loans. In general, the exceptions to the foregoing would
arise as a result of the subordination of the Subordinate Certificates in
connection with losses and defaults on the Mortgage Loans (in particular, the
Group 1 Loans) and, further, because no payments of principal may be made with
respect to the Subordinate Certificates for so long as any Class of Class A
Certificates is outstanding. The initial Certificate Balance of the Class A-1
Certificates and the initial Notional Amount of the Class X-1 Certificates will
each equal the aggregate Cut-off Date Balance of the Group 1 Loans, and the
Pass-Through Rates for such Certificates will be calculated based upon the Net
Mortgage Rates and/or Six-Month LIBOR in effect with respect to the Group 1
Loans. The aggregate initial Certificate Balance of the Class A-2A, Class A-2B,
Class B, Class C, Class D, Class E, Class F, Class G, Class H and Class J
Certificates will equal the aggregate Cut-off Date Balance of the Group 2 Loans,
and the fixed Pass-Through Rates for such Certificates have
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been set taking into account the Net Mortgage Rates (or, in the case of the two
Group 2 Loans that are ARM Loans, the minimum Net Mortgage Rates) for the Group
2 Loans.
DISTRIBUTIONS
General. Distributions on or with respect to the Certificates will be made
by the Trustee, to the extent of available funds, on the 15th day of each month
or, if any such 15th day is not a business day, then on the next succeeding
business day, commencing in August 1996 (each, a "Distribution Date"). Except as
otherwise described below, all such distributions will be made to the persons in
whose names the Certificates are registered at the close of business on the
related Record Date and, as to each such person, will be made by wire transfer
in immediately available funds to the account specified by the Certificateholder
at a bank or other entity having appropriate facilities therefor, if such
Certificateholder will have provided the Trustee with wiring instructions no
less than five business days prior to the related Record Date and is the
registered owner of Certificates with an aggregate initial principal amount of
at least $5,000,000 (or, alternatively, is the registered owner of all the Class
X Certificates of any Class thereof), or otherwise by check mailed to such
Certificateholder. Until Definitive Certificates are issued in respect thereof,
Cede & Co. will be the registered holder of the Offered Certificates. See
"--Registration and Denominations" above. The final distribution on any
Certificate (determined without regard to any possible future reimbursement of
any Realized Losses or Additional Trust Fund Expense previously allocated to
such Certificate) will be made in like manner, but only upon presentation and
surrender of such Certificate at the location that will be specified in a notice
of the pendency of such final distribution. Any distribution that is to be made
with respect to a Certificate in reimbursement of a Realized Loss or Additional
Trust Fund Expense previously allocated thereto, which reimbursement is to occur
after the date on which such Certificate is surrendered as contemplated by the
preceding sentence (the likelihood of any such distribution being remote), will
be made by check mailed to the Certificateholder that surrendered such
Certificate. All distributions made on or with respect to a Class of
Certificates will be allocated pro rata among such Certificates based on their
respective percentage interests in such Class.
With respect to any Distribution Date, the "Record Date" will be: (i) in
the case of the Class A-1 Certificates, the fifth day of the month in which such
Distribution Date occurs or, if such day is not a business day, the preceding
business day; and (ii) in the case of each other Class of Offered Certificates,
the last business day of the calendar month immediately preceding the month in
which such Distribution Date occurs.
The Available Distribution Amount. With respect to any Distribution Date,
distributions of interest on and principal of the Certificates will be made from
the Available Distribution Amount for such Distribution Date. The "Available
Distribution Amount" for any Distribution Date will, in general, equal (a) all
amounts on deposit in the Certificate Account as of the close of business on the
related Determination Date, exclusive of any portion thereof that represents one
or more of the following:
(i) Monthly Payments collected but due on a Due Date subsequent to the
related Due Period (or, in the case of Balloon Payments, subsequent to the
related Collection Period);
(ii) Prepayment Premiums (which are separately distributable on the
Certificates as hereinafter described);
(iii) amounts that are payable or reimbursable to any person other
than the Certificateholders (including amounts payable to the Master
Servicer, the Special Servicer or the Trustee as compensation or in
reimbursement of outstanding Advances and amounts payable in respect of
Additional Trust Fund Expenses); and
(iv) amounts deposited in the Certificate Account in error; plus
(b) to the extent not already included in clause (a), any P&I Advances made
with respect to such Distribution Date and payments made by the Master Servicer
to cover Balloon Payment Interest Shortfalls incurred during the related
Collection Period.
See "Description of the Pooling Agreements--Certificate Account" in the
Prospectus.
The "Collection Period" and "Prepayment Period" for each Distribution Date
is, in each case, the period that begins immediately following the Determination
Date in the calendar month preceding the month in which such Distribution Date
occurs (or, in the case of the initial Distribution Date, immediately following
the Cut-off Date) and
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ends on the Determination Date in the calendar month in which such Distribution
Date occurs. The "Determination Date" will be the fifth day of each month or, if
any such fifth day is not a business day, the immediately preceding business
day, commencing in August 1996.
Application of the Available Distribution Amount. On each Distribution
Date, the Trustee will apply the Available Distribution Amount for such date for
the following purposes and in the following order of priority:
(1) to pay interest to the holders of the respective Classes of Class
A and Class X Certificates, up to an amount equal to, and pro rata as among
such Classes in accordance with, all Distributable Certificate Interest in
respect of each such Class of Certificates for such Distribution Date;
(2) to pay principal: (a) first to the holders of the Class A-1
Certificates, second to the holders of the Class A-2A Certificates and
third to the holders of the Class A-2B Certificates, in each case, up to an
amount equal to the lesser of (i) the then outstanding Certificate Balance
of such Class of Certificates and (ii) the remaining Principal Distribution
Amount with respect to Loan Group 1 for such Distribution Date; and (b)
first to the holders of the Class A-2A Certificates, second to the holders
of the Class A-2B Certificates and third to the holders of the Class A-1
Certificates, in each case, up to an amount equal to the lesser of (i) the
then outstanding Certificate Balance of such Class of Certificates and (ii)
the remaining Principal Distribution Amount with respect to Loan Group 2
for such Distribution Date; payments pursuant to this clause (2) in respect
of the Principal Distribution Amounts with respect to the two Loan Groups
to be made pro rata based on the relative sizes thereof;
(3) to reimburse the holders of the respective Classes of Class A
Certificates, up to an amount equal to, and pro rata as among such Classes
in accordance with, the respective amounts of Realized Losses and
Additional Trust Fund Expenses, if any, previously deemed allocated to such
Classes of Certificates and for which no reimbursement has previously been
paid; and
(4) to make payments on the Subordinate Certificates as contemplated
below;
provided that, on each Distribution Date after the aggregate Certificate Balance
of the Subordinate Certificates has been reduced to zero, and in any event on
the final Distribution Date in connection with a termination of the Trust Fund
(see "--Termination" below), the payments of principal to be made out of the
Available Distribution Amount for such date, as contemplated by clause (2)
above, will be made to the holders of the respective Classes of Class A
Certificates, up to an amount equal to, and pro rata as among such Classes in
accordance with, the respective then outstanding Certificate Balances of such
Classes of Certificates, and without regard to the Principal Distribution
Amounts with respect to the two Loan Groups for such date.
On each Distribution Date, following the above-described distributions on
the Class A and Class X Certificates, the Trustee will apply the remaining
portion, if any, of the Available Distribution Amount for such date for the
following purposes and in the following order of priority:
(1) to pay interest to the holders of the Class B Certificates, up to
an amount equal to all Distributable Certificate Interest in respect of
such Class of Certificates for such Distribution Date;
(2) if the Certificate Balances of the Class A Certificates have been
reduced to zero, to pay principal to the holders of the Class B
Certificates, up to an amount equal to the lesser of (a) the then
outstanding Certificate Balance of such Class of Certificates and (b) the
aggregate of the remaining Principal Distribution Amounts for both Loan
Groups for such Distribution Date;
(3) to reimburse the holders of the Class B Certificates, up to an
amount equal to all Realized Losses and Additional Trust Fund Expenses, if
any, previously deemed allocated to such Class of Certificates and for
which no reimbursement has previously been paid;
(4) to pay interest to the holders of the Class C Certificates, up to
an amount equal to all Distributable Certificate Interest in respect of
such Class of Certificates for such Distribution Date;
(5) if the Certificate Balances of the Class A and Class B
Certificates have been reduced to zero, to pay principal to the holders of
the Class C Certificates, up to an amount equal to the lesser of (a) the
then outstanding Certificate Balance of such Class of Certificates and (b)
the aggregate of the remaining Principal Distribution Amounts for both Loan
Groups for such Distribution Date;
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(6) to reimburse the holders of the Class C Certificates, up to an
amount equal to all Realized Losses and Additional Trust Fund Expenses, if
any, previously deemed allocated to such Class of Certificates and for
which no reimbursement has previously been received;
(7) to pay interest to the holders of the Class D Certificates, up to
an amount equal to all Distributable Certificate Interest in respect of
such Class of Certificates for such Distribution Date;
(8) if the Certificate Balances of the Class A, Class B, and Class C
Certificates have been reduced to zero, to pay principal to the holders of
the Class D Certificates, up to an amount equal to the lesser of (a) the
then outstanding Certificate Balance of such Class of Certificates and (b)
the aggregate of the remaining Principal Distribution Amounts for both Loan
Groups for such Distribution Date;
(9) to reimburse the holders of the Class D Certificates, up to an
amount equal to all Realized Losses and Additional Trust Fund Expenses, if
any, previously deemed allocated to such Class of Certificates and for
which no reimbursement has previously been received;
(10) to pay interest to the holders of the Class E Certificates, up to
an amount equal to all Distributable Certificate Interest in respect of
such Class of Certificates for such Distribution Date;
(11) if the Certificate Balances of the Class A, Class B, Class C and
Class D Certificates have been reduced to zero, to pay principal to the
holders of the Class E Certificates, up to an amount equal to the lesser of
(a) the then outstanding Certificate Balance of such Class of Certificates
and (b) the aggregate of the remaining Principal Distribution Amounts for
both Loan Groups for such Distribution Date;
(12) to reimburse the holders of the Class E Certificates, up to an
amount equal to all Realized Losses and Additional Trust Fund Expenses, if
any, previously deemed allocated to such Class of Certificates and for
which no reimbursement has previously been received;
(13) to pay interest to the holders of the Class F Certificates, up to
an amount equal to all Distributable Certificate Interest in respect of
such Class of Certificates for such Distribution Date;
(14) if the Certificate Balances of the Class A, Class B, Class C,
Class D and Class E Certificates have been reduced to zero, to pay
principal to the holders of the Class F Certificates, up to an amount equal
to the lesser of (a) the then outstanding Certificate Balance of such Class
of Certificates and (b) the aggregate of the remaining Principal
Distribution Amounts for both Loan Groups for such Distribution Date;
(15) to reimburse the holders of the Class F Certificates, up to an
amount equal to all Realized Losses and Additional Trust Fund Expenses, if
any, previously deemed allocated to such Class of Certificates and for
which no reimbursement has previously been received;
(16) to pay interest to the holders of the Class G Certificates, up to
an amount equal to all Distributable Certificate Interest in respect of
such Class of Certificates for such Distribution Date;
(17) if the Certificate Balances of the Class A, Class B, Class C,
Class D, Class E and Class F Certificates have been reduced to zero, to pay
principal to the holders of the Class G Certificates, up to an amount equal
to the lesser of (a) the then outstanding Certificate Balance of such Class
of Certificates and (b) the aggregate of the remaining Principal
Distribution Amounts for both Loan Groups for such Distribution Date;
(18) to reimburse the holders of the Class G Certificates, up to an
amount equal to all Realized Losses and Additional Trust Fund Expenses, if
any, previously deemed allocated to such Class of Certificates and for
which no reimbursement has previously been received;
(19) to pay interest to the holders of the Class H Certificates, up to
an amount equal to all Distributable Certificate Interest in respect of
such Class of Certificates for such Distribution Date;
(20) if the Certificate Balances of the Class A, Class B, Class C,
Class D, Class E, Class F and Class G Certificates have been reduced to
zero, to pay principal to the holders of the Class H Certificates, up to an
amount equal to the lesser of (a) the then outstanding Certificate Balance
of such Class of Certificates and (b) the aggregate of the remaining
Principal Distribution Amounts for both Loan Groups for such Distribution
Date;
(21) to reimburse the holders of the Class H Certificates, up to an
amount equal to all Realized Losses and Additional Trust Fund Expenses, if
any, previously deemed allocated to such Class of Certificates and for
which no reimbursement has previously been received;
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(22) to pay interest to the holders of the Class J Certificates, up to
an amount equal to all Distributable Certificate Interest in respect of
such Class of Certificates for such Distribution Date;
(23) if the Certificate Balances of the Class A, Class B, Class C,
Class D, Class E, Class F, Class G and Class H Certificates have been
reduced to zero, to pay principal to the holders of the Class J
Certificates, up to an amount equal to the lesser of (a) the then
outstanding Certificate Balance of such Class of Certificates and (b) the
aggregate of the remaining Principal Distribution Amounts for both Loan
Groups for such Distribution Date;
(24) to reimburse the holders of the Class J Certificates, up to an
amount equal to all Realized Losses and Additional Trust Fund Expenses, if
any, previously deemed allocated to such Class of Certificates and for
which no reimbursement has previously been received; and
(25) to pay to the holders of the REMIC Residual Certificates, the
balance, if any, of the Available Distribution Amount for such Distribution
Date;
provided that, on the final Distribution Date in connection with a termination
of the Trust Fund, the payments of principal to be made out of the Available
Distribution Amount for such date as contemplated by any of clauses (2), (5),
(8), (11), (14), (17), (20) and (23) above with respect to any Class of
Sequential Pay Certificates, will be made, up to an amount equal to the entire
then outstanding Certificate Balance of such Class of Certificates, and without
regard to the Principal Distribution Amounts with respect to the two Loan Groups
for such date.
Distributable Certificate Interest. The "Distributable Certificate
Interest" in respect of each Class of REMIC Regular Certificates for each
Distribution Date is equal to the Accrued Certificate Interest in respect of
such Class of Certificates for such Distribution Date, reduced by such Class of
Certificates' allocable share (calculated as described below) of any Prepayment
Interest Shortfalls incurred with respect to the Mortgage Pool during the
related Prepayment Period, and increased by any Class Interest Shortfall in
respect of such Class of Certificates for such Distribution Date.
The "Accrued Certificate Interest" in respect of each Class of REMIC
Regular Certificates for each Distribution Date is equal to one month's interest
at the Pass-Through Rate applicable to such Class of Certificates for such
Distribution Date accrued on the related Certificate Balance or Notional Amount,
as the case may be, outstanding immediately prior to such Distribution Date.
Accrued Certificate Interest will be calculated on the basis of a 360-day year
consisting of twelve 30-day months.
The "Class Interest Shortfall" with respect to any Class of REMIC Regular
Certificates for any Distribution Date will equal: (a) in the case of the
initial Distribution Date, zero; and (b) in the case of any subsequent
Distribution Date, the sum of (i) the excess, if any, of (A) all Distributable
Certificate Interest in respect of such Class of Certificates for the
immediately preceding Distribution Date, over (B) all distributions of interest
made with respect to such Class of Certificates on the immediately preceding
Distribution Date, and (ii), to the extent permitted by applicable law, one
month's interest on any such excess at the Pass-Through Rate applicable to such
Class of Certificates for the current Distribution Date.
With respect to any Distribution Date, the "Interest Accrual Period will
be: (i) in the case of the Class A-1 Certificates, the period that begins on the
15th day of the calendar month preceding the month in which such Distribution
Date occurs (or, in the case of the initial Distribution Date, that begins on
the Delivery Date) and ends on the 14th day of the calendar month in which such
Distribution Date occurs; and (ii) in the case of each other Class of Offered
Certificates, the calendar month immediately preceding the month in which such
Distribution Date occurs.
Any Prepayment Interest Shortfalls incurred with respect to the Mortgage
Pool during any Prepayment Period will be allocated to the respective Classes of
REMIC Regular Certificates (other than the Senior Certificates) on the related
Distribution Date, sequentially in reverse alphabetical order of Class
designation, in each case up to the amount of the Accrued Certificate Interest
in respect of such Class of Certificates for such Distribution Date; and any
remaining portion of such Prepayment Interest Shortfalls will be allocated among
the respective Classes of Senior Certificates, pro rata, in accordance with the
respective amounts of Accrued Certificate Interest for each such Class of Senior
Certificates for such Distribution Date.
Principal Distribution Amount. The "Principal Distribution Amount" with
respect to each Loan Group for any Distribution Date will, in general, equal the
aggregate of the following:
(a) the principal portions of all Scheduled Payments (other than
Balloon Payments) and any Assumed Scheduled Payments due or deemed due, as
the case may be, in respect of the Mortgage Loans in such Loan Group for
their respective Due Dates occurring during the related Due Period;
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(b) all voluntary principal prepayments received on the Mortgage Loans
in such Loan Group during the related Prepayment Period;
(c) with respect to any Balloon Loan in such Loan Group as to which
the related stated maturity date occurred during or prior to the related
Collection Period, any payment of principal (exclusive of any voluntary
principal prepayment and any amount described in clause (d) below) made by
or on behalf of the related borrower during the related Collection Period,
net of any portion of such payment that represents a recovery of the
principal portion of any Scheduled Payment (other than a Balloon Payment)
due, or the principal portion of any Assumed Scheduled Payment deemed due,
in respect of such Mortgage Loan on a Due Date during or prior to the
related Due Period and not previously recovered;
(d) the portion of all Liquidation Proceeds, Condemnation Proceeds and
Insurance Proceeds that were received on the Mortgage Loans in such Loan
Group during the related Prepayment Period and that were identified and
applied by the Master Servicer as recoveries of principal thereof, in each
case net of any portion of such amounts that represents a recovery of the
principal portion of any Scheduled Payment (other than a Balloon Payment)
due, or the principal portion of any Assumed Scheduled Payment deemed due,
in respect of the related Mortgage Loan on a Due Date during or prior to
the related Due Period and not previously recovered; and
(e) if such Distribution Date is subsequent to the initial
Distribution Date, the excess, if any, of (i) the Principal Distribution
Amount with respect to such Loan Group for the immediately preceding
Distribution Date, over (ii) the aggregate distributions of principal made
on the Sequential Pay Certificates in respect of such Principal
Distribution Amount on such immediately preceding Distribution Date.
The "Scheduled Payment" due on any Mortgage Loan on any related Due Date
will, in general, be the scheduled payment of principal and/or interest due
thereon on such date (taking into account any waiver, modification or amendment
of such Mortgage Loan).
An "Assumed Scheduled Payment" is an amount deemed due in respect of: (i)
any Balloon Loan that is delinquent in respect of its Balloon Payment beyond the
first Determination Date that follows its stated maturity date and as to which
no arrangements have been agreed to for collection of the delinquent amounts; or
(ii) any Mortgage Loan as to which the related Mortgaged Property or Properties
have been acquired on behalf of the Certificateholders through foreclosure, deed
in lieu of foreclosure or otherwise (each such property, upon acquisition, an
"REO Property"). The Assumed Scheduled Payment deemed due on any such Balloon
Loan on its stated maturity date and on each successive Due Date that it remains
or is deemed to remain outstanding shall equal the Scheduled Payment that would
have been due thereon on such date if the related Balloon Payment had not come
due but rather such Mortgage Loan had continued to amortize in accordance with
such loan's amortization schedule, if any, in effect immediately prior to
maturity. The Assumed Scheduled Payment deemed due on any such Mortgage Loan as
to which the related Mortgaged Property or Properties have become REO Property
or Properties, on each Due Date for so long as such REO Property or Properties
remain part of the Trust Fund, shall equal the Scheduled Payment (or, in the
case of a Balloon Loan described in the prior sentence, the Assumed Scheduled
Payment) due on the last Due Date prior to the acquisition of such REO Property
or Properties.
Distributions of Prepayment Premiums. Any "Prepayment Premium" (whether
described in the related Mortgage Loan documents as a fixed prepayment premium
or a yield maintenance amount) actually collected with respect to a Mortgage
Loan during any particular Prepayment Period will be distributed on the related
Distribution Date as follows:
1. If such Prepayment Premium is with respect to a Group 1 Loan, to
the holders of the Class X-1 Certificates.
2. If such Prepayment Premium is with respect to a Group 2 Loan:
(a) First, on a pro rata basis in accordance with their
respective entitlements, (i) to the holders of the Class X-2
Certificates, up to an amount equal to (A) the present value
(discounted at the Discount Rate (as defined below) for the Class X-2
Certificates plus the Spread Rate (as defined below) for the Class X-2
Certificates) of the aggregate interest that would have been paid in
respect of the Class X-2 Certificates from the Distribution Date
occurring in the following month until the Notional Amount of the
Class X-2
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Certificates would have been reduced to zero had the related
prepayment not occurred, minus (B) the present value (discounted at
the Discount Rate for the Class X-2 Certificates plus the Spread Rate
for the Class X-2 Certificates) of the aggregate interest that would
have been paid in respect of the Class X-2 Certificates from the
Distribution Date occurring in the following month until the Notional
Amount of the Class X-2 Certificates is to be reduced to zero after
taking account of the related prepayment; (ii) to the holders of the
Class A-2A Certificates, up to an amount equal to (A) the present
value (discounted at the Discount Rate for the Class A-2A Certificates
plus the Spread Rate for the Class A-2A Certificates) of the aggregate
principal and interest that is to be paid in respect of the Class A-2A
Certificates from the Distribution Date occurring in the following
month until the Certificate Balance of the Class A-2A Certificates
would have been reduced to zero had the related prepayment not
occurred, minus (B) the sum of the amount of the related prepayment
distributed in respect of the Class A-2A Certificates and the present
value (discounted at the Discount Rate for the Class A-2A Certificates
plus the Spread Rate for the Class A-2A Certificates) of the aggregate
principal and interest that is to be paid in respect of the Class A-2A
Certificates from the Distribution Date occurring in the following
month until the Certificate Balance of the Class A-2A Certificates is
to be reduced to zero after taking account of the related prepayment;
and (iii) to the holders of the Class A-2B Certificates, up to an
amount equal to (A) the present value (discounted at the Discount Rate
for the Class A-2B Certificates plus the Spread Rate for the Class
A-2B Certificates) of the aggregate principal and interest that is to
be paid in respect of the Class A-2B Certificates from the
Distribution Date occurring in the following month until the
Certificate Balance of the Class A-2B Certificates would have been
reduced to zero had the related prepayment not occurred, minus (B) the
sum of the amount of the related prepayment distributed in respect to
the Class A-2B Certificates and the present value (discounted at the
Discount Rate for the Class A-2B Certificates plus the Spread Rate for
the Class A-2B Certificates) of the aggregate principal and interest
that is to be paid in respect of the Class A-2B Certificates from the
Distribution Date occurring in the following month until the
Certificate Balance of the Class A-2B Certificates is to be reduced to
zero after taking account of the related prepayment;
(b) then, to the extent of any portion of such Prepayment Premium
remaining following the distributions described in the preceding
clause (a), to the holders of the remaining Group 2 Certificates
(other than the Class G, Class H and Class J Certificates), in
alphabetical order of Class designation, in each case in the same
manner as described for the Class A-2A and Class A-2B Certificates in
clause (a)(ii) above (except that the Discount Rate and Spread Rate
for each such Class shall correspond to the applicable rate set forth
in the definitions below).
The foregoing calculations (as well as the calculation of Discount Rates
described in the next paragraph) will be made by assuming no future prepayments
on or in respect of the Mortgage Loans during, and by otherwise applying the
Maturity Assumptions to, the period subsequent to the end of the Prepayment
Period in which the related prepayment was received.
For purposes of the foregoing, the "Discount Rate" with respect to any
Class of Certificates is the rate determined by the Trustee, in its good faith,
to be the yield (interpolated and rounded to the nearest one-thousandth of a
percent, if necessary) in the secondary market for United States Treasury
securities with a maturity equal to the earlier of the maturity of the
particular Mortgage Loan being prepaid and the maturity of such Class of
Certificates (without taking into account the related principal prepayment).
The "Spread Rate" for the Class X-2 Certificates is 1.0% per annum, for the
Class A-2A and A-2B Certificates is 0.20% per annum, for the Class B
Certificates is 0.30% per annum, for the Class C Certificates is 0.40% per
annum, for the Class D Certificates is 0.50% per annum, for the Class E
Certificates is 1.00% per annum and for the Class F Certificates is 1.50% per
annum. The Class G, Class H and Class J will not receive any Prepayment
Premiums. The assumed LIBOR rate, if applicable, shall be the LIBOR rate in
effect for the next Interest Accrual Period.
The Prepayment Premiums, if any, collected on the Mortgage Loans during any
Collection Period may not be sufficient to fully compensate Certificateholders
of any Class for any loss in yield attributable to the related prepayments of
principal. See "Risk Factors--The Mortgage Loans--Prepayment Premiums" herein.
Treatment of REO Properties. Notwithstanding that any Mortgaged Property
may be acquired as part of the Trust Fund through foreclosure, deed in lieu of
foreclosure or otherwise, the related Mortgage Loan will be treated,
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for purposes of, among other things, determining distributions on the
Certificates, allocations of Realized Losses and Additional Trust Fund Expenses
to the Certificates, and the amount of Master Servicing Fees, Special Servicing
Fees and Trustee Fees payable under the Pooling Agreement, as having remained
outstanding until such REO Property is liquidated. Among other things, such
Mortgage Loan will be taken into account when determining Pass-Through Rates and
the Principal Distribution Amount for the related Loan Group. In connection
therewith, operating revenues and other proceeds derived from such REO Property
(after application thereof to pay certain costs and taxes, including certain
reimbursements payable to the Master Servicer, the Special Servicer and/or the
Trustee, incurred in connection with the operation and disposition of such REO
Property) will be "applied" by the Master Servicer as principal, interest and
other amounts "due" on such Mortgage Loan, and, subject to the recoverability
determination described below (see "--P&I Advances"), the Master Servicer will
be required to make P&I Advances in respect of such Mortgage Loan, in all cases
as if such Mortgage Loan had remained outstanding.
SUBORDINATION; ALLOCATION OF LOSSES AND CERTAIN EXPENSES
As and to the extent described herein, the rights of holders of the Class
B, the Class C, the Class D, the Class E, the Class F and the Private
Certificates (collectively, the "Subordinate Certificates") to receive
distributions of amounts collected or advanced on the Mortgage Loans will, in
the case of each Class thereof, be subordinated to the rights of holders of the
Class A and Class X Certificates (collectively, the "Senior Certificates") and,
further, to the rights of holders of each other Class of Subordinate
Certificates, if any, with an earlier alphabetical Class designation. This
subordination is intended to enhance the likelihood of timely receipt by holders
of the respective Classes of Senior Certificates of the full amount of
Distributable Certificate Interest payable in respect of their Certificates on
each Distribution Date, and the ultimate receipt by holders of the respective
Classes of Class A Certificates of principal equal to, in each such case, the
entire Certificate Balance of such Class of Certificates. Similarly, but to
decreasing degrees, this subordination is also intended to enhance the
likelihood of timely receipt by holders of the other Classes of Offered
Certificates of the full amount of Distributable Certificate Interest payable in
respect of their Certificates on each Distribution Date, and the ultimate
receipt by holders of the other Classes of Offered Certificates of principal
equal to, in each such case, the entire Certificate Balance of such Class of
Certificates. The subordination of any Class of Subordinate Certificates will be
accomplished by the application of the Available Distribution Amount on each
Distribution Date in the order of priority described under "--Distributions--
Application of the Available Distribution Amount" above. No other form of Credit
Support will be available for the benefit of holders of the Offered
Certificates.
If, following the distributions to be made in respect of the Certificates
on any Distribution Date, the aggregate Stated Principal Balance of the Mortgage
Pool that will be outstanding immediately following such Distribution Date is
less than the then aggregate Certificate Balance of the Sequential Pay
Certificates, the Certificate Balances of the Class J, Class H, Class G, Class
F, Class E, Class D, Class C and Class B Certificates will be reduced,
sequentially in that order, in the case of each such Class until such deficit
(or the related Certificate Balance) is reduced to zero (whichever occurs
first). If any portion of such deficit remains at such time as the Certificate
Balances of such Classes of Certificates are reduced to zero, then the
respective Certificate Balances of the Class A-1, Class A-2A and Class A-2B
Certificates will be reduced, pro rata in accordance with the relative sizes of
the remaining Certificate Balances of such Classes of Certificates, until such
deficit (or each such Certificate Balance) is reduced to zero. Any such deficit
may be the result of Realized Losses incurred in respect of the Mortgage Loans
and/or Additional Trust Fund Expenses. The foregoing reductions in the
Certificate Balances of the Sequential Pay Certificates will be deemed to
constitute an allocation of any such Realized Losses and Additional Trust Fund
Expenses.
"Realized Losses" are losses on or in respect of the Mortgage Loans arising
from the inability of the Master Servicer and/or the Special Servicer to collect
all amounts due and owing under any such Mortgage Loan, including by reason of
the fraud or bankruptcy of the borrower or a casualty of any nature at the
Mortgaged Property, to the extent not covered by insurance. The Realized Loss in
respect of a liquidated Mortgage Loan (or related REO Property or Properties) is
an amount generally equal to the excess, if any, of (a) the outstanding
principal balance of such Mortgage Loan as of the date of liquidation, together
with (i) all accrued and unpaid interest thereon at the related Mortgage Rate
through the end of the Prepayment Period in which the liquidation occurred and
(ii) all related unreimbursed Servicing Advances and outstanding liquidation
expenses, over (b) the aggregate amount of Liquidation Proceeds, if any,
recovered in connection with such liquidation. If any portion of the debt due
under a Mortgage Loan is forgiven, whether in connection with a modification,
waiver or amendment granted or agreed to by
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the Master Servicer or the Special Servicer or in connection with the bankruptcy
or similar proceeding involving the related borrower, the amount so forgiven
also will be treated as a Realized Loss.
"Additional Trust Fund Expenses" include, among other things, (i) all
Special Servicing Fees and Workout Fees paid to the Special Servicer, (ii) any
interest paid to the Master Servicer, the Special Servicer and/or the Trustee in
respect of unreimbursed Advances, and (iii) certain unanticipated, non-Mortgage
Loan specific expenses of the Trust Fund, including certain reimbursements to
the Trustee as described under "Description of the Pooling Agreements--Certain
Matters Regarding the Trustee" in the Prospectus, certain reimbursements to the
Master Servicer, the Special Servicer, the REMIC Administrator and the Sponsor
as described under "Description of the Pooling Agreements--Certain Matters
Regarding the Master Servicer, Special Servicer, REMIC Administrator and
Sponsor" in the Prospectus and certain federal, state and local taxes, and
certain tax-related expenses, payable out of the Trust Fund as described under
"Certain Federal Income Tax Consequences--Possible Taxes on Income From
Foreclosure Property" herein and "Material Federal Income Tax
Consequences--Prohibited Transactions Tax and Other Taxes" in the Prospectus.
Additional Trust Fund Expenses will reduce amounts payable to Certificateholders
and, consequently, may result in a loss on the Offered Certificates.
P&I ADVANCES
With respect to each Distribution Date, the Master Servicer will be
obligated, subject to the recoverability determination described below, to make
advances (each, a "P&I Advance") out of its own funds or, subject to the
replacement thereof as provided in the Pooling Agreement, funds held in the
Certificate Account that are not required to be part of the Available
Distribution Amount for such Distribution Date, in an amount generally equal to
the aggregate of all Scheduled Payments (other than Balloon Payments) and any
Assumed Scheduled Payments, in each case net of related Master Servicing Fees
and Workout Fees, that were due or deemed due, as the case may be, in respect of
the Mortgage Loans during the related Due Period and that were not paid by or on
behalf of the related mortgagors as of the close of business on the last day of
the related Collection Period or otherwise collected as of the close of business
on the last day of the related Prepayment Period. The Master Servicer's
obligations to make P&I Advances in respect of any Mortgage Loan will continue
through liquidation of such Mortgage Loan or disposition of any REO Property
acquired in respect thereof. Notwithstanding the foregoing, if it is determined
that an Appraisal Reduction Amount exists with respect to any Required Appraisal
Mortgage Loan (as defined below), then, with respect to the Distribution Date
immediately following the date of such determination and with respect to each
subsequent Distribution Date for so long as such Appraisal Reduction Amount
exists, in the event of subsequent delinquencies thereon, the interest portion
of the P&I Advance in respect of such Mortgage Loan will be reduced (no
reduction to be made in the principal portion, however) to equal to the product
of (i) the amount of the interest portion of such P&I Advance that would
otherwise be required to be made for such Distribution Date without regard to
this sentence, multiplied by (ii) a fraction (expressed as a percentage), the
numerator of which is equal to the Stated Principal Balance of such Mortgage
Loan, net of such Appraisal Reduction Amount, and the denominator of which is
equal to the Stated Principal Balance of such Mortgage Loan. See "--Appraisal
Reductions" below. If the Master Servicer fails to make a required P&I Advance,
the Trustee will be required to make such P&I Advance. See "--The Trustee"
below.
The Master Servicer and the Trustee will each be entitled to recover any
P&I Advance made out of its own funds from any amounts collected in respect of
the Mortgage Loan as to which such P&I Advance was made, whether in the form of
late payments, Insurance Proceeds, Condemnation Proceeds, Liquidation Proceeds
or otherwise ("Related Proceeds"). Notwithstanding the foregoing, neither the
Master Servicer nor the Trustee will be obligated to make any P&I Advance that
it determines in its reasonable good faith judgment would, if made, not be
recoverable out of Related Proceeds (a "Nonrecoverable P&I Advance"), and the
Master Servicer will be entitled to recover any P&I Advance at any time that it
is determined to be a Nonrecoverable P&I Advance out of funds received on or in
respect of other Mortgage Loans. See "Description of the Certificates--Advances
in Respect of Delinquencies" and "Description of the Pooling
Agreements--Certificate Account" in the Prospectus.
The Master Servicer and the Trustee will each be entitled with respect to
any Advance made thereby, and the Special Servicer will be entitled with respect
to any Servicing Advance made thereby, to interest accrued on the amount of such
Advance for so long as it is outstanding at a rate per annum (the "Reimbursement
Rate") equal to the "prime rate" as published in the "Money Rates" section of
The Wall Street Journal, as such "prime rate" may change from time to time. Such
interest on any Advance will be payable to the Master Servicer, the Special
Servicer or the
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Trustee, as the case may be, out of default interest collected in respect of the
related Mortgage Loan or, in connection with the reimbursement of such Advance,
out of any amounts then on deposit in the Certificate Account. To the extent not
offset by default interest actually collected in respect of any defaulted
Mortgage Loan, interest accrued on outstanding Advances made in respect thereof
will result in a reduction in amounts payable on the Certificates.
APPRAISAL REDUCTIONS
Upon the earliest of (i) the date on which any Mortgage Loan becomes a
Modified Mortgage Loan (as defined below), (ii) the 90th day following the
occurrence of any uncured delinquency in Monthly Payments with respect to any
Mortgage Loan, (iii) the date on which a receiver is appointed and continues in
such capacity in respect of a Mortgaged Property securing any Mortgage Loan and
(iv) the date on which a Mortgaged Property securing any Mortgage Loan becomes
an REO Property (each such Mortgage Loan, a "Required Appraisal Loan"), the
Master Servicer or the Special Servicer, as applicable, will be required, within
30 days (or such longer period as the Master Servicer or the Special Servicer,
as applicable, is diligently and in good faith proceeding to obtain such
appraisal), to obtain an appraisal of the related Mortgaged Property from an
independent MAI-designated appraiser, unless such an appraisal had previously
been obtained within the prior twelve months. The cost of such appraisal will be
advanced by the Master Servicer or the Special Servicer, as the case may be,
subject to its right to be reimbursed therefor as a Servicing Advance. As a
result of any such appraisal, it may be determined that an Appraisal Reduction
Amount exists with respect to the related Required Appraisal Loan. The
"Appraisal Reduction Amount" for any Required Appraisal Loan will equal the
excess, if any, of (a) the sum of, as of the Determination Date immediately
succeeding the date on which the appraisal is obtained, (i) the Stated Principal
Balance of such Required Appraisal Loan, (ii) to the extent not previously
advanced by or on behalf of the Master Servicer or the Trustee, all unpaid
interest on the Required Appraisal Loan through the most recent Due Date prior
to such Determination Date at a per annum rate equal to the related Net Mortgage
Rate, (iii) all accrued but unpaid Master Servicing Fees and Special Servicing
Fees in respect of such Required Appraisal Loan, (iv) all related unreimbursed
Advances made by or on behalf of the Master Servicer, the Special Servicer or
the Trustee with respect to such Required Appraisal Loan plus interest accrued
thereon at the Reimbursement Rate and (v) all currently due and unpaid real
estate taxes and assessments, insurance premiums, and, if applicable, ground
rents in respect of the related Mortgaged Property, net of any escrow reserves
held by the Master Servicer or Special Servicer to cover any such item, over (b)
90% of an amount equal to the appraised value of the related Mortgaged Property
or REO Property as determined by such appraisal (net of any liens on such
property that are prior to the lien of the Required Appraisal Loan).
With respect to each Required Appraisal Loan (unless such Mortgage Loan has
become a Corrected Mortgage Loan and has remained current for twelve consecutive
Monthly Payments, and no other Servicing Transfer Event has occurred with
respect thereto during the preceding twelve months), the Special Servicer is
required, within 30 days of each anniversary of such loan's becoming a Required
Appraisal Loan, to order an update of the prior appraisal (the cost of which
will be a Servicing Advance). Based upon such appraisal, the Special Servicer is
to redetermine and report to the Trustee the Appraisal Reduction Amount, if any,
with respect to such Mortgage Loan.
A "Modified Mortgage Loan" is any Mortgage Loan as to which any Servicing
Transfer Event has occurred and which has been modified by the Special Servicer
in a manner that: (A) affects the amount or timing of any payment of principal
or interest due thereon (other than, or in addition to, bringing current Monthly
Payments with respect such Mortgage Loan); (B) except as expressly contemplated
by the related Mortgage, results in a release of the lien of the Mortgage on any
material portion of the related Mortgaged Property without a corresponding
principal prepayment in an amount not less than the fair market value (as is) of
the property to be released; or (C) in the reasonable good faith judgment of the
Special Servicer, otherwise materially impairs the security for such Mortgage
Loan or reduces the likelihood of timely payment of amounts due thereon.
REPORTS TO CERTIFICATEHOLDERS; CERTAIN AVAILABLE INFORMATION
Trustee Reports. Based on information provided in monthly reports prepared
by the Master Servicer and the Special Servicer and delivered to the Trustee,
the Trustee will prepare and/or forward on each Distribution Date to each
Certificateholder, the following statements and reports (collectively, the
"Trustee Reports") substantially in the form of Annex B and substantially
containing the information set forth below:
(1) A statement (a "Distribution Date Statement") setting forth, among
other things: (i) the amount of distributions, if any, made on such
Distribution Date to the holders of each Class of Sequential Pay
Certificates
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and applied to reduce the respective Certificate Balances
thereof; (ii) the amount of distributions, if any, made on such
Distribution Date to the holders of each Class of REMIC Regular
Certificates allocable to Distributable Certificate Interest; (iii) the
number of outstanding Mortgage Loans at the close of business on the
related Determination Date and the aggregate Stated Principal Balance of
the Mortgage Loans immediately before and after such Distribution Date;
(iv) as of the Determination Date in the prior calendar month, the number
and aggregate unpaid principal balance of Mortgage Loans (A) delinquent one
month, (B) delinquent two months, (C) delinquent three or more months, (D)
that are Specially Serviced Mortgage Loans but are not delinquent or (E) as
to which foreclosure proceedings have been commenced; (v) with respect to
any Mortgage Loan as to which the related Mortgaged Property became an REO
Property during the related Prepayment Period, the Stated Principal Balance
and unpaid principal balance of such Mortgage Loan as of the date such
Mortgaged Property became an REO Property; (vi) as to any Mortgage Loan
repurchased or otherwise liquidated or disposed of during the related
Prepayment Period, the loan number thereof and the amount of any
Liquidation Proceeds and/or other amounts, if any, received thereon during
the related Prepayment Period and the portion thereof included in the
Available Distribution Amount for such Distribution Date; (vii) with
respect to any REO Property included in the Trust Fund as of the close of
business on the last day of the related Prepayment Period, the loan number
of the related Mortgage Loan, the book value of such REO Property and the
amount of any income collected with respect to such REO Property (net of
related expenses) and other amounts, if any, received on such REO Property
during the related Prepayment Period and the portion thereof included in
the Available Distribution Amount for such Distribution Date; (viii) with
respect to any REO Property sold or otherwise disposed of during the
related Prepayment Period, (A) the loan number of the related Mortgage Loan
and the amount of sale proceeds and other amounts, if any, received in
respect of such REO Property during the related Prepayment Period and the
portion thereof included in the Available Distribution Amount for such
Distribution Date and (B) the date of the related determination by the
Special Servicer that it has recovered all payments which it expects to be
finally recoverable; (ix) the Certificate Balance or Notional Amount of
each Class of REMIC Regular Certificates immediately before and immediately
after such Distribution Date, separately identifying any reduction in the
Certificate Balance or Notional Amount of each such Class due to Realized
Losses and Additional Trust Fund Expenses; (x) the aggregate amount of
principal prepayments made during the related Prepayment Period, and the
aggregate amount of any Prepayment Interest Shortfalls incurred in
connection therewith; (xi) the aggregate amount of servicing compensation
retained by or paid to the Master Servicer and the Special Servicer in
respect of the related Prepayment Period; (xii) the amount of Realized
Losses and Additional Trust Fund Expenses, if any, incurred with respect to
the Trust Fund during the related Prepayment Period; (xiii) the aggregate
amount of Advances outstanding as of the close of business on the prior
Distribution Date which had been made by the Master Servicer, the Special
Servicer and/or the Trustee; and (xiv) the amount of any Appraisal
Reduction Amount on a loan-by-loan basis and the total Appraisal Reduction
Amounts as of such Distribution Date. In the case of information furnished
pursuant to subclauses (i), (ii) and (ix) above, the amounts shall be
expressed as a dollar amount in the aggregate for all Certificates of each
applicable Class and per single Certificate of a specified minimum
denomination.
(2) A report containing information regarding the Mortgage Loans as of
the close of business on the related Determination Date, which report shall
contain substantially the categories of information regarding the Mortgage
Loans set forth in this Prospectus Supplement in the tables under the
caption "Annex A: Certain Characteristics of the Mortgage Loans"
(calculated, where applicable, on the basis of the most recent relevant
information provided by the borrowers to the Master Servicer or the Special
Servicer and by the Master Servicer or the Special Servicer, as the case
may be, to the Trustee) and such information shall be presented in a
loan-by-loan and tabular format substantially similar to the formats
utilized in this Prospectus Supplement on Annex A.
(3) A "Delinquent Loan Status Report" setting forth, among other
things, those Mortgage Loans which, as of the close of business on the
Determination Date in the prior calendar month, were delinquent 30-59 days,
delinquent 60-89 days, delinquent 90 days or more, current but specially
serviced, or in foreclosure but not REO Property.
(4) An "Historical Loan Modification Report" setting forth, among
other things, those Mortgage Loans which, as of the close of business on
the Determination Date immediately preceding the preparation of such
report, have been modified pursuant to the Pooling Agreement (i) during the
Collection Period ending on such Determination Date and (ii) since the
Cut-off Date, showing the original and the revised terms thereof.
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(5) An "Historical Loss Report" setting forth, among other things, as
of the close of business on the last day of the most recently ended
Prepayment Period preceding the preparation of such report, (i) the
aggregate amount of liquidation proceeds and liquidation expenses, both for
such Prepayment Period and historically, and (ii) the amount of Realized
Losses occurring during such Prepayment Period, set forth on a Mortgage
Loan-by-Mortgage Loan basis.
(6) An "REO Status Report" setting forth, among other things, with
respect to each REO Property that was included in the Trust Fund as of the
close of business on the last day of the most recently ended Prepayment
Period preceding the preparation of such report, (i) the acquisition date
of such REO Property, (ii) the amount of income collected with respect to
any REO Property (net of related expenses) and other amounts, if any,
received on such REO Property during such Prepayment Period and (iii) the
value of the REO Property based on the most recent appraisal or other
valuation thereof available to the Master Servicer as of such date of
determination (including any prepared internally by the Special Servicer).
(7) A "Special Servicer Loan Status Report" setting forth, among other
things, as of the close of business on the Determination Date immediately
preceding the preparation of such report, (i) the aggregate amount of
Specially Serviced Mortgage Loans and (ii) a loan-by-loan listing of all
Specially Serviced Mortgage Loans indicating their status, date and reason
for transfer to the Special Servicer.
None of the above reports will include any information that the Master
Servicer deems to be confidential. The information that pertains to Specially
Serviced Mortgage Loans and REO Properties reflected in such reports shall be
based solely upon the reports delivered by the Special Servicer to the Master
Servicer prior to the related Distribution Date. Absent manifest error, none of
the Master Servicer, the Special Servicer or the Trustee shall be responsible
for the accuracy or completeness of any information supplied to it by a borrower
or other third party that is included in any reports, statements, materials or
information prepared or provided by the Master Servicer, the Special Servicer or
the Trustee, as applicable.
The Master Servicer is also required to deliver to the Trustee annually, on
or before June 30 of each year, commencing with June 30, 1997, with respect to
each Mortgaged Property and REO Property, an "Operating Statement Analysis"
containing detailed revenue and expense line items normalized using the
methodology described in Annex A as of the end of the preceding calendar year,
together with copies of the operating statements and rent rolls (but only to the
extent the related borrower is required by the Mortgage to deliver, or otherwise
agrees to provide, such information) for such Mortgaged Property or REO Property
as of the end of the preceding calendar year.
Certificate Owners who have certified to the Trustee as to their beneficial
ownership of any Offered Certificate may also obtain copies of any of the
Trustee Reports and Operating Statement Analyses described above. Otherwise,
until such time as Definitive Certificates are issued in respect of the Offered
Certificates, the foregoing information will be available to the related
Certificate Owners only to the extent that it is forwarded by or otherwise
available through DTC and its Participants. Conveyance of notices and other
communications by DTC to Participants, and by Participants to Certificate
Owners, will be governed by arrangements among them, subject to any statutory or
regulatory requirements as may be in effect from time to time. The Master
Servicer, the Special Servicer, the Trustee, the Sponsor, the REMIC
Administrator, the Mortgage Loan Seller and the Certificate Registrar are
required to recognize as Certificateholders only those persons in whose names
the Certificates are registered on the books and records of the Certificate
Registrar.
For a discussion of certain annual information reports to be furnished by
the Trustee to persons who at any time during the prior calendar year were
holders of the Offered Certificates, see "Description of the
Certificates--Reports to Certificateholders" in the Prospectus.
Other Information. The Pooling Agreement requires that the Trustee make
available at its Corporate Trust Office, during normal business hours, upon
reasonable advance written notice, for review by any holder or Certificate Owner
of an Offered Certificate or any person identified to the Trustee as a
prospective transferee of an Offered Certificate or any interest therein,
originals or copies of, among other things, the following items: (a) the Pooling
Agreement and any amendments thereto, (b) all Trustee Reports delivered to
holders of the relevant Class of Offered Certificates since the Delivery Date,
(c) all officer's certificates delivered to the Trustee since the Delivery Date
as described under "Description of the Pooling Agreements--Evidence as to
Compliance" in the Prospectus, (d) all accountant's reports delivered to the
Trustee since the Delivery Date as described under "Description of the Pooling
Agreements--Evidence as to Compliance" in the Prospectus, and (e) the Mortgage
Note, Mortgage and other legal
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documents relating to each Mortgage Loan, including any and all modifications,
waivers and amendments of the terms of a Mortgage Loan entered into by the
Master Servicer or the Special Servicer and delivered to the Trustee. In
addition, the Master Servicer is required to make available, during normal
business hours, upon reasonable advance written notice, for review by any holder
or Certificate Owner of an Offered Certificate or any person identified to the
Master Servicer as a prospective transferee of an Offered Certificate or any
interest therein, originals or copies of any and all documents (in the case of
documents generated by the Special Servicer, to the extent received therefrom)
that constitute the servicing file for each Mortgage Loan. Copies of any and all
of the foregoing items will be available from the Trustee or the Master
Servicer, as the case may be, upon request; however, the Trustee or the Master
Servicer, as the case may be, will be permitted to require payment of a sum
sufficient to cover the reasonable costs and expenses of providing such
services.
The Trustee and Master Servicer will each make available, upon reasonable
advance notice and at the expense of the requesting party, copies of the items
referred to in the prior paragraph that are maintained thereby, to
Certificateholders, Certificate Owners and prospective purchasers of
Certificates and interests therein; provided that the Trustee and Master
Servicer may each require (a) in the case of a Certificate Owner, a written
confirmation executed by the requesting person or entity, in a form reasonably
acceptable to the Trustee or Master Servicer, as applicable, generally to the
effect that such person or entity is a beneficial owner of Offered Certificates,
is requesting the information solely for use in evaluating such person's or
entity's investment in such Certificates and will otherwise keep such
information confidential and (b) in the case of a prospective purchaser,
confirmation executed by the requesting person or entity, in a form reasonably
acceptable to the Trustee or Master Servicer, as applicable, generally to the
effect that such person or entity is a prospective purchaser of Offered
Certificates or an interest therein, is requesting the information solely for
use in evaluating a possible investment in such Certificates and will otherwise
keep such information confidential. Certificateholders, by the acceptance of
their Certificates, will be deemed to have agreed to keep such information
confidential.
VOTING RIGHTS
At all times during the term of the Pooling Agreement, ___% of the voting
rights for the Certificates (the "Voting Rights") shall be allocated among the
holders of the respective Classes of Sequential Pay Certificates in proportion
to the Certificate Balances of their Certificates, ___% of the Voting Rights
shall be allocated among the holders of the respective Classes of Class X
Certificates in proportion to the Notional Amounts of their Certificates (but
only for so long as such Class X Certificates remain outstanding), and all
Voting Rights not otherwise allocated in the aforesaid manner will be allocated
equally by Class among the holders of the respective Classes of REMIC Residual
Certificates. Voting Rights allocated to a Class of Certificateholders shall be
allocated among such Certificateholders in proportion to the percentage
interests in such Class evidenced by their respective Certificates. See
"Description of the Certificates--Voting Rights" in the Prospectus.
TERMINATION
The obligations created by the Pooling Agreement will terminate following
the earliest of (i) the final payment (or advance in respect thereof) or other
liquidation of the last Mortgage Loan or related REO Property remaining in the
Trust Fund, and (ii) the purchase of all of the Mortgage Loans and REO
Properties remaining in the Trust Fund by the Master Servicer or by any holder
(other than the Sponsor or Mortgage Loan Seller) of Certificates representing a
majority of the Voting Rights allocated to the Controlling Class. Written notice
of termination of the Pooling Agreement will be given to each Certificateholder,
and the final distribution with respect to each Certificate will be made only
upon surrender and cancellation of such Certificate at the office of the
Certificate Registrar or other location specified in such notice of termination.
Any such purchase by the Master Servicer or a majority holder of the
Controlling Class of all the Mortgage Loans and REO Properties remaining in the
Trust Fund is required to be made at a price equal to (a) the sum of (i) the
aggregate Purchase Price of all the Mortgage Loans then included in the Trust
Fund (other than the Mortgage Loans as to which the related Mortgaged Property
has become an REO Property) and (ii) the fair market value of all REO Properties
then included in the Trust Fund, as determined by an appraiser mutually agreed
upon by the Master Servicer and the Trustee, minus (b) (solely in the case of a
purchase by the Master Servicer) the aggregate of all amounts payable or
reimbursable to the Master Servicer under the Pooling Agreement. Such purchase
will effect early retirement of the then outstanding Certificates, but the right
of the Master Servicer or a majority holder of the
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Controlling Class to effect such termination is subject to the requirement that
the then aggregate Stated Principal Balance of the Mortgage Pool be less than
5.0% of the Initial Pool Balance. The purchase price paid by the Master Servicer
or a majority holder of the Controlling Class, exclusive of any portion thereof
payable or reimbursable to any person other than the Certificateholders, will
constitute part of the Available Distribution Amount for the final Distribution
Date.
THE TRUSTEE
State Street Bank and Trust Company, a trust company chartered under the
laws of the Commonwealth of Massachusetts, will act as Trustee on behalf of the
Certificateholders. The Corporate Trust Department of the Trustee is located at
Two International Place, 5th Floor, Boston, Massachusetts 02110. See
"Description of the Pooling Agreements--the Trustee", "--Duties of the Trustee",
"--Certain Matters Regarding the Trustee" and "--Resignation and Removal of the
Trustee" in the Prospectus.
Pursuant to the Pooling Agreement, the Master Servicer will be responsible
for paying the compensation of the Trustee.
The Trustee will also have certain duties with respect to REMIC
administration (in such capacity the "REMIC Administrator"). See "Material
Federal Income Tax Consequences--REMICs--Reporting and Other Administrative
Matters" and "Description of the Pooling Agreements--Certain Matters Regarding
the Master Servicer, the Special Servicer, the REMIC Administrator and the
Sponsor", "--Events of Default" and "--Rights Upon Event of Default" in the
Prospectus.
YIELD AND MATURITY CONSIDERATIONS
YIELD CONSIDERATIONS
General. The yield on any Offered Certificate will depend on (a) the price
at which such Certificate is purchased by an investor and (b) the rate, timing
and amount of distributions on such Certificate. The rate, timing and amount of
distributions on any Offered Certificate will in turn depend on, among other
things, (v) the Pass-Through Rate for such Certificate, (w) the rate and timing
of principal payments (including principal prepayments) and other principal
collections on or in respect of the Mortgage Loans and the extent to which such
amounts are to be applied or otherwise result in reduction of the Certificate
Balance or Notional Amount of the Class of Certificates to which such
Certificate belongs, (x) the rate, timing and severity of Realized Losses on or
in respect of the Mortgage Loans and of Additional Trust Fund Expenses and the
extent to which such losses and expenses are allocable or otherwise result in
reduction of the Certificate Balance or Notional Amount of the Class of
Certificates to which such Certificate belongs, (y) the timing and severity of
any Prepayment Interest Shortfalls and the extent to which such shortfalls are
allocable in reduction of the Distributable Certificate Interest payable on the
Class of Certificates to which such Certificate belongs and (z) the extent to
which Prepayment Premiums are collected and, in turn, distributed on the Class
of Certificates to which such Certificate belongs.
Pass-Through Rates. The Pass-Through Rate applicable to each Class of Class
X Certificates for any Distribution Date will be variable and, in general, will
be based upon the weighted average of the Net Mortgage Rates for some or all of
the Mortgage Loans. Accordingly, the yield on such Certificates will be
sensitive to changes in the relative composition of the two Loan Groups as a
result of scheduled amortization, voluntary prepayments and liquidations of
Mortgage Loans following default. The Pass-Through Rate applicable to the Class
A-1 Certificates will also be variable and will be based upon Six-Month LIBOR
from time to time. Accordingly, the yield on such Certificates will be sensitive
to changes in the value of such Index. See "Description of the
Certificates--Distributions--Pass-Through Rates" and "Description of the
Mortgage Pool" herein and "--Rate and Timing of Principal Payments" below.
Rate and Timing of Principal Payments. The yield to holders of Class X
Certificates will be extremely sensitive to, and the yield to holders of any
other Offered Certificates purchased at a discount or premium will be affected
by, the rate and timing of principal payments made in reduction of, or otherwise
resulting in the reduction of, the Certificate Balances or Notional Amounts of
such Certificates. As described herein, the Principal Distribution Amount with
respect to each Loan Group for each Distribution Date will be distributable
entirely in respect of the Class A Certificates of the related Certificate Group
until the related Certificate Balance(s) thereof is (are) reduced to zero,
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and will thereafter be distributable entirely in respect of the other Class A
Certificates, until the Certificate Balance(s) of such other Class A
Certificates is (are) reduced to zero. Following retirement of the Class A
Certificates, the Principal Distribution Amount with respect to each Loan Group
for each Distribution Date will be distributable entirely in respect of the
Class B Certificates, the Class C Certificates, the Class D Certificates, the
Class E Certificates, the Class F Certificates, the Class G Certificates, the
Class H Certificates and the Class J Certificates, in that order, in each case
until the Certificate Balance of such Class of Certificates is reduced to zero.
In addition, the Notional Amount of the Class X-1 Certificates will equal the
aggregate Stated Principal Balance of Loan Group 1 outstanding from time to
time, and the Notional Amount of the Class X-2 Certificates will equal the
aggregate Stated Principal Balance of the Mortgage Pool outstanding from time to
time. Consequently, the rate and timing of principal payments that are
distributed or otherwise result in reduction of the Certificate Balance or
Notional Amount, as the case may be, of each Class of Offered Certificates will
be directly related to the rate and timing of principal payments on or in
respect of the Mortgage Loans, which will in turn be affected by the
amortization schedules thereof, the dates on which Balloon Payments are due and
the rate and timing of principal prepayments and other unscheduled collections
thereon (including for this purpose, collections made in connection with
liquidations of Mortgage Loans due to defaults, casualties or condemnations
affecting the Mortgaged Properties, or purchases of Mortgage Loans out of the
Trust Fund). Prepayments and, assuming the respective stated maturity dates
therefor have not occurred, liquidations of the Mortgage Loans will result in
distributions on the Sequential Pay Certificates of amounts that would otherwise
be distributed over the remaining terms of the Mortgage Loans and will tend to
shorten the weighted average lives of those Certificates. Defaults on the
Mortgage Loans, particularly at or near their stated maturity dates, may result
in significant delays in payments of principal on the Mortgage Loans (and,
accordingly, on the Sequential Pay Certificates) while work outs are negotiated
or foreclosures are completed, and such delays will tend to lengthen the
weighted average lives of those Certificates. See "Servicing of the Mortgage
Loans--Modifications, Waivers, Amendments and Consents" herein and "Description
of the Pooling Agreements--Realization Upon Defaulted Mortgage Loans" and
"Certain Legal Aspects of Mortgage Loans--Foreclosure" in the Prospectus.
The extent to which the yield to maturity of any Class of Offered
Certificates may vary from the anticipated yield will depend upon the degree to
which such Certificates are purchased at a discount or premium and when, and to
what degree, payments of principal on or in respect of the Mortgage Loans are
distributed or otherwise result in a reduction of the Certificate Balance or
Notional Amount of such Certificates. An investor should consider, in the case
of any Offered Certificate purchased at a discount, the risk that a slower than
anticipated rate of principal payments on the Mortgage Loans could result in an
actual yield to such investor that is lower than the anticipated yield and, in
the case of any Class X Certificate or any other Offered Certificate purchased
at a premium, the risk that a faster than anticipated rate of principal payments
on the Mortgage Loans could result in an actual yield to such investor that is
lower than the anticipated yield. In general, the earlier a payment of principal
on or in respect of the Mortgage Loans is distributed in reduction of the
principal balance of a Class A, Class B, Class C, Class D, Class E or Class F
Certificate purchased at a discount or premium or results in the reduction of
the notional amount of a Class X Certificate, the greater will be the effect on
an investor's yield to maturity. As a result, the effect on an investor's yield
of principal payments (to the extent distributable or otherwise resulting in
reduction of the principal balance or notional amount of such investor's Offered
Certificates) occurring at a rate higher (or lower) than the rate anticipated by
the investor during any particular period would not be fully offset by a
subsequent like reduction (or increase) in the rate of principal payments.
Investors in the Class X Certificates should fully consider the risk that an
extremely rapid rate of principal payments on the Group 1 Loans, in the case of
the Class X-1 Certificates, and the Group 2 Loans (and, to a lesser extent, the
Group 1 Loans), in the case of the Class X-2 Certificates, could result in the
failure of such investors fully to recoup their initial investments. Because the
rate of principal payments on or in respect of the Mortgage Loans will depend on
future events and a variety of factors (as described more fully below), no
assurance can be given as to such rate or the rate of principal prepayments in
particular. The Sponsor is not aware of any relevant publicly available or
authoritative statistics with respect to the historical prepayment experience of
a large group of mortgage loans comparable to the Mortgage Loans.
Losses and Shortfalls. The yield to holders of the Offered Certificates
will also depend on the extent to which such holders are required to bear the
effects of any losses or shortfalls on the Mortgage Loans. Losses and other
shortfalls on the Mortgage Loans will, with the exception of Prepayment Interest
Shortfalls, generally be applied to reduce the Certificate Balances of the
Certificates in the following order: first, to each Class of Subordinate
Certificates, in reverse order of alphabetical designation, until the
Certificate Balance thereof has been reduced to zero; then, to the
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Class A-1, Class A-2A and Class A-2B Certificates pro rata in accordance with
their respective remaining Certificate Balances, until the remaining Certificate
Balance of each such Class of Certificates has been reduced to zero.
Certain Relevant Factors. The rate and timing of principal payments and
defaults and the severity of losses on or allocable to the Mortgage Loans maybe
affected by a number of factors, including, without limitation, prevailing
interest rates, the terms of the Mortgage Loans (for example, Prepayment
Premiums, lock-out periods and amortization terms that require Balloon
Payments), the demographics and relative economic vitality of the areas in which
the Mortgaged Properties are located and the general supply and demand for
rental units, office space, retail shopping space, self storage space or nursing
home beds, as the case may be, in such areas, the quality of management of the
Mortgaged Properties, the servicing of the Mortgage Loans, possible changes in
tax laws and other opportunities for investment. See "Risk Factors--The Mortgage
Loans", "Description of the Mortgage Pool" and "Servicing of the Mortgage Loans"
herein and "Description of the Pooling Agreements" and "Yield and Maturity
Considerations--Principal Prepayments" in the Prospectus.
The rate of prepayment on the Mortgage Loans is likely to be affected by
prevailing market interest rates for mortgage loans of a comparable type, term
and risk level. When the prevailing market interest rate is below the Mortgage
Rate at which a Mortgage Loan accrues interest, a borrower may have an increased
incentive to refinance such Mortgage Loan. If a Mortgage Loan is not in a
lock-out period, any Prepayment Premium in respect of such Mortgage Loan may not
be sufficient economic disincentive to prevent the related borrower from
voluntarily prepaying the loan as part of a refinancing thereof. See
"Description of the Mortgage Pool--Certain Terms and Conditions of the Mortgage
Loans" herein.
Depending on prevailing market interest rates, the outlook for market
interest rates and economic conditions generally, some borrowers may sell
Mortgaged Properties in order to realize their equity therein, to meet cash flow
needs or to make other investments. In addition, some borrowers may be motivated
by Federal and state tax laws (which are subject to change) to sell Mortgaged
Properties prior to the exhaustion of tax depreciation benefits.
The Sponsor makes no representation or warranty as to the particular
factors that will affect the rate and timing of prepayments and defaults on the
Mortgage Loans, as to the relative importance of such factors, as to the
percentage of the principal balance of the Mortgage Loans that will be prepaid
or as to which a default will have occurred as of any date or as to the overall
rate of prepayment or default on the Mortgage Loans.
Yield Sensitivity of the Class X Certificates. The yield to maturity of
each Class of Class X Certificates will be highly sensitive to the rate and
timing of principal payments (including by reason of prepayments, defaults and
liquidations) on or in respect of the Mortgage Loans that constitute part of the
Notional Amount of such Certificates. The Notional Amount of the Class X-1
Certificates is equal to the aggregate Stated Principal Balance of Loan Group 1
outstanding from time to time, and the Notional Amount of the Class X-2
Certificates is equal to the aggregate Stated Principal Balance of the Mortgage
Pool outstanding from time to time. Investors in the Class X Certificates should
fully consider the associated risks, including the risk that an extremely rapid
rate of amortization and prepayment of the related Notional Amount could result
in the failure of such investors to recoup their initial investments.
Prepayments on mortgage loans may be measured by a prepayment standard or
model. The model used in this Prospectus Supplement is the "Constant Prepayment
Rate" or "CPR" model. The CPR model represents an assumed constant annual rate
of prepayment each month, expressed as a per annum percentage of the then
scheduled principal balance of a mortgage pool. As used in the following tables,
the column headed "0%" assumes that none of the Mortgage Loans is prepaid before
maturity. The columns headed "2%", "4%", "6%", "8%" and "10%" assume that
prepayments on each of the Mortgage Loans are made at those CPRs, in the case of
the first table, and that no prepayments are made on any Mortgage Loan during
such Mortgage Loan's prepayment lock-out period, if any, or, unless otherwise
indicated, during such Mortgage Loan's yield maintenance period, if any, and are
otherwise made on each of the Mortgage Loans at the indicated CPRs, in the case
of the second table. There is no assurance, however, that prepayments of the
Mortgage Loans (whether or not in a prepayment lock-out period or a yield
maintenance period) will conform to any particular CPR, and no representation is
made that the Mortgage Loans will prepay in accordance with the assumptions at
any of the CPRs shown or at any other particular prepayment rate, that all the
Mortgage Loans will prepay in accordance with the assumptions at the same rate
or that Mortgage Loans that are in a prepayment lock-out period or a yield
maintenance period will not prepay as a result of involuntary liquidations upon
default or otherwise. A "prepayment lock-out period" is any period during which
a Mortgage Loan prohibits voluntary prepayments
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on the part of the borrower. A "yield maintenance period" is any period during
which a Mortgage Loan provides that voluntary prepayments be accompanied by a
Prepayment Premium calculated on the basis of a yield maintenance formula.
The following table indicates the approximate pre-tax yield to maturity on
a corporate bond equivalent ("CBE") basis on the Class X Certificates for the
specified CPRs based on the following assumptions (the "Maturity Assumptions"):
(i) the Initial Loan Group 1 Balance is $29,966,950.58 and the Initial Loan
Group 2 Balance is $452,390,861, (ii) the initial Certificate Balances and
Notional Amounts, as the case may be, of the respective Classes of Offered
Certificates are as described herein, and the Pass-Through Rates for the
respective Classes of Offered Certificates are as described herein, (iii) the
scheduled Monthly Payments for each Mortgage Loan are based on such Mortgage
Loan's Cut-off Date Balance, calculated remaining amortization term as of the
Cut-off Date and, in the case of the Group 1 Loans, a value of Six-Month LIBOR
equal to 5.75% per annum, and, in the case of the Group 2 Loans, the Mortgage
Rate as of the Cut-off Date, (iv) Six-Month LIBOR remains constant at 5.75% per
annum, (v) the Mortgage Rates for the Group 2 Loans that are ARM Loans, will
remain at their respective floors; (vi) there are no delinquencies or losses in
respect of the Mortgage Loans, scheduled Monthly Payments on the Mortgage Loans
are timely received and prepayments are otherwise made on each of the Mortgage
Loans at the indicated CPRs set forth in the table (without regard to any
limitations in such Mortgage Loans on partial voluntary principal prepayments)
(except to the extent modified below by the assumption numbered (xiv)), (vii)
all Mortgage Loans accrue interest on the basis of a 360-day year consisting of
twelve 30-day months, (viii) neither the Master Servicer nor any majority holder
of the Controlling Class exercises its right of optional termination described
herein, (ix) no Mortgage Loan is required to be repurchased by the Mortgage Loan
Seller, (x) no Prepayment Interest Shortfalls are incurred and no Prepayment
Premiums are collected, (xi) there are no Additional Trust Fund Expenses, (xii)
distributions on the Offered Certificates are made on the 15th day of each month
commencing in August, 1996, (xiii) the Offered Certificates are issued on July
10, 1996 and (xiv) no prepayments are received as to any Mortgage Loan during
such Mortgage Loan's prepayment lock-out period ("LOP"), if any, or yield
maintenance period ("YMP"), if any. With respect to the immediately following
table, the assumption numbered above as (xiv) was not utilized in the
calculation thereof. It was further assumed that the respective aggregate
purchase prices of the Class X-1 and Class X-2 Certificates are as specified
below, in each case, expressed as a percentage of their respective Notional
Amount.
PRE-TAX YIELD TO MATURITY (CBE)
OF THE CLASS X CERTIFICATES
ASSUMED PREPAYMENT ASSUMPTION (CPR)
PURCHASE -------------------------------------------------
CLASS PRICE 0% 2% 4% 6% 8% 10%
- ----- ----- -- -- -- -- -- ---
X-1 ......... 9.45% 12.56% 10.49% 8.40% 6.28% 4.14% 1.97%
9.65% 11.88 9.82 7.73 5.62 3.48 1.33
9.85% 11.23 9.17 7.08 4.98 2.85 0.70
X-2 ......... 4.80% 11.87 11.78 11.68 11.59 11.51 11.43
5.00% 10.76 10.67 10.58 10.49 10.40 10.32
5.20% 9.72 9.63 9.54 9.45 9.37 9.29
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PRE-TAX YIELD TO MATURITY (CBE)
OF THE CLASS X CERTIFICATES
(PREPAYMENTS LOCKED OUT THROUGH LOP AND YMP, THEN THE FOLLOWING CPR)
ASSUMED PREPAYMENT ASSUMPTION (CPR)
PURCHASE ------------------------------------------------
CLASS PRICE 0% 2% 4% 6% 8% 10%
- ----- ----- -- -- -- -- -- ---
X-1 ......... 9.45% 12.56% 10.49% 8.40% 6.28% 4.14% 1.97%
9.65% 11.88 9.82 7.73 5.62 3.48 1.33
9.85% 11.23 9.17 7.08 4.98 2.85 0.70
X-2 ......... 4.8% 11.87 9.99 8.26 6.66 5.18 3.67
5.0% 10.76 8.89 7.19 5.59 4.13 2.63
5.2% 9.72 7.87 6.18 4.60 3.15 1.66
The pre-tax yields set forth in the preceding table were calculated by
determining the monthly discount rates that, when applied to the assumed streams
of cash flows to be paid on each Class of Class X Certificates, would cause the
discounted present value of such assumed stream of cash flows to equal the
assumed aggregate purchase price thereof, and by converting such monthly rates
to corporate bond equivalent rates. Such calculation does not take into account
shortfalls in collection of interest due to prepayments (or other liquidations)
of the Mortgage Loans or the interest rates at which investors may be able to
reinvest funds received by them as distributions on the Class X Certificates and
consequently does not purport to reflect the return on any investment in the
Class X Certificates when such reinvestment rates are considered.
The characteristics of the Mortgage Loans may differ from those assumed in
preparing the table above. In addition, there can be no assurance that the
Mortgage Loans will prepay in accordance with the above assumptions at any of
the rates shown in the table or at any other particular rate, that the cash
flows on the respective Classes of Class X Certificates will correspond to the
cash flows shown herein or that the aggregate purchase prices of the respective
Classes of Class X Certificates will be as assumed. In addition, it is unlikely
that the Mortgage Loans will prepay in accordance with the above assumptions at
any of the specified CPRs until maturity or that all the Mortgage Loans will so
prepay at the same rate. Timing of changes in the rate of prepayments may
significantly affect the actual yield to maturity to investors, even if the
average rate of principal prepayments is consistent with the expectations of
investors. Investors must make their own decisions as to the appropriate
prepayment assumption to be used in deciding whether to purchase any Class X
Certificates.
WEIGHTED AVERAGE LIVES
The weighted average life of any Sequential Pay Certificate refers to the
average amount of time that will elapse from the date of its issuance until each
dollar to be applied in reduction of the principal balance of such Certificate
is distributed to the investor. The weighted average life of any such
Certificate will be influenced by, among other things, the rate at which
principal of the Mortgage Loans is paid or otherwise collected or advanced and
the extent to which such payments, collections and/or advances of principal are
in turn applied in reduction of the Certificate Balance of the Class of
Certificates to which such Certificate belongs. As described herein, the
Principal Distribution Amount with respect to each Loan Group for each
Distribution Date will be distributable entirely in respect of the Class A
Certificates until the Certificate Balances thereof are reduced to zero, and
will thereafter be distributable entirely in respect of the Class B, Class C,
Class D, Class E, Class F, Class G, Class H and Class J Certificates, in that
order, in each case until the Certificate Balance of each such Class of
Certificates is reduced to zero. As a consequence of the foregoing, the weighted
average lives of the Class A Certificates will be shorter, and the weighted
average lives of the other Classes of Sequential Pay Certificates may be longer,
than would otherwise be the case if the Principal Distribution Amount with
respect to each Loan Group for each Distribution Date was being distributed on a
pro rata basis among the respective Classes of Sequential Pay Certificates.
The following tables indicate the percentages of the respective initial
Certificate Balances of the Class A-1, Class A-2A, Class A-2B, Class B, Class C,
Class D, Class E, Class F, Class G, Class H or Class J Certificates that would
be outstanding after each of the dates shown at various CPRs and the
corresponding weighted average lives of such Classes of Sequential Pay
Certificates. Two tables have been prepared with respect to each such Class of
S-71
<PAGE>
Certificates. The first table of each such pair is based on the Maturity
Assumptions except that the assumption numbered above as (xiv) was not utilized
in the calculation thereof. The second table of each such pair has also been
prepared on the basis of the Maturity Assumptions. To the extent that the
Mortgage Loans have characteristics that differ from those assumed in preparing
the tables set forth below, the Class A-1, Class A-2A, Class A-2B, Class B,
Class C, Class D, Class E, Class F, Class G, Class H or Class J Certificates may
mature earlier or later than indicated by the tables. It is highly unlikely that
the Mortgage Loans will prepay in accordance with the above assumptions at any
of the specified CPRs until maturity or that all the Mortgage Loans will so
prepay at the same rate. In addition, variations in the actual prepayment
experience and the balance of the Mortgage Loans that prepay may increase or
decrease the percentages of initial Certificate Balances (and weighted average
lives) shown in the following tables. Such variations may occur even if the
average prepayment experience of the Mortgage Loans were to conform to the
assumptions and be equal to any of the specified CPRs. Investors are urged to
conduct their own analyses of the rates at which the Mortgage Loans may be
expected to prepay.
For purposes of the following tables, the weighted average life of a
Certificate is determined by (i) multiplying the amount of each principal
distribution thereon by the number of years from the Delivery Date to the
related Distribution Date, (ii) summing the results and (iii) dividing the sum
by the aggregate amount of the reductions in the principal balance of such
Certificate.
S-72
<PAGE>
Based on the above described assumptions, the following tables indicate the
resulting weighted average lives of the Class A-1 Certificates and set forth the
percentages of the initial Certificate Balance of the Class A-1 Certificates
that would be outstanding after each of the dates shown at the indicated CPRs.
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS A-1 CERTIFICATES AT THE SPECIFIED CPRS
Prepayment Assumption (CPR)
----------------------------------
Date 0% 2% 4% 6% 8% 10%
---- -- -- -- -- -- ---
Delivery Date .............................. 100% 100% 100% 100% 100% 100%
July 15, 1997 .............................. 99 97 95 93 91 89
July 15, 1998 .............................. 98 94 90 87 83 79
July 15, 1999 .............................. 97 91 86 80 75 71
July 15, 2000 .............................. 95 88 81 75 68 63
July 15, 2001 .............................. 94 85 77 69 62 56
July 15, 2002 .............................. 71 63 56 49 43 38
July 15, 2003 .............................. 70 61 53 45 39 33
July 15, 2004 .............................. 69 59 50 42 35 0
July 15, 2005 .............................. 0 * * 0 0 0
July 15, 2006 .............................. 0 0 0 0 0 0
Weighted Average Life (years)** ............ 7.2 6.7 6.2 5.8 5.4 4.7
- ----------
* Indicates an amount above zero and less than 0.5% of the original principal
balance is outstanding
** The weighted average life of a REMIC Certificate is determined as specified
under "Weighted Average Lives of REMIC Certificates".
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS A-1 CERTIFICATES AT THE SPECIFIED CPRS
(PREPAYMENTS LOCKED OUT THROUGH LOP AND YMP, THEN THE FOLLOWING CPR)
Prepayment Assumption (CPR)
----------------------------------
Date 0% 2% 4% 6% 8% 10%
---- -- -- -- -- -- ---
Delivery Date .............................. 100% 100% 100% 100% 100% 100%
July 15, 1997 .............................. 99 97 95 93 91 89
July 15, 1998 .............................. 98 94 90 87 83 79
July 15, 1999 .............................. 97 91 86 80 75 71
July 15, 2000 .............................. 95 88 81 75 68 63
July 15, 2001 .............................. 94 85 77 69 62 56
July 15, 2002 .............................. 71 63 56 49 43 38
July 15, 2003 .............................. 70 61 53 45 39 33
July 15, 2004 .............................. 69 59 50 42 35 30
July 15, 2005 .............................. 0 0 0 0 0 0
July 15, 2006 .............................. 0 0 0 0 0 0
Weighted Average Life (years)** ............ 7.2 6.7 6.2 5.8 5.4 5.0
- ----------
* Indicates an amount above zero and less than 0.5% of the original principal
balance is outstanding.
** The weighted average life of a REMIC Certificate is determined as specified
under "Weighted Average Lives of REMIC Certificates".
S-73
<PAGE>
Based on the above described assumptions, the following tables indicate the
resulting weighted average lives of the Class A-2A Certificates and set forth
the percentages of the initial Certificate Balance of the Class A-2A
Certificates that would be outstanding after each of the dates shown at the
indicated CPRs.
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS A-2A CERTIFICATES AT THE SPECIFIED CPRS
Prepayment Assumption (CPR)
---------------------------------------
Date 0% 2% 4% 6% 8% 10%
---- -- -- -- -- -- ---
Delivery Date ........................ 100% 100% 100% 100% 100% 100%
July 15, 1997 ........................ 96 90 84 78 72 66
July 15, 1998 ........................ 92 81 69 58 47 36
July 15, 1999 ........................ 88 71 54 39 24 9
July 15, 2000 ........................ 75 54 33 14 0 0
July 15, 2001 ........................ 69 43 19 0 0 0
July 15, 2002 ........................ 49 21 0 0 0 0
July 15, 2003 ........................ 19 0 0 0 0 0
July 15, 2004 ........................ 14 0 0 0 0 0
July 15, 2005 ........................ 0 0 0 0 0 0
Weighted Average Life (years)* ....... 5.6 4.1 3.1 2.4 2.0 1.6
- ----------
* The weighted average life of a REMIC Certificate is determined as specified
under "Weighted Average Lives of REMIC Certificates".
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS A-2A CERTIFICATES AT THE SPECIFIED CPRS
(PREPAYMENTS LOCKED OUT THROUGH LOP AND YMP, THEN THE FOLLOWING CPR)
Prepayment Assumption (CPR)
---------------------------------------
Date 0% 2% 4% 6% 8% 10%
---- -- -- -- -- -- ---
Delivery Date ........................ 100% 100% 100% 100% 100% 100%
July 15, 1997 ........................ 96 96 96 96 95 95
July 15, 1998 ........................ 92 92 91 91 90 90
July 15, 1999 ........................ 88 87 86 85 85 84
July 15, 2000 ........................ 75 75 74 74 73 73
July 15, 2001 ........................ 69 68 67 66 66 65
July 15, 2002 ........................ 49 49 48 47 47 46
July 15, 2003 ........................ 19 19 18 17 17 16
July 15, 2004 ........................ 14 13 12 11 11 10
July 15, 2005 ........................ 0 0 0 0 0 0
Weighted Average Life (years)* ....... 5.6 5.4 5.5 5.4 5.4 5.3
- ----------
* The weighted average life of a REMIC Certificate is determined as specified
under "Weighted Average Lives of REMIC Certificates".
S-74
<PAGE>
Based on the above described assumptions, the following tables indicate the
resulting weighted average lives of the Class A-2B Certificates and set forth
the percentages of the initial Certificate Balance of the Class A-2B
Certificates that would be outstanding after each of the dates shown at the
indicated CPRs.
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS A-2B CERTIFICATES AT THE SPECIFIED CPRS
Prepayment Assumption (CPR)
---------------------------------------
Date 0% 2% 4% 6% 8% 10%
---- -- -- -- -- -- ---
Delivery Date ........................ 100% 100% 100% 100% 100% 100%
July 15, 1997 ........................ 100 100 100 100 100 100
July 15, 1998 ........................ 100 100 100 100 100 100
July 15, 1999 ........................ 100 100 100 100 100 100
July 15, 2000 ........................ 100 100 100 100 97 79
July 15, 2001 ........................ 100 100 100 97 76 57
July 15, 2002 ........................ 100 100 95 71 49 30
July 15, 2003 ........................ 100 90 63 40 19 1
July 15, 2004 ........................ 100 81 52 28 6 0
July 15, 2005 ........................ 98 64 35 10 0 0
July 15, 2006 ........................ 0 0 0 0 0 0
Weighted Average Life (years)* ....... 9.4 8.9 8.0 7.0 6.0 5.2
- ----------
* The weighted average life of a REMIC Certificate is determined as specified
under "Weighted Average Lives of REMIC Certificates".
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS A-2B CERTIFICATES AT THE SPECIFIED CPRS
(PREPAYMENTS LOCKED OUT THROUGH LOP AND YMP, THEN THE FOLLOWING CPR)
Prepayment Assumption (CPR)
---------------------------------------
Date 0% 2% 4% 6% 8% 10%
---- -- -- -- -- -- ---
Delivery Date ........................ 100% 100% 100% 100% 100% 100%
July 15, 1997 ........................ 100 100 100 100 100 100
July 15, 1998 ........................ 100 100 100 100 100 100
July 15, 1999 ........................ 100 100 100 100 100 100
July 15, 2000 ........................ 100 100 100 100 100 100
July 15, 2001 ........................ 100 100 100 100 100 100
July 15, 2002 ........................ 100 100 100 100 100 100
July 15, 2003 ........................ 100 100 100 100 100 100
July 15, 2004 ........................ 100 100 100 100 100 100
July 15, 2005 ........................ 98 97 96 96 95 94
July 15, 2006 ........................ 0 0 0 0 0 0
Weighted Average Life (years)* ....... 9.4 9.4 9.4 9.4 9.4 9.4
- ----------
* The weighted average life of a REMIC Certificate is determined as specified
under "Weighted Average Lives of REMIC Certificates".
S-75
<PAGE>
Based on the above described assumptions, the following tables indicate the
resulting weighted average lives of the Class B Certificates and set forth the
percentages of the initial Certificate Balance of the Class B Certificates that
would be outstanding after each of the dates shown at the indicated CPRs.
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS B CERTIFICATES AT THE SPECIFIED CPRS
Prepayment Assumption (CPR)
---------------------------------------
Date 0% 2% 4% 6% 8% 10%
---- -- -- -- -- -- ---
Delivery Date ........................ 100% 100% 100% 100% 100% 100%
July 15, 1997 ........................ 100 100 100 100 100 100
July 15, 1998 ........................ 100 100 100 100 100 100
July 15, 1999 ........................ 100 100 100 100 100 100
July 15, 2000 ........................ 100 100 100 100 100 100
July 15, 2001 ........................ 100 100 100 100 100 100
July 15, 2002 ........................ 100 100 100 100 100 100
July 15, 2003 ........................ 100 100 100 100 100 100
July 15, 2004 ........................ 100 100 100 100 100 39
July 15, 2005 ........................ 100 100 100 100 0 0
July 15, 2006 ........................ 0 0 0 0 0 0
Weighted Average Life (years)* ....... 9.6 9.6 9.5 9.4 8.8 8.0
- ----------
* The weighted average life of a REMIC Certificate is determined as specified
under "Weighted Average Lives of REMIC Certificates".
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS B CERTIFICATES AT THE SPECIFIED CPRS
(PREPAYMENTS LOCKED OUT THROUGH LOP AND YMP, THEN THE FOLLOWING CPR)
Prepayment Assumption (CPR)
---------------------------------------
Date 0% 2% 4% 6% 8% 10%
---- -- -- -- -- -- ---
Delivery Date ........................ 100% 100% 100% 100% 100% 100%
July 15, 1997 ........................ 100 100 100 100 100 100
July 15, 1998 ........................ 100 100 100 100 100 100
July 15, 1999 ........................ 100 100 100 100 100 100
July 15, 2000 ........................ 100 100 100 100 100 100
July 15, 2001 ........................ 100 100 100 100 100 100
July 15, 2002 ........................ 100 100 100 100 100 100
July 15, 2003 ........................ 100 100 100 100 100 100
July 15, 2004 ........................ 100 100 100 100 100 100
July 15, 2005 ........................ 100 100 100 100 100 100
July 15, 2006 ........................ 0 0 0 0 0 0
Weighted Average Life (years)* ....... 9.6 9.6 9.6 9.6 9.6 9.6
- ----------
* The weighted average life of a REMIC Certificate is determined as specified
under "Weighted Average Lives of REMIC Certificates".
S-76
<PAGE>
Based on the above described assumptions, the following tables indicate the
resulting weighted average lives of the Class C Certificates and set forth the
percentages of the initial Certificate Balance of the Class C Certificates that
would be outstanding after each of the dates shown at the indicated CPRs.
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF THE
CLASS C CERTIFICATES AT THE SPECIFIED CPRS
Prepayment Assumption (CPR)
---------------------------------------
Date 0% 2% 4% 6% 8% 10%
---- -- -- -- -- -- ---
Delivery Date ........................ 100% 100% 100% 100% 100% 100%
July 15, 1997 ........................ 100 100 100 100 100 100
July 15, 1998 ........................ 100 100 100 100 100 100
July 15, 1999 ........................ 100 100 100 100 100 100
July 15, 2000 ........................ 100 100 100 100 100 100
July 15, 2001 ........................ 100 100 100 100 100 100
July 15, 2002 ........................ 100 100 100 100 100 100
July 15, 2003 ........................ 100 100 100 100 100 100
July 15, 2004 ........................ 100 100 100 100 100 100
July 15, 2005 ........................ 100 100 100 100 97 16
July 15, 2006 ........................ 0 0 0 0 0 0
Weighted Average Life (years)* ....... 9.7 9.6 9.6 9.5 9.3 8.7
- ----------
* The weighted average life of a REMIC Certificate is determined as specified
under "Weighted Average Lives of REMIC Certificates".
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF THE
CLASS C CERTIFICATES AT THE SPECIFIED CPRS
(PREPAYMENTS LOCKED OUT THROUGH LOP AND YMP, THEN THE FOLLOWING CPR)
Prepayment Assumption (CPR)
---------------------------------------
Date 0% 2% 4% 6% 8% 10%
---- -- -- -- -- -- ---
Delivery Date ........................ 100% 100% 100% 100% 100% 100%
July 15, 1997 ........................ 100 100 100 100 100 100
July 15, 1998 ........................ 100 100 100 100 100 100
July 15, 1999 ........................ 100 100 100 100 100 100
July 15, 2000 ........................ 100 100 100 100 100 100
July 15, 2001 ........................ 100 100 100 100 100 100
July 15, 2002 ........................ 100 100 100 100 100 100
July 15, 2003 ........................ 100 100 100 100 100 100
July 15, 2004 ........................ 100 100 100 100 100 100
July 15, 2005 ........................ 100 100 100 100 100 100
July 15, 2006 ........................ 0 0 0 0 0 0
Weighted Average Life (years)* ....... 9.7 9.7 9.7 9.7 9.7 9.7
- ----------
* The weighted average life of a REMIC Certificate is determined as specified
under "Weighted Average Lives of REMIC Certificates".
S-77
<PAGE>
Based on the above described assumptions, the following tables indicate the
resulting weighted average lives of the Class D Certificates and set forth the
percentages of the initial Certificate Balance of the Class D Certificates that
would be outstanding after each of the dates shown at the indicated CPRs.
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS D CERTIFICATES AT THE SPECIFIED CPRS
Prepayment Assumption (CPR)
---------------------------------------
Date 0% 2% 4% 6% 8% 10%
---- -- -- -- -- -- ---
Delivery Date ........................ 100% 100% 100% 100% 100% 100%
July 15, 1997 ........................ 100 100 100 100 100 100
July 15, 1998 ........................ 100 100 100 100 100 100
July 15, 1999 ........................ 100 100 100 100 100 100
July 15, 2000 ........................ 100 100 100 100 100 100
July 15, 2001 ........................ 100 100 100 100 100 100
July 15, 2002 ........................ 100 100 100 100 100 100
July 15, 2003 ........................ 100 100 100 100 100 100
July 15, 2004 ........................ 100 100 100 100 100 100
July 15, 2005 ........................ 100 100 100 100 100 100
July 15, 2006 ........................ 0 0 0 0 0 0
Weighted Average Life (years)* ....... 9.8 9.7 9.6 9.6 9.5 9.4
- ----------
* The weighted average life of a REMIC Certificate is determined as specified
under "Weighted Average Lives of REMIC Certificates".
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS D CERTIFICATES AT THE SPECIFIED CPRS
(PREPAYMENTS LOCKED OUT THROUGH LOP AND YMP, THEN THE FOLLOWING CPR)
Prepayment Assumption (CPR)
---------------------------------------
Date 0% 2% 4% 6% 8% 10%
---- -- -- -- -- -- ---
Delivery Date ........................ 100% 100% 100% 100% 100% 100%
July 15, 1997 ........................ 100 100 100 100 100 100
July 15, 1998 ........................ 100 100 100 100 100 100
July 15, 1999 ........................ 100 100 100 100 100 100
July 15, 2000 ........................ 100 100 100 100 100 100
July 15, 2001 ........................ 100 100 100 100 100 100
July 15, 2002 ........................ 100 100 100 100 100 100
July 15, 2003 ........................ 100 100 100 100 100 100
July 15, 2004 ........................ 100 100 100 100 100 100
July 15, 2005 ........................ 100 100 100 100 100 100
July 15, 2006 ........................ 0 0 0 0 0 0
Weighted Average Life (years)* ....... 9.8 9.8 9.8 9.8 9.8 9.8
- ----------
* The weighted average life of a REMIC Certificate is determined as specified
under "Weighted Average Lives of REMIC Certificates".
S-78
<PAGE>
Based on the above described assumptions, the following tables indicate the
resulting weighted average lives of the Class E Certificates and set forth the
percentages of the initial Certificate Balance of the Class E Certificates that
would be outstanding after each of the dates shown at the indicated CPRs.
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS E CERTIFICATES AT THE SPECIFIED CPRS
Prepayment Assumption (CPR)
---------------------------------------
Date 0% 2% 4% 6% 8% 10%
---- -- -- -- -- -- ---
Delivery Date ........................ 100% 100% 100% 100% 100% 100%
July 15, 1997 ........................ 100 100 100 100 100 100
July 15, 1998 ........................ 100 100 100 100 100 100
July 15, 1999 ........................ 100 100 100 100 100 100
July 15, 2000 ........................ 100 100 100 100 100 100
July 15, 2001 ........................ 100 100 100 100 100 100
July 15, 2002 ........................ 100 100 100 100 100 100
July 15, 2003 ........................ 100 100 100 100 100 100
July 15, 2004 ........................ 100 100 100 100 100 100
July 15, 2005 ........................ 100 100 100 100 100 100
July 15, 2006 ........................ 0 0 0 0 0 0
Weighted Average Life (years)* ....... 9.8 9.8 9.7 9.6 9.6 9.5
- ----------
* The weighted average life of a REMIC Certificate is determined as specified
under "Weighted Average Lives of REMIC Certificates".
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS E CERTIFICATES AT THE SPECIFIED CPRS
(PREPAYMENTS LOCKED OUT THROUGH LOP AND YMP, THEN THE FOLLOWING CPR)
Prepayment Assumption (CPR)
---------------------------------------
Date 0% 2% 4% 6% 8% 10%
---- -- -- -- -- -- ---
Delivery Date ........................ 100% 100% 100% 100% 100% 100%
July 15, 1997 ........................ 100 100 100 100 100 100
July 15, 1998 ........................ 100 100 100 100 100 100
July 15, 1999 ........................ 100 100 100 100 100 100
July 15, 2000 ........................ 100 100 100 100 100 100
July 15, 2001 ........................ 100 100 100 100 100 100
July 15, 2002 ........................ 100 100 100 100 100 100
July 15, 2003 ........................ 100 100 100 100 100 100
July 15, 2004 ........................ 100 100 100 100 100 100
July 15, 2005 ........................ 100 100 100 100 100 100
July 15, 2006 ........................ 0 0 0 0 0 0
Weighted Average Life (years)* ....... 9.8 9.8 9.8 9.8 9.8 9.8
- ----------
* The weighted average life of a REMIC Certificate is determined as specified
under "Weighted Average Lives of REMIC Certificates".
S-79
<PAGE>
Based on the above described assumptions, the following tables indicate the
resulting weighted average lives of the Class F Certificates and set forth the
percentages of the initial Certificate Balance of the Class F Certificates that
would be outstanding after each of the dates shown at the indicated CPRs.
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS F CERTIFICATES AT THE SPECIFIED CPRS
Prepayment Assumption (CPR)
---------------------------------------
Date 0% 2% 4% 6% 8% 10%
---- -- -- -- -- -- ---
Delivery Date ........................ 100% 100% 100% 100% 100% 100%
July 15, 1997 ........................ 100 100 100 100 100 100
July 15, 1998 ........................ 100 100 100 100 100 100
July 15, 1999 ........................ 100 100 100 100 100 100
July 15, 2000 ........................ 100 100 100 100 100 100
July 15, 2001 ........................ 100 100 100 100 100 100
July 15, 2002 ........................ 100 100 100 100 100 100
July 15, 2003 ........................ 100 100 100 100 100 100
July 15, 2004 ........................ 100 100 100 100 100 100
July 15, 2005 ........................ 100 100 100 100 100 100
July 15, 2006 ........................ 0 0 0 0 0 0
Weighted Average Life (years)* ....... 9.8 9.8 9.8 9.7 9.6 9.5
- ----------
* The weighted average life of a REMIC Certificate is determined as specified
under "Weighted Average Lives of REMIC Certificates".
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS F CERTIFICATES AT THE SPECIFIED CPRS
(PREPAYMENTS LOCKED OUT THROUGH LOP AND YMP, THEN THE FOLLOWING CPR)
Prepayment Assumption (CPR)
---------------------------------------
Date 0% 2% 4% 6% 8% 10%
---- -- -- -- -- -- ---
Delivery Date ........................ 100% 100% 100% 100% 100% 100%
July 15, 1997 ........................ 100 100 100 100 100 100
July 15, 1998 ........................ 100 100 100 100 100 100
July 15, 1999 ........................ 100 100 100 100 100 100
July 15, 2000 ........................ 100 100 100 100 100 100
July 15, 2001 ........................ 100 100 100 100 100 100
July 15, 2002 ........................ 100 100 100 100 100 100
July 15, 2003 ........................ 100 100 100 100 100 100
July 15, 2004 ........................ 100 100 100 100 100 100
July 15, 2005 ........................ 100 100 100 100 100 100
July 15, 2006 ........................ 0 0 0 0 0 0
Weighted Average Life (years)* ....... 9.8 9.8 9.8 9.8 9.8 9.8
- ----------
* The weighted average life of a REMIC Certificate is determined as specified
under "Weighted Average Lives of REMIC Certificates".
S-80
<PAGE>
Based on the above described assumptions, the following tables indicate the
resulting weighted average lives of the Class G Certificates and set forth the
percentages of the initial Certificate Balance of the Class G Certificates that
would be outstanding after each of the dates shown at the indicated CPRs.
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS G CERTIFICATES AT THE SPECIFIED CPRS
Prepayment Assumption (CPR)
---------------------------------------
Date 0% 2% 4% 6% 8% 10%
---- -- -- -- -- -- ---
Delivery Date ........................ 100% 100% 100% 100% 100% 100%
July 15, 1997 ........................ 100 100 100 100 100 100
July 15, 1998 ........................ 100 100 100 100 100 100
July 15, 1999 ........................ 100 100 100 100 100 100
July 15, 2000 ........................ 100 100 100 100 100 100
July 15, 2001 ........................ 100 100 100 100 100 100
July 15, 2002 ........................ 100 100 100 100 100 100
July 15, 2003 ........................ 100 100 100 100 100 100
July 15, 2004 ........................ 100 100 100 100 100 100
July 15, 2005 ........................ 100 100 100 100 100 100
July 15, 2006 ........................ 0 0 0 0 0 0
Weighted Average Life (years)* ....... 9.9 9.9 9.8 9.8 9.7 9.7
- ----------
* The weighted average life of a REMIC Certificate is determined as specified
under "Weighted Average Lives of REMIC Certificates".
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS G CERTIFICATES AT THE SPECIFIED CPRS
(PREPAYMENTS LOCKED OUT THROUGH LOP AND YMP, THEN THE FOLLOWING CPR)
Prepayment Assumption (CPR)
---------------------------------------
Date 0% 2% 4% 6% 8% 10%
---- -- -- -- -- -- ---
Delivery Date ........................ 100% 100% 100% 100% 100% 100%
July 15, 1997 ........................ 100 100 100 100 100 100
July 15, 1998 ........................ 100 100 100 100 100 100
July 15, 1999 ........................ 100 100 100 100 100 100
July 15, 2000 ........................ 100 100 100 100 100 100
July 15, 2001 ........................ 100 100 100 100 100 100
July 15, 2002 ........................ 100 100 100 100 100 100
July 15, 2003 ........................ 100 100 100 100 100 100
July 15, 2004 ........................ 100 100 100 100 100 100
July 15, 2005 ........................ 100 100 100 100 100 100
July 15, 2006 ........................ 0 0 0 0 0 0
Weighted Average Life (years)* ....... 9.9 9.9 9.9 9.9 9.9 9.9
- ----------
* The weighted average life of a REMIC Certificate is determined as specified
under "Weighted Average Lives of REMIC Certificates".
S-81
<PAGE>
Based on the above described assumptions, the following tables indicate the
resulting weighted average lives of the Class H Certificates and set forth the
percentages of the initial Certificate Balance of the Class H Certificates that
would be outstanding after each of the dates shown at the indicated CPRs.
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS H CERTIFICATES AT THE SPECIFIED CPRS
Prepayment Assumption (CPR)
---------------------------------------
Date 0% 2% 4% 6% 8% 10%
---- -- -- -- -- -- ---
Delivery Date ........................ 100% 100% 100% 100% 100% 100%
July 15, 1997 ........................ 100 100 100 100 100 100
July 15, 1998 ........................ 100 100 100 100 100 100
July 15, 1999 ........................ 100 100 100 100 100 100
July 15, 2000 ........................ 100 100 100 100 100 100
July 15, 2001 ........................ 100 100 100 100 100 100
July 15, 2002 ........................ 100 100 100 100 100 100
July 15, 2003 ........................ 100 100 100 100 100 100
July 15, 2004 ........................ 100 100 100 100 100 100
July 15, 2005 ........................ 100 100 100 100 100 100
July 15, 2006 ........................ 24 2 0 0 0 0
July 15, 2007 ........................ 16 0 0 0 0 0
July 15, 2008 ........................ 7 0 0 0 0 0
July 15, 2009 ........................ 0 0 0 0 0 0
Weighted Average Life (years)* ....... 10.3 9.9 9.9 9.9 9.9 9.8
- ----------
* The weighted average life of a REMIC Certificate is determined as specified
under "Weighted Average Lives of REMIC Certificates".
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS H CERTIFICATES AT THE SPECIFIED CPRS
(PREPAYMENTS LOCKED OUT THROUGH LOP AND YMP, THEN THE FOLLOWING CPR)
Prepayment Assumption (CPR)
---------------------------------------
Date 0% 2% 4% 6% 8% 10%
---- -- -- -- -- -- ---
Delivery Date ........................ 100% 100% 100% 100% 100% 100%
July 15, 1997 ........................ 100 100 100 100 100 100
July 15, 1998 ........................ 100 100 100 100 100 100
July 15, 1999 ........................ 100 100 100 100 100 100
July 15, 2000 ........................ 100 100 100 100 100 100
July 15, 2001 ........................ 100 100 100 100 100 100
July 15, 2002 ........................ 100 100 100 100 100 100
July 15, 2003 ........................ 100 100 100 100 100 100
July 15, 2004 ........................ 100 100 100 100 100 100
July 15, 2005 ........................ 100 100 100 100 100 100
July 15, 2006 ........................ 24 23 23 23 23 22
July 15, 2007 ........................ 16 15 15 14 14 13
July 15, 2008 ........................ 7 7 6 5 5 4
July 15, 2009 ........................ 0 0 0 0 0 0
Weighted Average Life (years)* ....... 10.3 10.3 10.3 10.3 10.2 10.2
- ----------
* The weighted average life of a REMIC Certificate is determined as specified
under "Weighted Average Lives of REMIC Certificates".
S-82
<PAGE>
Based on the above described assumptions, the following tables indicate the
resulting weighted average lives of the Class J Certificates and set forth the
percentages of the initial Certificate Balance of the Class J Certificates that
would be outstanding after each of the dates shown at the indicated CPRs.
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS J CERTIFICATES AT THE SPECIFIED CPRS
Prepayment Assumption (CPR)
---------------------------------------
Date 0% 2% 4% 6% 8% 10%
---- -- -- -- -- -- ---
Delivery Date ........................ 100% 100% 100% 100% 100% 100%
July 15, 1997 ........................ 100 100 100 100 100 100
July 15, 1998 ........................ 100 100 100 100 100 100
July 15, 1999 ........................ 100 100 100 100 100 100
July 15, 2000 ........................ 100 100 100 100 100 100
July 15, 2001 ........................ 100 100 100 100 100 100
July 15, 2002 ........................ 100 100 100 100 100 100
July 15, 2003 ........................ 100 100 100 100 100 100
July 15, 2004 ........................ 100 100 100 100 100 100
July 15, 2005 ........................ 100 100 100 100 100 100
July 15, 2006 ........................ 100 100 83 67 54 44
July 15, 2007 ........................ 100 94 75 59 47 37
July 15, 2008 ........................ 100 85 66 51 40 30
July 15, 2009 ........................ 98 76 58 44 33 25
July 15, 2010 ........................ 88 66 49 37 27 20
July 15, 2011 ........................ 4 3 2 2 1 1
July 15, 2012 ........................ 4 3 2 1 1 1
July 15, 2013 ........................ 4 2 2 1 1 1
July 15, 2014 ........................ 3 2 1 1 1 *
July 15, 2015 ........................ 3 2 1 1 1 *
July 15, 2016 ........................ 2 1 1 1 * *
July 15, 2017 ........................ 2 1 1 * * *
July 15, 2018 ........................ 1 1 * * * *
July 15, 2019 ........................ * * * * * *
July 15, 2020 ........................ 0 0 0 0 0 0
Weighted Average Life (years)** ...... 14.6 13.9 13.0 12.3 11.8 11.3
- ----------
* Indicates an amount above zero and less than 0.5% of the original principal
balance is outstanding.
** The weighted average life of a REMIC Certificate is determined as specified
under "Weighted Average Lives of REMIC Certificates".
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PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS J CERTIFICATES AT THE SPECIFIED CPRS
(PREPAYMENTS LOCKED OUT THROUGH LOP AND YMP, THEN THE FOLLOWING CPR)
Prepayment Assumption (CPR)
---------------------------------------
Date 0% 2% 4% 6% 8% 10%
---- -- -- -- -- -- ---
Delivery Date ........................ 100% 100% 100% 100% 100% 100%
July 15, 1997 ........................ 100 100 100 100 100 100
July 15, 1998 ........................ 100 100 100 100 100 100
July 15, 1999 ........................ 100 100 100 100 100 100
July 15, 2000 ........................ 100 100 100 100 100 100
July 15, 2001 ........................ 100 100 100 100 100 100
July 15, 2002 ........................ 100 100 100 100 100 100
July 15, 2003 ........................ 100 100 100 100 100 100
July 15, 2004 ........................ 100 100 100 100 100 100
July 15, 2005 ........................ 100 100 100 100 100 100
July 15, 2006 ........................ 100 100 100 100 100 100
July 15, 2007 ........................ 100 100 100 100 100 100
July 15, 2008 ........................ 100 100 100 100 100 100
July 15, 2009 ........................ 98 98 97 96 96 95
July 15, 2010 ........................ 88 87 87 86 86 86
July 15, 2011 ........................ 4 4 4 4 4 4
July 15, 2012 ........................ 4 4 3 3 3 3
July 15, 2013 ........................ 4 3 3 3 3 2
July 15, 2014 ........................ 3 3 3 2 2 2
July 15, 2015 ........................ 3 2 2 2 2 1
July 15, 2016 ........................ 2 2 2 1 1 1
July 15, 2017 ........................ 2 1 1 1 1 1
July 15, 2018 ........................ 1 1 1 1 * *
July 15, 2019 ........................ * * * * * *
July 15, 2020 ........................ 0 0 0 0 0 0
Weighted Average Life (years)** ...... 14.6 14.5 14.5 14.5 14.5 14.4
- ----------
* Indicates an amount above zero and less than 0.5% of the original principal
balance is outstanding.
** The weighted average life of a REMIC Certificate is determined as specified
under "Weighted Average Lives of REMIC Certificates".
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USE OF PROCEEDS
Substantially all of the proceeds from the sale of the Offered Certificates
will be used by the Sponsor to purchase the Mortgage Loans and to pay certain
expenses in connection with the issuance of the Certificates.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
Three separate "real estate mortgage investment conduit" ("REMIC")
elections will be made with respect to the Trust Fund for federal income tax
purposes, the resulting REMICs being herein referred to as REMIC I, REMIC II and
REMIC III, respectively. For such purposes, (a) the Class R-I Certificates will
be the sole class of "residual interests" in REMIC I, (b) separate
uncertificated "regular interests" in REMIC I will be issued and constitute the
assets of REMIC II, (c) the Class R-II Certificates will be the sole class of
"residual interests" in REMIC II, (d) separate uncertificated "regular
interests" in REMIC II will be issued and constitute the assets of REMIC III,
(e) the Class R-III Certificates will be the sole class of "residual interests"
in REMIC III and (f) the REMIC Regular Certificates will be the "regular
interests" in, and generally will be treated as debt obligations of, REMIC III.
Upon issuance of the Offered Certificates, Thacher Proffitt & Wood, special tax
counsel to the Sponsor, will deliver its opinion generally to the effect that,
assuming compliance with all provisions of the Pooling Agreement, for federal
income tax purposes, REMIC I, REMIC II and REMIC III will each qualify as a
REMIC under the Code. See "Material Federal Income Tax Consequences--REMICs" in
the Prospectus.
ORIGINAL ISSUE DISCOUNT AND PREMIUM
For federal income tax reporting purposes, (i) the ___________ Certificates
will and (ii) the ___________ Certificates will not be treated as having been
issued with original issue discount. The prepayment assumption that will be used
in determining the rate of accrual of original issue discount, market discount
and premium, if any, for federal income tax purposes will be based on the
assumption that subsequent to the date of any determination the Mortgages Loans
will prepay at a rate equal to a CPR of 0%, and that there will be no extensions
of maturity for any Mortgage Loan. However, no representation is made that the
Mortgage Loans will not prepay or that, if they do, that they will prepay at any
particular rate. See "Material Federal Income Tax Consequences--REMICs--Taxation
of Owners of REMIC Regular Certificates" in the Prospectus.
The Internal Revenue Service (the "IRS") has issued regulations (the "OID
Regulations") under Sections 1271 to 1275 of the Internal Revenue Code of 1986
(the "Code") generally addressing the treatment of debt instruments issued with
original issue discount. Purchasers of the Offered Certificates should be aware
that the OID Regulations and Section 1272(a)(6) of the Code do not adequately
address certain issues relevant to, or are not applicable to, prepayable
securities such as the Offered Certificates. Prospective purchasers of the
Offered Certificates are advised to consult their tax advisors concerning the
tax treatment of such Certificates.
If the method for computing original issue discount described in the
Prospectus results in a negative amount for any period with respect to a holder
of a Class X Certificate, the amount of original issue discount allocable to
such period would be zero and such Certificateholder will be permitted to offset
such negative amount only against future original issue discount (if any)
attributable to such Certificate. Although the matter is not free from doubt, a
holder of a Class X Certificate may be permitted to deduct a loss to the extent
that his or her respective remaining basis in such Certificate exceeds the
maximum amount of future payments to which such Certificateholder is entitled,
assuming no further prepayments of the Mortgage Loans. Any such loss might be
treated as a capital loss.
Prepayment Premiums actually collected on the Mortgage Loans will be
distributed to the holders of each Class of Certificates entitled thereto as
described herein. It is not entirely clear under the Code when the amount of a
Prepayment Premium should be taxed to the holder of a Class of Certificates
entitled to a Prepayment Premium. For federal income tax reporting purposes,
Prepayment Premiums will be treated as income to the holders of a Class of
Certificates entitled to Prepayment Premiums only after the Master Servicer's
actual receipt of a Prepayment Premium as to which such Class of Certificates is
entitled under the terms of the Pooling Agreement. It appears that Prepayment
Premiums are to be treated as ordinary income rather than capital gain. However,
the correct characterization of such income is not entirely clear and
Certificateholders should consult their own tax advisors concerning the
treatment of Prepayment Premiums.
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The OID Regulations in some circumstances permit the holder of a debt
instrument to recognize original issue discount under a method that differs from
that of the issuer. Accordingly, it is possible that holders of Offered
Certificates issued with original issue discount may be able to select a method
for recognizing original issue discount that differs from that used by the REMIC
Administrator in preparing reports to Certificateholders and the IRS.
Prospective purchasers of Offered Certificates issued with original issue
discount are advised to consult their tax advisors concerning the treatment of
such Certificates.
Certain Classes of the Offered Certificates may be treated for federal
income tax purposes as having been issued at a premium. Whether any holder of
such a Class of Certificates will be treated as holding a Certificate with
amortizable bond premium will depend on such Certificateholder's purchase price
and the distributions remaining to be made on such Certificate at the time of
its acquisition by such Certificateholders. Holders of such Classes of
Certificates should consult their own tax advisors regarding the possibility of
making an election to amortize such premium. See "Material Federal Income Tax
Consequences--REMICs--Taxation of Owners of REMIC Regular Certificates--Premium"
in the Prospectus.
CHARACTERIZATION OF INVESTMENTS IN OFFERED CERTIFICATES
The Offered Certificates will be "qualifying real property loans" within
the meaning of Section 593(d) of the Code, "real estate assets" within the
meaning of Section 856(c)(5)(A) of the Code and assets described in Section
7701(a)(19)(C) of the Code in the same proportion that the assets of the Trust
Fund would be so treated. In addition, interest (including original issue
discount, if any) on the Offered Certificates will be interest described in
Section 856(c)(3)(B) of the Code to the extent that such Certificates are
treated as "real estate assets" within the meaning of Section 856(c)(5)(A) of
the Code. Moreover, the Offered Certificates will be "qualified mortgages" under
Section 860G(a)(3) of the Code if transferred to another REMIC on its start-up
day in exchange for regular or residual interests therein.
The Offered Certificates will be treated as "loans secured by an interest
in residential real property" within the meaning of Section 7701(a)(19)(C)(v) of
the Code generally to the extent that the Mortgage Loans would be so treated.
See "Material Federal Income Tax Consequences--REMICs--Characterization of
Investments in REMIC Certificates" in the Prospectus.
POSSIBLE TAXES ON INCOME FROM FORECLOSURE PROPERTY
In general, the Special Servicer will be obligated to operate and manage
any Mortgaged Property acquired as REO Property in a manner that would, to the
extent commercially feasible, maximize the Trust Fund's net after-tax proceeds
from such property. After the Special Servicer reviews the operation of such
property and consults with the REMIC Administrator to determine the REMIC
Administrator's federal income tax reporting position with respect to income it
is anticipated that the Trust Fund would derive from such property, the Special
Servicer could determine that it would not be commercially feasible to manage
and operate such property in a manner that would avoid the imposition of a tax
on "net income from foreclosure property" within the meaning of the REMIC
Provisions or a tax on "prohibited transactions" under Section 860F of the Code
(either such tax referred to herein as an "REO Tax"). To the extent that income
the Trust Fund receives from an REO Property is subject to a tax on (i) "net
income from foreclosure property", such income would be subject to federal tax
at the highest marginal corporate tax rate (currently 35%) and (ii) "prohibited
transactions", such income would be subject to federal tax at a 100% rate. The
determination as to whether income from an REO Property would be subject to an
REO Tax will depend on the specific facts and circumstances relating to the
management and operation of each REO Property. Generally, income from an REO
Property that is directly operated by the Special Servicer would be apportioned
and classified as "service" or "non-service" income. The "service" portion of
such income could be subject to federal tax either at the highest marginal
corporate tax rate or at the 100% rate on "prohibited transactions", and the
"non-service" portion of such income could be subject to federal tax at the
highest marginal corporate tax rate or, although it appears unlikely, at the
100% rate applicable to "prohibited transactions". Any REO Tax imposed on the
Trust Fund's income from an REO Property would reduce the amount available for
distribution to Certificateholders. Certificateholders are advised to consult
their own tax advisors regarding the possible imposition of REO Taxes in
connection with the operation of commercial REO Properties by REMICs.
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REPORTING AND OTHER ADMINISTRATIVE MATTERS
Reporting of interest income, including any original issue discount, with
respect to REMIC Regular Certificates is required annually, and may be required
more frequently under Treasury regulations. These information reports generally
are required to be sent to individual holders of REMIC Regular Certificates and
the IRS; holders of REMIC Regular Certificates that are corporations, trusts,
securities dealers and certain other non-individuals will be provided interest
and original issue discount income information and the information set forth in
the following paragraph upon request in accordance with the requirements of the
applicable regulations. The information must be provided by the later of 30 days
after the end of the quarter for which the information was requested, or two
weeks after the receipt of the request. The REMIC must also comply with rules
requiring a REMIC Regular Certificate issued with original issue discount to
disclose on its face the amount of original issue discount and the issue date,
and requiring such information to be reported to the IRS. Reporting with respect
to the REMIC Residual Certificates, including income, excess inclusions,
investment expenses and relevant information regarding qualification of the
REMIC's assets will be made as required under the Treasury regulations,
generally on a quarterly basis.
As applicable, the REMIC Regular Certificate information reports will
include a statement of the adjusted issue price of the REMIC Regular Certificate
at the beginning of each accrual period. In addition, the reports will include
information required by regulations with respect to computing the accrual of any
market discount. Because exactly computation of the accrual of market discount
on a constant yield method would require information relating to the holder's
purchase price that the REMIC may not have, such regulations only require that
information pertaining to the appropriate proportionate method of accruing
market discount be provided.
The "tax matters person" for each REMIC will be the holder of Residual
Certificates evidencing the largest percentage interest in its class of Residual
Certificates. All holders of Residual Certificates will irrevocably designate
the REMIC administrator as agent for such "tax matters persons" in all respects.
For further information regarding the federal income tax consequences of
investing in the Offered Certificates see "Material Federal Income Tax
Consequences--REMICs" in the Prospectus.
ERISA CONSIDERATIONS
A fiduciary of any employee benefit plan or other retirement plan or
arrangement, including individual retirement accounts and annuities, Keogh plans
and collective investment funds and separate accounts in which such plans,
accounts or arrangements are invested, that is subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or Section 4975 of
the Code (each, a "Plan") should carefully review with its legal advisors
whether the purchase or holding of Offered Certificates could give rise to a
transaction that is prohibited or is not otherwise permitted either under ERISA
or Section 4975 of the Code or whether there exists any statutory or
administrative exemption applicable thereto.
The U.S. Department of Labor issued to Citicorp an individual prohibited
transaction exemption, Prohibited Transaction Exemption ("PTE") 90-88, and to
Goldman, Sachs & Co. ("Goldman, Sachs") an individual prohibited transaction
exemption, PTE 89-88 (the "Exemptions"), which generally exempt from the
application of the prohibited transaction provisions of Section 406 of ERISA,
and the excise taxes imposed on such prohibited transactions pursuant to
Sections 4975(a) and (b) of the Code and Section 502(i) of ERISA, certain
transactions, among others, relating to the servicing and operation of mortgage
pools, such as the Mortgage Pool, and the purchase, sale and holding of mortgage
pass-through certificates, such as the Senior Certificates, underwritten by an
Underwriter (as hereinafter defined), provided that certain conditions set forth
in the Exemptions are satisfied. For purposes of this Section "ERISA
Considerations", the term "Underwriter" shall include (a) Citicorp, (b) Goldman,
Sachs, (c) any person directly or indirectly, through one or more
intermediaries, controlling, controlled by or under common control with either
Citicorp (such as Citibank, N.A.) or Goldman, Sachs, and (d) any member of the
underwriting syndicate or selling group of which a person described in (a), (b)
or (c) is a manager or co-manager with respect to the Senior Certificates.
The Exemptions set forth six general conditions which must be satisfied for
a transaction involving the purchase, sale and holding of a Senior Certificate
to be eligible for exemptive relief thereunder. First, the acquisition of such
Certificate by a Plan must be on terms that are at least as favorable to the
Plan as they would be in an arm's-length transaction with an unrelated party.
Second, the rights and interests evidenced by such Certificate must not be
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subordinated to the rights and interests evidenced by the other certificates of
the same trust. Third, such Certificate at the time of acquisition by the Plan
must be rated in one of the three highest generic rating categories by S&P,
Fitch, Moody's Investors Service, Inc. ("Moody's") or Duff & Phelps Credit
Rating Co. ("Duff & Phelps"). Fourth, the Trustee cannot be an affiliate of any
other member of the "Restricted Group", which consists of any Underwriter, the
Sponsor, the Trustee, the Master Servicer, the Special Servicer, any
sub-servicer, and any borrower with respect to Mortgage Loans constituting more
than 5% of the aggregate unamortized principal balance of the Mortgage Pool as
of the date of initial issuance of the Certificates. Fifth, the sum of all
payments made to and retained by the Underwriters must represent not more than
reasonable compensation for underwriting the Senior Certificates; the sum of all
payments made to and retained by the Sponsor pursuant to the assignment of the
Mortgage Loans to the Trust Fund must represent not more than the fair market
value of such obligations; and the sum of all payments made to and retained by
the Master Servicer, the Special Servicer and any sub-servicer must represent
not more than reasonable compensation for such person's services under the
Pooling Agreement and reimbursement of such person's reasonable expenses in
connection therewith. Sixth, the investing Plan must be an accredited investor
as defined in Rule 501(a)(1) of Regulation D of the SEC under the Securities Act
of 1933, as amended (the "Securities Act").
Because the Senior Certificates are not subordinated to any other Class of
Certificates, the second general condition set forth above is satisfied with
respect to such Certificates. It is a condition of their issuance that the Class
A Certificates be rated not lower than "AAA" by S&P and Fitch and that the Class
X Certificates be rated not lower than "AAA" by Fitch. As of the Delivery Date,
the fourth general condition set forth above will be satisfied with respect to
the Senior Certificates. A fiduciary of a Plan contemplating purchasing a Senior
Certificate in the secondary market must make its own determination that, at the
time of such purchase, such Certificate continues to satisfy the third and
fourth general conditions set forth above. A fiduciary of a Plan contemplating
purchasing a Senior Certificate, whether in the initial issuance of such
Certificate or in the secondary market, must make its own determination that the
first, fifth and sixth general conditions set forth above will be satisfied with
respect to such Certificate.
The Exemptions also require that the Trust Fund meet the following
requirements: (i) the Trust Fund must consist solely of assets of the type that
have been included in other investment pools; (ii) certificates in such other
investment pools must have been rated in one of the three highest categories of
S&P, Fitch, Moody's or Duff & Phelps for at least one year prior to the Plan's
acquisition of a Senior Certificate; and (iii) certificates in such other
investment pools must have been purchased by investors other than Plans for at
least one year prior to any Plan's acquisition of a Senior Certificate. The
Sponsor has confirmed to its satisfaction that such requirements have been
satisfied as of the date hereof.
If the general conditions of the Exemptions are satisfied, the Exemptions
may provide an exemption from the restrictions imposed by Sections 406(a) and
407(a) of ERISA (as well as the excise taxes imposed by Sections 4975(a) and (b)
of the Code by reason of Sections 4975(c)(1)(A) through (D) of the Code) in
connection with (i) the direct or indirect sale, exchange or transfer of Senior
Certificates in the initial issuance of Certificates between the Sponsor or an
Underwriter and a Plan when the Sponsor, an Underwriter, the Trustee, the Master
Servicer, the Special Servicer, a sub-servicer or a borrower is a Party in
Interest with respect to the investing Plan, (ii) the direct or indirect
acquisition or disposition in the secondary market of Senior Certificates by a
Plan and (iii) the holding of Senior Certificates by a Plan. However, no
exemption is provided from the restrictions of Sections 406(a)(1)(E), 406(a)(2)
and 407 of ERISA for the acquisition or holding of a Senior Certificate on
behalf of an "Excluded Plan" by any person who has discretionary authority or
renders investment advice with respect to the assets of such Excluded Plan. For
purposes hereof, an Excluded Plan is a Plan sponsored by any member of the
Restricted Group.
If certain specific conditions of the Exemptions are also satisfied, the
Exemptions may provide an exemption from the restrictions imposed by Sections
406(b)(1) and (b)(2) of ERISA and the taxes imposed by Section 4975(c)(1)(E) of
the Code in connection with (1) the direct or indirect sale, exchange or
transfer of Senior Certificates in the initial issuance of Certificates between
the Sponsor or an Underwriter and a Plan when the person who has discretionary
authority or renders investment advice with respect to the investment of Plan
assets in such Certificates is (a) a borrower with respect to 5% or less of the
fair market value of the Mortgage Pool or (b) an affiliate of such a person, (2)
the direct or indirect acquisition or disposition in the secondary market of
Senior Certificates by a Plan and (3) the holding of Senior Certificates by a
Plan.
Further, if certain specific conditions of the Exemptions are satisfied,
the Exemptions may provide an exemption from the restrictions imposed by
Sections 406(a), 406(b) and 407(a) of ERISA, and the taxes imposed by Sections
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4975(a) and (b) of the Code by reason of Section 4975(c) of the Code for
transactions in connection with the servicing, management and operation of the
Mortgage Pool. The Sponsor expects that the specific conditions of the
Exemptions required for this purpose will be satisfied with respect to the
Senior Certificates.
The Exemptions also may provide an exemption from the restrictions imposed
by Sections 406(a) and 407(a) of ERISA, and the taxes imposed by Sections
4975(a) and (b) of the Code by reason of Sections 4975(c)(1) (A) through (D) of
the Code if such restrictions are deemed to otherwise apply merely because a
person is deemed to be a Party in Interest with respect to an investing Plan by
virtue of providing services to the Plan (or by virtue of having certain
specified relationships to such a person) solely as a result of the Plan's
ownership of Senior Certificates.
Before purchasing a Senior Certificate, a fiduciary of a Plan should itself
confirm that (i) the Senior Certificates constitute "certificates" for purposes
of the Exemptions and (ii) the specific and general conditions and the other
requirements set forth in the Exemptions would be satisfied. In addition to
making its own determination as to the availability of the exemptive relief
provided in the Exemptions, the Plan fiduciary should consider the availability
of any other prohibited transaction exemptions. See "ERISA Considerations" in
the Prospectus. A purchaser of a Senior Certificate should be aware, however,
that even if the conditions specified in one or more exemptions are satisfied,
the scope of relief provided by an exemption may not cover all acts which might
be construed as prohibited transactions.
Because the characteristics of the Class B, Class C, Class D, Class E and
Class F Certificates do not meet the requirements of the Exemption, the purchase
or holding of such Certificates or interests therein by a Plan may result in
prohibited transactions or the imposition of excise taxes or civil penalties. AS
A RESULT, NO TRANSFER OF A CLASS B, CLASS C, CLASS D, CLASS E OR CLASS F
CERTIFICATE OR ANY INTEREST THEREIN MAY BE MADE TO A PLAN OR TO ANY PERSON WHO
IS DIRECTLY OR INDIRECTLY PURCHASING SUCH CERTIFICATE OR INTEREST THEREIN ON
BEHALF OF, AS NAMED FIDUCIARY OF, AS TRUSTEE OF, OR WITH ASSETS OF A PLAN. See
"ERISA Considerations" in the Prospectus.
Any Plan fiduciary considering whether to purchase an Offered Certificate
on behalf of a Plan should consult with its counsel regarding the applicability
of the fiduciary responsibility and prohibited transaction provisions of ERISA
and the Code to such investment.
LEGAL INVESTMENT
The Offered Certificates will not be "mortgage related securities" for
purposes of SMMEA. As a result, the appropriate characterization of the Offered
Certificates under various legal investment restrictions, and thus the ability
of investors subject to these restrictions to purchase the Offered Certificates,
is subject to significant interpretive uncertainties. The Sponsor makes no
representation as to the ability of particular investors to purchase the Offered
Certificates under applicable legal investment or other restrictions. All
institutions whose investment activities are subject to legal investment laws
and regulations, regulatory capital requirements or review by regulatory
authorities should consult with their own legal advisors in determining whether
and to what extent the Offered Certificates constitute legal investments for
them or are subject to investment, capital or other restrictions. See "Legal
Investment" in the Prospectus.
METHOD OF DISTRIBUTION
Subject to the terms and conditions set forth in the Underwriting Agreement
between the Sponsor and the Underwriters, the Offered Certificates will be
purchased from the Sponsor by the Underwriters upon issuance. Citibank, N.A. is
an affiliate of the Sponsor. Proceeds to the Sponsor from the sale of the
Offered Certificates, before deducting expenses payable by the Sponsor, will be
__% of the initial aggregate Certificate Balance thereof, plus accrued interest.
Citibank, N.A. and Goldman, Sachs & Co. have agreed in the Underwriting
Agreement to purchase 60.3% and 39.7%, respectively, of the aggregate principal
or notional amount of each Class of Offered Certificates.
Distribution of the Offered Certificates will be made by the Underwriters
from time to time in negotiated transactions or otherwise at varying prices to
be determined at the time of sale. The Underwriters may effect such transactions
by selling the Offered Certificates to or through dealers, and such dealers may
receive compensation in
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the form of underwriting discounts, concessions or commissions from the
Underwriters. In connection with the purchase and sale of the Offered
Certificates, the Underwriters may be deemed to have received compensation from
the Sponsor in the form of underwriting discounts. The Underwriters and any
dealers that participate with the Underwriter in the distribution of the Offered
Certificates may be deemed to be underwriters and any profit on the resale of
the Offered Certificates positioned by them may be deemed to be underwriting
discounts and commissions under the Securities Act.
Purchasers of the Offered Certificates, including dealers, may, depending
on the facts and circumstances of such purchases, be deemed to be "underwriters"
within the meaning of the Securities Act in connection with reoffers and sales
by them of Offered Certificates. Certificateholders should consult with their
legal advisors in this regard prior to any such reoffer or sale.
The Sponsor also has been advised by the Underwriters that the Underwriters
presently intend to make a market in the Offered Certificates; however, neither
Underwriter has any obligation to do so, any market making may be discontinued
at any time and there can be no assurance that an active public market for the
Offered Certificates will develop. See "Risk Factors--Limited Liquidity" herein
and "Risk Factors--Certain Factors Adversely Affecting Resale of the Offered
Certificates" in the Prospectus.
ContiFinancial Services Corporation, an affiliate of ContiTrade, may act as
a dealer with respect to the Class X-1 Certificates.
The Sponsor has agreed to indemnify each Underwriter and each person, if
any, who controls each Underwriter within the meaning of Section 15 of the
Securities Act against, or make contributions to each Underwriter and each such
controlling person with respect to, certain liabilities, including liabilities
under the Securities Act. ContiTrade has agreed to indemnify the Sponsor and the
Mortgage Loan Seller with respect to certain liabilities, including liabilities
under the Securities Act, relating to the ContiTrade Mortgage Loans.
LEGAL MATTERS
Certain legal matters will be passed upon for the Sponsor by Stephen E.
Dietz, as an Associate General Counsel of Citibank, N.A., and for the
Underwriters by Thacher Proffitt & Wood, New York, New York. Mr. Dietz owns or
has the right to acquire a number of shares of common stock of Citicorp equal to
less than .01% of the outstanding common stock of Citicorp. Thacher Proffitt &
Wood will act as special tax counsel to the Sponsor with respect to certain
federal income tax and ERISA matters. Skadden, Arps, Slate, Meagher & Flom will
also pass upon certain legal matters on behalf of Goldman, Sachs & Co.
RATING
It is a condition to their issuance that the following Classes of
Certificates receive the indicated credit ratings from Standard & Poor's Ratings
Services, a Division of McGraw-Hill Companies, Inc. ("S&P") and/or Fitch
Investors Service, L.P. ("Fitch" and, together with S&P, the "Rating Agencies"):
CLASS S&P FITCH
--------- --------- ------
Class X-1 ......................... Not Rated "AAA"
Class X-2 ......................... Not Rated "AAA"
Class A-1 ......................... "AAA" "AAA"
Class A-2A ........................ "AAA" "AAA"
Class A-2B ........................ "AAA" "AAA"
Class B ........................... "AA+" "AAA"
Class C ........................... "A+" "AA-"
Class D ........................... "A-" "A"
Class E ........................... "BBB" "BBB"
Class F ........................... "BBB-" "BBB-"
Class G ........................... "BB" "BB"
Class H ........................... "B" "B"
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The ratings on the Offered Certificates address the likelihood of the
receipt by holders thereof of all payments of principal and/or interest to which
they are entitled by June 15, 2028 (the "Rated Final Distribution Date"). The
ratings take into consideration the credit quality of the Mortgage Pool,
structural and legal aspects associated with the Certificates, and the extent to
which the payment stream from the Mortgage Pool is adequate to make payments of
principal and interest required under the Offered Certificates. The ratings on
the Offered Certificates do not, however, constitute a statement regarding
frequency of prepayments on or allocable to the Mortgage Loans, the likelihood
that Prepayment Premiums will be collected in connection with such prepayments
or the corresponding effect on yield to investors or the possibility that, as a
result of principal prepayments, investors in any Class X Certificates may
realize a lower than anticipated yield or may fail to recover fully their
initial investment.
As described herein, the amounts payable with respect to the Class X
Certificates do not include principal. If all the Mortgage Loans were to prepay
in the initial month, with the result that the Class X Certificates were to
receive only a single month's interest (without regard to any Prepayment
Premiums that may be collected), and thus suffer a nearly complete loss of their
investment, all amounts "due" to such Certificateholders will nevertheless have
been paid, and such result is consistent with the ratings assigned to the Class
X Certificates. The ratings on the Class X Certificates by Fitch do not address
the timing or magnitude of reductions of the Notional Amounts of the Class X
Certificates, but only the obligation to pay interest timely on the Notional
Amount of each Class of Class X Certificates, as such may be reduced from time
to time as described herein.
There can be no assurance as to whether any rating agency not requested to rate
the Offered Certificates will nonetheless issue a rating to any Class thereof
and, if so, what such rating would be. A rating assigned to any Class of Offered
Certificates by a rating agency that has not been requested by the Sponsor to do
so may be lower than the ratings assigned thereto by S&P and Fitch.
The ratings on 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 assigning rating agency. See "Risk Factors--
Limited Nature of Credit Ratings" in the Prospectus.
S-91
<PAGE>
<TABLE>
INDEX OF PRINCIPAL DEFINITIONS
<CAPTION>
Page Page
---- ----
<S> <C> <C> <C>
Accrued Certificate Interest ............ S-58 Initial Pool Balance .................... S-2, S-6, S-31
Additional Trust Fund Expenses .......... S-11, S-62 Interest Accrual Period ................. S-5, S-58
Advances ................................ S-47 IRS ..................................... S-85
Appraisal Reduction Amount .............. S-63 LIBOR Business Day ...................... S-33
ARM Loans ............................... S-8, S-32 LIBOR Determination Date ................ S-33
Assumed Final Distribution Date ......... S-2 LIBOR Reference Period .................. S-33
Assumed Scheduled Payment ............... S-17, S-59 Loan Group .............................. S-2, S-8, S-32
Available Distribution Amount ........... S-14, S-55 Loan Group 1 ............................ S-2, S-8, S-32
Assumed Scheduled Payment ............... S-17, S-59 Loan Group 2 ............................ S-2, S-8, S-32
Balloon Loans ........................... S-2, S-9, S-33 Lock-Out Expiration Date ................ S-34
Balloon Payment ......................... S-2, S-9, S-34 LOP ..................................... S-70
Balloon Payment Interest Excess ......... S-46 Master Servicer ......................... S-4, S-44
Balloon Payment Interest Shortfall ...... S-46 Maturity Assumptions .................... S-69
CERCLA .................................. S-27 Modified Mortgage Loan .................. S-63
Certificate Balance ..................... S-11, S-53 Monthly Payments ........................ S-8, S-32
Certificate Group ....................... S-2, S-13, S-54 Mortgage ................................ S-6, S-31
Certificate Owner ....................... S-5, S-52 Mortgage Loan Schedule .................. S-41
Certificate Registrar ................... S-52 Mortgage Loan Seller .................... S-2, S-4, S-32
Certificateholders ...................... S-2, S-10 Mortgage Loans .......................... S-2, S-6, S-31
Certificates ............................ S-1, S-4, S-51 Mortgage Note ........................... S-6, S-31
Class ................................... S-1, S-4, S-52 Mortgage Pool ........................... S-2?
Class A Certificates .................... S-1, S-4, S-52 Mortgage Rate ........................... S-32
Class Interest Shortfall ................ S-16, S-58 Mortgaged Property ...................... S-6, S-31
Class X Certificates .................... S-1, S-4, S-51 Net Mortgage Rate ....................... S-13, S-54
Code .................................... S-85 NOD ..................................... S-38
Collection Period ....................... S-5, S-55 Non-recoverable P&I Advance ............. S-62
Controlling Class ....................... S-19, S-24, S-51 Notional Amount ......................... S-3, S-12, S-53
Corrected Mortgage Loans ................ S-44 Offered Certificates .................... S-1, S-4, S-52
Cross-Collateralized Mortgage Loans ..... S-6, S-31 OID Regulations ......................... S-85
Cut-off Date ............................ S-2, S-4, S-31 P&I Advance ............................. S-62
Cut-off Date Balance .................... S-6, S-31 P&I Advance Date ........................ S-5, S-18
Definitive Certificate .................. S-5, S-52 Pass-Through Rate ....................... S-1?
Delivery Date ........................... S-1, S-5? Permitted Investments ................... S-45
Determination Date ...................... S-5, S-56 Plan .................................... S-87
Distributable Certificate Interest ...... S-16, S-58 Pooling Agreement ....................... S-11, S-52
Distribution Date ....................... S-3, S-5, S-55 Prepayment Interest Excess .............. S-46
Distribution Date Statement ............. S-63 Prepayment Interest Shortfall ........... S-57
DTC ..................................... S-1, S-5, S-52 Prepayment Period ....................... S-5, S-55
Due Date ................................ S-8, S-32 Prepayment Premiums ..................... S-3, S-9, S-59
Due Period .............................. S-5? Principal Distribution Amount ........... S-16, S-58
Emergency Advance ....................... S-48 Private Certificates .................... S-4, S-52
ERISA ................................... S-21, S-87 Purchase Price .......................... S-40
Excluded Plan ........................... S-88 Rated Certificates ...................... S-22
Extension Adviser ....................... S-20, S-48 Rated Final Distribution Date ........... S-2
FIRREA .................................. S-37 Rating Agencies ......................... S-22, S-90
Fitch ................................... S-22, S-90 Realized Losses ......................... S-61
Fixed-Rate Loans ........................ S-8, S-32 Record Date ............................. S-5, S-55
Gross Margin ............................ S-8, S-32 Reference Banks ......................... S-33
Group 1 Certificates .................... S-2, S-13, S-54 Reimbursement Rate ...................... S-18, S-62
Group 1 Loans ........................... S-2, S-8? Reinvestment Yield ...................... S-60
Group 2 Certificates .................... S-2, S-13, S-54 Related Proceeds ........................ S-47
Group 2 Loans ........................... S-2, S-8? REMIC ................................... S-3, S-20
Index ................................... S-8, S-32 REMIC Administrator ..................... S-4, S-67
Initial Group 1 Balance ................. S-8, S-32 REMIC Regular Certificates .............. S-1, S-4, S-52
Initial Group 2 Balance ................. S-8, S-32 REMIC Residual Certificates ............. S-1, S-4, S-52
</TABLE>
S-92
<PAGE>
<TABLE>
INDEX OF PRINCIPAL DEFINITIONS (Continued)
<CAPTION>
Page Page
---- ----
<S> <C> <C> <C>
REO Property ............................ S-17, S-43, S-59 Special Servicing Fee Rate .............. S-46
S&P ..................................... S-22, S-90 Specially Serviced Mortgage Loan ........ S-43
Scheduled Payment ....................... S-17, S-59 Sponsor ................................. S-2, S-4?
SEC ..................................... S-40 Standby Fee ............................. S-45
Securities Act .......................... S-88 Stated Principal Balance ................ S-53
Self-Amortizing Loans ................... S-9, S-34 Subordinate Certificates ................ S-3, S-18, S-66
Senior Certificates ..................... S-3, S-18, S-61 Sub-Servicer ............................ S-45
Sequential Pay Certificates ............. S-3, S-11, S-53 Sub-Servicing Agreement ................. S-45
Servicing Advances ...................... S-47 Trust Fund .............................. S-2, S-52
Servicing Return Date ................... S-46 Trustee ................................. S-4?
Servicing Standard ...................... S-43 Underwriters ............................ S-1?
Servicing Transfer Event ................ S-43 Voting Rights ........................... S-66
Six-Month LIBOR ......................... S-33 Workout Event ........................... S-46
Six-Month LIBOR Formula 1 ............... S-33 Workout Fee ............................. S-46
Six-Month LIBOR Formula 1 Loans ......... S-33 Workout Fee Rate ........................ S-46
Special Servicer ........................ S-4, S-44 YMP ..................................... S-70
Special Servicing Fee ................... S-46
</TABLE>
S-93
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
ANNEX A
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
General. The schedule and tables appearing in this Annex A set forth
certain information with respect to the Mortgage Loans and Mortgaged Properties.
Unless otherwise indicated, such information is presented as of the Cut-off
Date. The statistics in such schedule and tables were derived, in many cases,
from information and operating statements furnished by or on behalf of the
respective borrowers. Such information and operating statements were generally
unaudited and have not been independently verified by the Sponsor or the
Underwriters or any of their respective affiliates or any other person.
For purposes of the Prospectus Supplement, including the schedule and
tables in this Annex A, the indicated terms shall have the following meanings:
1. "Underwriting NOI" or "U/W NOI" as used herein with respect to any
Mortgaged Property means an estimate, calculated at origination or purchase of
the related Mortgage Loan, of the total cash flow anticipated to be available
for annual debt service on such Mortgage Loan calculated as the excess of
Estimated Annual Revenues over Estimated Annual Operating Expenses, each of
which was generally derived in the following manner:
(i) "Estimated Annual Revenues" were generally assumed to be equal to:
(a) the actual amounts of gross rents received during the latest full
calendar year (or annualized or estimated in certain cases), in the case of
the Multifamily Mortgaged Properties; and (b) the annualized amounts of
gross potential rents (in the case of the self-storage Mortgaged
Properties) or monthly contractual base rents (in the case of the
Commercial Mortgaged Properties other than the self-storage and nursing
home Mortgaged Properties) under leases in effect as reflected on a rent
roll provided by the borrower in connection with the origination of the
related Mortgage Loan; and (c) amounts consistent with historical operating
trends and market and competitive conditions, in the case of nursing home
Mortgaged Properties; provided that such revenues were generally modified
by (x) assuming that the occupancy rate for the Mortgaged Property was
consistent with the relevant market if such was less than the occupancy
rate reflected in the most recent rent roll or operating statements, as the
case may be, furnished by the related borrower, and (y), in the case of
retail, industrial and office Mortgaged Properties, assuming a level of
reimbursements from tenants consistent with the terms of the lease or
historical trends at the property, and in certain cases, assuming that a
specified percentage of rent will become defaulted or otherwise
uncollectible. In addition, in the case of retail, combination
retail/office, self-storage and industrial Mortgaged Properties, upward
adjustments may have been made with respect to such revenues to account for
all or a portion of the rents provided for under any new leases scheduled
to take effect later in the year.
Estimated Annual Revenues generally include: (x) for the Multifamily
Mortgaged Properties and the self-storage Mortgaged Properties, rental and
other revenues; (y) for the retail, office, combination retail/office and
industrial Mortgaged Properties, base rent, percentage rent, expense
reimbursements and other revenues; and (z) for the nursing home Mortgaged
Properties, resident charges and other revenues. In the case of the one
Multifamily Mortgaged Property that is cooperatively owned, all occupied
units were assumed to be rented at market rents.
(ii) "Estimated Annual Operating Expenses" were generally assumed to
be equal to historical expenses reflected in the operating statements and
other information furnished by the borrower, except that such expenses were
generally modified by (a) if there was no management fee or a below market
management fee, assuming that a management fee was payable with respect to
the Mortgaged Property in an amount approximately equal to between 1.5% and
6.9% of assumed gross revenues for the year, (b) adjusting certain
historical expense items upwards or downwards to amounts that reflect
industry norms for the particular type of property and/or taking into
consideration material changes in the operating position of the related
Mortgaged Property (such as newly signed leases and market data) and (c)
adjusting for non-recurring items (such as capital expenditures), and
tenant improvement and leasing commissions, if applicable. In addition, in
the case of certain retail, office, combination retail/office and
industrial Mortgaged Properties, adjustments may have been made to account
for tenant improvements and leasing commissions at costs consistent with
historical trends or prevailing market conditions. In other cases,
operating expenses did not include such costs.
A-1
<PAGE>
Estimated Annual Operating Expenses generally include salaries and
wages, the costs or fees of utilities, repairs and maintenance, marketing,
insurance, management, landscaping, security (if provided at the Mortgaged
Property) and the amount of real estate taxes, general and administrative
expenses, ground lease payments, and other costs but without any deductions
for debt service, depreciation and amortization or capital expenditures or
reserves therefor (except as described above). In the case of certain
retail, office, combination retail/office, industrial and/or self-storage
Mortgaged Properties (where such self-storage properties include ancillary
retail and/or warehouse facilities), Estimated Annual Operating Expenses
may have included leasing commissions and tenant improvements.
The historical expenses with respect to any Mortgaged Property were
generally obtained (x) from operating statements relating to the latest
full calendar year (or annualized or estimated in certain cases), (y) by
analyzing the amount of expenses for previous partial periods for which
operating statements were available, with certain adjustments for items
deemed inappropriate for annualization or (z) by reviewing the amounts of
expenses for prior periods, where such information was available.
The management fees and reserves used in calculating Underwriting NOI
differ in many cases from the management fees and reserves provided for
under the loan documents for the Mortgage Loans. Further, actual conditions
at the Mortgaged Properties will differ, and may differ substantially, from
the assumed conditions used in calculating Underwriting NOI. In particular,
the assumptions regarding tenant vacancies, tenant improvements and leasing
commissions, future rental rates, future expenses and other conditions if
and to the extent used in calculating Underwriting NOI for a Mortgaged
Property, may differ substantially from actual conditions with respect to
such Mortgaged Property.
In addition, capital expenditures and leasing commissions and other
reletting costs are crucial to the operation of commercial and multifamily
properties. There can be no assurance that the actual costs of reletting
and capital improvements will not exceed those estimated or assumed in
connection with the origination or purchase of the Mortgage Loans.
No representation is made as to the future net cash flow of the properties,
nor is "Underwriting NOI" set forth herein intended to represent such future net
cash flow.
Underwriting NOI and the Estimated Annual Revenues and Estimated Annual
Operating Expenses used to determine Underwriting NOI for each Mortgaged
Property are derived from information furnished by the respective borrowers. Net
income for a Mortgaged Property as determined under generally accepted
accounting principles ("GAAP") would not be the same as the stated Underwriting
NOI for such Mortgaged Property as set forth in the following schedule or
tables. In addition, Underwriting NOI is not a substitute for or comparable to
operating income as determined in accordance with GAAP as a measure of the
results of a property's operations or a substitute for cash flows from operating
activities determined in accordance with GAAP as a measure of liquidity.
2. "Appraised Value" or "Final Value" means, for any Mortgaged Property,
the appraiser's adjusted value as stated in the most recent third party
appraisal, available to the Sponsor.
3. "Annual Debt Service" means, for any Mortgage Loan, twelve times the
amount of the Monthly Payment under such Mortgage Loan as of the first Due Date
following the Cut-off Date.
4. "1995 Debt Service Coverage Ratio" or "1995 DSCR" means, with respect to
any Mortgage Loan, (a) the 1995 NOI for the related Mortgaged Property or
Properties, divided by (b) the Annual Debt Service for such Mortgage Loan.
5. "Cut-off Date Loan-to-Value Ratio" or "Cut-off Date LTV Ratio" or "LTV"
means, with respect to any Mortgage Loan, the Cut-off Date Balance of such
Mortgage Loan divided by the Appraised Value of the related Mortgaged Property.
6. "Leasable Square Footage" or "Property Size (SF)" means, in the case of
a Mortgaged Property operated as a retail center, office complex, industrial
facility, self-storage facility or combination retail/office facility, the
square footage of the gross leasable area.
7. "Total Units" means: (i) in the case of a Mortgaged Property operated as
multifamily housing, the number of apartments, regardless of the size of or
number of rooms in such apartment; (ii) in the case of a Mortgaged Property
operated as a self-storage facility, the number of self-storage units; (iii) in
the case of a Mortgaged Property operated
A-2
<PAGE>
as a nursing home, the number of beds; and (iv) in the case of a Mortgaged
Property constituting a mobile home park, the number of pads.
8. "Occupancy %" means the percentage of Leasable Square Footage or Total
Units, as the case may be, of the Mortgaged Property that was occupied as of a
specified date as specified by the borrower or as derived from the Mortgaged
Property's rent rolls, which generally are calculated by physical presence or,
alternatively, collected rents as a percentage of potential rental revenues.
9. "Major Tenants" means the two largest tenants of a Commercial Mortgaged
Property, provided that each tenant rents at least 20% of the Leasable Square
Footage at such property.
10. "Anchor Tenant" means a tenant of a retail or office Mortgaged Property
that, because of characteristics such as size, diversity of merchandise, name
recognition and/or range of advertising, attracts customers to the property from
a broad geographic area in a manner that benefits all of the tenants of such
Mortgaged Property.
11. "LC & TI" means, as to any Mortgaged Property, the leasing commission
and tenant improvement expenses paid or contracted to be paid.
12. "1995 NOI" (which is for the period ending as of the date specified in
this Annex A) is the net operating income for a Mortgaged Property as
established by information provided by the related borrower, except that in
certain cases such net operating income has been adjusted by removing certain
non-recurring expenses and revenue or by certain other normalizations. 1995 NOI
does not necessarily reflect accrual of certain costs such as real estate taxes
and capital expenditures and does not reflect non-cash items such as
depreciation or amortization. In some cases, capital expenditures and
non-recurring items may have been treated by a borrower as an expense but were
deducted from 1995 Operating Expenses to reflect normalized 1995 NOI. The
Sponsor has not made any attempt to verify the accuracy of any information
provided by each borrower or to reflect changes in net operating income that may
have occurred since the date of the information provided by each borrower for
the related Mortgaged Property. 1995 NOI was not necessarily determined in
accordance with generally accepted accounting principles. Moreover, 1995 NOI is
not a substitute for net income determined in accordance with generally accepted
accounting principles as a measure of the results of a Mortgaged Property's
operations or a substitute for cash flows from operating activities determined
in accordance with generally accepted accounting principles as a measure of
liquidity and in certain cases may reflect partial-year annualizations.
13. "1995 Operating Expenses" are equal to actual expenses incurred for a
Mortgaged Property for the year ended December 31, 1995, as reflected in the
operating statements and other information furnished by the related borrower,
and generally includes salaries and wages, the costs or fees of utilities,
repairs and maintenance, marketing, insurance, management, landscaping, security
(if provided at the Mortgaged Property) and the amount of real estate taxes,
general and administrative expenses, ground lease payments, and other costs but
without any deductions for debt service, depreciation and amortization or
capital expenditures or reserves therefor. In the case of certain retail,
office, combination retail/office, industrial and/or self-storage Mortgaged
Properties (where such self-storage properties include ancillary retail and/or
warehouse facilities), 1995 Annual Operating Expenses may have included leasing
commissions and tenant improvements.
14. "1995 Annual Revenues", for a Mortgaged Property generally includes for
the year ended December 31, 1995 as reflected in the operating statements and
other information furnished by the related borrower (or annualized amounts in
certain cases): (a) for the Multifamily Mortgaged Properties and the
self-storage Mortgaged Properties, gross rental and other revenues; (b) for the
retail, office, combination retail/office and industrial Mortgaged Properties,
base rent, percentage rent, expense reimbursements and other revenues; and (c)
for the nursing home Mortgaged Properties, resident charges and other revenues;
and in the case of the one Multifamily Mortgaged Property that is cooperatively
owned, resident maintenance payments.
In the schedule and tables set forth in this Annex A, with respect to
Mortgage Loans evidenced by one Mortgage Note, but secured by multiple Mortgaged
Properties, a portion of the principal balance of the Mortgage Loan has been
allocated to each related Mortgaged Property for certain purposes, including
determining the Cut-off Date Loan-to-Value Ratio and 1995 Debt Service Coverage
Ratio.
A-3
<PAGE>
ANNEX A
<TABLE>
<CAPTION>
COUNTER CONTROL LOAN
NUMBER NUMBER NUMBER PROPERTY NAME PROPERTY ADDRESS CITY
------- ------- ------ ------------- ---------------- ----
<S> <C> <C> <C> <C> <C>
Group 1
1 CO1 04-1000001 Woodhaven 625 S Redwood Road Salt Lake City
2 CO2 04-1000009 Sandstone 405 East Prince Road Tucson
3 CO3 06-1000001 Green Tree 50 Jadwin Avenue Richland
4 CO4 04-1000002 Hunters Glen 1201 Bacon Ranch Road Killeen
5 CO5 04-1000012 Oak Hollow 2601 Bill Owens Parkway Longview
6 CO6 04-1000003 Stone Ridge 1000 South Danville Road Kilgore
7 CO7 06-1000004 Holme Circle 2740-2800 Axe Factory Road Philadelphia
8 CO8 06-1000003 Washington Crossing 614-15 E. Mosser Street Allentown
Group 2
9A 2A 643802-5 Ginger Creek Apartments 2800 Springfield Avenue Champaign
9B 2B 643802-5 Continental Plaza Apartments 907 South Mattis Avenue Champaign
9C 2C 643802-5 Stoneleigh Court 800 South Mattis Avenue Champaign
9D 2D 643802-5 Colonial Village Apartments 1003 South Mattis Avenue Champaign
9E 2E 643802-5 Healey Street Apartments 607,609,611,613 West Healey St Champaign
9F 2F 643802-5 Clark Street Apartments 307,311,312,402 West Clark St Champaign
9G 2G 643802-5 Green Street Apartments 507-509 West Green Street Champaign
9H 2H 643802-5 Anthony Drive Apartments 1500 Anthony Drive Champaign
9I 2I 643802-5 Colonial South Apartments 1101 South Mattis Avenue Champaign
10 3 644135-5 Hampton Court Apartments 3955 Swenson Ave Las Vegas
11 4 650901-9 Eagle Court Apartments 215 West 84th St New York
12 6 644111-9 Latham Village Apartments Latham Village Lane Latham
13 7 643277-5 Navajo Bluffs Apartments 6575 Jaffe Court San Diego
14 9 650647-8 Lantana Apartments 4103 Wesley Club Drive Atlanta
15 10 650565-7 Bren Mar Apartments 6374 Beryl Road Alexandria
16 11 644048-2 Newport Apartments 415 South Pine Island Rd Plantation
17 12 642968-1 Wyoga Lake Apartments 4260-4261 Americana Drive Cuyahoga Falls
18 13 2 Greenbriar Village Township Line Road Bath (Allentown)
19 14 642996-6 Winbranch Apartments 3551 Dalebranch Drive Memphis
20 15 643812-2 Crystal Village 2610-A Camellia Street Durham
21 16 650675-3 Saratoga Lake Apartments 3552 Panthersville Road Decatur
22 17 643000-7 Trenton Place Apartments 34188 Euclid Avenue Willoughby
23 18 644109-6 Prospect Point Apts 200-300 West Curtis Savoy
24 20 642952-6 Garden Village Apartments 2000 North Mattis Ave Champaign
25 21 642000-4 City Terrace Apartments 425 East 3rd Street Long Beach
26 22 644143-6 Hidden Oaks Apartments 1329 Northwest Military Highwy San Antonio
27 23 644122-9 Foxglove Apartments 210 Redd Road El Paso
28 24 650513-6 Shannon View Apartments University Drive Fort Lauderdale
29A 25A 642885-7 Brighton Properties I 88 Washington Street Boston
29B 25B 642885-7 Brighton Properties II 119-127 Sutherland Road Boston
29C 25C 642885-7 Brighton Properties III 1687 Commonwealth Ave. Boston
30 27 650518-1 Courtyard Apartments 3222-3294 E. Dakota Avenue Fresno
31 28 650553-4 Montrose Square Apartments 6531 Emmons Drive Fort Wayne
32 30 650570-9 Hunter Chase Apartments 1897 Madison Street Clarksville
33 32 643773-8 Wildwood East Apartments 2237 East 56th Avenue Anchorage
34 91 11 Fairfield Apartments 18 Country Club Drive Newark
35 35 650800-7 Bedford Crossing Apartments 550 Old Hickory Blvd Jackson
- -------------
</TABLE>
Footnotes:
(1) Reflects tenant lease-up as of year-end 1995. These properties were newly
constructed, renovated or expanded in 1995.
(2) Management fees have been adjusted to market.
(3) Underlying mortgage on cooperative was underwritten as a multi-family
rental property with market rents less a vacancy factor.
(4) Complete financials were unavailable for 1995. Underwritten numbers were
utilized.
(5) 1994 NOI reflects 1993 amounts
(6) Largest tenant lease expired 12/1/95; currently on month-to-month basis.
(7) Related Mortgage Loans are grouped by alphabetical designations.
A-4
<PAGE>
<TABLE>
<CAPTION>
ANNEX A
CUT-OFF
PROPERTY ORIGINAL DATE CURRENT NOTE FIRST MONTHLY
STATE ZIP TYPE BALANCE BALANCE RATE DATE PYMT DATE PAYMENT
- ----- --- -------- -------- ------- ------- ---- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
UT 84104 Multifamily 7,951,729 7,844,670 8.219% 9/9/94 11/1/94 59,623.15
AZ 85032 Multifamily 6,540,454 6,452,395 8.219% 9/9/94 11/1/94 49,041.22
WA 99352 Multifamily 4,950,000 4,836,173 8.000% 8/23/94 10/1/94 38,276.64
TX 76542 Multifamily 3,645,692 3,596,608 8.219% 9/9/94 11/1/94 27,335.89
TX 75601 Multifamily 3,195,112 3,152,094 8.219% 9/9/94 11/1/94 23,957.38
TX 75662 Multifamily 1,818,466 1,793,983 8.219% 9/9/94 11/1/94 13,635.11
PA 19152 Multifamily 1,300,000 1,275,221 8.438% 11/30/94 1/1/95 10,421.37
PA 18103 Multifamily 1,030,000 1,015,808 8.625% 11/28/94 1/1/95 7,996.60
IL 61821 Multifamily 3,885,000 3,874,468 8.000% 2/28/96 4/1/96 28,506.77
IL 61821 Multifamily 2,200,000 2,194,036 8.000% 2/28/96 4/1/96 16,142.83
IL 61821 Multifamily 1,200,000 1,196,747 8.000% 2/28/96 4/1/96 8,805.18
IL 61821 Multifamily 1,140,000 1,136,910 8.000% 2/28/96 4/1/96 8,364.92
IL 61820 Multifamily 1,040,000 1,037,181 8.000% 2/28/96 4/1/96 7,631.15
IL 61820 Multifamily 810,000 807,804 8.000% 2/28/96 4/1/96 5,943.50
IL 61820 Multifamily 750,000 747,967 8.000% 2/28/96 4/1/96 5,503.24
IL 61821 Multifamily 625,000 623,306 8.000% 2/28/96 4/1/96 4,586.03
IL 61821 Multifamily 400,000 398,916 8.000% 2/28/96 4/1/96 2,935.06
NV 89119 Multifamily 11,000,000 10,979,492 8.410% 3/21/96 5/1/96 83,879.86
NY 10024 Multifamily 10,000,000 9,978,364 7.845% 4/5/96 6/1/96 76,157.65
NY 12110 Multifamily 8,000,000 7,967,186 7.990% 12/21/95 2/1/96 58,645.41
CA 92119 Multifamily 7,200,000 7,172,731 7.460% 1/5/96 3/1/96 50,146.38
GA 30034 Multifamily 6,155,000 6,147,877 8.740% 4/17/96 6/1/96 48,377.46
VA 23212 Multifamily 5,350,000 5,336,072 8.200% 2/22/96 4/1/96 40,004.87
FL 33324 Multifamily 5,100,000 5,090,036 8.180% 3/28/96 5/1/96 38,063.91
OH 44224 Multifamily 5,300,000 5,207,443 8.110% 12/4/95 2/1/96 50,986.70
PA 18104 Mobile Home 5,000,000 4,991,089 8.630% 3/28/96 5/1/96 38,907.28
TN 38116 Multifamily 4,800,000 4,763,898 7.990% 1/22/95 1/1/96 37,015.39
NC 27705 Multifamily 4,400,000 4,380,950 7.720% 12/28/95 2/1/96 31,430.97
GA 30034 Multifamily 4,300,000 4,295,024 8.740% 4/17/96 6/1/96 33,797.41
OH 44094 Multifamily 4,200,000 4,173,057 8.000% 12/7/95 2/1/96 32,416.28
IL 68121 Multifamily 4,000,000 3,985,119 7.550% 1/25/96 3/1/96 28,105.66
IL 61821 Multifamily 3,650,000 3,636,742 7.670% 1/23/96 3/1/96 25,947.56
CA 90802 Multifamily 3,500,000 3,477,330 7.940% 12/1/95 2/1/96 26,874.60
TX 78231 Multifamily 3,400,000 3,390,072 7.630% 2/15/96 4/1/96 24,076.68
TX 79932 Multifamily 3,300,000 3,293,190 7.910% 3/8/96 5/1/96 24,007.50
FL 33324 Multifamily 3,225,300 3,223,444 8.750% 5/9/96 7/1/96 25,373.45
MA 02135 Multifamily 825,000 815,803 9.005% 6/22/95 8/1/95 6,926.20
MA 02135 Multifamily 1,350,000 1,334,951 9.005% 6/22/95 8/1/95 11,333.77
MA 02135 Multifamily 1,012,500 1,001,213 9.005% 6/22/95 8/1/95 8,500.33
CA 93726 Multifamily 3,154,000 3,148,573 8.800% 3/26/96 5/1/96 24,925.25
IN 46255 Multifamily 2,800,000 2,792,172 8.780% 3/21/96 5/1/96 23,077.12
TN 37043 Multifamily 2,500,000 2,495,456 8.910% 4/3/96 6/1/96 20,826.05
AK 99502 Multifamily 1,950,000 1,936,150 7.360% 12/8/95 2/1/96 14,233.22
DE 19711 Multifamily 1,900,000 1,898,333 9.100% 5/30/96 7/1/96 16,075.04
TN 38301 Multifamily 1,875,000 1,873,277 8.820% 5/24/96 7/1/96 15,504.47
</TABLE>
A-5
<PAGE>
<TABLE>
ANNEX A
<CAPTION>
RELATED
COUNTER ORIGINAL ORIGINAL REMAINING MATURITY MORTGAGE
NUMBER PROPERTY NAME TERM AMORT SEASONING TERM DATE LOANS
------ ------------- ---- ----- --------- ---- ---- -----
Group 1
<S> <C> <C> <C> <C> <C> <C>
1 Woodhaven 120 360 21 99 10/1/04 No
2 Sandstone 120 360 21 99 10/1/04 No
3 Green Tree 84 300 22 62 9/1/01 No
4 Hunters Glen 120 360 21 99 10/1/04 No
5 Oak Hollow 120 360 21 99 10/1/04 No
6 Stone Ridge 120 360 21 99 10/1/04 No
7 Holme Circle 84 300 19 65 12/1/01 No
8 Washington Crossing 84 360 19 65 12/1/01 No
Group 2
9A Ginger Creek Apartments 120 360 4 116 3/1/06 Yes(i)
9B Continental Plaza Apartments 120 360 4 116 3/1/06 Yes(i)
9C Stoneleigh Court 120 360 4 116 3/1/06 Yes(i)
9D Colonial Village Apartments 120 360 4 116 3/1/06 Yes(i)
9E Healey Street Apartments 120 360 4 116 3/1/06 Yes(i)
9F Clark Street Apartments 120 360 4 116 3/1/06 Yes(i)
9G Green Street Apartments 120 360 4 116 3/1/06 Yes(i)
9H Anthony Drive Apartments 120 360 4 116 3/1/06 Yes(i)
9I Colonial South Apartments 120 360 4 116 3/1/06 Yes(i)
10 Hampton Court Apartments 120 360 3 117 4/1/06 No
11 Eagle Court Apartments 120 300 2 118 5/1/06 No
12 Latham Village Apartments 180 360 6 174 12/31/10 No
13 Navajo Bluffs Apartments 120 360 5 115 2/1/06 No
14 Lantana Apartments 120 360 2 118 5/1/06 No
15 Bren Mar Apartments 120 360 4 116 3/1/06 No
16 Newport Apartments 120 360 3 117 4/1/06 No
17 Wyoga Lake Apartments 180 180 6 174 1/1/11 No
18 Greenbriar Village 120 360 3 117 4/1/06 No
19 Winbranch Apaprtments 120 300 7 113 12/1/05 No
20 Crystal Village 120 360 6 114 1/1/06 No
21 Saratoga Lake Apartments 120 360 2 118 5/1/06 No
22 Trenton Place Apartments 84 300 6 78 1/1/03 No
23 Prospect Point Apts 120 360 5 115 2/1/06 No
24 Garden Village Apartments 120 360 5 115 2/1/06 No
25 City Terrace Apartments 120 300 6 114 1/1/06 No
26 Hidden Oaks Apartments 120 360 4 116 3/1/06 No
27 Foxglove Apartments 84 360 3 81 4/1/03 No
28 Shannon View Apartments 120 360 1 119 6/1/06 No
29A Brighton Properties I 120 300 12 108 7/1/05 Yes(j)
29B Brighton Properties II 120 300 12 108 7/1/05 Yes(j)
29C Brighton Properties III 120 300 12 108 7/1/05 Yes(j)
30 Courtyard Apartments 120 360 3 117 4/1/06 No
31 Montrose Square Apartments 120 300 3 117 4/1/06 No
32 Hunter Chase Apartments 120 300 2 118 5/1/06 No
33 Wildwood East Apartments 180 300 6 174 1/1/11 Yes(k)
34 Fairfield Apartments 120 300 1 119 6/1/06 No
35 Bedford Crossing Apartments 120 300 1 119 6/1/06 No
</TABLE>
A-6
<PAGE>
<TABLE>
ANNEX A
<CAPTION>
LOCKOUT PREPAY PREPAY PREPAY PREPAY PREPAY PREPAY PREPAY PREPAY PREPAY PREPAY PREPAY
EXPIRATION YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10 YEAR 11
---------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5% 4% 3% 2% 1% 0% 0% 0% 0% 0% n/a
5% 4% 3% 2% 1% 0% 0% 0% 0% 0% n/a
3% 2% 1% 0% 0% 0% 0% n/a n/a n/a n/a
5% 4% 3% 2% 1% 0% 0% 0% 0% 0% n/a
5% 4% 3% 2% 1% 0% 0% 0% 0% 0% n/a
5% 4% 3% 2% 1% 0% 0% 0% 0% 0% n/a
5% 4% 3% 2% 1% 0% 0% n/a n/a n/a n/a
5% 4% 3% 2% 1% 0% 0% n/a n/a n/a n/a
2/29/00 LO LO LO LO YM YM YM YM YM YM n/a
2/29/00 LO LO LO LO YM YM YM YM YM YM n/a
2/29/00 LO LO LO LO YM YM YM YM YM YM n/a
2/29/00 LO LO LO LO YM YM YM YM YM YM n/a
2/29/00 LO LO LO LO YM YM YM YM YM YM n/a
2/29/00 LO LO LO LO YM YM YM YM YM YM n/a
2/29/00 LO LO LO LO YM YM YM YM YM YM n/a
2/29/00 LO LO LO LO YM YM YM YM YM YM n/a
2/29/00 LO LO LO LO YM YM YM YM YM YM n/a
3/31/00 LO LO LO LO YM YM YM YM YM YM n/a
5/1/98 LO LO YM/2 YM/2 YM YM YM YM YM YM n/a
12/31/01 LO LO LO LO LO LO YM YM YM YM YM
1/31/00 LO LO LO LO YM YM YM YM YM YM n/a
4/30/00 LO LO LO LO YM YM YM YM YM YM n/a
2/28/00 LO LO LO LO YM YM YM YM YM YM n/a
3/31/00 LO LO LO LO YM YM YM YM YM YM n/a
12/31/99 LO LO LO LO YM YM YM YM YM YM 0%
3/31/00 LO LO LO LO YM YM YM YM YM YM n/a
11/30/99 LO LO LO LO YM YM YM YM YM YM n/a
12/31/99 LO LO LO LO YM YM YM YM YM YM n/a
4/30/00 LO LO LO LO YM YM YM YM YM YM n/a
12/31/97 LO LO 5% 4% 3% 2% 1% n/a n/a n/a n/a
1/31/00 LO LO LO LO YM YM YM YM YM YM n/a
1/31/00 LO LO LO LO YM YM YM YM YM YM n/a
1/30/00 LO LO LO LO YM YM YM YM YM YM n/a
2/29/00 LO LO LO LO YM YM YM YM YM YM n/a
3/31/98 LO LO YM YM YM YM YM n/a n/a n/a n/a
5/31/00 LO LO LO LO YM YM YM YM YM YM n/a
6/30/00 LO LO LO LO LO 5% 4% 3% 2% 1% n/a
6/30/00 LO LO LO LO LO 5% 4% 3% 2% 1% n/a
6/30/00 LO LO LO LO LO 5% 4% 3% 2% 1% n/a
3/31/00 LO LO LO LO YM YM YM YM YM YM n/a
3/31/00 LO LO LO LO YM YM YM YM YM YM n/a
4/30/00 LO LO LO LO YM YM YM YM YM YM n/a
12/31/00 LO LO LO LO LO YM YM YM YM YM YM
5/31/00 LO LO LO LO YM YM YM YM YM YM n/a
5/31/00 LO LO LO LO YM YM YM YM YM YM n/a
</TABLE>
A-7
<PAGE>
<TABLE>
ANNEX A
<CAPTION>
COUNTER PREPAY PREPAY PREPAY PREPAY PREPAY OPEN APPRAISAL
NUMBER PROPERTY NAME YR 12 YR 13 YR 14 YR 15 YR 16-25 PERIOD DATE
- ------ ------------- ----- ----- ----- ----- -------- ------ ----
Group 1
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Woodhaven n/a n/a n/a n/a n/a 60 3/10/94
2 Sandstone n/a n/a n/a n/a n/a 60 3/8/94
3 Green Tree n/a n/a n/a n/a n/a 48 7/21/94
4 Hunters Glen n/a n/a n/a n/a n/a 60 1/26/94
5 Oak Hollow n/a n/a n/a n/a n/a 60 1/26/94
6 Stone Ridge n/a n/a n/a n/a n/a 60 1/26/94
7 Holme Circle n/a n/a n/a n/a n/a 24 10/11/94
8 Washington Crossing n/a n/a n/a n/a n/a 24 9/19/94
Group 2
9A Ginger Creek Apartments n/a n/a n/a n/a n/a 6 11/10/95
9B Continental Plaza Apartments n/a n/a n/a n/a n/a 6 11/22/95
9C Stoneleigh Court n/a n/a n/a n/a n/a 6 11/20/95
9D Colonial Village Apartments n/a n/a n/a n/a n/a 6 11/23/95
9E Healey Street Apartments n/a n/a n/a n/a n/a 6 12/14/95
9F Clark Street Apartments n/a n/a n/a n/a n/a 6 12/1/95
9G Green Street Apartments n/a n/a n/a n/a n/a 6 11/29/95
9H Anthony Drive Apartments n/a n/a n/a n/a n/a 6 11/26/95
9I Colonial South Apartments n/a n/a n/a n/a n/a 6 11/24/95
10 Hampton Court Apartments n/a n/a n/a n/a n/a 6 12/21/95
11 Eagle Court Apartments n/a n/a n/a n/a n/a 6 1/17/96
12 Latham Village Apartments YM YM YM YM n/a 6 11/9/95
13 Navajo Bluffs Apartments n/a n/a n/a n/a n/a 6 8/31/95
14 Lantana Apartments n/a n/a n/a n/a n/a 6 1/16/96
15 Bren Mar Apartments n/a n/a n/a n/a n/a 6 9/6/95
16 Newport Apartments n/a n/a n/a n/a n/a 6 12/8/95
17 Wyoga Lake Apartments 0% 0% 0% 0% n/a 60 9/8/95
18 Greenbriar Village n/a n/a n/a n/a n/a 6 12/4/95
19 Winbranch Apartments n/a n/a n/a n/a n/a 6 8/1/95
20 Crystal Village n/a n/a n/a n/a n/a 6 10/3/95
21 Saratoga Lake Apartments n/a n/a n/a n/a n/a 6 1/16/96
22 Trenton Place Apartments n/a n/a n/a n/a n/a 6 9/21/95
23 Prospect Point Apts n/a n/a n/a n/a n/a 6 11/13/95
24 Garden Village Apartments n/a n/a n/a n/a n/a 6 11/19/95
25 City Terrace Apartments n/a n/a n/a n/a n/a 6 11/27/94
26 Hidden Oaks Apartments n/a n/a n/a n/a n/a 6 11/6/95
27 Foxglove Apartments n/a n/a n/a n/a n/a 6 12/11/95
28 Shannon View Apartments n/a n/a n/a n/a n/a 6 1/15/96
29A Brighton Properties I n/a n/a n/a n/a n/a 0 3/9/95
29B Brighton Properties II n/a n/a n/a n/a n/a 0 3/9/95
29C Brighton Properties III n/a n/a n/a n/a n/a 0 3/9/95
30 Courtyard Apartments n/a n/a n/a n/a n/a 6 1/18/96
31 Montrose Square Apartments n/a n/a n/a n/a n/a 6 6/26/95
32 Hunter Chase Apartments n/a n/a n/a n/a n/a 6 1/17/96
33 Wildwood East Apartments YM YM YM YM n/a 6 9/28/95
34 Fairfield Apartments n/a n/a n/a n/a n/a 6 4/20/95
35 Bedford Crossing Apartments n/a n/a n/a n/a n/a 6 2/14/96
</TABLE>
A-8
<PAGE>
<TABLE>
ANNEX A
<CAPTION>
FINAL YEAR BUILT/ TOTAL PROPERTY LOAN PER
VALUE LTV RENOVATED UNITS SIZE (SF) SF/UNIT UNIT/SF OCCUPANCY %
----- --- --------- ----- --------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
12,150,000 64.6% 1986 378 204,876 20,753.09 Unit 96%
10,150,000 63.6% 1985 330 181,137 19,552.71 Unit 92%
8,400,000 57.6% 1974/1981 236 199,760 20,492.26 Unit 84%
5,340,000 67.4% 1985 152 115,488 23,661.89 Unit 95%
4,500,000 70.1% 1982 200 156,960 15,760.47 Unit 94%
2,470,000 72.6% 1982 136 86,376 13,191.05 Unit 97%
1,790,000 71.2% 1963 102 63,900 12,502.16 Unit 93%
1,550,000 65.5% 1989 60 30,600 16,930.13 Unit 88%
5,300,000 73.1% 1987/1991 104 99,922 37,254.50 Unit 97%
2,950,000 74.4% 1965 92 82,000 23,848.22 Unit 100%
1,675,000 71.5% 1967 42 31,350 28,493.98 Unit 95%
1,675,000 67.9% 1966 39 41,100 29,151.53 Unit 95%
1,450,000 71.5% 1962/1977 52 33,700 19,945.78 Unit 90%
1,275,000 63.4% 1940/1961 48 29,156 16,829.25 Unit 96%
1,040,000 71.9% 1964/1988 30 21,670 24,932.23 Unit 100%
870,000 71.6% 1972 32 19,200 19,478.30 Unit 100%
540,000 73.9% 1966 21 10,560 18,995.98 Unit 100%
15,500,000 70.8% 1974 420 232,992 26,141.65 Unit 99%
16,000,000 62.4% 1902/1983 128 86,374 77,955.97 Unit 100%
12,000,000 66.4% 1964 352 387,492 22,634.05 Unit 95%
9,990,000 71.8% 1975/1988 210 135,808 34,155.86 Unit 93%
8,400,000 73.2% 1971/1995 257 292,980 23,921.70 Unit 93%
6,770,000 78.8% 1958/1987 135 107,221 39,526.46 Unit 93%
7,000,000 72.7% 1973/1991 152 139,364 33,487.08 Unit 100%
7,100,000 73.3% 1973 264 273,000 19,725.16 Unit 90%
7,700,000 64.8% 1985 319 2,775,208 15,646.05 Pad 87%
7,250,000 65.7% 1973/1995 460 370,236 10,356.30 Unit 94%
6,400,000 68.5% 1985 136 114,560 32,212.87 Unit 94%
5,750,000 74.7% 1974 123 169,348 34,918.89 Unit 94%
5,750,000 72.6% 1974 144 119,720 28,979.56 Unit 99%
5,500,000 72.5% 1993/1995 112 98,672 35,581.42 Unit 96%
5,475,000 66.4% 1965/1972 163 135,150 22,311.30 Unit 97%
5,350,000 65.0% 1986 98 47,172 35,482.96 Unit 93%
4,560,000 74.3% 1986 124 96,704 27,339.29 Unit 94%
4,550,000 72.4% 1983 176 160,084 18,711.31 Unit 86%
4,450,000 72.4% 1985 120 97,776 26,862.04 Unit 92%
1,100,000 74.2% 1935 36 21,400 22,661.21 Unit 97%
1,800,000 74.2% 1920/1984 43 32,300 31,045.38 Unit 96%
1,350,000 74.2% 1930 34 25,300 29,447.45 Unit 94%
4,600,000 68.5% 1973 154 135,538 20,445.28 Unit 95%
3,775,000 74.0% 1987 136 70,000 20,530.67 Unit 100%
3,500,000 71.3% 1972 160 133,984 15,596.60 Unit 95%
3,375,000 57.4% 1985 88 68,488 22,001.70 Unit 100%
2,550,000 74.4% 1966/1988 66 88,068 28,762.63 Unit 96%
2,850,000 65.7% 1971 144 116,784 13,008.87 Unit 98%
</TABLE>
A-9
<PAGE>
<TABLE>
ANNEX A
<CAPTION>
MAX MIN
COUNTER LOAN INTEREST INTEREST
NUMBER PROPERTY NAME TYPE INDEX MARGIN RATE RATE
------- ------------- ---- ----- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C>
Group 1
1 Woodhaven Floating 6 mo Libor 2.750% 11.750% 6.000%
2 Sandstone Floating 6 mo Libor 2.750% 11.750% 6.000%
3 Green Tree Floating 6 mo Libor 2.750% 12.560% 7.813%
4 Hunters Glen Floating 6 mo Libor 2.750% 11.750% 6.000%
5 Oak Hollow Floating 6 mo Libor 2.750% 11.750% 6.000%
6 Stone Ridge Floating 6 mo Libor 2.750% 11.750% 6.000%
7 Holme Circle Floating 6 mo Libor 2.750% 12.630% 6.375%
8 Washington Crossing Floating 6 mo Libor 2.750% 12.880% 8.625%
Group 2
9A Ginger Creek Apartments Fixed
9B Continental Plaza Apartments Fixed
9C Stoneleigh Court Fixed
9D Colonial Village Apartments Fixed
9E Healey Street Apartments Fixed
9F Clark Street Apartments Fixed
9G Green Street Apartments Fixed
9H Anthony Drive Apartments Fixed
9I Colonial South Apartments Fixed
10 Hampton Court Apartments Fixed
11 Eagle Court Apartments Fixed
12 Latham Village Apartments Fixed
13 Navajo Bluffs Apartments Fixed
14 Lantana Apartments Fixed
15 Bren Mar Apartments Fixed
16 Newport Apartments Fixed
17 Wyoga Lake Apartments Fixed
18 Greenbriar Village Fixed
19 Winbranch Apartments Fixed
20 Crystal Village Fixed
21 Saratoga Lake Apartments Fixed
22 Trenton Place Apartments Fixed
23 Prospect Point Apts Fixed
24 Garden Village Apartments Fixed
25 City Terrace Apartments Fixed
26 Hidden Oaks Apartments Fixed
27 Foxglove Apartments Fixed
28 Shannon View Apartments Fixed
29A Brighton Properties I Fixed
29B Brighton Properties II Fixed
29C Brighton Properties III Fixed
30 Courtyard Apartments Fixed
31 Montrose Square Apartments Fixed
32 Hunter Chase Apartments Fixed
33 Wildwood East Apartments Fixed
34 Fairfield Apartments Fixed
35 Bedford Crossing Apartments Fixed
</TABLE>
A-10
<PAGE>
<TABLE>
ANNEX A
<CAPTION>
LARGEST LARGEST LARGEST
TENANT TENANT TENANT SECOND
LARGEST TENANT LEASED SF % OF TOTAL SF LEASE EXPIRATION LARGEST TENANT
- -------------- --------- ------------- ---------------- --------------
<S> <C> <C> <C> <C>
</TABLE>
A-11
<PAGE>
<TABLE>
ANNEX A
<CAPTION>
SECOND LARGEST SECOND LARGEST SECOND LARGEST
COUNTER TENANT TENANT TENANT
NUMBER PROPERTY NAME LEASED SF % OF TOTAL SF LEASE EXPIRATION 1994 NOI
------- ------------- -------------- -------------- ---------------- ----------
<S> <C> <C>
Group 1
1 Woodhaven 1,213,326
2 Sandstone 984,947
3 Green Tree 1,007,465
4 Hunters Glen 593,112
5 Oak Hollow 422,662
6 Stone Ridge 285,871
7 Holme Circle --
8 Washington Crossing 160,632
Group 2
9A Ginger Creek Apartments 471,364
9B Continental Plaza Apartments 254,201
9C Stoneleigh Court 149,899
9D Colonial Village Apartments 131,263
9E Healey Street Apartments 129,513
9F Clark Street Apartments 96,937
9G Green Street Apartments 92,071
9H Anthony Drive Apartments 81,460
9I Colonial South Apartments 54,265
10 Hampton Court Apartments 1,535,162
11 Eagle Court Apartments 1,848,034
12 Latham Village Apartments 1,175,443
13 Navajo Bluffs Apartments 876,052
14 Lantana Apartments 566,064
15 Bren Mar Apartments 647,505
16 Newport Apartments 639,361
17 Wyoga Lake Apartments 721,966
18 Greenbriar Village 716,403
19 Winbranch Apaprtments 734,227
20 Crystal Village 615,345
21 Saratoga Lake Apartments --
22 Trenton Place Apartments 516,783
23 Prospect Point Apts 302,646
24 Garden Village Apartments 479,758
25 City Terrace Apartments 536,561
26 Hidden Oaks Apartments 424,303
27 Foxglove Apartments 368,354
28 Shannon View Apartments 420,944
29A Brighton Properties I 128,557
29B Brighton Properties II 219,038
29C Brighton Properties III 155,000
30 Courtyard Apartments 431,520
31 Montrose Square Apartments 343,945
32 Hunter Chase Apartments 413,801
33 Wildwood East Apartments 464,614
34 Fairfield Apartments 259,728
35 Bedford Crossing Apartments 269,442
</TABLE>
A-12
<PAGE>
<TABLE>
ANNEX A
<CAPTION>
1995 REVENUES 1995 EXPENSES 1995 NOI FOOTNOTE 1995 DSCR 1995 COMBINED DSCR ANNUALIZED
------------- ------------- -------- -------- --------- ------------------ -----------
<S> <C> <C> <C> <C> <C> <C>
1,862,564 591,316 1,271,248 1.78 Trailing 12
1,584,211 582,839 1,001,372 1.70 Trailing 12
1,247,142 595,306 651,836 1.42 Trailing 12
972,494 379,510 592,984 1.81 Trailing 12
881,595 420,171 461,424 1.61 Trailing 12
594,022 311,240 282,782 1.73 Trailing 12
467,218 244,699 222,519 1.78 Trailing 12
258,658 125,699 132,959 1.39 Trailing 12
812,463 362,490 449,973 1.32 1.36 Trailing 12
502,179 224,697 277,482 1.43 1.36 Trailing 12
231,430 101,538 129,892 1.23 1.36 Trailing 12
251,023 127,665 123,358 1.23 1.36 Trailing 12
245,858 114,057 131,801 1.44 1.36 Trailing 12
216,764 125,026 91,738 1.29 1.36 Trailing 12
71,948 70,971 100,977 1.53 1.36 Trailing 12
137,966 50,172 87,794 1.60 1.36 Trailing 12
88,370 36,309 52,061 1.48 1.36 Trailing 12
2,510,970 912,806 1,598,164 1.59 Trailing 12
2,856,495 1,167,389 1,689,106 1.85 Trailing 12
1,965,719 824,744 1,140,975 1.62 Trailing 12
1,334,754 471,285 863,469 1.43 Trailing 12
1,452,317 734,331 717,986 1.24 Trailing 12
1,098,148 491,928 606,220 1.26 Trailing 12
1,171,911 484,751 687,160 1.50 Trailing 12
1,448,040 658,554 789,486 1.29 Trailing 12
1,008,523 264,531 743,992 1.59 Trailing 12
1,904,157 960,864 943,293 2.12 Trailing 12
907,531 329,284 578,247 1.53 Trailing 12
900,500 351,371 549,129 (1) 1.35 Estimated
1,016,808 477,478 539,330 1.39 6 mos ann
735,232 276,438 458,794 1.36 Trailing 12
870,468 393,919 476,549 1.53 Trailing 12
724,577 211,185 513,392 1.59 Trailing 12
755,944 335,177 420,767 1.46 Trailing 12
968,564 531,126 437,438 1.52 Trailing 12
858,043 411,179 446,865 1.47 Trailing 12
248,093 126,487 121,606 1.46 1.49 Trailing 12
380,349 168,092 212,257 1.56 1.49 Trailing 12
282,543 137,063 145,480 1.43 1.49 Trailing 12
768,604 365,829 402,775 1.35 Trailing 12
621,621 236,398 385,223 1.39 11 mos ann
736,400 348,078 388,322 1.55 Trailing 12
750,939 230,333 520,606 3.05 2.60 Trailing 12
461,343 173,218 288,125 1.49 Trailing 12
725,354 424,235 301,119 1.62 Trailing 12
</TABLE>
A-13
<PAGE>
<TABLE>
ANNEX A
<CAPTION>
COUNTER
NUMBER PROPERTY NAME END DATE U/WNOI MASTER SERVICING FEE
------- ------------- -------- ------ --------------------
<S> <C> <C> <C> <C>
Group 1
1 Woodhaven 12/31/95 1,120,666 0.270%
2 Sandstone 12/31/95 872,372 0.270%
3 Green Tree 12/31/95 904,911 0.270%
4 Hunters Glen 12/31/95 544,027 0.270%
5 Oak Hollow 12/31/95 442,696 0.270%
6 Stone Ridge 12/31/95 277,280 0.270%
7 Holme Circle 12/31/95 190,434 0.270%
8 Washington Crossing 12/31/95 124,453 0.270%
Group 2
9A Ginger Creek Apartments 12/31/95 483,672 0.185%
9B Continental Plaza Apartments 12/31/95 284,039 0.185%
9C Stoneleigh Court 12/31/95 147,211 0.185%
9D Colonial Village Apartments 12/31/95 142,172 0.185%
9E Healey Street Apartments 12/31/95 140,456 0.185%
9F Clark Street Apartments 12/31/95 111,862 0.185%
9G Green Street Apartments 12/31/95 102,371 0.185%
9H Anthony Drive Apartments 12/31/95 87,628 0.185%
9I Colonial South Apartments 12/31/95 54,053 0.185%
10 Hampton Court Apartments 12/31/95 1,408,595 0.185%
11 Eagle Court Apartments 12/31/95 1,370,204 0.130%
12 Latham Village Apartments 12/31/95 1,146,688 0.185%
13 Navajo Bluffs Apartments 12/31/95 844,602 0.185%
14 Lantana Apartments 12/31/95 777,356 0.185%
15 Bren Mar Apartments 12/31/95 628,611 0.185%
16 Newport Apartments 12/31/95 613,230 0.185%
17 Wyoga Lake Apartments 12/31/95 805,087 0.185%
18 Greenbriar Village 12/31/95 764,179 0.185%
19 Winbranch Apartments 12/31/95 752,659 0.185%
20 Crystal Village 12/31/95 562,274 0.185%
21 Saratoga Lake Apartments Estimated 549,129 0.185%
22 Trenton Place Apartments 6/30/95 534,820 0.185%
23 Prospect Point Apts 12/31/95 469,793 0.185%
24 Garden Village Apartments 12/31/95 499,156 0.185%
25 City Terrace Apartments 12/31/95 481,697 0.185%
26 Hidden Oaks Apartments 12/31/95 425,273 0.185%
27 Foxglove Apartments 12/31/95 402,416 0.185%
28 Shannon View Apartments 12/31/95 410,602 0.185%
29A Brighton Properties I 12/31/95 117,810 0.185%
29B Brighton Properties II 12/31/95 192,780 0.185%
29C Brighton Properties III 12/31/95 144,585 0.185%
30 Courtyard Apartments 12/31/95 412,602 0.185%
31 Montrose Square Apartments 11/30/95 381,732 0.185%
32 Hunter Chase Apartments 12/31/95 394,077 0.185%
33 Wildwood East Apartments 12/31/95 369,000 0.185%
34 Fairfield Apartments 12/31/95 266,070 0.185%
35 Bedford Crossing Apartments 12/31/95 290,491 0.185%
</TABLE>
A-14
<PAGE>
MORTGAGE LOAN SCHEDULE
LOAN COUNTERS 36-83
A-15
<PAGE>
<TABLE>
<CAPTION>
ANNEX A
COUNTER CONTROL LOAN
NUMBER NUMBER NUMBER PROPERTY NAME PROPERTY ADDRESS CITY
------- ------- ------ ------------- ---------------- ----
<S> <C> <C> <C> <C> <C>
36 36 643766-0 Silver Terrace Apartments 4697 Rose Coral Drive Orlando
37 37 643018-8 Flamingo Apartments 1650 West 44th Place Hialeah
38 38 643099-7 Torrey Pines Apartments 45235 7th Street East Lancaster
39 40 650785-9 Cedarwood Apartments 2880 Beverly Hills Rd. Memphis
40 41 642944-5 Colebrook Manor 2456 Iverson Street Temple Hills
41 42 644046-3 Valley View 5, 6, 8 & 11 Secora Road Monsey
42 43 650692-8 Quarry Apartments 270 Quarry Street Quincy
43 45 650693-1 Park Drive Limited Partnership 149-151 Park Drive Boston
44 46 643232-2 Haven Manor Apartments 905 West 26th Street Lynn Haven
45 47 643765-7 Willow Trail Apartments 4801 Clyde Morris Blvd Port Orange
46 48 643051-5 One And Only Apartments 3602/3619 Bolivar Drive Dallas
47 49 650795-6 Pratton Arms Apartments 20 Eames Street Framingham
48 50 642967-8 Quilliams Noble Apartments 2481-2487 Noble Road Cleveland Hghts
49 51 643775-4 Chugach South Apartments 9540 & 9600 Morningside Loop Anchorage
50 52 8 Lakeview Manor 1700 Newcombtown Road Millville
51 53 643774-1 Chugach West Apartments 1340 & 1402 West 26th Avenue Anchorage
52 54 3 Eldorado Gardens 200 Mill Street Bellville
53 55 650694-4 Pembroke Apartments 2051-2061 NW 81 Street Pembroke Pines
54 90 650523-3 Great Northeast Plaza 2201-2235 Cottman Avenue Philadelphia
and 2290 Bleigh Street
55 56 642895-4 Village Square at Kiln Creek 5007 Victory Blvd. York County
56 57 644081-9 Promenade Shopping Center 9810 Alternate Route A1A Palm Beach
Gardens
57 59 643091-3 Escada 7 East 57th Street New York
58 60 650656-2 Santa Fe Springs Market Place Washington Blvd./Norwalk Blvd. Santa Fe
Springs
59 61 642963-6 Plaza Del Rienzi North Canal Blvd/Rue London Thibodaux
60 62 650578-3 Battlefield Plaza 313 East Battlefield Road Springfield
61 63 643327-9 Harnett Crossing Shopping Center 2106-2330 Cumberland Street Dunn
62 65 650460-3 Grand Union Shopping Center 402-430 Union Blvd West Islip
63 67 643016-2 Village II (Indian Wells) Highway 111 Indian Wells
64 68 642940-3 Eckerd Plaza N.E. Corner Of Golden Gate Pkwy Naples
65 70 650698-6 MVP Sports 1207 Washington Street (Route 53) Hanover
66 71 650695-7 IRG Waltham Limited 101 First Avenue Waltham
67 72 643017-5 Ritchey Business Centre 1831 S. Ritchey St. Santa Ana
68 73 643015-9 Highland Plaza 3001-3051 Nicollet Avenue Minneapolis
69 74 643789-3 Regency Pointe 940 Arlington Expressway Jackonsonville
70 75 643186-0 Cohaire Plaza Inter. Of Westover Rd & Sunset Clinton
71 76 650867-0 Tokeneke Center 23-25 Tokeneke Road Darien
72 77 650796-9 Quincy Flagship/Mithell 625 Southern Artery Quincy
73 78 643762-8 Ecor Rouge Shopping Center 49 North Greeno Road Fairhope
74 79 650874-8 Great Falls Shopping Center Highway 158 Roanoke Rapids
75 80 643085-8 Yancey Commons Shopping Center US Highway 19E/Dogwood Lane Burnsville
76 81 643790-3 Foxmoor Center 5660 Foxmoor Bayshore Road, N. North Ft. Meyers
77 82 650797-2 Eleven Hurley 11 Hurley Street Cambridge
78 83 4 University Plaza Highway 22 Martin
79 84 650696-0 Dudley Plaza Realty Airport Road Dudley
80 85 642962-3 Parkside Plaza Highway 15 & West 10th Street Laurel
81 86 642947-4 Heritage Plaza Shopping Center 2410 North Heritage St. Kinston
82 87 643792-9 Everything Organized 310 North Pointe Parkway Alpharetta
83 88 650697-3 CVS Clinton 14-16 East Main Street Clinton
</TABLE>
- ------------
Footnotes:
(1) Reflects tenant lease-up as of year-end 1995. These properties were newly
constructed, renovated or expanded in 1995.
(2) Management fees have been adjusted to market.
(3) Underlying mortgage on cooperative was underwritten as a multi-family
rental property with market rents less a vacancy factor.
(4) Complete financials were unavailable for 1995. Underwritten numbers were
utilized.
(5) 1994 NOI reflects 1993 amounts
(6) Largest tenant lease expired 12/1/95; currently on month-to-month basis.
(7) Related Mortgage Loans are grouped by alphabetical designations.
A-16
<PAGE>
<TABLE>
<CAPTION>
ANNEX A
CUT-OFF
PROPERTY ORIGINAL DATE CURRENT NOTE FIRST MONTHLY
STATE ZIP TYPE BALANCE BALANCE RATE DATE PYMT DATE PAYMENT
- ----- --- -------- -------- ------- ------- ----- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FL 32808 Multifamily 1,867,500 1,857,858 8.310% 10/18/95 12/1/95 14,108.75
FL 33012 Multifamily 1,750,000 1,735,499 8.240% 10/6/95 12/1/95 13,786.19
CA 93535 Multifamily 1,650,000 1,640,952 8.010% 10/4/95 12/1/95 12,118.62
TN 38128 Multifamily 1,525,000 1,523,587 8.770% 5/24/96 7/1/96 12,558.42
MD 20748 Multifamily 1,465,000 1,447,496 8.120% 11/30/95 1/1/96 12,363.48
NY 10952 Multifamily 1,450,000 1,441,783 8.260% 5/1/96 6/1/96 14,075.47
MA 02171 Multifamily 1,450,000 1,437,907 8.200% 10/31/95 12/1/95 11,384.12
MA 02115 Multifamily 1,350,000 1,332,144 9.820% 2/15/95 4/1/95 12,096.58
FL 32444 Multifamily 1,275,000 1,269,592 8.010% 2/12/96 4/1/96 9,849.11
FL 32119 Multifamily 1,233,000 1,231,614 8.880% 4/29/96 6/1/96 9,814.72
TX 75220 Multifamily 1,275,000 1,263,400 9.080% 8/21/95 10/1/95 10,767.69
MA 01701 Multifamily 1,026,000 1,019,301 7.890% 12/21/95 2/1/96 7,844.22
OH 44121 Multifamily 975,000 957,914 8.070% 12/4/95 2/1/96 9,357.05
AK 99502 Multifamily 950,000 943,617 7.710% 12/8/95 2/1/96 7,150.69
NJ 08332 Multifamily 900,000 898,394 9.020% 4/25/96 6/1/96 7,565.10
AK 99503 Multifamily 835,000 829,478 7.810% 12/8/95 2/1/96 6,339.92
NJ 07109 Multifamily 825,000 823,583 9.250% 5/1/96 6/1/96 7,065.15
FL 33024 Multifamily 750,000 741,218 8.700% 6/8/95 8/1/95 6,140.62
PA 19149 Retail 18,000,000 17,990,250 9.040% 5/17/96 7/1/96 145,350.43
VA 23602 Retail 15,375,000 15,314,180 8.170% 12/26/95 2/1/96 114,643.68
FL 33410 Retail 13,160,671 12,423,775 9.000% 12/29/92 2/1/93 107,110.37
NY 10022 Retail 10,600,000 10,475,650 8.270% 11/13/95 1/1/96 90,452.07
CA 90605 Retail 7,475,000 7,471,197 9.340% 5/10/96 7/1/96 61,983.11
LA 70301 Retail 6,270,000 6,263,528 9.290% 4/30/96 6/1/96 51,763.60
MO 65807 Retail 6,225,000 6,186,080 8.160% 12/15/95 2/1/96 48,707.22
NC 28334 Retail 6,200,000 6,189,109 8.700% 3/18/96 5/1/96 48,554.19
NY 11795 Retail 5,750,000 5,726,697 8.050% 12/18/95 2/1/96 42,392.06
CA 92210 Office 4,750,000 4,726,315 8.410% 1/3/96 3/1/96 37,960.63
FL 33999 Retail 4,200,000 4,176,487 8.840% 12/19/95 2/1/96 34,787.22
MA 01887 Retail 3,650,000 3,625,239 8.630% 11/10/95 1/1/96 29,711.24
MA 02154 Office 3,100,000 3,065,527 9.020% 6/23/95 8/1/95 26,057.56
CA 92705 Industrial 3,080,000 3,071,460 8.830% 3/26/96 5/1/96 25,489.64
MN 55408 Retail 3,000,000 2,984,523 8.200% 1/24/96 3/1/96 23,553.35
FL 75231 Retail 3,000,000 2,515,288 9.375% 8/17/93 10/1/95 34,165.78
NC 28328 Retail 2,475,000 2,461,855 8.020% 1/19/96 3/1/96 19,135.25
CT 06490 Retail 2,250,000 2,231,265 8.960% 9/28/95 11/1/95 18,820.13
MA 02169 Retail 1,810,000 1,795,214 8.420% 1/17/96 3/1/96 15,616.07
AL 36532 Retail 1,800,000 1,794,934 8.740% 3/7/96 5/1/96 14,786.36
NC 27870 Retail 1,800,000 1,793,007 8.550% 3/5/96 4/1/96 14,554.79
NC 28714 Retail 1,750,000 1,738,659 8.910% 11/30/95 1/1/96 14,578.23
FL 15212 Retail 1,600,000 1,384,229 9.000% 11/29/93 1/1/94 18,208.49
MA 02141 Office 1,400,000 1,388,858 8.630% 1/30/96 3/1/96 12,264.96
TN 38237 Retail 1,440,000 1,438,839 9.600% 5/23/96 7/1/96 12,681.48
MA 01571 Retail 1,330,000 1,319,225 8.380% 10/19/95 12/1/95 10,602.18
MS 39441 Retail 1,180,000 1,178,142 9.766% 4/30/96 6/1/96 10,528.64
NC 28502 Retail 1,135,000 1,129,482 8.565% 1/11/96 3/1/96 9,189.10
GA 30202 Retail 1,100,000 1,067,363 9.740% 7/22/94 1/1/96 10,479.72
CT 06413 Retail 840,000 831,767 8.450% 12/14/95 2/1/96 7,263.15
</TABLE>
A-17
<PAGE>
<TABLE>
ANNEX A
<CAPTION>
RELATED
COUNTER ORIGINAL ORIGINAL REMAINING MATURITY MORTGAGE
NUMBER PROPERTY NAME TERM AMORT SEASONING TERM DATE LOANS
- ------ ------------- ---- ----- --------- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
36 Silver Terrace Apartments 120 360 8 112 11/1/05 No
37 Flamingo Apartments 120 300 8 112 11/1/05 No
38 Torrey Pines Apartments 120 360 8 112 11/1/05 No
39 Cedarwood Apartments 120 300 1 119 6/1/06 No
40 Colebrook Manor 120 240 7 113 12/1/05 No
41 Valley View 180 180 2 178 5/1/11 No
42 Quarry Apartments 83 300 8 75 10/1/02 No
43 Park Drive Limited Partnership 84 300 16 68 3/1/02 No
44 Haven Manor Apartments 120 300 4 116 3/1/06 No
45 Willow Trail Apartments 120 360 2 118 5/1/06 No
46 One And Only Apartments 120 300 10 110 9/1/05 No
47 Pratton Arms Apartments 84 300 6 78 1/1/03 No
48 Quilliams Noble Apartments 180 180 6 174 1/1/11 No
49 Chugach South Apartments 180 300 6 174 1/1/11 Yes(k)
50 Lakeview Manor 120 300 2 118 5/1/06 No
51 Chugach West Apartments 180 300 6 174 1/1/11 Yes(k)
52 Eldorado Gardens 120 300 2 118 5/1/06 No
53 Pembroke Apartments 119 300 12 107 6/1/05 No
54 Great Northeast Plaza 120 360 1 119 6/1/06 No
55 Village Square at Kiln Creek 120 360 6 114 12/31/05 No
56 Promenade Shopping Center 84 360 42 42 1/1/00 No
57 Escada 84 240 7 77 12/1/02 No
58 Santa Fe Springs Market Place 120 360 1 119 6/1/06 No
59 Plaza Del Rienzi 120 360 2 118 5/1/06 No
60 Battlefield Plaza 120 300 6 114 1/1/06 No
61 Harnett Crossing Shopping Cntr. 120 360 3 117 4/1/06 No
62 Grand Union Shopping Center 120 360 6 114 1/1/06 No
63 Village II (Indian Wells) 120 300 5 115 2/1/06 No
64 Eckerd Plaza 120 300 6 114 1/1/06 No
65 MVP Sports 120 300 7 113 12/1/05 No
66 IRG Waltham Limited 120 300 12 108 7/1/05 No
67 Ritchey Business Centre 120 300 3 117 4/1/06 No
68 Highland Plaza 120 300 5 115 2/1/06 No
69 Regency Pointe 144 144 10 110 9/1/05 No
70 Cohaire Plaza 120 300 5 115 2/1/06 No
71 Tokeneke Center 84 300 9 75 10/1/02 No
72 Quincy Flagship/Mithell 84 240 5 79 2/1/03 No
73 Ecor Rouge Shopping Center 120 300 3 117 4/1/06 No
74 Great Falls Shopping Center 120 300 4 116 3/1/06 No
75 Yancey Commons Shopping Cntr. 120 300 7 113 12/1/05 No
76 Foxmoor Center 144 144 31 113 12/1/05 No
77 Eleven Hurley 120 240 5 115 2/1/06 No
78 University Plaza 120 300 1 119 6/1/06 No
79 Dudley Plaza Realty 120 300 8 112 11/1/05 No
80 Parkside Plaza 120 300 2 118 5/1/06 No
81 Heritage Plaza Shopping Center 120 300 5 115 2/1/06 No
82 Everything Organized 110 230 7 103 2/1/05 No
83 CVS Clinton 119 240 6 113 12/1/05 No
</TABLE>
A-18
<PAGE>
<TABLE>
ANNEX A
<CAPTION>
LOCKOUT PREPAY PREPAY PREPAY PREPAY PREPAY PREPAY PREPAY PREPAY PREPAY PREPAY PREPAY
EXPIRATION YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10 YEAR 11
---------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10/31/99 LO LO LO LO YM YM YM YM YM YM n/a
11/1/99 LO LO LO LO YM YM YM YM YM YM n/a
10/31/99 LO LO LO LO YM YM YM YM YM YM n/a
5/31/00 LO LO LO LO YM YM YM YM YM YM n/a
11/30/00 LO LO LO LO LO 5% 4% 3% 2% 1% n/a
5/1/03 LO LO LO LO LO LO LO YM YM YM 0%
11/30/97 LO LO YM YM YM YM YM n/a n/a n/a n/a
3/31/97 LO LO YM YM YM YM YM n/a n/a n/a n/a
2/28/00 LO LO LO LO YM YM YM YM YM YM n/a
4/30/00 LO LO LO LO YM YM YM YM YM YM n/a
8/31/99 LO LO LO LO YM YM YM YM YM YM n/a
12/21/97 LO LO YM YM YM YM YM n/a n/a n/a n/a
12/31/99 LO LO LO LO YM YM YM YM YM YM 0%
12/31/00 LO LO LO LO LO YM YM YM YM YM YM
4/30/00 LO LO LO LO YM YM YM YM YM YM n/a
12/31/00 LO LO LO LO LO YM YM YM YM YM YM
4/30/00 LO LO LO LO YM YM YM YM YM YM n/a
7/31/97 LO LO YM YM YM YM YM YM YM YM n/a
5/31/99 LO LO LO YM YM YM YM YM YM YM n/a
12/31/99 LO LO LO LO YM YM YM YM YM YM n/a
n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a
11/30/97 LO LO YM YM YM YM YM n/a n/a n/a n/a
5/31/00 LO LO LO LO YM YM YM YM YM YM n/a
4/30/00 LO LO LO LO YM YM YM YM YM YM n/a
12/31/00 LO LO LO LO LO YM YM YM YM YM n/a
4/1/00 LO LO LO LO YM YM YM YM YM YM n/a
12/31/99 LO LO LO LO YM YM YM YM YM YM n/a
1/31/00 LO LO LO LO YM YM YM YM YM YM n/a
1/31/00 LO LO LO LO YM YM YM YM YM YM n/a
12/31/97 LO LO YM YM YM YM YM YM YM YM n/a
7/31/97 LO LO YM YM YM YM YM YM YM YM n/a
4/1/98 LO LO YM/2 YM/2 YM YM YM YM YM YM n/a
1/31/00 LO LO LO LO YM YM YM YM YM YM n/a
9/1/95 LO LO YM YM YM YM YM YM YM YM YM
1/31/99 LO LO LO YM YM YM YM YM YM YM n/a
11/1/97 LO LO YM YM YM YM YM n/a n/a n/a n/a
1/17/98 LO LO YM YM YM YM YM n/a n/a n/a n/a
3/31/00 LO LO LO LO YM YM YM YM YM YM n/a
3/6/00 LO LO LO LO YM YM YM YM YM YM n/a
12/31/99 LO LO LO LO YM YM YM YM YM YM n/a
12/31/95 LO LO YM YM YM YM YM YM YM YM YM
1/30/00 LO LO LO LO YM YM YM YM YM YM n/a
5/31/00 LO LO LO LO YM YM YM YM YM YM n/a
11/1/97 LO LO YM YM YM YM YM YM YM YM n/a
4/30/00 LO LO LO LO YM YM YM YM YM YM n/a
2/28/01 LO LO LO LO LO 5% 4% 3% 2% 1% n/a
2/1/97 LO LO .5LO/.5YM YM YM YM YM YM YM YM YM
1/31/98 LO LO YM YM YM YM YM YM YM YM n/a
</TABLE>
A-19
<PAGE>
<TABLE>
ANNEX A
<CAPTION>
COUNTER PREPAY PREPAY PREPAY PREPAY PREPAY OPEN APPRAISAL
NUMBER PROPERTY NAME YR 12 YR 13 YR 14 YR 15 YR 16-25 PERIOD DATE
- ------ ------------- ----- ----- ----- ----- -------- ------ ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
36 Silver Terrace Apartments n/a n/a n/a n/a n/a 6 6/19/95
37 Flamingo Apartments n/a n/a n/a n/a n/a 6 7/27/95
38 Torrey Pines Apartments n/a n/a n/a n/a n/a 6 6/30/95
39 Cedarwood Apartments n/a n/a n/a n/a n/a 6 2/20/96
40 Colebrook Manor n/a n/a n/a n/a n/a 0 8/14/95
41 Valley View 0% 0% 0% 0% n/a 60 1/29/96
42 Quarry Apartments n/a n/a n/a n/a n/a 6 7/12/95
43 Park Drive Limited Partnership n/a n/a n/a n/a n/a 6 12/19/94
44 Haven Manor Apartments n/a n/a n/a n/a n/a 6 11/19/95
45 Willow Trail Apartments n/a n/a n/a n/a n/a 6 11/20/95
46 One And Only Apartments n/a n/a n/a n/a n/a 6 7/24/95
47 Pratton Arms Apartments n/a n/a n/a n/a n/a 6 12/7/95
48 Quilliams Noble Apartments 0% 0% 0% 0% n/a 60 9/8/95
49 Chugach South Apartments YM YM YM YM n/a 6 9/28/95
50 Lakeview Manor n/a n/a n/a n/a n/a 6 2/20/96
51 Chugach West Apartments YM YM YM YM n/a 6 9/28/95
52 Eldorado Gardens n/a n/a n/a n/a n/a 6 3/19/96
53 Pembroke Apartments n/a n/a n/a n/a n/a 6 4/7/95
54 Great Northeast Plaza n/a n/a n/a n/a n/a 6 3/5/96
55 Village Square at Kiln Creek n/a n/a n/a n/a n/a 6 9/15/95
56 Promenade Shopping Center n/a n/a n/a n/a n/a n/a 4/29/96
57 Escada n/a n/a n/a n/a n/a 0 8/24/95
58 Santa Fe Springs Market Place n/a n/a n/a n/a n/a 6 3/1/96
59 Plaza Del Rienzi n/a n/a n/a n/a n/a 6 12/15/95
60 Battlefield Plaza n/a n/a n/a n/a n/a 6 11/29/95
61 Harnett Crossing Shopping Center n/a n/a n/a n/a n/a 6 1/8/96
62 Grand Union Shopping Center n/a n/a n/a n/a n/a 6 11/21/95
63 Village II (Indian Wells) n/a n/a n/a n/a n/a 6 8/24/96
64 Eckerd Plaza n/a n/a n/a n/a n/a 6 9/13/95
65 MVP Sports n/a n/a n/a n/a n/a 6 5/31/95
66 IRG Waltham Limited n/a n/a n/a n/a n/a 6 1/11/95
67 Ritchey Business Centre n/a n/a n/a n/a n/a 6 8/31/95
68 Highland Plaza Sc n/a n/a n/a n/a n/a 6 10/9/95
69 Regency Pointe YM n/a n/a n/a n/a 3 6/11/93
70 Cohaire Plaza n/a n/a n/a n/a n/a 6 9/8/95
71 Tokeneke Center n/a n/a n/a n/a n/a 6 8/11/95
72 Quincy Flagship/Mithell n/a n/a n/a n/a n/a 6 7/27/95
73 Ecor Rouge Shopping Center n/a n/a n/a n/a n/a 6 11/24/95
74 Great Falls Shopping Center n/a n/a n/a n/a n/a 6 9/25/95
75 Yancey Commons Shopping Center n/a n/a n/a n/a n/a 6 8/21/95
76 Foxmoor Center YM n/a n/a n/a n/a 3 8/10/93
77 Eleven Hurley n/a n/a n/a n/a n/a 6 12/1/95
78 University Plaza n/a n/a n/a n/a n/a 6 2/28/96
79 Dudley Plaza Realty n/a n/a n/a n/a n/a 6 5/4/95
80 Parkside Plaza n/a n/a n/a n/a n/a 6 12/15/95
81 Heritage Plaza Shopping Center n/a n/a n/a n/a n/a 0 9/18/95
82 Everything Organized n/a n/a n/a n/a n/a 9 5/4/94
83 CVS Clinton n/a n/a n/a n/a n/a 6 5/17/95
</TABLE>
A-20
<PAGE>
<TABLE>
ANNEX A
<CAPTION>
FINAL YEAR BUILT/ TOTAL PROPERTY LOAN PER
VALUE LTV RENOVATED UNITS SIZE (SF) SF/UNIT UNIT/SF OCCUPANCY %
----- --- --------- ----- --------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
2,490,000 74.6% 1988 104 52,416 17,864.02 Unit 98%
2,375,000 73.1% 1987 54 50,606 32,138.87 Unit 98%
2,400,000 68.4% 1987 78 73,488 21,037.84 Unit 94%
2,050,000 74.3% 1973 80 76,000 19,044.83 Unit 95%
3,000,000 48.3% 1950 84 60,480 17,232.09 Unit 100%
4,000,000 36.0% 1974 100 81,242 14,417.83 Unit 98%
2,000,000 71.9% 1970/1994 48 33,479 29,956.41 Unit 92%
1,850,000 72.0% 1910/1984 48 23,850 27,753.00 Unit 96%
1,700,000 74.7% 1986 86 43,776 14,762.70 Unit 100%
1,725,000 71.4% 1986 68 39,744 18,111.97 Unit 96%
1,715,000 73.7% 1985 118 68,904 10,706.78 Unit 97%
1,400,000 72.8% 1972 36 20,820 28,313.92 Unit 100%
1,300,000 73.7% 1944 64 41,895 14,967.41 Unit 100%
1,500,000 62.9% 1985 40 38,000 23,590.41 Unit 100%
1,225,000 73.3% 1970 48 48,240 18,716.54 Unit 97%
1,500,000 55.3% 1984 40 38,000 20,736.95 Unit 88%
1,180,000 69.8% 1965 26 17,550 31,676.27 Unit 100%
1,050,000 70.6% 1974 36 35,040 20,589.38 Unit 97%
24,000,000 75.0% 1961/1990 -- 298,242 60.32 SF 97%
20,500,000 74.7% 1993 -- 264,206 57.96 SF 100%
17,600,000 70.6% 1968/1988 -- 205,485 60.46 SF 99%
18,900,000 55.4% 1930/1990 -- 14,102 742.85 SF 100%
12,000,000 62.3% 1989 -- 100,156 74.60 SF 97%
9,000,000 69.6% 1976/1987 -- 185,619 33.74 SF 98%
8,500,000 72.8% 1988 -- 157,225 39.35 SF 99%
8,300,000 74.6% 1985/1995 -- 194,570 31.81 SF 100%
8,000,000 71.6% 1973/1995 -- 74,100 77.28 SF 100%
8,100,000 58.4% 1987 -- 72,361 65.32 SF 92%
6,100,000 68.5% 1991 -- 53,719 77.75 SF 100%
4,700,000 77.1% 1987/1995 -- 40,697 89.08 SF 100%
4,400,000 69.7% 1968/1993 -- 55,300 55.43 SF 100%
4,500,000 68.3% 1967 -- 119,945 25.61 SF 96%
4,000,000 74.6% 1987 -- 45,719 65.28 SF 100%
6,000,000 41.9% 1981/1989 -- 67,410 37.31 SF 81%
3,575,000 68.9% 1976 -- 117,486 20.95 SF 100%
3,000,000 74.4% 1930/1986 4 15,500 143.95 SF 100%
2,700,000 66.5% 1950/1995 -- 22,000 81.60 SF 100%
2,550,000 70.4% 1988 -- 56,648 31.69 SF 100%
3,250,000 55.2% 1986/1995 -- 120,624 14.86 SF 98%
2,500,000 69.6% 1991 -- 62,240 27.93 SF 100%
2,650,000 52.2% 1984 -- 49,980 27.70 SF 91%
2,200,000 63.1% 1994 -- 23,850 58.23 SF 100%
2,820,000 51.0% 1986 -- 72,621 19.81 SF 96%
2,500,000 52.8% 1968/1995 -- 95,324 13.84 SF 96%
1,900,000 62.0% 1972/1978 -- 112,345 10.49 SF 97%
1,750,000 64.5% 1980 -- 50,690 22.28 SF 100%
1,810,000 59.0% 1994 -- 16,060 66.46 SF 0%
1,120,000 74.3% 1995 -- 8,800 94.52 SF 100%
</TABLE>
A-21
<PAGE>
ANNEX A
<TABLE>
<CAPTION>
MAX MIN
COUNTER LOAN INTEREST INTEREST
NUMBER PROPERTY NAME TYPE INDEX MARGIN RATE RATE
- ------- ------------- ---- ----- -------- -------- ----
<S> <C> <C>
36 Silver Terrace Apartments Fixed
37 Flamingo Apartments Fixed
38 Torrey Pines Apartments Fixed
39 Cedarwood Apartments Fixed
40 Colebrook Manor Fixed
41 Valley View Fixed
42 Quarry Apartments Fixed
43 Park Drive Limited Partnership Fixed
44 Haven Manor Apartments Fixed
45 Willow Trail Apartments Fixed
46 One And Only Apartments Fixed
47 Pratton Arms Apartments Fixed
48 Quilliams Noble Apartments Fixed
49 Chugach South Apartments Fixed
50 Lakeview Manor Fixed
51 Chugach West Apartments Fixed
52 Eldorado Gardens Fixed
53 Pembroke Apartments Fixed
54 Great Northeast Plaza Fixed
55 Village Square at Kiln Creek Fixed
56 Promenade Shopping Center Fixed
57 Escada Fixed
58 Santa Fe Springs Market Place Fixed
59 Plaza Del Rienzi Fixed
60 Battlefield Plaza Fixed
61 Harnett Crossing Shopping Center Fixed
62 Grand Union Shopping Center Fixed
63 Village II (Indian Wells) Fixed
64 Eckerd Plaza Fixed
65 MVP Sports Fixed
66 IRG Waltham Limited Fixed
67 Ritchey Business Centre Fixed
68 Highland Plaza Sc Fixed
69 Regency Pointe Fixed
70 Cohaire Plaza Fixed
71 Tokeneke Center Fixed
72 Quincy Flagship/Mithell Fixed
73 Ecor Rouge Shopping Center Fixed
74 Great Falls Shopping Center Fixed
75 Yancey Commons Shopping Center Fixed
76 Foxmoor Center Fixed
77 Eleven Hurley Fixed
78 University Plaza Fixed
79 Dudley Plaza Realty Fixed
80 Parkside Plaza Fixed
81 Heritage Plaza Shopping Center Fixed
82 Everything Organized Fixed
83 CVS Clinton Fixed
</TABLE>
A-22
<PAGE>
<TABLE>
<CAPTION>
ANNEX A
LARGEST LARGEST LARGEST
TENANT TENANT TENANT SECOND
LARGEST TENANT LEASED SF % OF TOTAL SF LEASE EXPIRATION LARGEST TENANT
- -------------- --------- ------------- ---------------- --------------
<S> <C> <C> <C> <C>
Sears 177,771 60% 1/31/10 Phar-Mor
Kmart 191,008 72% 11/30/18 Ben Franklin
Publix Store 42,112 20% 2/22/09 United Artist Theater
Escada 14,102 100% 6/10/10
Trak Auto 18,014 18% 12/31/00 Thrifty
Winn-Dixie 57,056 31% 5/31/16 McDonalds
Fleming Foods 55,005 35% 12/12/03 Heilig-Meyers
Wal Mart Stores 65,930 34% 8/5/08 Wal Mart Stores Expansion
Grand Union 47,900 65% 1/31/03 WITC Corporation
Prudential 7,000 10% 9/11/04 PaineWebber
Eckerd Drugs 9,500 18% 1/21/10 Performance Tire
MVP Sports 40,000 100% 11/9/15
Airflow Research 30,000 54% 10/14/03 Boston Computer
Mastersort 24,082 20% 9/27/04 CCROP
Office Max 25,000 56% 1/31/03 Big Dollar Store
Olive Garden 9,098 13% 12/13/00 Recordtown, Inc.
Rose's 51,819 44% 3/30/03 Belk
Blackstreets 2,000 13% 10/1/16 Partnership Design
NY Carpet World 13,000 59% 12/15/05 Pet supplies
Bruno's 42,848 76% 6/30/07 Goodwill Industries
Food Lion 27,800 24% 9/1/07 Goody's Family Clothing
Roses's Store, Inc 50,040 80% 4/14/11 Dollar General
Kash/Karry 29,040 58% 8/31/03 Tiny Place (pool)
Biopure Corporation 23,850 100% 12/31/07
Excel (Fleming & Martin & Bailey) 23,668 33% 4/14/07 Goody's
Ames Department 52,000 55% 2/28/11 Park N' Shop Super
Rose's 50,100 45% 4/11/98 Good Samaritan
Food Lion 21,000 41% 9/15/11 Food Lion Expansion
Vacant 0% N/A
CVS Drug Store 8,800 100% 1/31/11
</TABLE>
A-23
<PAGE>
<TABLE>
ANNEX A
<CAPTION>
SECOND LARGEST SECOND LARGEST SECOND LARGEST
COUNTER TENANT TENANT TENANT
NUMBER PROPERTY NAME LEASED SF % OF TOTAL SF LEASE EXPIRATION 1994 NOI
- ------ ------------- -------------- -------------- ---------------- --------
<S> <C> <C> <C> <C> <C>
36 Silver Terrace Apartments 241,437
37 Flamingo Apartments 269,197
38 Torrey Pines Apartments 247,975
39 Cedarwood Apartments 200,460
40 Colebrook Manor 278,654
41 Valley View 173,670
42 Quarry Apartments 239,478
43 Park Drive Limited Partnership 256,643
44 Haven Manor Apartments 197,905
45 Willow Trail Apartments 158,146
46 One And Only Apartments 123,473
47 Pratton Arms Apartments 134,033
48 Quilliams Noble Apartments 215,999
49 Chugach South Apartments 195,985
50 Lakeview Manor 136,982
51 Chugach West Apartments 118,783
52 Eldorado Gardens 132,575
53 Pembroke Apartments 109,905
54 Great Northeast Plaza 69,254 23% 6/30/10 2,318,794
55 Village Square at Kiln Creek 19,700 7% 5/31/05 1,242,663
56 Promenade Shopping Center 23,060 11% 5/4/09 1,737,036
57 Escada 1,653,318
58 Santa Fe Springs Market Place 17,880 18% 5/31/14 867,727
59 Plaza Del Rienzi -- 0% 6/29/02 652,432
60 Battlefield Plaza 25,200 16% 1/31/08 517,507
61 Harnett Crossing Shopping Center 40,070 21% 8/5/08 755,056
62 Grand Union Shopping Center 5,400 7% 5/31/99 475,461
63 Village II (Indian Wells) 6,240 9% 4/3/98 708,786
64 Eckerd Plaza 6,000 11% 2/28/97 444,091
65 MVP Sports --
66 IRG Waltham Limited 9,800 18% 3/14/99 240,166
67 Ritchey Business Centre 23,222 19% 8/31/98 451,707
68 Highland Plaza 4,316 10% 2/28/97 350,537
69 Regency Pointe 7,840 12% 1/31/01 565,010
70 Cohaire Plaza 36,500 31% 12/31/97 384,025
71 Tokeneke Center 1,500 10% 1/1/01 254,262
72 Quincy Flagship/Mithell 9,000 41% 12/1/05 --
73 Ecor Rouge Shopping Center 9,000 16% 8/31/00 219,971
74 Great Falls Shopping Center 26,250 23% 12/31/98 187,684
75 Yancey Commons Shopping Center 6,950 11% 7/31/97 248,515
76 Foxmoor Center 3,720 7% 5/31/03 308,989
77 Eleven Hurley --
78 University Plaza 10,500 14% 8/30/98 --
79 Dudley Plaza Realty 30,924 32% 3/31/03 78,200
80 Parkside Plaza 23,800 21% 9/30/97 337,964
81 Heritage Plaza Shopping Center 8,356 16% 9/15/11 193,763
82 Everything Organized -- 0% N/A --
83 CVS Clinton --
</TABLE>
A-24
<PAGE>
<TABLE>
ANNEX A
<CAPTION>
1995 REVENUES 1995 EXPENSES 1995 NOI FOOTNOTE 1995 DSCR 1995 COMBINED DSCR ANNUALIZED
------------- ------------- -------- -------- --------- ------------------ ----------
<S> <C> <C> <C> <C> <C> <C>
470,619 208,590 262,030 1.55 Trailing 12
391,589 132,054 259,535 1.57 10 mos ann
395,593 184,119 211,474 1.45 Trailing 12
415,276 195,420 219,856 1.46 Trailing 12
585,477 279,988 305,489 2.06 Trailing 12
857,850 397,492 460,358 (3) 2.73 Estimated
343,076 102,156 240,920 1.76 6 mos ann
434,239 209,072 225,166 1.55 10 mos ann
358,439 156,166 202,274 1.71 Trailing 12
315,685 149,087 166,598 1.41 Trailing 12
513,815 269,034 244,781 1.89 9 mos ann
250,569 97,207 153,362 1.63 Trailing 12
440,233 219,088 221,145 1.97 Trailing 12
319,185 126,045 193,140 2.25 2.60 Trailing 12
288,196 151,695 136,501 1.50 Trailing 12
304,207 154,305 149,902 1.97 2.60 Trailing 12
216,910 83,742 133,168 1.57 Trailing 12
226,696 116,990 109,706 1.49 Trailing 12
3,741,385 1,528,121 2,213,264 1.27 Trailing 12
2,077,181 329,700 1,747,481 1.27 Trailing 12
2,611,251 853,993 1,757,258 1.37 Trailing 12
1,696,138 -- 1,696,138 1.56 Trailing 12
1,387,002 393,094 993,908 1.34 Trailing 12
1,106,550 253,277 853,273 (1) 1.37 Estimated
1,082,402 277,523 804,879 1.38 Trailing 12
909,187 141,108 768,079 1.32 Trailing 12
1,024,590 345,528 679,061 1.33 9 mos ann
1,281,965 450,077 831,888 1.83 9 mos ann
682,410 210,645 471,765 1.13 Trailing 12
581,000 96,924 484,076 (1) 1.36 Estimated
886,466 350,956 535,511 1.71 Trailing 12
683,902 190,312 493,589 1.61 Trailing 12
736,529 274,371 462,158 1.64 Trailing 12
811,275 259,374 551,901 1.35 Trailing 12
525,043 144,422 380,621 1.66 Trailing 12
401,427 127,930 273,497 1.21 7 mos ann
330,993 54,464 276,529 (1) 1.48 Estimated
294,005 56,738 237,267 1.34 Trailing 12
473,965 144,622 329,343 (1) 1.89 Estimated
294,842 32,237 262,605 1.50 Trailing 12
433,211 134,923 298,289 1.37 Trailing 12
220,613 4,019 216,594 1.47 8 mos ann
332,574 97,209 235,365 (4) 1.55 Estimated
362,501 135,147 227,354 (1) 1.79 Estimated
283,764 89,188 194,576 (2) 1.54 Estimated
207,657 57,115 150,542 1.37 Trailing 12
216,766 44,662 172,105 1.37 Trailing 12
146,496 38,068 108,428 (1) 1.24 Estimated
</TABLE>
A-25
<PAGE>
<TABLE>
<CAPTION>
ANNEX A
COUNTER
NUMBER PROPERTY NAME END DATE U/WNOI MASTER SERVICING FEE
- ------- ------------- -------- ------ --------------------
<S> <C> <C> <C> <C>
36 Silver Terrace Apartments 12/31/95 247,441 0.185%
37 Flamingo Apartments 12/31/95 235,486 0.185%
38 Torrey Pines Apartments 12/31/95 208,437 0.185%
39 Cedarwood Apartments 12/31/95 226,136 0.185%
40 Colebrook Manor 12/31/95 311,190 0.185%
41 Valley View Estimated 460,358 0.185%
42 Quarry Apartments 6/30/95 228,565 0.185%
43 Park Drive Limited Partnership 12/31/95 228,999 0.185%
44 Haven Manor Apartments 12/31/95 173,989 0.185%
45 Willow Trail Apartments 12/31/95 163,128 0.185%
46 One And Only Apartments 12/31/95 185,319 0.185%
47 Pratton Arms Apartments 12/31/95 136,832 0.185%
48 Quilliams Noble Apartments 12/31/95 152,349 0.185%
49 Chugach South Apartments 12/31/95 162,580 0.185%
50 Lakeview Manor 12/31/95 132,497 0.310%
51 Chugach West Apartments 12/31/95 135,000 0.185%
52 Eldorado Gardens 12/31/95 116,865 0.310%
53 Pembroke Apartments 12/31/95 109,906 0.185%
54 Great Northeast Plaza 12/31/95 2,289,465 0.185%
55 Village Square at Kiln Creek 12/31/95 1,944,924 0.185%
56 Promenade Shopping Center 12/31/95 1,622,123 0.160%
57 Escada 12/31/95 1,670,696 0.185%
58 Santa Fe Springs Market Place 12/31/95 1,019,116 0.185%
59 Plaza Del Rienzi Estimated 853,273 0.185%
60 Battlefield Plaza 12/31/95 918,612 0.185%
61 Harnett Crossing Shopping Center 12/31/95 797,194 0.185%
62 Grand Union Shopping Center 12/31/95 734,230 0.185%
63 Village II (Indian Wells) 12/31/95 860,000 0.185%
64 Eckerd Plaza 12/31/95 571,451 0.185%
65 MVP Sports Estimated 484,076 0.185%
66 IRG Waltham Limited 12/31/95 451,902 0.185%
67 Ritchey Business Centre 12/31/95 447,656 0.185%
68 Highland Plaza 12/31/95 396,443 0.185%
69 Regency Pointe 12/31/95 526,689 0.465%
70 Cohaire Plaza 12/31/95 366,006 0.185%
71 Tokeneke Center 7/31/95 298,795 0.185%
72 Quincy Flagship/Mithell Estimated 276,529 0.185%
73 Ecor Rouge Shopping Center 12/31/95 245,800 0.185%
74 Great Falls Shopping Center Estimated 329,343 0.185%
75 Yancey Commons Shopping Center 12/31/95 254,551 0.185%
76 Foxmore Center 12/31/95 291,004 0.560%
77 Eleven Hurley 12/31/95 201,791 0.185%
78 University Plaza Estimated 235,365 0.210%
79 Dudley Plaza Realty Estimated 227,354 0.185%
80 Parkside Plaza Estimated 194,576 0.185%
81 Heritage Plaza Shopping Center 12/31/95 161,407 0.185%
82 Everything Organized 12/31/95 219,912 2.005%
83 CVS Clinton Estimated 108,428 0.185%
</TABLE>
A-26
<PAGE>
MORTGAGE LOAN SCHEDULE
LOAN COUNTERS 84-127
A-27
<PAGE>
<TABLE>
<CAPTION>
ANNEX A
COUNTER CONTROL LOAN
NUMBER NUMBER NUMBER PROPERTY NAME PROPERTY ADDRESS CITY
- ------ ------ ------ ------------- ---------------- -----
<S> <C> <C> <C> <C> <C>
84 89 643722-0 Bonnie Brea Shopping Center 5030-5080 Benita Road/ San Diego
5037 Central Avenue
85 CO9 P00676 Mott - 76 S. Bergen Place 76 S. Bergen Place Freeport
86 CO10 P00722 Mott - 655 Nassau Road 655 Nassau Road Hempstead
87 CO11 P00686 Mott - 45 Broadway 45 Broadway Freeport
88 CO12 P00670 Mott - 35 N. Long Beach Avenue 35 N. Long Beach Avenue Freeport
89 CO13 P00692 Mott - 56 N. Long Beach Avenue 56 N. Long Beach Avenue Freeport
90 CO14 P00720 Mott - 27 Attorney Street 27 Attorney Street Hempstead
91 CO15 P00682 Mott - 95 Jerusalem Avenue 95 Jerusalem Avenue Hempstead
92 CO16 P00708 Mott - 271 Washington Street 271 Washington Street Hempstead
93 CO17 P00678 Mott - 155 Pine Street 155 Pine Street Freeport
94 CO18 P00690 Mott - 40 Graffing Place 40 Graffing Place Freeport
95 CO19 P00704 Mott - 260 Belmont Parkway 260 Belmont Parkway Hempstead
96 CO20 P00710 Mott - 360 Washington Street 360 Washington Street Hempstead
97 CO21 P00706 Mott - 55 Nassau Place 55 Nassau Place Hempstead
98 CO22 P00714 Mott - 25 Peninsula Boulevard 25-27 Peninsula Boulevard Hempstead
99 CO23 P00684 Mott - 1100 Ward Place 1100 Ward Place Woodmere
100 CO24 P00610 Ridgecrest Retirement Center 1900 Highway 6 West Waco
101 CO25 941-0103 Morningstar Mini - Charlotte 3912 Wilkinson Boulevard Charlotte
102 CO26 941-0095 Morningstar Mini - Hickory 1970 Tate Boulevard S.E. Hickory
103 CO27 941-0104 Morningstar Mini - Winston Salem 5713 Robin Wood Lane Winston-Salem
104 CO28 941-0094 Morningstar Mini - Florence 753 N. Cashua Drive Florence
105 CO29 941-0096 Morningstar Mini - Lexington 951 N. Main Street Lexington
106 CO30 941-0097 Morningstar Mini - Sumter 1277 Camden Highway Sumter
107 CO31 941-0086 Thousand Oaks Self-storage 3485 Old Conejo Road Thousand Oaks
108 CO32 P00638 King Shopping Center 7001-7101 Martin Luther Palmer Park
King, Jr. Hwy.
109 CO33 941-0062 Starr Avenue 30-28 Starr Avenue Long Island City
110A CO34a P00630 Kmart/Elizabeth City 683 South Hughes Blvd. Elizabeth City
110B CO34b P00628 Kmart/Rocky Mount 720 Sutters Creek Boulevard Rocky Mount
111 CO35 P00664 Regency Park-El Molino 245 South El Molino Avenue Pasadena
112 CO36 P00640 Millburn Common 225 Millburn Avenue Millburn
113A CO37a 941-0075 Sentry SS - Williamsburg 5393 Moorestown Road Williamsburg
113B CO37b 941-0075 Sentry SS - Chesapeake 4815 Station House Road Chesapeake
113C CO37c 941-0075 Sentry SS - Newport 5868 Jefferson Avenue Newport News
113D CO37d 941-0075 Sentry SS - Whitestone Eastside Route 3 White Stone
114 CO38 P00578 The Drake Tower Apartments 1512-1514 Spruce Street Philadelphia
115 CO39 941-0061 Snyder Avenue 40 Snyder Avenue Brooklyn
116 CO40 941-0063 Diamond Mini Storage 7741 Brayton Drive Anchorage
117 CO41 941-0064 International Self-storage 130 & 150 West International Anchorage
Airport Road
118 CO42 P00540 Eastgate Shopping Center 2830 North Avenue Grand Junction
119 CO43 941-0090 AZ Storage Inns - Country Club 1750 N. Country Club Drive Mesa
120 CO44 941-0091 AZ Storage Inns - Greenfield 139 North Greenfield Road Mesa
121 CO45 941-0089 AZ Storage Inns - Broadway 837 East Broadway Road Mesa
122 CO46 98-1000159 Sterling Meadows Apartments 33433 Schoenherr Road Sterling Heights
123 CO47 941-0074 Coldwater Self-storage 7215 Coldwater Canyon Avenue North Hollywood
124 CO48 P00658 Picador Plaza 1270 - 1290 Picador Boulevard San Diego
125 CO49 941-0116 Security Public Storage 471 C Street Chula Vista
126 CO50 P00626 Cedar Grove Apartments 800 E. South Street Alvin
127 CO51 P00612 Canyon Pointe Apartments 3621 N. Black Canyon Hwy. Phoenix
</TABLE>
- ------------
Footnotes:
(1) Reflects tenant lease-up as of year-end 1995. These properties were newly
constructed, renovated or expanded in 1995.
(2) Management fees have been adjusted to market.
(3) Underlying mortgage on cooperative was underwritten as a multi-family
rental property with market rents less a
vacancy factor.
(4) Complete financials were unavailable for 1995. Underwritten numbers were
utilized.
(5) 1994 NOI reflects 1993 amounts.
(6) Largest tenant lease expired 12/1/95; currently on month-to-month basis.
(7) Related Mortgage Loans are grouped by alphabetical designations.
A-28
<PAGE>
<TABLE>
<CAPTION>
ANNEX A
CUT-OFF
PROPERTY ORIGINAL DATE CURRENT NOTE FIRST MONTHLY
STATE ZIP TYPE BALANCE BALANCE RATE DATE PYMT DATE PAYMENT
- ----- --- -------- -------- ------- ------- ---- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CA 91902 Retail 4,015,000 4,011,605 9.320% 5/16/96 7/1/96 34,577.87
NY 11520 Multifamily 3,232,500 3,219,268 8.000% 12/21/95 2/1/96 23,718.94
NY 11550 Multifamily 2,238,750 2,229,586 8.000% 12/21/95 2/1/96 16,427.15
NY 11520 Multifamily 2,045,560 2,037,186 8.000% 12/21/95 2/1/96 15,009.59
NY 11520 Multifamily 1,279,000 1,273,764 8.000% 12/21/95 2/1/96 9,384.85
NY 11520 Multifamily 1,106,250 1,101,721 8.000% 12/21/95 2/1/96 8,117.27
NY 11550 Multifamily 648,750 646,094 8.000% 12/21/95 2/1/96 4,760.30
NY 11550 Multifamily 570,000 567,667 8.000% 12/21/95 2/1/96 4,182.46
NY 11550 Multifamily 529,500 527,332 8.000% 12/21/95 2/1/96 3,885.28
NY 11520 Multifamily 502,500 500,443 8.000% 12/21/95 2/1/96 3,687.17
NY 11520 Multifamily 450,000 448,158 8.000% 12/21/95 2/1/96 3,301.94
NY 11550 Multifamily 392,250 390,644 8.000% 12/21/95 2/1/96 2,878.19
NY 11530 Multifamily 390,000 388,404 8.000% 12/21/95 2/1/96 2,861.68
NY 11550 Multifamily 378,000 376,453 8.000% 12/21/95 2/1/96 2,773.63
NY 11550 Multifamily 351,750 350,310 8.000% 12/21/95 2/1/96 2,581.02
NY 11598 Multifamily 316,800 315,503 8.000% 12/21/95 2/1/96 2,324.57
TX 76712 Nursing 9,300,000 9,227,221 10.000% 8/3/95 10/1/95 84,509.17
NC 28208 Self-storage 2,150,000 2,134,249 9.000% 10/31/95 12/1/95 18,042.72
NC 28601 Self-storage 1,875,000 1,861,376 9.050% 10/31/95 12/1/95 15,799.18
NC 27105 Self-storage 1,800,000 1,786,813 9.000% 10/31/95 12/1/95 15,105.53
SC 29502 Self-storage 1,481,000 1,470,239 9.050% 10/31/95 12/1/95 12,479.25
NC 27292 Self-storage 990,000 982,807 9.050% 10/31/95 12/1/95 8,341.97
SC 29150 Self-storage 911,250 904,629 9.050% 10/31/95 12/1/95 7,678.40
CA 91320 Self-storage 7,400,000 7,341,236 9.250% 9/27/95 11/1/95 63,372.26
MD 20875 Retail 7,200,000 7,163,256 8.250% 1/12/96 3/1/96 56,748.41
NY 11101 Self-storage 7,150,000 7,113,352 9.375% 12/21/95 2/1/96 61,849.17
NC 27909 Retail 3,575,000 3,551,698 8.875% 11/14/95 1/1/96 29,695.85
NC 27804 Retail 3,425,000 3,402,676 8.875% 11/14/95 1/1/96 28,449.87
CA 91101 Nursing 6,000,000 5,947,602 9.375% 12/21/95 2/1/96 55,439.02
NJ 07041 Office/Retail 5,500,000 5,474,056 8.750% 1/15/96 3/1/96 45,217.90
VA 23188 Self-storage 1,896,000 1,881,846 9.625% 9/27/95 11/1/95 16,730.33
VA 23321 Self-storage 1,206,000 1,196,997 9.625% 9/27/95 11/1/95 10,641.76
VA 23605 Self-storage 1,146,000 1,137,445 9.625% 9/27/95 11/1/95 10,112.32
VA 22578 Self-storage 222,000 220,343 9.625% 9/27/95 11/1/95 1,958.93
PA 19102 Multifamily 4,250,000 4,199,631 8.625% 6/23/95 8/1/95 34,580.90
NY 11226 Self-storage 4,100,000 4,059,534 9.750% 6/15/95 8/1/95 36,536.63
AK 99507 Self-storage 2,200,000 2,178,701 10.375% 5/23/95 7/1/95 20,575.90
AK 99518 Self-storage 1,550,000 1,534,994 10.375% 5/23/95 7/1/95 14,496.66
CO 81501 Retail 3,400,000 3,366,058 9.125% 7/28/95 9/1/95 28,824.27
AZ 85201 Self-storage 1,400,000 1,389,627 9.670% 9/27/95 11/1/95 12,397.60
AZ 85205 Self-storage 1,050,000 1,042,220 9.670% 9/27/95 11/1/95 9,298.20
AZ 85204 Self-storage 900,000 893,331 9.670% 9/27/95 11/1/95 7,969.89
MI 48312 Multifamily 3,059,000 3,034,000 10.220% 12/28/94 2/1/95 27,343.54
CA 91605 Self-storage 2,910,000 2,886,749 9.875% 8/23/95 10/1/95 26,187.20
CA 92154 Retail 2,900,000 2,882,839 8.500% 12/13/95 2/1/96 23,351.59
CA 91910 Self-storage 2,600,000 2,585,822 9.000% 12/18/95 2/1/96 21,819.11
TX 77511 Multifamily 2,560,000 2,549,781 8.125% 12/8/95 2/1/96 19,007.93
AZ 85015 Multifamily 2,450,000 2,441,842 8.125% 1/3/96 3/1/96 18,191.18
</TABLE>
A-29
<PAGE>
<TABLE>
ANNEX A
<CAPTION>
RELATED
COUNTER ORIGINAL ORIGINAL REMAINING MATURITY MORTGAGE
NUMBER PROPERTY NAME TERM AMORT SEASONING TERM DATE LOANS
------ ------------- ---- ----- --------- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
84 Bonnie Brea Shopping Center 120 300 1 119 6/1/06 No
85 Mott - 76 S. Bergen Place 120 360 6 114 1/1/06 Yes(c)
86 Mott - 655 Nassau Road 120 360 6 114 1/1/06 Yes(c)
87 Mott - 45 Broadway 120 360 6 114 1/1/06 Yes(c)
88 Mott - 35 N. Long Beach Avenue 120 360 6 114 1/1/06 Yes(c)
89 Mott - 56 N. Long Beach Avenue 120 360 6 114 1/1/06 Yes(c)
90 Mott - 27 Attorney Street 120 360 6 114 1/1/06 Yes(c)
91 Mott - 95 Jerusalem Avenue 120 360 6 114 1/1/06 Yes(c)
92 Mott - 271 Washington Street 120 360 6 114 1/1/06 Yes(c)
93 Mott - 155 Pine Street 120 360 6 114 1/1/06 Yes(c)
94 Mott - 40 Graffing Place 120 360 6 114 1/1/06 Yes(c)
95 Mott - 260 Belmont Parkway 120 360 6 114 1/1/06 Yes(c)
96 Mott - 360 Washington Street 120 360 6 114 1/1/06 Yes(c)
97 Mott - 55 Nassau Place 120 360 6 114 1/1/06 Yes(c)
98 Mott - 25 Peninsula Boulevard 120 360 6 114 1/1/06 Yes(c)
99 Mott - 1100 Ward Place 120 360 6 114 1/1/06 Yes(c)
100 Ridgecrest Retirement Center 120 300 10 110 9/1/05 No
101 Morninstar Mini - Charlotte 121 300 8 113 12/1/05 Yes(h)
102 Morninstar Mini - Hickory 121 300 8 113 12/1/05 Yes(h)
102 Morninstar Mini - Winston Salem 121 300 8 113 12/1/05 Yes(h)
104 Morninstar Mini - Florence 121 300 8 113 12/1/05 Yes(h)
105 Morninstar Mini - Lexington 121 300 8 113 12/1/05 Yes(h)
106 Morninstar Mini - Sumter 121 300 8 113 12/1/05 Yes(h)
107 Thousand Oaks Self Storage 121 300 9 112 11/1/05 No
108 King Shopping Center 120 300 5 115 2/1/06 No
109 Starr Avenue 121 300 6 115 2/1/06 No
110A Kmart/Elizabeth City 180 300 7 173 12/1/10 Yes(a)
110B Kmart/Rocky Mount 180 300 7 173 12/1/10 Yes(a)
111 Regency Park-El Molino 120 240 6 114 1/1/06 No
112 Millburn Common 120 300 5 115 2/1/06 No
113A Sentry SS - Williamsburg 85 300 9 76 11/1/02 Yes(f)
113B Sentry SS - Chesapeake 85 300 9 76 11/1/02 Yes(f)
113C Sentry SS - Newport 85 300 9 76 11/1/02 Yes(f)
113D Sentry SS - Whitestone 85 300 9 76 11/1/02 Yes(f)
114 The Drake Tower Apartments 84 300 12 72 7/1/02 No
115 Snyder Avenue 120 300 12 108 6/15/05 No
116 Diamond Mini Storage 120 300 13 107 5/16/05 Yes(d)
117 International Self Storage 120 300 13 107 5/16/05 Yes(d)
118 Eastgate Shopping Center 84 300 11 73 8/1/02 No
119 AZ Storage Inns - Country Club 121 300 9 112 11/1/05 Yes(g)
120 AZ Storage Inns - Greenfield 121 300 9 112 11/1/05 Yes(g)
121 AZ Storage Inns - Broadway 121 300 9 112 11/1/05 Yes(g)
122 Sterling Meadows Apartments 84 360 18 66 1/1/02 No
123 Coldwater Self Storage 121 300 10 111 10/1/05 No
124 Picador Plaza 84 300 6 78 1/1/03 No
125 Security Public Storage 121 300 6 115 2/1/06 No
126 Cedar Grove Apartments 84 360 6 78 1/1/03 No
127 Canyon Pointe Apartments 120 360 5 115 2/1/06 No
</TABLE>
A-30
<PAGE>
<TABLE>
ANNEX A
<CAPTION>
LOCKOUT PREPAY PREPAY PREPAY PREPAY PREPAY PREPAY PREPAY PREPAY PREPAY PREPAY PREPAY
EXPIRATION YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10 YEAR 11
---------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5/31/00 LO LO LO LO YM YM YM YM YM YM n/a
YM YM YM YM YM YM YM YM YM YM n/a
YM YM YM YM YM YM YM YM YM YM n/a
YM YM YM YM YM YM YM YM YM YM n/a
YM YM YM YM YM YM YM YM YM YM n/a
YM YM YM YM YM YM YM YM YM YM n/a
YM YM YM YM YM YM YM YM YM YM n/a
YM YM YM YM YM YM YM YM YM YM n/a
YM YM YM YM YM YM YM YM YM YM n/a
YM YM YM YM YM YM YM YM YM YM n/a
YM YM YM YM YM YM YM YM YM YM n/a
YM YM YM YM YM YM YM YM YM YM n/a
YM YM YM YM YM YM YM YM YM YM n/a
YM YM YM YM YM YM YM YM YM YM n/a
YM YM YM YM YM YM YM YM YM YM n/a
YM YM YM YM YM YM YM YM YM YM n/a
YM YM YM YM YM YM YM YM YM YM n/a
YM YM YM YM YM YM YM YM YM YM n/a
YM YM YM YM YM YM YM YM YM YM n/a
YM YM YM YM YM YM YM YM YM YM n/a
YM YM YM YM YM YM YM YM YM YM n/a
YM YM YM YM YM YM YM YM YM YM n/a
YM YM YM YM YM YM YM YM YM YM n/a
YM YM YM YM YM YM YM YM YM YM n/a
YM YM YM YM YM YM YM YM YM YM n/a
YM YM YM YM YM YM YM YM YM YM n/a
YM YM YM YM YM YM YM YM YM YM YM
YM YM YM YM YM YM YM YM YM YM YM
YM YM YM YM YM YM YM YM YM YM n/a
YM YM YM YM YM YM YM YM YM YM n/a
YM YM YM YM YM YM YM n/a n/a n/a n/a
YM YM YM YM YM YM YM n/a n/a n/a n/a
YM YM YM YM YM YM YM n/a n/a n/a n/a
YM YM YM YM YM YM YM n/a n/a n/a n/a
YM YM YM YM YM YM YM n/a n/a n/a n/a
YM YM YM YM YM 5% 3% 1% 0% 0% n/a
YM YM YM YM YM YM YM 2% 1% 0% n/a
YM YM YM YM YM YM YM 2% 1% 0% n/a
YM YM YM YM YM YM YM n/a n/a n/a n/a
YM YM YM 3% 2% 1% 1% 1% 0% 0% n/a
YM YM YM 3% 2% 1% 1% 1% 0% 0% n/a
YM YM YM 3% 2% 1% 1% 1% 0% 0% n/a
YM/3 YM/3 YM/3 YM/3 YM/3 2% 1% n/a n/a n/a n/a
YM YM YM YM YM YM YM YM YM YM n/a
YM YM YM YM YM YM YM YM YM YM n/a
YM YM YM YM YM YM YM YM YM YM n/a
12/31/00 LO LO LO LO LO YM YM n/a n/a n/a n/a
YM YM YM YM YM YM YM YM YM YM n/a
</TABLE>
A-31
<PAGE>
<TABLE>
<CAPTION>
ANNEX A
COUNTER PREPAY PREPAY PREPAY PREPAY PREPAY OPEN APPRAISAL
NUMBER PROPERTY NAME YR 12 YR 13 YR 14 YR 15 YR 16-25 PERIOD DATE
------ ------------- ----- ----- ----- ----- -------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
84 Bonnie Brea Shopping Center n/a n/a n/a n/a n/a 6 11/7/95
85 Mott - 76 S. Bergen Place n/a n/a n/a n/a n/a 6 11/1/95
86 Mott - 655 Nassau Road n/a n/a n/a n/a n/a 6 11/1/95
87 Mott - 45 Broadway n/a n/a n/a n/a n/a 6 11/1/95
88 Mott - 35 N. Long Beach Avenue n/a n/a n/a n/a n/a 6 11/1/95
89 Mott - 56 N. Long Beach Avenue n/a n/a n/a n/a n/a 6 11/1/95
90 Mott - 27 Attorney Street n/a n/a n/a n/a n/a 6 11/1/95
91 Mott - 95 Jerusalem Avenue n/a n/a n/a n/a n/a 6 11/1/95
92 Mott - 271 Washington Street n/a n/a n/a n/a n/a 6 11/1/95
93 Mott - 155 Pine Street n/a n/a n/a n/a n/a 6 11/1/95
94 Mott - 40 Graffing Place n/a n/a n/a n/a n/a 6 11/1/95
95 Mott - 260 Belmont Parkway n/a n/a n/a n/a n/a 6 11/1/95
96 Mott - 360 Washington Street n/a n/a n/a n/a n/a 6 11/1/95
97 Mott - 55 Nassau Place n/a n/a n/a n/a n/a 6 11/1/95
98 Mott - 25 Peninsula Boulevard n/a n/a n/a n/a n/a 6 11/1/95
99 Mott - 1100 Ward Place n/a n/a n/a n/a n/a 6 11/1/95
100 Ridgecrest Retirement Center n/a n/a n/a n/a n/a 6 5/11/95
101 Morningstar Mini - Charlotte n/a n/a n/a n/a n/a 12 9/12/95
102 Morningstar Mini - Hickory n/a n/a n/a n/a n/a 12 8/20/95
103 Morningstar Mini - Winston Salem n/a n/a n/a n/a n/a 6 9/8/95
104 Morningstar Mini - Florence n/a n/a n/a n/a n/a 12 8/19/95
105 Morningstar Mini - Lexington n/a n/a n/a n/a n/a 12 8/19/95
106 Morningstar Mini - Sumter n/a n/a n/a n/a n/a 12 8/18/95
107 Thousand Oaks Self-storage n/a n/a n/a n/a n/a 12 7/3/95
108 King Shopping Center n/a n/a n/a n/a n/a 6 10/19/95
109 Starr Avenue n/a n/a n/a n/a n/a 12 12/1/94
110A Kmart/Elizabeth City YM YM YM YM n/a 6 7/21/95
110B Kmart/Rocky Mount YM YM YM YM n/a 6 7/19/95
111 Regency Park-El Molino n/a n/a n/a n/a n/a 6 9/18/95
112 Millburn Common n/a n/a n/a n/a n/a 6 11/1/95
113A Sentry SS - Williamsburg n/a n/a n/a n/a n/a 12 5/30/95
113B Sentry SS - Chesapeake n/a n/a n/a n/a n/a 12 5/30/95
113C Sentry SS - Newport n/a n/a n/a n/a n/a 12 5/30/95
113D Sentry SS - Whitestone n/a n/a n/a n/a n/a 12 5/30/95
114 The Drake Tower Apartments n/a n/a n/a n/a n/a 6 5/8/95
115 Snyder Avenue n/a n/a n/a n/a n/a 24 12/1/94
116 Diamond Mini Storage n/a n/a n/a n/a n/a 12 1/18/95
117 International Self-storage n/a n/a n/a n/a n/a 12 1/21/95
118 Eastgate Shopping Center n/a n/a n/a n/a n/a 6 3/28/95
119 AZ Storage Inns - Country Club n/a n/a n/a n/a n/a 24 7/18/95
120 AZ Storage Inns - Greenfield n/a n/a n/a n/a n/a 24 7/18/95
121 AZ Storage Inns - Broadway n/a n/a n/a n/a n/a 24 7/3/95
122 Sterling Meadows Apartments n/a n/a n/a n/a n/a 6 10/31/94
123 Coldwater Self-storage n/a n/a n/a n/a n/a 12 7/5/95
124 Picador Plaza n/a n/a n/a n/a n/a 6 9/18/95
125 Security Public Storage n/a n/a n/a n/a n/a 6 10/19/95
126 Cedar Grove Apartments n/a n/a n/a n/a n/a 6 8/25/95
127 Canyon Pointe Apartments n/a n/a n/a n/a n/a 6 8/31/95
</TABLE>
A-32
<PAGE>
<TABLE>
<CAPTION>
ANNEX A
FINAL YEAR BUILT/ TOTAL PROPERTY LOAN PER
VALUE LTV RENOVATED UNITS SIZE (SF) SF/UNIT UNIT/SF OCCUPANCY %
----- --- ---------- ----- --------- -------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
5,500,000 72.9% 1977/1987 -- 50,421 79.56 SF 95%
4,310,000 74.7% 1962 82 75,000 39,259.36 Unit 100%
2,985,000 74.7% 1969 67 47,340 33,277.40 Unit 99%
2,735,000 74.5% 1962 63 74,828 32,336.29 Unit 97%
1,775,000 71.8% 1963 43 37,780 29,622.43 Unit 100%
1,475,000 74.7% 1962 35 32,400 31,477.76 Unit 97%
865,000 74.7% 1972 20 15,224 32,304.71 Unit 100%
760,000 74.7% 1964 22 18,600 25,803.03 Unit 100%
706,000 74.7% 1928 17 10,428 31,019.56 Unit 94%
670,000 74.7% 1967 15 9,600 33,362.86 Unit 93%
600,000 74.7% 1974 20 13,700 22,407.90 Unit 100%
523,000 74.7% 1962 12 9,108 32,553.69 Unit 100%
520,000 74.7% 1964 12 9,822 32,366.96 Unit 100%
550,000 68.5% 1976 14 6,656 26,889.47 Unit 100%
469,000 74.7% 1963 14 11,756 25,022.15 Unit 100%
431,000 73.2% 1926 12 8,217 26,291.93 Unit 100%
14,800,000 62.4% 1986 146 142,475 63,200.14 Bed 95%
2,820,000 75.7% 1986-1995 663 90,540 3,219.08 Unit 89%
2,650,000 70.2% 1986-1994 660 85,325 2,820.27 Unit 98%
2,750,000 65.0% 1986-1994 609 74,632 2,934.01 Unit 80%
2,150,000 68.4% 1986-1990 586 70,800 2,508.94 Unit 95%
1,650,000 59.6% 1987-1994 474 56,008 2,073.43 Unit 96%
1,350,000 67.0% 1986-1993 478 58,962 1,892.53 Unit 98%
10,500,000 69.9% 1982-1993 1,236 145,630 5,939.51 Unit 87%
9,800,000 73.1% 1991 -- 91,140 78.60 SF 95%
9,910,000 71.8% 1920/1988 2,242 166,460 3,172.77 Unit 87%
4,650,000 76.4% 1993 -- 94,841 37.45 SF 100%
4,450,000 76.5% 1992 -- 91,266 37.28 SF 100%
8,100,000 73.4% 1977 101 49,870 58,887.15 Bed 95%
9,510,000 57.6% 1950/1980 -- 90,395 60.56 SF 95%
2,500,000 75.3% 1982-1984 426 49,859 4,417.48 Unit 78%
1,600,000 74.8% 1983 420 51,111 2,849.99 Unit 82%
1,500,000 75.8% 1984 371 42,071 3,065.89 Unit 91%
330,000 66.8% 1976/1982 100 11,160 2,203.43 Unit 92%
6,500,000 64.6% 1929/1987 254 283,530 16,533.98 Unit 95%
6,300,000 64.4% 1920/1986-88 2,013 109,753 2,016.66 Unit 91%
3,050,000 71.4% 1983-1993 660 59,907 3,301.06 Unit 93%
2,400,000 64.0% 1974-1983 440 47,964 3,488.62 Unit 89%
4,700,000 71.6% 1972 -- 144,067 23.36 SF 100%
1,980,000 70.2% 1983 403 46,300 3,448.21 Unit 95%
1,620,000 64.3% 1986 413 48,553 2,523.54 Unit 93%
1,450,000 61.6% 1986 380 38,425 2,350.87 Unit 96%
4,500,000 67.4% 1988 83 60,950 36,554.21 Unit 98%
5,000,000 57.7% 1984-1986 862 62,542 3,348.90 Unit 95%
4,100,000 70.3% 1975/1994 -- 44,188 65.24 SF 100%
4,000,000 64.7% 1984 1,159 75,017 2,231.08 Unit 70%
3,650,000 69.9% 1981 168 112,960 15,177.27 Unit 90%
3,400,000 71.8% 1981 144 99,732 16,957.24 Unit 91%
</TABLE>
A-33
<PAGE>
<TABLE>
ANNEX A
<CAPTION>
MAX MIN
COUNTER LOAN INTEREST INTEREST
NUMBER PROPERTY NAME TYPE INDEX MARGIN RATE RATE
------- ------------- ---- ----- ------ -------- --------
<S> <C> <C> <C> <C> <C> <C>
84 Bonnie Brea Shopping Center Fixed
85 Mott - 76 S. Bergen Place Fixed
86 Mott - 655 Nassau Road Fixed
87 Mott - 45 Broadway Fixed
88 Mott - 35 N. Long Beach Avenue Fixed
89 Mott - 56 N. Long Beach Avenue Fixed
90 Mott - 27 Attorney Street Fixed
91 Mott - 95 Jerusalem Avenue Fixed
92 Mott - 271 Washington Street Fixed
93 Mott - 155 Pine Street Fixed
94 Mott - 40 Graffing Place Fixed
95 Mott - 260 Belmont Parkway Fixed
96 Mott - 360 Washington Street Fixed
97 Mott - 55 Nassau Place Fixed
98 Mott - 25 Peninsula Boulevard Fixed
99 Mott - 1100 Ward Place Fixed
100 Ridgecrest Retirement Center Fixed
101 Morningstar Mini - Charlotte Fixed
102 Morningstar Mini - Hickory Fixed
103 Morningstar Mini - Winston Salem Fixed
104 Morningstar Mini - Florence Fixed
105 Morningstar Mini - Lexington Fixed
106 Morningstar Mini - Sumter Fixed
107 Thousand Oaks Self-storage Fixed
108 King Shopping Center Fixed
109 Starr Avenue Fixed
110A Kmart/Elizabeth City Fixed
110B Kmart/Rocky Mount Fixed
111 Regency Park - El Molino Fixed
112 Millburn Common Fixed
113A Sentry SS - Williamsburg Fixed
113B Sentry SS - Chesapeake Fixed
113C Sentry SS - Newport Fixed
113D Sentry SS - Whitestone Fixed
114 The Drake Tower Apartments Fixed
115 Snyder Avenue Fixed
116 Diamond Mini Storage Fixed
117 International Self-storage Fixed
118 Eastgate Shopping Center Fixed
119 AZ Storage Inns - Country Club Fixed
120 AZ Storage Inns - Greenfield Fixed
121 AZ Storage Inns - Broadway Fixed
122 Sterling Meadows Apartments Fixed
123 Coldwater Self-storage Fixed
124 Picador Plaza Fixed
125 Security Public Storage Fixed
126 Cedar Grove Apartments Fixed
127 Canyon Pointe Apartments Fixed
</TABLE>
A-34
<PAGE>
<TABLE>
ANNEX A
<CAPTION>
LARGEST LARGEST LARGEST
TENANT TENANT TENANT SECOND
LARGEST TENANT LEASED SF % OF TOTAL SF LEASE EXPIRATION LARGEST TENANT
- -------------- --------- ------------- ---------------- ----------------------
<S> <C> <C> <C> <C>
Century 21 5,924 12% 7/1/00 South Fork Steak Ranch
Shoppers Food Warehouse 36,500 40% 6/1/11 Peoples Drug Store
Kmart/Elizabeth City 94,841 100% 6/1/17 n/ap
Kmart/Rocky Mount 91,266 100% 7/1/17 n/ap
Schechner Lifson Corporation 10,858 12% 2/1/02 Wasserman et al Law
City Market 55,792 39% 9/1/99 Ernst Home Improvement
Food Market 10,853 25% 6/1/05 Department of Motor Vehicles
</TABLE>
A-35
<PAGE>
<TABLE>
ANNEX A
<CAPTION>
SECOND LARGEST SECOND LARGEST SECOND LARGEST
COUNTER TENANT TENANT TENANT
NUMBER PROPERTY NAME LEASED SF % OF TOTAL SF LEASE EXPIRATION 1994 NOI
------- ------------- -------------- -------------- ---------------- --------
<S> <C> <C> <C> <C> <C>
84 Bonnie Brea Shopping Center 5,040 10% 10/31/00 674,103
85 Mott - 76 S. Bergen Place 416,403
86 Mott - 655 Nassau Road 314,391
87 Mott - 45 Broadway 274,076
88 Mott - 35 N. Long Beach Avenue 166,257
89 Mott - 56 N. Long Beach Avenue 145,474
90 Mott - 27 Attorney Street 86,923
91 Mott - 95 Jerusalem Avenue 80,129
92 Mott - 271 Washington Street 78,542
93 Mott - 155 Pine Street 68,184
94 Mott - 40 Graffing Place 61,989
95 Mott - 260 Belmont Parkway 50,232
96 Mott - 360 Washington Street 42,007
97 Mott - 55 Nassau Place 58,097
98 Mott - 25 Peninsula Boulevard 52,673
99 Mott - 1100 Ward Place 39,204
100 Ridgecrest Retirement Center 1,465,016
101 Morningstar Mini - Charlotte 216,627
102 Morningstar Mini - Hickory 476,137
103 Morningstar Mini - Winston Salem 231,042
104 Morningstar Mini - Florence 197,126
105 Morningstar Mini - Lexington 149,782
106 Morningstar Mini - Sumter 133,811
107 Thousand Oaks Self-storage 1,043,938
108 King Shopping Center 6,840 8% 6/1/01 929,218
109 Starr Avenue 1,066,661
110A Kmart/Elizabeth City 508,880
110B Kmart/Rocky Mount 488,764
111 Regency Park-El Molino 971,591
112 Millburn Common 8,200 9% 12/1/03 674,495
113A Sentry SS - Williamsburg 272,911
113B Sentry SS - Chesapeake 176,937
113C Sentry SS - Newport 167,032
113D Sentry SS - Whitestone 32,896
114 The Drake Tower Apartments 702,830
115 Snyder Avenue 760,425
116 Diamond Mini Storage 438,809
117 International Self-storage 319,296
118 Eastgate Shopping Center 54,475 38% 6/1/08 584,385
119 AZ Storage Inns - Country Club 173,049
120 AZ Storage Inns - Greenfield 149,038
121 AZ Storage Inns - Broadway 135,797
122 Sterling Meadows Apartments 412,225
123 Coldwater Self-storage 476,138
124 Picador Plaza 8,226 19% 1/1/98 434,558
125 Security Public Storage 425,061
126 Cedar Grove Apartments 351,051
127 Canyon Pointe Apartments (7,071)
</TABLE>
A-36
<PAGE>
<TABLE>
ANNEX A
<CAPTION>
1995 REVENUES 1995 EXPENSES 1995 NOI FOOTNOTE 1995 DSCR 1995 COMBINED DSCR ANNUALIZED
------------- ------------- -------- -------- --------- ------------------ ----------
<S> <C> <C> <C> <C> <C> <C>
792,598 173,673 618,925 1.49 Trailing 12
747,984 323,589 424,395 1.49 1.50 Trailing 12
669,877 356,414 313,463 1.59 1.50 Trailing 12
588,433 326,922 261,511 1.45 1.50 Trailing 12
374,880 221,847 153,033 1.36 1.50 Trailing 12
340,604 204,487 136,117 1.40 1.50 Trailing 12
182,539 90,229 92,310 1.62 1.50 Trailing 12
176,898 101,147 75,751 1.51 1.50 Trailing 12
153,403 80,943 72,460 1.55 1.50 Trailing 12
122,774 49,161 73,613 1.66 1.50 Trailing 12
148,659 79,130 69,529 1.75 1.50 Trailing 12
107,271 52,952 54,319 1.57 1.50 Trailing 12
102,786 55,723 47,063 1.37 1.50 Trailing 12
113,314 66,261 47,053 1.41 1.50 Trailing 12
122,828 79,393 43,435 1.40 1.50 Trailing 12
103,475 60,400 43,075 1.54 1.50 Trailing 12
4,655,739 3,273,749 1,381,990 1.36 Trailing 12
433,212 153,454 279,758 1.29 1.44 Trailing 12
427,984 148,481 279,503 1.47 1.44 Trailing 12
392,016 142,327 249,689 1.38 1.44 Trailing 12
361,084 125,578 235,506 1.57 1.44 Trailing 12
264,023 125,419 138,604 1.38 1.44 Trailing 12
288,561 137,884 150,677 1.64 1.44 Trailing 12
1,611,395 490,860 1,120,535 1.47 Trailing 12
1,250,433 281,536 968,897 1.42 Trailing 12
2,478,070 1,230,716 1,247,354 1.68 Trailing 12
509,380 500 508,880 1.43 1.43 Trailing 12
492,582 3,818 488,764 1.43 1.43 Trailing 12
2,428,777 1,483,297 945,480 1.42 Trailing 12
1,456,484 645,563 810,921 1.49 Trailing 12
343,348 82,958 260,390 1.30 1.40 Trailing 12
276,620 93,263 183,357 1.44 1.40 Trailing 12
256,119 80,737 175,382 1.45 1.40 Trailing 12
67,671 26,495 41,176 1.75 1.40 Trailing 12
1,816,776 1,197,291 619,485 1.49 Trailing 12
1,866,433 1,020,022 846,411 1.93 Trailing 12
610,885 241,908 368,977 1.49 1.55 Trailing 12
535,125 252,895 282,230 1.62 1.55 Trailing 12
753,084 201,255 551,829 1.60 Trailing 12
294,375 100,475 193,900 1.30 1.52 Trailing 12
263,240 81,032 182,208 1.63 1.52 Trailing 12
241,984 76,816 165,168 1.73 1.52 Trailing 12
632,357 198,479 433,878 1.32 Trailing 12
779,313 280,810 498,503 1.59 Trailing 12
712,646 200,467 512,179 1.83 Trailing 12
621,903 198,320 423,583 1.62 Trailing 12
749,867 422,966 326,901 1.43 Trailing 12
607,575 291,552 316,023 1.45 9 mos ann
</TABLE>
A-37
<PAGE>
<TABLE>
ANNEX A
<CAPTION>
COUNTER
NUMBER PROPERTY NAME END DATE U/WNOI MASTER SERVICING FEE
------- ------------- -------- ------ --------------------
<S> <C> <C> <C> <C>
84 Bonnie Brea Shopping Center 12/31/95 565,531 0.175%
85 Mott - 76 S. Bergen Place 9/30/95 374,508 0.270%
86 Mott - 655 Nassau Road 9/30/95 283,354 0.270%
87 Mott - 45 Broadway 9/30/95 234,284 0.270%
88 Mott - 35 N. Long Beach Avenue 9/30/95 146,545 0.270%
89 Mott - 56 N. Long Beach Avenue 9/30/95 127,565 0.270%
90 Mott - 27 Attorney Street 9/30/95 76,770 0.270%
91 Mott - 95 Jerusalem Avenue 9/30/95 72,796 0.270%
92 Mott - 271 Washington Street 9/30/95 62,526 0.270%
93 Mott - 155 Pine Street 9/30/95 60,638 0.270%
94 Mott - 40 Graffing Place 9/30/95 52,119 0.270%
95 Mott - 260 Belmont Parkway 9/30/95 47,468 0.270%
96 Mott - 360 Washington Street 9/30/95 48,753 0.270%
97 Mott - 55 Nassau Place 9/30/95 43,738 0.270%
98 Mott - 25 Peninsula Boulevard 9/30/95 41,035 0.270%
99 Mott - 1100 Ward Place 9/30/95 36,289 0.270%
100 Ridgecrest Retirement Center 12/31/95 1,412,246 0.270%
101 Morningstar Mini - Charlotte 12/31/95 304,713 0.270%
102 Morningstar Mini - Hickory 12/31/95 260,510 0.270%
103 Morningstar Mini - Winston Salem 12/31/95 254,251 0.270%
104 Morningstar Mini - Florence 12/31/95 199,011 0.270%
105 Morningstar Mini - Lexington 12/31/95 139,908 0.270%
106 Morningstar Mini - Sumter 12/31/95 135,950 0.270%
107 Thousand Oaks Self-storage 12/31/95 1,048,471 0.270%
108 King Shopping Center 12/31/95 974,711 0.270%
109 Starr Avenue 12/31/95 1,000,358 0.270%
110A Kmart/Elizabeth City 12/31/95 470,098 0.270%
110B Kmart/Rocky Mount 12/31/95 451,221 0.270%
111 Regency Park-El Molino 12/31/95 927,058 0.270%
112 Millburn Common 12/31/95 862,127 0.270%
113A Sentry SS - Williamsburg 12/31/95 263,378 0.270%
113B Sentry SS - Chesapeake 12/31/95 171,834 0.270%
113C Sentry SS - Newport 12/31/95 160,985 0.270%
113D Sentry SS - Whitestone 12/31/95 31,537 0.270%
114 The Drake Tower Apartments 12/31/95 601,389 0.270%
115 Snyder Avenue 12/31/95 717,937 0.270%
116 Diamond Mini Storage 12/31/95 392,321 0.270%
117 International Self-storage 12/31/95 269,310 0.270%
118 Eastgate Shopping Center 12/31/95 504,579 0.270%
119 AZ Storage Inns - Country Club 12/31/95 205,644 0.270%
120 AZ Storage Inns - Greenfield 12/31/95 186,645 0.270%
121 AZ Storage Inns - Broadway 12/31/95 142,270 0.270%
122 Sterling Meadows Apartments 12/31/95 410,796 0.270%
123 Coldwater Self-storage 12/31/95 500,076 0.270%
124 Picador Plaza 12/31/95 480,588 0.270%
125 Security Public Storage 9/30/95 396,516 0.270%
126 Cedar Grove Apartments 12/31/95 362,311 0.270%
127 Canyon Pointe Apartments 9/30/95 290,023 0.270%
</TABLE>
A-38
<PAGE>
MORTGAGE LOAN SCHEDULE
LOAN COUNTERS 128-162
A-39
<PAGE>
<TABLE>
<CAPTION>
ANNEX A
COUNTER CONTROL LOAN
NUMBER NUMBER NUMBER PROPERTY NAME PROPERTY ADDRESS CITY
- ------ ------ ------ ------------- ---------------- ----
<S> <C> <C> <C> <C> <C>
128 CO52 941-0085 Central Avenue Self Storage 3399 Central Avenue Riverside
129 CO53 P00660 Country Brook Apartments 5 Country Brook Lane Rochester
130 CO54 941-0099 Atlantic Self Storage 2401 Build America Drive Hampton
131 CO55 P00546 Delicare Convalescent Center 1340 East Madison Avenue El Cajon
132 CO56 P00642 Midwest Distribution Center 3300 Lockbourne Road Columbus
133 CO57 941-0073 Ranchos Stor-All 813 Short Court Gardnerville
134 CO58 941-0072 Stor-All 3395 West T. Quarter Circle Road Winnemucca
135 CO59 941-0106 Morninstar Mini - Charlotte 5301 North Sharon Amity Road Charlotte
136 CO60 P00534 215 East Gunhill 215 East Gunhill Road Bronx
137 CO61 P00155 The Corners Apartments 4150 Winchester Road Memphis
138 CO62 941-0088 Palo Verde Mini Storage 255 McKellips Road Mesa
139 CO63 941-0071 Stop & Stor 1700 Shore Parkway Brooklyn
140 CO64 P00150 Urbanwood Apartments 3816 106th Street Urbandale
141 CO65 P00514 Lexington Avenue Apartments 801 Lexington Avenue Lakewood
142 CO66 P00512 485 Front Street 485 Front Street Hempstead
143 CO67 941-0068 Safeguard Self Storage #11 300 23rd Street Kenner
144 CO68 941-0102 AZ Storage Inns - Apache Trails 5253 East Main Street Mesa
145 CO69 P00582 Longwood Retirement Village 480 East Church Avenue Longwood
146 CO70 P00614 Euclid Convalescent Center 1350 Euclid Avenue San Diego
147 CO71 941-0058 Safeguard 9642/9705 South Padre Corpus Christi
Island Drive
148 CO72 P00588 Homeland Grocery Store 12508 North May Avenue Oklahoma City
149 CO73 941-0098 Conyers Self Storage 1840 Iris Drive Conyers
150 CO74 P00648 Le Shoppe 90 W. Mount Pleasant Avenue Livingston
151 CO75 P00502 Briarwood Apartments 13600 Horizon Boulevard El Paso
152 CO76 P00503 Lakeway Apartments 1600 McMahon Avenue & El Paso
14790 Breaux Street
153 CO77 941-0082 Regency Mini Storage 8740 Atlantic Boulevard Jacksonville
154 CO78 98-1000160 Bellamar Apartments 1470 West 40th Street Hialeah
155 CO79 941-0083 Normandy Mini Storage 8204 Normandy Boulevard Jacksonville
156 CO80 941-0114 Stor-A-Lot Self Storage 17108 Main Street Hesperia
157 CO81 P00646 Perth Amboy Industrial Center 31-63 Pennsylvania Avenue Kearny
158 CO82 941-0105 Handy Mini Storage 2445 Main Street Chula Vista
159 CO83 941-0107 Morningstar Mini - Matthews 10716 Monroe Road Matthews
160 CO84 941-0057 A Storage #2 7413 W. Saint Bernard Highway Arabi
161 CO85 941-0093 Ironwood Self Storage 1678 West Superstition Boulevard Apache Junction
162 CO86 P00272 Carriage House Apartments 131-139 North Bend Road Baltimore
----
176
====
</TABLE>
- ---------------
Footnotes:
(1) Reflects tenant lease-up as of year-end 1995. These properties were newly
constructed, renovated or expanded in 1995.
(2) Management fees have been adjusted to market.
(3) Underlying mortgage on cooperative was underwritten as a multi-family
rental property with market rents less a vacancy factor.
(4) Complete financials were unavailable for 1995. Underwritten numbers were
utilized.
(5) 1994 NOI reflects 1993 amounts.
(6) Largest tenant lease expired 12/1/95; currently on month-to-month basis.
(7) Related Mortgage Loans are grouped by alphabetical designations.
A-40
<PAGE>
<TABLE>
<CAPTION>
ANNEX A
CUT-OFF
PROPERTY ORIGINAL DATE CURRENT NOTE FIRST MONTHLY
STATE ZIP TYPE BALANCE BALANCE RATE DATE PYMT DATE PAYMENT
- ----- --- -------- -------- ------- -------- ----- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CA 92506 Self-storage 2,450,000 2,440,995 9.300% 11/20/95 1/1/96 20,244.38
NH 3839 Multifamily 2,400,000 2,391,840 8.000% 1/8/96 3/1/96 17,610.35
VA 23666 Self-storage 2,400,000 2,380,941 9.250% 9/26/95 11/1/95 20,553.16
CA 92021 Nursing 2,250,000 2,211,352 10.375% 5/12/95 7/1/95 22,274.94
OH 43207 Industrial 2,200,000 2,169,162 8.500% 1/15/96 3/1/96 21,664.27
NV 89410 Self-storage 1,200,000 1,181,298 9.750% 7/17/95 9/1/95 11,382.20
NV 89445 Self-storage 1,000,000 984,895 10.000% 7/26/95 9/1/95 9,650.22
NC 28215 Self-storage 2,000,000 1,987,017 8.900% 11/28/95 1/1/96 16,647.18
NY 10467 Multifamily 2,000,000 1,975,349 10.250% 2/27/95 4/1/95 18,527.67
TN 38115 Multifamily 2,100,000 1,856,915 10.000% 8/16/94 10/1/94 19,082.72
AZ 85201 Self-storage 1,750,000 1,737,695 9.250% 10/3/95 12/1/95 14,986.68
NY 11214 Self-storage 1,700,000 1,684,039 9.500% 7/5/95 9/1/95 14,852.84
IA 50322 Multifamily 1,700,000 1,668,577 9.875% 8/11/94 10/1/94 15,298.37
NJ 8701 Multifamily 1,650,000 1,634,562 10.375% 9/30/94 11/1/94 14,939.22
NY 11550 Multifamily 1,636,000 1,614,114 10.875% 11/10/94 1/1/95 15,887.02
LA 70062 Self-storage 1,550,000 1,534,994 10.375% 5/8/95 7/1/95 14,496.66
AZ 85204 Self-storage 1,500,000 1,490,087 9.625% 10/11/95 12/1/95 13,236.02
FL 32750 Nursing 1,500,000 1,488,569 9.500% 9/22/95 11/1/95 13,105.45
CA 92105 Nursing 1,500,000 1,484,169 9.125% 11/29/95 1/1/96 13,616.71
TX 78418 Self-storage 1,450,000 1,429,684 9.875% 1/27/95 3/1/95 13,048.28
OK 73120 Retail 1,300,000 1,288,799 8.750% 9/27/95 11/1/95 10,687.87
GA 30207 Self-storage 1,200,000 1,191,734 9.375% 10/26/95 12/1/95 10,380.28
NJ 7039 Retail 1,200,000 1,182,994 8.375% 1/15/96 3/1/96 11,729.11
TX 79927 Multifamily 805,000 791,417 10.125% 9/6/94 11/1/94 7,386.09
TX 79927 Multifamily 360,000 353,926 10.125% 9/8/94 11/1/94 3,303.10
FL 32211 Self-storage 1,120,000 1,100,168 9.750% 11/30/95 1/1/96 11,864.86
FL 33012 Multifamily 1,097,558 1,088,476 10.160% 12/30/94 2/1/95 9,761.88
FL 32221 Self-storage 1,100,000 1,080,522 9.750% 11/30/95 1/1/96 11,652.99
CA 92345 Self-storage 1,025,000 1,019,411 9.000% 12/19/95 2/1/96 8,601.76
NJ 7032 Industrial 1,000,000 983,119 8.500% 12/27/95 2/1/96 9,847.40
CA 91911 Self-storage 930,000 925,133 9.250% 12/19/95 2/1/96 7,964.35
NC 28105 Self-storage 900,000 894,158 8.900% 11/27/95 1/1/96 7,491.23
LA 70032 Self-storage 850,000 837,934 9.750% 1/30/95 3/1/95 7,575.27
AZ 85220 Self-storage 600,000 587,808 9.750% 10/27/95 12/1/95 6,356.18
MD 21229 Multifamily 547,000 536,043 10.250% 5/10/94 7/1/94 5,067.32
----------- ----------- ------------
486,998,842 482,357,812 3,964,097.68
=========== =========== ============
</TABLE>
A-41
<PAGE>
<TABLE>
<CAPTION>
ANNEX A
Related
Counter Original Original Remaining Maturity Mortgage
Number Property Name Term Amort Seasoning Term Date Loans
- ------ ------------- ---- ----- --------- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C>
128 Central Avenue Self Storage 121 360 7 114 1/1/06 No
129 Country Brook Apartments 84 360 5 79 2/1/03 No
130 Atlantic Self Storage 121 300 9 112 11/1/05 No
131 Delicare Convalescent Center 84 240 13 71 6/1/02 No
132 Midwest Distribution Center 120 180 5 115 2/1/06 No
133 Ranchos Stor-All 120 240 11 109 8/1/05 Yes(e)
134 Stor-All 120 240 11 109 8/1/05 Yes(e)
135 Morningstar Mini - Charlotte 121 300 7 114 1/1/06 No
136 215 East Gunhill 84 300 16 68 3/1/02 No
137 The Corners Apartments 84 300 22 62 9/1/01 No
138 Palo Verde Mini Storage 121 300 8 113 12/1/05 No
139 Stop & Stor 83 300 11 72 6/30/02 No
140 Urbanwood Apartments 72 300 22 50 9/1/00 No
141 Lexington Avenue Apartments 84 360 21 63 10/1/01 No
142 485 Front Street 120 300 19 101 12/1/04 No
143 Safeguard Self Storage #11 84 300 13 71 5/7/02 No
144 AZ Storage Inns - Apache Trails 121 300 8 113 12/1/05 No
145 Longwood Retirement Village 120 300 9 111 10/1/05 No
146 Euclid Convalescent Center 120 240 7 113 12/1/05 No
147 Safeguard 84 300 17 67 1/26/02 No
148 Homeland Grocery Store 120 300 9 111 10/1/05 No
149 Conyers Self Storage 121 300 8 113 12/1/05 No
150 Le Shoppe 120 180 5 115 2/1/06 No
151 Briarwood Apartments 300 300 21 279 10/1/19 Yes(b)
152 Lakeway Apartments 300 300 21 279 10/1/19 Yes(b)
153 Regency Mini Storage 181 180 7 174 1/1/11 No
154 Bellamar Apartments 84 360 18 66 1/1/02 No
155 Normandy Mini Storage 181 180 7 174 1/1/11 No
156 Stor-A-Lot Self Storage 85 300 6 79 2/1/03 No
157 Perth Amboy Industrial Center 120 180 6 114 1/1/06 No
158 Handy Mini Storage 85 300 6 79 2/1/03 No
159 Morningstar Mini - Matthews 121 300 7 114 1/1/06 No
160 A Storage #2 84 300 17 67 1/29/02 No
161 Ironwood Self Storage 181 180 8 173 12/1/10 No
162 Carriage House Apartments 84 300 25 59 6/1/01 No
</TABLE>
A-42
<PAGE>
<TABLE>
<CAPTION>
ANNEX A
Lockout Prepay Prepay Prepay Prepay Prepay Prepay Prepay Prepay Prepay Prepay Prepay
Expiration Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11
---------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
YM YM YM YM YM YM YM YM YM 0% n/a
YM YM YM YM YM YM YM n/a n/a n/a n/a
YM YM YM YM YM YM YM YM YM YM n/a
YM YM YM YM YM YM YM n/a n/a n/a n/a
YM YM YM YM YM YM YM YM YM YM n/a
YM YM YM YM YM YM YM YM YM YM n/a
YM YM YM YM YM YM YM YM YM YM n/a
YM YM YM YM YM YM YM YM YM YM n/a
3/31/96 LO YM YM YM YM YM YM n/a n/a n/a n/a
9/30/95 LO 2.5% 2.5% 1.5% 1.5% 0% 0% n/a n/a n/a n/a
YM YM YM YM YM YM YM YM YM YM n/a
YM YM YM YM YM YM YM n/a n/a n/a n/a
9/30/95 LO 2.5% 2.5% 1.5% 1.5% 0% n/a n/a n/a n/a n/a
10/31/95 LO YM YM YM YM YM YM n/a n/a n/a n/a
12/31/95 LO YM YM YM YM YM YM YM YM YM n/a
YM YM YM YM YM YM YM n/a n/a n/a n/a
YM YM YM 3% 2% 1% 1% 1% 0% 0% n/a
YM YM YM YM YM YM YM YM YM YM n/a
YM YM YM YM YM YM YM YM YM YM n/a
6% 5% 4% 3% 2% 1% 0% n/a n/a n/a n/a
YM YM YM YM YM YM YM YM YM YM n/a
YM YM YM YM YM YM YM YM YM YM n/a
YM YM YM YM YM YM YM YM YM YM n/a
9/30/99 LO LO LO LO LO YM YM YM YM YM YM
9/30/99 LO LO LO LO LO YM YM YM YM YM YM
YM YM YM YM YM YM YM YM YM YM 5%
YM/3 YM/3 YM/3 YM/3 YM/3 2% 1% n/a n/a n/a n/a
YM YM YM YM YM YM YM YM YM YM 5%
YM YM YM YM YM YM YM n/a n/a n/a n/a
YM YM YM YM YM YM YM YM YM YM n/a
YM YM YM YM YM YM YM n/a n/a n/a n/a
YM YM YM YM YM YM YM YM YM YM n/a
6% 5% 4% 3% 2% 1% 0% n/a n/a n/a n/a
YM YM YM YM YM YM YM YM YM YM YM
6/30/95 LO 2.5% 2.5% 1.5% 1.5% n/a n/a n/a n/a n/a n/a
</TABLE>
A-43
<PAGE>
<TABLE>
<CAPTION>
ANNEX A
Counter Prepay Prepay Prepay Prepay Prepay Open Appraisal
Number Property Name Yr 12 Yr 13 Yr 14 Yr 15 Yr 16-25 Period Date
- ------ ------------- ----- ----- ----- ----- -------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
128 Central Avenue Self Storage n/a n/a n/a n/a n/a 12 7/13/95
129 Country Brook Apartments n/a n/a n/a n/a n/a 6 11/17/95
130 Atlantic Self Storage n/a n/a n/a n/a n/a 12 8/1/95
131 Delicare Convalescent Center n/a n/a n/a n/a n/a 6 1/12/95
132 Midwest Distribution Center n/a n/a n/a n/a n/a 6 10/17/95
133 Ranchos Stor-All n/a n/a n/a n/a n/a 12 4/12/95
134 Stor-All n/a n/a n/a n/a n/a 12 4/10/95
135 Morningstar Mini - Charlotte n/a n/a n/a n/a n/a 6 9/22/95
136 215 East Gunhill n/a n/a n/a n/a n/a 6 10/26/94
137 The Corners Apartments n/a n/a n/a n/a n/a 24 4/25/94
138 Palo Verde Mini Storage n/a n/a n/a n/a n/a 6 7/25/95
139 Stop & Stor n/a n/a n/a n/a n/a 12 3/8/95
140 Urbanwood Apartments n/a n/a n/a n/a n/a 6 6/30/94
141 Lexington Avenue Apartments n/a n/a n/a n/a n/a 6 7/20/94
142 485 Front Street n/a n/a n/a n/a n/a 6 8/19/94
143 Safeguard Self Storage #11 n/a n/a n/a n/a n/a 6 2/21/95
144 AZ Storage Inns - Apache Trails n/a n/a n/a n/a n/a 24 8/18/95
145 Longwood Retirement Village n/a n/a n/a n/a n/a 6 3/30/95
146 Euclid Convalescent Center n/a n/a n/a n/a n/a 6 7/11/95
147 Safeguard n/a n/a n/a n/a n/a 12 11/5/94
148 Homeland Grocery Store n/a n/a n/a n/a n/a 6 6/1/95
149 Conyers Self Storage n/a n/a n/a n/a n/a 12 8/8/95
150 Le Shoppe n/a n/a n/a n/a n/a 6 11/1/95
151 Briarwood Apartments YM YM YM YM 1% 6 6/15/94
152 Lakeway Apartments YM YM YM YM 1% 6 6/15/94
153 Regency Mini Storage 3% 1% 1% 0% n/a 12 6/17/95
154 Bellamar Apartments n/a n/a n/a n/a n/a 6 9/21/94
155 Normandy Mini Storage 3% 1% 1% 0% n/a 12 6/17/95
156 Stor-A-Lot Self Storage n/a n/a n/a n/a n/a 6 11/10/95
157 Perth Amboy Industrial Center n/a n/a n/a n/a n/a 6 11/1/95
158 Handy Mini Storage n/a n/a n/a n/a n/a 6 8/31/95
159 Morningstar Mini - Matthews n/a n/a n/a n/a n/a 6 9/22/95
160 A Storage #2 n/a n/a n/a n/a n/a 12 10/25/94
161 Ironwood Self Storage YM YM YM YM n/a 6 8/2/95
162 Carriage House Apartments n/a n/a n/a n/a n/a 6 3/25/95
</TABLE>
A-44
<PAGE>
<TABLE>
<CAPTION>
ANNEX A
Final Year Built/ Total Property Loan Per
Value LTV Renovated Units Size (SF) SF/UNIT UNIT/SF Occupancy %
----- --- --------- ----- --------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
3,280,000 74.4% 1991 677 88,212 3,605.61 Unit 84%
3,300,000 72.5% 1987 96 76,000 24,915.00 Unit 95%
4,000,000 59.5% 1985 769 87,650 3,096.15 Unit 88%
3,100,000 71.3% 1968 99 28,550 22,336.89 Bed 93%
4,000,000 54.2% 1964/1974/1980 -- 301,744 7.19 SF 100%
2,200,000 53.7% 1985-1992 468 59,841 2,524.14 Unit 72%
1,500,000 65.7% 1975-1990 409 67,350 2,408.06 Unit 91%
3,300,000 60.2% 1986 768 83,892 2,587.26 Unit 96%
2,760,000 71.6% 1932 94 134,820 21,014.36 Unit 96%
3,018,000 61.5% 1975 200 129,952 9,284.58 Unit 91%
2,390,000 72.7% 1983-1985 691 57,691 2,514.75 Unit 90%
4,180,000 40.3% 1991-1992 676 48,259 2,491.18 Unit 87%
2,280,000 73.2% 1976/1977 90 82,500 18,539.74 Unit 95%
2,200,000 74.3% 1972/1993 40 45,800 40,864.05 Unit 100%
2,800,000 57.7% 1959 79 73,320 20,431.82 Unit 92%
2,300,000 66.7% 1981-1986 471 62,184 3,259.01 Unit 92%
3,000,000 49.7% 1985 767 82,523 1,942.75 Unit 77%
3,000,000 49.6% 1960/1985 112 37,700 13,290.79 Bed 98%
2,760,000 53.8% 1967 99 23,026 14,991.61 Bed 90%
2,260,000 63.3% 1984 516 123,200 2,770.71 Unit 97%
1,850,000 69.7% 1980 -- 50,605 25.47 SF 100%
1,800,000 66.2% 1986 466 56,593 2,557.37 Unit 92%
1,585,000 74.6% 1995 -- 12,773 92.62 SF 100%
1,100,000 72.0% 1986 40 44,400 19,785.43 Unit 83%
500,000 70.8% 1968/1993 24 19,600 14,746.90 Unit 88%
2,150,000 51.2% 1982 788 85,646 1,396.15 Unit 82%
1,480,000 73.6% 1984 34 27,900 32,014.00 Unit 100%
1,680,000 64.3% 1989 465 55,170 2,323.70 Unit 97%
1,520,000 67.1% 1989 486 70,479 2,097.55 Unit 75%
1,800,000 54.6% 1945 -- 65,663 14.97 SF 100%
1,400,000 66.1% 1980-1982 420 44,158 2,202.70 Unit 92%
1,310,000 68.3% 1984-1989 274 37,450 3,263.35 Unit 95%
1,200,000 69.8% 1976 286 34,175 2,929.84 Unit 99%
930,000 63.2% 1982-1986 320 31,600 1,836.90 Unit 96%
1,000,000 53.6% 1964 50 39,850 10,720.85 Unit 98%
-----------
714,382,000
===========
</TABLE>
A-45
<PAGE>
<TABLE>
ANNEX A
<CAPTION>
MAX MIN
COUNTER LOAN INTEREST INTEREST
NUMBER PROPERTY NAME TYPE INDEX MARGIN RATE RATE
------- ------------- ---- ----- ------ -------- --------
<S> <C> <C> <C> <C> <C> <C>
128 Central Avenue Self Storage Fixed
129 Country Brook Apartments Fixed
130 Atlantic Self Storage Fixed
131 Delicare Convalescent Center Fixed
132 Midwest Distribution Center Fixed
133 Ranchos Stor-All Fixed
134 Stor-All Fixed
135 Morningstar Mini - Charlotte Fixed
136 215 East Gunhill Fixed
137 The Corners Apartments Fixed
138 Palo Verde Mini Storage Fixed
139 Stop & Stor Fixed
140 Urbanwood Apartments Fixed
141 Lexington Avenue Apartments Fixed
142 485 Front Street Fixed
143 Safeguard Self Storage #11 Fixed
144 AZ Storage Inns - Apache Trails Fixed
145 Longwood Retirement Village Fixed
146 Euclid Convalescent Center Fixed
147 Safeguard Floating 1 mo Libor 3.750% 13.880% 9.875%
148 Homeland Grocery Store Fixed
149 Conyers Self Storage Fixed
150 Le Shoppe Fixed
151 Briarwood Apartments Fixed
152 Lakeway Apartments Fixed
153 Regency Mini Storage Fixed
154 Bellamar Apartments Fixed
155 Normandy Mini Storage Fixed
156 Stor-A-Lot Self Storage Fixed
157 Perth Amboy Industrial Center Fixed
158 Handy Mini Storage Fixed
159 Morningstar Mini - Matthews Fixed
160 A Storage #2 Floating 1 mo Libor 3.750% 13.750% 9.750%
161 Ironwood Self Storage Fixed
162 Carriage House Apartments Fixed
</TABLE>
A-46
<PAGE>
<TABLE>
ANNEX A
<CAPTION>
LARGEST LARGEST LARGEST
TENANT TENANT TENANT SECOND
LARGEST TENANT LEASED SF % OF TOTAL SF LEASE EXPIRATION LARGEST TENANT
-------------- --------- ------------- ---------------- --------------
<S> <C> <C> <C> <C>
Midwest Distribution Center 301,744 100% 10/1/99 n/ap
Homeland Grocery Store 50,605 100% 7/1/05 n/ap
Paul Gerard, Inc. 12,773 100% 9/1/10 n/ap
Galaxy Air Freight 22,000 34% 12/1/95 Warehouse Management
</TABLE>
A-47
<PAGE>
<TABLE>
<CAPTION>
ANNEX A
SECOND LARGEST SECOND LARGEST SECOND LARGEST
TENANT TENANT TENANT
LOAN NUMBER PROPERTY NAME LEASED SF % OF TOTAL SF LEASE EXPIRATION 1994 NOI
- ----------- ------------- -------------- -------------- ---------------- --------
<S> <C> <C> <C> <C> <C>
128 Central Avenue Self Storage 349,965
129 Country Brook Apartments 273,740
130 Atlantic Self Storage 418,561
131 Delicare Convalescent Center 409,425
132 Midwest Distribution Center 393,278
133 Ranchos Stor-All 182,123
134 Stor-All 264,137
135 Morningstar Mini - Charlotte 308,335
136 215 East Gunhill 350,575
137 The Corners Apartments 380,236
138 Palo Verde Mini Storage 267,969
139 Stop & Stor 233,389
140 Urbanwood Apartments 262,064
141 Lexington Avenue Apartments 301,350
142 485 Front Street 283,976
143 Safeguard Self Storage #11 252,830
144 AZ Storage Inns - Apache Trails 235,401
145 Longwood Retirement Village 295,693
146 Euclid Convalescent Center 350,817
147 Safeguard 244,241
148 Homeland Grocery Store 182,791
149 Conyers Self Storage 186,747
150 Le Shoppe --
151 Briarwood Apartments 115,908
152 Lakeway Apartments 51,332
153 Regency Mini Storage 210,174
154 Bellamar Apartments 182,392
155 Normandy Mini Storage 188,882
156 Stor-A-Lot Self Storage 148,665
157 Perth Amboy Industrial Center 19,000 29% 3/1/98 160,482
158 Handy Mini Storage 117,239
159 Morningstar Mini - Matthews 141,585
160 A Storage #2 170,641
161 Ironwood Self Storage 132,564
162 Carriage House Apartments 107,253
----------
65,886,405
==========
</TABLE>
A-48
<PAGE>
<TABLE>
<CAPTION>
ANNEX A
1995 REVENUES 1995 EXPENSES 1995 NOI FOOTNOTE 1995 DSCR 1995 COMBINED DSCR ANNUALIZED
- ------------- ------------- -------- -------- --------- ------------------ ----------
<S> <C> <C> <C> <C> <C> <C>
557,627 180,576 377,051 1.55 Trailing 12
530,612 248,637 281,975 1.33 9 mos ann
574,340 162,722 411,618 1.67 Trailing 12
3,337,664 2,811,237 526,427 1.97 Trailing 12
546,287 64,056 482,231 1.85 Trailing 12
339,053 68,186 270,867 1.98 1.86 Trailing 12
263,080 65,258 197,822 1.71 1.86 Trailing 12
545,948 204,585 341,363 1.71 Trailing 12
604,959 260,553 344,406 (5) 1.55 7 mos ann
857,573 443,959 413,614 1.81 9 mos ann
351,795 69,593 282,202 1.57 Trailing 12
763,937 399,059 364,878 2.05 Trailing 12
540,143 273,611 266,532 1.45 9 mos ann
411,320 132,207 279,113 1.56 9 mos ann
664,722 395,741 268,981 1.41 10 mos ann
426,757 147,339 279,418 1.61 Trailing 12
418,666 144,199 274,467 1.73 Trailing 12
1,496,614 1,272,397 224,217 1.43 Trailing 12
3,122,405 2,812,221 310,184 1.90 Trailing 12
417,672 156,438 261,234 1.67 Trailing 12
190,344 19,009 171,335 1.34 Trailing 12
285,309 96,644 188,665 1.51 Trailing 12
234,955 62,871 172,084 1.22 3 mos ann
194,754 86,154 108,600 (5) 1.23 1.34 Trailing 12
106,694 43,196 63,498 (5) 1.60 1.34 Trailing 12
339,009 150,380 188,629 1.32 Trailing 12
230,292 71,557 158,735 1.36 3 mos ann
286,336 78,757 207,579 1.48 Trailing 12
233,389 86,680 146,709 1.42 Trailing 12
302,454 99,949 202,505 (6) 1.71 Trailing 12
228,724 95,580 133,144 1.39 Trailing 12
201,544 59,199 142,345 1.58 Trailing 12
241,842 68,368 173,474 1.91 Trailing 12
194,330 73,514 120,816 1.58 Trailing 12
278,359 159,206 119,153 1.96 Trailing 12
----------- ---------- ----------
126,587,487 54,486,607 72,100,880
=========== ========== ==========
</TABLE>
A-49
<PAGE>
<TABLE>
<CAPTION>
ANNEX A
COUNTER
NUMBER PROPERTY NAME END DATE U/WNOI MASTER SERVICING FEE
- ------ ------------- -------- ------ --------------------
<S> <C> <C> <C> <C>
128 Central Avenue Self Storage 12/31/95 345,048 0.270%
129 Country Brook Apartments 9/30/95 265,487 0.270%
130 Atlantic Self Storage 12/31/95 425,241 0.270%
131 Delicare Convalescent Center 9/30/95 417,632 0.270%
132 Midwest Distribution Center 11/30/95 433,643 0.270%
133 Ranchos Stor-All 9/30/95 229,915 0.270%
134 Stor-All 9/30/95 158,087 0.270%
135 Morningstar Mini - Charlotte 12/31/95 320,068 0.270%
136 215 East Gunhill 10/31/95 286,674 0.270%
137 The Corners Apartments 9/30/95 287,124 0.270%
138 Palo Verde Mini Storage 9/30/95 247,152 0.270%
139 Stop & Stor 12/31/95 348,948 0.270%
140 Urbanwood Apartments 9/30/95 228,088 0.270%
141 Lexington Avenue Apartments 9/30/95 230,479 0.270%
142 485 Front Street 10/31/95 238,238 0.270%
143 Safeguard Self Storage #11 12/31/95 244,944 0.270%
144 AZ Storage Inns - Apache Trails 12/31/95 305,014 0.270%
145 Longwood Retirement Village 12/31/95 387,644 0.270%
146 Euclid Convalescent Center 12/31/95 324,966 0.270%
147 Safeguard 9/30/95 245,289 0.270%
148 Homeland Grocery Store 12/31/95 175,514 0.270%
149 Conyers Self Storage 12/31/95 179,261 0.270%
150 Le Shoppe 12/31/95 184,097 0.270%
151 Briarwood Apartments 10/31/95 115,387 0.270%
152 Lakeway Apartments 10/31/95 51,640 0.270%
153 Regency Mini Storage 12/31/95 208,255 0.270%
154 Bellamar Apartments 12/31/95 146,428 0.270%
155 Normandy Mini Storage 12/31/95 173,661 0.270%
156 Stor-A-Lot Self Storage 9/30/95 129,881 0.270%
157 Perth Amboy Industrial Center 12/31/95 177,785 0.270%
158 Handy Mini Storage 12/31/95 136,089 0.270%
159 Morningstar Mini - Matthews 12/31/95 130,544 0.270%
160 A Storage #2 9/30/95 133,763 0.270%
161 Ironwood Self Storage 12/31/95 101,571 0.270%
162 Carriage House Apartments 9/23/95 82,068 0.270%
----------
69,557,924
==========
</TABLE>
A-50
<PAGE>
<TABLE>
<CAPTION>
1995 DEBT SERVICE COVERAGE RATIO
MORTGAGE POOL
Weighted
Aggregate % of Weighted Average Weighted
# of % of # of Cut-off Initial Average Cut-off Average
Range of Mortgage Mortgage Mortgaged Date Pool 1995 Date Mortgage
1995 DSCR Loans Loans Properties Balance Balance DSCR LTV Ratio Rate
--------- -------- -------- ---------- --------- ------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1.10x - 1.19x 1 0.6% 1 $ 4,176,487 0.9% 1.13x 68.5% 8.840%
1.20x - 1.29x 10 6.2% 10 $ 57,167,515 11.9% 1.26x 74.9% 8.600%
1.30x - 1.39x 31 19.1% 39 $112,081,058 23.2% 1.36x 68.8% 8.808%
1.40x - 1.49x 34 21.0% 40 $100,510,386 20.8% 1.45x 70.0% 8.717%
1.50x - 1.59x 31 19.1% 31 $ 78,673,073 16.3% 1.58x 67.4% 8.587%
1.60x - 1.69x 19 11.7% 19 $ 45,922,853 9.5% 1.63x 68.4% 8.823%
1.70x - 1.79x 14 8.6% 14 $ 31,245,127 6.5% 1.74x 64.6% 8.518%
1.80x - 1.89x 8 4.9% 8 $ 28,266,609 5.9% 1.84x 62.5% 8.346%
1.90x - 1.99x 8 4.9% 8 $ 12,097,722 2.5% 1.94x 63.3% 9.544%
2.00x - 2.99x 5 3.1% 5 $ 10,280,831 2.1% 2.20x 54.7% 8.268%
3.00x - 4.00x 1 0.6% 1 $ 1,936,150 0.4% 3.05x 57.4% 7.360%
--- ----- --- ------------ ----- ---- ---- -----
Totals/Wtd Avg 162 100.0% 176 $482,357,812 100.0% 1.52x 68.4% 8.685%
=== ===== === =========== ===== ==== ==== =====
1995 DEBT SERVICE COVERAGE RATIO
LOAN GROUP 1
Weighted
Aggregate % of Weighted Average Weighted
# of % of # of Cut-off Initial Average Cut-off Average
Range of Mortgage Mortgage Mortgaged Date Group 1 1995 Date Mortgage
1995 DSCR Loans Loans Properties Balance Balance DSCR LTV Ratio Rate
--------- -------- -------- ---------- --------- ------- -------- --------- --------
1.30x - 1.39x 1 12.5% 1 $ 1,015,808 3.4% 1.39x 65.5% 8.625%
1.40x - 1.49x 1 12.5% 1 $ 4,836,173 16.1% 1.42x 57.6% 8.000%
1.60x - 1.69x 1 12.5% 1 $ 3,152,094 10.5% 1.61x 70.1% 8.219%
1.70x - 1.79x 4 50.0% 4 $17,366,268 58.0% 1.75x 65.5% 8.235%
1.80x - 1.89x 1 12.5% 1 $ 3,596,608 12.0% 1.81x 67.3% 8.219%
-- ----- -- ----------- ----- ---- ---- -----
Totals/Wtd Avg 8 100.0% 8 $29,966,951 100.0% 1.67x 64.9% 8.207%
== ===== == =========== ===== ==== ==== =====
1995 DEBT SERVICE COVERAGE RATIO
LOAN GROUP 2
Weighted
Aggregate % of Weighted Average Weighted
# of % of # of Cut-off Initial Average Cut-off Average
Range of Mortgage Mortgage Mortgaged Date Group 2 1995 Date Mortgage
1995 DSCR Loans Loans Properties Balance Balance DSCR LTV Ratio Rate
--------- -------- -------- ---------- --------- ------- -------- --------- --------
1.10x - 1.19x 1 0.6% 1 $ 4,176,487 0.9% 1.13x 68.5% 8.840%
1.20x - 1.29x 10 6.5% 10 $ 57,167,515 12.6% 1.26x 74.9% 8.600%
1.30x - 1.39x 30 19.5% 38 $111,065,250 24.6% 1.36x 68.9% 8.809%
1.40x - 1.49x 33 21.4% 39 $ 95,674,213 21.1% 1.45x 70.6% 8.754%
1.50x - 1.59x 31 20.1% 31 $ 78,673,073 17.4% 1.56x 67.4% 8.587%
1.60x - 1.69x 18 11.7% 18 $ 42,770,759 9.5% 1.64x 68.2% 8.867%
1.70x - 1.79x 10 6.5% 10 $ 13,878,859 3.1% 1.73x 63.5% 8.871%
1.80x - 1.89x 7 4.5% 7 $ 24,670,002 5.5% 1.85x 61.8% 8.364%
1.90x - 1.99x 8 5.2% 8 $ 12,097,722 2.7% 1.94x 63.3% 9.544%
2.00x - 2.99x 5 3.2% 5 $ 10,280,831 2.3% 2.20x 54.7% 8.268%
3.00x - 4.00x 1 0.6% 1 $ 1,936,150 0.4% 3.05x 57.4% 7.360%
--- ----- --- ------------ ----- ---- ---- -----
Totals/Wtd Avg 154 100.0% 168 $452,390,861 100.0% 1.50x 68.6% 8.717%
=== ===== === ============ ===== ==== ==== =====
</TABLE>
A-51
<PAGE>
<TABLE>
<CAPTION>
CUT-OFF DATE LOAN-TO-VALUE RATIO
MORTGAGE POOL
Weighted
Aggregate % of Weighted Average Weighted
# of % of # of Cut-off Initial Average Cut-off Average
Range of Mortgage Mortgage Mortgaged Date Pool 1995 Date Mortgage
Cut-off Date LTV Loans Loans Properties Balance Balance DSCR LTV Rate
---------------- -------- -------- ---------- ------------ ------- -------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
25% - 49% 6 3.7% 6 $ 10,067,260 2.1% 1.83x 44.0% 9.111%
50% - 59% 21 13.0% 21 $ 50,599,052 10.5% 1.67x 56.2% 8.731%
60% - 69% 54 33.3% 54 $156,900,358 32.5% 1.58x 65.7% 8.786%
70% - 79% 81 50.0% 95 $264,791,142 54.9% 1.43x 73.2% 8.600%
--- ----- --- ------------ ------ ----- ----- ------
Totals/Wtd Avg 162 100.0% 176 $482,357,812 100.0% 1.52x 68.4% 8.685%
=== ===== === ============ ====== ===== ===== ======
CUT-OFF DATE LOAN-TO-VALUE RATIO
LOAN GROUP 1
Weighted
Aggregate % of Weighted Average Weighted
# of % of # of Cut-off Initial Average Cut-off Average
Range of Mortgage Mortgage Mortgaged Date Group 1 1995 Date Mortgage
Cut-off Date LTV Loans Loans Properties Balance Balance DSCR LTV Rate
---------------- -------- -------- ---------- ----------- ------- -------- ------ --------
50% - 59% 1 12.5% 1 $ 4,836,173 16.1% 1.42x 57.6% 8.000%
60% - 69% 4 50.0% 4 $18,909,481 63.1% 1.74x 64.8% 8.241%
70% - 79% 3 37.5% 3 $ 6,221,297 20.8% 1.68x 71.0% 8.264%
-- ----- -- ----------- ------ ----- ----- ------
Totals/Wtd Avg 8 100.0% 8 $29,966,951 100.0% 1.67x 64.9% 8.207%
== ===== == =========== ====== ===== ===== ======
CUT-OFF DATE LOAN-TO-VALUE RATIO
LOAN GROUP 2
Weighted
Aggregate % of Weighted Average Weighted
# of % of # of Cut-off Initial Average Cut-off Average
Range of Mortgage Mortgage Mortgaged Date Group 2 1995 Date Mortgage
Cut-off Date LTV Loans Loans Properties Balance Balance DSCR LTV Rate
---------------- -------- -------- ---------- ------------ ------- -------- -------- --------
25% - 49% 6 3.9% 6 $ 10,067,260 2.2% 1.83x 44.0% 9.111%
50% - 59% 20 13.0% 20 $ 45,762,879 10.1% 1.70x 56.1% 8.809%
60% - 69% 50 32.5% 50 $137,990,878 30.5% 1.56x 65.9% 8.861%
70% - 79% 78 50.6% 92 $258,569,844 57.2% 1.43x 73.3% 8.608%
--- ------ --- ------------ ------ ----- ----- ------
Totals/Wtd Avg 154 100.0% 168 $452,390,861 100.0% 1.50x 68.6% 8.717%
=== ====== === ============ ====== ===== ===== ======
</TABLE>
A-52
<PAGE>
<TABLE>
<CAPTION>
PROPERTY TYPE
MORTGAGE POOL
Weighted
Average Aggregate % of Weighted Average Weighted
# of % of # of Cut-off Cut-off Initial Average Cut-off Average
Mortgage Mortgage Mortgaged Date Date Pool 1995 Date Mortgage
Property Type Loans Loans Properties Balance Balance Balance DSCR LTV Rate
- ------------- ----- ----- ---------- ------- ------- ------- ---- --- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Industrial 3 1.9% 3 $2,074,580 $ 6,223,740 1.3% 1.71x 61.2% 8.663%
Mobil Home 1 0.6% 1 $4,991,089 $ 4,991,089 1.0% 1.59x 64.8% 8.630%
Multifamily 81 50.0% 91 $2,699,785 $218,682,582 45.3% 1.56x 69.4% 8.320%
Nursing 5 3.1% 5 $4,071,782 $ 20,358,912 4.2% 1.49x 65.0% 9.758%
Office 3 1.9% 3 $3,060,233 $ 9,180,700 1.9% 1.74x 62.9% 8.647%
Office/Retail 1 0.6% 1 $5,474,056 $ 5,474,056 1.1% 1.49x 57.6% 8.750%
Retail 33 20.4% 34 $4,495,634 $148,355,908 30.8% 1.39x 69.6% 8.714%
Selfstorage 35 21.6% 38 $1,974,024 $ 69,090,824 14.3% 1.59x 66.2% 9.468%
--- ----- --- ---------- ------------ ----- ---- ---- -----
Totals/Wtd Avg 162 100.0% 176 $2,977,517 $482,357,812 100.0% 1.52x 68.4% 8.685%
=== ===== === ========== ============ ===== ==== ==== =====
PROPERTY TYPE
LOAN GROUP 1
Weighted
Average Aggregate of Weighted Average Weighted
# of % of # of Cut-off Cut-off Initial Average Cut-off Average
Mortgage Mortgage Mortgaged Date Date Group 1 1995 Date Mortgage
Property Type Loans Loans Properties Balance Balance Balance DSCR LTV Rate
- ------------- ----- ----- ---------- ------- ------- ------- ---- --- ----
Multifamily 8 100.0% 8 $3,745,869 $29,966,951 100.0% 1.67x 64.9% 8.207%
-- ----- -- ---------- ----------- ----- ---- ---- -----
Totals/Wtd Avg 8 100.0% 8 $3,745,869 $29,966,951 100.0% 1.67x 64.9% 8.207%
== ===== == ========== =========== ===== ==== ==== =====
PROPERTY TYPE
LOAN GROUP 2
Weighted
Average Aggregate % of Weighted Average Weighted
# of % of # of Cut-off Cut-off Initial Average Cut-off Average
Mortgage Mortgage Mortgaged Date Date Group 2 1995 Date Mortgage
Property Type Loans Loans Properties Balance Balance Balance DSCR LTV Rate
- ------------- ----- ----- ---------- ------- ------- ------- ---- --- ----
Industrial 3 1.9% 3 $2,074,580 $ 6,223,740 1.4% 1.71x 61.2% 8.663%
Mobil Home 1 0.6% 1 $4,991,089 $ 4,991,089 1.1% 1.59x 64.8% 8.630%
Multifamily 73 47.4% 83 $2,585,146 $188,715,632 41.7% 1.54x 70.1% 8.338%
Nursing 5 3.2% 5 $4,071,782 $ 20,358,912 4.5% 1.49x 65.0% 9.758%
Office 3 1.9% 3 $3,060,233 $ 9,180,700 2.0% 1.74x 62.9% 8.647%
Office/Retail 1 0.6% 1 $5,474,056 $ 5,474,056 1.2% 1.49x 57.6% 8.750%
Retail 33 21.4% 34 $4,495,634 $148,355,908 32.8% 1.39x 69.6% 8.714%
Selfstorage 35 22.7% 38 $1,974,024 $ 69,090,824 15.3% 1.59x 66.2% 9.468%
--- ----- --- ---------- ------------ ----- ---- ---- -----
Totals/Wtd Avg 154 100.0% 168 $2,937,603 $452,390,861 100.0% 1.50x 68.6% 8.717%
=== ===== === ========== ============ ===== ==== ==== =====
</TABLE>
A-53
<PAGE>
<TABLE>
<CAPTION>
GEOGRAPHIC DISTRIBUTION
MORTGAGE POOL
Weighted
Aggregate % of Weighted Average Weighted
# of % of # of Cut-off Initial Average Cut-off Average
Mortgage Mortgage Mortgaged Date Pool 1995 Date Mortgage
States Loans Loans Properties Balance Balance DSCR LTV Rate
------ ----- ----- ---------- ------- ------- ---- --- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AK 5 3.1% 5 $ 7,422,940 1.5% 2.07x 63.3% 8.963%
AL 1 0.6% 1 $ 1,794,934 0.4% 1.34x 70.4% 8.740%
AZ 8 4.9% 8 $ 16,035,006 3.3% 1.61x 65.0% 8.804%
CA 18 11.1% 18 $ 64,445,470 13.4% 1.54x 67.5% 8.889%
CO 1 0.6% 1 $ 3,366,058 0.7% 1.60x 71.6% 9.125%
CT 2 1.2% 2 $ 3,063,033 0.6% 1.22x 74.3% 8.822%
DE 1 0.6% 1 $ 1,898,333 0.4% 1.49x 74.4% 9.100%
FL 15 9.3% 15 $ 40,406,774 8.4% 1.40x 67.4% 8.869%
GA 4 2.5% 4 $ 12,701,998 2.6% 1.31x 71.9% 8.884%
IA 1 0.6% 1 $ 1,668,577 0.3% 1.45x 73.2% 9.875%
IL 3 1.9% 11 $ 19,639,195 4.1% 1.39x 70.9% 7.848%
IN 1 0.6% 1 $ 2,792,172 0.6% 1.39x 74.0% 8.780%
LA 3 1.9% 3 $ 8,636,457 1.8% 1.47x 69.1% 9.527%
MA 9 5.6% 11 $ 18,135,384 3.8% 1.55x 70.4% 8.734%
MD 3 1.9% 3 $ 9,146,794 1.9% 1.55x 68.0% 8.347%
MI 1 0.6% 1 $ 3,034,000 0.6% 1.32x 67.4% 10.220%
MN 1 0.6% 1 $ 2,984,523 0.6% 1.64x 74.6% 8.200%
MO 1 0.6% 1 $ 6,186,080 1.3% 1.38x 72.8% 8.160%
MS 1 0.6% 1 $ 1,178,142 0.2% 1.54x 62.0% 9.766%
NC 13 8.0% 14 $ 34,293,855 7.1% 1.47x 70.1% 8.640%
NH 1 0.6% 1 $ 2,391,840 0.5% 1.33x 72.5% 8.000%
NJ 6 3.7% 6 $ 10,996,707 2.3% 1.50x 63.8% 8.988%
NV 3 1.9% 3 $ 13,145,686 2.7% 1.63x 68.9% 8.650%
NY 25 15.4% 25 $ 66,408,600 13.8% 1.65x 65.3% 8.457%
OH 4 2.5% 4 $ 12,507,575 2.6% 1.47x 69.8% 8.138%
OK 1 0.6% 1 $ 1,288,799 0.3% 1.34x 69.7% 8.750%
PA 5 3.1% 5 $ 29,471,999 6.1% 1.38x 71.3% 8.871%
SC 2 1.2% 2 $ 2,374,868 0.5% 1.60x 67.9% 9.050%
TN 6 3.7% 6 $ 13,951,971 2.9% 1.78x 65.6% 8.785%
TX 11 6.8% 11 $ 30,841,376 6.4% 1.53x 68.2% 8.829%
UT 1 0.6% 1 $ 7,844,670 1.6% 1.78x 64.6% 8.219%
VA 4 2.5% 7 $ 27,467,825 5.7% 1.32x 74.2% 8.504%
WA 1 0.6% 1 $ 4,836,173 1.0% 1.42x 57.6% 8.000%
--- ----- --- ------------ ----- ---- ---- ------
Totals/Wtd Avg 162 100.0% 176 $482,357,812 100.0% 1.52x 68.4% 8.685%
=== ===== === ============ ===== ==== ==== ======
GEOGRAPHIC DISTRIBUTION
LOAN GROUP 1
Weighted
Aggregate % of Weighted Average Weighted
# of % of # of Cut-off Initial Average Cut-off Average
Mortgage Mortgage Mortgaged Date Group 1 1995 Date Mortgage
States Loans Loans Properties Balance Balance DSCR LTV Rate
------ ----- ----- ---------- ------- ------- ---- --- ----
AZ 1 12.5% 1 $ 6,452,395 21.5% 1.70x 63.6% 8.219%
PA 2 25.0% 2 $ 2,291,028 7.6% 1.61x 68.7% 8.521%
TX 3 37.5% 3 $ 8,542,684 28.5% 1.72x 69.5% 8.219%
UT 1 12.5% 1 $ 7,844,670 26.2% 1.78x 64.6% 8.219%
WA 1 12.5% 1 $ 4,836,173 16.1% 1.42x 57.6% 8.000%
-- ----- -- ----------- ----- ---- ---- -----
Totals/Wtd Avg 8 100.0% 8 $29,966,951 100.0% 1.67x 64.9% 8.207%
== ===== == =========== ===== ==== ==== =====
</TABLE>
A-54
<PAGE>
<TABLE>
<CAPTION>
GEOGRAPHIC DISTRIBUTION
LOAN GROUP 2
Weighted
Aggregate % of Weighted Average Weighted
# of % of # of Cut-off Initial Average Cut-off Average
Mortgage Mortgage Mortgaged Date Group 2 1995 Date Mortgage
States Loans Loans Properties Balance Balance DSCR LTV Rate
------ ----- ----- ---------- ------- ------- ---- --- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AK 5 3.2% 5 $ 7,422,940 1.6% 2.07x 63.3% 8.963%
AL 1 0.6% 1 $ 1,794,934 0.4% 1.34x 70.4% 8.740%
AZ 7 4.5% 7 $ 9,582,610 2.1% 1.55x 66.0% 9.198%
CA 18 11.7% 18 $ 64,445,470 14.2% 1.54x 67.5% 8.889%
CO 1 0.6% 1 $ 3,366,058 0.7% 1.60x 71.6% 9.125%
CT 2 1.3% 2 $ 3,063,033 0.7% 1.22x 74.3% 8.822%
DE 1 0.6% 1 $ 1,898,333 0.4% 1.49x 74.4% 9.100%
FL 15 9.7% 15 $ 40,406,774 8.9% 1.40x 67.4% 8.869%
GA 4 2.6% 4 $ 12,701,998 2.8% 1.31x 71.9% 8.884%
IA 1 0.6% 1 $ 1,668,577 0.4% 1.45x 73.2% 9.875%
IL 3 1.9% 11 $ 19,639,195 4.3% 1.39x 70.9% 7.848%
IN 1 0.6% 1 $ 2,792,172 0.6% 1.39x 74.0% 8.780%
LA 3 1.9% 3 $ 8,636,457 1.9% 1.47x 69.1% 9.527%
MA 9 5.8% 11 $ 18,135,384 4.0% 1.55x 70.4% 8.734%
MD 3 1.9% 3 $ 9,146,794 2.0% 1.55x 68.0% 8.347%
MI 1 0.6% 1 $ 3,034,000 0.7% 1.32x 67.4% 10.220%
MN 1 0.6% 1 $ 2,984,523 0.7% 1.64x 74.6% 8.200%
MO 1 0.6% 1 $ 6,186,080 1.4% 1.38x 72.8% 8.160%
MS 1 0.6% 1 $ 1,178,142 0.3% 1.54x 62.0% 9.766%
NC 13 8.4% 14 $ 34,293,855 7.6% 1.47x 70.1% 8.640%
NH 1 0.6% 1 $ 2,391,840 0.5% 1.33x 72.5% 8.000%
NJ 6 3.9% 6 $ 10,996,707 2.4% 1.50x 63.8% 8.988%
NV 3 1.9% 3 $ 13,145,686 2.9% 1.63x 68.9% 8.650%
NY 25 16.2% 25 $ 66,408,600 14.7% 1.65x 65.3% 8.457%
OH 4 2.6% 4 $ 12,507,575 2.8% 1.47x 69.8% 8.138%
OK 1 0.6% 1 $ 1,288,799 0.3% 1.34x 69.7% 8.750%
PA 3 1.9% 3 $ 27,180,970 6.0% 1.36x 71.5% 8.901%
SC 2 1.3% 2 $ 2,374,868 0.5% 1.60x 67.9% 9.050%
TN 6 3.9% 6 $ 13,951,971 3.1% 1.78x 65.6% 8.785%
TX 8 5.2% 8 $ 22,298,691 4.9% 1.46x 67.7% 9.063%
VA 4 2.6% 7 $ 27,467,825 6.1% 1.32x 74.2% 8.504%
--- ----- --- ------------ ----- ---- ---- ------
Totals/Wtd Avg 154 100.0% 168 $452,390,861 100.0% 1.50x 68.6% 8.717%
=== ===== === ============ ===== ==== ==== ======
</TABLE>
A-55
<PAGE>
<TABLE>
<CAPTION>
MORTGAGE RATE
MORTGAGE POOL
Weighted
Aggregate % of Weighted Average Weighted
# of % of # of Cut-off Initial Average Cut-off Average
Range of Mortgage Mortgage Mortgaged Date Pool 1995 Date Mortgage
Mortgage Rates Loans Loans Properties Balance Balance DSCR LTV Rate
-------------- ----- ----- ---------- ------- ------- ---- --- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
7.00% - 7.49% 2 1.2% 2 $ 9,108,881 1.9% 1.77x 68.7% 7.439%
7.50% - 7.99% 12 7.4% 12 $ 47,665,247 9.9% 1.68x 66.9% 7.828%
8.00% - 8.49% 51 31.5% 59 $165,467,331 34.3% 1.51x 69.3% 8.171%
8.50% - 8.99% 31 19.1% 32 $ 87,450,791 18.1% 1.45x 69.1% 8.741%
9.00% - 9.49% 31 19.1% 33 $109,835,338 22.8% 1.45x 69.5% 9.163%
9.50% - 9.99% 20 12.3% 23 $ 32,273,265 6.7% 1.62x 61.9% 9.714%
10.00% - 10.49% 14 8.6% 14 $ 28,942,845 6.0% 1.51x 66.6% 10.174%
10.50% - 10.99% 1 0.6% 1 $ 1,614,114 0.3% 1.41x 57.6% 10.875%
--- ----- --- ------------ ----- ---- ---- ------
Totals/Wtd Avg 162 100.0% 176 $482,357,812 100.0% 1.52x 68.4% 8.685%
=== ===== === ============ ===== ==== ==== ======
MORTGAGE RATE
LOAN GROUP 1
Weighted
Aggregate % of Weighted Average Weighted
# of % of # of Cut-off Initial Average Cut-off Average
Range of Mortgage Mortgage Mortgaged Date Group 1 1995 Date Mortgage
Mortgage Rates Loans Loans Properties Balance Balance DSCR LTV Rate
-------------- ----- ----- ---------- ------- ------- ---- --- ----
8.00% - 8.49% 7 87.5% 7 $ 28,951,143 96.6% 1.68x 64.9% 8.192%
8.50% - 8.99% 1 12.5% 1 $ 1,015,808 3.4% 1.39x 65.5% 8.625%
-- ----- -- ------------ ----- ---- ---- -----
Totals/Wtd Avg 8 100.0% 8 $ 29,966,951 100.0% 1.67x 64.9% 8.207%
== ===== == ============ ===== ==== ==== =====
MORTGAGE RATE
LOAN GROUP 2
Weighted
Aggregate % of Weighted Average Weighted
# of % of # of Cut-off Initial Average Cut-off Average
Range of Mortgage Mortgage Mortgaged Date Group 2 1995 Date Mortgage
Mortgage Rates Loans Loans Properties Balance Balance DSCR LTV Rate
-------------- ----- ----- ---------- ------- ------- ---- --- ----
7.00% - 7.49% 2 1.3% 2 $ 9,108,881 2.0% 1.77x 68.7% 7.439%
7.50% - 7.99% 12 7.8% 12 $ 47,665,247 10.5% 1.68x 66.9% 7.828%
8.00% - 8.49% 44 28.6% 52 $136,516,188 30.2% 1.48x 70.3% 8.167%
8.50% - 8.99% 30 19.5% 31 $ 86,434,983 19.1% 1.45x 69.1% 8.743%
9.00% - 9.49% 31 20.1% 33 $109,835,338 24.3% 1.45x 69.5% 9.163%
9.50% - 9.99% 20 13.0% 23 $ 32,273,265 7.1% 1.62x 61.9% 9.714%
10.00% - 10.49% 14 9.1% 14 $ 28,942,845 6.4% 1.51x 66.6% 10.174%
10.50% - 10.99% 1 0.6% 1 $ 1,614,114 0.4% 1.41x 57.6% 10.875%
--- ----- --- ------------ ----- ---- ---- ------
Totals/Wtd Avg 154 100.0% 168 $452,390,861 100.0% 1.50x 68.6% 8.717%
=== ===== === ============ ===== ==== ==== ======
</TABLE>
A-56
<PAGE>
<TABLE>
<CAPTION>
CUT-OFF DATE BALANCE
MORTGAGE POOL
Weighted
Aggregate % of Weighted Average Weighted
Range of # of % of # of Cut-off Initial Average Cut-off Average
Cut-off Date Mortgage Mortgage Mortgaged Date Pool 1995 Date Mortgage
Balances (000's) Loans Loans Properties Balance Balance DSCR LTV Ratio Rate
- ----------------- ------- -------- ---------- ------------ -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$0 - $999 29 17.9% 29 $ 20,212,178 4.2% 1.63x 67.7% 8.817%
$1,000 - $2,499 71 43.8% 71 $115,006,213 23.8% 1.60x 66.1% 8.999%
$2,500 - $4,999 35 21.6% 40 $125,684,259 26.1% 1.54x 68.3% 8.573%
$5,000 - $9,999 21 13.0% 22 $142,254,481 29.5% 1.48x 69.1% 8.605%
$10,000 - $18,990 6 3.7% 14 $ 79,200,680 16.4% 1.38x 70.6% 8.519%
--- ------ --- ------------ ------ ----- ----- ------
Totals/Wtd Avg 162 100.0% 176 $482,357,812 100.0% 1.52x 68.4% 8.685%
=== ====== === ============ ====== ===== ===== ======
CUT-OFF DATE BALANCE
LOAN GROUP 1
Weighted
Aggregate % of Weighted Average Weighted
Range of # of % of # of Cut-off Initial Average Cut-off Average
Cut-off Date Mortgage Mortgage Mortgaged Date Group 1 1995 Date Mortgage
Balances (000's) Loans Loans Properties Balance Balance DSCR LTV Ratio Rate
- ----------------- ------- -------- ---------- ------------ -------- -------- --------- --------
$1,000 - $2,499 3 37.5% 3 $ 4,085,011 13.6% 1.66x 70.4% 8.388%
$2,500 - $4,999 3 37.5% 3 $ 11,584,874 38.7% 1.59x 64.0% 8.128%
$5,000 - $9,999 2 25.0% 2 $ 14,297,065 47.7% 1.74x 64.1% 8.219%
--- ------ --- ------------ ------ ----- ----- ------
Totals/Wtd Avg 8 100.0% 8 $ 29,966,951 100.0% 1.67x 64.9% 8.207%
=== ====== === ============ ====== ===== ===== ======
CUT-OFF DATE BALANCE
LOAN GROUP 2
Weighted
Aggregate % of Weighted Average Weighted
Range of # of % of # of Cut-off Initial Average Cut-off Average
Cut-off Date Mortgage Mortgage Mortgaged Date Group 2 1995 Date Mortgage
Balances (000's) Loans Loans Properties Balance Balance DSCR LTV Ratio Rate
- ----------------- ------- -------- ---------- ------------ -------- -------- --------- --------
$0 - $999 29 18.8% 29 $ 20,212,178 4.5% 1.63x 67.7% 8.817%
$1,000 - $2,499 68 44.2% 68 $110,921,201 24.5% 1.60x 66.0% 9.021%
$2,500 - $4,999 32 20.8% 37 $114,099,385 25.2% 1.54x 68.8% 8.618%
$5,000 - $9,999 19 12.3% 20 $127,957,417 28.3% 1.45x 69.7% 8.648%
$10,000 - $18,990 6 3.9% 14 $ 79,200,680 17.5% 1.38x 70.6% 8.519%
--- ------ --- ------------ ------ ----- ----- ------
Totals/Wtd Avg 154 100.0% 168 $452,390,861 100.0% 1.50x 68.6% 8.717%
=== ====== === ============ ====== ===== ===== ======
</TABLE>
A-57
<PAGE>
<TABLE>
<CAPTION>
YEAR OF MORTGAGE ORIGINATION
MORTGAGE POOL
Weighted
Aggregate % of Weighted Average Weighted
# of % of # of Cut-off Initial Average Cut-off Average
Year of Mortgage Mortgage Mortgaged Date Pool 1995 Date Mortgage
Orgination Loans Loans Properties Balance Balance DSCR LTV Rate
- ----------------- ------- -------- ---------- ------------ ------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1992 1 0.6% 1 $ 12,423,775 2.6% 1.37x 70.6% 9.000%
1993 2 1.2% 2 $ 3,899,517 0.8% 1.36x 45.6% 9.242%
1994 18 11.1% 18 $ 43,612,342 9.0% 1.61x 65.5% 8.829%
1995 94 58.0% 100 $232,977,761 48.3% 1.54x 68.2% 8.789%
1996 47 29.0% 55 $189,444,417 39.3% 1.47x 69.6% 8.492%
--- ------ --- ------------ ------ ----- ----- ------
Totals/Wtd Avg 162 100.0% 176 $482,357,812 100.0% 1.52x 68.4% 8.685%
=== ====== === ============ ====== ===== ===== ======
YEAR OF MORTGAGE ORIGINATION
LOAN GROUP 1
Weighted
Aggregate % of Weighted Average Weighted
# of % of # of Cut-off Initial Average Cut-off Average
Year of Mortgage Mortgage Mortgaged Date Group 1 1995 Date Mortgage
Orgination Loans Loans Properties Balance Balance DSCR LTV Rate
- ----------------- ------- -------- ---------- ------------ ------- -------- --------- --------
1994 8 100.0% 8 $29,966,951 100.0% 1.67x 64.9% 8.207%
-- ------ -- ------------ ------ ----- ----- ------
Totals/Wtd Avg 8 100.0% 8 $29,966,951 100.0% 1.67x 64.9% 8.207%
== ====== == ============ ====== ===== ===== ======
YEAR OF MORTGAGE ORIGINATION
LOAN GROUP 2
Weighted
Aggregate % of Weighted Average Weighted
# of % of # of Cut-off Initial Average Cut-off Average
Year of Mortgage Mortgage Mortgaged Date Group 2 1995 Date Mortgage
Orgination Loans Loans Properties Balance Balance DSCR LTV Rate
- ----------------- ------- -------- ---------- ------------ ------- -------- --------- --------
1992 1 0.6% 1 $ 12,423,775 2.7% 1.37x 70.6% 9.000%
1993 2 1.3% 2 $ 3,899,517 0.9% 1.36x 45.6% 9.242%
1994 10 6.5% 10 $ 13,645,392 3.0% 1.48x 66.6% 10.195%
1995 94 61.0% 100 $232,977,761 51.5% 1.54x 68.2% 8.789%
1996 47 30.5% 55 $189,444,417 41.9% 1.47x 69.6% 8.492%
--- ------ --- ------------ ------ ----- ----- -------
Totals/Wtd Avg 154 100.0% 168 $452,390,861 100.0% 1.50x 68.6% 8.717%
=== ====== === ============ ====== ===== ===== =======
</TABLE>
A-58
<PAGE>
<TABLE>
<CAPTION>
ORIGINAL TERM TO MATURITY
MORTGAGE POOL
Weighted
Range of Aggregate % of Weighted Average Weighted
Original # of % of # of Cut-off Initial Average Cut-off Average
Terms to Mortgage Mortgage Mortgaged Date Pool 1995 Date Mortgage
Maturity (Mos.) Loans Loans Properties Balance Balance DSCR LTV Rate
- ----------------- ------- -------- ---------- ------------ ------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
72 - 83 3 1.9% 3 $ 4,790,523 1.0% 1.75x 61.2% 9.240%
84 - 95 29 17.9% 32 $ 81,781,432 17.0% 1.50x 67.5% 8.908%
96 - 119 3 1.9% 3 $ 2,640,348 0.5% 1.36x 67.0% 9.042%
120 - 179 114 70.4% 124 $362,993,725 75.3% 1.50x 68.8% 8.647%
180 - 239 11 6.8% 12 $ 29,006,441 6.0% 1.69x 67.0% 8.351%
240 - 300 2 1.2% 2 $ 1,145,343 0.2% 1.34x 71.6% 10.125%
--- ------ --- ------------ ------ ----- ----- -------
Totals/Wtd Avg 162 100.0% 176 $482,357,812 100.0% 1.52x 68.4% 8.685%
=== ====== === ============ ====== ===== ===== =======
ORIGINAL TERM TO MATURITY
LOAN GROUP 1
Weighted
Range of Aggregate % of Weighted Average Weighted
Original # of % of # of Cut-off Initial Average Cut-off Average
Terms to Mortgage Mortgage Mortgaged Date Group 1 1995 Date Mortgage
Maturity (Mos.) Loans Loans Properties Balance Balance DSCR LTV Rate
- ----------------- ------- -------- ---------- ------------ ------- -------- --------- --------
84 - 95 3 37.5% 3 $ 7,127,201 23.8% 1.48x 61.2% 8.167%
120 - 179 5 62.5% 5 $22,839,749 76.2% 1.73x 66.1% 8.219%
-- ------ -- ------------ ------ ----- ----- ------
Totals/Wtd Avg 8 100.0% 8 $29,966,951 100.0% 1.67x 64.9% 8.207%
== ====== == ============ ====== ===== ===== ======
ORIGINAL TERM TO MATURITY
LOAN GROUP 2
Weighted
Range of Aggregate % of Weighted Average Weighted
Original # of % of # of Cut-off Initial Average Cut-off Average
Terms to Mortgage Mortgage Mortgaged Date Group 2 1995 Date Mortgage
Maturity (Mos.) Loans Loans Properties Balance Balance DSCR LTV Rate
- ----------------- ------- -------- ---------- ------------ ------- -------- --------- --------
72 - 83 3 1.9% 3 $ 4,790,523 1.1% 1.75x 61.2% 9.240%
84 - 95 26 16.9% 29 $ 74,654,231 16.5% 1.50x 68.1% 8.979%
96 - 119 3 1.9% 3 $ 2,640,348 0.6% 1.36x 67.0% 9.042%
120 - 179 109 70.8% 119 $340,153,976 75.2% 1.49x 69.0% 8.676%
180 - 239 11 7.1% 12 $ 29,006,441 6.4% 1.69x 67.0% 8.351%
240 - 300 2 1.3% 2 $ 1,145,343 0.3% 1.34x 71.6% 10.125%
--- ------ --- ------------ ------ ----- ----- -------
Totals/Wtd Avg 154 100.0% 168 $452,390,861 100.0% 1.50x 68.6% 8.717%
=== ====== === ============ ====== ===== ===== =======
</TABLE>
A-59
<PAGE>
<TABLE>
<CAPTION>
ORIGINAL AMORTIZATION TERM
MORTGAGE POOL
Weighted
Range of Aggregate % of Weighted Average Weighted
Original # of % of # of Cut-off Initial Average Cut-off Average
Amortization Mortgage Mortgage Mortgaged Date Pool 1995 Date Mortgage
Terms (Mos.) Loans Loans Properties Balance Balance DSCR LTV Rate
- ----------------- ------- -------- ---------- ------------ ------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0 - 180 2 1.2% 2 $ 3,899,517 0.8% 1.36x 45.6% 9.242%
180 - 239 10 6.2% 10 $ 15,778,275 3.3% 1.59x 62.7% 8.617%
240 - 299 10 6.2% 10 $ 27,748,302 5.8% 1.61x 62.0% 8.870%
300 - 311 86 53.1% 92 $215,958,043 44.8% 1.58x 67.2% 8.920%
348 - 360 54 33.3% 62 $218,973,676 45.4% 1.44x 71.1% 8.425%
--- ------ --- ------------ ------ ----- ----- -------
Totals/Wtd Avg 162 100.0% 176 $482,357,812 100.0% 1.52x 68.4% 8.685%
=== ====== === ============ ====== ===== ===== =======
ORIGINAL AMORTIZATION TERM
LOAN GROUP 1
Weighted
Range of Aggregate % of Weighted Average Weighted
Original # of % of # of Cut-off Initial Average Cut-off Average
Amortization Mortgage Mortgage Mortgaged Date Group 1 1995 Date Mortgage
Terms (Mos.) Loans Loans Properties Balance Balance DSCR LTV Rate
- ----------------- ------- -------- ---------- ----------- ------- -------- --------- --------
300 - 311 2 25.0% 2 $ 6,111,393 20.4% 1.50x 60.4% 8.091%
348 - 360 6 75.0% 6 $23,855,557 79.6% 1.72x 66.1% 8.236%
-- ------ -- ----------- ------ ----- ----- -------
Totals/Wtd Avg 8 100.0% 8 $29,966,951 100.0% 1.67x 64.9% 8.207%
== ====== == =========== ====== ===== ===== =======
ORIGINAL AMORTIZATION TERM
LOAN GROUP 2
Weighted
Range of Aggregate % of Weighted Average Weighted
Original # of % of # of Cut-off Initial Average Cut-off Average
Amortization Mortgage Mortgage Mortgaged Date Group 2 1995 Date Mortgage
Terms (Mos.) Loans Loans Properties Balance Balance DSCR LTV Rate
- ----------------- ------- -------- ---------- ------------ ------- -------- --------- --------
0 - 180 2 1.3% 2 $ 3,899,517 0.9% 1.36x 45.6% 9.242%
180 - 239 10 6.5% 10 $ 15,778,275 3.5% 1.59x 62.7% 8.617%
240 - 299 10 6.5% 10 $ 27,748,302 6.1% 1.61x 62.0% 8.870%
300 - 311 84 54.5% 90 $209,846,649 46.4% 1.58x 67.4% 8.944%
348 - 360 48 31.2% 56 $195,118,119 43.1% 1.40x 71.8% 8.448%
--- ------ --- ------------ ------ ----- ----- -------
Totals/Wtd Avg 154 100.0% 168 $452,390,861 100.0% 1.50x 68.6% 8.717%
=== ====== === ============ ====== ===== ===== =======
</TABLE>
A-60
<PAGE>
<TABLE>
<CAPTION>
YEAR OF MORTGAGE MATURITY
MORTGAGE POOL
Weighted
Aggregate % of Weighted Average Weighted
# of % of # of Cut-off Initial Average Cut-off Average
Year of Mortgage Mortgage Mortgaged Date Pool 1995 Date Mortgage
Maturity Loans Loans Properties Balance Balance DSCR LTV Rate
-------- ----- ----- ---------- ------- ------- ---- --- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
2000 2 1.2% 2 $ 14,092,351 2.9% 1.38x 70.9% 9.104%
2001 6 3.7% 6 $ 11,154,721 2.3% 1.57x 62.8% 8.896%
2002 15 9.3% 18 $ 41,275,116 8.6% 1.56x 65.3% 9.221%
2003 9 5.6% 9 $ 20,049,767 4.2% 1.49x 70.7% 8.214%
2004 6 3.7% 6 $ 24,453,863 5.1% 1.71x 65.6% 8.394%
2005 41 25.3% 43 $100,385,678 20.8% 1.52x 66.6% 9.050%
2006 70 43.2% 78 $240,794,532 49.9% 1.47x 70.0% 8.509%
2010 3 1.9% 4 $ 15,509,367 3.2% 1.53x 70.8% 8.454%
2011 8 4.9% 8 $ 13,497,074 2.8% 1.87x 62.7% 8.234%
2019 2 1.2% 2 $ 1,145,343 0.2% 1.34x 71.6% 10.125%
--- ----- --- ------------ ----- ---- ---- ------
Totals/Wtd Avg 162 100.0% 176 $482,357,812 100.0% 1.52x 68.4% 8.685%
=== ===== === ============ ===== ==== ==== ======
YEAR OF MORTGAGE MATURITY
LOAN GROUP 1
Weighted
Aggregate % of Weighted Average Weighted
# of % of # of Cut-off Initial Average Cut-off Average
Year of Mortgage Mortgage Mortgaged Date Group 1 1995 Date Mortgage
Maturity Loans Loans Properties Balance Balance DSCR LTV Rate
-------- ----- ----- ---------- ------- ------- ---- --- ----
2001 3 37.5% 3 $ 7,127,201 23.8% 1.48x 61.2% 8.167%
2004 5 62.5% 5 $22,839,749 76.2% 1.73x 66.1% 8.219%
-- ----- -- ----------- ----- ---- ---- -----
Totals/Wtd Avg 8 100.0% 8 $29,966,951 100.0% 1.67x 64.9% 8.207%
== ===== == =========== ===== ==== ==== =====
YEAR OF MORTGAGE MATURITY
LOAN GROUP 2
Weighted
Aggregate % of Weighted Average Weighted
# of % of # of Cut-off Initial Average Cut-off Average
Year of Mortgage Mortgage Mortgaged Date Group 2 1995 Date Mortgage
Maturity Loans Loans Properties Balance Balance DSCR LTV Rate
-------- ----- ----- ---------- ------- ------- ---- --- ----
2000 2 1.3% 2 $ 14,092,351 3.1% 1.38x 70.9% 9.104%
2001 3 1.9% 3 $ 4,027,520 0.9% 1.73x 65.7% 10.185%
2002 15 9.7% 18 $ 41,275,116 9.1% 1.56x 65.3% 9.221%
2003 9 5.8% 9 $ 20,049,767 4.4% 1.49x 70.7% 8.214%
2004 1 0.6% 1 $ 1,614,114 0.4% 1.41x 57.6% 10.875%
2005 41 26.6% 43 $100,385,678 22.2% 1.52x 66.6% 9.050%
2006 70 45.5% 78 $240,794,532 53.2% 1.47x 70.0% 8.509%
2010 3 1.9% 4 $ 15,509,367 3.4% 1.53x 70.8% 8.454%
2011 8 5.2% 8 $ 13,497,074 3.0% 1.87x 62.7% 8.234%
2019 2 1.3% 2 $ 1,145,343 0.3% 1.34x 71.6% 10.125%
--- ----- --- ------------ ----- ---- ---- ------
Totals/Wtd Avg 154 100.0% 168 $452,390,861 100.0% 1.50x 68.6% 8.717%
=== ===== === ============ ===== ==== ==== ======
</TABLE>
A-61
<PAGE>
<TABLE>
<CAPTION>
REMAINING TERM TO MATURITY
MORTGAGE POOL
Weighted
Range of Aggregate % of Weighted Average Weighted
Remaining # of % of # of Cut-off Initial Average Cut-off Average
Terms to Mortgage Mortgage Mortgaged Date Pool 1995 Date Mortgage
Maturity (Mos.) Loans Loans Properties Balance Balance DSCR LTV Rate
- --------------- ----- ----- ---------- ------- ------- ---- --- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
24 - 59 3 1.9% 3 $ 14,628,394 3.0% 1.40x 70.3% 9.146%
60 - 83 29 17.9% 32 $ 71,943,561 14.9% 1.54x 66.5% 8.882%
84 - 119 117 72.2% 127 $365,634,073 75.8% 1.50x 68.8% 8.650%
120 - 179 11 6.8% 12 $ 29,006,441 6.0% 1.69x 67.0% 8.351%
240 - 299 2 1.2% 2 $ 1,145,343 0.2% 1.34x 71.6% 10.125%
--- ----- --- ------------ ----- ---- ---- -----
Totals/Wtd Avg 162 100.0% 176 $482,357,812 100.0% 1.52x 68.4% 8.685%
=== ===== === ============ ===== ==== ==== =====
REMAINING TERM TO MATURITY
LOAN GROUP 1
Weighted
Range of Aggregate % of Weighted Average Weighted
Remaining # of % of # of Cut-off Initial Average Cut-off Average
Terms to Mortgage Mortgage Mortgaged Date Group 1 1995 Date Mortgage
Maturity (Mos.) Loans Loans Properties Balance Balance DSCR LTV Rate
- --------------- ----- ----- ---------- ------- ------- ---- --- ----
60 - 83 3 37.5% 3 $ 7,127,201 23.8% 1.48x 61.2% 8.167%
84 - 119 5 62.5% 5 $22,839,749 76.2% 1.73x 66.1% 8.219%
-- ----- -- ----------- ----- ---- ---- -----
Totals/Wtd Avg 8 100.0% 8 $29,966,951 100.0% 1.67x 64.9% 8.207%
== ===== == =========== ===== ==== ==== =====
REMAINING TERM TO MATURITY
LOAN GROUP 2
Weighted
Range of Aggregate % of Weighted Average Weighted
Remaining # of % of # of Cut-off Initial Average Cut-off Average
Terms to Mortgage Mortgage Mortgaged Date Group 2 1995 Date Mortgage
Maturity (Mos.) Loans Loans Properties Balance Balance DSCR LTV Rate
- --------------- ----- ----- ---------- ------- ------- ---- --- ----
24 - 59 3 1.9% 3 $ 14,628,394 3.2% 1.40x 70.3% 9.146%
60 - 83 26 16.9% 29 $ 64,816,360 14.3% 1.55x 67.1% 8.961%
84 - 119 112 72.7% 122 $342,794,324 75.8% 1.49x 69.0% 8.679%
120 - 179 11 7.1% 12 $ 29,006,441 6.4% 1.69x 67.0% 8.351%
240 - 299 2 1.3% 2 $ 1,145,343 0.3% 1.34x 71.6% 10.125%
--- ----- --- ------------ ----- ---- ---- -----
Totals/Wtd Avg 154 100.0% 168 $452,390,861 100.0% 1.50x 68.6% 8.717%
=== ===== === ============ ===== ==== ==== =====
</TABLE>
A-62
<PAGE>
ANNEX B
Statement Date:
Payment Date:
Prior Payment:
Record Date:
Mortgage Capital Funding, Inc.
GMAC Commercial Mortgage Corporation as Master Servicer
Hanford Healy Asset Management Company as Special Servicer
State Street Bank and Trust Company as Trustee
Multifamily/Commercial Mortgage Pass-Through Certificates
Series 1996-MC1
<TABLE>
<CAPTION>
====================================================================================================================================
REPORTING PACKAGE CONTENTS
Number of Page Description
-------------- -----------
<S> <C> <C>
Table of Contents 1 Summary of Reports
REMIC Certificate Report 1 Payment information by Certificate Class
Other Related Information 2 Miscellaneous reporting items as per pooling agreement
Delinquency / prepayment / Rate History Report 1 Rolling 15 months of summarized information
Delinquency Detail Report 1 Detail listing of all loans not paid through the most recent payment date
Mortgage Loan Stratification Report 1 Update of selected stratification tables for all outstanding loans and
loan groups
Loan Level Detail Listing 1 Current status of all loans assigned to the trust on the Closing Date
Total pages included in this package 8
--
Appendix A - Special Servicing Summary 1 Current summary information regarding loans now specially services
Appendix B - Special Servicing Detail 1 Current detail information regarding loans now specially serviced
Appendix C - Loan Modification Detail 1 Cumulative list of all loan modications executed since the Closing Date
Appendix D - Realized Loss Detail 1 Cumulative list of all loans experiencing realized losses since the
Closing Date
====================================================================================================================================
</TABLE>
B-1
<PAGE>
Statement Date:
Payment Date:
Prior Payment:
Record Date:
Mortgage Capital Funding, Inc.
GMAC Commercial Mortgage Corporation as Master Servicer
Hanford Healy Asset Management Company as Special Servicer
State Street Bank and Trust Company as Trustee
Multifamily/Commercial Mortgage Pass-Through Certificates
Series 1996-MC1
<TABLE>
<CAPTION>
========================================================================================================================
Original Opening Principal Principal Negative Closing Interest Interest Pass-Through
Class Face Value Balance Payment Adj. or Loss Amortization Balance Payment Adjustment Rate
CUSIP Per $1,000 Per $1,000 Per $1,000 Per $1,000 Per $1,000 Per $1,000 Per $1,000 Per $1,000 Next Rate
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
---------------------------
Total P&I Payment
---------------------------
Total P&L Payment
B-2
<PAGE>
Statement Date:
Payment Date:
Prior Payment:
Record Date:
Mortgage Capital Funding, Inc.
GMAC Commercial Mortgage Corporation as Master Servicer
Hanford Healy Asset Management Company as Special Servicer
State Street Bank and Trust Company as Trustee
Multifamily/Commercial Mortgage Pass-Through Certificates
Series 1996-MC1
================================================================================
OTHER RELATED INFORMATION
Servicing Fees
Servicing Fees per $1,000
Special Servicing Fees per $1,000
Interest Shortfall
Aggregate Advance Reconciliation (Table)
================================================================================
B-3
<PAGE>
Statement Date:
Payment Date:
Prior Payment:
Record Date:
Mortgage Capital Funding, Inc.
GMAC Commercial Mortgage Corporation as Master Servicer
Hanford Healy Asset Management Company as Special Servicer
State Street Bank and Trust Company as Trustee
Multifamily/Commercial Mortgage Pass-Through Certificates
Series 1996-MC1
================================================================================
OTHER RELATED INFORMATION
ASER Loan and Aggregate Information
SER Information:
Controlling Class / Operating Advisor Information
Class Determination Balance, etc.
================================================================================
B-4
<PAGE>
Statement Date:
Payment Date:
Prior Payment:
Record Date:
Mortgage Capital Funding, Inc.
GMAC Commercial Mortgage Corporation as Master Servicer
Hanford Healy Asset Management Company as Special Servicer
State Street Bank and Trust Company as Trustee
Multifamily/Commercial Mortgage Pass-Through Certificates
Series 1996-MC1
<TABLE>
Delinquency / Prepayment / Rate History Reporting
<CAPTION>
====================================================================================================================================
Delinq 1 Delinq 2 Delinq 3+ Foreclosure/ Net Weighted
Month Months Months Bankruptcy REO Modifications Prepayments Avg.
Determination --------------------------------------------------------------------------------------------------------------------
Date # Balance # Balance # Balance # Balance # Balance # Balance # Balance Coupon Remit
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: Foreclosure and REO Totals are Included in the Appropriate Delinquency
Aging Category
B-5
<PAGE>
Statement Date:
Payment Date:
Prior Payment:
Record Date:
Mortgage Capital Funding, Inc.
GMAC Commercial Mortgage Corporation as Master Servicer
Hanford Healy Asset Management Company as Special Servicer
State Street Bank and Trust Company as Trustee
Multifamily/Commercial Mortgage Pass-Through Certificates
Series 1996-MC1
<TABLE>
Delinquency Loan Detail
<CAPTION>
====================================================================================================================================
Outstanding Special
Offering Current Outstanding Property Advance Loan Servicer
Circular Loan Paid Thru P&I P&I Protection Description Status Transfer Foreclosure Bankruptcy REO
Control # Group Period Date Advance Advances* Advances (1) (2) Date Date Date Date
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
TOTALS: 0.00 0.00 0.00
====================================================================================================================================
(1) Advance 0. P&I Advance - Late Payment but less than (2) Loan Status 1. Specially Serviced 6. DPO
Description one month delinquent 2. Foreclosure 7. Foreclosure Sale
1. P&I Advance - Loan delinquent 1 month 3. Bankruptcy 8. Bankruptcy Sale
2. P&I Advance - Loan delinquent 2 months 4. REO 9. REO Disposition
3. P&I Advance - Loan delinquent 3 months or more 5. Prepay in Full 10. Modification / Workout
4. P&I Advance - Loan in Grace Period
5. P&I Advance - Assumed Scheduled Payment
====================================================================================================================================
</TABLE>
* Outstanding P&I Advances Include the current period P&I Advance
B-6
<PAGE>
Statement Date:
Payment Date:
Prior Payment:
Record Date:
Mortgage Capital Funding, Inc.
GMAC Commercial Mortgage Corporation as Master Servicer
Hanford Healy Asset Management Company as Special Servicer
State Street Bank and Trust Company as Trustee
Multifamily/Commercial Mortgage Pass-Through Certificates
Series 1996-MC1
================================================================================
MORTGAGE LOAN STRATIFICATION REPORT
Updated Collateral Tables as they appear in Prospectus
================================================================================
B-7
<PAGE>
Statement Date:
Payment Date:
Prior Payment:
Record Date:
Mortgage Capital Funding, Inc.
GMAC Commercial Mortgage Corporation as Master Servicer
Hanford Healy Asset Management Company as Special Servicer
State Street Bank and Trust Company as Trustee
Multifamily/Commercial Mortgage Pass-Through Certificates
Series 1996-MC1
<TABLE>
Loan Level Detail
<CAPTION>
====================================================================================================================================
Special
Offering Servicer Neg Beginning Scheduled Paid Prepayment
Circular GRP Property Transfer Maturity Am Scheduled Principal Prepayments/ Prepayment Through Premium Loan
Control # ID Type Date State Date (Y/N) Balance Note Rate Payment Liquidations Date Date Amount Status(*)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
====================================================================================================================================
(*) Legend 1) Specially Serviced 4) REO 7) Foreclosure Sale 10) Modification / Workout
2) Foreclosure 5) Prepay in Full 8) Bankruptcy Sale
3) Bankruptcy 6) DPO 9) REO Disposition
====================================================================================================================================
</TABLE>
B-8
<PAGE>
Statement Date:
Payment Date:
Prior Payment:
Record Date:
Mortgage Capital Funding, Inc.
GMAC Commercial Mortgage Corporation as Master Servicer
Hanford Healy Asset Management Company as Special Servicer
State Street Bank and Trust Company as Trustee
Multifamily/Commercial Mortgage Pass-Through Certificates
Series 1996-MC1
<TABLE>
Specially Serviced Loan Summary
<CAPTION>
====================================================================================================================================
<S> <C>
Number of Loans as of the Closing Date 0
Principal Balance as of the Closing Date 0.00
Current Number of Loans 0
Current Outstanding Principal Balance 0.00
Current Number of Specially Serviced Loans 0
Current Outstanding Principal Balance of Specially Serviced Loans 0.00
Percent of Specially Serviced Loans (per Current Number of Loans) 0.0000%
Percent of Specially Serviced Loans (per Current Outstanding Principal Balance) 0.0000%
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Current Current
Principal Principal
Current Balance as a % Balance as a %
Number of Initial Principal Principal of Specially of Total Pool
Specially Serviced Loan Status Loans Balance Balance Serviced Loans Balance
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1) Request for waiver of Prepayment Penalty
2) Payment Default
3) Request for Loan Modification or Workout
4) Loans with Borrower Bankruptcy
5) Loans in Process of Foreclosure
6) Loans now REO Property
7) Loans Paid Off
8) Loans Returned to Master Servicer
- -----------------------------------------------------------------------------------------------------------------------------
Total 0.00 0.00 0.00
====================================================================================================================================
</TABLE>
B-9
<PAGE>
Statement Date:
Payment Date:
Prior Payment:
Record Date:
Mortgage Capital Funding, Inc.
GMAC Commercial Mortgage Corporation as Master Servicer
Hanford Healy Asset Management Company as Special Servicer
State Street Bank and Trust Company as Trustee
Multifamily/Commercial Mortgage Pass-Through Certificates
Series 1996-MC1
<TABLE>
Specially Serviced Loan Detail
<CAPTION>
====================================================================================================================================
Special Debt Specially
Offering Servicer Sched Sched Net Service Serviced
Circular Transfer Principal Interest Maturity Property Operating Coverage Status
Control # Date Balance Rate Date Type State Income NOI Date Ratio Code*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
====================================================================================================================================
*Legend: 1) Request for waiver of Prepayment Penalty 4) Loans with Borrower Bankruptcy 7) Loan Paid Off
2) Payment Default 5) Loans in Process of Foreclosure 8) Loans Returned to Master Servicer
3) Request for Loan Modification or Workout 6) Loans now REO Property
====================================================================================================================================
</TABLE>
B-10
<PAGE>
Statement Date:
Payment Date:
Prior Payment:
Record Date:
Mortgage Capital Funding, Inc.
GMAC Commercial Mortgage Corporation as Master Servicer
Hanford Healy Asset Management Company as Special Servicer
State Street Bank and Trust Company as Trustee
Multifamily/Commercial Mortgage Pass-Through Certificates
Series 1996-MC1
Modified Loan Detail
================================================================================
Offering
Modification Circular Modification Modification
Date Control # Date Description
- --------------------------------------------------------------------------------
================================================================================
B-11
<PAGE>
Statement Date:
Payment Date:
Prior Payment:
Record Date:
Mortgage Capital Funding, Inc.
GMAC Commercial Mortgage Corporation as Master Servicer
Hanford Healy Asset Management Company as Special Servicer
State Street Bank and Trust Company as Trustee
Multifamily/Commercial Mortgage Pass-Through Certificates
Series 1996-MC1
<TABLE>
Realized Loss Detail
<CAPTION>
====================================================================================================================================
Gross Net
Appraisal Proceeds Proceeds
Offering Value/ Sched as a % of Aggregate Net as a % of Current
Distribution Circular Appraisal Brokers Principal Gross Sched Liquidation Liquidation Sched Realized
Date Control # Date Estimate Balance Proceeds Principal Expenses* Proceeds Balance Loss
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Current Total 0 0 0 0 0 0
Cumulative 0 0 0 0 0 0
====================================================================================================================================
</TABLE>
* Aggregate liquidation expenses also include outstanding P&I advances and
unpaid servicing fees, unpaid special servicing fees, unpaid trustee fees,
etc.
B-12
<PAGE>
PROSPECTUS
- ----------
MORTGAGE CAPITAL FUNDING, INC.
(Sponsor)
Commercial and Multifamily
Mortgage Pass-Through Certificates
(Issuable in Series)
The mortgage pass-through certificates (the "Offered Certificates") offered
hereby and by the supplements hereto (each, a "Prospectus Supplement") will be
offered from time to time in series. The Offered Certificates of each series,
together with any other mortgage pass-through certificates of such series, are
collectively referred to herein as the "Certificates".
Each series of Certificates will represent in the aggregate the entire
beneficial ownership interest in a trust fund (with respect to any series, the
"Trust Fund") consisting primarily of a segregated pool (a "Mortgage Asset
Pool") of one or more of various types of multifamily or commercial mortgage
loans (the "Mortgage Loans"), mortgage-backed securities ("MBS") that evidence
interests in, or that are secured by pledges of, one or more of various types of
multifamily or commercial mortgage loans, or a combination of Mortgage Loans and
MBS (collectively, "Mortgage Assets"). If so specified in the related Prospectus
Supplement, the Trust Fund for a series of Certificates may include letters of
credit, insurance policies, guarantees, reserve funds or other types of credit
support, or any combination thereof (with respect to any series, collectively,
"Credit Support"), and currency or interest rate exchange agreements and other
financial assets, or any combination thereof (with respect to any series,
collectively, "Cash Flow Agreements"). See "Description of the Trust Funds",
"Description of the Certificates" and "Description of Credit Support".
As described in the related Prospectus Supplement, the Certificates of each
series, including the Offered Certificates of such series, may consist of one or
more classes of Certificates that: (i) provide for the accrual of interest
thereon based on a fixed, variable or adjustable interest rate; (ii) are senior
or subordinate to one or more other classes of Certificates in entitlement to
certain distributions on the Certificates; (iii) are entitled to distributions
of principal, with disproportionately small, nominal or no distributions of
interest; (iv) are entitled to distributions of interest, with
disproportionately small, nominal or no distributions of principal; (v) provide
for distributions of interest thereon or principal thereof that commence only
following the occurrence of certain events, such as the retirement of one or
more other classes of Certificates of such series; (vi) provide for
distributions of principal thereof to be made, from time to time or for
designated periods, at a rate that is faster (and, in some cases, substantially
faster) or slower (and, in some cases, substantially slower) than the rate at
which payments or other collections of principal are received on the Mortgage
Assets in the related Trust Fund; or (vii) provide for distributions of
principal thereof to be made, subject to available funds, based on a specified
principal payment schedule or other methodology. See "Description of the
Certificates".
(cover continued on next page)
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------
The Offered Certificates of any series may be offered through one or more
different methods, including offerings through underwriters, as more fully
described under "Method of Distribution" and in the related Prospectus
Supplement.
Prior to issuance there will have been no market for the Certificates of
any series and there can be no assurance that a secondary market for any Offered
Certificates will develop or that, if it does develop, it will continue. See
"Risk Factors".
This Prospectus may not be used to consummate sales of the Offered
Certificates of any series unless accompanied by the Prospectus Supplement for
such series.
JUNE 18, 1996
<PAGE>
(cover continued)
Distributions in respect of the Certificates of each series will be made on
a monthly, quarterly, semi-annual, annual or other periodic basis as specified
in the related Prospectus Supplement. Unless otherwise specified in the related
Prospectus Supplement, such distributions will be made only from the assets of
the related Trust Fund.
No series of Certificates will represent an obligation of or interest in
the Sponsor or any of its affiliates, except to the limited extent described
herein and in the related Prospectus Supplement. Neither the Certificates of any
series nor the assets in any Trust Fund will be guaranteed or insured by any
governmental agency or instrumentality or by any other person, unless otherwise
provided in the related Prospectus Supplement. The assets in each Trust Fund
will be held in trust for the benefit of the holders of the related series of
Certificates (the "Certificateholders") pursuant to a Pooling Agreement, as more
fully described herein.
The yield on each class of Certificates of a series will be affected by,
among other things, the rate of payment of principal (including prepayments) on
the Mortgage Assets in the related Trust Fund and the timing of receipt of such
payments as described herein and in the related Prospectus Supplement. See
"Yield and Maturity Considerations". A Trust Fund may be subject to early
termination under the circumstances described herein and in the related
Prospectus Supplement. See "Description of the Certificates".
Prospective investors should review the information appearing under the
caption "Risk Factors" herein and such information as may be set forth under the
caption "Risk Factors" in the related Prospectus Supplement before purchasing
any Offered Certificate.
If so provided in the related Prospectus Supplement, one or more elections
may be made to treat the related Trust Fund or a designated portion thereof as a
"real estate mortgage investment conduit" (a "REMIC") for federal income tax
purposes. See "Material Federal Income Tax Consequences" herein.
2
<PAGE>
PROSPECTUS SUPPLEMENT
As more particularly described herein, the Prospectus Supplement relating
to each series of Offered Certificates will, among other things, set forth, as
and to the extent appropriate: (i) a description of the class or classes of such
Offered Certificates, including the payment provisions with respect to each such
class, the aggregate principal amount of each such class (the "Certificate
Balance"), the rate at which interest accrues from time to time, if at all, with
respect to each such class (the "Pass-Through Rate") or the method of
determining such rate, and whether interest with respect to each such class will
accrue from time to time on its aggregate principal amount or a specified
notional amount, if at all; (ii) information with respect to any other classes
of Certificates of the same series; (iii) the respective dates on which
distributions are to be made; (iv) information as to the assets constituting the
related Trust Fund, including the general characteristics of the assets included
therein, including the Mortgage Assets and any Credit Support and Cash Flow
Agreements (with respect to the Certificates of any series, the "Trust Assets");
(v) the circumstances, if any, under which the related Trust Fund may be subject
to early termination; (vi) additional information with respect to the method of
distribution of such Offered Certificates; (vii) the initial percentage
ownership interest in the related Trust Fund to be evidenced by each class of
Certificates of such series; (viii) information concerning the trustee (as to
any series, the "Trustee") of the related Trust Fund; (ix) if the related Trust
Fund includes Mortgage Loans, information concerning the master servicer (as to
any series, the "Master Servicer") and, if different than the Master Servicer,
the special servicer (as to any series, the "Special Servicer") of such Mortgage
Loans and the circumstances under which all or a portion, as specified, of the
servicing of a Mortgage Loan would transfer from the Master Servicer to the
Special Servicer; (x) whether one or more REMIC elections will be made, the
designation of the "regular interests" and "residual interests" in each REMIC to
be created and the identity of the person (the "REMIC Administrator")
responsible for the various tax-related administrative duties in respect of each
REMIC to be created; (xi) information as to the nature and extent of
subordination of any class of Certificates of such series, including a class of
Offered Certificates; and (xii) whether such Offered Certificates will be
initially issued in definitive or book-entry form.
AVAILABLE INFORMATION
The Sponsor has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (of which this Prospectus forms a part)
under the Securities Act of 1933, as amended, with respect to the Offered
Certificates. This Prospectus and the Prospectus Supplement relating to each
series of Offered Certificates contain summaries of the material terms of the
documents referred to herein and therein, but do not contain all of the
information set forth in the Registration Statement pursuant to the rules and
regulations of the Commission. For further information, reference is made to
such Registration Statement and the exhibits thereto. Such Registration
Statement and exhibits can be inspected and copied at prescribed rates at the
public reference facilities maintained by the Commission at its Public Reference
Section, 450 Fifth Street, N.W., Washington, D.C. 20549, and at its Regional
Offices located as follows: Chicago Regional Office, 500 West Madison, 14th
Floor, Chicago, Illinois 60661; and New York Regional Office, Seven World Trade
Center, New York, New York 10048.
No person has been authorized to give any information or to make any
representation not contained in this Prospectus and any related Prospectus
Supplement and, if given or made, such information or representation must not be
relied upon. This Prospectus and any related Prospectus Supplement do not
constitute an offer to sell or a solicitation of an offer to buy any securities
other than the Offered Certificates, or an offer of the Offered Certificates to
any person in any state or other jurisdiction in which such offer would be
unlawful. The delivery of this Prospectus at any time does not imply that
information herein is correct as of any time subsequent to its date; however, if
any material change occurs while this Prospectus is required by law to be
delivered, this Prospectus will be amended or supplemented accordingly.
The related Master Servicer or Trustee will be required to mail to holders
of the Offered Certificates of each series periodic unaudited reports concerning
the related Trust Fund. If beneficial interests in a class or series of Offered
Certificates are being held and transferred in book-entry format through the
facilities of The Depository Trust Company ("DTC") as described herein, then
unless otherwise provided in the related Prospectus Supplement, such reports
will be sent on behalf of the related Trust Fund to a nominee of DTC as the
registered holder of the Offered Certificates. Conveyance of notices and other
communications by DTC to its participating organizations, and directly or
indirectly through such participating organizations to the beneficial owners of
the applicable Offered Certificates,
3
<PAGE>
will be governed by arrangements among them, subject to any statutory or
regulatory requirements as may be in effect from time to time. See "Description
of the Certificates -- Reports to Certificateholders" and " -- Book-Entry
Registration and Definitive Certificates" and "Description of the Pooling
Agreements -- Evidence as to Compliance."
The Sponsor will file or cause to be filed with the Commission such
periodic reports with respect to each Trust Fund as are required under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations of the Commission thereunder. The Sponsor intends to make a
written request to the staff of the Commission that the staff either (i) issue
an order pursuant to Section 12(h) of the Exchange Act exempting the Sponsor
from certain reporting requirements under the Exchange Act with respect to each
Trust Fund or (ii) state that the staff will not recommend that the Commission
take enforcement action if the Sponsor fulfills its reporting obligations as
described in its written request. If such request is granted, the Sponsor will
file or cause to be filed with the Commission as to each Trust Fund the periodic
unaudited reports to holders of the Offered Certificates referenced in the
preceding paragraph; however, because of the nature of the Trust Funds, it is
unlikely that any significant additional information will be filed. In addition,
because of the limited number of Certificateholders expected for each series,
the Sponsor anticipates that a significant portion of such reporting
requirements will be permanently suspended following the first fiscal year for
the related Trust Fund.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
There are incorporated herein by reference all documents and reports filed
or caused to be filed by the Sponsor with respect to a Trust Fund pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to the termination
of an offering of Offered Certificates evidencing interests therein. The Sponsor
will provide or cause to be provided without charge to each person to whom this
Prospectus is delivered in connection with the offering of one or more classes
of Offered Certificates, upon written or oral request of such person, a copy of
any or all documents or reports incorporated herein by reference, in each case
to the extent such documents or reports relate to one or more of such classes of
such Offered Certificates, other than the exhibits to such documents (unless
such exhibits are specifically incorporated by reference in such documents).
Requests to the Sponsor should be directed in writing to its principal executive
offices specified herein under "Mortgage Capital Funding, Inc." The Sponsor has
determined that its financial statements will not be material to the offering of
any Offered Certificates.
4
<PAGE>
TABLE OF CONTENTS
Page
----
PROSPECTUS SUPPLEMENT ..................................................... 3
AVAILABLE INFORMATION ..................................................... 3
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE ......................... 4
SUMMARY OF PROSPECTUS ..................................................... 9
RISK FACTORS .............................................................. 17
Certain Factors Adversely Affecting Resale of the Offered
Certificates ......................................................... 17
Limited Assets for Payment of Certificates ............................. 17
Prepayments; Average Life of Certificates; Yields ...................... 18
Limited Nature of Credit Ratings ....................................... 19
Certain Risks Associated with Mortgage Loans Secured by
Commercial and Multifamily Properties ................................ 20
Balloon Payments; Borrower Default ..................................... 20
Credit Support Limitations ............................................. 21
Leases and Rents as Security for a Mortgage Loan ....................... 21
Environmental Risks .................................................... 21
Special Hazard Losses .................................................. 22
ERISA Considerations ................................................... 22
Certain Federal Tax Considerations Regarding REMIC Residual
Certificates ......................................................... 22
Book-Entry Registration ................................................ 22
Conflicts of Interest Involving Parties to a Pooling Agreement ......... 23
Delinquent and Non-Performing Mortgage Loans ........................... 23
DESCRIPTION OF THE TRUST FUNDS ............................................ 23
General ................................................................ 23
Mortgage Loans ......................................................... 24
General ................................................................ 24
Default and Loss Considerations with Respect to the
Mortgage Loans .................................................... 24
Payment Provisions of the Mortgage Loans ............................ 25
Mortgage Loan Information in Prospectus Supplements ................. 26
MBS .................................................................... 26
Certificate Accounts ................................................... 27
Credit Support ......................................................... 27
Cash Flow Agreements ................................................... 27
YIELD AND MATURITY CONSIDERATIONS ......................................... 27
General ................................................................ 27
Pass-Through Rate ...................................................... 28
Payment Delays ......................................................... 28
Certain Shortfalls in Collections of Interest .......................... 28
Yield and Prepayment Considerations .................................... 28
Weighted Average Life and Maturity ..................................... 30
Controlled Amortization Classes and Companion Classes .................. 30
Other Factors Affecting Yield, Weighted Average Life
and Maturity ......................................................... 31
Balloon Payments; Extensions of Maturity ............................ 31
Negative Amortization ............................................... 31
Foreclosures and Payment Plans ...................................... 32
Losses and Shortfalls on the Mortgage Assets ........................ 32
Additional Certificate Amortization ................................. 32
Optional Early Termination .......................................... 33
MORTGAGE CAPITAL FUNDING, INC ............................................. 33
USE OF PROCEEDS ........................................................... 33
5
<PAGE>
Page
----
DESCRIPTION OF THE CERTIFICATES ........................................... 34
General ................................................................ 34
Distributions .......................................................... 34
Distributions of Interest on the Certificates .......................... 35
Distributions of Principal of the Certificates ......................... 35
Distributions on the Certificates in Respect of Prepayment
Premiums or in Respect of Equity Participations ...................... 36
Allocation of Losses and Shortfalls .................................... 36
Advances in Respect of Delinquencies ................................... 36
Reports to Certificateholders .......................................... 37
Voting Rights .......................................................... 38
Termination ............................................................ 38
Book-Entry Registration and Definitive Certificates .................... 39
DESCRIPTION OF THE POOLING AGREEMENTS ..................................... 40
General ................................................................ 40
Assignment of Mortgage Loans; Repurchases .............................. 41
Representations and Warranties; Repurchases ............................ 42
Collection and Other Servicing Procedures .............................. 42
Sub-Servicers .......................................................... 43
Certificate Account .................................................... 43
General ............................................................. 43
Deposits ............................................................ 44
Withdrawals ......................................................... 45
Escrow Accounts ........................................................ 46
Modifications, Waivers and Amendments of Mortgage Loans ................ 46
Realization Upon Defaulted Mortgage Loans .............................. 47
Hazard Insurance Policies .............................................. 48
Due-on-Sale and Due-on-Encumbrance Provisions .......................... 49
Servicing Compensation and Payment of Expenses ......................... 49
Evidence as to Compliance .............................................. 50
Certain Matters Regarding the Master Servicer, the Special
Servicer, the REMIC Administrator and the Sponsor .................... 50
Events of Default ...................................................... 51
Rights Upon Event of Default ........................................... 52
Amendment .............................................................. 53
List of Certificateholders ............................................. 53
The Trustee ............................................................ 53
Duties of the Trustee .................................................. 53
Certain Matters Regarding the Trustee .................................. 54
Resignation and Removal of the Trustee ................................. 54
DESCRIPTION OF CREDIT SUPPORT ............................................. 54
General ................................................................ 54
Subordinate Certificates ............................................... 55
Cross-Support Provisions ............................................... 55
Insurance or Guarantees with Respect to Mortgage Loans ................. 55
Letter of Credit ....................................................... 55
Certificate Insurance and Surety Bonds ................................. 55
Reserve Funds .......................................................... 56
Credit Support with Respect to MBS ..................................... 56
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS ................................... 56
General ................................................................ 56
Types of Mortgage Instruments .......................................... 57
6
<PAGE>
Page
----
Leases and Rents .......................................................... 57
Personalty ............................................................. 57
Foreclosure ............................................................ 58
General ............................................................. 58
Judicial Foreclosure ................................................ 58
Equitable Limitations on Enforceability of Certain Provision ........ 58
Non-Judicial Foreclosure/Power of Sale .............................. 58
Public Sale ......................................................... 59
Rights of Redemption ................................................ 59
Anti-Deficiency Legislation ......................................... 60
Leasehold Risks ..................................................... 60
Bankruptcy Laws ........................................................ 60
Environmental Risks .................................................... 61
General ............................................................. 61
Superlien Laws ...................................................... 61
CERCLA .............................................................. 61
Certain Other Federal and State Laws ................................ 62
Additional Considerations ........................................... 62
Environmental Site Assessments ...................................... 63
Due-on-Sale and Due-on-Encumbrance ..................................... 63
Subordinate Financing .................................................. 63
Default Interest and Limitations on Prepayments ........................ 63
Applicability of Usury Laws ............................................ 64
Soldiers' and Sailors' Civil Relief Act of 1940 ........................ 64
Americans with Disabilities Act ........................................ 64
Forfeitures in Drug and RICO Proceedings ............................... 64
MATERIAL FEDERAL INCOME TAX CONSEQUENCES .................................. 65
General ................................................................ 65
REMICs ................................................................. 66
Classification of REMICs ............................................ 66
Characterization of Investments in REMIC Certificates ............... 66
Tiered REMIC Structures ............................................. 66
Taxation of Owners of REMIC Regular Certificates ....................... 67
General ............................................................. 67
Original Issue Discount ............................................. 67
Market Discount ..................................................... 69
Premium ............................................................. 70
Realized Losses ..................................................... 70
Taxation of Owners of REMIC Residual Certificates ................... 71
General ............................................................. 71
Taxable Income of the REMIC ......................................... 71
Basis Rules, Net Losses and Distributions ........................... 72
Excess Inclusions ................................................... 73
Noneconomic REMIC Residual Certificates ............................. 74
Mark-to-Market Rules ................................................ 75
Possible Pass-Through of Miscellaneous Itemized Deductions .......... 75
Sales of REMIC Certificates ......................................... 76
Prohibited Transactions Tax and Other Taxes ......................... 77
Tax and Restrictions on Transfers of REMIC Residual
Certificates to Certain Organizations ............................. 77
7
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Page
----
Termination ......................................................... 78
Reporting and Other Administrative Matters .......................... 78
Backup Withholding with Respect to REMIC Certificates ............... 79
Foreign Investors in REMIC Certificates ............................. 79
Grantor Trust Funds .................................................... 79
Classification of Grantor Trust Funds ............................... 79
Characterization of Investments in Grantor Trust Certificates ....... 80
Grantor Trust Fractional Interest Certificates ...................... 80
Stripped Interest Certificates ...................................... 80
Taxation of Owners of Grantor Trust Fractional Interest
Certificates ...................................................... 80
General ............................................................. 80
If Stripped Bond Rules Apply ........................................ 81
If Stripped Bond Rules Do Not Apply ................................. 82
Market Discount ..................................................... 84
Premium ............................................................. 85
Taxation of Owners of Stripped Interest Certificates ................ 85
Possible Application of Proposed Contingent Payment Rules ........... 86
Sales of Grantor Trust Certificates ................................. 86
Grantor Trust Reporting ............................................. 87
Backup Withholding .................................................. 87
Foreign Investors ................................................... 87
STATE AND OTHER TAX CONSEQUENCES .......................................... 87
ERISA CONSIDERATIONS ...................................................... 87
General ................................................................ 87
Plan Asset Regulations ................................................. 88
LEGAL INVESTMENT .......................................................... 88
METHOD OF DISTRIBUTION .................................................... 90
FINANCIAL INFORMATION ..................................................... 91
RATING .................................................................... 91
INDEX OF PRINCIPAL DEFINITIONS ............................................ 92
8
<PAGE>
SUMMARY OF PROSPECTUS
The following summary of certain pertinent information is qualified in its
entirety by reference to the more detailed information appearing elsewhere in
this Prospectus and by reference to the information with respect to each series
of Certificates contained in the Prospectus Supplement to be prepared and
delivered in connection with the offering of Offered Certificates of such
series. An Index of Principal Definitions is included at the end of this
Prospectus.
TITLE OF CERTIFICATES .............. Commercial and Multifamily Mortgage
Pass-Through Certificates, issuable in
series (the "Certificates").
SPONSOR ............................ Mortgage Capital Funding, Inc., a
wholly-owned subsidiary of Citicorp
Banking Corporation, which in turn is a
wholly-owned subsidiary of Citicorp. See
"The Sponsor".
MASTER SERVICER .................... The master servicer (the "Master
Servicer"), if any, for a series of
Certificates will be named in the
related Prospectus Supplement. Any
Master Servicer may be an affiliate of
the Sponsor. See "Description of the
Pooling Agreements--Collection and Other
Servicing Procedures".
SPECIAL SERVICER ................... The special servicer (the "Special
Servicer"), if any, for a series of
Certificates will be named in the
related Prospectus Supplement. Any
Special Servicer may be an affiliate of
the Sponsor and/or may also be acting as
Master Servicer. See "Description of the
Pooling Agreements--Collection and Other
Servicing Procedures".
TRUSTEE ............................ The trustee (the "Trustee") for each
series of Certificates will be named in
the related Prospectus Supplement. See
"Description of the Pooling
Agreements--The Trustee".
REMIC ADMINISTRATOR ................ The person (the "REMIC Administrator")
responsible for the various tax-related
administrative duties for a series of
Certificates as to which one or more
REMIC elections have been made, will be
named in the related Prospectus
Supplement. Any REMIC Administrator may
be an affiliate of the Sponsor and/or
may also be acting as Master Servicer,
Special Servicer or Trustee. See
"Material Federal Income Tax
Consequences--REMICs--Reporting and
Other Administrative Matters".
THE TRUST ASSETS ................... Each series of Certificates will
represent in the aggregate the entire
beneficial ownership interest in a Trust
Fund consisting primarily of:
A. MORTGAGE ASSETS ............... The Mortgage Assets with respect to each
series of Certificates will, in general,
consist of a pool of mortgage loans
(collectively, the "Mortgage Loans")
secured by liens on, or security
interests in, without limitation, (i)
residential properties consisting of
five or more rental or
cooperatively-owned dwelling units (the
"Multifamily Properties") or (ii)
office buildings, shopping centers,
retail stores, hotels or motels, nursing
homes, hospitals or other health-care
related facilities, mobile home parks,
warehouse facilities, mini-warehouse
facilities or self-storage facilities,
industrial plants, mixed use or various
other types of income-producing
properties or unimproved land (the
"Commercial Properties"). If so
specified in the related Prospectus
Supplement, a Trust Fund may include
Mortgage Loans secured by liens on real
estate projects under construction. The
Mortgage Loans will not be guaranteed or
insured by the Sponsor or any of its
affiliates or, unless otherwise provided
in the related Prospectus Supplement, by
any governmental agency or
instrumentality or by any other person.
If so specified in the related
Prospectus Supple-
9
<PAGE>
ment, some Mortgage
Loans may be delinquent or
non-performing as of the date the
related Trust Fund is formed.
As and to the extent described in the
related Prospectus Supplement, a
Mortgage Loan (i) may provide for
accrual of interest thereon at an
interest rate (a "Mortgage Rate") that
is fixed over its term or that adjusts
from time to time, or that may be
converted at the borrower's election
from an adjustable to a fixed Mortgage
Rate, or from a fixed to an adjustable
Mortgage Rate, and in some cases back
again, (ii) may provide for level
payments to maturity or for payments
that adjust from time to time to
accommodate changes in the Mortgage Rate
or to reflect the occurrence of certain
events, and may permit negative
amortization, (iii) may be fully
amortizing over its term to maturity or
may require a balloon payment on its
stated maturity date, (iv) may provide
for no amortization prior to its stated
maturity date, (v) may contain a
prohibition on prepayment or require
payment of a premium or a yield
maintenance penalty in connection with a
prepayment and (vi) may provide for
payments of principal, interest or both,
on due dates that occur monthly,
quarterly, semi-annually, annually or at
such other interval as is specified in
the related Prospectus Supplement.
Unless otherwise provided in the related
Prospectus Supplement, each Mortgage
Loan will have had an original term to
maturity of not more than 40 years.
Unless otherwise provided in the related
Prospectus Supplement, no Mortgage Loan
will have been originated by the
Sponsor; however, some or all of the
Mortgage Loans in any Trust Fund may
have been originated by an affiliate of
the Sponsor. See "Description of the
Trust Funds--Mortgage Loans".
If and to the extent specified in the
related Prospectus Supplement, the
Mortgage Assets with respect to a series
of Certificates may also include, or
consist of, (i) private mortgage
participations, mortgage pass-through
certificates or other mortgage-backed
securities or (ii) certificates insured
or guaranteed by the Federal Home Loan
Mortgage Corporation ("FHLMC"), the
Federal National Mortgage Association
("FNMA"), the Governmental National
Mortgage Association ("GNMA") or the
Federal Agricultural Mortgage
Corporation ("FAMC") (collectively, the
mortgage-backed securities referred to
in clauses (i) and (ii), "MBS"),
provided that each MBS will evidence an
interest in, or will be secured by a
pledge of, one or more mortgage loans
that conform to the descriptions of the
Mortgage Loans contained herein. See
"Description of the Trust Funds--MBS".
Each Mortgage Asset will be selected by
the Sponsor for inclusion in a Trust
Fund from among those purchased, either
directly or indirectly, from a prior
holder thereof (a "Mortgage Asset
Seller"), which prior holder may or may
not be the originator of such Mortgage
Loan or the issuer of such MBS and may
be an affiliate of the Sponsor.
B. CERTIFICATE ACCOUNT ........... Each Trust Fund will include one or more
accounts (collectively, the "Certificate
Account") established and maintained on
behalf of the Certificateholders into
which the person or persons designated
in the related Prospectus Supplement
will, to the extent provided in the
related Pooling Agreement (as defined
below) and described herein and in the
related Prospectus Supplement, deposit
all payments and other collections
received or advanced with respect to the
Mortgage Assets and other assets in such
Trust Fund. A Certificate Account may be
maintained as an inter-
10
<PAGE>
est bearing or a non-interest bearing
account, and funds held therein may be
held as cash or invested in certain
obligations acceptable to each Rating
Agency (as defined below) rating one or
more classes of the related series of
Offered Certificates. See "Description
of the Trust Funds--Certificate
Accounts" and "Description of the
Pooling Agreements--Certificate
Account".
C. CREDIT SUPPORT ................ If so provided in the related Prospectus
Supplement, partial or full protection
against certain defaults and losses on
the Mortgage Assets in the related Trust
Fund may be provided to one or more
classes of Certificates of the related
series in the form of subordination of
one or more other classes of
Certificates of such series, which other
classes may include one or more classes
of Offered Certificates, or by one or
more other types of credit support, such
as a letter of credit, insurance policy,
guarantee, reserve fund or another type
of credit support, or a combination
thereof (any such coverage with respect
to the Certificates of any series,
"Credit Support"). If so specified in
the related Prospectus Supplement, any
form of Credit Support may offer
protection only against specific types
of losses and shortfalls. The amount and
types of any Credit Support, the
coverage afforded by it, the
identification of the entity providing
it (if applicable) and related
information will be set forth in the
Prospectus Supplement for a series of
Offered Certificates. See "Risk
Factors--Credit Support Limitations",
"Description of the Trust Funds--Credit
Support" and "Description of Credit
Support".
D. CASH FLOW AGREEMENTS .......... If so provided in the related Prospectus
Supplement, a Trust Fund may include
guaranteed investment contracts pursuant
to which moneys held in the funds and
accounts established for the related
series will be invested at a specified
rate. The Trust Fund may also include
certain other agreements, such as
interest rate exchange agreements,
interest rate cap or floor agreements,
currency exchange agreements or similar
agreements designed to reduce the
effects of interest rate or currency
exchange rate fluctuations on the
Mortgage Assets or on one or more
classes of Certificates. The principal
terms of any such guaranteed investment
contract or other agreement (any such
agreement, a "Cash Flow Agreement"),
including, without limitation,
provisions relating to the timing,
manner and amount of payments thereunder
and provisions relating to the
termination thereof, will be described
in the Prospectus Supplement for the
related series. In addition, the related
Prospectus Supplement will contain
certain information that pertains to the
obligor under any such CashFlow
Agreement. See "Description of the Trust
Funds--Cash Flow Agreements".
DESCRIPTION OF CERTIFICATES ........ Each series of Certificates will be
issued in one or more classes pursuant
to a pooling and servicing agreement or
other agreement specified in the related
Prospectus Supplement (in either case, a
"Pooling Agreement") and will represent
in the aggregate the entire beneficial
ownership interest in the related Trust
Fund. As described in the related
Prospectus Supplement, the Certificates
of each series, including the Offered
Certificates of such series, may consist
of one or more classes of Certificates
that: (i) are senior (collectively,
"Senior Certificates") or subordinate
(collectively, "Subordinate
Certificates") to one or more other
classes of Certificates in entitlement
to certain distributions on the
Certificates; (ii) are entitled to
distributions of principal, with
disproportionately small, nominal or no
11
<PAGE>
distributions of interest (collectively,
"Stripped Principal Certificates");
(iii) are entitled to distributions of
interest, with disproportionately small,
nominal or no distributions of principal
(collectively, "Stripped Interest
Certificates"); (iv) provide for
distributions of interest thereon or
principal thereof that commence only
after the occurrence of certain events,
such as the retirement of one or more
other classes of Certificates of such
series; (v) provide for distributions of
principal thereof to be made, from time
to time or for designated periods, at a
rate that is faster (and, in some cases,
substantially faster) or slower (and, in
some cases, substantially slower) than
the rate at which payments or other
collections of principal are received on
the Mortgage Assets in the related Trust
Fund; or (vi) provide for distributions
of principal thereof to be made, subject
to available funds, based on a specified
principal payment schedule or other
method.
Each class of Certificates, other than
certain classes of Stripped Interest
Certificates and certain classes of
REMIC Residual Certificates (as defined
below), will have a stated principal
amount (a "Certificate Balance"); and
each class of Certificates, other than
certain classes of Stripped Principal
Certificates and certain REMIC Residual
Certificates, will accrue interest at a
fixed, variable or adjustable interest
rate (a "Pass-Through Rate") on its
Certificate Balance or, in the case of
certain classes of Stripped Interest
Certificates, on a hypothetical or
notional amount (a "Notional Amount")
used solely for such purpose and not
evidencing a right to receive
distributions of principal. The related
Prospectus Supplement will specify the
Certificate Balance, Notional Amount
and/or Pass-Through Rate (or, in the
case of a variable or adjustable
Pass-Through Rate, the method for
determining such), as applicable, for
each class of Offered Certificates.
The Certificates will not be guaranteed or
insured by the Sponsor or any of its
affiliates, by any governmental agency
or instrumentality or by any other
person, unless otherwise provided in the
related Prospectus Supplement. See "Risk
Factors--Limited Assets for Payment of
Certificates" and "Description of the
Certificates".
DISTRIBUTIONS OF INTEREST ON THE
CERTIFICATES ..................... Interest on each class of Offered
Certificates (other than certain classes
of Stripped Principal Certificates and
certain classes of REMIC Residual
Certificates) of each series will accrue
at the applicable Pass-Through Rate on
the Certificate Balance or, in the case
of certain classes of Stripped Interest
Certificates, the Notional Amount
thereof outstanding from time to time
and will be distributed to
Certificateholders as provided in the
related Prospectus Supplement (each of
the specified dates on which
distributions are to be made, a
"Distribution Date"). Distributions of
interest with respect to one or more
classes of Certificates (collectively,
"Accrual Certificates") may not
commence until the occurrence of certain
events, such as the retirement of one or
more other classes of Certificates, and
interest accrued with respect to a class
of Accrual Certificates prior to the
occurrence of such an event will either
be added to the Certificate Balance
thereof or otherwise deferred.
Distributions of interest with respect
to one or more classes of Certificates
may be reduced to the extent of certain
delinquencies, losses and other
contingencies described herein and in
the related Prospectus Supplement. See
"Risk Factors--Prepay-
12
<PAGE>
ments; Average Life of Certificates;
Yields", "Yield and Maturity
Considerations", and "Description of the
Certificates--Distributions of Interest
on the Certificates".
DISTRIBUTIONS OF PRINCIPAL OF THE
CERTIFICATES ..................... Each class of Certificates of each
series (other than certain classes of
Stripped Interest Certificates and
certain classes of REMIC Residual
Certificates) will have a Certificate
Balance. The Certificate Balance of a
class of Certificates outstanding from
time to time will represent the maximum
amount that the holders thereof are then
entitled to receive in respect of
principal from future cash flow on the
assets in the related Trust Fund. Unless
otherwise specified in the related
Prospectus Supplement, the initial
aggregate Certificate Balance of all
classes of a series of Certificates will
not be greater than the outstanding
principal balance of the related
Mortgage Assets as of a specified date
(the "Cut-off Date"), after application
of scheduled payments due on or before
such date, whether or not received. As
and to the extent described in the
related Prospectus Supplement,
distributions of principal with respect
to each series of Certificates will be
made on each Distribution Date to the
holders of the class or classes of
Certificates of such series entitled
thereto until the Certificate Balances
of such Certificates have been reduced
to zero. Distributions of principal with
respect to one or more classes of
Certificates may be made at a rate that
is faster (and, in some cases,
substantially faster) than the rate at
which payments or other collections of
principal are received on the Mortgage
Assets in the related Trust Fund.
Distributions of principal with respect
to one or more classes of Certificates
may not commence until the occurrence of
certain events, such as the retirement
of one or more other classes of
Certificates of the same series, or may
be made at a rate that is slower (and,
in some cases, substantially slower)
than the rate at which payments or other
collections of principal are received on
the Mortgage Assets in the related Trust
Fund. Distributions of principal with
respect to one or more classes of
Certificates (each such class, a
"Controlled Amortization Class") may be
made, subject to available funds, based
on a specified principal payment
schedule. Distributions of principal
with respect to one or more classes of
Certificates (each such class, a
"Companion Class") may be contingent on
the specified principal payment schedule
for a Controlled Amortization Class of
the same series and the rate at which
payments and other collections of
principal on the Mortgage Assets in the
related Trust Fund are received. Unless
otherwise specified in the related
Prospectus Supplement, distributions of
principal of any class of Certificates
will be made on a pro rata basis among
all ofthe Certificates of such class.
See "Description of the
Certificates--Distributions of Principal
of the Certificates".
ADVANCES ........................... If and to the extent provided in the
related Prospectus Supplement, if a
Trust Fund includes Mortgage Loans, the
Master Servicer, the Special Servicer,
the Trustee, any provider of Credit
Support and/or any other specified
person may be obligated to make, or have
the option of making, certain advances
with respect to delinquent scheduled
payments of principal and/or interest on
such Mortgage Loans. Any such advances
made with respect to a particular
Mortgage Loan will be reimbursable from
subsequent recoveries in respect of such
Mortgage Loan and otherwise to the
extent described herein and in the
related Prospectus Supplement. If and to
13
<PAGE>
the extent provided in the Prospectus
Supplement for a series of Certificates,
any entity making such advances may be
entitled to receive interest thereon for
the period that such advances are
outstanding, payable from amounts in the
related Trust Fund. See "Description of
the Certificates--Advances in Respect of
Delinquencies". If a Trust Fund
includes MBS, any comparable advancing
obligation of a party to the related
Pooling Agreement, or of a party to the
related MBS Agreement, will be described
in the related Prospectus Supplement.
TERMINATION ........................ If so specified in the related
Prospectus Supplement, a series of
Certificates may be subject to optional
early termination through the repurchase
of the Mortgage Assets in the related
Trust Fund by the party or parties
specified therein, under the
circumstances and in the manner set
forth therein. If so provided in the
related Prospectus Supplement, upon the
reduction of the Certificate Balance of
a specified class or classes of
Certificates by a specified percentage
or amount, a party specified therein may
be authorized or required to solicit
bids for the purchase of all of the
Mortgage Assets of the related Trust
Fund, or of a sufficient portion of
suchMortgage Assets to retire such class
or classes, under the circumstances and
in the manner set forth therein. See
"Description of the
Certificates--Termination".
REGISTRATION OF BOOK-ENTRY
CERTIFICATES ..................... If so provided in the related Prospectus
Supplement, one or more classes of the
Offered Certificates of any series will
be offered in book-entry format
(collectively, "Book-Entry
Certificates") through the facilities of
The Depository Trust Company ("DTC").
Each class of Book-Entry Certificates
will be initially represented by one or
more Certificates registered in the name
of a nominee of DTC. No person acquiring
an interest in a class of Book-Entry
Certificates (a "Certificate Owner")
will be entitled to receive a
Certificate of such class in fully
registered, definitive form (a
"Definitive Certificate"), except under
the limited circumstances described
herein. See "Risk Factors--Book-Entry
Registration" and "Description of the
Certificates--Book-Entry Registration
and Definitive Certificates".
TAX STATUS OF THE CERTIFICATES ..... The Certificates of each series will
constitute either (i) "regular
interests" ("REMIC Regular
Certificates") and "residual interests"
("REMIC Residual Certificates") in a
Trust Fund, or a designated portion
thereof, treated as a real estate
mortgage investment conduit (a "REMIC")
under Sections 860A through 860G of the
Internal Revenue Code of 1986 (the
"Code"), or (ii) interests ("Grantor
Trust Certificates") in a Trust Fund
treated as a grantor trust under
applicable provisions of the Code.
A. REMIC ......................... REMIC Regular Certificates generally
will be treated as debt obligations of
the applicable REMIC for federal income
tax purposes. In general, to the extent
the assets and income of the REMIC are
treated as qualifying assets and income
under the following sections of the
Code, REMIC Regular Certificates owned
by a thrift institution will be treated
as "qualifying real property loans"
within the meaning of Section 593(d) of
the Code, and REMIC Regular Certificates
owned by a real estate investment trust
will be treated as "real estate assets"
for purposes of Section 856(c)(5)(A) of
the Code and interest income therefrom
will be treated as "interest on
obligations secured by mortgages on real
property" for purposes of Section
856(c)(3)(B) of the Code. In addition,
REMIC Regular Certificates
14
<PAGE>
will be "qualified mortgages" within the
meaning of Section 860G(a)(3) of the
Code. Moreover, if 95% or more of the
assets and the income of the REMIC
qualify for any of the foregoing
treatments, the REMIC Regular
Certificates will qualify for the
foregoing treatments in their entirety.
However, REMIC Regular Certificates
owned by a thrift institution will
constitute "loans ... secured by an
interest in real property" for purposes
of Section 7701(a)(19)(C)(v) of the Code
only if so specified in the related
Prospectus Supplement. Holders of REMIC
Regular Certificates must report income
with respect thereto on the accrual
method, regardless of their method of
tax accounting generally. Holders of any
class of REMIC Regular Certificates
issued with original issue discount
generally will be required to include
the original issue discount in income as
it accrues, which will be determined
using an initial prepayment assumption
and taking into account, from time to
time, actual prepayments occurring at a
rate different than the prepayment
assumption. See "Material Federal Income
Tax Consequences--REMICs--Taxation of
Owners of REMIC Regular Certificates"
and "--REMICs--Foreign Investors in
REMIC Certificates".
REMIC Residual Certificates generally will
be treated as representing an interest
in qualifying assets and income to the
same extent described above for
institutions subject to Sections 593(d),
856(c)(5)(a) and 856(c)(3)(B) of the
Code, but not for purposes of Section
7701(a)(19)(C)(v) of the Code unless
otherwise stated in the related
Prospectus Supplement. A portion (or, in
certain cases, all) of the income from
REMIC Residual Certificates (i) may not
be offset by any losses from other
activities of the holder of such REMIC
Residual Certificates (except generally
with respect to thrift institutions
described in Section 593 of the Code, if
such REMIC Residual Certificate has
"significant value"), (ii) may be
treated as unrelated business taxable
income for holders of REMIC Residual
Certificates that are subject to tax on
unrelated business taxable income (as
defined in Section 511 of the Code), and
(iii) may be subject to foreign
withholding rules. In addition,
transfers of certain REMIC Residual
Certificates may be prohibited, or may
be disregarded under some circumstances
for federal income tax purposes. See
"Material Federal Income Tax
Consequences--REMICs--Taxation of Owners
of REMIC Residual Certificates" and
"--REMICs--Foreign Investors in REMIC
Certificates".
B. GRANTOR TRUST.................... Unless otherwise provided in the
related Prospectus Supplement, Grantor
Trust Certificates may be either (i)
Certificates that have a Certificate
Balance and a Pass-Through Rate or that
are Stripped Principal Certificates
(collectively, "Grantor Trust Fractional
Interest Certificates") or (ii) Stripped
Interest Certificates.
Owners of Grantor Trust Fractional
Interest Certificates will be treated
for federal income tax purposes as
owners of an undivided pro rata interest
in the assets of the related Trust Fund,
and generally will be required to report
their pro rata share of the entire gross
income (including amounts incurred as
servicing or other fees and expenses)
from the Mortgage Assets and will be
entitled, subject to certain
limitations, to deduct their pro rata
shares of any servicing or other fees
and expenses incurred during the year.
Holders of Grantor Trust Fractional
Interest Certificates generally will be
treated as owning an interest in
qualifying assets and income under
Sections
15
<PAGE>
593(d), 856(c)(5)(A), 856(c)(3)(B) and
860G(a)(3)(A) of the Code, but will not
be so treated for purposes of Section
7701(a)(19)(C)(v) of the Code unless
otherwise stated in the related
Prospectus Supplement.
It is unclear whether Stripped Interest
Certificates will be treated as
representing an ownership interest in
qualifying assets and income under
Sections 593(d), 856(c)(5)(A) and
856(c)(3)(B) of the Code, although the
policy considerations underlying those
Sections suggest that such treatment
should be available. However, such
Certificates will not be treated as
representing an ownership interest in
assets described in Section
7701(a)(19)(C)(v) of the Code unless
otherwise stated in the related
Prospectus Supplement. The taxation of
holders of Stripped Interest
Certificates is uncertain in various
respects, including in particular the
method such holders should use to
recover their purchase price and to
report their income with respect to such
Stripped Interest Certificates. See
"Material Federal Income Tax
Consequences--Grantor Trust Funds".
Investors are advised to consult their tax
advisors and to review "Material Federal
Income Tax Consequences" herein and
"Certain Federal Income Tax
Consequences" in the related Prospectus
Supplement.
ERISA CONSIDERATIONS ............... Fiduciaries of employee benefit plans
and certain other retirement plans and
arrangements, including individual
retirement accounts, annuities, Keogh
plans, and collective investment funds
and separate accounts in which such
plans, accounts, annuities or
arrangements are invested, that are
subject to the Employee Retirement
Income Security Act of 1974, as amended
("ERISA"), or Section 4975 of the
Code, should carefully review with their
legal advisors whether the purchase or
holding of Offered Certificates could
give rise to a transaction that is
prohibited or is not otherwise
permissible either under ERISA or
Section 4975 of the Code. See "ERISA
Considerations" herein and in the
related Prospectus Supplement.
LEGAL INVESTMENT ................... The Offered Certificates will constitute
"mortgage related securities" for
purposes of the Secondary Mortgage
Market Enhancement Act of 1984 only if
so specified in the related Prospectus
Supplement. Investors whose investment
authority is subject to legal
restrictions should consult their own
legal advisors to determine whether and
to what extent the Offered Certificates
constitute legal investments for them.
See "Legal Investment" herein and in the
related Prospectus Supplement.
RATING ............................. At their respective dates of issuance,
each class of Offered Certificates will
be rated not lower than investment grade
by one or more nationally recognized
statistical rating agencies (each, a
"Rating Agency"). See "Rating" herein
and in the related Prospectus
Supplement.
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RISK FACTORS
In considering an investment in the Offered Certificates of any series,
investors should consider, among other things, the following factors and any
other factors set forth under the heading "Risk Factors" in the related
Prospectus Supplement. In general, to the extent that the factors discussed
below pertain to or are influenced by the characteristics or behavior of
Mortgage Loans included in a particular Trust Fund, they would similarly pertain
to and be influenced by the characteristics or behavior of the mortgage loans
underlying any MBS included in such Trust Fund.
CERTAIN FACTORS ADVERSELY AFFECTING RESALE OF THE OFFERED CERTIFICATES
There can be no assurance that a secondary market for the Offered
Certificates of any series will develop or, if it does develop, that it will
provide holders with liquidity of investment or will continue for as long as
such Certificates remain outstanding. The Prospectus Supplement for any series
of Offered Certificates may indicate that an underwriter specified therein
intends to make a secondary market in such Offered Certificates; however, no
underwriter will be obligated to do so. Any such secondary market may provide
less liquidity to investors than any comparable market for securities that
evidence interests in single-family mortgage loans.
The primary source of ongoing information regarding the Offered
Certificates of any series, including information regarding the status of the
related Mortgage Assets and any Credit Support for such Certificates, will be
the periodic reports to Certificateholders to be delivered pursuant to the
related Pooling Agreement as described herein under the heading "Description of
the Certificates--Reports to Certificateholders". There can be no assurance that
any additional ongoing information regarding the Offered Certificates of any
series will be available through any other source. The limited nature of such
information in respect of a series of Offered Certificates may adversely affect
the liquidity thereof, even if a secondary market for such Certificates does
develop.
Insofar as a secondary market does develop for any series of Offered
Certificates or class thereof, the market value of such Certificates will be
affected by several factors, including the perceived liquidity and riskiness
thereof, the anticipated cash flow thereon (which may vary widely depending upon
the prepayment and default assumptions applied in respect of the underlying
Mortgage Loans) and prevailing interest rates. The price payable at any given
time in respect of certain classes of Offered Certificates (in particular, a
class with a relatively long average life, a Companion Class or a class of
Stripped Interest Certificates or Stripped Principal Certificates) may be
extremely sensitive to small fluctuations in prevailing interest rates; and the
relative change in price for an Offered Certificate in response to an upward or
downward movement in prevailing interest rates may not necessarily equal the
relative change in price for such Offered Certificate in response to an equal
but opposite movement in such rates. Accordingly, the sale of Offered
Certificates by a holder in any secondary market that may develop may be at a
discount from the price paid by such holder. The Sponsor is not aware of any
source through which price information about the Offered Certificates will be
generally available on an ongoing basis.
Except to the extent described herein and in the related Prospectus
Supplement, Certificateholders will have no redemption rights, and the Offered
Certificates of each series are subject to early retirement only under certain
specified circumstances described herein and in the related Prospectus
Supplement. See "Description of the Certificates--Termination".
LIMITED ASSETS FOR PAYMENT OF CERTIFICATES
Unless otherwise specified in the related Prospectus Supplement, neither
the Offered Certificates of any series nor the Mortgage Assets in the related
Trust Fund will be guaranteed or insured by the Sponsor or any of its
affiliates, by any governmental agency or instrumentality or by any other
person; and no Offered Certificate of any series will represent a claim against
or security interest in the Trust Funds for any other series. Accordingly, if
the related Trust Fund has insufficient assets to make payments on a series of
Offered Certificates, no other assets will be available for payment of the
deficiency. Additionally, certain amounts on deposit from time to time in
certain funds or accounts constituting part of a Trust Fund, including the
Certificate Account and any accounts maintained as Credit Support, may be
withdrawn under certain conditions, as described in the related Prospectus
Supplement, for purposes other than the payment of principal of or interest on
the related series of Certificates. If so provided in the Prospectus Supplement
for a series of Certificates consisting of one or more classes of Subordinate
Certificates, on any Distribution Date in respect of which losses or shortfalls
in collections on the Mortgage Assets have been incurred, the amount of such
losses or shortfalls will be borne first by one or more classes of the
Subordinate Certificates, and,
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thereafter, by the remaining classes of Certificates in the priority and manner
and subject to the limitations specified in such Prospectus Supplement.
PREPAYMENTS; AVERAGE LIFE OF CERTIFICATES; YIELDS
As a result of, among other things, prepayments on the Mortgage Loans in
any Trust Fund, the amount and timing of distributions of principal and/or
interest on the Offered Certificates of the related series may be highly
unpredictable. Prepayments on the Mortgage Loans in any Trust Fund will result
in a faster rate of principal payments on one or more classes of the related
series of Certificates than if payments on such Mortgage Loans were made as
scheduled. Thus, the prepayment experience on the Mortgage Loans may affect the
average life of each class of such Certificates, including a class of Offered
Certificates. The rate of principal payments on pools of mortgage loans varies
among pools and from time to time is influenced by a variety of economic,
demographic, geographic, social, tax and legal factors, as well as acts of God.
For example, if prevailing interest rates fall significantly below the Mortgage
Rates borne by the Mortgage Loans included in a Trust Fund, principal
prepayments thereon are likely to be higher than if prevailing interest rates
remain at or above the rates borne by those Mortgage Loans. Conversely, if
prevailing interest rates rise significantly above the Mortgage Rates borne by
the Mortgage Loans included in a Trust Fund, principal prepayments thereon are
likely to be lower than if prevailing interest rates remain at or below the
rates borne by those Mortgage Loans. The foregoing is subject, however, to,
among other things, the particular terms of the Mortgage Loans (e.g., provisions
which prohibit voluntary prepayments during specified periods or impose
penalties in connection therewith) and the ability of borrowers to get new
financing. There can be no assurance as to the actual rate of prepayment on the
Mortgage Loans in any Trust Fund or that such rate of prepayment will conform to
any model described herein or in any Prospectus Supplement. As a result,
depending on the anticipated rate of prepayment for the Mortgage Loans in any
Trust Fund, the retirement of any class of Certificates of the related series
could occur significantly earlier or later than expected.
The extent to which prepayments on the Mortgage Loans in any Trust Fund
ultimately affect the average life of any class of Certificates of the related
series will depend on the terms of such Certificates. A class of Certificates,
including a class of Offered Certificates, may provide that on any Distribution
Date the holders of such Certificates are entitled to a pro rata share of the
prepayments on the Mortgage Loans in the related Trust Fund that are
distributable on such date, to a disproportionately large share (which, in some
cases, may be all) of such prepayments, or to a disproportionately small share
(which, in some cases, may be none) of such prepayments. A class of Certificates
that entitles the holders thereof to a disproportionately large share of the
prepayments on the Mortgage Loans in the related Trust Fund enhances the risk of
early retirement of such class ("call risk") if the rate of prepayment is
relatively fast; while a class of Certificates that entitles the holders thereof
to a disproportionately small share of the prepayments on the Mortgage Loans in
the related Trust Fund enhances the risk of an extended average life of such
class ("extension risk") if the rate of prepayment is relatively slow. As and to
the extent described in the related Prospectus Supplement, the respective
entitlements of the various classes of Certificateholders of any series to
receive payments (and, in particular, prepayments) of principal of the Mortgage
Loans in the related Trust Fund may vary based on the occurrence of certain
events (e.g., the retirement of one or more classes of Certificates of such
series) or subject to certain contingencies (e.g., prepayment and default rates
with respect to such Mortgage Loans).
A series of Certificates may include one or more Controlled Amortization
Classes that will entitle the holders thereof to receive principal distributions
according to a specified principal payment schedule. Although prepayment risk
cannot be eliminated entirely for any class of Certificates, a Controlled
Amortization Class will generally provide a relatively stable cash flow so long
as the actual rate of prepayment on the Mortgage Loans in the related Trust Fund
remains relatively constant at the rate, or within the range of rates, of
prepayment used to establish the specific principal payment schedule for such
Certificates. Prepayment risk with respect to a given Mortgage Asset Pool does
not disappear, however, and the stability afforded to a Controlled Amortization
Class comes at the expense of one or more Companion Classes of the same series,
any of which Companion Classes may also be a class of Offered Certificates. In
general, and as more specifically described in the related Prospectus
Supplement, a Companion Class may entitle the holders thereof to a
disproportionately large share of prepayments on the Mortgage Loans in the
related Trust Fund when the rate of prepayment is relatively fast, and/or may
entitle the holders thereof to a disproportionately small share of prepayments
on the Mortgage Loans in the related Trust Fund when the rate of prepayment is
relatively slow. As and to the extent described in the related Prospectus
Supplement, a Companion Class absorbs some (but not all) of the "call risk"
and/or "extension risk" that would otherwise belong to the related
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Controlled Amortization Class if all payments of principal of the Mortgage Loans
in the related Trust Fund were allocated on a pro rata basis.
A series of Certificates may include one or more classes of Offered
Certificates offered at a premium or discount. Yields on such classes of
Certificates will be sensitive, and in some cases extremely sensitive, to
prepayments on the Mortgage Loans in the related Trust Fund and, where the
amount of interest payable with respect to a class is disproportionately large,
as compared to the amount of principal, as with certain classes of Stripped
Interest Certificates, a holder might fail to recoup its original investment
under some prepayment scenarios. The extent to which the yield to maturity of
any class of Offered Certificates may vary from the anticipated yield will
depend upon the degree to which they are purchased at a discount or premium and
the amount and timing of distributions thereon. An investor should consider, in
the case of any Offered Certificate purchased at a discount, the risk that a
slower than anticipated rate of principal payments on the Mortgage Loans could
result in an actual yield to such investor that is lower than the anticipated
yield and, in the case of any Offered Certificate purchased at a premium, the
risk that a faster than anticipated rate of principal payments could result in
an actual yield to such investor that is lower than the anticipated yield. See
"Yield and Maturity Considerations" herein.
When considering the effects of prepayments on the average life and yield
of an Offered Certificate, an investor should also consider provisions of the
related Pooling Agreement that permit the optional early termination of the
class of Certificates to which such Offered Certificate belongs. If so specified
in the related Prospectus Supplement, a series of Certificates may be subject to
optional early termination through the repurchase of the Mortgage Assets in the
related Trust Fund by the party or parties specified therein, under the
circumstances and in the manner set forth therein. If so provided in the related
Prospectus Supplement, upon the reduction of the Certificate Balance of a
specified class or classes of Certificates by a specified percentage or amount,
a party specified therein may be authorized or required to solicit bids for the
purchase of all of the Mortgage Assets of the related Trust Fund, or of a
sufficient portion of such Mortgage Assets to retire such class or classes,
under the circumstances and in the manner set forth therein. See "Description of
the Certificates--Termination".
LIMITED NATURE OF CREDIT RATINGS
Any rating assigned by a Rating Agency to a class of Offered Certificates
will reflect only its assessment of the likelihood that holders of such Offered
Certificates will receive payments to which such Certificateholders are entitled
under the related Pooling Agreement. Such rating will not constitute an
assessment of the likelihood that principal prepayments on the related Mortgage
Loans will be made, the degree to which the rate of such prepayments might
differ from that originally anticipated or the likelihood of early optional
termination of the related Trust Fund. Furthermore, such rating will not address
the possibility that prepayment of the related Mortgage Loans at a higher or
lower rate than anticipated by an investor may cause such investor to experience
a lower than anticipated yield or that an investor that purchases an Offered
Certificate at a significant premium might fail to recoup its initial investment
under certain prepayment scenarios.
The amount, type and nature of Credit Support, if any, provided with
respect to a series of Certificates will be determined on the basis of criteria
established by each Rating Agency rating classes of the Certificates of such
series. Those criteria are sometimes based upon an actuarial analysis of the
behavior of mortgage loans in a larger group. However, there can be no assurance
that the historical data supporting any such actuarial analysis will accurately
reflect future experience, or that the data derived from a large pool of
mortgage loans will accurately predict the delinquency, foreclosure or loss
experience of any particular pool of Mortgage Loans. In other cases, such
criteria may be based upon determinations of the values of the Mortgaged
Properties that provide security for the Mortgage Loans. However, no assurance
can be given that those values will not decline in the future. If the commercial
or multifamily residential real estate markets should experience an overall
decline in property values such that the outstanding principal balances of the
Mortgage Loans 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 by institutional lenders. In
addition, adverse economic conditions (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 rates of
delinquencies, foreclosures and losses with respect to any Trust Fund. To the
extent that such losses are not covered by Credit Support, such losses may be
borne, at least in part, by the holders of one or more classes of Offered
Certificates of the related series. See "Description of Credit Support" and
"Rating".
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CERTAIN RISKS ASSOCIATED WITH MORTGAGE LOANS SECURED BY COMMERCIAL AND
MULTIFAMILY PROPERTIES
Mortgage Loans made on the security of multifamily or commercial property
may entail risks of delinquency and foreclosure, and risks of loss in the event
thereof, that are greater than similar risks associated with loans made on the
security of single-family property. See "Description of the Trust
Funds--Mortgage Loans". The ability of a borrower to repay a loan secured by an
income-producing property typically is dependent primarily upon the successful
operation of such property rather than upon the existence of independent income
or assets of the borrower; thus, the value of an income- producing property is
directly related to the net operating income derived from such property. If the
net operating income of the property is reduced (for example, if rental or
occupancy rates decline or real estate tax rates or other operating expenses
increase), the borrower's ability to repay the loan may be impaired. A number of
the Mortgage Loans may be secured by liens on owner-occupied Mortgaged
Properties or on Mortgaged Properties leased to a single tenant. Accordingly, a
decline in the financial condition of the borrower or single tenant, as
applicable, may have a disproportionately greater effect on the net operating
income from such Mortgaged Properties than would be the case with respect to
Mortgaged Properties with multiple tenants. Furthermore, the value of any
Mortgaged Property may be adversely affected by risks generally incident to
interests in real property, including various events which the Sponsor, a Master
Servicer and a Special Servicer may be unable to predict or control such as
changes in general or local economic conditions and/or specific industry
segments; declines in real estate values; declines in rental or occupancy rates;
increases in interest rates, real estate tax rates and other operating expenses;
changes in governmental rules, regulations and fiscal policies, including
environmental legislation; acts of God; environmental hazards; and social unrest
and civil disturbances.
In addition, additional risk may be presented by the type and use of a
particular Mortgaged Property. For instance, Mortgaged Properties that operate
as hospitals and nursing homes may present special risks to lenders due to the
significant governmental regulation of the ownership, operation, maintenance and
financing of health care institutions. Hotel and motel properties are often
operated pursuant to franchise, management or operating agreements which may be
terminable by the franchisor or operator. Moreover, the transferability of a
hotel's operating, liquor and other licenses upon a transfer of the hotel,
whether through purchase or foreclosure, is subject to local law requirements.
It is anticipated that some or all of the Mortgage Loans included in any
Trust Fund will be nonrecourse loans or loans for which recourse may be
restricted or unenforceable. As to those Mortgage Loans, recourse in the event
of borrower default will be limited to the specific real property and other
assets, if any, that were pledged to secure the Mortgage Loan. However, even
with respect to those Mortgage Loans that provide for recourse against the
borrower and its assets generally, there can be no assurance that enforcement of
such recourse provisions will be practicable, or that the assets of the borrower
will be sufficient to permit a recovery in respect of a defaulted Mortgage Loan
in excess of the liquidation value of the related Mortgaged Property.
Further, the concentration of default, foreclosure and loss risks in
individual Mortgage Loans in a particular Trust Fund will generally be greater
than for pools of single-family loans because Mortgage Loans in a Trust Fund
will generally consist of a smaller number of higher balance loans than would a
pool of single-family loans of comparable aggregate unpaid principal balance.
BALLOON PAYMENTS; BORROWER DEFAULT
Certain of the Mortgage Loans included in a Trust Fund may not be fully
amortizing, and in some cases may provide for no amortization, over their terms
to maturity and, thus, will require substantial principal payments (that is,
balloon payments) at their stated maturity. Mortgage Loans of this type involve
a greater degree of risk than self-amortizing loans because the ability of a
borrower to make a balloon payment typically will depend upon its ability either
to refinance the loan or to sell the related Mortgaged Property. The ability of
a borrower to accomplish either of these goals will be affected by a number of
factors, including the value of the related Mortgaged Property, the level of
available mortgage rates at the time of sale or refinancing, the borrower's
equity in the related Mortgaged Property, the financial condition and operating
history of the borrower and the related Mortgaged Property, tax laws, rent
control laws (with respect to certain residential properties), Medicaid and
Medicare reimbursement rates (with respect to hospitals and nursing homes),
prevailing general economic conditions and the availability of credit for loans
secured by commercial or multifamily, as the case may be, real properties
generally. Neither the Sponsor nor any of its affiliates will be required to
refinance any Mortgage Loan.
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If and to the extent described herein and in the related Prospectus
Supplement, in order to maximize recoveries on defaulted Mortgage Loans, the
Master Servicer and/or Special Servicer for a Trust Fund will be permitted
(within prescribed limits) to extend and modify the Mortgage Loans in such Trust
Fund that are in default or as to which a payment default is imminent. While a
Master Servicer and/or Special Servicer generally will be required to determine
that any such extension or modification is reasonably likely to produce a
greater recovery on a present value basis than liquidation, there can be no
assurance that any such extension or modification will in fact increase the
present value of receipts from or proceeds of the affected Mortgage Loans.
CREDIT SUPPORT LIMITATIONS
The Prospectus Supplement for a series of Offered Certificates will
describe any Credit Support provided with respect thereto. Use of Credit Support
will be subject to the conditions and limitations described herein and in the
related Prospectus Supplement. Moreover, such Credit Support may not cover all
potential losses or risks; for example, Credit Support may or may not cover
fraud or negligence by a mortgage loan originator or other parties.
A series of Certificates may include one or more classes of Subordinate
Certificates (which may include Offered Certificates), if so provided in the
related Prospectus Supplement. Although subordination is intended to reduce the
risk to holders of Senior Certificates of delinquent distributions or ultimate
losses, the amount of subordination will be limited and may decline under
certain circumstances. In addition, if principal payments on one or more classes
of Certificates of a series are made in a specified order of priority, any
limits with respect to the aggregate amount of claims under any related Credit
Support may be exhausted before the principal of the later paid classes of
Certificates of such series has been repaid in full. As a result, the impact of
losses and shortfalls experienced with respect to the Mortgage Assets may fall
primarily upon those classes of Certificates having a later right of payment.
Moreover, if a form of Credit Support covers more than one series of
Certificates, holders of Certificates of one series will be subject to the risk
that such Credit Support will be exhausted by the claims of the holders of
Certificates of one or more other series.
The amount of any applicable Credit Support supporting one or more classes
of Offered Certificates, including the subordination of one or more classes of
Certificates, will be determined on the basis of criteria established by each
Rating Agency rating such classes of Certificates that take into account an
assumed level of defaults, delinquencies and losses on the underlying Mortgage
Assets. There can, however, be no assurance that the loss experience on the
related Mortgage Assets will not exceed such assumed levels. See "--Limited
Nature of Credit Ratings", "Description of the Certificates" and "Description of
Credit Support".
LEASES AND RENTS AS SECURITY FOR A MORTGAGE LOAN
The Mortgage Loans included in any Trust Fund typically will be secured by
an assignment of leases and rents pursuant to which the borrower assigns to the
lender its right, title and interest as landlord under the leases of the related
Mortgaged Property, and the income derived therefrom, as further security for
the related Mortgage Loan, while retaining a license to collect rents for so
long as there is no default. If the borrower defaults, the license terminates
and the lender is entitled to collect rents. Some state laws may require that
the lender take possession of the Mortgaged Property and obtain a judicial
appointment of a receiver before becoming entitled to collect the rents. In
addition, if bankruptcy or similar proceedings are commenced by or in respect of
the borrower, the lender's ability to collect the rents may be adversely
affected. See "Certain Legal Aspects of Mortgage Loans--Leases and Rents".
ENVIRONMENTAL RISKS
Under the laws of certain states, contamination of real property may give
rise to a lien on the property to assure the costs of cleanup. In several
states, such a lien has priority over an existing mortgage lien on such
property. In addition, under the laws of some states and under the federal
Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA"), a lender may be liable, as an "owner" or "operator", for costs of
addressing releases or threatened releases of hazardous substances at a
property, if agents or employees of the lender have become sufficiently involved
in the operations of the borrower, regardless of whether or not the
environmental damage or threat was caused by the borrower or a prior owner. A
lender also risks such liability on foreclosure of the mortgage. Unless
otherwise specified in the related Prospectus Supplement, if a Trust Fund
includes Mortgage Loans, then the related Pooling Agreement will contain
provisions generally to the effect that neither the Master Servicer nor the
Special Servicer may, on behalf of the Trust Fund, acquire title to a Mortgaged
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Property or assume control of its operation unless the Special Servicer, based
upon a report prepared by a person who regularly conducts environmental site
assessments, has made the determination that it is appropriate to do so, as
described under "Description of the Pooling Agreements--Realization Upon
Defaulted Mortgage Loans". See "Certain Legal Aspects of Mortgage
Loans--Environmental Legislation".
SPECIAL HAZARD LOSSES
Unless otherwise specified in the related Prospectus Supplement, the Master
Servicer and Special Servicer for any Trust Fund will each be required to cause
the borrower on each Mortgage Loan serviced by it to maintain such insurance
coverage in respect of the related Mortgaged Property as is required under the
related Mortgage, including hazard insurance; provided that, as and to the
extent described herein and in the related Prospectus Supplement, each of the
Master Servicer and the Special Servicer may satisfy its obligation to cause
hazard insurance to be maintained with respect to any Mortgaged Property through
acquisition of a blanket policy. In general, the standard form of fire and
extended coverage policy covers physical damage to or destruction of the
improvements of the property by fire, lightning, explosion, smoke, windstorm and
hail, and riot, strike and civil commotion, subject to the conditions and
exclusions specified in each policy. Although the policies covering the
Mortgaged Properties will be underwritten by different insurers under different
state laws in accordance with different applicable state forms, and therefore
will not contain identical terms and conditions, most such 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 mudflows), wet or dry rot, vermin, domestic animals
and other kinds of risks not specified in the preceding sentence. Unless the
related Mortgage specifically requires the mortgagor to insure against physical
damage arising from such causes, then, to the extent any consequent losses are
not covered by Credit Support, such losses may be borne, at least in part, by
the holders of one or more classes of Offered Certificates of the related
series. See "Description of the Pooling Agreements--Hazard Insurance Policies".
ERISA CONSIDERATIONS
Generally, ERISA applies to investments made by employee benefit plans and
transactions involving the assets of such plans. Due to the complexity of
regulations that govern such plans, prospective investors that are subject to
ERISA are urged to consult their own counsel regarding consequences under ERISA
of acquisition, ownership and disposition of the Offered Certificates of any
series. See "ERISA Considerations".
CERTAIN FEDERAL TAX CONSIDERATIONS REGARDING REMIC RESIDUAL CERTIFICATES
Holders of REMIC Residual Certificates will be required to report on their
federal income tax returns as ordinary income their pro rata share of the
taxable income of the REMIC, regardless of the amount or timing of their receipt
of cash payments, as described under "Material Federal Income Tax
Consequences--REMICs". Accordingly, under certain circumstances, holders of
Offered Certificates that constitute REMIC Residual Certificates may have
taxable income and tax liabilities arising from such investment during a taxable
year in excess of the cash received during such period. The requirement that
holders of REMIC Residual Certificates report their pro rata share of the
taxable income and net loss of the REMIC will continue until the Certificate
Balances of all classes of Certificates of the related series have been reduced
to zero, even though holders of REMIC Residual Certificates have received full
payment of their stated interest and principal. A portion (or, in certain
circumstances, all) of such Certificateholder's share of the REMIC taxable
income may be treated as "excess inclusion" income to such holder, which (i)
generally will not be subject to offset by losses from other activities, (ii)
for a tax-exempt holder, will be treated as unrelated business taxable income
and (iii) for a foreign holder, will not qualify for exemption from withholding
tax. Individual holders of REMIC Residual Certificates may be limited in their
ability to deduct servicing fees and other expenses of the REMIC. In addition,
REMIC Residual Certificates are subject to certain restrictions on transfer.
Because of the special tax treatment of REMIC Residual Certificates, the taxable
income arising in a given year on a REMIC Residual Certificate will not be equal
to the taxable income associated with investment in a corporate bond or stripped
instrument having similar cash flow characteristics and pre-tax yield.
Therefore, the after-tax yield on a REMIC Residual Certificate may be
significantly less than that of a corporate bond or stripped instrument having
similar cash flow characteristics.
BOOK-ENTRY REGISTRATION
If so provided in the related Prospectus Supplement, one or more classes of
the Offered Certificates of any series will be issued as Book-Entry
Certificates. Each class of Book-Entry Certificates will be initially
represented by one or
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more Certificates registered in the name of a nominee for DTC. As a result,
unless and until corresponding Definitive Certificates are issued, the
Certificate Owners with respect to any class of Book-Entry Certificates will be
able to exercise the rights of Certificateholders only indirectly through DTC
and its participating organizations ("Participants"). In addition, the access of
Certificate Owners to information regarding the Book-Entry Certificates in which
they hold interests may be limited. Conveyance of notices and other
communications by DTC to its Participants, and directly and indirectly through
such Participants to Certificate Owners, will be governed by arrangements among
them, subject to any statutory or regulatory requirements as may be in effect
from time to time. Furthermore, as described herein, Certificate Owners may
suffer delays in the receipt of payments on the Book-Entry Certificates, and the
ability of any Certificate Owner to pledge or otherwise take actions with
respect to its interest in the Book-Entry Certificates may be limited due to the
lack of a physical certificate evidencing such interest. See "Description of the
Certificates--Book-Entry Registration and Definitive Certificates".
CONFLICTS OF INTEREST INVOLVING PARTIES TO A POOLING AGREEMENT
If so specified in the related Prospectus Supplement, the Master Servicer
may also perform the duties of Special Servicer, and the Master Servicer, the
Special Servicer or the Trustee may also perform the duties of REMIC
Administrator. If so specified in the related Prospectus Supplement, an
affiliate of the Sponsor, or the Mortgage Asset Seller or an affiliate thereof,
may perform the functions of Master Servicer, Special Servicer and/or REMIC
Administrator. In addition, any party to a Pooling Agreement or any affiliate
thereof may own Certificates. Investors in the Offered Certificates should
consider that any resulting conflicts of interest could affect the performance
of duties under the related Pooling Agreement. For example, if the same party
serves as both Master Servicer and Special Servicer for any Trust Fund and, as
Master Servicer, such party is obligated to make advances in respect of
delinquent payments on the Mortgage Loans in such Trust Fund, or if the Master
Servicer or Special Servicer for any Trust Fund owns a significant portion of
any class of Offered Certificates of the related series, then, notwithstanding
the applicable servicing standard imposed by the related Prospectus Supplement,
either such fact could influence servicing decisions in respect of the Mortgage
Loans in such Trust Fund.
DELINQUENT AND NON-PERFORMING MORTGAGE LOANS
If so provided in the related Prospectus Supplement, the Trust Fund for a
particular series of Certificates may include Mortgage Loans that are past due
or are non-performing. Unless otherwise described in the related Prospectus
Supplement, the servicing of such Mortgage Loans as to which a specified number
of payments are delinquent will be performed by the Special Servicer; however,
the same entity may act as both Master Servicer and Special Servicer. Credit
Support provided with respect to a particular series of Certificates may not
cover all losses related to such delinquent or non-performing Mortgage Loans,
and investors should consider the risk that the inclusion of such Mortgage Loans
in the Trust Fund may adversely affect the rate of defaults and prepayments on
the Mortgage Assets in such Trust Fund and the yield on the Offered Certificates
of such series. See "Description of the Trust Funds--Mortgage Loans-General".
DESCRIPTION OF THE TRUST FUNDS
GENERAL
The primary assets of each Trust Fund will consist of (i) one or more
various types of multifamily or commercial mortgage loans (the "Mortgage
Loans"), (ii) mortgage participations, pass-through certificates or other
mortgage-backed securities ("MBS") that evidence interests in, or that are
secured by pledges of, one or more of various types of multifamily or commercial
mortgage loans or (iii) a combination of Mortgage Loans and MBS (collectively,
"Mortgage Assets"). Each Trust Fund will be established by Mortgage Capital
Funding, Inc. (the "Sponsor"). Each Mortgage Asset will be selected by the
Sponsor for inclusion in a Trust Fund from among those purchased, either
directly or indirectly, from a prior holder thereof (a "Mortgage Asset Seller"),
which prior holder may or may not be the originator of such Mortgage Loan or the
issuer of such MBS and may be an affiliate of the Sponsor. The Mortgage Assets
will not be guaranteed or insured by the Sponsor or any of its affiliates or,
unless otherwise provided in the related Prospectus Supplement, by any
governmental agency or instrumentality or by any other person. The discussion
below under the heading "--Mortgage Loans", unless otherwise noted, applies
equally to mortgage loans underlying any MBS included in a particular Trust
Fund.
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MORTGAGE LOANS
General. The Mortgage Loans will be evidenced by promissory notes (the
"Mortgage Notes") secured by mortgages, deeds of trust or similar security
instruments (the "Mortgages") that create liens on fee or leasehold estates in
properties (the "Mortgaged Properties") consisting of, without limitation, (i)
residential properties consisting of five or more rental or cooperatively-owned
dwelling units in high-rise, mid-rise or garden apartment buildings or other
residential structures ("Multifamily Properties") or (ii) office buildings,
retail stores, hotels or motels, nursing homes, hospitals or other health
care-related facilities, mobile home parks, warehouse facilities, mini-warehouse
facilities, self-storage facilities, industrial plants, mixed use or various
other types of income-producing properties or unimproved land ("Commercial
Properties"). The Multifamily Properties may include mixed commercial and
residential structures and may include apartment buildings owned by private
cooperative housing corporations ("Cooperatives"). Unless otherwise specified in
the related Prospectus Supplement, each Mortgage will create a first priority
mortgage lien on a borrower's fee estate in a Mortgaged Property. If a Mortgage
creates a lien on a borrower's leasehold estate in a property, then, unless
otherwise specified in the related Prospectus Supplement, the term of any such
leasehold will exceed the term of the Mortgage Note. Unless otherwise specified
in the related Prospectus Supplement, each Mortgage Loan will have been
originated by a person (the "Originator") other than the Sponsor; however, the
Originator may be or may have been an affiliate of the Sponsor.
If so specified in the related Prospectus Supplement, Mortgage Assets for a
series of Certificates may include Mortgage Loans made on the security of real
estate projects under construction. In that case, the related Prospectus
Supplement will describe the procedures and timing for making disbursements from
construction reserve funds as portions of the related real estate project are
completed. In addition, the Mortgage Assets for a particular series of
Certificates may include Mortgage Loans that are delinquent or non-performing as
of the date such Certificates are issued. In that case, the related Prospectus
Supplement will set forth, as to each such Mortgage Loan, available information
as to the period of such delinquency or non-performance, any forbearance
arrangement then in effect, the condition of the related Mortgaged Property and
the ability of the Mortgaged Property to generate income to service the mortgage
debt.
Default and Loss Considerations with Respect to the Mortgage Loans.
Mortgage loans secured by liens on income-producing properties are substantially
different from loans made on the security of owner-occupied single-family homes.
The repayment of a loan secured by a lien on an income-producing property is
typically dependent upon the successful operation of such property (that is, its
ability to generate income.) Moreover, some or all of the Mortgage Loans
included in a particular Trust Fund may be non-recourse loans, which means that,
absent special facts, recourse in the case of default will be limited to the
Mortgaged Property and such other assets, if any, that were pledged to secure
repayment of the Mortgage Loan.
Lenders typically look to the Debt Service Coverage Ratio of a loan secured
by income-producing property as an important measure of the risk of default on
such a loan. Unless otherwise defined in the related Prospectus Supplement, the
"Debt Service Coverage Ratio" of a Mortgage Loan at any given time is the ratio
of (i) the Net Operating Income derived from the related Mortgaged Property for
a twelve-month period to (ii) the annualized scheduled payments on the Mortgage
Loan and any other loans senior thereto that are secured by the related
Mortgaged Property. Unless otherwise defined in the related Prospectus
Supplement, "Net Operating Income" means, for any given period, the total
operating revenues derived from a Mortgaged Property during such period, minus
the total operating expenses incurred in respect of such Mortgaged Property
during such period other than (i) non-cash items such as depreciation and
amortization, (ii) capital expenditures and (iii) debt service on the related
Mortgage Loan or on any other loans that are secured by such Mortgaged Property.
The Net Operating Income of a Mortgaged Property will fluctuate over time and
may or may not be sufficient to cover debt service on the related Mortgage Loan
at any given time. As the primary source of the operating revenues of a
non-owner occupied, income-producing property, rental income (and maintenance
payments from tenant-stockholders of a Cooperative) may be affected by the
condition of the applicable real estate market and/or area economy. In addition,
properties typically leased, occupied or used on a short-term basis (i.e., six
months or less) such as certain health care-related facilities, hotels and
motels, and mini-warehouse and self-storage facilities, tend to be affected more
rapidly by changes in market or business conditions than do properties typically
leased for longer periods, such as warehouses, retail stores, office buildings
and industrial plants. Commercial Properties may be owner-occupied or leased to
a single tenant. Thus, the Net Operating Income of such a Mortgaged Property may
depend substantially on the
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financial condition of the borrower or the single tenant, and Mortgage Loans
secured by liens on such properties may pose greater risks than loans secured by
liens on Multifamily Properties or on multi-tenant Commercial Properties.
Increases in operating expenses due to the general economic climate or
economic conditions in a locality or industry segment, such as increases in
interest rates, real estate tax rates, energy costs, labor costs and other
operating expenses, and/or to changes in governmental rules, regulations and
fiscal policies, may also affect the risk of default on a Mortgage Loan. As may
be further described in the related Prospectus Supplement, in some cases leases
of Mortgaged Properties may provide that the lessee, rather than the
borrower/landlord, is responsible for payment of operating expenses ("Net
Leases"). However, the existence of such "net of expense" provisions will result
in stable Net Operating Income to the borrower/landlord only to the extent that
the lessee is able to absorb operating expense increases while continuing to
make rent payments.
Lenders also look to the Loan-to-Value Ratio of a mortgage loan as a
measure of risk of loss if a property must be liquidated following a default.
Unless otherwise defined in the related Prospectus Supplement, the
"Loan-to-Value Ratio" of a Mortgage Loan at any given time is the ratio
(expressed as a percentage) of (i) the then outstanding principal balance of the
Mortgage Loan and any other loans senior thereto that are secured by the related
Mortgaged Property to (ii) the Value of the related Mortgaged Property. The
"Value" of a Mortgaged Property is generally its fair market value determined in
an appraisal obtained by the Originator at the origination of such loan. The
lower the Loan-to-Value Ratio, the greater the percentage of the borrower's
equity in a Mortgaged Property, and thus the greater the cushion provided to the
lender against loss on liquidation following a default.
Loan-to-Value Ratios will not necessarily constitute an accurate measure of
the risk of liquidation loss in a pool of Mortgage Loans. For example, the value
of a Mortgaged Property as of the date of initial issuance of the related series
of Certificates may be less than the Value determined at loan origination, and
will likely continue to fluctuate from time to time based upon changes in
economic conditions and the real estate market. Moreover, even when current, an
appraisal is not necessarily a reliable estimate of value. Appraised values of
income-producing properties are generally based on the market comparison method
(recent resale value of comparable properties at the date of the appraisal), the
cost replacement method (the cost of replacing the property at such date), the
income capitalization method (a projection of value based upon the property's
projected net cash flow), or upon a selection from or interpolation of the
values derived from such methods. Each of these appraisal methods can present
analytical difficulties. It is often difficult to find truly comparable
properties that have recently been sold; the replacement cost of a property may
have little to do with its current market value; and income capitalization is
inherently based on inexact projections of income and expense and the selection
of an appropriate capitalization rate. Where more than one of these appraisal
methods are used and provide significantly different results, an accurate
determination of value and, correspondingly, a reliable analysis of default and
loss risks, is even more difficult.
While the Sponsor believes that the foregoing considerations are important
factors that generally distinguish loans secured by liens on income-producing
real estate from single-family mortgage loans there is no assurance that all of
such factors will in fact have been prudently considered by the Originators of
the Mortgage Loans, or that, for a particular Mortgage Loan, they are complete
or relevant. See "Risk Factors--Certain Risks Associated with Mortgage Loans
Secured by Commercial and Multifamily Properties" and "--Balloon Payments;
Borrower Default".
Payment Provisions of the Mortgage Loans. Unless otherwise specified in the
related Prospectus Supplement, all of the Mortgage Loans will have had original
terms to maturity of not more than 40 years, and will provide for scheduled
payments of principal, interest or both, to be made on specified dates ("Due
Dates") that occur monthly, quarterly, semi-annually or annually. A Mortgage
Loan (i) may provide for accrual of interest thereon at an interest rate (a
"Mortgage Rate") that is fixed over its term or that adjusts from time to time,
or that may be converted at the borrower's election from an adjustable to a
fixed Mortgage Rate, or from a fixed to an adjustable Mortgage Rate, and in some
cases back again, (ii) may provide for level payments to maturity or for
payments that adjust from time to time to accommodate changes in the Mortgage
Rate or to reflect the occurrence of certain events, and may permit negative
amortization, (iii) may be fully amortizing over its term to maturity or may
require a balloon payment on its stated maturity date, (iv) may provide for no
amortization prior to its stated maturity date, and (v) may contain a
prohibition on prepayment (the period of such prohibition, a "Lock-out Period"
and its date of expiration, a "Lock-out Date") or require payment of a premium
or a yield maintenance penalty (a "Prepayment Premium") in connection with a
prepayment, in each case as described in the related Prospectus Supplement. A
Mortgage Loan may also contain a provision that entitles the lender to a share
of profits realized from the operation or disposition of the Mortgaged
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Property (an "Equity Participation"), as described in the related Prospectus
Supplement. If holders of any class or classes of Offered Certificates of a
series will be entitled to all or a portion of an Equity Participation in
addition to normal payments of interest on and/or principal of such Offered
Certificates, the related Prospectus Supplement will describe the Equity
Participation and the method or methods by which distributions in respect
thereof will be made to such holders.
Mortgage Loan Information in Prospectus Supplements. Each Prospectus
Supplement will contain certain information pertaining to the Mortgage Loans
which will generally be current as of a date specified in the related Prospectus
Supplement and which, to the extent then applicable and specifically known to
the Sponsor, will include the following: (i) the aggregate outstanding principal
balance and the largest, smallest and average outstanding principal balance of
the Mortgage Loans, (ii) the type or types of property that provide security for
repayment of the Mortgage Loans, (iii) the earliest and latest origination date
and maturity date of the Mortgage Loans, (iv) the original and remaining terms
to maturity of the Mortgage Loans, or the respective ranges thereof, and the
weighted average original and remaining terms to maturity of the Mortgage Loans,
(v) the original Loan-to-Value Ratios of the Mortgage Loans, or the range
thereof, and the weighted average original Loan-to-Value Ratio of the Mortgage
Loans, (vi) the Mortgage Rates borne by the Mortgage Loans, or the range
thereof, and the weighted average Mortgage Rate borne by the Mortgage Loans,
(vii) with respect to Mortgage Loans with adjustable Mortgage Rates ("ARM
Loans"), the index or indices upon which such adjustments are based, the
adjustment dates, the range of gross margins and the weighted average gross
margin, and any limits on Mortgage Rate adjustments at the time of any
adjustment and over the life of the ARM Loan, (viii) information regarding the
payment characteristics of the Mortgage Loans, including without limitation
balloon payment and other amortization provisions, Lock-out Periods and
Prepayment Premiums, (ix) the Debt Service Coverage Ratios of the Mortgage Loans
(either at origination or as of a more recent date), or the range thereof, and
the weighted average of such Debt Service Coverage Ratios, and (x) the
geographic distribution of the Mortgaged Properties on a state-by-state basis.
In appropriate cases, the related Prospectus Supplement will, as to certain
Mortgage Loans, provide the information described above on a loan-by-loan basis
and will also contain certain information available to the Sponsor that pertains
to the provisions of leases and the nature of tenants of the Mortgaged
Properties. If the Sponsor is unable to tabulate the specific information
described above at the time Offered Certificates of a series are initially
offered, more general information of the nature described above will be provided
in the related Prospectus Supplement, and specific information will be set forth
in a report which will be available to purchasers of those Certificates at or
before the initial issuance thereof and will be filed as part of a Current
Report on Form 8-K with the Commission within fifteen days following such
issuance.
MBS
MBS may include (i) private (that is, not guaranteed or insured by the
United States or any agency or instrumentality thereof) mortgage participations,
mortgage pass-through certificates or other mortgage-backed securities or (ii)
certificates insured or guaranteed by FHLMC, FNMA, GNMA or FAMC, provided that
each MBS will evidence an interest in, or will be secured by a pledge of,
mortgage loans that conform to the descriptions of the Mortgage Loans contained
herein.
Any MBS will have been issued pursuant to a participation and servicing
agreement, a pooling and servicing agreement, an indenture or similar agreement
(an "MBS Agreement"). The issuer of the MBS (the "MBS Issuer") and/or the
servicer of the underlying mortgage loans (the "MBS Servicer") will have entered
into the MBS Agreement, generally with a trustee (the "MBS Trustee") or, in the
alternative, with the original purchaser or purchasers of the MBS.
The MBS may have been issued in one or more classes with characteristics
similar to the classes of Certificates described herein. Distributions in
respect of the MBS will be made by the MBS Servicer or the MBS Trustee on the
dates specified in the related Prospectus Supplement. The MBS Issuer or the MBS
Servicer or another person specified in the related Prospectus Supplement may
have the right or obligation to repurchase or substitute assets underlying the
MBS after a certain date or under other circumstances specified in the related
Prospectus Supplement.
Reserve funds, subordination or other credit support similar to that
described for the Certificates under "Description of Credit Support" may have
been provided with respect to the MBS. The type, characteristics and amount of
such credit support, if any, will reflect the characteristics of the MBS and the
underlying mortgage loans and generally will have been established on the basis
of the requirements of any Rating Agency that may have assigned a rating to the
MBS, or by the initial purchasers of the MBS.
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The Prospectus Supplement for a series of Certificates that evidence
interests in MBS will specify, to the extent available, (i) the aggregate
approximate initial and outstanding principal amount and type of the MBS to be
included in the Trust Fund, (ii) the original and remaining term to stated
maturity of the MBS, if applicable, (iii) the pass-through or bond rate of the
MBS or the formula for determining such rates (iv) the payment characteristics
of the MBS, (v) the MBS Issuer, MBS Servicer and MBS Trustee, as applicable,
(vi) a description of the credit support, if any, (vii) the circumstances under
which the related underlying mortgage loans, or the MBS themselves, may be
purchased prior to their maturity, (viii) the terms on which mortgage loans may
be substituted for those originally underlying the MBS, (ix) the type of
mortgage loans underlying the MBS and, to the extent available to the Sponsor
and appropriate under the circumstances, such other information in respect of
the underlying mortgage loans described under "--Mortgage Loans--Mortgage Loan
Information in Prospectus Supplements" and (x) the characteristics of any cash
flow agreements that relate to the MBS.
CERTIFICATE ACCOUNTS
Each Trust Fund will include one or more accounts (collectively, the
"Certificate Account") established and maintained on behalf of the
Certificateholders into which the person or persons designated in the related
Prospectus Supplement will, to the extent provided in the related Pooling
Agreement and described herein and in the related Prospectus Supplement, deposit
all payments and collections received or advanced with respect to the Mortgage
Assets and other assets in the Trust Fund. A Certificate Account may be
maintained as an interest bearing or a non-interest bearing account, and funds
held therein may be held as cash or invested in certain obligations acceptable
to each Rating Agency rating one or more classes of the related series of
Offered Certificates.
CREDIT SUPPORT
If so provided in the related Prospectus Supplement, partial or full
protection against certain defaults and losses on the Mortgage Assets in the
related Trust Fund may be provided to one or more classes of Certificates in the
related series in the form of subordination of one or more other classes of
Certificates in such series or by one or more other types of credit support,
such as a letter of credit, insurance policy, guarantee or reserve fund, among
others, or a combination thereof (any such coverage with respect to the
Certificates of any series, "Credit Support"). If so specified in the related
Prospectus Supplement, any form of Credit Support may offer protection only
against specific types of losses and shortfalls. The amount and types of Credit
Support, the coverage afforded by it, the identification of the entity providing
it (if applicable) and related information with respect to each type of Credit
Support, if any, will be set forth in the Prospectus Supplement for a series of
Offered Certificates. See "Risk Factors--Credit Support Limitations" and
"Description of Credit Support".
Cash Flow Agreements
If so provided in the related Prospectus Supplement, the Trust Fund may
include guaranteed investment contracts pursuant to which moneys held in the
funds and accounts established for the related series will be invested at a
specified rate. The Trust Fund may also include certain other agreements, such
as interest rate exchange agreements, interest rate cap or floor agreements,
currency exchange agreements or similar agreements designed to reduce the
effects of interest rate or currency exchange rate fluctuations on the Mortgage
Assets on one or more classes of Certificates. The principal terms of any such
guaranteed investment contract or other agreement (any such agreement, a "Cash
Flow Agreement"), and the identity of the Cash Flow Agreement obligor, will be
described in the Prospectus Supplement for a series of Offered Certificates.
YIELD AND MATURITY CONSIDERATIONS
GENERAL
The yield on any Offered Certificate will depend on the price paid by the
Certificateholder, the Pass-Through Rate of the Certificate and the amount and
timing of distributions on the Certificate. See "Risk Factors--Prepayments;
Average Life of Certificates; Yields". The following discussion contemplates a
Trust Fund that consists solely of Mortgage Loans. While the characteristics and
behavior of mortgage loans underlying MBS can generally be expected to have the
same effect on the yield to maturity and/or weighted average life of a Class of
Certificates as will the characteristics and behavior of comparable Mortgage
Loans, the effect may differ due to the payment characteristics of the MBS. If a
Trust Fund includes MBS, the related Prospectus Supplement will discuss
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the effect that the MBS payment characteristics may have on the yield to
maturity and weighted average lives of the Offered Certificates offered thereby.
PASS-THROUGH RATE
The Certificates of any class within a series may have a fixed, variable or
adjustable Pass-Through Rate, which may or may not be based upon the interest
rates borne by the Mortgage Loans in the related Trust Fund. The Prospectus
Supplement with respect to any series of Offered Certificates will specify the
Pass-Through Rate for each class of such Certificates or, in the case of a class
of Offered Certificates with a variable or adjustable Pass-Through Rate, the
method of determining the Pass-Through Rate; the effect, if any, of the
prepayment of any Mortgage Loan on the Pass-Through Rate of one or more classes
of Offered Certificates; and whether the distributions of interest on the
Offered Certificates of any class will be dependent, in whole or in part, on the
performance of any obligor under a Cash Flow Agreement.
PAYMENT DELAYS
With respect to any series of Certificates, a period of time will elapse
between the date upon which payments on the Mortgage Loans in the related Trust
Fund are due and the Distribution Date on which such payments are passed through
to Certificateholders. That delay will effectively reduce the yield that would
otherwise be produced if payments on such Mortgage Loans were distributed to
Certificateholders on or near the date they were due.
CERTAIN SHORTFALLS IN COLLECTIONS OF INTEREST
When a principal prepayment in full or in part is made on a Mortgage Loan,
the borrower is generally charged interest only for the period from the Due Date
of the preceding scheduled payment up to the date of such prepayment, instead of
up to the Due Date for the next succeeding scheduled payment. However, interest
accrued on any series of Certificates and distributable thereon on any
Distribution Date will generally correspond to interest accrued on the Mortgage
Loans to their respective Due Dates during the related Due Period. Unless
otherwise specified in the related Prospectus Supplement, a "Due Period" is a
specified time period generally corresponding in length to the time period
between Distribution Dates, and all scheduled payments on the Mortgage Loans in
any Trust Fund that are due during a given Due Period will, to the extent
received by a specified date (the "Determination Date") or otherwise advanced by
the related Master Servicer, Special Servicer or other specified person, be
distributed to the related series of Certificateholders on the next succeeding
Distribution Date. Consequently, if a prepayment on any Mortgage Loan is
distributable to Certificateholders on a particular Distribution Date, but such
prepayment is not accompanied by interest thereon to the Due Date for such
Mortgage Loan in the related Due Period, then the interest charged to the
borrower (net of servicing and administrative fees) may be less (such shortfall,
a "Prepayment Interest Shortfall") than the corresponding amount of interest
accrued and otherwise payable on the Certificates of the related series. If and
to the extent that any such shortfall is allocated to a class of Offered
Certificates, the yield thereon will be adversely affected. The Prospectus
Supplement for a series of Certificates will describe the manner in which any
such shortfalls will be allocated among the classes of such Certificates. If so
specified in the related Prospectus Supplement, the Master Servicer will be
required to apply some or all of its servicing compensation for the
corresponding period to offset the amount of any such shortfalls. The related
Prospectus Supplement will also describe any other amounts available to offset
such shortfalls. See "Description of the Pooling Agreements--Servicing
Compensation and Payment of Expenses".
YIELD AND PREPAYMENT CONSIDERATIONS
A Certificate's yield to maturity will be affected by the rate of principal
payments on the Mortgage Loans in the related Trust Fund and the allocation
thereof to reduce the principal balance (or notional amount, if applicable) of
such Certificate. The rate of principal payments on the Mortgage Loans in any
Trust Fund will in turn be affected by the amortization schedules thereof
(which, in the case of ARM Loans, will change periodically to accommodate
adjustments to the Mortgage Rates thereon), the dates on which any balloon
payments are due, and the rate of principal prepayments thereon (including for
this purpose, prepayments resulting from liquidations of Mortgage Loans due to
defaults, casualties or condemnations affecting the Mortgaged Properties, or
purchases of Mortgage Loans out of the related Trust Fund). Because the rate of
principal prepayments on the Mortgage Loans in any Trust Fund will depend on
future events and a variety of factors (as described more fully below), no
assurance can be given as to such rate.
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The extent to which the yield to maturity of a class of Offered
Certificates of any series may vary from the anticipated yield will depend upon
the degree to which they are purchased at a discount or premium and when, and to
what degree, payments of principal on the Mortgage Loans in the related Trust
Fund are in turn distributed on such Certificates (or, in the case of a class of
Stripped Interest Certificates, result in the reduction of the Notional Amount
thereof). An investor should consider, in the case of any Offered Certificate
purchased at a discount, the risk that a slower than anticipated rate of
principal payments on the Mortgage Loans in the related Trust Fund could result
in an actual yield to such investor that is lower than the anticipated yield
and, in the case of any Offered Certificate purchased at a premium, the risk
that a faster than anticipated rate of principal payments on such Mortgage Loans
could result in an actual yield to such investor that is lower than the
anticipated yield. In addition, if an investor purchases an Offered Certificate
at a discount (or premium), and principal payments are made in reduction of the
principal balance or notional amount of such investor's Offered Certificates at
a rate slower (or faster) than the rate anticipated by the investor during any
particular period, the consequent adverse effects on such investor's yield would
not be fully offset by a subsequent like increase (or decrease) in the rate of
such principal payments at a later date.
A class of Certificates, including a class of Offered Certificates, may
provide that on any Distribution Date the holders of such Certificates are
entitled to a pro rata share of the prepayments on the Mortgage Loans in the
related Trust Fund that are distributable on such date, to a disproportionately
large share (which, in some cases, may be all) of such prepayments, or to a
disproportionately small share (which, in some cases, may be none) of such
prepayments. As and to the extent described in the related Prospectus
Supplement, the respective entitlements of the various classes of
Certificateholders of any series to receive payments (and, in particular,
prepayments) of principal of the Mortgage Loans in the related Trust Fund may
vary based on the occurrence of certain events (e.g., the retirement of one or
more classes of Certificates of such series) or subject to certain contingencies
(e.g., prepayment and default rates with respect to such Mortgage Loans).
In general, the Notional Amount of a class of Stripped Interest
Certificates will either (i) be based on the principal balances of some or all
of the Mortgage Assets in the related Trust Fund or (ii) equal the Certificate
Balances of one or more of the other classes of Certificates of the same series.
Accordingly, the yield on such Stripped Interest Certificates will be inversely
related to the rate at which payments and other collections of principal are
received on such Mortgage Assets or distributions are made in reduction of the
Certificate Balances of such classes of Certificates, as the case may be.
Consistent with the foregoing, if a class of Certificates of any series
consists of Stripped Interest Certificates or Stripped Principal Certificates, a
lower than anticipated rate of principal prepayments on the Mortgage Loans in
the related Trust Fund will negatively affect the yield to investors in Stripped
Principal Certificates, and a higher than anticipated rate of principal
prepayments on such Mortgage Loans will negatively affect the yield to investors
in Stripped Interest Certificates. If the Offered Certificates of a series
include any such Certificates, the related Prospectus Supplement will include a
table showing the effect of various assumed levels of prepayment on yields on
such Certificates. Such tables will be intended to illustrate the sensitivity of
yields to various assumed prepayment rates and will not be intended to predict,
or provide information that will enable investors to predict, yields or
prepayment rates.
The Sponsor is not aware of any relevant publicly available or
authoritative statistics with respect to the historical prepayment experience of
a large group of multifamily or commercial mortgage loans. However, the extent
of prepayments of principal of the Mortgage Loans in any Trust Fund may be
affected by a number of factors, including, without limitation, the availability
of mortgage credit, the relative economic vitality of the area in which the
Mortgaged Properties are located, the quality of management of the Mortgaged
Properties, the servicing of the Mortgage Loans, possible changes in tax laws
and other opportunities for investment. In addition, the rate of principal
payments on the Mortgage Loans in any Trust Fund may be affected by the
existence of Lock-out Periods and requirements that principal prepayments be
accompanied by Prepayment Premiums, and by the extent to which such provisions
may be practicably enforced.
The rate of prepayment on a pool of mortgage loans is also affected by
prevailing market interest rates for mortgage loans of a comparable type, term
and risk level. When the prevailing market interest rate is below a mortgage
coupon, a borrower may have an increased incentive to refinance its mortgage
loan. Even in the case of ARM Loans, as prevailing market interest rates
decline, and without regard to whether the Mortgage Rates on such ARM Loans
decline in a manner consistent therewith, the related borrowers may have an
increased incentive to refinance for purposes of either (i) converting to a
fixed rate loan and thereby "locking in" such rate or (ii) taking
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advantage of the initial "teaser rate" (a mortgage interest rate below what it
would otherwise be if the applicable index and gross margin were applied) on
another adjustable rate mortgage loan.
Depending on prevailing market interest rates, the outlook for market
interest rates and economic conditions generally, some borrowers may sell
Mortgaged Properties in order to realize their equity therein, to meet cash flow
needs or to make other investments. In addition, some borrowers may be motivated
by federal and state tax laws (which are subject to change) to sell Mortgaged
Properties prior to the exhaustion of tax depreciation benefits. The Sponsor
will make no representation as to the particular factors that will affect the
prepayment of the Mortgage Loans in any Trust Fund, as to the relative
importance of such factors, as to the percentage of the principal balance of
such Mortgage Loans that will be paid as of any date or as to the overall rate
of prepayment on such Mortgage Loans.
WEIGHTED AVERAGE LIFE AND MATURITY
The rate at which principal payments are received on the Mortgage Loans in
any Trust Fund will affect the ultimate maturity and the weighted average life
of one or more classes of the Certificates of such series. Weighted average life
refers to the average amount of time that will elapse from the date of issuance
of an instrument until each dollar allocable as principal of such instrument is
repaid to the investor.
The weighted average life and maturity of a class of Certificates of any
series will be influenced by the rate at which principal on the related Mortgage
Loans, whether in the form of scheduled amortization or prepayments (for this
purpose, the term "prepayment" includes voluntary prepayments, liquidations due
to default and purchases of Mortgage Loans out of the related Trust Fund), is
paid to such class. Prepayment rates on loans are commonly measured relative to
a prepayment standard or model, such as the Constant Prepayment Rate ("CPR")
prepayment model or the Standard Prepayment Assumption ("SPA") prepayment model.
CPR represents an assumed constant rate of prepayment each month (expressed as
an annual percentage) relative to the then outstanding principal balance of a
pool of loans for the life of such loans. SPA represents an assumed variable
rate of prepayment each month (expressed as an annual percentage) relative to
the then outstanding principal balance of a pool of loans, with different
prepayment assumptions often expressed as percentages of SPA. For example, a
prepayment assumption of 100% of SPA assumes prepayment rates of 0.2% per annum
of the then outstanding principal balance of such loans in the first month of
the life of the loans and an additional 0.2% per annum in each month thereafter
until the thirtieth month. Beginning in the thirtieth month, and in each month
thereafter during the life of the loans, 100% of SPA assumes a constant
prepayment rate of 6% per annum each month.
Neither CPR nor SPA nor any other prepayment model or assumption purports
to be a historical description of prepayment experience or a prediction of the
anticipated rate of prepayment of any particular pool of loans. Moreover, the
CPR and SPA models were developed based upon historical prepayment experience
for single-family loans. Thus, it is unlikely that the prepayment experience of
the Mortgage Loans included in any Trust Fund will conform to any particular
level of CPR or SPA.
The Prospectus Supplement with respect to each series of Certificates will
contain tables, if applicable, setting forth the projected weighted average life
of each class of Offered Certificates of such series and the percentage of the
initial Certificate Balance of each such class that would be outstanding on
specified Distribution Dates based on the assumptions stated in such Prospectus
Supplement, including assumptions that prepayments on the related Mortgage Loans
are made at rates corresponding to various percentages of CPR or SPA, or at such
other rates specified in such Prospectus Supplement. Such tables and assumptions
will illustrate the sensitivity of the weighted average lives of the
Certificates to various assumed prepayment rates and will not be intended to
predict, or to provide information that will enable investors to predict, the
actual weighted average lives of the Certificates.
CONTROLLED AMORTIZATION CLASSES AND COMPANION CLASSES
A series of Certificates may include one or more Controlled Amortization
Classes that will entitle the holders thereof to receive principal distributions
according to a specified principal payment schedule, which schedule is protected
by prioritizing, as and to the extent described in the related Prospectus
Supplement, the principal payments from the Mortgage Loans in the related Trust
Fund. Unless otherwise specified in the related Prospectus Supplement, each
Controlled Amortization Class will either be a Planned Amortization Class (a
"PAC") or a Targeted Amortization Class (a "TAC"). In general, a PAC has a
"prepayment collar" (that is, a range of prepayment rates that can be sustained
without disruption) that determines the principal cash flow of such
Certificates. Such a prepayment
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collar is not static, and may expand or contract after the issuance of the PAC
depending upon the actual prepayment experience for the underlying Mortgage
Loans. Distributions of principal on a PAC would be made in accordance with the
specified schedule so long as prepayments on the underlying Mortgage Loans
remain at a relatively constant rate within the prepayment collar and, as
described below, Companion Classes exist to absorb "excesses" or "shortfalls" in
principal payments on the underlying Mortgage Loans. If the rate of prepayment
on the underlying Mortgage Loans from time to time falls outside the prepayment
collar, or fluctuates significantly within the prepayment collar, especially for
any extended period of time, such an event may have material consequences in
respect of the anticipated weighted average life and maturity for a PAC. A TAC
is structured so that principal distributions generally will be payable thereon
in accordance with its specified principal payment schedule so long as the rate
of prepayments on the related Mortgage Assets remains relatively constant at the
particular rate used in establishing such schedule. A TAC will generally afford
the holders thereof some protection against early retirement or some protection
against an extended average life, but not both.
Although prepayment risk cannot be eliminated entirely for any class of
Certificates, a Controlled Amortization Class will generally provide a
relatively stable cash flow so long as the actual rate of prepayment on the
Mortgage Loans in the related Trust Fund remains relatively constant at the
rate, or within the range of rates, of prepayment used to establish the specific
principal payment schedule for such Certificates. Prepayment risk with respect
to a given Mortgage Asset Pool does not disappear, however, and the stability
afforded to a Controlled Amortization Class comes at the expense of one or more
Companion Classes of the same series, any of which Companion Classes may also be
a class of Offered Certificates. In general, and as more particularly described
in the related Prospectus Supplement, a Companion Class will entitle the holders
thereof to a disproportionately large share of prepayments on the Mortgage Loans
in the related Trust Fund when the rate of prepayment is relatively fast, and
will entitle the holders thereof to a disproportionately small share of
prepayments on the Mortgage Loans in the related Trust Fund when the rate of
prepayment is relatively slow. A class of Certificates that entitles the holders
thereof to a disproportionately large share of the prepayments on the Mortgage
Loans in the related Trust Fund enhances the risk of early retirement of such
class ("call risk") if the rate of prepayment is relatively fast; while a class
of Certificates that entitles the holders thereof to a disproportionately small
share of the prepayments on the Mortgage Loans in the related Trust Fund
enhances the risk of an extended average life of such class ("extension risk")
if the rate of prepayment is relatively slow. Thus, as and to the extent
described in the related Prospectus Supplement, a Companion Class absorbs some
(but not all) of the "call risk" and/or "extension risk" that would otherwise
belong to the related Controlled Amortization Class if all payments of principal
of the Mortgage Loans in the related Trust Fund were allocated on a pro rata
basis.
OTHER FACTORS AFFECTING YIELD, WEIGHTED AVERAGE LIFE AND MATURITY
Balloon Payments; Extensions of Maturity. Some or all of the Mortgage Loans
included in a particular Trust Fund may require that balloon payments be made at
maturity. Because the ability of a borrower to make a balloon payment typically
will depend upon its ability either to refinance the loan or to sell the related
Mortgaged Property, there is a risk that Mortgage Loans that require balloon
payments may default at maturity, or that the maturity of such a Mortgage Loan
may be extended in connection with a workout. In the case of defaults, recovery
of proceeds may be delayed by, among other things, bankruptcy of the borrower or
adverse conditions in the market where the property is located. In order to
minimize losses on defaulted Mortgage Loans, the Master Servicer and/or Special
Servicer for a Trust Fund, to the extent and under the circumstances set forth
herein and in the related Prospectus Supplement, may be authorized to modify
Mortgage Loans in such Trust Fund that are in default or as to which a payment
default is imminent. Any defaulted balloon payment or modification that extends
the maturity of a Mortgage Loan may delay distributions of principal on a class
of Offered Certificates and thereby extend the weighted average life of such
Certificates and, if such Certificates were purchased at a discount, reduce the
yield thereon.
Negative Amortization. The weighted average life of a class of Certificates
can be affected by Mortgage Loans that permit negative amortization to occur. A
Mortgage Loan that permits negative amortization would be expected during a
period of increasing interest rates to amortize at a slower rate (and perhaps
not at all) than if interest rates were declining or were remaining constant.
Such slower rate of Mortgage Loan amortization would correspondingly be
reflected in a slower rate of amortization for one or more classes of
Certificates of the related series. In addition, negative amortization on one or
more Mortgage Loans in any Trust Fund may result in negative amortization on the
Certificates of the related series. The related Prospectus Supplement will
describe, if applicable, the manner in which negative amortization in respect of
the Mortgage Loans in any Trust Fund is allocated among the respective classes
of
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Certificates of the related series. The portion of any Mortgage Loan negative
amortization allocated to a class of Certificates (other than certain classes of
REMIC Residual Certificates) will result in a deferral of some or all of the
interest payable thereon, which deferred interest may be added to the
Certificate Balance thereof. Accordingly, the weighted average lives of Mortgage
Loans that permit negative amortization (and that of the classes of Certificates
to which any such negative amortization would be allocated or which would bear
the effects of a slower rate of amortization on such Mortgage Loans) may
increase as a result of such feature.
Notwithstanding the foregoing, negative amortization generally occurs in
respect of those ARM Loans that allow for such because the related Mortgage Note
limits the amount by which the scheduled payment thereon may adjust in response
to a change in the Mortgage Rate thereon and/or the related Mortgage Note
provides that the scheduled payment thereon will adjust less frequently than the
Mortgage Rate thereon. Accordingly, during a period of declining interest rates,
the scheduled payment on a Mortgage Loan that permits negative amortization may
exceed the amount necessary to amortize the loan fully over its remaining
amortization schedule and pay interest at the then applicable Mortgage Rate,
thereby resulting in the accelerated amortization of such Mortgage Loan. Any
such acceleration in amortization of its principal balance will shorten the
weighted average life of such Mortgage Loan and, correspondingly, the weighted
average lives of those classes of Certificates entitled to a portion of the
principal payments on such Mortgage Loan.
The extent to which the yield on any Offered Certificate will be affected
by the inclusion in the related Trust Fund of Mortgage Loans that permit
negative amortization, will depend upon (i) whether such Offered Certificate was
purchased at a premium or a discount and (ii) the extent to which the payment
characteristics of such Mortgage Loans delay or accelerate the distributions of
principal on such Certificate (or, in the case of a Stripped Interest
Certificate, delay or accelerate the amortization of the notional amount
thereof). See "--Yield and Prepayment Considerations" above.
Foreclosures and Payment Plans. The number of foreclosures and the
principal amount of the Mortgage Loans that are foreclosed in relation to the
number and principal amount of Mortgage Loans that are repaid in accordance with
their terms will affect the weighted average lives of those Mortgage Loans and,
accordingly, the weighted average lives of and yields on the Certificates of the
related series. Servicing decisions made with respect to the Mortgage Loans,
including the use of payment plans prior to a demand for acceleration and the
restructuring of Mortgage Loans in bankruptcy proceedings, may also have an
effect upon the payment patterns of particular Mortgage Loans and thus the
weighted average lives of and yields on the Certificates of the related series.
Losses and Shortfalls on the Mortgage Assets. The yield to holders of the
Offered Certificates of any series will directly depend on the extent to which
such holders are required to bear the effects of any losses or shortfalls in
collections arising out of defaults on the Mortgage Loans in the related Trust
Fund and the timing of such losses and shortfalls. In general, the earlier that
any such loss or shortfall occurs, the greater will be the negative effect on
yield for any class of Certificates that is required to bear the effects
thereof.
The amount of any losses or shortfalls in collections on the Mortgage
Assets in any Trust Fund (to the extent not covered or offset by draws on any
reserve fund or under any instrument of Credit Support) will be allocated among
the respective classes of Certificates of the related series in the priority and
manner, and subject to the limitations, specified in the related Prospectus
Supplement. As described in the related Prospectus Supplement, such allocations
may result in reductions in the entitlements to interest and/or Certificate
Balances of one or more such classes of Certificates, or may be effected simply
by a prioritization of payments among such classes of Certificates.
The yield to maturity on a class of Subordinate Certificates may be
extremely sensitive to losses and shortfalls in collections on the Mortgage
Loans in the related Trust Fund.
Additional Certificate Amortization. In addition to entitling the holders
thereof to a specified portion (which may range from none to all) of the
principal payments received on the Mortgage Assets in the related Trust Fund,
one or more classes of Certificates of any series, including one or more classes
of Offered Certificates of such series, may provide for distributions of
principal thereof from (i) amounts attributable to interest accrued but not
currently distributable on one or more classes of Accrual Certificates, (ii)
Excess Funds or (iii) any other amounts described in the related Prospectus
Supplement. Unless otherwise specified in the related Prospectus Supplement,
"Excess Funds" will, in general, represent that portion of the amounts
distributable in respect of the Certificates of any series on any Distribution
Date that represent (i) interest received or advanced on the Mortgage Assets in
the related Trust Fund that is in excess of the interest currently distributable
on the Certificates of such series, as well as any interest
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accrued but not currently distributable on any Accrual Certificates of such
series, or (ii) Prepayment Premiums, payments from Equity Participations or any
other amounts received on the Mortgage Assets in the related Trust Fund that do
not constitute interest thereon or principal thereof.
The amortization of any class of Certificates out of the sources described
in the preceding paragraph would shorten the weighted average life of such
Certificates and, if such Certificates were purchased at a premium, reduce the
yield thereon. The related Prospectus Supplement will discuss the relevant
factors to be considered in determining whether distributions of principal of
any class of Certificates out of such sources would have any material effect on
the rate at which such Certificates are amortized.
Optional Early Termination. If so specified in the related Prospectus
Supplement, a series of Certificates may be subject to optional early
termination through the repurchase of the Mortgage Assets in the related Trust
Fund by the party or parties specified therein, under the circumstances and in
the manner set forth therein. If so provided in the related Prospectus
Supplement, upon the reduction of the Certificate Balance of a specified class
or classes of Certificates by a specified percentage or amount, a party
specified therein may be authorized or required to solicit bids for the purchase
of all of the Mortgage Assets of the related Trust Fund, or of a sufficient
portion of such Mortgage Assets to retire such class or classes, under the
circumstances and in the manner set forth therein. In the absence of other
factors, any such early retirement of a class of Offered Certificates would
shorten the weighted average life thereof and, if such Certificates were
purchased at premium, reduce the yield thereon.
MORTGAGE CAPITAL FUNDING, INC.
The Sponsor was incorporated in the State of Delaware on October 7, 1986
under its former name of CitiCMO, Inc., and is a direct wholly-owned subsidiary
of Citicorp Banking Corporation, which in turn is a direct wholly-owned
subsidiary of Citicorp. The principal executive offices of the Sponsor are
located at 399 Park Avenue, 3rd floor, New York, New York 10043, and its
telephone number is (212) 793-5880. All inquiries, requests and other
communications to the Sponsor regarding the matters described herein should be
made or sent to the attention of "Mortgage Finance". The Sponsor does not have,
nor is it expected in the future to have, any significant assets.
USE OF PROCEEDS
The net proceeds to be received from the sale of the Certificates of any
series will be applied by the Sponsor to the purchase of Trust Assets or will be
used by the Sponsor for general corporate purposes. The Sponsor expects to sell
the Certificates 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 Sponsor, prevailing interest rates, availability
of funds and general market conditions.
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DESCRIPTION OF THE CERTIFICATES
GENERAL
Each series of Certificates will represent the entire beneficial ownership
interest in the Trust Fund created pursuant to the related Pooling Agreement. As
described in the related Prospectus Supplement, the Certificates of each series,
including the Offered Certificates of such series, may consist of one or more
classes of Certificates that: (i) provide for the accrual of interest thereon at
a fixed, variable or adjustable rate; (ii) are senior (collectively, "Senior
Certificates") or subordinate (collectively, "Subordinate Certificates") to one
or more other classes of Certificates in entitlement to certain distributions on
the Certificates; (iii) are entitled to distributions of principal, with
disproportionately small, nominal or no distributions of interest (collectively,
"Stripped Principal Certificates"); (iv) are entitled to distributions of
interest, with disproportionately small, nominal or no distributions of
principal (collectively, "Stripped Interest Certificates"); (v) provide for
distributions of interest thereon or principal thereof that commence only after
the occurrence of certain events, such as the retirement of one or more other
classes of Certificates of such series; (vi) provide for distributions of
principal thereof to be made, from time to time or for designated periods, at a
rate that is faster (and, in some cases, substantially faster) or slower (and,
in some cases, substantially slower) than the rate at which payments or other
collections of principal are received on the Mortgage Assets in the related
Trust Fund; or (vii) provide for distributions of principal thereof to be made,
subject to available funds, based on a specified principal payment schedule or
other methodology.
Each class of Offered Certificates of a series will be issued in minimum
denominations corresponding to the principal balances or, in case of Stripped
Interest Certificates or REMIC Residual Certificates, notional amounts or
percentage interests, specified in the related Prospectus Supplement. As
provided in the related Prospectus Supplement, one or more classes of Offered
Certificates of any series may be issued in fully registered, definitive form
(such Certificates, "Definitive Certificates") or may be offered in book-entry
format (such Certificates, "Book-Entry Certificates") through the facilities of
The Depository Trust Company ("DTC"). The Offered Certificates of each series
(if issued as Definitive Certificates) may be transferred or exchanged, subject
to any restrictions on transfer described in the related Prospectus Supplement,
at the location specified in the related Prospectus Supplement, without the
payment of any service charges, other than any tax or other governmental charge
payable in connection therewith. Interests in a class of Book-Entry Certificates
will be transferred on the book-entry records of DTC and its participating
organizations ("Participants"). See "Risk Factors--Limited Liquidity",
"--Limited Assets for Payment of Certificates" and "--Book-Entry Registration".
DISTRIBUTIONS
Distributions on the Certificates of each series will be made by or on
behalf of the related Trustee or Master Servicer on each Distribution Date as
specified in the related Prospectus Supplement from the Available Distribution
Amount for such series and such Distribution Date. Unless otherwise provided in
the related Prospectus Supplement, the "Available Distribution Amount" for any
series of Certificates and any Distribution Date will refer to the total of all
payments or other collections (or advances in lieu thereof) on, under or in
respect of the Mortgage Assets and any other assets included in the related
Trust Fund that are available for distribution to the Certificateholders of such
series on such date. The particular components of the Available Distribution
Amount for any series on each Distribution Date will be more specifically
described in the related Prospectus Supplement.
Except as otherwise specified in the related Prospectus Supplement,
distributions on the Certificates of each series (other than the final
distribution in retirement of any such Certificate) will be made to the persons
in whose names such Certificates are registered at the close of business on the
last business day of the month preceding the month in which the applicable
Distribution Date occurs (the "Record Date"), and the amount of each
distribution will be determined as of the close of business on the date (the
"Determination Date") specified in the related Prospectus Supplement. All
distributions with respect to each class of Certificates on each Distribution
Date will be allocated pro rata among the outstanding Certificates in such
class. Payments will be made either by wire transfer in immediately available
funds to the account of a Certificateholder at a bank or other entity having
appropriate facilities therefor, if such Certificateholder has provided the
person required to make such payments with wiring instructions (which may be
provided in the form of a standing order applicable to all subsequent
distributions) no later than the date specified in the related Prospectus
Supplement (and, if so provided in the related Prospectus Supplement, such
Certificateholder holds Certificates in the requisite amount or denomination
specified therein), or by check mailed to the address of such Certificateholder
as it appears on the Certificate Register; provided, however, that the final
distribution in
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retirement of any class of Certificates (whether Definitive Certificates or
Book-Entry Certificates) will be made only upon presentation and surrender of
such Certificates at the location specified in the notice to Certificateholders
of such final distribution.
DISTRIBUTIONS OF INTEREST ON THE CERTIFICATES
Each class of Certificates of each series (other than certain classes of
Stripped Principal Certificates and certain classes of REMIC Residual
Certificates that have no Pass-Through Rate) may have a different Pass-Through
Rate, which in each case may be fixed, variable or adjustable. The related
Prospectus Supplement will specify the Pass-Through Rate or, in the case of a
variable or adjustable Pass-Through Rate, the method for determining the
Pass-Through Rate, for each class. Unless otherwise specified in the related
Prospectus Supplement, interest on the Certificates of each series will be
calculated on the basis of a 360-day year consisting of twelve 30-day months.
Distributions of interest in respect of any class of Certificates (other
than certain classes of Certificates that will be entitled to distributions of
accrued interest commencing only on the Distribution Date, or under the
circumstances, specified in the related Prospectus Supplement ("Accrual
Certificates"), and other than any class of Stripped Principal Certificates or
REMIC Residual Certificates that is not entitled to any distributions of
interest) will be made on each Distribution Date based on the Accrued
Certificate Interest for such class and such Distribution Date, subject to the
sufficiency of the portion of the Available Distribution Amount allocable to
such class on such Distribution Date. Prior to the time interest is
distributable on any class of Accrual Certificates, the amount of Accrued
Certificate Interest otherwise distributable on such class will be added to the
Certificate Balance thereof on each Distribution Date. With respect to each
class of Certificates (other than certain classes of Stripped Interest
Certificates and certain classes of REMIC Residual Certificates), the "Accrued
Certificate Interest" for each Distribution Date will be equal to interest at
the applicable Pass-Through Rate accrued for a specified period (generally equal
to the time period between Distribution Dates) on the outstanding Certificate
Balance of such class of Certificates immediately prior to such Distribution
Date. Unless otherwise provided in the related Prospectus Supplement, the
Accrued Certificate Interest for each Distribution Date on a class of Stripped
Interest Certificates will be similarly calculated except that it will accrue on
a hypothetical or notional amount (a "Notional Amount") that is either (i) based
on the principal balances of some or all of the Mortgage Assets in the related
Trust Fund or (ii) equal to the Certificate Balances of one or more other
classes of Certificates of the same series. Reference to a Notional Amount with
respect to a class of Stripped Interest Certificates is solely for convenience
in making certain calculations and does not represent the right to receive any
distributions of principal. If so specified in the related Prospectus
Supplement, the amount of Accrued Certificate Interest that is otherwise
distributable on (or, in the case of Accrual Certificates, that may otherwise be
added to the Certificate Balance of) one or more classes of the Certificates of
a series will be reduced to the extent that any Prepayment Interest Shortfalls,
as described under "Yield and Maturity Considerations--Certain Shortfalls in
Collections of Interest", exceed the amount of any sums (including, if and to
the extent specified in the related Prospectus Supplement, the Master Servicer's
servicing compensation) that are applied to offset such shortfalls. The
particular manner in which such shortfalls will be allocated among some or all
of the classes of Certificates of that series will be specified in the related
Prospectus Supplement. The related Prospectus Supplement will also describe the
extent to which the amount of Accrued Certificate Interest that is otherwise
distributable on (or, in the case of Accrual Certificates, that may otherwise be
added to the Certificate Balance of) a class of Offered Certificates may be
reduced as a result of any other contingencies, including delinquencies, losses
and deferred interest on or in respect of the Mortgage Assets in the related
Trust Fund. Unless otherwise provided in the related Prospectus Supplement, any
reduction in the amount of Accrued Certificate Interest otherwise distributable
on a class of Certificates by reason of the allocation to such class of a
portion of any deferred interest on or in respect of the Mortgage Assets in the
related Trust Fund will result in a corresponding increase in the Certificate
Balance of such class. See "Risk Factors--Prepayments; Average Life of
Certificates; Yields" and "Yield and Maturity Considerations".
DISTRIBUTIONS OF PRINCIPAL OF THE CERTIFICATES
Each class of Certificates of each series (other than certain classes of
Stripped Interest Certificates and certain classes of REMIC Residual
Certificates) will have a "Certificate Balance" which, at any time, will equal
the then maximum amount that the holders of Certificates of such class will be
entitled to receive in respect of principal out of the future cash flow on the
Mortgage Assets and other assets included in the related Trust Fund. The
outstanding Certificate Balance of a class of Certificates will be reduced by
distributions of principal made thereon from time to time and, if so provided in
the related Prospectus Supplement, further by any losses incurred in respect of
the related
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Mortgage Assets allocated thereto from time to time. In turn, the outstanding
Certificate Balance of a class of Certificates may be increased as a result of
any deferred interest on or in respect of the related Mortgage Assets being
allocated thereto from time to time, and will be increased, in the case of a
class of Accrual Certificates prior to the Distribution Date on which
distributions of interest thereon are required to commence, by the amount of any
Accrued Certificate Interest in respect thereof (reduced as described above).
Unless otherwise provided in the related Prospectus Supplement, the initial
aggregate Certificate Balance of all classes of a series of Certificates will
not be greater than the aggregate outstanding principal balance of the related
Mortgage Assets as of the applicable Cut-off Date, after application of
scheduled payments due on or before such date, whether or not received. The
initial Certificate Balance of each class of a series of Certificates will be
specified in the related Prospectus Supplement. As and to the extent described
in the related Prospectus Supplement, distributions of principal with respect to
a series of Certificates will be made on each Distribution Date to the holders
of the class or classes of Certificates of such series entitled thereto until
the Certificate Balances of such Certificates have been reduced to zero.
Distributions of principal with respect to one or more classes of Certificates
may be made at a rate that is faster (and, in some cases, substantially faster)
than the rate at which payments or other collections of principal are received
on the Mortgage Assets in the related Trust Fund. Distributions of principal
with respect to one or more classes of Certificates may not commence until the
occurrence of certain events, such as the retirement of one or more other
classes of Certificates of the same series, or may be made at a rate that is
slower (and, in some cases, substantially slower) than the rate at which
payments or other collections of principal are received on the Mortgage Assets
in the related Trust Fund. Distributions of principal with respect to one or
more classes of Certificates (each such class, a "Controlled Amortization
Class") may be made, subject to available funds, based on a specified principal
payment schedule. Distributions of principal with respect to one or more classes
of Certificates (each such class, a "Companion Class") may be contingent on the
specified principal payment schedule for a Controlled Amortization Class of the
same series and the rate at which payments and other collections of principal on
the Mortgage Assets in the related Trust Fund are received. Unless otherwise
specified in the related Prospectus Supplement, distributions of principal of
any class of Certificates will be made on a pro rata basis among all of the
Certificates of such class.
DISTRIBUTIONS ON THE CERTIFICATES IN RESPECT OF PREPAYMENT PREMIUMS OR IN
RESPECT OF EQUITY PARTICIPATIONS
If so provided in the related Prospectus Supplement, Prepayment Premiums or
payments in respect of Equity Participations received on or in connection with
the Mortgage Assets in any Trust Fund will be distributed on each Distribution
Date to the holders of the class of Certificates of the related series entitled
thereto in accordance with the provisions described in such Prospectus
Supplement.
ALLOCATION OF LOSSES AND SHORTFALLS
The amount of any losses or shortfalls in collections on the Mortgage
Assets in any Trust Fund (to the extent not covered or offset by draws on any
reserve fund or under any instrument of Credit Support) will be allocated among
the respective classes of Certificates of the related series in the priority and
manner, and subject to the limitations, specified in the related Prospectus
Supplement. As described in the related Prospectus Supplement, such allocations
may result in reductions in the entitlements to interest and/or Certificate
Balances of one or more such classes of Certificates, or may be effected simply
by a prioritization of payments among such classes of Certificates.
ADVANCES IN RESPECT OF DELINQUENCIES
If and to the extent provided in the related Prospectus Supplement, if a
Trust Fund includes Mortgage Loans, the Master Servicer, the Special Servicer,
the Trustee, any provider of Credit Support and/or any other specified person
may be obligated to advance, or have the option of advancing, on or before each
Distribution Date, from its or their own funds or from excess funds held in the
related Certificate Account that are not part of the Available Distribution
Amount for the related series of Certificates for such Distribution Date, an
amount up to the aggregate of any payments of principal (other than any balloon
payments) and interest that were due on or in respect of such Mortgage Loans
during the related Due Period and were delinquent on the related Determination
Date.
Advances are intended to maintain a regular flow of scheduled interest and
principal payments to holders of the class or classes of Certificates entitled
thereto, rather than to guarantee or insure against losses. Accordingly, all
advances made out of a specific entity's own funds will be reimbursable out of
related recoveries on the Mortgage
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Loans (including amounts received under any instrument of Credit Support)
respecting which such advances were made (as to any Mortgage Loan, "Related
Proceeds") and such other specific sources as may be identified in the related
Prospectus Supplement, including in the case of a series that includes one or
more classes of Subordinate Certificates, collections on other Mortgage Loans in
the related Trust Fund that would otherwise be distributable to the holders of
one or more classes of such Subordinate Certificates. No advance will be
required to be made by a Master Servicer, Special Servicer or Trustee if, in the
judgment of the Master Servicer, Special Servicer or Trustee, as the case may
be, such advance would not be recoverable from Related Proceeds or another
specifically identified source (any such advance, a "Nonrecoverable Advance");
and, if previously made by a Master Servicer, Special Servicer or Trustee, a
Nonrecoverable Advance will be reimbursable thereto from any amounts in the
related Certificate Account prior to any distributions being made to the related
series of Certificateholders.
If advances have been made by a Master Servicer, Special Servicer, Trustee
or other entity from excess funds in a Certificate Account, such Master
Servicer, Special Servicer, Trustee or other entity, as the case may be, will be
required to replace such funds in such Certificate Account on any future
Distribution Date to the extent that funds in such Certificate Account on such
Distribution Date are less than payments required to be made to the related
series of Certificateholders on such date. If so specified in the related
Prospectus Supplement, the obligation of a Master Servicer, Special Servicer,
Trustee or other entity to make advances may be secured by a cash advance
reserve fund or a surety bond. If applicable, information regarding the
characteristics of, and the identity of any obligor on, any such surety bond,
will be set forth in the related Prospectus Supplement.
If and to the extent so provided in the related Prospectus Supplement, any
entity making advances may be entitled to receive interest thereon for the
period that such advances are outstanding at the rate specified in such
Prospectus Supplement, and such entity will be entitled to payment of such
interest periodically from general collections on the Mortgage Loans in the
related Trust Fund prior to any payment to the related series of
Certificateholders or as otherwise provided in the related Pooling Agreement and
described in such Prospectus Supplement.
The Prospectus Supplement for any series of Certificates evidencing an
interest in a Trust Fund that includes MBS will describe any comparable
advancing obligation of a party to the related Pooling Agreement or of a party
to the related MBS Agreement.
REPORTS TO CERTIFICATEHOLDERS
On each Distribution Date, together with the distribution to the holders of
each class of the Offered Certificates of a series, a Master Servicer or
Trustee, as provided in the related Prospectus Supplement, will forward to each
such holder, a statement (a "Distribution Date Statement") that, unless
otherwise provided in the related Prospectus Supplement, will set forth, among
other things, in each case to the extent applicable:
(i) the amount of such distribution to holders of such class of
Offered Certificates that was applied to reduce the Certificate Balance
thereof;
(ii) the amount of such distribution to holders of such class of
Offered Certificates that is allocable to Accrued Certificate Interest;
(iii) the amount, if any, of such distribution to holders of such
class of Offered Certificates that is allocable to (A) Prepayment Premiums
and (B) payments on account of Equity Participations;
(iv) the amount, if any, by which such distribution is less than the
amounts to which holders of such class of Offered Certificates are
entitled;
(v) the Certificate Balance or Notional Amount, as the case may be, of
each class of Certificates (including any class of Certificates not offered
hereby) at the close of business on such Distribution Date, separately
identifying any reduction in such Certificate Balance or Notional Amount
due to the allocation of any losses in respect of the related Mortgage
Assets, any increase in such Certificate Balance or Notional Amount due to
the allocation of any negative amortization in respect of the related
Mortgage Assets and any increase in the Certificate Balance of a class of
Accrual Certificates, if any, in the event that Accrued Certificate
Interest has been added to such balance;
(vi) information regarding the aggregate principal balance of the
related Mortgage Assets on or shortly before such Distribution Date;
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(vii) if such class of Offered Certificates has a variable
Pass-Through Rate or an adjustable Pass-Through Rate, the Pass-Through Rate
applicable thereto for such Distribution Date;
(viii) the amount deposited in or withdrawn from any reserve fund on
such Distribution Date, and the amount remaining on deposit in such reserve
fund as of the close of business on such Distribution Date;
(ix) if the related Trust Fund includes one or more instruments of
Credit Support, such as a letter of credit, an insurance policy and/or a
surety bond, the amount of coverage under each such instrument as of the
close of business on such Distribution Date; and
(x) to the extent not otherwise reflected through the information
furnished pursuant to subclauses (v) and (vi) above, the amount of Credit
Support being afforded by any classes of Subordinate Certificates.
In the case of information furnished pursuant to subclauses (i)-(iii)
above, the amounts will be expressed as a dollar amount per minimum denomination
of the relevant class of Offered Certificates or per a specified portion of such
minimum denomination. The Prospectus Supplement for each series of Offered
Certificates will describe any additional information to be included in reports
to the holders of such Certificates. Upon request, a Certificateholder may
receive with respect to the Mortgage Loans, if any, in the related Trust Fund, a
monthly report regarding the delinquencies thereon, indicating the number and
aggregate principal amount of such Mortgage Loans delinquent one month and two
or more months, as well as the book value of any related Mortgaged Property
acquired through foreclosure, deed in lieu of foreclosure or other exercise of
rights respecting the Trustee's interest in such Mortgage Loans.
Within a reasonable period of time after the end of each calendar year, the
related Master Servicer or Trustee, as the case may be, will be required to
furnish to each person who at any time during the calendar year was a holder of
an Offered Certificate a statement containing the information set forth in
subclauses (i)-(iii) above, aggregated for such calendar year or the applicable
portion thereof during which such person was a Certificateholder, together with
such other customary information as the Sponsor or the reporting party
determines to be necessary to enable Certificateholders to prepare their tax
returns for such calendar year. See, however, "Description of the
Certificates--Book-Entry Registration and Definitive Certificates". If the Trust
Fund for a series of Certificates includes MBS, the ability of the related
Master Servicer or Trustee, as the case may be, to include in any Distribution
Date Statement information regarding the mortgage loans underlying such MBS will
depend on the reports received with respect to such MBS. In such cases, the
related Prospectus Supplement will describe the loan-specific information to be
included in the Distribution Date Statements that will be forwarded to the
holders of the Offered Certificates of that series in connection with
distributions made to them.
VOTING RIGHTS
The voting rights evidenced by each series of Certificates (as to such
series, the "Voting Rights") will be allocated among the respective classes of
such series in the manner described in the related Prospectus Supplement.
Certificateholders will generally not have a right to vote, except with
respect to required consents to certain amendments to the related Pooling
Agreement and as otherwise specified in the related Prospectus Supplement. See
"Description of the Pooling Agreements--Amendment". The holders of specified
amounts of Certificates of a particular series will have the right to act as a
group to remove the related Trustee and also upon the occurrence of certain
events which if continuing would constitute an Event of Default on the part of
the related Master Servicer, Special Servicer or REMIC Administrator. See
"Description of the Pooling Agreements--Events of Default", "--Rights Upon Event
of Default" and "--Resignation and Removal of the Trustee".
TERMINATION
The obligations created by the Pooling Agreement for each series of
Certificates will terminate following (i) the final payment or other liquidation
of the last Mortgage Asset subject thereto or the disposition of all property
acquired upon foreclosure of any Mortgage Loan subject thereto and (ii) the
payment to Certificateholders of that series of all amounts required to be paid
to them pursuant to such Pooling Agreement. Written notice of termination of a
Pooling Agreement will be given to each Certificateholder of the related series,
and the final distribution will be made only upon presentation and surrender of
the Certificates of such series at the location to be specified in the notice of
termination.
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If so specified in the related Prospectus Supplement, a series of
Certificates may be subject to optional early termination through the repurchase
of the Mortgage Assets in the related Trust Fund by the party or parties
specified therein, under the circumstances and in the manner set forth therein.
If so provided in the related Prospectus Supplement, upon the reduction of the
Certificate Balance of a specified class or classes of Certificates by a
specified percentage or amount, a party specified therein may be authorized or
required to solicit bids for the purchase of all the Mortgage Assets of the
related Trust Fund, or of a sufficient portion of such Mortgage Assets to retire
such class or classes, under the circumstances and in the manner set forth
therein.
BOOK-ENTRY REGISTRATION AND DEFINITIVE CERTIFICATES
If so provided in the related Prospectus Supplement, one or more classes of
the Offered Certificates of any series will be offered in book-entry format
through the facilities of The Depository Trust Company ("DTC"), and each such
class will be represented by one or more global Certificates registered in the
name of DTC or its nominee.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking corporation" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
was created to hold securities for its participating organizations
("Participants") and facilitate the clearance and settlement of securities
transactions between Participants through electronic computerized book-entry
changes in their accounts, thereby eliminating the need for physical movement of
securities certificates. "Direct Participants", which maintain accounts with
DTC, include securities brokers and dealers, banks, trust companies and clearing
corporations and may include certain other organizations. DTC is owned by a
number of its Direct Participants and by the New York Stock Exchange, Inc., the
American Stock Exchange, Inc., and the National Association of Securities
Dealers, Inc. Access to the DTC system also is available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Direct Participant, either directly or indirectly
("Indirect Participants"). The Rules applicable to DTC and its Participants are
on file with the Commission.
Purchases of Book-Entry Certificates under the DTC system must be made by
or through Direct Participants, which will receive a credit for the Book-Entry
Certificates on DTC's records. The ownership interest of each actual purchaser
of a Book-Entry Certificate (a "Certificate Owner") is in turn to be recorded on
the Direct and Indirect Participants' records. Certificate Owners will not
receive written confirmation from DTC of their purchases, but Certificate Owners
are expected to receive written confirmations providing details of such
transactions, as well as periodic statements of their holdings, from the Direct
or Indirect Participant through which each Certificate Owner entered into the
transaction. Transfers of ownership interest in the Book-Entry Certificates are
to be accomplished by entries made on the books of Participants acting on behalf
of Certificate Owners. Certificate Owners will not receive certificates
representing their ownership interests in the Book-Entry Certificates, except in
the event that use of the book-entry system for the Book-Entry Certificates of
any series is discontinued as described below.
DTC has no knowledge of the actual Certificate Owners of the Book-Entry
Certificates; DTC's records reflect only the identity of the Direct Participants
to whose accounts such Certificates are credited, which may or may not be the
Certificate Owners. The Participants will remain responsible for keeping account
of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Certificate Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Distributions on the Book-Entry Certificates will be made to DTC. DTC's
practice is to credit Direct Participants' accounts on the related Distribution
Date in accordance with their respective holdings shown on DTC's records unless
DTC has reason to believe that it will not receive payment on such date.
Disbursement of such distributions by Participants to Certificate Owners will be
governed by standing instructions and customary practices, as is the case with
securities held for the accounts of customers in bearer form or registered in
"street name", and will be the responsibility of each such Participant (and not
of DTC, the Sponsor or any Trustee, Master Servicer or Special Servicer),
subject to any statutory or regulatory requirements as may be in effect from
time to time. Under a book-entry system, Certificate Owners may receive payments
after the related Distribution Date.
Unless otherwise provided in the related Prospectus Supplement, the only
"Certificateholder"(as such term is used in the related Pooling Agreement) will
be the nominee of DTC, and the Certificate Owners will not be recognized
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as Certificateholders under the Pooling Agreement. Certificate Owners will be
permitted to exercise the rights of Certificateholders under the related Pooling
Agreement only indirectly through the Participants who in turn will exercise
their rights through DTC. The Sponsor is informed that DTC will take action
permitted to be taken by a Certificateholder under a Pooling Agreement only at
the direction of one or more Participants to whose account with DTC interests in
the Book-Entry Certificates are credited.
Because DTC can act only on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain Certificate Owners, the ability of a
Certificate Owner to pledge its interest in Book-Entry Certificates to persons
or entities that do not participate in the DTC system, or otherwise take actions
in respect of its interest in Book-Entry Certificates, may be limited due to the
lack of a physical certificate evidencing such interest.
Unless otherwise specified in the related Prospectus Supplement,
Certificates initially issued in book-entry form will be issued in fully
registered, certificated form (as so issued, "Definitive Certificates") to
Certificate Owners or their nominees, rather than to DTC or its nominee, only if
(i) the Sponsor advises the Trustee in writing that DTC is no longer willing or
able to properly discharge its responsibilities as depository with respect to
such Certificates and the Sponsor is unable to locate a qualified successor or
(ii) the Sponsor, at its option, elects to terminate the book-entry system
through DTC with respect to such Certificates. Upon the occurrence of either of
the events described in the preceding sentence, DTC will be required to notify
all Participants of the availability through DTC of Definitive Certificates.
Upon surrender by DTC of the certificate or certificates representing a class of
Book-Entry Certificates, together with instructions for registration, the
Trustee or other designated party will be required to issue to the Certificate
Owners identified in such instructions the Definitive Certificates to which they
are entitled, and thereafter the holders of such Definitive Certificates will be
recognized as Certificateholders under the related Pooling Agreement.
DESCRIPTION OF THE POOLING AGREEMENTS
GENERAL
The Certificates of each series will be issued pursuant to a pooling and
servicing agreement or other agreement specified in the related Prospectus
Supplement (in either case, a "Pooling Agreement"). In general, the parties to a
Pooling Agreement will include the Sponsor, the Trustee, the Master Servicer,
the Special Servicer and, if one or more REMIC elections have been made with
respect to the related Trust Fund, the REMIC Administrator. However, a Pooling
Agreement may include a Mortgage Asset Seller as a party, and a Pooling
Agreement that relates to a Trust Fund that consists solely of MBS may not
include a Master Servicer, Special Servicer or other servicer as a party. All
parties to each Pooling Agreement under which Certificates of a series are
issued will be identified in the related Prospectus Supplement. If so specified
in the related Prospectus Supplement, the Mortgage Asset Seller or an affiliate
thereof or of the Sponsor may perform the duties of Master Servicer, Special
Servicer or REMIC Administrator. If so specified in the related Prospectus
Supplement, the Master Servicer may also perform the duties of Special Servicer,
and the Master Servicer, the Special Servicer or the Trustee may also perform
the duties of REMIC Administrator. Any party to a Pooling Agreement may own
Certificates issued thereunder; however, except with respect to required
consents to certain amendments to a Pooling Agreement, Certificates issued
thereunder that are held by the related Master Servicer or Special Servicer will
not be allocated Voting Rights. See "Risk Factors--Conflicts of Interest
Involving Parties to a Pooling Agreement".
A form of a pooling and servicing agreement has been filed as an exhibit to
the Registration Statement of which this Prospectus is a part. However, the
provisions of each Pooling Agreement will vary depending upon the nature of the
Certificates to be issued thereunder and the nature of the related Trust Fund.
The following summaries describe certain provisions that may appear in a Pooling
Agreement under which Certificates that evidence interests in Mortgage Loans
will be issued. The Prospectus Supplement for a series of Certificates will
describe any provision of the related Pooling Agreement that materially differs
from the description thereof contained in this Prospectus and, if the related
Trust Fund includes MBS, will summarize all of the material provisions of the
related Pooling Agreement. The summaries herein 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 Agreement for each series of Certificates and the
description of such provisions in the related Prospectus Supplement. As used
herein with respect to any series, the term "Certificate" refers to all of the
Certificates of that series, whether or not offered hereby and by the related
Prospectus Supplement, unless the context otherwise requires. The Sponsor will
provide a copy of the Pooling Agreement (without exhibits) that relates to any
series of Certificates without charge upon written request of a holder of a
Certificate of such series addressed to it at its principal executive offices
specified herein under "Mortgage Capital Funding, Inc."
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ASSIGNMENT OF MORTGAGE LOANS; REPURCHASES
At the time of issuance of any series of Certificates, the Sponsor will
assign (or cause to be assigned) to the designated Trustee the Mortgage Loans to
be included in the related Trust Fund, together with, unless otherwise specified
in the related Prospectus Supplement, all principal and interest to be received
on or with respect to such Mortgage Loans after the Cut-off Date, other than
principal and interest due on or before the Cut-off Date. The Trustee will,
concurrently with such assignment, deliver the Certificates to or at the
direction of the Sponsor in exchange for the Mortgage Loans and the other assets
to be included in the Trust Fund for such series. Each Mortgage Loan will be
identified in a schedule appearing as an exhibit to the related Pooling
Agreement. Such schedule generally will include detailed information that
pertains to each Mortgage Loan included in the related Trust Fund, which
information will typically include: the address of the related Mortgaged
Property and type of such property; the Mortgage Rate and, if applicable, the
applicable index, gross margin, adjustment date and any rate cap information;
the original and remaining term to maturity; the original amortization term; and
the original and outstanding principal balance.
With respect to each Mortgage Loan to be included in a Trust Fund, the
Sponsor will deliver (or cause to be delivered) to the related Trustee (or to a
custodian appointed by the Trustee) certain loan documents which, unless
otherwise specified in the related Prospectus Supplement, will include the
original Mortgage Note endorsed, without recourse, to the order of the Trustee,
the original Mortgage or a certified copy thereof, with evidence of recording or
filing indicated thereon, and an assignment of the Mortgage to the Trustee in
recordable form. In certain cases where documents respecting a Mortgage Loan may
not be available prior to execution of the related Pooling Agreement, the
Sponsor may be permitted to deliver (or cause to be delivered) copies thereof
(if applicable, without evidence of recording or filing thereon) to the related
Trustee (or to a custodian appointed by the Trustee), provided that such
documents or certified copies thereof are delivered (if applicable, with
evidence of recording or filing thereon) promptly upon receipt.
Assignments of Mortgage to a Trustee will be recorded or filed in the
appropriate jurisdictions except in states where, in the written opinion of
local counsel acceptable to the Sponsor, such filing or recording is not
required to protect the Trustee's interests in the related Mortgage Loans
against sale, further assignment, satisfaction or discharge by the related
Mortgage Asset Seller, the related Master Servicer, the related Special
Servicer, any Sub-Servicers or the Sponsor.
The related Trustee (or a custodian appointed by the Trustee) will be
required to review the Mortgage Loan documents delivered to it within a
specified period of days after receipt thereof, and the Trustee (or such
custodian) will hold such documents in trust for the benefit of the
Certificateholders of the related series. Unless otherwise specified in the
related Prospectus Supplement, if any such document is found to be missing or
defective, and such omission or defect, as the case may be, materially and
adversely affects the interests of the related series of Certificateholders, the
Trustee (or such custodian) will be required to notify the Master Servicer, the
Special Servicer and the Sponsor, and one of such persons will be required to
notify the relevant Mortgage Asset Seller. In that case, and if the Mortgage
Asset Seller cannot deliver the document or cure the defect within a specified
number of days after receipt of such notice, then, except as otherwise specified
below or in the related Prospectus Supplement, the Mortgage Asset Seller will be
obligated to repurchase the related Mortgage Loan from the Trustee at a price
that will be specified in the related Prospectus Supplement. If so provided in
the Prospectus Supplement for a series of Certificates, a Mortgage Asset Seller,
in lieu of repurchasing a Mortgage Loan as to which there is missing or
defective loan documentation, will have the option, exercisable upon certain
conditions and/or within a specified period after initial issuance of such
series of Certificates, to replace such Mortgage Loan with one or more other
mortgage loans, in accordance with standards that will be described in the
Prospectus Supplement. Unless otherwise specified in the related Prospectus
Supplement, this repurchase or substitution obligation will constitute the sole
remedy to holders of the Certificates of any series or to the related Trustee on
their behalf for missing or defective loan documentation, and none of the
Sponsor, the Master Servicer or the Special Servicer, in the last two cases
unless it is the Mortgage Asset Seller, will be obligated to purchase or replace
a Mortgage Loan if a Mortgage Asset Seller defaults on its obligation to do so.
Notwithstanding the foregoing, if a document has not been delivered to the
related Trustee (or to a custodian appointed by the Trustee) because such
document has been submitted for recording, and neither such document nor a
certified copy thereof, in either case with evidence of recording thereon, can
be obtained because of delays on the part of the applicable recording office,
then the Mortgage Asset Seller will not be required to
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repurchase or replace the affected Mortgage Loan on the basis of such missing
document so long as it continues in good faith to attempt to obtain such
document or such certified copy.
REPRESENTATIONS AND WARRANTIES; REPURCHASES
Unless otherwise provided in the related Prospectus Supplement, the Sponsor
will, with respect to each Mortgage Loan in the related Trust Fund, make or
assign, or cause to be made or assigned, certain representations and warranties
(the person making such representations and warranties, the "Warranting Party")
covering, by way of example: (i) the accuracy of the information set forth for
such Mortgage Loan on the schedule of Mortgage Loans appearing as an exhibit to
the related Pooling Agreement; (ii) the enforceability of the related Mortgage
Note and Mortgage and the existence of title insurance insuring the lien
priority of the related Mortgage; (iii) the Warranting Party's title to the
Mortgage Loan and the authority of the Warranting Party to sell the Mortgage
Loan; and (iv) the payment status of the Mortgage Loan. It is expected that in
most cases the Warranting Party will be the Mortgage Asset Seller; however, the
Warranting Party may also be an affiliate of the Mortgage Asset Seller, the
Sponsor or an affiliate of the Sponsor, the Master Servicer, the Special
Servicer or another person acceptable to the Sponsor. The Warranting Party, if
other than the Mortgage Asset Seller, will be identified in the related
Prospectus Supplement.
Unless otherwise provided in the related Prospectus Supplement, each
Pooling Agreement will provide that the Master Servicer, Special Servicer and/or
Trustee will be required to notify promptly any Warranting Party 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 related series of
Certificateholders. If such Warranting Party cannot cure such breach within a
specified period following the date on which it was notified of such breach,
then, unless otherwise provided in the related Prospectus Supplement, it will be
obligated to repurchase such Mortgage Loan from the Trustee at a price that will
be specified in the related Prospectus Supplement. If so provided in the
Prospectus Supplement for a series of Certificates, a Warranting Party, in lieu
of repurchasing a Mortgage Loan as to which a breach has occurred, will have the
option, exercisable upon certain conditions and/or within a specified period
after initial issuance of such series of Certificates, to replace such Mortgage
Loan with one or more other mortgage loans, in accordance with standards that
will be described in the Prospectus Supplement. Unless otherwise specified in
the related Prospectus Supplement, this repurchase or substitution obligation
will constitute the sole remedy available to holders of the Certificates of any
series or to the related Trustee on their behalf for a breach of representation
and warranty by a Warranting Party, and none of the Sponsor, the Master Servicer
or the Special Servicer, in each case unless it is the Warranting Party, will be
obligated to purchase or replace a Mortgage Loan if a Warranting Party defaults
on its obligation to do so.
In some cases, representations and warranties will have been made in
respect of a Mortgage Loan as of a date prior to the date upon which the related
series of Certificates is issued, and thus may not address events that may occur
following the date as of which they were made. However, the Sponsor will not
include any Mortgage Loan in the Trust Fund for any series of Certificates if
anything has come to the Sponsor's attention that would cause it to believe that
the representations and warranties made in respect of such Mortgage Loan will
not be accurate in all material respects as of the date of issuance. The date as
of which the representations and warranties regarding the Mortgage Loans in any
Trust Fund were made, will be specified in the related Prospectus Supplement.
COLLECTION AND OTHER SERVICING PROCEDURES
The Master Servicer and Special Servicer for any Trust Fund, directly or
through Sub-Servicers, will each be required to make reasonable efforts to
collect all scheduled payments under the Mortgage Loans in such Trust Fund
serviced thereby, and will each be required to follow such collection procedures
as it would follow with respect to mortgage loans that are comparable to the
Mortgage Loans in such Trust Fund serviced thereby and held for its own account,
provided such procedures are consistent with (i) the terms of the related
Pooling Agreement and any related instrument of Credit Support included in such
Trust Fund, (ii) applicable law and (iii) the servicing standard specified in
the related Pooling Agreement and Prospectus Supplement (the "Servicing
Standard").
The Master Servicer and Special Servicer for any Trust Fund, either jointly
or separately, directly or through Sub-Servicers, also will be required to
perform as to the Mortgage Loans in such Trust Fund various other customary
functions of a servicer of comparable loans, including maintaining escrow or
impound accounts for payment of taxes, insurance premiums, ground rents and
similar items, or otherwise monitoring the timely payment of those items;
attempting to collect delinquent payments; supervising foreclosures; conducting
property inspections on a periodic or other basis; managing Mortgaged Properties
acquired on behalf of such Trust Fund through foreclosure,
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deed-in-lieu of foreclosure or otherwise (each, an "REO Property"); and
maintaining servicing records relating to such Mortgage Loans. The related
Prospectus Supplement will specify when and the extent to which servicing of a
Mortgage Loan is to be transferred from the Master Servicer to the Special
Servicer. In general, and subject to the discussion in the related Prospectus
Supplement, a Special Servicer will be responsible for the servicing and
administration of: (i) Mortgage Loans that are delinquent in respect of a
specified number of scheduled payments; (ii) Mortgage Loans as to which the
related borrower has entered into or consented to bankruptcy, appointment of a
receiver or conservator or similar insolvency proceeding, or the related
borrower has become the subject of a decree or order for such a proceeding which
shall have remained in force undischarged or unstayed for a specified number of
days; and (iii) REO Properties. If so specified in the related Prospectus
Supplement, a Pooling Agreement also may provide that if a default on a Mortgage
Loan has occurred or, in the judgment of the related Master Servicer, a payment
default is imminent, the related Master Servicer may elect to transfer the
servicing thereof, in whole or in part, to the related Special Servicer. Unless
otherwise provided in the related Prospectus Supplement, when the circumstances
no longer warrant a Special Servicer's continuing to service a particular
Mortgage Loan (e.g., the related borrower is paying in accordance with the
forbearance arrangement entered into between the Special Servicer and such
borrower), the Master Servicer will resume the servicing duties with respect
thereto. If and to the extent provided in the related Pooling Agreement and
described in the related Prospectus Supplement, a Special Servicer may perform
certain limited duties in respect of Mortgage Loans for which the Master
Servicer is primarily responsible (including, if so specified, performing
property inspections and evaluating financial statements); and a Master Servicer
may perform certain limited duties in respect of any Mortgage Loan for which the
Special Servicer is primarily responsible (including, if so specified,
continuing to receive payments on such Mortgage Loan (including amounts
collected by the Special Servicer), making certain calculations with respect to
such Mortgage Loan and making remittances and preparing certain reports to the
Trustee and/or Certificateholders with respect to such Mortgage Loan). Unless
otherwise specified in the related Prospectus Supplement, the Master Servicer
will be responsible for filing and settling claims in respect of particular
Mortgage Loans under any applicable instrument of Credit Support. See
"Description of Credit Support".
SUB-SERVICERS
A Master Servicer or Special Servicer may delegate its servicing
obligations in respect of the Mortgage Loans serviced thereby to one or more
third-party servicers (each, a "Sub-Servicer"); provided that, unless otherwise
specified in the related Prospectus Supplement, such Master Servicer or Special
Servicer will remain obligated under the related Pooling Agreement. Unless
otherwise provided in the related Prospectus Supplement, each sub-servicing
agreement between a Master Servicer or Special Servicer, as the case may be, and
a Sub-Servicer (a "Sub-Servicing Agreement") must provide that, if for any
reason such Master Servicer or Special Servicer is no longer acting in such
capacity, the Trustee or any successor to such Master Servicer or Special
Servicer may assume such party's rights and obligations under such Sub-Servicing
Agreement. The Master Servicer and Special Servicer for any Trust Fund will each
be required to monitor the performance of Sub-Servicers retained by it, and will
each have the right to remove a Sub-Servicer retained by it at any time it
considers such removal to be in the best interests of Certificateholders.
Unless otherwise provided in the related Prospectus Supplement, a Master
Servicer or Special Servicer will be solely liable for all fees owed by it to
any Sub-Servicer, irrespective of whether its compensation pursuant to the
related Pooling Agreement is sufficient to pay such fees. Each Sub-Servicer will
be reimbursed by the Master Servicer or Special Servicer, as the case may be,
that retained it for certain expenditures which it makes, generally to the same
extent such Master Servicer or Special Servicer would be reimbursed under a
Pooling Agreement. See "--Certificate Account" and "--Servicing Compensation and
Payment of Expenses".
CERTIFICATE ACCOUNT
General. The Master Servicer, the Special Servicer and/or the Trustee will,
as to each Trust Fund that includes Mortgage Loans, establish and maintain or
cause to be established and maintained one or more separate accounts for the
collection of payments on or in respect of such Mortgage Loans (collectively,
the "Certificate Account"), which will be established so as to comply with the
standards of each Rating Agency that has rated any one or more classes of
Certificates of the related series. A Certificate Account may be maintained as
an interest-bearing or a non-interest-bearing account and the funds held therein
may be invested pending each succeeding Distribution Date in United States
government securities and other obligations (including guaranteed investment
contracts) that are acceptable to each Rating Agency that has rated any one or
more classes of Certificates of the related series
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("Permitted Investments"). Unless otherwise provided in the related Prospectus
Supplement, any interest or other income earned on funds in a Certificate
Account will be paid to the related Master Servicer, Special Servicer or Trustee
as additional compensation. A Certificate Account may be maintained with the
related Master Servicer, Special Servicer or Mortgage Asset Seller or with a
depository institution that is an affiliate of any of the foregoing or of the
Sponsor, provided that it complies with applicable Rating Agency standards. If
permitted by the applicable Rating Agency or Agencies and so specified in the
related Prospectus Supplement, a Certificate Account may contain funds relating
to more than one series of mortgage pass-through certificates and may contain
other funds representing payments on mortgage loans owned by the related Master
Servicer or Special Servicer or any related Sub-Servicer or serviced by any of
them on behalf of others.
Deposits. Unless otherwise provided in the related Pooling Agreement and
described in the related Prospectus Supplement, a Master Servicer, Special
Servicer or Trustee will be required to deposit or cause to be deposited in the
Certificate Account for each Trust Fund that includes Mortgage Loans, within a
certain period following receipt (in the case of collections on or in respect of
the Mortgage Loans) or otherwise as provided in the related Pooling Agreement,
the following payments and collections received or made by the Master Servicer,
the Special Servicer or the Trustee subsequent to the Cut-off Date (other than
payments due on or before the Cut-off Date):
(i) all payments on account of principal, including principal
prepayments, on the Mortgage Loans;
(ii) all payments on account of interest on the Mortgage Loans,
including any default interest collected, in each case net of any portion
thereof retained by the Master Servicer, the Special Servicer or any
Sub-Servicer as its servicing compensation or as compensation to the
Trustee;
(iii) all proceeds received under any hazard, title or other insurance
policy that provides coverage with respect to a Mortgaged Property or the
related Mortgage Loan (other than proceeds applied to the restoration of
the property or released to the related borrower in accordance with the
customary servicing practices of the Master Servicer (or the Special
Servicer, with respect to Mortgage Loans serviced by it) and/or the terms
and conditions of the related Mortgage) (collectively, "Insurance
Proceeds"), all proceeds received in connection with the condemnation or
other governmental taking of all or any Mortgaged Property (other than
proceeds applied to the restoration of the property or released to the
related borrower in accordance with the customary servicing practices of
the Master Servicer (or the Special Servicer, with respect to Mortgage
Loans serviced by it) and/or the terms and conditions of the related
Mortgage) (collectively, "Condemnation Proceeds") and all other amounts
received and retained in connection with the liquidation of defaulted
Mortgage Loans or property acquired in respect thereof, by foreclosure or
otherwise ("Liquidation Proceeds"), together with the net operating income
(less reasonable reserves for future expenses) derived from the operation
of any Mortgaged Properties acquired by the Trust Fund through foreclosure
or otherwise;
(iv) any amounts paid under any instrument or drawn from any fund that
constitutes Credit Support for the related series of Certificates as
described under "Description of Credit Support";
(v) any advances made as described under "Description of the
Certificates--Advances in Respect of Delinquencies";
(vi) any amounts paid under any Cash Flow Agreement, as described
under "Description of the Trust Funds--Cash Flow Agreements";
(vii) all proceeds of the purchase of any Mortgage Loan, or property
acquired in respect thereof, by the Sponsor, any Mortgage Asset Seller or
any other specified person as described under "--Assignment of Mortgage
Loans; Repurchases" and "--Representations and Warranties; Repurchases",
all proceeds of the purchase of any defaulted Mortgage Loan as described
under "--Realization Upon Defaulted Mortgage Loans", and all proceeds of
any Mortgage Asset purchased as described under "Description of the
Certificates--Termination" (all of the foregoing, also "Liquidation
Proceeds");
(viii) any amounts paid by the Master Servicer to cover Prepayment
Interest Shortfalls arising out of the prepayment of Mortgage Loans as
described under "--Servicing Compensation and Payment of Expenses";
(ix) to the extent that any such item does not constitute additional
servicing compensation to the Master Servicer or Special Servicer, any
payments on account of modification or assumption fees, late payment
charges, Prepayment Premiums or Equity Participations on the Mortgage
Loans;
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(x) 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 Policies";
(xi) any amount required to be deposited by the Master Servicer, the
Special Servicer or the Trustee in connection with losses realized on
investments for the benefit of the Master Servicer, the Special Servicer or
the Trustee, as the case may be, of funds held in the Certificate Account;
and
(xii) any other amounts required to be deposited in the Certificate
Account as provided in the related Pooling Agreement and described in the
related Prospectus Supplement.
Withdrawals. Unless otherwise provided in the related Pooling Agreement and
described in the related Prospectus Supplement, a Master Servicer, Special
Servicer or Trustee may make withdrawals from the Certificate Account for each
Trust Fund that includes Mortgage Loans for any of the following purposes:
(i) to make distributions to the Certificateholders on each
Distribution Date;
(ii) to pay the Master Servicer, the Special Servicer or any
Sub-Servicer any servicing fees not previously retained thereby, such
payment to be made, unless otherwise provided in the related Prospectus
Supplement, out of payments on the particular Mortgage Loans as to which
such fees were earned;
(iii) to reimburse the Master Servicer, the Special Servicer, the
Trustee or any other specified person for any unreimbursed amounts advanced
by it as described under "Description of the Certificates--Advances in
Respect of Delinquencies", such reimbursement to be made out of amounts
received which were identified and applied by the Master Servicer or
Special Servicer, as applicable, as late collections of interest on and
principal of the particular Mortgage Loans with respect to which the
advances were made or out of amounts drawn under any form of Credit Support
with respect to such Mortgage Loans;
(iv) to reimburse the Master Servicer or the Special Servicer for
unpaid servicing fees earned by it and certain unreimbursed servicing
expenses incurred by it with respect to Mortgage Loans in the Trust Fund
and properties acquired in respect thereof, such reimbursement to be made
out of amounts that represent Liquidation Proceeds, Condemnation Proceeds
and Insurance Proceeds collected on the particular Mortgage Loans and
properties, and net income collected on the particular properties, with
respect to which such fees were earned or such expenses were incurred or
out of amounts drawn under any form of Credit Support with respect to such
Mortgage Loans and properties;
(v) to reimburse the Master Servicer, the Special Servicer or the
Trustee for any advances described in clause (iii) above made by it and/or
any servicing expenses referred to in clause (iv) above incurred by it
which, in the good faith judgment of the Master Servicer, the Special
Servicer or the Trustee, as applicable, will not be recoverable from the
amounts described in clauses (iii) and (iv), respectively, such
reimbursement to be made from amounts collected on other Mortgage Loans in
the same Trust Fund or, if and to the extent so provided by the related
Pooling Agreement and described in the related Prospectus Supplement, only
from that portion of amounts collected on such other Mortgage Loans that is
otherwise distributable on one or more classes of Subordinate Certificates
of the related series;
(vi) if and to the extent described in the related Prospectus
Supplement, to pay the Master Servicer, the Special Servicer, the Trustee
or any other specified person interest accrued on the advances described in
clause (iii) above made by it and/or the servicing expenses described in
clause (iv) above incurred by it while such remain outstanding and
unreimbursed;
(vii) to pay for costs and expenses incurred by the Trust Fund for
environmental site assessments performed with respect to Mortgaged
Properties that constitute security for defaulted Mortgage Loans, and for
any containment, clean-up or remediation of hazardous wastes and materials
present on such Mortgaged Properties, as described under "--Realization
Upon Defaulted Mortgage Loans";
(viii) to reimburse the Master Servicer, the Special Servicer, the
REMIC Administrator (if any), the Sponsor, or any of their respective
directors, officers, employees and agents, as the case may be, for certain
expenses, costs and liabilities incurred thereby, as and to the extent
described under "--Certain Matters Regarding the Master Servicer, the
Special Servicer, the REMIC Administrator and the Sponsor";
(ix) if and to the extent described in the related Prospectus
Supplement, to pay the fees of the Trustee and/or the REMIC Administrator
(if any);
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(x) if and to the extent described in the related Prospectus
Supplement, to pay the fees of any provider of Credit Support;
(xi) if and to the extent described in the related Prospectus
Supplement, to reimburse prior draws on any form of Credit Support;
(xii) to reimburse the Trustee or any of its directors, officers,
employees and agents, as the case may be, for certain expenses, costs and
liabilities incurred thereby, as and to the extent described under
"--Certain Matters Regarding the Trustee";
(xiii) to pay the Master Servicer, the Special Servicer or the
Trustee, as appropriate, interest and investment income earned in respect
of amounts held in the Certificate Account as additional compensation;
(xiv) to pay (generally from related income) for costs incurred in
connection with the operation, management and maintenance of any Mortgaged
Property acquired by the Trust Fund by foreclosure or otherwise;
(xv) if one or more elections have been made to treat the Trust Fund
or designated portions thereof as a REMIC, to pay any federal, state or
local taxes imposed on the Trust Fund or its assets or transactions, as and
to the extent described under "Material Federal Income Tax
Consequences--REMICS--Prohibited Transactions Tax and Other Taxes";
(xvi) to pay for the cost of an independent appraiser or other expert
in real estate matters retained to determine a fair sale price for a
defaulted Mortgage Loan or a property acquired in respect thereof in
connection with the liquidation of such Mortgage Loan or property;
(xvii) to pay for the cost of various opinions of counsel obtained
pursuant to the related Pooling Agreement for the benefit of
Certificateholders;
(xviii) to make any other withdrawals permitted by the related Pooling
Agreement and described in the related Prospectus Supplement; and
(xix) to clear and terminate the Certificate Account upon the
termination of the Trust Fund.
ESCROW ACCOUNTS
A Pooling Agreement may require the Master Servicer or Special Servicer
thereunder to establish and maintain, as and to the extent permitted by the
terms of the related Mortgage Loans, one or more escrow accounts into which
mortgagors deposit amounts sufficient to pay taxes, assessments, hazard
insurance premiums or comparable items. Withdrawals from the escrow accounts
maintained in respect of the Mortgage Loans in any Trust Fund may be made to
effect timely payment of taxes, assessments and hazard insurance premiums or
comparable items, to reimburse the related Master Servicer or Special Servicer
out of related collections for prior advances in respect of taxes, assessments
and hazard insurance premiums or comparable items, to refund to mortgagors
amounts determined to be overages, to remit to mortgagors, if required, interest
earned, if any, on balances in any of the escrow accounts, to repair or
otherwise protect the related Mortgaged Property and to clear and terminate any
of the escrow accounts. The Master Servicer and Special Servicer each will be
solely responsible for administration of the escrow accounts maintained by it.
MODIFICATIONS, WAIVERS AND AMENDMENTS OF MORTGAGE LOANS
Unless otherwise provided in the related Prospectus Supplement, a Master
Servicer or Special Servicer may agree to modify, waive or amend any term of any
Mortgage Loan serviced by it in a manner consistent with the applicable
Servicing Standard; provided that the modification, waiver or amendment (i) will
not affect the amount or timing of any scheduled payments of principal or
interest on the Mortgage Loan, (ii) will not, in the judgment of the Master
Servicer or Special Servicer, as the case may be, materially impair the security
for the Mortgage Loan or reduce the likelihood of timely payment of amounts due
thereon, and (iii) will not adversely affect the coverage under any applicable
instrument of Credit Support. Unless otherwise provided in the related
Prospectus Supplement, a Special Servicer also may agree to any other
modification, waiver or amendment if, in its judgment, (i) a material default on
the Mortgage Loan has occurred or a payment default is imminent, (ii) such
modification, waiver or amendment is reasonably likely to produce a greater
recovery with respect to the Mortgage Loan on a present value
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basis than would liquidation, and (iii) such modification, waiver or amendment
will not adversely affect the coverage under any applicable instrument of Credit
Support.
REALIZATION UPON DEFAULTED MORTGAGE LOANS
A borrower's failure to make required Mortgage Loan payments may mean that
operating income is insufficient to service the mortgage debt, or may reflect
the diversion of that income from the servicing of the mortgage debt. In
addition, a borrower that is unable to make Mortgage Loan payments may also be
unable to make timely payment of taxes and insurance premiums and to otherwise
maintain the related Mortgaged Property. In general, and subject to the
discussion in the related Prospectus Supplement, the related Special Servicer
will be required to monitor any Mortgage Loan that is in default more than a
specified number of scheduled payments, evaluate whether the causes of the
default can be corrected over a reasonable period without significant impairment
of the value of the related Mortgaged Property, initiate corrective action in
cooperation with the borrower if cure is likely, inspect the related Mortgaged
Property and take such other actions as are consistent with the Servicing
Standard. A significant period of time may elapse before the Special Servicer is
able to assess the success of any such corrective action or the need for
additional initiatives.
The time within which the Special Servicer can make the initial
determination of appropriate action, evaluate the success of corrective action,
develop additional initiatives, institute foreclosure proceedings and actually
foreclose (or accept a deed to a Mortgaged Property in lieu of foreclosure) on
behalf of the Certificateholders may vary considerably depending on the
particular Mortgage Loan, the Mortgaged Property, the borrower, the presence of
an acceptable party to assume the Mortgage Loan and the laws of the jurisdiction
in which the Mortgaged Property is located. If a borrower files a bankruptcy
petition, the Special Servicer may not be permitted to accelerate the maturity
of the related Mortgage Loan or to foreclose on the related Mortgaged Property
for a considerable period of time, and such Mortgage Loan may be restructured in
the resulting bankruptcy proceedings. See "Certain Legal Aspects of Mortgage
Loans".
A Pooling Agreement may grant to the Master Servicer, the Special Servicer,
a provider of Credit Support and/or the holder or holders of certain classes of
the related series of Certificates a right of first refusal to purchase from the
Trust Fund, at a predetermined purchase price (which, if insufficient to fully
fund the entitlements of Certificateholders to principal and interest thereon,
will be specified in the related Prospectus Supplement), any Mortgage Loan as to
which a specified number of scheduled payments are delinquent. In addition,
unless otherwise specified in the related Prospectus Supplement, the Special
Servicer may offer to sell any defaulted Mortgage Loan if and when the Special
Servicer determines, consistent with the applicable Servicing Standard, that
such a sale would produce a greater recovery on a present value basis than would
liquidation of the related Mortgaged Property. Unless otherwise provided in the
related Prospectus Supplement, the related Pooling Agreement will require that
the Special Servicer accept the highest cash bid received from any person
(including itself, the Master Servicer, the Sponsor or any affiliate of any of
them or any Certificateholder) that constitutes a fair price for such defaulted
Mortgage Loan. In the absence of any bid determined in accordance with the
related Pooling Agreement to be fair, the Special Servicer will generally be
required to proceed against the related Mortgaged Property, subject to the
discussion below.
If a default on a Mortgage Loan has occurred or, in the Special Servicer's
judgment, a payment default is imminent, the Special Servicer, on behalf of the
Trustee, may at any time institute foreclosure proceedings, exercise any power
of sale contained in the related Mortgage, obtain a deed in lieu of foreclosure,
or otherwise acquire title to the related Mortgaged Property, by operation of
law or otherwise, if such action is consistent with the Servicing Standard.
Unless otherwise specified in the related Prospectus Supplement, however,
neither the Special Servicer nor the Master Servicer may acquire title to any
Mortgaged Property, have a receiver of rents appointed with respect to any
Mortgaged Property or take any other action with respect to any Mortgage
Property that would cause the Trustee, for the benefit of the related series of
Certificateholders, or any other specified person to be considered to hold title
to, to be a "mortgagee-in-possession" of, or to be an "owner" or an "operator"
of such Mortgaged Property within the meaning of certain federal environmental
laws, unless the Special Servicer has previously determined, based on a report
prepared by a person who regularly conducts environmental audits (which report
will be an expense of the Trust Fund), that either:
(i) the Mortgaged Property is in compliance with applicable
environmental laws and regulations or, if not, that taking such actions as
are necessary to bring the Mortgaged Property into compliance therewith is
reasonably likely to produce a greater recovery to Certificateholders on a
present value basis than not taking such actions; and
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(ii) there are no circumstances or conditions present at the Mortgaged
Property that have resulted in any contamination for which investigation,
testing, monitoring, containment, clean-up or remediation could be required
under any applicable environmental laws and regulations or, if such
circumstances or conditions are present for which any such action could be
required, taking such actions with respect to the Mortgaged Property is
reasonably likely to produce a greater recovery to Certificateholders on a
present value basis than not taking such actions. See "Certain Legal
Aspects of Mortgage Loans--Environmental Legislation".
Unless otherwise provided in the related Prospectus Supplement, if title to
any Mortgaged Property is acquired by a Trust Fund as to which a REMIC election
has been made, the Special Servicer, on behalf of the Trust Fund, will be
required to sell the Mortgaged Property within two years of acquisition, unless
(i) the Internal Revenue Service grants an extension of time to sell such
property or (ii) the Trustee and REMIC Administrator each receives an opinion of
independent counsel to the effect that the holding of the property by the Trust
Fund for more than two years after its acquisition will not result in the
imposition of a tax on the Trust Fund or cause the Trust Fund (or any designated
portion thereof) to fail to qualify as a REMIC under the Code at any time that
any Certificate is outstanding. Subject to the foregoing, the Special Servicer
will generally be required to solicit bids for any Mortgaged Property so
acquired in such a manner as will be reasonably likely to realize a fair price
for such property. If the Trust Fund acquires title to any Mortgaged Property,
the Special Servicer, on behalf of the Trust Fund, may retain an independent
contractor to manage and operate such property. The retention of an independent
contractor, however, will not relieve the Special Servicer of its obligation to
manage such Mortgaged Property in a manner consistent with the Servicing
Standard.
If Liquidation Proceeds collected with respect to a defaulted Mortgage Loan
are less than the outstanding principal balance of the defaulted Mortgage Loan
plus interest accrued thereon plus the aggregate amount of reimbursable expenses
incurred by the Special Servicer and/or Master Servicer in connection with such
Mortgage Loan, the Trust Fund will realize a loss in the amount of such
difference. The Special Servicer and/or Master Servicer will be entitled to
reimbursement out of the Liquidation Proceeds recovered on any defaulted
Mortgage Loan, prior to the distribution of such Liquidation Proceeds to
Certificateholders, amounts that represent unpaid servicing compensation in
respect of the Mortgage Loan, unreimbursed servicing expenses incurred with
respect to the Mortgage Loan and any unreimbursed advances of delinquent
payments made with respect to the Mortgage Loan.
If any Mortgaged Property suffers damage such that the proceeds, if any, of
the related hazard insurance policy are insufficient to fully restore the
damaged property, neither the Special Servicer nor the Master Servicer will be
required to expend its own funds to effect such restoration unless (and to the
extent not otherwise provided in the related Prospectus Supplement) it
determines (i) that such restoration will increase the proceeds to
Certificateholders on liquidation of the Mortgage Loan after reimbursement of
the Special Servicer or Master Servicer, as the case may be, for its expenses
and (ii) that such expenses will be recoverable by it from related Insurance
Proceeds or Liquidation Proceeds.
Notwithstanding the foregoing discussion, if and to the extent described in
the related Prospectus Supplement, the related Pooling Agreement may provide
that any or all of the rights, duties and obligations of a Special Servicer with
respect to any defaulted Mortgage Loan or REO Property as described under this
section "--Realization Upon Defaulted Mortgage Loans" and elsewhere in this
Prospectus, may be exercised or performed by a Master Servicer with the consent
of, at the direction of or following consultation with the Special Servicer.
Moreover, a single entity may act as both Master Servicer and Special Servicer
for any Trust Fund.
HAZARD INSURANCE POLICIES
Unless otherwise specified in the related Prospectus Supplement, each
Pooling Agreement will require the Master Servicer (or the Special Servicer with
respect to Mortgage Loans serviced thereby) to cause each Mortgage Loan borrower
to maintain a hazard insurance policy that provides for such coverage as is
required under the related Mortgage or, if the Mortgage permits the holder
thereof to dictate to the borrower the insurance coverage to be maintained on
the related Mortgaged Property, such coverage as is consistent with the
requirements of the Servicing Standard. Unless otherwise specified in the
related Prospectus Supplement, such coverage generally will be in an amount
equal to the lesser of the principal balance owing on such Mortgage Loan and the
replacement cost of the related Mortgaged Property. The ability of a Master
Servicer (or Special Servicer) to assure that hazard insurance proceeds are
appropriately applied may be dependent upon its being named as an additional
insured under any hazard insurance policy and under any other insurance policy
referred to below, or upon the extent to which information concerning covered
losses is furnished by borrowers. All amounts collected by a Master Servicer (or
Special
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Servicer) under any such policy (except for amounts to be applied to the
restoration or repair of the Mortgaged Property or released to the borrower in
accordance with the Master Servicer's (or Special Servicer's) normal servicing
procedures and/or to the terms and conditions of the related Mortgage and
Mortgage Note) will be deposited in the related Certificate Account. The Pooling
Agreement may provide that the Master Servicer (or Special Servicer) may satisfy
its obligation to cause borrowers to maintain such hazard insurance policies by
maintaining a blanket policy insuring against hazard losses on all of the
related Mortgage Loans. If such blanket policy contains a deductible clause, the
Master Servicer (or Special Servicer) will be required, in the event of a
casualty covered by such blanket policy, to deposit or cause to be deposited in
the related Certificate Account all sums that would have been deposited therein
but for such deductible clause.
In general, the standard form of fire and extended coverage policy covers
physical damage to or destruction of the improvements of the property by fire,
lightning, explosion, smoke, windstorm and hail, and riot, strike and civil
commotion, subject to the conditions and exclusions specified in each policy.
Although the policies covering the Mortgaged Properties will be underwritten by
different insurers under different state laws in accordance with different
applicable state forms, and therefore will not contain identical terms and
conditions, most such 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
mudflows), wet or dry rot, vermin, domestic animals and other kinds of risks not
specified in the preceding sentence. Accordingly, a Mortgaged Property may not
be insured for losses arising from any such cause unless the related Mortgage
specifically requires, or permits the holder thereof to require, such coverage.
The hazard insurance policies covering the Mortgaged Properties will
typically contain co-insurance clauses that in effect require an insured at all
times to carry insurance of a specified percentage (generally 80% to 90%) of the
full replacement value of the improvements on the property in order to recover
the full amount of any partial loss. If the insured's coverage falls below this
specified percentage, such clauses generally provide that the insurer's
liability in the event of partial loss does not exceed the lesser of (i) the
replacement cost of the improvements less physical depreciation and (ii) such
proportion of the loss as the amount of insurance carried bears to the specified
percentage of the full replacement cost of such improvements.
DUE-ON-SALE AND DUE-ON-ENCUMBRANCE PROVISIONS
Certain of the Mortgage Loans may contain a due-on-sale clause that
entitles the lender to accelerate payment of the Mortgage Loan upon any sale or
other transfer of the related Mortgaged Property made without the lender's
consent. Certain of the Mortgage Loans may also contain a due-on-encumbrance
clause that entitles the lender to accelerate the maturity of the Mortgage Loan
upon the creation of any other lien or encumbrance upon the Mortgaged Property.
Unless otherwise provided in the related Prospectus Supplement, the Master
Servicer or the Special Servicer will determine whether to exercise any right
the Trustee may have under any such provision in a manner consistent with the
Servicing Standard. Unless otherwise specified in the related Prospectus
Supplement, the Master Servicer or Special Servicer, as applicable, will be
entitled to retain as additional servicing compensation any fee collected in
connection with the permitted transfer of a Mortgaged Property. See "Certain
Legal Aspects of Mortgage Loans--Due-on-Sale and Due-on-Encumbrance".
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
Unless otherwise specified in the related Prospectus Supplement, a Master
Servicer's primary servicing compensation with respect to a series of
Certificates will come from the periodic payment to it of a specified portion of
the interest payments on each Mortgage Loan in the related Trust Fund, including
Mortgage Loans serviced by the related Special Servicer. If and to the extent
described in the related Prospectus Supplement, a Special Servicer's primary
compensation with respect to a series of Certificates may consist of any or all
of the following components: (i) a specified portion of the interest payments on
each Mortgage Loan in the related Trust Fund, whether or not serviced by it;
(ii) an additional specified portion of the interest payments on each Mortgage
Loan then currently serviced by it; and (iii) subject any specified limitations,
a fixed percentage of some or all of the collections and proceeds received with
respect to each Mortgage Loan which was at any time serviced by it, including
Mortgage Loans for which servicing was returned to the Master Servicer. Insofar
as any portion of the Master Servicer's or Special Servicer's compensation
consists of a specified portion of the interest payments on a Mortgage Loan,
such compensation will generally be based on a percentage of the principal
balance of such Mortgage Loan outstanding
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from time to time and, accordingly, will decrease with the amortization of the
Mortgage Loan. As additional compensation, a Master Servicer or Special Servicer
may be entitled to retain all or a portion of late payment charges, Prepayment
Premiums, modification fees and other fees collected from borrowers and any
interest or other income that may be earned on funds held in the related
Certificate Account. A more detailed description of each Master Servicer's and
Special Servicer's compensation will be provided in the related Prospectus
Supplement. Any Sub-Servicer will receive as its sub-servicing compensation a
portion of the servicing compensation to be paid to the Master Servicer or
Special Servicer that retained such Sub-Servicer.
In addition to amounts payable to any Sub-Servicer retained by it, a Master
Servicer or Special Servicer may be required, to the extent provided in the
related Prospectus Supplement, to pay from amounts that represent its servicing
compensation certain expenses incurred in connection with the administration of
the related Trust Fund, including, without limitation, payment of the fees and
disbursements of independent accountants and payment of expenses incurred in
connection with distributions and reports to Certificateholders. Certain other
expenses, including certain expenses related to Mortgage Loan defaults and
liquidations and, to the extent so provided in the related Prospectus
Supplement, interest on such expenses at the rate specified therein, may be
required to be borne by the Trust Fund.
If and to the extent provided in the related Prospectus Supplement, a
Master Servicer may be required to apply a portion of the servicing compensation
otherwise payable to it in respect of any period to Prepayment Interest
Shortfalls. See "Yield and Maturity Considerations--Certain Shortfalls in
Collections of Interest".
EVIDENCE AS TO COMPLIANCE
Unless otherwise provided in the related Prospectus Supplement, each
Pooling Agreement will require that, on or before a specified date in each year,
the Master Servicer and, if and to the extent appropriate, the Special Servicer
each cause a firm of independent public accountants to furnish to the Trustee a
statement to the effect that (i) such firm has obtained a letter of
representations regarding certain matters relating to the management of the
Master Servicer or the Special Servicer, as the case may be, which includes an
assertion that the Master Servicer or the Special Servicer, as the case may be,
has complied with certain minimum mortgage loan servicing standards (to the
extent applicable to commercial and multifamily mortgage loans), identified in
the Uniform Single Attestation Program for Mortgage Bankers established by the
Mortgage Bankers Association of America, with respect to the servicing of
commercial and multifamily mortgage loans during the most recently completed
calendar year and (ii) on the basis of an examination conducted by such firm in
accordance with standards established by the American Institute of Certified
Public Accountants, such representation is fairly stated in all material
respects, subject to such exceptions and other qualifications that may be
appropriate. In rendering its report, such firm may rely, as to matters relating
to the direct servicing of commercial and multifamily mortgage loans by
sub-servicers, upon comparable reports of firms of independent public
accountants rendered on the basis of examinations conducted in accordance with
the same standards (rendered within one year of such report) with respect to
those sub-servicers. A Prospectus Supplement may provide that additional or
alternative reports of independent certified public accountants relating to the
servicing of mortgage loans may be required to be delivered to the Trustee.
Each Pooling Agreement will also require that, on or before a specified
date in each year, the Master Servicer and Special Servicer each deliver to the
Trustee a statement signed by one or more officers thereof to the effect that
the Master Servicer or the Special Servicer, as the case may be, has fulfilled
its material obligations under the Pooling Agreement throughout the preceding
calendar year or other specified twelve month period.
CERTAIN MATTERS REGARDING THE MASTER SERVICER, THE SPECIAL SERVICER,
THE REMIC ADMINISTRATOR AND THE SPONSOR
Any entity serving as Master Servicer, Special Servicer or REMIC
Administrator under a Pooling Agreement may be an affiliate of the Sponsor and
may have other normal business relationships with the Sponsor or the Sponsor's
affiliates. Unless otherwise specified in the Prospectus Supplement for a series
of Certificates, the related Pooling Agreement will permit the Master Servicer,
the Special Servicer and any REMIC Administrator to resign from its obligations
thereunder only upon (a) the appointment of, and the acceptance of such
appointment by, a successor thereto and receipt by the Trustee of written
confirmation from each applicable Rating Agency that such resignation and
appointment will not have an adverse effect on the rating assigned by such
Rating Agency to any class of Certificates of such series or (b) a determination
that such obligations are no longer permissible under applicable law or are in
material conflict by reason of applicable law with any other activities carried
on by it. No such resignation
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will become effective until the Trustee or other successor has assumed the
obligations and duties of the resigning Master Servicer, Special Servicer or
REMIC Administrator, as the case may be, under the Pooling Agreement. The Master
Servicer and Special Servicer for each Trust Fund will be required to maintain a
fidelity bond and errors and omissions policy or their equivalent that provides
coverage against losses that may be sustained as a result of an officer's or
employee's misappropriation of funds or errors and omissions, subject to certain
limitations as to amount of coverage, deductible amounts, conditions, exclusions
and exceptions permitted by the related Pooling Agreement.
Unless otherwise specified in the related Prospectus Supplement, each
Pooling Agreement will further provide that none of the Master Servicer, the
Special Servicer, the REMIC Administrator (if any), the Sponsor or any director,
officer, employee or agent of any of them will be under any liability to the
related Trust Fund or Certificateholders for any action taken, or not taken, in
good faith pursuant to the Pooling Agreement or for errors in judgment;
provided, however, that none of the Master Servicer, the Special Servicer, the
REMIC Administrator (if any), the Sponsor or any such person will be protected
against any liability that would otherwise be imposed by reason of willful
misfeasance, bad faith or gross negligence in the performance of obligations or
duties thereunder or by reason of reckless disregard of such obligations and
duties. Unless otherwise specified in the related Prospectus Supplement, each
Pooling Agreement will further provide that the Master Servicer, the Special
Servicer, the REMIC Administrator (if any), the Sponsor and any director,
officer, employee or agent of any of them will be entitled to indemnification by
the related Trust Fund against any loss, liability or expense incurred in
connection with any legal action that relates to such Pooling Agreement or the
related series of Certificates; provided, however, that such indemnification
will not extend to any loss, liability or expense incurred by reason of
misfeasance, bad faith or gross negligence in the performance of obligations or
duties under such Pooling Agreement, or by reason of reckless disregard of such
obligations or duties. In addition, each Pooling Agreement will provide that
none of the Master Servicer, the Special Servicer, the REMIC Administrator (if
any) or the Sponsor 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 Agreement and that in its opinion may involve
it in any expense or liability. However, each of the Master Servicer, the
Special Servicer, the REMIC Administrator (if any) and the Sponsor will be
permitted, in the exercise of its discretion, to undertake any such action that
it may deem necessary or desirable with respect to the enforcement and/or
protection of the rights and duties of the parties to the Pooling Agreement and
the interests of the related series of Certificateholders thereunder. In such
event, the legal expenses and costs of such action, and any liability resulting
therefrom, will be expenses, costs and liabilities of the related series of
Certificateholders, and the Master Servicer, the Special Servicer, the REMIC
Administrator or the Sponsor, as the case may be, will be entitled to charge the
related Certificate Account therefor.
Any person into which the Master Servicer, the Special Servicer, the REMIC
Administrator (if any) or the Sponsor may be merged or consolidated, or any
person resulting from any merger or consolidation to which the Master Servicer,
the Special Servicer, the REMIC Administrator (if any) or the Sponsor is a
party, or any person succeeding to the business of the Master Servicer, the
Special Servicer, the REMIC Administrator (if any) or the Sponsor, will be the
successor of the Master Servicer, the Special Servicer, the REMIC Administrator
or the Sponsor, as the case may be, under the related Pooling Agreement.
Unless otherwise specified in the related Prospectus Supplement, a REMIC
Administrator will be entitled to perform any of its duties under the related
Pooling Agreement either directly or by or through agents or attorneys, and the
REMIC Administrator will not be responsible for any willful misconduct or gross
negligence on the part of any such agent or attorney appointed by it with due
care.
EVENTS OF DEFAULT
Unless otherwise provided in the Prospectus Supplement for a series of
Certificates, "Events of Default" under the related Pooling Agreement will
include (i) any failure by the Master Servicer to distribute or cause to be
distributed to the Certificateholders of such series, or to remit to the Trustee
for distribution to such Certificateholders, any amount required to be so
distributed or remitted, which failure continues unremedied for five days after
written notice thereof has been given to the Master Servicer by any other party
to the related Pooling Agreement, or to the Master Servicer, with a copy to each
other party to the related Pooling Agreement, by Certificateholders entitled to
not less than 25% (or such other percentage specified in the related Prospectus
Supplement) of the Voting Rights for such series; (ii) any failure by the
Special Servicer to remit to the Master Servicer or the Trustee any amount
required to be so remitted, which failure continues unremedied for five days
after written notice thereof has been given to the Special Servicer by any other
party to the related Pooling Agreement, or to the Special Servicer, with a copy
to each other
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party to the related Pooling Agreement, by the Certificateholders entitled to
not less than 25% (or such other percentage specified in the related Prospectus
Supplement) of the Voting Rights of such series; (iii) any failure by the Master
Servicer or the Special Servicer duly to observe or perform in any material
respect any of its other covenants or obligations under the related Pooling
Agreement, which failure continues unremedied for sixty days after written
notice thereof has been given to the Master Servicer or the Special Servicer, as
the case may be, by any other party to the related Pooling Agreement, or to the
Master Servicer or the Special Servicer, as the case may be, with a copy to each
other party to the related Pooling Agreement, by Certificateholders entitled to
not less than 25% (or such other percentage specified in the related Prospectus
Supplement) of the Voting Rights for such series; (iv) any failure by a REMIC
Administrator (if any) duly to observe or perform in any material respect any of
its covenants or obligations under the related Pooling Agreement, which failure
continues unremedied for sixty days after written notice thereof has been given
to the REMIC Administrator by any other party to the related Pooling Agreement,
or to the REMIC Administrator, with a copy to each other party to the related
Pooling Agreement, by Certificateholders entitled to not less than 25% (or such
other percentage specified in the related Prospectus Supplement) of the Voting
Rights for such series; and (v) certain events of insolvency, readjustment of
debt, marshalling of assets and liabilities, or similar proceedings in respect
of or relating to the Master Servicer, the Special Servicer, or a REMIC
Administrator (if any), and certain actions by or on behalf of the Master
Servicer, the Special Servicer or a REMIC Administrator (if any) indicating its
insolvency or inability to pay its obligations. Material variations to the
foregoing Events of Default (other than to add thereto or shorten cure periods
or eliminate notice requirements) will be specified in the related Prospectus
Supplement. Unless otherwise specified in the related Prospectus Supplement,
when a single entity acts as Master Servicer, Special Servicer and REMIC
Administrator, or in any two of the foregoing capacities, for any Trust Fund, an
Event of Default in one capacity will constitute an Event of Default in each
capacity.
RIGHTS UPON EVENT OF DEFAULT
If an Event of Default occurs with respect to the Master Servicer, the
Special Servicer or a REMIC Administrator (if any) under a Pooling Agreement,
then, in each and every such case, so long as the Event of Default remains
unremedied, the Sponsor or the Trustee will be authorized, and at the direction
of Certificateholders of the related series entitled to not less than 51% (or
such other percentage specified in the related Prospectus Supplement) of the
Voting Rights for such series, the Trustee will be required, to terminate all of
the rights and obligations of the defaulting party as Master Servicer, Special
Servicer or REMIC Administrator, as applicable, under the Pooling Agreement,
whereupon the Trustee will succeed to all of the responsibilities, duties and
liabilities of the defaulting party as Master Servicer, Special Servicer or
REMIC Administrator, as applicable, under the Pooling Agreement (except that if
the defaulting party is required to make advances thereunder regarding
delinquent Mortgage Loans, but the Trustee is prohibited by law from obligating
itself to make such advances, or if the related Prospectus Supplement so
specifies, the Trustee will not be obligated to make such advances) and will be
entitled to similar compensation arrangements. Unless otherwise specified in the
related Prospectus Supplement, if the Trustee is unwilling or unable so to act,
it may (or, at the written request of Certificateholders of the related series
entitled to not less than 51% (or such other percentage specified in the related
Prospectus Supplement) of the Voting Rights for such series, it will be required
to) appoint, or petition a court of competent jurisdiction to appoint, a loan
servicing institution that (unless otherwise provided in the related Prospectus
Supplement) is acceptable to each applicable Rating Agency to act as successor
to the Master Servicer, Special Servicer or REMIC Administrator, as the case may
be, under the Pooling Agreement. Pending such appointment, the Trustee will be
obligated to act in such capacity.
No Certificateholder will have the right under any Pooling Agreement to
institute any proceeding with respect thereto unless such holder previously has
given to the Trustee written notice of default and unless Certificateholders of
the same series entitled to not less than 25% (or such other percentage
specified in the related Prospectus Supplement) of the Voting Rights for such
series shall have made written request upon the Trustee to institute such
proceeding in its own name as Trustee thereunder and shall have offered to the
Trustee reasonable indemnity, and the Trustee for sixty days (or such other
period specified in the related Prospectus Supplement) shall have neglected or
refused to institute any such proceeding. The Trustee, however, will be under no
obligation to exercise any of the trusts or powers vested in it by any Pooling
Agreement or to make any investigation of matters arising thereunder or to
institute, conduct or defend any litigation thereunder or in relation thereto at
the request, order or direction of any of the holders of Certificates of the
related series, unless such Certificateholders have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
which may be incurred therein or thereby.
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AMENDMENT
Each Pooling Agreement may be amended by the respective parties thereto,
without the consent of any of the holders of the related series of Certificates,
(i) to cure any ambiguity, (ii) to correct a defective provision therein or to
correct, modify or supplement any provision therein that may be inconsistent
with any other provision therein, (iii) to add any other provisions with respect
to matters or questions arising under the Pooling Agreement that are not
inconsistent with the provisions thereof, (iv) to comply with any requirements
imposed by the Code, or (v) for any other purpose; provided that such amendment
(other than an amendment for the specific purpose referred to in clause (iv)
above) may not (as evidenced by an opinion of counsel to such effect
satisfactory to the Trustee) adversely affect in any material respect the
interests of any such holder; and provided further that such amendment (other
than an amendment for one of the specific purposes referred to in clauses (i)
through (iv) above) must be acceptable to each applicable Rating Agency. Unless
otherwise specified in the related Prospectus Supplement, each Pooling Agreement
may also be amended by the respective parties thereto, with the consent of the
holders of the related series of Certificates entitled to not less than 51% (or
such other percentage specified in the related Prospectus Supplement) of the
Voting Rights for such series allocated to the affected classes, for any
purpose; provided that, unless otherwise specified in the related Prospectus
Supplement, no such amendment may (i) reduce in any manner the amount of, or
delay the timing of, payments received or advanced on Mortgage Loans that are
required to be distributed in respect of any Certificate without the consent of
the holder of such Certificate, (ii) adversely affect in any material respect
the interests of the holders of any class of Certificates, in a manner other
than as described in clause (i), without the consent of the holders of all
Certificates of such class or (iii) modify the provisions of the Pooling
Agreement described in this paragraph without the consent of the holders of all
Certificates of the related series. However, unless otherwise specified in the
related Prospectus Supplement, the Trustee will be prohibited from consenting to
any amendment of a Pooling Agreement pursuant to which a REMIC election is to be
or has been made unless the Trustee shall first have received an opinion of
counsel to the effect that such amendment will not result in the imposition of a
tax on the related Trust Fund or cause the related Trust Fund (or designated
portion thereof) to fail to qualify as a REMIC at any time that the related
Certificates are outstanding.
LIST OF CERTIFICATEHOLDERS
Unless otherwise specified in the related Prospectus Supplement, upon
written request of three or more Certificateholders of record made for purposes
of communicating with other holders of Certificates of the same series with
respect to their rights under the related Pooling Agreement, the Trustee or
other specified person will afford such Certificateholders access during normal
business hours to the most recent list of Certificateholders of that series held
by such person. If such list is of a date more than 90 days prior to the date of
receipt of such Certificateholders' request, then such person, if not the
registrar for such series of Certificates, will be required to request from such
registrar a current list and to afford such requesting Certificateholders access
thereto promptly upon receipt.
THE TRUSTEE
The Trustee under each Pooling Agreement will be named in the related
Prospectus Supplement. The commercial bank, national banking association,
banking corporation or trust company that serves as Trustee may have typical
banking relationships with the Sponsor and its affiliates and with any Master
Servicer, Special Servicer or REMIC Administrator and its affiliates.
DUTIES OF THE TRUSTEE
The Trustee for each series of Certificates will make no representation as
to the validity or sufficiency of the related Pooling Agreement, the
Certificates or any underlying Mortgage Loan or related document and will not be
accountable for the use or application by or on behalf of any Master Servicer or
Special Servicer of any funds paid to the Master Servicer or Special Servicer in
respect of the Certificates or the underlying Mortgage Loans, or any funds
deposited into or withdrawn from the Certificate Account for such series or any
other account by or on behalf of the Master Servicer or Special Servicer. If no
Event of Default has occurred and is continuing, the Trustee for each series of
Certificates will be required to perform only those duties specifically required
under the related Pooling Agreement. However, upon receipt of any of the various
certificates, reports or other instruments required to be furnished to it
pursuant to the related Pooling Agreement, a Trustee will be required to examine
such documents and to determine whether they conform to the requirements of such
agreement.
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CERTAIN MATTERS REGARDING THE TRUSTEE
As and to the extent described in the related Prospectus Supplement, the
fees and normal disbursements of any Trustee may be the expense of the related
Master Servicer or other specified person or may be required to be borne by the
related Trust Fund.
Unless otherwise specified in the related Prospectus Supplement, the
Trustee for each series of Certificates will be entitled to indemnification,
from amounts held in the Certificate Account for such series, for any loss,
liability or expense incurred by the Trustee in connection with the Trustee's
acceptance or administration of its trusts under the related Pooling Agreement;
provided, however, that such indemnification will not extend to any loss,
liability or expense incurred by reason of willful misfeasance, bad faith or
gross negligence on the part of the Trustee in the performance of its
obligations and duties thereunder, or by reason of its reckless disregard of
such obligations or duties.
Unless otherwise specified in the related Prospectus Supplement, the
Trustee for each series of Certificates will be entitled to execute any of its
trusts or powers under the related Pooling Agreement or perform any of its
duties thereunder either directly or by or through agents or attorneys, and the
Trustee will not be responsible for any willful misconduct or gross negligence
on the part of any such agent or attorney appointed by it with due care.
RESIGNATION AND REMOVAL OF THE TRUSTEE
A Trustee will be permitted at any time to resign from its obligations and
duties under the related Pooling Agreement by giving written notice thereof to
the Sponsor. Upon receiving such notice of resignation, the Sponsor (or such
other person as may be specified in the related Prospectus Supplement) will be
required to use its best efforts to promptly appoint a successor trustee. If no
successor trustee shall have accepted an appointment within a specified period
after the giving of such notice of resignation, the resigning Trustee may
petition any court of competent jurisdiction to appoint a successor trustee.
If at any time a Trustee ceases to be eligible to continue as such under
the related Pooling Agreement, or if at any time the Trustee becomes incapable
of acting, or if certain events of (or proceedings in respect of) bankruptcy or
insolvency occur with respect to the Trustee, the Sponsor will be authorized to
remove the Trustee and appoint a successor trustee. In addition, holders of the
Certificates of any series entitled to at least 33 1/8% (or such other
percentage specified in the related Prospectus Supplement) of the Voting Rights
for such series may at any time (with or without cause) remove the Trustee under
the related Pooling Agreement and appoint a successor trustee, provided that
other holders of Certificates of the same series entitled to a greater
percentage of the Voting Rights for such series do not object.
Any resignation or removal of a Trustee and appointment of a successor
trustee will not become effective until acceptance of appointment by the
successor trustee.
DESCRIPTION OF CREDIT SUPPORT
GENERAL
Credit Support may be provided with respect to one or more classes of the
Certificates of any series, or with respect to the related Mortgage Assets.
Credit Support may be in the form of a letter of credit, the subordination of
one or more classes of Certificates, the use of a pool insurance policy or
guarantee insurance, the establishment of one or more reserve funds or another
method of Credit Support described in the related Prospectus Supplement, or any
combination of the foregoing. If so provided in the related Prospectus
Supplement, any form of Credit Support may provide credit enhancement for more
than one series of Certificates to the extent described therein.
Unless otherwise provided in the related Prospectus Supplement for a series
of Certificates, the Credit Support will not provide protection against all
risks of loss and will not guarantee payment to Certificateholders of all
amounts to which they are entitled under the related Pooling Agreement. If
losses or shortfalls occur that exceed the amount covered by the related Credit
Support or that are not covered by such Credit Support, Certificateholders will
bear their allocable share of deficiencies. Moreover, if a form of Credit
Support covers more than one series of Certificates, holders of Certificates of
one series will be subject to the risk that such Credit Support will be
exhausted by the claims of the holders of Certificates of one or more other
series before the former receive their intended share of such coverage.
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If Credit Support is provided with respect to one or more classes of
Certificates of a series, or with respect to the related Mortgage Assets, the
related Prospectus Supplement will include a description of (i) the nature and
amount of coverage under such Credit Support, (ii) any conditions to payment
thereunder not otherwise described herein, (iii) the conditions (if any) under
which the amount of coverage under such Credit Support may be reduced and under
which such Credit Support may be terminated or replaced and (iv) the material
provisions relating to such Credit Support. Additionally, the related Prospectus
Supplement will set forth certain information with respect to the obligor under
any instrument of Credit Support, including (i) a brief description of its
principal business activities, (ii) its principal place of business, place of
incorporation and the jurisdiction under which it is chartered or licensed to do
business, (iii) if applicable, the identity of regulatory agencies that exercise
primary jurisdiction over the conduct of its business and (iv) its total assets,
and its stockholders' equity or policyholders' surplus, if applicable, as of a
date that will be specified in the Prospectus Supplement. See "Risk
Factors--Credit Support Limitations".
SUBORDINATE CERTIFICATES
If so specified in the related Prospectus Supplement, one or more classes
of Certificates of a series may be Subordinate Certificates. To the extent
specified in the related Prospectus Supplement, the rights of the holders of
Subordinate Certificates to receive distributions from the Certificate Account
on any Distribution Date will be subordinated to the corresponding rights of the
holders of Senior Certificates. If so provided in the related Prospectus
Supplement, the subordination of a class may apply only in the event of (or may
be limited to) certain types of losses or shortfalls. The related Prospectus
Supplement will set forth information concerning the manner and amount of
subordination provided by a class or classes of Subordinate Certificates in a
series and the circumstances under which such subordination will be available.
CROSS-SUPPORT PROVISIONS
If the Mortgage Assets in any Trust Fund are divided into separate groups,
each supporting a separate class or classes of Certificates of the related
series, Credit Support may be provided by cross-support provisions requiring
that distributions be made on Senior Certificates evidencing interests in one
group of Mortgage Assets prior to distributions on Subordinate Certificates
evidencing interests in a different group of Mortgage Assets within the Trust
Fund. The Prospectus Supplement for a series that includes a cross-support
provision will describe the manner and conditions for applying such provisions.
INSURANCE OR GUARANTEES WITH RESPECT TO MORTGAGE LOANS
If so provided in the Prospectus Supplement for a series of Certificates,
Mortgage Loans included in the related Trust Fund will be covered for certain
default risks by insurance policies or guarantees. To the extent material, a
copy of each such instrument will accompany the Current Report on Form 8-K to be
filed with the Commission within 15 days of issuance of the Certificates of the
related series.
LETTER OF CREDIT
If so provided in the Prospectus Supplement for a series of Certificates,
deficiencies in amounts otherwise payable on such Certificates or certain
classes thereof will be covered by one or more letters of credit, issued by a
bank or financial institution specified in such Prospectus Supplement (the "L/C
Bank"). Under a letter of credit, the L/C Bank will be obligated to honor draws
thereunder in an aggregate fixed dollar amount, net of unreimbursed payments
thereunder, generally equal to a percentage specified in the related Prospectus
Supplement of the aggregate principal balance of the Mortgage Assets on the
related Cut-off Date or of the initial aggregate Certificate Balance of one or
more classes of Certificates. If so specified in the related Prospectus
Supplement, the letter of credit may permit draws only in the event of certain
types of losses and shortfalls. The amount available under the letter of credit
will, in all cases, be reduced to the extent of the unreimbursed payments
thereunder and may otherwise be reduced as described in the related Prospectus
Supplement. The obligations of the L/C Bank under the letter of credit for each
series of Certificates will expire at the earlier of the date specified in the
related Prospectus Supplement or the termination of the Trust Fund. A copy of
any such letter of credit will accompany the Current Report on Form 8-K to be
filed with the Commission within 15 days of issuance of the Certificates of the
related series.
CERTIFICATE INSURANCE AND SURETY BONDS
If so provided in the Prospectus Supplement for a series of Certificates,
deficiencies in amounts otherwise payable on such Certificates or certain
classes thereof will be covered by insurance policies and/or surety bonds
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provided by one or more insurance companies or sureties. Such instruments may
cover, with respect to one or more classes of Certificates of the related
series, timely distributions of interest and/or full distributions of principal
on the basis of a schedule of principal distributions set forth in or determined
in the manner specified in the related Prospectus Supplement. The related
Prospectus Supplement will describe any limitations on the draws that may be
made under any such instrument. A copy of any such instrument will accompany the
Current Report on Form 8-K to be filed with the Commission within 15 days of
issuance of the Certificates of the related series.
RESERVE FUNDS
If so provided in the Prospectus Supplement for a series of Certificates,
deficiencies in amounts otherwise payable on such Certificates or certain
classes thereof will be covered (to the extent of available funds) by one or
more reserve funds in which cash, a letter of credit, Permitted Investments, a
demand note or a combination thereof will be deposited, in the amounts specified
in such Prospectus Supplement. If so specified in the related Prospectus
Supplement, the reserve fund for a series may also be funded over time by a
specified amount of the collections received on the related Mortgage Assets.
Amounts on deposit in any reserve fund for a series, together with the
reinvestment income thereon, if any, will be applied for the purposes, in the
manner, and to the extent specified in the related Prospectus Supplement. If so
specified in the related Prospectus Supplement, reserve funds may be established
to provide protection only against certain types of losses and shortfalls.
Following each Distribution Date, amounts in a reserve fund in excess of any
amount required to be maintained therein may be released from the reserve fund
under the conditions and to the extent specified in the related Prospectus
Supplement.
If so specified in the related Prospectus Supplement, amounts deposited in
any reserve fund will be invested in Permitted Investments. Unless otherwise
specified in the related Prospectus Supplement, any reinvestment income or other
gain from such investments will be credited to the related reserve fund for such
series, and any loss resulting from such investments will be charged to such
reserve fund. However, such income may be payable to any related Master Servicer
or another service provider as additional compensation for its services. The
reserve fund, if any, for a series will not be a part of the Trust Fund unless
otherwise specified in the related Prospectus Supplement.
CREDIT SUPPORT WITH RESPECT TO MBS
If so provided in the Prospectus Supplement for a series of Certificates,
any MBS included in the related Trust Fund and/or the related underlying
mortgage loans may be covered by one or more of the types of Credit Support
described herein. The related Prospectus Supplement will specify, as to each
such form of Credit Support, the information indicated above with respect
thereto, to the extent such information is material and available.
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS
The following discussion contains general summaries of certain legal
aspects of loans secured by commercial and multifamily residential properties.
Because such legal aspects are governed by applicable state law (which laws may
differ substantially), the summaries do not purport to be complete, to reflect
the laws of any particular state, or to encompass the laws of all states in
which the security for the Mortgage Loans (or mortgage loans underlying any MBS)
is situated. Accordingly, the summaries are qualified in their entirety by
reference to the applicable laws of those states. If the Mortgage Assets in any
Trust Fund that are ultimately secured by the properties in a particular state
represent a significant concentration (by balance) of all the Mortgage Assets in
such Trust Fund, the Sponsor will include in the related Prospectus Supplement
such additional information regarding the real estate laws of such state as may
be material to an investment decision with respect to the related series of
Offered Certificates. See "Description of the Trust Funds--Mortgage Loans". For
purposes of the following discussion, "Mortgage Loan" includes a mortgage loan
underlying an MBS.
GENERAL
Each Mortgage Loan will be evidenced by a note or bond and secured by an
instrument granting a security interest in real property, which may be a
mortgage, deed of trust or a deed to secure debt, depending upon the prevailing
practice and law in the state in which the related Mortgaged Property is
located. Mortgages, deeds of trust and deeds to secure debt are herein
collectively referred to as "mortgages". A mortgage creates a lien upon, or
grants
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a title interest in, the real property covered thereby, and represents the
security for the repayment of the indebtedness customarily evidenced by a
promissory note. The priority of the lien created or interest granted will
depend on the terms of the mortgage and, in some cases, on the terms of separate
subordination agreements or intercreditor agreements with others that hold
interests in the real property, the knowledge of the parties to the mortgage
and, generally, the order of recordation of the mortgage in the appropriate
public recording office. However, the lien of a recorded mortgage will generally
be subordinate to later-arising liens for real estate taxes and assessments and
other charges imposed under governmental police powers.
TYPES OF MORTGAGE INSTRUMENTS
There are two parties to a mortgage: a mortgagor (the borrower and usually
the owner of the subject property) and a mortgagee (the lender). In contrast, a
deed of trust is a three-party instrument, among a trustor (the equivalent of a
borrower), a trustee to whom the real property is conveyed, and a beneficiary
(the lender) for whose benefit the conveyance is made. Under a deed of trust,
the trustor grants the property, irrevocably until the debt is paid, in trust
and generally with a power of sale, to the trustee to secure repayment of the
indebtedness evidenced by the related note. A deed to secure debt typically has
two parties. The borrower, or grantor, conveys title to the real property to the
grantee, or lender, generally with a power of sale, until such time as the debt
is repaid. In a case where the borrower is a land trust, there would be an
additional party because legal title to the property is held by a land trustee
under a land trust agreement for the benefit of the borrower. At origination of
a mortgage loan involving a land trust, the borrower executes a separate
undertaking to make payments on the mortgage note. The mortgagee's authority
under a mortgage, the trustee's and beneficiary's authority under a deed of
trust and the grantee's authority under a deed to secure debt are governed by
the express provisions of the related instrument, the law of the state in which
the real property is located, certain federal laws (including, without
limitation, the Soldiers' and Sailors' Civil Relief Act of 1940). In addition,
in some deed of trust transactions, the trustee's authority may be governed by
the directions of the beneficiary.
LEASES AND RENTS
Mortgages that encumber income-producing property often contain an
assignment of rents and leases, pursuant to which the borrower assigns to the
lender the borrower's right, title and interest as landlord under each lease and
the income derived therefrom, while (unless rents are to be paid directly to the
lender) retaining a revocable license to collect the rents for so long as there
is no default. If the borrower defaults, the license terminates and the lender
is entitled to collect the rents. Local law may require that the lender take
possession of the property and/or obtain a court-appointed receiver before
becoming entitled to collect the rents.
In most states, hotel and motel room rates are considered accounts
receivable under the Uniform Commercial Code ("UCC"); in cases where hotels or
motels constitute loan security, the rates are generally pledged by the borrower
as additional security for the loan. In general, the lender must file financing
statements in order to perfect its security interest in the room rates and must
file continuation statements, generally every five years, to maintain perfection
of such security interest. In certain cases, Mortgage Loans secured by hotels or
motels may be included in a Trust Fund even if the security interest in the room
rates was not perfected or the requisite UCC filings were allowed to lapse; and,
if such fact is deemed by the Sponsor to be material to the investment decision
with respect to a series of Offered Certificates, it will be set forth in the
related Prospectus Supplement. Even if the lender's security interest in room
rates is perfected under the UCC, it will generally be required to commence a
foreclosure action or otherwise take possession of the property in order to
collect the room rates following a default. In the bankruptcy setting, the
lender will be stayed from enforcing its rights to collect room rates, but those
room rates (in light of certain revisions to the Bankruptcy Code which are
effective for all bankruptcy cases commenced on or after October 22, 1994)
constitute "cash collateral" and therefore cannot be used by the bankruptcy
debtor without a hearing or lender's consent and unless the lender's interest in
the room rates is given adequate protection (e.g., cash payment for otherwise
encumbered funds or a replacement lien on unencumbered property, in either case
equal in value to the amount of room rates that the debtor proposes to use, or
other similar relief). See "--Bankruptcy Laws".
PERSONALTY
In the case of certain types of mortgaged properties, such as hotels,
motels and nursing homes, personal property (to the extent owned by the borrower
and not previously pledged) may constitute a significant portion of the
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property's value as security. The creation and enforcement of liens on personal
property are governed by the UCC. Accordingly, if a borrower pledges personal
property as security for a mortgage loan, the lender generally must file UCC
financing statements in order to perfect its security interest therein, and must
file continuation statements, generally every five years, to maintain that
perfection. In certain cases, Mortgage Loans secured in part by personal
property may be included in a Trust Fund even if the security interest in such
personal property was not perfected or the requisite UCC filings were allowed to
lapse; and, if such fact is deemed by the Sponsor to be material to the
investment decision with respect to a series of Offered Certificates, it will be
set forth in the related Prospectus Supplement.
FORECLOSURE
General. Foreclosure is a legal procedure that allows the lender to recover
its mortgage debt by enforcing its rights and available legal remedies under the
mortgage. If the borrower defaults in payment or performance of its obligations
under the note or mortgage, the lender has the right to institute foreclosure
proceedings to sell the real property at public auction to satisfy the
indebtedness.
Foreclosure procedures vary from state to state. Two primary methods of
foreclosing a mortgage are judicial foreclosure, involving court proceedings,
and non-judicial foreclosure pursuant to a power of sale granted in the mortgage
instrument. Other foreclosure procedures are available in some states, but they
are either infrequently used or available only in limited circumstances. A
foreclosure action is subject to most of the delays and expenses of other
lawsuits if defenses are raised or counterclaims are interposed, and sometimes
requires several years to complete.
Judicial Foreclosure. A judicial foreclosure proceeding is conducted in a
court having jurisdiction over the mortgaged property. Generally, the action is
initiated by the service of legal pleadings upon the borrower and all parties
having a subordinate interest of record in the real property and all parties in
possession of the property, under leases or otherwise, whose interests are
subordinate to the mortgage. Delays in completion of the foreclosure may
occasionally result from difficulties in locating defendants. When the lender's
right to foreclose is contested, the legal proceedings can be time-consuming.
Upon successful completion of a judicial foreclosure proceeding, the court
generally issues a judgment of foreclosure and appoints a referee or other
officer to conduct a public sale of the mortgaged property, the proceeds of
which are used to satisfy the judgment. Such sales are made in accordance with
procedures that vary from state to state.
Equitable Limitations on Enforceability of Certain Provision. United States
courts have traditionally imposed general equitable principles to limit the
remedies available to lenders in foreclosure actions. These principles are
generally designed to relieve borrowers from the effects of mortgage defaults
perceived as harsh or unfair. Relying on such principles, a court may alter the
specific terms of a loan to the extent it considers necessary to prevent or
remedy an injustice, undue oppression or overreaching, or may require the lender
to undertake affirmative actions to determine the cause of the borrower's
default and the likelihood that the borrower will be able to reinstate the loan.
In some cases, courts have substituted their judgment for the lender's and have
required that lenders reinstate loans or recast payment schedules in order to
accommodate borrowers who are suffering from a temporary financial disability.
In other cases, courts have limited the right of the lender to foreclose in the
case of a non-monetary default, such as a failure to adequately maintain the
mortgaged property or an impermissible further encumbrance of the mortgaged
property. Finally, some courts have addressed the issue of whether federal or
state constitutional provisions reflecting due process concerns for adequate
notice require that a borrower receive notice in addition to
statutorily-prescribed minimum notice. For the most part, these cases have
upheld the reasonableness of the notice provisions or have found that a public
sale under a mortgage providing for a power of sale does not involve sufficient
state action to trigger constitutional protections. In addition, some states may
provide statutory protections such as the right of the borrower to cure
outstanding defaults and reinstate a mortgage loan after commencement of
foreclosure proceedings but prior to a foreclosure sale.
Non-Judicial Foreclosure/Power of Sale. Foreclosure of a deed of trust is
generally accomplished by a non-judicial trustee's sale pursuant to a power of
sale typically granted in the deed of trust. A power of sale may also be
contained in any other type of mortgage instrument if applicable law so permits.
A power of sale under a deed of trust allows a non-judicial public sale to be
conducted generally following a request from the beneficiary/lender to the
trustee to sell the property upon default by the borrower and after notice of
sale is given in accordance with the terms of the mortgage and applicable state
law. In some states, prior to such sale, the trustee under the deed of trust
must record a notice of default and notice of sale and send a copy to the
borrower and to any other party who has recorded a
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request for a copy of a notice of default and notice of sale. In addition, in
some states the trustee must provide notice to any other party having an
interest of record in the real property, including junior lienholders. A notice
of sale must be posted in a public place and, in most states, published for a
specified period of time in one or more newspapers. The borrower or junior
lienholder may then have the right, during a reinstatement period required in
some states, to cure the default by paying the entire actual amount in arrears
(without regard to the acceleration of the indebtedness), plus the lender's
expenses incurred in enforcing the obligation. In other states, the borrower or
the junior lienholder is not provided a period to reinstate the loan, but has
only the right to pay off the entire debt to prevent the foreclosure sale.
Generally, state law governs the procedure for public sale, the parties entitled
to notice, the method of giving notice and the applicable time periods.
Public Sale. A third party may be unwilling to purchase a mortgaged
property at a public sale because of the difficulty in determining the exact
status of title to the property (due to, among other things, redemption rights
that may exist) (see "--Foreclosure--Rights of Redemption" below) and because of
the possibility that physical deterioration of the property may have occurred
during the foreclosure proceedings. Potential buyers may also be reluctant to
purchase property at a foreclosure sale as a result of the 1980 decision of the
United States Court of Appeals for the Fifth Circuit in Durrett v. Washington
National Insurance Company. The court in Durrett held that even a non-collusive,
regularly conducted foreclosure sale was a fraudulent transfer under Section 67d
of the former Bankruptcy Act (Section 548 of the Bankruptcy Code, Bankruptcy
Reform Act of 1978, as amended, 11 U.S.C. ss.ss.101-1330 (the "Bankruptcy
Code")) regardless of the parties' intent and, therefore, could be rescinded in
favor of the bankrupt's estate, if (i) the foreclosure sale was held while the
debtor was insolvent, maintained unreasonably small capital or intended to incur
debts beyond its ability to pay and not more than one year prior to the filing
of the bankruptcy petition and (ii) the price paid for the foreclosed property
did not represent "fair consideration" ("reasonably equivalent value" under the
Bankruptcy Code). Although the reasoning and result of Durrett were rejected by
the United States Supreme Court in May 1994, the case could nonetheless be
persuasive to a court applying a state fraudulent conveyance law with provisions
similar to those construed in Durrett. For these reasons, it is common for the
lender to purchase the mortgaged property for an amount equal to the secured
indebtedness and accrued and unpaid interest plus the expenses of foreclosure,
in which event the borrower's debt will be extinguished, or for a lesser amount
in order to preserve its right to seek a deficiency judgment if such is
available under state law. (The Mortgage Loans, however, are generally expected
to be non-recourse. See "Risk Factors--Investment in Commercial and Multifamily
Mortgage Loans".) Thereafter, subject to the borrower's right in some states to
remain in possession during a redemption period, the lender will become the
owner of the property and have both the benefits and burdens of ownership,
including the obligation to pay debt service on any senior mortgages, to pay
taxes, to obtain casualty insurance and to make such repairs as are necessary to
render the property suitable for sale. The costs of operating and maintaining a
commercial or multifamily residential property may be significant and may be
greater than the income derived from that property. The lender also will
commonly obtain the services of a real estate broker and pay the broker's
commission in connection with the sale or lease 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. Moreover, because of the expenses
associated with acquiring, owning and selling a mortgaged property, a lender
could realize an overall loss on a mortgage loan even if the mortgaged property
is sold at foreclosure, or resold after it is acquired through foreclosure, for
an amount equal to the full outstanding principal amount of the loan plus
accrued interest.
The holder of a junior mortgage that forecloses on a mortgaged property
does so subject to senior mortgages and any other prior liens, and may be
obliged to keep senior mortgage loans current in order to avoid foreclosure of
its interest in the property. In addition, if the foreclosure of a junior
mortgage triggers the enforcement of a "due-on-sale" clause contained in a
senior mortgage, the junior mortgagee could be required to pay the full amount
of the senior mortgage indebtedness or face foreclosure.
Rights of Redemption. The purposes of a foreclosure action are to enable
the lender to realize upon its security and to bar the borrower, and all persons
who have interests in the property that are subordinate to that of the
foreclosing lender, from exercise of their "equity of redemption". The doctrine
of equity of redemption provides that, until the property encumbered by a
mortgage has been sold in accordance with a properly conducted foreclosure and
foreclosure sale, those having interests that are subordinate to that of the
foreclosing lender have an equity of redemption and may redeem the property by
paying the entire debt with interest. Those having an equity of redemption must
generally be made parties and joined in the foreclosure proceeding in order for
their equity of redemption to be terminated.
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The equity of redemption is a common-law (non-statutory) right which should
be distinguished from post-sale statutory rights of redemption. In some states,
after sale pursuant to a deed of trust or foreclosure of a mortgage, the
borrower and foreclosed junior lienors are given a statutory period in which to
redeem the property. In some states, statutory redemption may occur only upon
payment of the foreclosure sale price. In other states, redemption may be
permitted if the former borrower pays only a portion of the sums due. The effect
of a statutory right of redemption is to diminish the ability of the lender to
sell the foreclosed property because the exercise of a right of redemption would
defeat the title of any purchaser through a foreclosure. Consequently, the
practical effect of the redemption right is to force the lender to maintain the
property and pay the expenses of ownership until the redemption period has
expired. In some states, a post-sale statutory right of redemption may exist
following a judicial foreclosure, but not following a trustee's sale under a
deed of trust.
Anti-Deficiency Legislation. Some or all of the Mortgage Loans may be
nonrecourse loans, as to which recourse in the case of default will be limited
to the Mortgaged Property and such other assets, if any, that were pledged to
secure the Mortgage Loan. However, even if a mortgage loan by its terms provides
for recourse to the borrower's other assets, a lender's ability to realize upon
those assets may be limited by state law. For example, in some states a lender
cannot obtain a deficiency judgment against the borrower following foreclosure
or sale under a deed of trust. A deficiency judgment is a personal judgment
against the former borrower equal to the difference between the net amount
realized upon the public sale of the real property and the amount due to the
lender. Other statutes may require the lender to exhaust the security afforded
under a mortgage 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 such security;
however, in some of those states, the lender, following judgment on such
personal action, may be deemed to have elected a remedy and thus may be
precluded from foreclosing upon the security. Consequently, lenders in those
states where such an election of remedy provision exists will usually proceed
first against the security. Finally, other statutory provisions, designed to
protect borrowers from exposure to large deficiency judgments that might result
from bidding at below-market values at the foreclosure sale, limit any
deficiency judgment to the excess of the outstanding debt over the fair market
value of the property at the time of the sale.
Leasehold Risks. Mortgage Loans may be secured by a lien on the borrower's
leasehold interest in a ground lease. Leasehold mortgage loans are subject to
certain risks not associated with mortgage loans secured by a lien on the fee
estate of the borrower. The most significant of these risks is that if the
borrower's leasehold were to be terminated (for example, as a result of a lease
default or the bankruptcy of the ground lessor or the borrower/ground lessee),
the leasehold mortgagee would be left without its security. This risk may be
substantially lessened if the ground lease contains provisions protective of the
leasehold mortgagee, such as a provision that requires the ground lessor to give
the leasehold mortgagee notices of lessee defaults and an opportunity to cure
them, a provision that permits the leasehold estate to be assigned to and by the
leasehold mortgagee or the purchaser at a foreclosure sale, a provision that
gives the leasehold mortgagee the right to enter into a new ground lease with
the ground lessor on the same terms and conditions as the old ground lease or a
provision that prohibits the ground lessee/borrower from treating the ground
lease as terminated in the event of the ground lessor's bankruptcy and rejection
of the ground lease by the trustee for the debtor/ground lessor. Certain
Mortgage Loans, however, may be secured by liens on ground leases that do not
contain these provisions. In addition, the enforceability of certain of these
provisions is not assured.
BANKRUPTCY LAWS
Operation of the Bankruptcy Code and related state laws may interfere with
or affect the ability of a lender to realize upon collateral and/or to enforce a
deficiency judgment. For example, under the Bankruptcy Code, virtually all
actions (including foreclosure actions and deficiency judgment proceedings) to
collect a debt are automatically stayed upon the filing of the bankruptcy
petition and, often, no interest or principal payments are made during the
course of the bankruptcy case. The delay and the consequences thereof caused by
such automatic stay can be significant. Also, under the Bankruptcy Code, the
filing of a petition in bankruptcy by or on behalf of a junior lienor may stay
the senior lender from taking action to foreclose out such junior lien.
Under the Bankruptcy Code, provided certain substantive and procedural
safeguards protective of the lender are met, the amount and terms of a mortgage
loan secured by a lien on property of the debtor may be modified under certain
circumstances. For example, the outstanding amount of the loan may be reduced to
the then-current value of the property (with a corresponding partial reduction
of the amount of lender's security interest) pursuant to a
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confirmed plan or lien avoidance proceeding, thus leaving the lender a general
unsecured creditor for the difference between such value and the outstanding
balance of the loan. Other modifications may include the reduction in the amount
of each scheduled payment, by means of a reduction in the rate of interest
and/or an alteration of the repayment schedule (with or without affecting the
unpaid principal balance of the loan), and/or by an extension (or shortening) of
the term to maturity. Some bankruptcy courts have approved plans, based on the
particular facts of the reorganization case, that effected the cure of a
mortgage loan default by paying arrearages over a number of years. Also, a
bankruptcy court may permit a debtor, through its rehabilitative plan, to
reinstate a loan mortgage payment schedule even if the lender has obtained a
final judgment of foreclosure prior to the filing of the debtor's petition.
Federal bankruptcy law may also have the effect of interfering with or
affecting the ability of the secured lender to enforce the borrower's assignment
of rents and leases related to the mortgaged property even where the secured
lender has received an absolute assignment of rents rather than an assignment of
rents as additional security. Under Section 362 of the Bankruptcy Code, the
lender will usually be stayed from enforcing the assignment, and the legal
proceedings necessary to resolve the issue could be time-consuming, with
resulting delays in the lender's receipt of the rents. However, the Bankruptcy
Code has recently been amended to provide that a lender's perfected pre-petition
security interest in leases, rents and hotel revenues continues in the
post-petition leases, rents and hotel revenues, unless a bankruptcy court orders
to the contrary "based on the equities of the case." Thus, unless a court orders
otherwise, revenues from a mortgaged property generated after the date the
bankruptcy petition is filed will constitute "cash collateral" under the
Bankruptcy Code. Debtors may only use cash collateral upon obtaining the
lender's consent or a prior court order finding that the lender's interest in
the mortgaged properties and the cash collateral is "adequately protected" as
such term is defined and interpreted under the Bankruptcy Code.
If a borrower's ability to make payment on a mortgage loan is dependent on
its receipt of rent payments under a lease of the related property, that ability
may be impaired by the commencement of a bankruptcy proceeding relating to a
lessee under such lease. Under the Bankruptcy Code, the filing of a petition in
bankruptcy by or on behalf of a lessee results in a stay in bankruptcy against
the commencement or continuation of any state court proceeding for past due
rent, for accelerated rent, for damages or for a summary eviction order with
respect to a default under the lease that occurred prior to the filing of the
lessee's petition. In addition, the Bankruptcy Code generally provides that a
trustee or debtor-in-possession may, subject to approval of the court, (i)
assume the lease and retain it or assign it to a third party even when the lease
prohibits such assignment or (ii) reject the lease. If the lease is assumed, the
trustee or debtor-in-possession (or assignee, if applicable) must cure any
pre-and post-petition defaults under the lease, compensate the lessor for its
losses and provide the lessor with "adequate assurance" of future performance.
Such remedies may be insufficient, and any assurances provided to the lessor
may, after the fact, eventually be inadequate. If the lease is rejected, the
lessor will be treated as an unsecured creditor with respect to its claim for
damages for termination of the lease. The Bankruptcy Code also limits a lessor's
damages for lease rejection to the rent reserved by the lease (without regard to
acceleration) for the greater of one year, or 15%, not to exceed three years, of
the remaining term of the lease. In addition, some courts have limited a
lessor's post-petition pre-rejection priority claim for lease payments to fair
market value or less based on the benefit of the lease to the debtor's
bankruptcy estate.
ENVIRONMENTAL RISKS
General. A lender may be subject to environmental risks when taking a
security interest in real property. Of a particular concern may be properties
that are or have been used for industrial, manufacturing, military or disposal
activity. Such environmental risks include the risk of the diminution of the
value of a contaminated property or, as discussed below, liability for clean-up
costs or other remedial actions that could exceed the value of the property or
the amount of the lender's loan. In certain circumstances, a lender could
determine to abandon a contaminated mortgaged property as collateral for its
loan rather than foreclose and risk liability for clean-up costs.
Superlien Laws. Under the laws of many states, contamination on a property
may give rise to a lien on the property for clean-up costs. In several states,
such a lien has priority over all existing liens, including those of existing
mortgages. In these states, the lien of a mortgage may lose its priority to such
a "superlien".
CERCLA. The federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA"), imposes strict liability on
present and past "owners" and "operators" of contaminated real property for the
costs of clean-up. A secured lender may be liable as an "owner" or "operator" of
a contaminated mortgaged property if agents or employees of the lender have
become sufficiently involved in the management of such mortgaged property or the
operations of the borrower. Such liability may exist even if the lender did not
cause or
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contribute to the contamination and regardless of whether the lender has
actually taken possession of a mortgaged property through foreclosure, deed in
lieu of foreclosure or otherwise. Moreover, such liability is not limited to the
original or unamortized principal balance of a loan or to the value of the
property securing a loan. Excluded from CERCLA's definition of "owner" or
"operator", however, is a person "who without participating in the management of
the facility, holds indicia of ownership primarily to protect his security
interest."
In general, what constitutes sufficient participation in the management of
a mortgaged property or the business of a borrower to render the secured
creditor exemption unavailable to a lender is based upon judicial interpretation
of the statutory language, and court decisions have been inconsistent in this
matter.
The Court of Appeals for the Eleventh Circuit (which covers Georgia,
Florida and Alabama) has narrowly construed the secured creditor exemption. In
United States v. Fleet Factors, 901 F. 2d 1550 (11th Cir. 1990), cert. den. 498
U.S. 1046 (1991), that court suggested that the mere capacity of the lender to
influence a borrower's disposal of hazardous substances was sufficient
participation in the management of the borrower's business to deny the secured
creditor exemption to the lender. Although such rule was not determinative of
the case (agents of the lender had actually disposed of hazardous substances in
a manner that was arguably egregious and thus the lender had far more than the
mere capacity to influence the borrower's disposition of hazardous substances),
the onerous standard for participation in the management of collateral property
suggested by the Fleet Factors court is still apparently the law in the Eleventh
Circuit and could be persuasive to courts in other jurisdictions.
Not all court decisions have been adverse to the lender, however. The Court
of Appeals for the Ninth Circuit (which covers the nine most western states)
disagreed with the Fleet Factors decision and held that there must be some
degree of "actual management" of a facility on the part of a lender in order to
bar its reliance on the secured creditor exemption. See In re: Bergsoe, 910 F.2d
668 (9th Cir. 1990). In addition, certain cases decided in the First Circuit
(which covers Maine, New Hampshire, Massachusetts and Rhode Island) and the
Fourth Circuit (which covers Maryland, Virginia, West Virginia, North Carolina
and South Carolina) have held that lenders were entitled to the secured creditor
exemption, notwithstanding foreclosure. See United States v. McLamb, 5 F.3d 69
(4th Cir. 1993) and Waterville Industries v. Finance Authority of Maine, 984
F.2d 543 (1st Cir. 1993).
CERCLA's "innocent landowner" defense may be available to a lender that has
taken title to a mortgaged property and has performed an appropriate
environmental site assessment that does not disclose existing contamination and
that meets other requirements of the defense. However, it is unclear whether the
environmental site assessment must be conducted upon loan origination, prior to
foreclosure, or both, and uncertainty exists as to what kind of environmental
site assessment must be performed in order to qualify for the defense.
Certain Other Federal and State Laws. Many states have statutes similar to
CERCLA, and not all those statutes provide for a secured creditor exemption. In
addition, under federal law, there is potential liability relating to
underground storage tanks pursuant to Subtitle I of the federal Resource
Conservation and Recovery Act.
In a few states, transfer of some types of properties is conditioned upon
clean-up of contamination prior to transfer. In these cases, a lender that
becomes the owner of a property through foreclosure, deed in lieu of foreclosure
or otherwise, may be required to clean-up the contamination before selling or
otherwise transferring the property.
Beyond statute-based environmental liability, there exist common law causes
of action (for example, actions based on nuisance or on toxic tort resulting in
death, personal injury or damage to property) related to hazardous environmental
conditions on a property. While it may be more difficult to hold a lender liable
in such cases, unanticipated or uninsurable liabilities of the borrower may
jeopardize the borrower's ability to meet its loan obligations.
Additional Considerations. The cost of remediating hazardous substance
contamination at a property can be substantial. If a lender becomes liable, it
can bring an action for contribution against the owner or operator who created
the environmental hazard, but that individual or entity may be without
substantial assets. Accordingly, it is possible that such costs could become a
liability of a Trust Fund and occasion a loss to Certificateholders of the
related series.
To reduce the likelihood of such a loss, and unless otherwise provided in
the related Prospectus Supplement, the related Pooling Agreement will provide
that neither the Master Servicer nor the Special Servicer, acting on behalf of
the Trustee, may acquire title to a Mortgaged Property or take over its
operation unless the Special Servicer, based on a report prepared by a person
who regularly conducts environmental audits, has made the determination that it
is
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appropriate to do so, as described under "Description of the Pooling
Agreements--Realization Upon Defaulted Mortgage Loans".
If a lender forecloses on a mortgage secured by a property, the operations
on which are subject to environmental laws and regulations, the lender will be
required to operate the property in accordance with those laws and regulations.
Such compliance may entail substantial expense, especially in the case of
industrial or manufacturing properties.
In addition, a lender may be obligated to disclose environmental conditions
on a property to government entities and/or to prospective buyers (including
prospective buyers at a foreclosure sale or following foreclosure). Such
disclosure may decrease the amount that prospective buyers are willing to pay
for the affected property, sometimes substantially, and thereby decrease the
ability of the lender to recoup its investment in a loan upon foreclosure.
Environmental Site Assessments. In most cases, an environmental site
assessment of each Mortgaged Property will have been performed in connection
with the origination of the related Mortgage Loan or at some time prior to the
issuance of the related series of Certificates. Environmental site assessments,
however, vary considerably in their content, quality and cost. Even when
adhering to good, commercial and customary professional practices, environmental
consultants will sometimes not detect significant environmental problems because
to do an exhaustive environmental assessment would be far too costly and
time-consuming to be practical.
DUE-ON-SALE AND DUE-ON-ENCUMBRANCE
Certain of the Mortgage Loans may contain "due-on-sale" and
"due-on-encumbrance" clauses that purport to permit the lender to accelerate the
maturity of the loan if the borrower transfers or encumbers the related
Mortgaged Property. In recent years, court decisions and legislative actions
placed substantial restrictions on the right of lenders to enforce such clauses
in many states. By virtue, however, of the Garn-St Germain Depository
Institutions Act of 1982 (the "Garn Act"), effective October 15, 1982 (which
purports to preempt state laws that prohibit the enforcement of due-on-sale
clauses by providing among other matters, that "due-on-sale" clauses in certain
loans made after the effective date of the Garn Act are enforceable, within
certain limitations as set forth in the Garn Act and the regulations promulgated
thereunder), a Master Servicer may nevertheless have the right to accelerate the
maturity of a Mortgage Loan that contains a "due-on-sale" provision upon
transfer of an interest in the property, regardless of the Master Servicer's
ability to demonstrate that a sale threatens its legitimate security interest.
SUBORDINATE FINANCING
Certain of the Mortgage Loans may not restrict the ability of the borrower
to use the Mortgaged Property as security for one or more additional loans.
Where a borrower encumbers a mortgaged property with one or more junior liens,
the senior lender is subjected to additional risk. First, the borrower may have
difficulty servicing and repaying multiple loans. Moreover, if the subordinate
financing permits recourse to the borrower (as is frequently the case) and the
senior loan does not, a borrower may have more incentive to repay sums due on
the subordinate loan. Second, acts of the senior lender that prejudice the
junior lender or impair the junior lender's security may create a superior
equity in favor of the junior lender. For example, if the borrower and the
senior lender agree to an increase in the principal amount of or the interest
rate payable on the senior loan, the senior lender may lose its priority to the
extent any existing junior lender is harmed or the borrower is additionally
burdened. Third, if the borrower defaults on the senior loan and/or any junior
loan or loans, the existence of junior loans and actions taken by junior lenders
can impair the security available to the senior lender and can interfere with or
delay the taking of action by the senior lender. Moreover, the bankruptcy of a
junior lender may operate to stay foreclosure or similar proceedings by the
senior lender.
DEFAULT INTEREST AND LIMITATIONS ON PREPAYMENTS
Notes and mortgages may contain provisions that obligate the borrower to
pay a late charge or additional interest if payments are not timely made, and in
some circumstances, may prohibit prepayments for a specified period and/or
condition prepayments upon the borrower's payment of prepayment fees or yield
maintenance penalties. In certain states, there are or may be specific
limitations upon the late charges which a lender may collect from a borrower for
delinquent payments. Certain states also limit the amounts that a lender may
collect from a borrower as an additional charge if the loan is prepaid. In
addition, the enforceability of provisions that provide for prepayment fees or
penalties upon an involuntary prepayment is unclear under the laws of many
states.
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APPLICABILITY OF USURY LAWS
Title V of the Depository Institutions Deregulation and Monetary Control
Act of 1980 ("Title V") provides that state usury limitations shall not apply to
certain types of residential (including multifamily) first mortgage loans
originated by certain lenders after March 31, 1980. Title V authorized any state
to reimpose interest rate limits by adopting, before April 1, 1983, a law or
constitutional provision that expressly rejects 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 and/or to limit discount points or other charges.
No Mortgage Loan originated in any state in which application of Title V
has been expressly rejected or a provision limiting discount points or other
charges has been adopted, will (if originated after that rejection or adoption)
be eligible for inclusion in a Trust Fund unless (i) such Mortgage Loan provides
for such interest rate, discount points and charges as are permitted in such
state or (ii) such Mortgage Loan provides that the terms thereof are to be
construed in accordance with the laws of another state under which such interest
rate, discount points and charges would not be usurious and the borrower's
counsel has rendered an opinion that such choice of law provision would be given
effect.
SOLDIERS' AND SAILORS' CIVIL RELIEF ACT OF 1940
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 such borrower's mortgage loan (including a borrower who was in
reserve status and is called to active duty after origination of the Mortgage
Loan), may not be charged interest (including fees and charges) above an annual
rate of 6% during the period of such borrower's active duty status, unless a
court orders otherwise upon application of the lender. The Relief Act applies to
individuals who are members of the Army, Navy, Air Force, Marines, National
Guard, Reserves, Coast Guard and officers of the U.S. Public Health Service
assigned to duty with the military. Because the Relief Act applies to
individuals who enter military service (including reservists who are called to
active duty) after origination of the related mortgage loan, no information can
be provided as to the number of loans with individuals as borrowers that may be
affected by the Relief Act. Application of the Relief Act would adversely
affect, for an indeterminate period of time, the ability of a Master Servicer or
Special Servicer to collect full amounts of interest on certain of the Mortgage
Loans. Any shortfalls in interest collections resulting from the application of
the Relief Act would result in a reduction of the amounts distributable to the
holders of the related series of Certificates, and would not be covered by
advances or, unless otherwise specified in the related Prospectus Supplement,
any form of Credit Support provided in connection with such Certificates. In
addition, the Relief Act imposes limitations that would impair the ability of a
Master Servicer or Special Servicer to foreclose on an affected Mortgage Loan
during the borrower's period of active duty status, and, under certain
circumstances, during an additional three month period thereafter.
AMERICANS WITH DISABILITIES ACT
Under Title III of the Americans with Disabilities Act of 1990 and rules
promulgated thereunder (collectively, the "ADA"), in order to protect
individuals with disabilities, public accommodations (such as hotels,
restaurants, shopping centers, hospitals, schools and social service center
establishments) must remove architectural and communication barriers that are
structural in nature from existing places of public accommodation to the extent
"readily achievable". In addition, under the ADA, alterations to a place of
public accommodation or a commercial facility are to be made so that, to the
maximum extent feasible, such altered portions are readily accessible to and
usable by disabled individuals. The "readily achievable" standard takes into
account, among other factors, the financial resources of the affected site,
owner, landlord or other applicable person. The requirements of the ADA may also
be imposed on a foreclosing lender who succeeds to the interest of the borrower
as owner or landlord. Since the "readily achievable" standard may vary depending
on the financial condition of the owner or landlord, a foreclosing lender who is
financially more capable than the borrower of complying with the requirements of
the ADA may be subject to more stringent requirements than those to which the
borrower is subject.
FORFEITURES IN DRUG AND RICO PROCEEDINGS
Federal law provides that property owned by persons convicted of
drug-related crimes or of criminal violations of the Racketeer Influenced and
Corrupt Organizations ("RICO") statute can be seized by the government if the
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property was used in, or purchased with the proceeds of, such crimes. Under
procedures contained in the Comprehensive Crime Control Act of 1984, the
government may seize the property even before conviction. The government must
publish notice of the forfeiture proceeding and may give notice to all parties
"known to have an alleged interest in the property", including the holders of
mortgage loans.
A lender may avoid forfeiture of its interest in the property if it
establishes that: (i) its mortgage was executed and recorded before commission
of the crime upon which the forfeiture is based, or (ii) the lender was, at the
time of execution of the mortgage, "reasonably without cause to believe" that
the property was used in, or purchased with the proceeds or, illegal drug or
RICO activities.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following is a general discussion of the anticipated material federal
income tax consequences of the purchase, ownership and disposition of Offered
Certificates by Certificateholders that will hold the Certificates as capital
assets within the meaning of Section 1221 of the Internal Revenue Code of 1986
(the "Code"), and represents the opinion of Thacher Proffitt & Wood on the
material matters associated with such consequences. However, the following
discussion does not purport to discuss all federal income tax consequences that
may be applicable to particular categories of investors, some of which (such as
banks, insurance companies and foreign investors) may be subject to special
rules. Further, the authorities on which this discussion, and the opinion
referred to above, are based are subject to change or differing interpretations,
which could apply retroactively. Taxpayers and preparers of tax returns
(including those filed by any REMIC or other issuer) should be aware that under
applicable Treasury regulations a provider of advice on specific issues of law
is not considered an income tax return preparer unless the advice (i) is given
with respect to events that have occurred at the time the advice is rendered and
is not given with respect to the consequences of contemplated actions, and (ii)
is directly relevant to the determination of an entry on a tax return.
Accordingly, taxpayers should consult their own tax advisors and tax return
preparers regarding the preparation of any item on a tax return, even where the
anticipated tax treatment has been discussed herein. In addition to the federal
income tax consequences described herein, potential investors should consider
the state and local tax consequences, if any, of the purchase, ownership and
disposition of the Certificates. See "State and Other Tax Consequences".
Certificateholders are advised to consult their own tax advisors concerning the
federal, state, local or other tax consequences to them of the purchase,
ownership and disposition of Offered Certificates.
The following discussion addresses securities of two general types: (i)
certificates ("REMIC Certificates") representing interests in a Trust Fund, or a
portion thereof, that a REMIC Administrator will elect to have treated as a real
estate mortgage investment conduit ("REMIC") under Sections 860A through 860G
(the "REMIC Provisions") of the Code, and (ii) certificates ("Grantor Trust
Certificates") representing interests in a Trust Fund ("Grantor Trust Fund") as
to which no such election will be made. The Prospectus Supplement for each
series of Certificates will indicate whether a REMIC election (or elections)
will be made for the related Trust Fund and, if such an election is to be made,
will identify all "regular interests" and "residual interests" in the REMIC. For
purposes of this tax discussion, references to a "Certificateholder" or a
"holder" are to the beneficial owner of a Certificate.
The following discussion is limited in applicability to Offered
Certificates. Moreover, this discussion applies only to the extent that Mortgage
Assets held by a Trust Fund consist solely of Mortgage Loans. To the extent that
other Mortgage Assets, including REMIC certificates and mortgage pass-through
certificates, are to be held by a Trust Fund, the tax consequences associated
with the inclusion of such assets will be disclosed in the related Prospectus
Supplement. In addition, if Cash Flow Agreements, other than guaranteed
investment contracts, are included in a Trust Fund, the tax consequences
associated with such Cash Flow Agreements also will be disclosed in the related
Prospectus Supplement. See "Description of the Trust Funds--Cash Flow
Agreements".
Furthermore, the following discussion is based in part upon the rules
governing original issue discount that are set forth in Sections 1271-1273 and
1275 of the Code and in the Treasury regulations issued thereunder (the "OID
Regulations"), and in part upon the REMIC Provisions and the Treasury
regulations issued thereunder (the "REMIC Regulations"). The OID Regulations do
not adequately address certain issues relevant to, and in some instances provide
that they are not applicable to securities such as the Certificates.
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REMICs
Classification of REMICs. Upon the issuance of each series of REMIC
Certificates, counsel to the Sponsor will deliver its opinion generally to the
effect that, assuming compliance with all provisions of the related Pooling
Agreement, the related Trust Fund (or each applicable portion thereof) will
qualify as a REMIC and the REMIC Certificates offered with respect thereto will
be considered to evidence ownership of "regular interests" ("REMIC Regular
Certificates") or "residual interests" ("REMIC Residual Certificates") in that
REMIC within the meaning of the REMIC Provisions.
If an entity electing to be treated as a REMIC fails to comply with one or
more of the ongoing requirements of the Code for such status during any taxable
year, the Code provides that the entity will not be treated as a REMIC for such
year and thereafter. In that event, such entity may be taxable as a corporation
under Treasury regulations, and the related REMIC Certificates may not be
accorded the status or given the tax treatment described below. Although the
Code authorizes the Treasury Department to issue regulations providing relief in
the event of an inadvertent termination of REMIC status, no such regulations
have been issued. Any such relief, moreover, may be accompanied by sanctions,
such as the imposition of a corporate tax on all or a portion of the Trust
Fund's income for the period in which the requirements for such status are not
satisfied. The Pooling Agreement with respect to each REMIC will include
provisions designed to maintain the Trust Fund's status as a REMIC under the
REMIC Provisions. It is not anticipated that the status of any Trust Fund as a
REMIC will be terminated.
Characterization of Investments in REMIC Certificates. In general, unless
otherwise provided in the related Prospectus Supplement, the REMIC Certificates
will be "qualifying real property loans" within the meaning of Section 593(d) of
the Code, "real estate assets" within the meaning of Section 856(c)(5)(A) of the
Code and assets described in Section 7701(a)(19)(C) of the Code in the same
proportion that the assets of the REMIC underlying such Certificates would be so
treated. However, to the extent that the REMIC assets constitute mortgages on
property not used for residential or certain other prescribed purposes, the
REMIC Certificates will not be treated as assets qualifying under Section
7701(a)(19)(C)(v). Moreover, if 95% or more of the assets of the REMIC qualify
for any of the foregoing treatments at all times during a calendar year, the
REMIC Certificates will qualify for the corresponding status in their entirety
for that calendar year. Interest (including original issue discount) on the
REMIC Regular Certificates and income allocated to the class of REMIC Residual
Certificates will be interest described in Section 856(c)(3)(B) of the Code to
the extent that such Certificates are treated as "real estate assets" within the
meaning of Section 856(c)(5)(A) of the Code. In addition, the REMIC Regular
Certificates will be "qualified mortgages" within the meaning of Section
860G(a)(3) of the Code. The determination as to the percentage of the REMIC's
assets that constitute assets described in the foregoing sections of the Code
will be made with respect to each calendar quarter based on the average adjusted
basis of each category of the assets held by the REMIC during such calendar
quarter. The REMIC Administrator will report those determinations to
Certificateholders in the manner and at the times required by the applicable
Treasury regulations.
The assets of the REMIC will include, in addition to Mortgage Loans,
payments on Mortgage Loans held pending distribution on the REMIC Certificates
and property acquired by foreclosure held pending sale, and may include amounts
in reserve accounts. It is unclear whether property acquired by foreclosure held
pending sale and amounts in reserve accounts would be considered to be part of
the Mortgage Loans, or whether such assets (to the extent not invested in assets
described in the foregoing sections) otherwise would receive the same treatment
as the Mortgage Loans for purposes of all of the foregoing sections. In
addition, in some instances Mortgage Loans may not be treated entirely as assets
described in the foregoing sections. If so, the related Prospectus Supplement
will describe those Mortgage Loans that may be so treated. The REMIC Regulations
do provide, however, that payments on Mortgage Loans held pending distribution
are considered part of the Mortgage Loans for purposes of Sections 593(d) and
856(c)(5)(A) of the Code.
Tiered REMIC Structures. For certain series of REMIC Certificates, two or
more separate elections may be made to treat designated portions of the related
Trust Fund as REMICs ("Tiered REMICs") for federal income tax purposes. Upon the
issuance of any such series of REMIC Certificates, counsel to the Sponsor will
deliver its opinion generally to the effect that, assuming compliance with all
provisions of the related Pooling Agreement, each of the Tiered REMICs will
qualify as a REMIC, and the REMIC Certificates issued by each of the Tiered
REMICs will be considered to evidence ownership of REMIC Regular Certificates or
REMIC Residual Certificates, as the case may be, in such REMIC, within the
meaning of the REMIC Provisions.
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Solely for purposes of determining whether the REMIC Certificates will be
"qualifying real property loans" under Section 593(d) of the Code, "real estate
assets" within the meaning of Section 856(c)(5)(A) of the Code, and "loans
secured by an interest in real property" under Section 7701(a)(19)(C) of the
Code, and whether the income on such Certificates is interest described in
Section 856(c)(3)(B) of the Code, the Tiered REMICs will be treated as one
REMIC.
Taxation of Owners of REMIC Regular Certificates.
General. Except as otherwise stated in this discussion, REMIC 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 REMIC Regular Certificates that otherwise report income
under a cash method of accounting will be required to report income with respect
to REMIC Regular Certificates under an accrual method.
Original Issue Discount. Certain REMIC Regular Certificates may be issued
with "original issue discount" within the meaning of Section 1273(a) of the
Code. Any holders of REMIC Regular Certificates issued with original issue
discount generally will be required to include original issue discount in income
as it accrues, in accordance with the method described below, in advance of the
receipt of the cash attributable to such income. In addition, Section 1272(a)(6)
of the Code provides special rules applicable to REMIC Regular Certificates and
certain other debt instruments issued with original issue discount. Regulations
have not been issued under that section.
The Code requires that a prepayment assumption be used with respect to
Mortgage Loans held by a REMIC in computing the accrual of original issue
discount on REMIC Regular Certificates issued by that REMIC, and that
adjustments be made in the amount and rate of accrual of such discount to
reflect differences between the actual prepayment rate and the prepayment
assumption. The prepayment assumption is to be determined in a manner prescribed
in Treasury regulations; as noted above, those regulations have not been issued.
The Conference Committee Report accompanying the Tax Reform Act of 1986 (the
"Committee Report") indicates that the regulations will provide that the
prepayment assumption used with respect to a REMIC Regular Certificate must be
the same as that used in pricing the initial offering of such REMIC Regular
Certificate. The prepayment assumption (the "Prepayment Assumption") used in
reporting original issue discount for each series will be consistent with this
standard and will be disclosed in the related Prospectus Supplement. However,
neither the Sponsor nor any other person will make any representation that the
Mortgage Loans will in fact prepay at a rate conforming to the Prepayment
Assumption or at any other rate.
The original issue discount, if any, on a REMIC Regular Certificate will be
the excess of its stated redemption price at maturity over its issue price. The
issue price of a particular class of REMIC Regular Certificates will be the
first cash price at which a substantial amount of REMIC Regular Certificates of
that class is sold (excluding sales to bond houses, brokers and underwriters).
If less than a substantial amount of a particular class of REMIC Regular
Certificates is sold for cash on or prior to the date of their initial issuance
(the "Closing Date") the issue price for such class will be the fair market
value of such class on the Closing Date. Under the OID Regulations, the stated
redemption price of a REMIC Regular Certificate is equal to the total of all
payments to be made on such Certificate other than "qualified stated interest".
"Qualified stated interest" includes interest that is unconditionally payable at
least annually at a single fixed rate, at a "qualified floating rate" or at an
"objective rate", a combination of a single fixed rate and one or more
"qualified floating rates" or one "qualified inverse floating rate", or a
combination of "qualified floating rates" that does not operate in a manner that
accelerates or defers interest payments on such REMIC Regular Certificate.
In the case of REMIC Regular Certificates bearing adjustable interest
rates, the determination of the total amount of original issue discount and the
timing of the inclusion thereof will vary according to the characteristics of
such REMIC Regular Certificates. If the original issue discount rules apply to
such Certificates, the related Prospectus Supplement will describe the manner in
which such rules will be applied with respect to those Certificates in preparing
information returns to the Certificateholders and the Internal Revenue Service
(the "IRS").
Certain classes of the REMIC Regular Certificates may provide for the first
interest payment with respect to such Certificates to be made more than one
month after the date of issuance, a period which is longer than the subsequent
monthly intervals between interest payments. Assuming the "accrual period" (as
defined below) for original issue discount is each monthly period that ends on a
Distribution Date, in some cases, as a consequence of this "long first accrual
period", some or all interest payments may be required to be included in the
stated redemption price of the
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REMIC Regular Certificate and accounted for as original issue discount. Because
interest on REMIC Regular Certificates must in any event be accounted for under
an accrual method, applying this analysis would result in only a slight
difference in the timing of the inclusion in income of the yield on the REMIC
Regular Certificates.
In addition, if the accrued interest to be paid on the first Distribution
Date is computed with respect to a period that begins prior to the Closing Date,
a portion of the purchase price paid for a REMIC Regular Certificate will
reflect such accrued interest. In such cases, information returns provided to
the Certificateholders and the IRS will be based on the position that the
portion of the purchase price paid for the interest accrued with respect to
periods prior to the Closing Date is treated as part of the overall cost of such
REMIC Regular Certificate (and not as a separate asset the cost of which is
recovered entirely out of interest received on the next Distribution Date) and
that portion of the interest paid on the first Distribution Date in excess of
interest accrued for a number of days corresponding to the number of days from
the Closing Date to the first Distribution Date should be included in the stated
redemption price of such REMIC Regular Certificate. However, the OID Regulations
state that all or some portion of such accrued interest may be treated as a
separate asset the cost of which is recovered entirely out of interest paid on
the first Distribution Date. It is unclear how an election to do so would be
made under the OID Regulations and whether such an election could be made
unilaterally by a Certificateholder.
Notwithstanding the general definition of original issue discount, original
issue discount on a REMIC Regular Certificate will be considered to be de
minimis if it is less than 0.25% of the stated redemption price of the REMIC
Regular Certificate multiplied by its weighted average life. For this purpose,
the weighted average life of the REMIC Regular Certificate is computed as the
sum of the amounts determined, as to each payment included in the stated
redemption price of such REMIC Regular Certificate, by multiplying (i) the
number of complete years (rounding down for partial years) from the issue date
until such payment is expected to be made (presumably taking into account the
Prepayment Assumption) by (ii) a fraction, the numerator of which is the amount
of the payment and the denominator of which is the stated redemption price at
maturity of such REMIC Regular Certificate. Under the OID Regulations, original
issue discount of only a de minimis amount (other than de minimis original issue
discount attributable to a so-called "teaser" interest rate or an initial
interest holiday) will be included in income as each payment of stated principal
is made, based on the product of the total amount of such de minimis original
issue discount and a fraction, the numerator of which is the amount of such
principal payment and the denominator of which is the outstanding stated
principal amount of the REMIC Regular Certificate. The OID Regulations also
would permit a Certificateholder to elect to accrue de minimis original issue
discount into income currently based on a constant yield method. See "--Taxation
of Owners of REMIC Regular Certificates--Market Discount" for a description of
such election under the OID Regulations.
If original issue discount on a REMIC Regular Certificate is in excess of a
de minimis amount, the holder of such Certificate must include in ordinary gross
income the sum of the "daily portions" of original issue discount for each day
during its taxable year on which it held such REMIC Regular Certificate,
including the purchase date but excluding the disposition date. In the case of
an original holder of a REMIC Regular Certificate, the daily portions of
original issue discount will be determined as follows.
As to each "accrual period", that is, unless otherwise stated in the
related Prospectus Supplement, each period that ends on a date that corresponds
to a Distribution Date and begins on the first day following the immediately
preceding accrual period (or in the case of the first such period, begins on the
Closing Date), a calculation will be made of the portion of the original issue
discount that accrued during such accrual period. The portion of original issue
discount that accrues in any accrual period will equal the excess, if any, of
(i) the sum of (a) the present value, as of the end of the accrual period, of
all of the distributions remaining to be made on the REMIC Regular Certificate,
if any, in future periods and (b) the distributions made on such REMIC Regular
Certificate during the accrual period of amounts included in the stated
redemption price, over (ii) the adjusted issue price of such REMIC Regular
Certificate at the beginning of the accrual period. The present value of the
remaining distributions referred to in the preceding sentence will be calculated
(i) assuming that distributions on the REMIC Regular Certificate will be
received in future periods based on the Mortgage Loans being prepaid at a rate
equal to the Prepayment Assumption and (ii) using a discount rate equal to the
original yield to maturity of the Certificate. For these purposes, the original
yield to maturity of the Certificate will be calculated based on its issue price
and assuming that distributions on the Certificate will be made in all accrual
periods based on the Mortgage Loans being prepaid at a rate equal to the
Prepayment Assumption. The adjusted issue price of a REMIC Regular Certificate
at the beginning of any accrual period will equal the issue price of such
Certificate, increased by the aggregate amount of original issue discount that
accrued with respect to
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such Certificate in prior accrual periods, and reduced by the amount of any
distributions made on such REMIC Regular Certificate in prior accrual periods of
amounts included in the stated redemption price. The original issue discount
accruing during any accrual period, computed as described above, will be
allocated ratably to each day during the accrual period to determine the daily
portion of original issue discount for such day.
A subsequent purchaser of a REMIC Regular Certificate that purchases such
Certificate at a cost (excluding any portion of such cost attributable to
accrued qualified stated interest) less than its remaining stated redemption
price will also be required to include in gross income the daily portions of any
original issue discount with respect to such Certificate. However, each such
daily portion will be reduced, if such cost is in excess of its "adjusted issue
price", in proportion to the ratio such excess bears to the aggregate original
issue discount remaining to be accrued on such REMIC Regular Certificate. The
adjusted issue price of a REMIC Regular Certificate on any given day equals the
sum of (i) the adjusted issue price (or, in the case of the first accrual
period, the issue price) of such Certificate at the beginning of the accrual
period which includes such day and (ii) the daily portions of original issue
discount for all days during such accrual period prior to such day.
Market Discount. A Certificateholder that purchases a REMIC Regular
Certificate at a market discount, that is, in the case of a REMIC Regular
Certificate issued without original issue discount, at a purchase price less
than its remaining stated principal amount, or in the case of a REMIC Regular
Certificate issued with original issue discount, at a purchase price less than
its adjusted issue price will recognize gain upon receipt of each distribution
representing stated redemption price. In particular, under Section 1276 of the
Code such a Certificateholder generally will be required to allocate the portion
of each such distribution representing stated redemption price 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, such election will apply to all
market discount bonds acquired by such Certificateholder on or after the first
day of the first taxable year to which such election applies. In addition, 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. If such an election were
made with respect to a REMIC Regular Certificate with market discount, the
Certificateholder would be deemed to have made an election to include currently
market discount in income with respect to all other debt instruments having
market discount that such Certificateholder acquires during the taxable year of
the election or thereafter, and possibly previously acquired instruments.
Similarly, a Certificateholder that made this election for a Certificate that is
acquired at a premium would be deemed to have made an election to amortize bond
premium with respect to all debt instruments having amortizable bond premium
that such Certificateholder owns or acquires. See "--Taxation of Owners of REMIC
Regular Certificates--Premium" below. Each of these elections to accrue
interest, discount and premium with respect to a Certificate on a constant yield
method or as interest would be irrevocable.
However, market discount with respect to a REMIC Regular Certificate will
be considered to be de minimis for purposes of Section 1276 of the Code if such
market discount is less than 0.25% of the remaining stated redemption price of
such REMIC Regular Certificate multiplied by the number of complete years to
maturity remaining after the date of its purchase. In interpreting a similar
rule with respect to original issue discount on obligations payable in
installments, the OID Regulations refer to the weighted average maturity of
obligations, and it is likely that the same rule will be applied with respect to
market discount, presumably taking into account the Prepayment Assumption. If
market discount is treated as de minimis under this rule, it appears that the
actual discount would be treated in a manner similar to original issue discount
of a de minimis amount. See "--Taxation of Owners of REMIC Regular
Certificates--Original Issue Discount". Such treatment would result in discount
being included in income at a slower rate than discount would be required to be
included in income using the method described above.
Section 1276(b)(3) of the Code specifically authorizes the Treasury
Department to issue regulations providing for the method for accruing market
discount on debt instruments, the principal of which is payable in more than one
installment. Until regulations are issued by the Treasury Department, certain
rules described in the Committee Report apply. The Committee Report indicates
that in each accrual period market discount on REMIC Regular Certificates should
accrue, at the Certificateholder's option: (i) on the basis of a constant yield
method, (ii) in the case of a REMIC Regular Certificate issued without original
issue discount, in an amount that bears the same ratio to the total remaining
market discount as the stated interest paid in the accrual period bears to the
total amount of stated interest remaining to be paid on the REMIC Regular
Certificate as of the beginning of the accrual period, or (iii) in the case of a
REMIC Regular Certificate issued with original issue discount, in an amount that
bears the same ratio to the total remaining
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market discount as the original issue discount accrued in the accrual period
bears to the total original issue discount remaining on the REMIC Regular
Certificate at the beginning of the accrual period. Moreover, the Prepayment
Assumption used in calculating the accrual of original issue discount is also
used in calculating the accrual of market discount. Because the regulations
referred to in this paragraph have not been issued, it is not possible to
predict what effect such regulations might have on the tax treatment of a REMIC
Regular Certificate purchased at a discount in the secondary market.
To the extent that REMIC Regular Certificates provide for monthly or other
periodic distributions throughout their term, the effect of these rules may be
to require market discount to be includible in income at a rate that is not
significantly slower than the rate at which such discount would accrue if it
were original issue discount. Moreover, in any event a holder of a REMIC Regular
Certificate generally will be required to treat a portion of any gain on the
sale or exchange of such Certificate as ordinary income to the extent of the
market discount accrued to the date of disposition under one of the foregoing
methods, less any accrued market discount previously reported as ordinary
income.
Further, under Section 1277 of the Code a holder of a REMIC Regular
Certificate may be required to defer a portion of its interest deductions for
the taxable year attributable to any indebtedness incurred or continued to
purchase or carry a REMIC Regular Certificate purchased with market discount.
For these purposes, the de minimis rule referred to above applies. Any such
deferred interest expense would not exceed the market discount that accrues
during such taxable year and is, in general, allowed as a deduction not later
than the year in which such market discount is includible in income. If such
holder elects to include market discount in income currently as it accrues on
all market discount instruments acquired by such holder in that taxable year or
thereafter, the interest deferral rule described above will not apply.
Premium. A REMIC Regular Certificate purchased at a cost (excluding any
portion of such cost attributable to accrued qualified stated interest) greater
than its remaining stated redemption price will be considered to be purchased at
a premium. The holder of such a REMIC Regular Certificate may elect under
Section 171 of the Code to amortize such premium under the constant yield method
over the life of the Certificate. If made, such an election will apply to all
debt instruments having amortizable bond premium that the holder owns or
subsequently acquires. Amortizable premium will be treated as an offset to
interest income on the related debt instrument, rather than as a separate
interest deduction. The OID Regulations also permit Certificateholders to elect
to include all interest, discount and premium in income based on a constant
yield method, further treating the Certificateholder as having made the election
to amortize premium generally. See "--Taxation of Owners of REMIC Regular
Certificates--Market Discount". The Committee Report states that the same rules
that apply to accrual of market discount (which rules will require use of a
Prepayment Assumption in accruing market discount with respect to REMIC Regular
Certificates without regard to whether such Certificates have original issue
discount) will also apply in amortizing bond premium under Section 171 of the
Code.
Realized Losses. Under Section 166 of the Code, both corporate holders of
the REMIC Regular Certificates and noncorporate holders of the REMIC Regular
Certificates that acquire such Certificates in connection with a trade or
business should be allowed to deduct, as ordinary losses, any losses sustained
during a taxable year in which their Certificates become wholly or partially
worthless as the result of one or more realized losses on the Mortgage Loans.
However, it appears that a noncorporate holder that does not acquire a REMIC
Regular Certificate in connection with a trade or business will not be entitled
to deduct a loss under Section 166 of the Code until such holder's Certificate
becomes wholly worthless (i.e., until its outstanding principal balance has been
reduced to zero) and that the loss will be characterized as a short-term capital
loss.
Each holder of a REMIC Regular Certificate will be required to accrue
interest and original issue discount with respect to such Certificate, without
giving effect to any reductions in distributions attributable to defaults or
delinquencies on the Mortgage Assets until it can be established that any such
reduction ultimately will not be recoverable. As a result, the amount of taxable
income reported in any period by the holder of a REMIC Regular Certificate could
exceed the amount of economic income actually realized by the holder in such
period. Although the holder of a REMIC Regular Certificate eventually will
recognize a loss or reduction in income attributable to previously accrued and
included income that as a result of a realized loss ultimately will not be
realized, the law is unclear with respect to the timing and character of such
loss or reduction in income.
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Taxation of Owners of REMIC Residual Certificates.
General. As residual interests, the REMIC Residual Certificates will be
subject to tax rules that differ significantly from those that would apply if
the REMIC Residual Certificates were treated for federal income tax purposes as
direct ownership interests in the Mortgage Loans or as debt instruments issued
by the REMIC.
A holder of a REMIC Residual Certificate generally will be required to
report its daily portion of the taxable income or, subject to the limitations
noted in this discussion, the net loss of the REMIC for each day during a
calendar quarter that such holder owned such REMIC Residual Certificate. For
this purpose, the taxable income or net loss of the REMIC will be allocated to
each day in the calendar quarter ratably using a "30 days per month/90 days per
quarter/360 days per year" convention unless otherwise disclosed in the related
Prospectus Supplement. The daily amounts so allocated will then be allocated
among the Residual Certificateholders in proportion to their respective
ownership interests on such day. Any amount included in the gross income or
allowed as a loss of any Residual Certificateholder by virtue of this paragraph
will be treated as ordinary income or loss. The taxable income of the REMIC will
be determined under the rules described below in "--Taxable Income of the REMIC"
and will be taxable to the Residual Certificateholders without regard to the
timing or amount of cash distributions by the REMIC. Ordinary income derived
from REMIC Residual Certificates will be "portfolio income" for purposes of the
taxation of taxpayers subject to limitations under Section 469 of the Code on
the deductibility of "passive losses".
A holder of a Residual Certificate that purchased such Certificate from a
prior holder of such Certificate also will be required to report on its federal
income tax return amounts representing its daily share of the taxable income (or
net loss) of the REMIC for each day that it holds such REMIC Residual
Certificate. Those daily amounts generally will equal the amounts of taxable
income or net loss determined as described above. The Committee Report indicates
that certain modifications of the general rules may be made, by regulations,
legislation or otherwise to reduce (or increase) the income of a Residual
Certificateholder that purchased such REMIC Residual Certificate from a prior
holder of such Certificate at a price greater than (or less than) the adjusted
basis (as defined below) such REMIC Residual Certificate would have had in the
hands of an original holder of such Certificate. The REMIC Regulations, however,
do not provide for any such modifications.
Any payments received by a holder of a REMIC Residual Certificate in
connection with the acquisition of such REMIC Residual Certificate will be taken
into account in determining the income of such holder for federal income tax
purposes. Although it appears likely that any such payment would be includible
in income immediately upon its receipt, the IRS might assert that such payment
should be included in income over time according to an amortization schedule or
according to some other method. Because of the uncertainty concerning the
treatment of such payments, holders of REMIC Residual Certificates should
consult their tax advisors concerning the treatment of such payments for income
tax purposes.
The amount of income Residual Certificateholders will be required to report
(or the tax liability associated with such income) may exceed the amount of cash
distributions received from the REMIC for the corresponding period.
Consequently, Residual Certificateholders should have other sources of funds
sufficient to pay any federal income taxes due as a result of their ownership of
REMIC Residual Certificates or unrelated deductions against which income may be
offset, subject to the rules relating to "excess inclusions", residual interests
without "significant value" and "noneconomic" residual interests discussed
below. The fact that the tax liability associated with the income allocated to
Residual Certificateholders may exceed the cash distributions received by such
Residual Certificateholders for the corresponding period may significantly
adversely affect such Residual Certificateholders' after-tax rate of return.
Taxable Income of the REMIC. The taxable income of the REMIC will equal the
income from the Mortgage Loans and other assets of the REMIC plus any
cancellation of indebtedness income due to the allocation of realized losses to
REMIC Regular Certificates, less the deductions allowed to the REMIC for
interest (including original issue discount and reduced by any premium on
issuance) on the REMIC Regular Certificates (and any other class of REMIC
Certificates constituting "regular interests" in the REMIC not offered hereby),
amortization of any premium on the Mortgage Loans, bad debt losses with respect
to the Mortgage Loans and, except as described below, for servicing,
administrative and other expenses.
For purposes of determining its taxable income, the REMIC will have an
initial aggregate basis in its assets equal to the sum of the issue prices of
all REMIC Certificates (or, if a class of REMIC Certificates is not sold
initially, their fair market values). Such aggregate basis will be allocated
among the Mortgage Loans and the other assets of the REMIC in proportion to
their respective fair market values. The issue price of any REMIC Certificates
offered hereby
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will be determined in the manner described above under "--Taxation of Owners of
REMIC Regular Certificates--Original Issue Discount". The issue price of a REMIC
Certificate received in exchange for an interest in the Mortgage Loans or other
property will equal the fair market value of such interests in the Mortgage
Loans or other property. Accordingly, if one or more classes of REMIC
Certificates are retained initially rather than sold, the REMIC Administrator
may be required to estimate the fair market value of such interests in order to
determine the basis of the REMIC in the Mortgage Loans and other property held
by the REMIC.
Subject to possible application of the de minimis rules, the method of
accrual by the REMIC of original issue discount income and market discount
income with respect to Mortgage Loans that it holds will be equivalent to the
method for accruing original issue discount income for holders of REMIC Regular
Certificates (that is, under the constant yield method taking into account the
Prepayment Assumption). However, a REMIC that acquires loans at a market
discount must include such market discount in income currently, as it accrues,
on a constant yield basis. See "--Taxation of Owners of REMIC Regular
Certificates" above, which describes a method for accruing such discount income
that is analogous to that required to be used by a REMIC as to Mortgage Loans
with market discount that it holds.
A Mortgage Loan will be deemed to have been acquired with discount (or
premium) to the extent that the REMIC's basis therein, determined as described
in the preceding paragraph, is less than (or greater than) its stated redemption
price. Any such discount will be includible in the income of the REMIC as it
accrues, in advance of receipt of the cash attributable to such income, under a
method similar to the method described above for accruing original issue
discount on the REMIC Regular Certificates. It is anticipated that each REMIC
will elect under Section 171 of the Code to amortize any premium on the Mortgage
Loans. Premium on any Mortgage Loan to which such election applies may be
amortized under a constant yield method, presumably taking into account a
Prepayment Assumption. Further, such an election would not apply to any Mortgage
Loan originated on or before September 27, 1985. Instead, premium on such a
Mortgage Loan should be allocated among the principal payments thereon and be
deductible by the REMIC as those payments become due or upon the prepayment of
such Mortgage Loan.
A REMIC will be allowed deductions for interest (including original issue
discount) on the REMIC Regular Certificates (including any other class of REMIC
Certificates constituting "regular interests" in the REMIC not offered hereby)
equal to the deductions that would be allowed if the REMIC Regular Certificates
(including any other class of REMIC Certificates constituting "regular
interests" in the REMIC not offered hereby) were indebtedness of the REMIC.
Original issue discount will be considered to accrue for this purpose as
described above under "--Taxation of Owners of REMIC Regular
Certificates--Original Issue Discount", except that the de minimis rule and the
adjustments for subsequent holders of REMIC Regular Certificates (including any
other class of REMIC Certificates constituting "regular interests" in the REMIC
not offered hereby) described therein will not apply.
If a class of REMIC Regular Certificates is issued at a price in excess of
the stated redemption price of such class (such excess "Issue Premium"), the net
amount of interest deductions that are allowed the REMIC in each taxable year
with respect to the REMIC Regular Certificates of such class will be reduced by
an amount equal to the portion of the Issue Premium that is considered to be
amortized or repaid in that year. Although the matter is not entirely certain,
it is likely that Issue Premium would be amortized under a constant yield method
in a manner analogous to the method of accruing original issue discount
described above under "--Taxation of Owners of REMIC Regular Certificates
- --Original Issue Discount".
As a general rule, the taxable income of a REMIC will be determined in the
same manner as if the REMIC were an individual having the calendar year as its
taxable year and using the accrual method of accounting. However, no item of
income, gain, loss or deduction allocable to a prohibited transaction will be
taken into account. See "--Prohibited Transactions Tax and Other Taxes" below.
Further, the limitation on miscellaneous itemized deductions imposed on
individuals by Section 67 of the Code (which allows such deductions only to the
extent they exceed in the aggregate two percent of the taxpayer's adjusted gross
income) will not be applied at the REMIC level so that the REMIC will be allowed
deductions for servicing, administrative and other non-interest expenses in
determining its taxable income. All such expenses will be allocated as a
separate item to the holders of REMIC Certificates, subject to the limitation of
Section 67 of the Code. See "--Possible Pass-Through of Miscellaneous Itemized
Deductions" below. If the deductions allowed to the REMIC exceed its gross
income for a calendar quarter, such excess will be the net loss for the REMIC
for that calendar quarter.
Basis Rules, Net Losses and Distributions. The adjusted basis of a REMIC
Residual Certificate will be equal to the amount paid for such REMIC Residual
Certificate, increased by amounts included in the income of the Residual
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Certificateholder and decreased (but not below zero) by distributions made, and
by net losses allocated, to such Residual Certificateholder.
A Residual Certificateholder is not allowed to take into account any net
loss for any calendar quarter to the extent such net loss exceeds such Residual
Certificateholder's adjusted basis in its REMIC Residual Certificate as of the
close of such calendar quarter (determined without regard to such net loss). Any
loss that is not currently deductible by reason of this limitation may be
carried forward indefinitely to future calendar quarters and, subject to the
same limitation, may be used only to offset income from the REMIC Residual
Certificate. The ability of Residual Certificateholders to deduct net losses may
be subject to additional limitations under the Code, as to which Residual
Certificateholders should consult their tax advisors.
Any distribution on a REMIC Residual Certificate will be treated as a
non-taxable return of capital to the extent it does not exceed the holder's
adjusted basis in such REMIC Residual Certificate. To the extent a distribution
on a REMIC Residual Certificate exceeds such adjusted basis, it will be treated
as gain from the sale of such REMIC Residual Certificate. Holders of certain
REMIC Residual Certificates may be entitled to distributions early in the term
of the related REMIC under circumstances in which their bases in such REMIC
Residual Certificates will not be sufficiently large that such distributions
will be treated as nontaxable returns of capital. Their bases in such REMIC
Residual Certificates will initially equal the amount paid for such REMIC
Residual Certificates and will be increased by their allocable shares of taxable
income of the Trust Fund. However, such bases increases may not occur until the
end of the calendar quarter, or perhaps the end of the calendar year, with
respect to which such REMIC taxable income is allocated to the REMIC Residual
Certificateholders. To the extent such REMIC Residual Certificateholders'
initial bases are less than the distributions to such Residual
Certificateholders, and increases in such initial bases either occur after such
distributions or (together with their initial bases) are less than the amount of
such distributions, gain will be recognized to such Residual Certificateholders
on such distributions and will be treated as gain from the sale of their REMIC
Certificates.
The effect of these rules is that a Residual Certificateholder may not
amortize its basis in a REMIC Residual Certificate, but may only recover its
basis through distributions, through the deduction of any net losses of the
REMIC or upon the sale of its REMIC Residual Certificate. See "--Sales of REMIC
Certificates". For a discussion of possible modifications of these rules that
may require adjustments to income of a holder of a REMIC Residual Certificate
other than an original holder in order to reflect any difference between the
cost of such REMIC Residual Certificate to such Residual Certificateholder and
the adjusted basis such REMIC Residual Certificate would have in the hands of an
original holder. See "--Taxation of Owners of REMIC Residual
Certificates--General".
Excess Inclusions. Any "excess inclusions" with respect to a REMIC Residual
Certificate will, with an exception discussed below for certain REMIC Residual
Certificates held by thrift institutions, be subject to federal income tax in
all events.
In general, the "excess inclusions" with respect to a REMIC Residual
Certificate for any calendar quarter will be the excess, if any, of (i) the sum
of the daily portions of REMIC taxable income allocable to such REMIC Residual
Certificate over (ii) the sum of the "daily accruals" (as defined below) for
each day during such quarter that such REMIC Residual Certificate was held by
such Residual Certificateholder. The daily accruals of a Residual
Certificateholder will be determined by allocating to each day during a calendar
quarter its ratable portion of the product of the "adjusted issue price" of the
REMIC Residual Certificate at the beginning of the calendar quarter and 120% of
the "long-term Federal rate" in effect on the Closing Date. For this purpose,
the adjusted issue price of a REMIC Residual Certificate as of the beginning of
any calendar quarter will be equal to the issue price of the REMIC Residual
Certificate, increased by the sum of the daily accruals for all prior quarters
and decreased (but not below zero) by any distributions made with respect to
such REMIC Residual Certificate before the beginning of such quarter. The issue
price of a REMIC Residual Certificate is the initial offering price to the
public (excluding bond houses and brokers) at which a substantial amount of the
REMIC Residual Certificates were sold. The "long-term Federal 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.
For Residual Certificateholders, an excess inclusion (i) will not be
permitted to be offset by deductions, losses or loss carryovers from other
activities, (ii) will be treated as "unrelated business taxable income" to an
otherwise tax-exempt organization and (iii) will not be eligible for any rate
reduction or exemption under any applicable tax treaty with respect to the 30%
United States withholding tax imposed on distributions to Residual
Certificateholders that are foreign investors. See, however, "--Foreign
Investors in REMIC Certificates".
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As an exception to the general rules described above, thrift institutions
are allowed to offset their excess inclusions with unrelated deductions, losses
or loss carryovers, but only if the REMIC Residual Certificates are considered
to have "significant value". The REMIC Regulations provide that in order to be
treated as having significant value, the REMIC Residual Certificates must have
an aggregate issue price at least equal to two percent of the aggregate issue
prices of all of the related REMIC's Regular and Residual Certificates. In
addition, based on the Prepayment Assumption, the anticipated weighted average
life of the REMIC Residual Certificates must equal or exceed 20 percent of the
anticipated weighted average life of the REMIC, based on the Prepayment
Assumption and on any required or permitted clean up calls or required
liquidation provided for in the REMIC's organizational documents. Although it
has not done so, the Treasury also has authority to issue regulations that would
treat the entire amount of income accruing on a REMIC Residual Certificate as an
excess inclusion if the REMIC Residual Certificates are considered not to have
"significant value". The related Prospectus Supplement will disclose whether
offered REMIC Residual Certificates may be considered to have "significant
value" under the REMIC Regulations; provided, however, that any disclosure that
a REMIC Residual Certificate will have "significant value" will be based upon
certain assumptions, and the Sponsor will make no representation that a REMIC
Residual Certificate will have "significant value" for purposes of the
above-described rules. The above-described exception for thrift institutions
applies only to those residual interests held directly by, and deductions,
losses and loss carryovers incurred by, such institutions (and not by other
members of an affiliated group of corporations filing a consolidated income tax
return) or by certain wholly-owned direct subsidiaries of such institutions
formed or operated exclusively in connection with the organization and operation
of one or more REMICs.
In the case of any REMIC Residual Certificates held by a real estate
investment trust, the aggregate excess inclusions with respect to such REMIC
Residual Certificates, reduced (but not below zero) by the real estate
investment trust taxable income (within the meaning of Section 857(b)(2) of the
Code, excluding any net capital gain), will be allocated among the shareholders
of such trust in proportion to the dividends received by such shareholders from
such trust, and any amount so allocated will be treated as an excess inclusion
with respect to a REMIC Residual Certificate as if held directly by such
shareholder. Treasury regulations yet to be issued could apply a similar rule to
regulated investment companies, common trust funds and certain cooperatives; the
REMIC Regulations currently do not address this subject.
Noneconomic REMIC Residual Certificates. Under the REMIC Regulations,
transfers of "noneconomic" REMIC Residual Certificates will be disregarded for
all federal income tax purposes if "a significant purpose of the transfer was to
enable the transferor to impede the assessment or collection of tax". If such
transfer is disregarded, the purported transferor will continue to remain liable
for any taxes due with respect to the income on such "noneconomic" REMIC
Residual Certificate. The REMIC Regulations provide that a REMIC Residual
Certificate is noneconomic unless, based on the Prepayment Assumption and on any
required or permitted clean up calls, or required liquidation provided for in
the REMIC's organizational documents, (1) the present value of the expected
future distributions (discounted using the "applicable Federal rate" for
obligations whose term ends on the close of the last quarter in which excess
inclusions are expected to accrue with respect to the REMIC Residual
Certificate, which rate is computed and published monthly by the IRS) on the
REMIC Residual Certificate equals at least the present value of the expected tax
on the anticipated excess inclusions, and (2) the transferor reasonably expects
that the transferee will receive distributions with respect to the REMIC
Residual Certificate at or after the time the taxes accrue on the anticipated
excess inclusions in an amount sufficient to satisfy the accrued taxes.
Accordingly, all transfers of REMIC Residual Certificates that may constitute
noneconomic residual interests will be subject to certain restrictions under the
terms of the related Pooling Agreement that are intended to reduce the
possibility of any such transfer being disregarded. Such restrictions will
require each party to a transfer to provide an affidavit that no purpose of such
transfer is to impede the assessment or collection of tax, including certain
representations as to the financial condition of the prospective transferee, as
to which the transferor is also required to make a reasonable investigation to
determine such transferee's historic payment of its debts and ability to
continue to pay its debts as they come due in the future. Prior to purchasing a
REMIC Residual Certificate, prospective purchasers should consider the
possibility that a purported transfer of such REMIC Residual Certificate by such
a purchaser to another purchaser at some future date may be disregarded in
accordance with the above-described rules which would result in the retention of
tax liability by such purchaser.
The related Prospectus Supplement will disclose whether offered REMIC
Residual Certificates may be considered "noneconomic" residual interests under
the REMIC Regulations; provided, however, that any disclosure that a REMIC
Residual Certificate will not be considered "noneconomic" will be based upon
certain assumptions,
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and the Sponsor will make no representation that a REMIC Residual Certificate
will not be considered "noneconomic" for purposes of the above-described rules.
See "--Foreign Investors in REMIC Certificates--REMIC Residual Certificates"
below for additional restrictions applicable to transfers of certain REMIC
Residual Certificates to foreign persons.
Mark-to-Market Rules. Prospective purchasers of a REMIC Residual
Certificate should be aware that on December 28, 1993, the IRS released
temporary regulations under Code Section 475 (the "Temporary Mark-to-Market
Regulations") relating to the requirement that a securities dealer mark to
market securities held for sale to customers. This mark-to-market requirement
applies to all securities owned by a dealer, except to the extent that the
dealer has specifically identified a security as held for investment. The
Temporary Mark-to-Market Regulations provide that for purposes of this
mark-to-market requirement, a "negative value" REMIC Residual Certificate is not
treated as a security and thus generally may not be marked to market. In
general, a REMIC Residual Certificate has negative value if, as of the date a
taxpayer acquires the REMIC Residual Certificate, the present value of the tax
liabilities associated with holding the REMIC Residual Certificate exceeds the
sum of (i) the present value of the expected future distributions on the REMIC
Residual Certificate, and (ii) the present value of the anticipated tax savings
associated with holding the REMIC Residual Certificate as the REMIC generates
losses. The amounts and present values of the anticipated tax liabilities,
expected future distributions and anticipated tax savings are all to be
determined using (i) the prepayment and reinvestment assumptions adopted under
Section 1272(a)(6) of the Code, or that would have been adopted had the REMIC's
regular interests been issued with original issue discount, (ii) any required or
permitted clean up calls, or required qualified liquidation, provided for in the
REMIC's organizational documents and (iii) a discount rate equal to the
"applicable Federal rate" (as specified in Section 1274(d)(1) of the Code) that
would apply to a debt instrument issued on the date of acquisition of the REMIC
Residual Certificate. The Temporary Mark-to-Market Regulations apply to taxable
years ending on or after December 31, 1993. Furthermore, the Temporary
Mark-to-Market Regulations provide the IRS with the authority to treat any REMIC
Residual Certificate having substantially the same economic effect as a
"negative value" residual interest. On January 3, 1995, the IRS released
proposed regulations under Section 475 of the Code (the "Proposed Mark-to-Market
Regulations"). The Proposed Mark-to-Market Regulations provide that any residual
interest (regardless of whether it has a negative value) that is acquired on or
after January 4, 1995 is not a "security" for the purposes of Section 475 of the
Code, and thus is not subject to the mark-to-market rules. Prospective
purchasers of a REMIC Residual Certificate should consult their tax advisors
regarding the possible application of the Temporary Mark-to-Market Regulations
and the Proposed Mark-to-Market Regulations.
Possible Pass-Through of Miscellaneous Itemized Deductions. Fees and
expenses of a REMIC generally will be allocated to the holders of the related
REMIC Residual Certificates. The applicable Treasury regulations indicate,
however, that in the case of a REMIC that is similar to a single class grantor
trust, all or a portion of such fees and expenses should be allocated to the
holders of the related REMIC Regular Certificates. Unless otherwise stated in
the related Prospectus Supplement, such fees and expenses will be allocated to
holders of the related REMIC Residual Certificates in their entirety and not to
the holders of the related REMIC Regular Certificates.
With respect to REMIC Residual Certificates or REMIC Regular Certificates
the holders of which receive an allocation of fees and expenses in accordance
with the preceding discussion, if any holder thereof is an individual, estate or
trust, or a "pass-through entity" beneficially owned by one or more individuals,
estates or trusts, (i) an amount equal to such individual's, estate's or trust's
share of such fees and expenses will be added to the gross income of such holder
and (ii) such individual's, estate's or trust's share of such fees and expenses
will be treated as a miscellaneous itemized deduction allowable subject to the
limitation of Section 67 of the Code, which permits such deductions only to the
extent they exceed in the aggregate two percent of a taxpayer's adjusted gross
income. In addition, Section 68 of the Code provides that the amount of itemized
deductions otherwise allowable for an individual whose adjusted gross income
exceeds a specified amount will be reduced by the lesser of (i) 3% of the excess
of the individual's adjusted gross income over such amount or (ii) 80% of the
amount of itemized deductions otherwise allowable for the taxable year. The
amount of additional taxable income reportable by REMIC Certificateholders that
are subject to the limitations of either Section 67 or Section 68 of the Code
may be substantial. Furthermore, in determining the alternative minimum taxable
income of such a holder of a REMIC Certificate that is an individual, estate or
trust, or a "pass-through entity" beneficially owned by one or more individuals,
estates or trusts, no deduction will be allowed for such holder's allocable
portion of servicing fees and other miscellaneous itemized deductions of the
REMIC, even though an amount equal to the amount of such fees and other
deductions will be included in such holder's gross income. Accordingly, such
REMIC Certificates may not be appropriate
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investments for individuals, estates, or trusts, or pass-through entities
beneficially owned by one or more individuals, estates or trusts. Such
prospective investors should carefully consult with their own tax advisors prior
to making an investment in such Certificates.
Sales of REMIC Certificates. If a REMIC Certificate is sold, the selling
Certificateholder will recognize gain or loss equal to the difference between
the amount realized on the sale and its adjusted basis in the REMIC Certificate.
The adjusted basis of a REMIC Regular Certificate generally will equal the cost
of such REMIC Regular Certificate to such Certificateholder, increased by income
reported by such Certificateholder with respect to such REMIC Regular
Certificate (including original issue discount and market discount income) and
reduced (but not below zero) by distributions on such REMIC Regular Certificate
received by such Certificateholder and by any amortized premium. The adjusted
basis of a REMIC Residual Certificate will be determined as described under
"--Taxation of Owners of REMIC Residual Certificates--Basis Rules, Net Losses
and Distributions". Except as provided in the following two paragraphs, any such
gain or loss will be capital gain or loss, provided such REMIC Certificate is
held as a capital asset (generally, property held for investment) within the
meaning of Section 1221 of the Code. The Code as of the date of this Prospectus,
provides for a top marginal tax rate of 39.6% for individuals and a maximum
marginal rate for long-term capital gains of individuals of 28%. No such rate
differential exists for corporations. In addition, the distinction between a
capital gain or loss and ordinary income or loss remains relevant for other
purposes.
Gain from the sale of a REMIC Regular Certificate that might otherwise be
capital gain will be treated as ordinary income to the extent such gain does not
exceed the excess, if any, of (i) the amount that would have been includible in
the seller's income with respect to such REMIC Regular Certificate assuming that
income had accrued thereon at a rate equal to 110% of the "applicable Federal
rate" (generally, a rate based on an average of current yields on Treasury
securities having a maturity comparable to that of the Certificate based on the
application of the Prepayment Assumption to such Certificate, which rate is
computed and published monthly by the IRS), determined as of the date of
purchase of such REMIC Regular Certificate, over (ii) the amount of ordinary
income actually includible in the seller's income prior to such sale. In
addition, gain recognized on the sale of a REMIC Regular Certificate by a seller
who purchased such REMIC Regular Certificate at a market discount will be
taxable as ordinary income in an amount not exceeding the portion of such
discount that accrued during the period such REMIC Certificate was held by such
holder, reduced by any market discount included in income under the rules
described above under "--Taxation of Owners of REMIC Regular
Certificates--Market Discount" and "--Premium".
REMIC Certificates will be "evidences of indebtedness" within the meaning
of Section 582(c)(1) of the Code, so that gain or loss recognized from the sale
of a REMIC Certificate by a bank or thrift institution to which such section
applies will be ordinary income or loss.
A portion of any gain from the sale of a REMIC Regular Certificate that
might otherwise be capital gain may be treated as ordinary income to the extent
that such Certificate is held as part of a "conversion transaction" within the
meaning of Section 1258 of the Code. A conversion transaction generally is one
in which the taxpayer has taken two or more positions in the same or similar
property that reduce or eliminate market risk, if substantially all of the
taxpayer's return is attributable to the time value of the taxpayer's net
investment in such transaction. The amount of gain so realized in a conversion
transaction that is recharacterized as ordinary income generally will not exceed
the amount of interest that would have accrued on the taxpayer's net investment
at 120% of the appropriate "applicable Federal rate" (which rate is computed and
published monthly by the IRS) at the time the taxpayer enters into the
conversion transaction, subject to appropriate reduction for prior inclusion of
interest and other ordinary income items from the transaction.
Finally, a taxpayer may elect to have net capital gains taxed at ordinary
income rates rather than capital gain rates in order to include such net capital
gain in total net investment income for the taxable year, for purposes of the
rule that limits the deduction of interest on indebtedness incurred to purchase
or carry property held for investment to a taxpayer's net investment income.
Except as may be provided in Treasury regulations yet to be issued, if the
seller of a REMIC Residual Certificate reacquires a REMIC Residual Certificate,
or acquires any other residual interest in a REMIC or any similar interest in a
"taxable mortgage pool" (as defined in Section 7701(i) of the Code) during the
period beginning six months before, and ending six months after, the date of
such sale, such sale will be subject to the "wash sale" rules of Section 1091 of
the Code. In that event, any loss realized by the REMIC Residual
Certificateholder on the sale will not be deductible, but instead will be added
to such REMIC Residual Certificateholder's adjusted basis in the newly-acquired
asset.
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Prohibited Transactions Tax and Other Taxes. The Code imposes a tax on
REMICs equal to 100% of the net income derived from "prohibited transactions" (a
"Prohibited Transactions Tax"). 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 REMIC Certificates. It is
not anticipated that the REMIC will engage in any prohibited transactions in
which it would recognize a material amount of net income.
In addition, certain contributions to a REMIC made after the day on which
the REMIC issues all of its interests could result in the imposition of a tax on
the REMIC equal to 100% of the value of the contributed property (a
"Contributions Tax"). Each Pooling Agreement will include provisions designed to
prevent the acceptance of any contributions that would be subject to such tax.
REMICs also are 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 gain from the sale of a foreclosure property that is
inventory property and gross income from foreclosure property other than
qualifying rents and other qualifying income for a real estate investment trust.
Unless otherwise disclosed in the related Prospectus Supplement, it is not
anticipated that any REMIC will recognize "net income from foreclosure property"
subject to federal income tax.
Unless otherwise disclosed in the related Prospectus Supplement, it is not
anticipated that any material state or local income or franchise tax will be
imposed on any REMIC.
Unless otherwise stated in the related Prospectus Supplement, and to the
extent permitted by then applicable laws, 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 the REMIC will be borne by
the related REMIC Administrator, Master Servicer, Special Servicer or Trustee in
any case out of its own funds, provided that such person has sufficient assets
to do so, and provided further that such tax arises out of a breach of such
person's obligations under the related Pooling Agreement and in respect of
compliance with applicable laws and regulations. Any such tax not borne by a
REMIC Administrator, Master Servicer, Special Servicer or Trustee will be
charged against the related Trust Fund resulting in a reduction in amounts
payable to holders of the related REMIC Certificates.
Tax and Restrictions on Transfers of REMIC Residual Certificates to Certain
Organizations. If a REMIC Residual Certificate is transferred to a "disqualified
organization" (as defined below), a tax would be imposed in an amount
(determined under the REMIC Regulations) equal to the product of (i) the present
value (discounted using the "applicable Federal rate" for obligations whose term
ends on the close of the last quarter in which excess inclusions are expected to
accrue with respect to the REMIC Residual Certificate, which rate is computed
and published monthly by the IRS) of the total anticipated excess inclusions
with respect to such REMIC Residual Certificate for periods after the transfer
and (ii) the highest marginal federal income tax rate applicable to
corporations. The anticipated excess inclusions must be determined as of the
date that the REMIC Residual Certificate is transferred and must be based on
events that have occurred up to the time of such transfer, the Prepayment
Assumption and any required or permitted clean up calls or required liquidation
provided for in the REMIC's organizational documents. Such a tax generally would
be imposed on the transferor of the REMIC Residual Certificate, except that
where such transfer is through an agent for a disqualified organization, the tax
would instead be imposed on such agent. However, a transferor of a REMIC
Residual Certificate would in no event be liable for such tax with respect to a
transfer if the transferee furnishes to the transferor an affidavit that the
transferee is not a disqualified organization and, as of the time of the
transfer, the transferor does not have actual knowledge that such affidavit is
false. Moreover, an entity will not qualify as a REMIC unless there are
reasonable arrangements designed to ensure that (i) residual interests in such
entity are not held by disqualified organizations and (ii) information necessary
for the application of the tax described herein will be made available.
Restrictions on the transfer of REMIC Residual Certificates and certain other
provisions that are intended to meet this requirement will be included in the
Pooling Agreement, and will be discussed more fully in any Prospectus Supplement
relating to the offering of any REMIC Residual Certificate.
In addition, if a "pass-through entity" (as defined below) includes in
income excess inclusions with respect to a REMIC Residual Certificate, and a
disqualified organization is the record holder of an interest in such entity,
then a tax will be imposed on such entity equal to the product of (i) the amount
of excess inclusions on the REMIC Residual Certificate that are allocable to the
interest in the pass-through entity held by such disqualified organization and
(ii)
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the highest marginal federal income tax rate imposed on corporations. A
pass-through entity will not be subject to this tax for any period, however, if
each record holder of an interest in such pass-through entity furnishes to such
pass-through entity (i) such holder's social security number and a statement
under penalty of perjury that such social security number is that of the record
holder or (ii) a statement under penalty of perjury that such record holder is
not a disqualified organization.
For these purposes, a "disqualified organization" means (i) the United
States, any State or political subdivision thereof, any foreign government, any
international organization, or any agency or instrumentality of the foregoing
(but would not include instrumentalities described in Section 168(h)(2)(D) of
the Code or the Federal Home Loan Mortgage Corporation), (ii) any organization
(other than a cooperative described in Section 521 of the Code) that is exempt
from federal income tax, unless it is subject to the tax imposed by Section 511
of the Code or (iii) any organization described in Section 1381(a)(2)(C) of the
Code. For these purposes, a "pass-through entity" means any regulated investment
company, real estate investment trust, trust, partnership or certain other
entities described in Section 860E(e)(6) of the Code. In addition, a person
holding an interest in a pass-through entity as a nominee for another person
will, with respect to such interest, be treated as a pass-through entity.
Termination. A REMIC will terminate immediately after the Distribution Date
following receipt by the REMIC of the final payment in respect of the Mortgage
Loans or upon a sale of the REMIC's assets following the adoption by the REMIC
of a plan of complete liquidation. The last distribution on a REMIC Regular
Certificate will be treated as a payment in retirement of a debt instrument. In
the case of a REMIC Residual Certificate, if the last distribution on such REMIC
Residual Certificate is less than the Residual Certificateholder's adjusted
basis in such REMIC Residual Certificate, such Residual Certificateholder should
(but may not) be treated as realizing a loss equal to the amount of such
difference, and such loss may be treated as a capital loss.
Reporting and Other Administrative Matters. Solely for purposes of the
administrative provisions of the Code, the REMIC will be treated as a
partnership and Residual Certificateholders will be treated as partners. Unless
otherwise stated in the related Prospectus Supplement, the REMIC Administrator
will file REMIC federal income tax returns on behalf of the REMIC, will be
designated as and will act as the "tax matters person" with respect to the REMIC
in all respects, and will generally hold at least a nominal amount of REMIC
Residual Certificates.
As the tax matters person, the REMIC Administrator, subject to certain
notice requirements and various restrictions and limitations, generally will
have the authority to act on behalf of the REMIC and the Residual
Certificateholders in connection with the administrative and judicial review of
items of income, deduction, gain or loss of the REMIC, as well as the REMIC's
classification. Residual Certificateholders generally will be required to report
such REMIC items consistently with their treatment on the related REMIC's tax
return and may in some circumstances be bound by a settlement agreement between
the REMIC Administrator, as tax matters person, and the IRS concerning any such
REMIC item. Adjustments made to the REMIC tax return may require a Residual
Certificateholder to make corresponding adjustments on its return, and an audit
of the REMIC's tax return, or the adjustments resulting from such an audit,
could result in an audit of a Residual Certificateholder's return. No REMIC will
be registered as a tax shelter pursuant to Section 6111 of the Code because it
is not anticipated that any REMIC will have a net loss for any of the first five
taxable years of its existence. Any person that holds a REMIC Residual
Certificate as a nominee for another person may be required to furnish the
related REMIC, in a manner to be provided in Treasury regulations, with the name
and address of such person and other information.
Reporting of interest income, including any original issue discount, with
respect to REMIC Regular Certificates is required annually, and may be required
more frequently under Treasury regulations. These information reports generally
are required to be sent to individual holders of REMIC Regular Interests and the
IRS; holders of REMIC Regular Certificates that are corporations, trusts,
securities dealers and certain other non-individuals will be provided interest
and original issue discount income information and the information set forth in
the following paragraph upon request in accordance with the requirements of the
applicable regulations. The information must be provided by the later of 30 days
after the end of the quarter for which the information was requested, or two
weeks after the receipt of the request. The REMIC must also comply with rules
requiring a REMIC Regular Certificate issued with original issue discount to
disclose on its face the amount of original issue discount and the issue date,
and requiring such information to be reported to the IRS. Reporting with respect
to the REMIC Residual Certificates, including income, excess inclusions,
investment expenses and relevant information regarding qualification of the
REMIC's assets will be made as required under the Treasury regulations,
generally on a quarterly basis.
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As applicable, the REMIC Regular Certificate information reports will
include a statement of the adjusted issue price of the REMIC Regular Certificate
at the beginning of each accrual period. In addition, the reports will include
information required by regulations with respect to computing the accrual of any
market discount. Because exact computation of the accrual of market discount on
a constant yield method would require information relating to the holder's
purchase price that the REMIC may not have, such regulations only require that
information pertaining to the appropriate proportionate method of accruing
market discount be provided. See "--Taxation of Owners of REMIC Regular
Certificates--Market Discount".
Unless otherwise specified in the related Prospectus Supplement, the
responsibility for complying with the foregoing reporting rules will be borne by
the person designated as REMIC Administrator.
Backup Withholding with Respect to REMIC Certificates. Payments of interest
and principal, as well as payments of proceeds from the sale of REMIC
Certificates, may be subject to the "backup withholding tax" under Section 3406
of the Code at a rate of 31% if recipients of such payments fail to furnish to
the payor certain information, including their taxpayer identification numbers,
or otherwise fail to establish an exemption from such tax. Any amounts deducted
and withheld from a distribution to a recipient would be allowed as a credit
against such recipient's federal income tax. Furthermore, certain penalties may
be imposed by the IRS on a recipient of payments that is required to supply
information but that does not do so in the proper manner.
Foreign Investors in REMIC Certificates. A REMIC Regular Certificateholder
that is not a "United States person" (as defined below) and is not subject to
federal income tax as a result of any direct or indirect connection to the
United States in addition to its ownership of a REMIC Regular Certificate will
not, unless otherwise disclosed in the related Prospectus Supplement, be subject
to United States federal income or withholding tax in respect of a distribution
on a REMIC Regular Certificate, provided that the holder complies to the extent
necessary with certain identification requirements (including delivery of a
statement, signed by the Certificateholder under penalties of perjury,
certifying that such Certificateholder is not a United States person and
providing the name and address of such Certificateholder). For these purposes,
"United States person" means a citizen or resident of the United States, a
corporation, partnership or other entity created or organized in, or under the
laws of, the United States or any political subdivision thereof, or an estate or
trust whose income from sources without the United States is includible in gross
income for United States federal income tax purposes regardless of its
connection with the conduct of a trade or business within the United States. It
is possible that the IRS may assert that the foregoing tax exemption should not
apply with respect to a REMIC Regular Certificate held by a Residual
Certificateholder that owns directly or indirectly a 10% or greater interest in
the REMIC Residual Certificates. If the holder does not qualify for exemption,
distributions of interest, including distributions in respect of accrued
original issue discount, to such holder may be subject to a tax rate of 30%,
subject to reduction under any applicable tax treaty.
In addition, the foregoing rules will not apply to exempt a United States
shareholder of a controlled foreign corporation from taxation on such United
States shareholder's allocable portion of the interest income received by such
controlled foreign corporation.
Further, it appears that a REMIC 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 should consult their tax advisors concerning this question.
Unless otherwise stated in the related Prospectus Supplement, transfers of
REMIC Residual Certificates to investors that are not United States Persons will
be prohibited under the related Pooling Agreement.
GRANTOR TRUST FUNDS
Classification of Grantor Trust Funds. With respect to each series of
Grantor Trust Certificates, counsel to the Sponsor will deliver its opinion to
the effect that, assuming compliance with all provisions of the related Pooling
Agreement, the related Grantor Trust Fund will be classified as a grantor trust
under subpart E, part I of subchapter J of the Code and not as a partnership or
an association taxable as a corporation. Accordingly, each holder of a Grantor
Trust Certificate generally will be treated as the owner of an interest in the
Mortgage Loans included in the Grantor Trust Fund.
For purposes of the following discussion, a Grantor Trust Certificate
representing an undivided equitable ownership interest in the principal of the
Mortgage Loans constituting the related Grantor Trust Fund, together with
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interest thereon at a pass-through rate, will be referred to as a "Grantor Trust
Fractional Interest Certificate". A Grantor Trust Certificate representing
ownership of all or a portion of the difference between interest paid on the
Mortgage Loans constituting the related Grantor Trust Fund (net of normal
administration fees and any spread) and interest paid to the holders of Grantor
Trust Fractional Interest Certificates issued with respect to such Grantor Trust
Fund will be referred to as a "Stripped Interest Certificate". A Stripped
Interest Certificate may also evidence a nominal ownership interest in the
principal of the Mortgage Loans constituting the related Grantor Trust Fund.
Characterization of Investments in Grantor Trust Certificates.
Grantor Trust Fractional Interest Certificates. In the case of Grantor
Trust Fractional Interest Certificates, unless otherwise disclosed in the
related Prospectus Supplement, counsel to the Sponsor will deliver an opinion
that, in general, Grantor Trust Fractional Interest Certificates will represent
interests in (i) "qualifying real property loans" within the meaning of Section
593(d) of the Code; (ii) "loans . . . secured by an interest in real property"
within the meaning of Section 7701(a)(19)(C)(v) of the Code (but generally only
to the extent that the underlying Mortgage Loans have been made with respect to
property that is used for residential or certain other prescribed purposes);
(iii) "obligations (including any participation or certificate of beneficial
ownership therein) which . . . [are] principally secured by an interest in real
property" within the meaning of Section 860G(a)(3)(A) of the Code; and (iv)
"real estate assets" within the meaning of Section 856(c)(5)(A) of the Code. In
addition, counsel to the Sponsor will deliver an opinion that interest on
Grantor Trust Fractional Interest Certificates will to the same extent be
considered "interest on obligations secured by mortgages on real property or on
interests in real property" within the meaning of Section 856(c)(3)(B) of the
Code.
Stripped Interest Certificates. Even if Stripped Interest Certificates
evidence an interest in a Grantor Trust Fund consisting of Mortgage Loans that
are "loans . . . secured by an interest in real property" within the meaning of
Section 7701(a)(19)(C)(v) of the Code, "qualifying real property loans" within
the meaning of Section 593(d) of the Code, and "real estate assets" within the
meaning of Section 856(c)(5)(A) of the Code, and the interest on which is
"interest on obligations secured by mortgages on real property" within the
meaning of Section 856(c)(3)(B) of the Code, it is unclear whether the Stripped
Interest Certificates, and the income therefrom, will be so characterized.
However, the policies underlying such sections (namely, to encourage or require
investments in mortgage loans by thrift institutions and real estate investment
trusts) may suggest that such characterization is appropriate. Counsel to the
Sponsor will not deliver any opinion on these questions. Prospective purchasers
to which such characterization of an investment in Stripped Interest
Certificates is material should consult their tax advisors regarding whether the
Stripped Interest Certificates, and the income therefrom, will be so
characterized.
The Stripped Interest Certificates will be "obligations (including any
participation or certificate of beneficial ownership therein) which . . . [are]
principally secured by an interest in real property" within the meaning of
Section 860G(a)(3)(A) of the Code.
Taxation of Owners of Grantor Trust Fractional Interest Certificates
General. Holders of a particular series of Grantor Trust Fractional
Interest Certificates generally will be required to report on their federal
income tax returns their shares of the entire income from the Mortgage Loans
(including amounts used to pay reasonable servicing fees and other expenses) and
will be entitled to deduct their shares of any such reasonable servicing fees
and other expenses. Because of stripped interests, market or original issue
discount, or premium, the amount includible in income on account of a Grantor
Trust Fractional Interest Certificate may differ significantly from the amount
distributable thereon representing interest on the Mortgage Loans. Under Section
67 of the Code, an individual, estate or trust holding a Grantor Trust
Fractional Interest Certificate directly or through certain pass-through
entities will be allowed a deduction for such reasonable servicing fees and
expenses only to the extent that the aggregate of such holder's miscellaneous
itemized deductions exceeds two percent of such holder's adjusted gross income.
In addition, Section 68 of the Code provides that the amount of itemized
deductions otherwise allowable for an individual whose adjusted gross income
exceeds a specified amount will be reduced by the lesser of (i) 3% of the excess
of the individual's adjusted gross income over such amount or (ii) 80% of the
amount of itemized deductions otherwise allowable for the taxable year. The
amount of additional taxable income reportable by holders of Grantor Trust
Fractional Interest Certificates who are subject to the limitations of either
Section 67 or Section 68 of the Code may be substantial. Further,
Certificateholders (other than corporations) subject to the alternative minimum
tax may not deduct miscellaneous itemized deductions in determining such
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holder's alternative minimum taxable income. Although it is not entirely clear,
it appears that in transactions in which multiple classes of Grantor Trust
Certificates (including Stripped Interest Certificates) are issued, such fees
and expenses should be allocated among the classes of Grantor Trust Certificates
using a method that recognizes that each such class benefits from the related
services. In the absence of statutory or administrative clarification as to the
method to be used, it currently is intended to base information returns or
reports to the IRS and Certificateholders on a method that allocates such
expenses among classes of Grantor Trust Certificates with respect to each period
based on the distributions made to each such class during that period.
The federal income tax treatment of Grantor Trust Fractional Interest
Certificates of any series will depend on whether they are subject to the
"stripped bond" rules of Section 1286 of the Code. Grantor Trust Fractional
Interest Certificates may be subject to those rules if (i) a class of Stripped
Interest Certificates is issued as part of the same series of Certificates or
(ii) the Sponsor or any of its affiliates retains (for its own account or for
purposes of resale) a right to receive a specified portion of the interest
payable on a Mortgage Asset. Further, the IRS has ruled that an unreasonably
high servicing fee retained by a seller or servicer will be treated as a
retained ownership interest in mortgages that constitutes a stripped coupon. For
purposes of determining what constitutes reasonable servicing fees for various
types of mortgages, the IRS has established certain "safe harbors". The
servicing fees paid with respect to the Mortgage Loans for certain series of
Grantor Trust Fractional Interest Certificates may be higher than the "safe
harbors" and, accordingly, may not constitute reasonable servicing compensation.
The related Prospectus Supplement will include information regarding servicing
fees paid to a Master Servicer, a Special Servicer, any Sub-Servicer or their
respective affiliates necessary to determine whether the preceding "safe harbor"
rules apply.
If Stripped Bond Rules Apply. If the stripped bond rules apply, each
Grantor Trust Fractional Interest Certificate will be treated as having been
issued with "original issue discount" within the meaning of Section 1273(a) of
the Code, subject, however, to the discussion below regarding the treatment of
certain stripped bonds as market discount bonds and the discussion regarding de
minimis market discount. See "--Taxation of Owners of Grantor Trust Fractional
Interest Certificates--Market Discount". Under the stripped bond rules, the
holder of a Grantor Trust Fractional Interest Certificate (whether a cash or
accrual method taxpayer) will be required to report interest income from its
Grantor Trust Fractional Interest Certificate for each month in an amount equal
to the income that accrues on such Certificate in that month calculated under a
constant yield method, in accordance with the rules of the Code relating to
original issue discount.
The original issue discount on a Grantor Trust Fractional Interest
Certificate will be the excess of such Certificate's stated redemption price
over its issue price. The issue price of a Grantor Trust Fractional Interest
Certificate as to any purchaser will be equal to the price paid by such
purchaser for the Grantor Trust Fractional Interest Certificate. The stated
redemption price of a Grantor Trust Fractional Interest Certificate will be the
sum of all payments to be made on such Certificate, other than "qualified stated
interest", if any, as well as such Certificate's share of reasonable servicing
fees and other expenses. See "--Taxation of Owners of Grantor Trust Fractional
Interest Certificates--If Stripped Bond Rules Do Not Apply" for a definition of
"qualified stated interest". In general, the amount of such income that accrues
in any month would equal the product of such holder's adjusted basis in such
Grantor Trust Fractional Interest Certificate at the beginning of such month
(see "--Sales of Grantor Trust Certificates") and the yield of such Grantor
Trust Fractional Interest Certificate to such holder. Such yield would be
computed at the rate (compounded based on the regular interval between payment
dates) that, if used to discount the holder's share of future payments on the
Mortgage Loans, would cause the present value of those future payments to equal
the price at which the holder purchased such Certificate. In computing yield
under the stripped bond rules, a Certificateholder's share of future payments on
the Mortgage Loans will not include any payments made in respect of any spread
or any other ownership interest in the Mortgage Loans retained by the Sponsor, a
Master Servicer, a Special Servicer, any Sub-Servicer or their respective
affiliates, but will include such Certificateholder's share of any reasonable
servicing fees and other expenses.
Section 1272(a)(6) of the Code requires (i) the use of a reasonable
prepayment assumption in accruing original issue discount and (ii) adjustments
in the accrual of original issue discount when prepayments do not conform to the
prepayment assumption, with respect to certain categories of debt instruments,
and regulations could be adopted applying those provisions to the Grantor Trust
Fractional Interest Certificates. It is unclear whether those provisions would
be applicable to the Grantor Trust Fractional Interest Certificates or whether
use of a reasonable prepayment assumption may be required or permitted without
reliance on these rules. It is also uncertain, if a prepayment assumption is
used, whether the assumed prepayment rate would be determined based on
conditions at the time of the
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first sale of the Grantor Trust Fractional Interest Certificate or, with respect
to any holder, at the time of purchase of the Grantor Trust Fractional Interest
Certificate by that holder. Certificateholders are advised to consult their own
tax advisors concerning reporting original issue discount in general and, in
particular, whether a prepayment assumption should be used in reporting original
issue discount with respect to Grantor Trust Fractional Interest Certificates.
In the case of a Grantor Trust Fractional Interest Certificate acquired at
a price equal to the principal amount of the Mortgage Loans allocable to such
Certificate, the use of a prepayment assumption generally would not have any
significant effect on the yield used in calculating accruals of interest income.
In the case, however, of a Grantor Trust Fractional Interest Certificate
acquired at a discount or premium (that is, at a price less than or greater than
such principal amount, respectively), the use of a reasonable prepayment
assumption would increase or decrease such yield, and thus accelerate or
decelerate, respectively, the reporting of income.
If a prepayment assumption is not used, then when a Mortgage Loan prepays
in full, the holder of a Grantor Trust Fractional Interest Certificate acquired
at a discount or a premium generally will recognize ordinary income or loss
equal to the difference between the portion of the prepaid principal amount of
the Mortgage Loan that is allocable to such Certificate and the portion of the
adjusted basis of such Certificate that is allocable to such Certificateholder's
interest in the Mortgage Loan. If a prepayment assumption is used, it appears
that no separate item of income or loss should be recognized upon a prepayment.
Instead, a prepayment should be treated as a partial payment of the stated
redemption price of the Grantor Trust Fractional Interest Certificate and
accounted for under a method similar to that described for taking account of
original issue discount on REMIC Regular Certificates. See "--REMICs--Taxation
of Owners of REMIC Regular Certificates--Original Issue Discount". It is unclear
whether any other adjustments would be required to reflect differences between
an assumed prepayment rate and the actual rate of prepayments.
In the absence of statutory or administrative clarification, it is
currently intended to base information reports or returns to the IRS and
Certificateholders in transactions subject to the stripped bond rules on a
prepayment assumption (the "Prepayment Assumption") that will be disclosed in
the related Prospectus Supplement and on a constant yield computed using a
representative initial offering price for each class of Certificates. However,
neither the Sponsor nor any other person will make any representation that the
Mortgage Loans will in fact prepay at a rate conforming to such Prepayment
Assumption or any other rate and Certificateholders should bear in mind that the
use of a representative initial offering price will mean that such information
returns or reports, even if otherwise accepted as accurate by the IRS, will in
any event be accurate only as to the initial Certificateholders of each series
who bought at that price.
Under Treasury regulation Section 1.1286-1T, certain stripped bonds are to
be treated as market discount bonds and, accordingly, any purchaser of such a
bond is to account for any discount on the bond as market discount rather than
original issue discount. This treatment only applies, however, if immediately
after the most recent disposition of the bond by a person stripping one or more
coupons from the bond and disposing of the bond or coupon (i) there is no
original issue discount (or only a de minimis amount of original issue discount)
or (ii) the annual stated rate of interest payable on the original bond is no
more than one percentage point lower than the gross interest rate payable on the
original mortgage loan (before subtracting any servicing fee or any stripped
coupon). If interest payable on a Grantor Trust Fractional Interest Certificate
is more than one percentage point lower than the gross interest rate payable on
the Mortgage Loans, the related Prospectus Supplement will disclose that fact.
If the original issue discount or market discount on a Grantor Trust Fractional
Interest Certificate determined under the stripped bond rules is less than 0.25%
of the stated redemption price multiplied by the weighted average maturity of
the Mortgage Loans, then such original issue discount or market discount will be
considered to be de minimis. Original issue discount or market discount of only
a de minimis amount will be included in income in the same manner as de minimis
original issue and market discount described in "--Taxation of Owners of Grantor
Trust Fractional Interest Certificates--If Stripped Bond Rules Do Not Apply" and
"--Market Discount".
If Stripped Bond Rules Do Not Apply. Subject to the discussion below on
original issue discount, if the stripped bond rules do not apply to a Grantor
Trust Fractional Interest Certificate, the Certificateholder will be required to
report its share of the interest income on the Mortgage Loans in accordance with
such Certificateholder's normal method of accounting. The original issue
discount rules will apply to a Grantor Trust Fractional Interest Certificate to
the extent it evidences an interest in Mortgage Loans issued with original issue
discount.
The original issue discount, if any, on the Mortgage Loans will equal the
difference between the stated redemption price of such Mortgage Loans and their
issue price. Under the OID Regulations the stated redemption
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price is equal to the total of all payments to be made on such Mortgage Loan
other than "qualified stated interest". "Qualified stated interest" includes
interest that is unconditionally payable at least annually at a single fixed
rate, at a "qualified floating rate", or at an "objective rate", a combination
of a single fixed rate and one or more "qualified floating rates" or one
"qualified inverse floating rate", or a combination of "qualified floating
rates" that does not operate in a manner that accelerates or defers interest
payments on such Mortgage Loan. In general, the issue price of a Mortgage Loan
will be the amount received by the borrower from the lender under the terms of
the Mortgage Loan, less any "points" paid by the borrower, and the stated
redemption price of a Mortgage Loan will equal its principal amount, unless the
Mortgage Loan provides for an initial below-market rate of interest or the
acceleration or the deferral of interest payments.
In the case of Mortgage Loans bearing adjustable or variable interest
rates, the related Prospectus Supplement will describe the manner in which such
rules will be applied with respect to those Mortgage Loans by the Trustee or
Master Servicer, as applicable, in preparing information returns to the
Certificateholders and the IRS.
Notwithstanding the general definition of original issue discount, original
issue discount will be considered to be de minimis if such original issue
discount is less than 0.25% of the stated redemption price multiplied by the
weighted average maturity of the Mortgage Loan. For this purpose, the weighted
average maturity of the Mortgage Loan will be computed as the sum of the amounts
determined, as to each payment included in the stated redemption price of such
Mortgage Loan, by multiplying (i) the number of complete years (rounding down
for partial years) from the issue date until such payment is expected to be
made, by (ii) a fraction, the numerator of which is the amount of the payment
and the denominator of which is the stated redemption price of the Mortgage
Loan. Under the OID Regulations, original issue discount of only a de minimis
amount (other than de minimis original issue discount attributable to a
so-called "teaser" rate or initial interest holiday) will be included in income
as each payment of stated principal is made, based on the product of the total
amount of such de minimis original issue discount and a fraction, the numerator
of which is the amount of each such payment and the denominator of which is the
outstanding stated principal amount of the Mortgage Loan. The OID Regulations
also permit a Certificateholder to elect to accrue de minimis original issue
discount into income currently based on a constant yield method. See "--Taxation
of Owners of Grantor Trust Fractional Interest Certificates--Market Discount"
below.
If original issue discount is in excess of a de minimis amount, all
original issue discount with respect to a Mortgage Loan will be required to be
accrued and reported in income in each month, based on a constant yield. The OID
Regulations suggest that no prepayment assumption is appropriate in computing
the yield on prepayable obligations issued with original issue discount. In the
absence of statutory or administrative clarification, it currently is not
intended to base information reports or returns to the IRS and
Certificateholders on the use of a prepayment assumption in transactions not
subject to the stripped bond rules. However, Section 1272(a)(6) of the Code may
require that a prepayment assumption be made in computing yield with respect to
all mortgage-backed securities. Certificateholders are advised to consult their
own tax advisors concerning whether a prepayment assumption should be used in
reporting original issue discount with respect to Grantor Trust Fractional
Interest Certificates. Certificateholders should refer to the related Prospectus
Supplement with respect to each series to determine whether and in what manner
the original issue discount rules will apply to Mortgage Loans in such series.
A purchaser of a Grantor Trust Fractional Interest Certificate that
purchases such Grantor Trust Fractional Interest Certificate at a cost less than
such Certificate's allocable portion of the aggregate remaining stated
redemption price of the Mortgage Loans held in the related Trust Fund will also
be required to include in gross income such Certificate's daily portions of any
original issue discount with respect to such Mortgage Loans. However, each such
daily portion will be reduced, if the cost of such Grantor Trust Fractional
Interest Certificate to such purchaser is in excess of such Certificate's
allocable portion of the aggregate "adjusted issue prices" of the Mortgage Loans
held in the related Trust Fund, approximately in proportion to the ratio such
excess bears to such Certificate's allocable portion of the aggregate original
issue discount remaining to be accrued on such Mortgage Loans. The adjusted
issue price of a Mortgage Loan on any given day equals the sum of (i) the
adjusted issue price (or, in the case of the first accrual period, the issue
price) of such Mortgage Loan at the beginning of the accrual period that
includes such day and (ii) the daily portions of original issue discount for all
days during such accrual period prior to such day. The adjusted issued price of
a Mortgage Loan at the beginning of any accrual period will equal the issue
price of such Mortgage Loan, increased by the aggregate amount of original issue
discount with respect to such Mortgage Loan that accrued in prior accrual
periods, and reduced by the amount of any payments made on such Mortgage Loan in
prior accrual periods of amounts included in its stated redemption price.
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Unless otherwise provided in the related Prospectus Supplement, the Trustee
or Master Servicer, as applicable, will provide to any holder of a Grantor Trust
Fractional Interest Certificate such information as such holder may reasonably
request from time to time with respect to original issue discount accruing on
Grantor Trust Fractional Interest Certificates. See "--Grantor Trust Reporting"
below.
Market Discount. If the stripped bond rules do not apply to the Grantor
Trust Fractional Interest Certificate, a Certificateholder may be subject to the
market discount rules of Sections 1276 through 1278 of the Code to the extent an
interest in a Mortgage Loan is considered to have been purchased at a "market
discount", that is, in the case of a Mortgage Loan issued without original issue
discount, at a purchase price less than its remaining stated redemption price
(as defined above), or in the case of a Mortgage Loan issued with original issue
discount, at a purchase price less than its adjusted issue price (as defined
above). If market discount is in excess of a de minimis amount (as described
below), the holder generally will be required to include in income in each month
the amount of such discount that has accrued (under the rules described in the
next paragraph) through such month that has not previously been included in
income, but limited, in the case of the portion of such discount that is
allocable to any Mortgage Loan, to the payment of stated redemption price on
such Mortgage Loan that is received by (or, in the case of accrual basis
Certificateholders, due to) the Trust Fund in that month. A Certificateholder
may elect to include market discount in income currently as it accrues (under a
constant yield method based on the yield of the Certificate to such holder)
rather than including it on a deferred basis in accordance with the foregoing.
If made, such election will apply to all market discount bonds acquired by such
Certificateholder during or after the first taxable year to which such election
applies. In addition, the OID Regulations would 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. If such an election were made with respect to a Mortgage Loan with
market discount, the Certificateholder would be deemed to have made an election
to include currently market discount in income with respect to all other debt
instruments having market discount that such Certificateholder acquires during
the taxable year of the election and thereafter, and possibly previously
acquired instruments. Similarly, a Certificateholder that made this election for
a Certificate acquired at a premium would be deemed to have made an election to
amortize bond premium with respect to all debt instruments having amortizable
bond premium that such Certificateholder owns or acquires. See
"--REMICs--Taxation of Owners of REMIC Regular Certificates--Premium". Each of
these elections to accrue interest, discount and premium with respect to a
Certificate on a constant yield method or as interest is irrevocable.
Section 1276(b)(3) of the Code authorized the Treasury Department to issue
regulations providing for the method for accruing market discount on debt
instruments, the principal of which is payable in more than one installment.
Until such time as regulations are issued by the Treasury Department, certain
rules described in the Committee Report apply. Under those rules, in each
accrual period market discount on the Mortgage Loans should accrue, at the
Certificateholder's option: (i) on the basis of a constant yield method, (ii) in
the case of a Mortgage Loan issued without original issue discount, in an amount
that bears the same ratio to the total remaining market discount as the stated
interest paid in the accrual period bears to the total stated interest remaining
to be paid on the Mortgage Loan as of the beginning of the accrual period, or
(iii) in the case of a Mortgage Loan issued with original issue discount, in an
amount that bears the same ratio to the total remaining market discount as the
original issue discount accrued in the accrual period bears to the total
original issue discount remaining at the beginning of the accrual period. The
prepayment assumption, if any, used in calculating the accrual of original issue
discount is to be used in calculating the accrual of market discount. The effect
of using a prepayment assumption could be to accelerate the reporting of such
discount income. Because the regulations referred to in this paragraph have not
been issued, it is not possible to predict what effect such regulations might
have on the tax treatment of a Mortgage Loan purchased at a discount in the
secondary market.
Because the Mortgage Loans will provide for periodic payments of stated
redemption price, such discount may be required to be included in income at a
rate that is not significantly slower than the rate at which such discount would
be included in income if it were original issue discount.
Market discount with respect to Mortgage Loans generally will be considered
to be de minimis if it is less than 0.25% of the stated redemption price of the
Mortgage Loans multiplied by the number of complete years to maturity remaining
after the date of its purchase. In interpreting a similar rule with respect to
original issue discount on obligations payable in installments, the OID
Regulations refer to the weighted average maturity of obligations, and it is
likely that the same rule will be applied with respect to market discount,
presumably taking into account the prepayment assumption used, if any. The
effect of using a prepayment assumption could be to accelerate the reporting
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of such discount income. If market discount is treated as de minimis under the
foregoing rule, it appears that actual discount would be treated in a manner
similar to original issue discount of a de minimis amount. See "--Taxation of
Owners of Grantor Trust Fractional Interest Certificates--If Stripped Bond Rules
Do Not Apply".
Further, under the rules described in "--REMICs--Taxation of Owners of
REMIC Regular Certificates--Market Discount", any discount that is not original
issue discount and exceeds a de minimis amount may require the deferral of
interest expense deductions attributable to accrued market discount not yet
includible in income, unless an election has been made to report market discount
currently as it accrues. This rule applies without regard to the origination
dates of the Mortgage Loans.
Premium. If a Certificateholder is treated as acquiring the underlying
Mortgage Loans at a premium, that is, at a price in excess of their remaining
stated redemption price, such Certificateholder may elect under Section 171 of
the Code to amortize using a constant yield method the portion of such premium
allocable to Mortgage Loans originated after September 27, 1985. Amortizable
premium is treated as an offset to interest income on the related debt
instrument, rather than as a separate interest deduction. However, premium
allocable to Mortgage Loans originated before September 28, 1985 or to Mortgage
Loans for which an amortization election is not made, should be allocated among
the payments of stated redemption price on the Mortgage Loan and be allowed as a
deduction as such payments are made (or, for a Certificateholder using the
accrual method of accounting, when such payments of stated redemption price are
due).
It is unclear whether a prepayment assumption should be used in computing
amortization of premium allowable under Section 171 of the Code. If premium is
not subject to amortization using a prepayment assumption and a Mortgage Loan
prepays in full, the holder of a Grantor Trust Fractional Interest Certificate
acquired at a premium should recognize a loss equal to the difference between
the portion of the prepaid principal amount of the 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. If a prepayment assumption
is used to amortize such premium, it appears that such a loss would be
unavailable. Instead, if a prepayment assumption is used, a prepayment should be
treated as a partial payment of the stated redemption price of the Grantor Trust
Fractional Interest Certificate and accounted for under a method similar to that
described for taking account of original issue discount on REMIC Regular
Certificates. See "--REMICs--Taxation of Owners of REMIC Regular
Certificates--Original Issue Discount". It is unclear whether any other
adjustments would be required to reflect differences between the prepayment
assumption and the actual rate of prepayments.
Taxation of Owners of Stripped Interest Certificates. The "stripped coupon"
rules of Section 1286 of the Code will apply to the Stripped Interest
Certificates. Except as described above in "--Taxation of Owners of Grantor
Trust Fractional Interest Certificates--If Stripped Bond Rules Apply", no
regulations or published rulings under Section 1286 of the Code have been issued
and some uncertainty exists as to how it will be applied to securities such as
the Stripped Interest Certificates. Accordingly, holders of Stripped Interest
Certificates should consult their own tax advisors concerning the method to be
used in reporting income or loss with respect to such Certificates.
The OID Regulations do not apply to "stripped coupons", although they
provide general guidance as to how the original issue discount sections of the
Code will be applied. In addition, the discussion below is subject to the
discussion under "--Possible Application of Proposed Contingent Payment Rules"
below and assumes that the holder of a Stripped Interest Certificate will not
own any Grantor Trust Fractional Interest Certificates.
Under the stripped coupon rules, it appears that original issue discount
will be required to be accrued in each month on the Stripped Interest
Certificates based on a constant yield method. In effect, each holder of
Stripped Interest Certificates would include as interest income in each month an
amount equal to the product of such holder's adjusted basis in such Stripped
Interest Certificate at the beginning of such month and the yield of such
Stripped Interest Certificate to such holder. Such yield would be calculated
based on the price paid for that Stripped Interest Certificate by its holder and
the payments remaining to be made thereon at the time of the purchase, plus an
allocable portion of the servicing fees and expenses to be paid with respect to
the Mortgage Loans. See "--Taxation of Owners of Grantor Trust Fractional
Interest Certificates--If Stripped Bond Rules Apply" above.
As noted above, Section 1272(a)(6) of the Code requires that a prepayment
assumption be used in computing the accrual of original issue discount with
respect to certain categories of debt instruments, and that adjustments be made
in the amount and rate of accrual of such discount when prepayments do not
conform to such prepayment assumption. Regulations could be adopted applying
those provisions to the Stripped Interest Certificates. It is unclear whether
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those provisions would be applicable to the Stripped Interest Certificates or
whether use of a prepayment assumption may be required or permitted in the
absence of such regulations. It is also uncertain, if a prepayment assumption is
used, whether the assumed prepayment rate would be determined based on
conditions at the time of the first sale of the Stripped Interest Certificate
or, with respect to any subsequent holder, at the time of purchase of the
Stripped Interest Certificate by that holder.
The accrual of income on the Stripped Interest Certificates will be
significantly slower if a prepayment assumption is permitted to be made than if
yield is computed assuming no prepayments. In the absence of statutory or
administrative clarification, it currently is intended to base information
returns or reports to the IRS and Certificateholders on the Prepayment
Assumption disclosed in the related Prospectus Supplement and on a constant
yield computed using a representative initial offering price for each class of
Certificates. However, neither the Sponsor nor any other person will make any
representation that the Mortgage Loans will in fact prepay at a rate conforming
to the Prepayment Assumption or at any other rate and Certificateholders should
bear in mind that the use of a representative initial offering price will mean
that such information returns or reports, even if otherwise accepted as accurate
by the IRS, will in any event be accurate only as to the initial
Certificateholders of each series who bought at that price. Prospective
purchasers of the Stripped Interest Certificates should consult their own tax
advisors regarding the use of the Prepayment Assumption.
It is unclear under what circumstances, if any, the prepayment of a
Mortgage Loan will give rise to a loss to the holder of a Stripped Interest
Certificate. If a Stripped Interest 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 such
Stripped Interest Certificate, it appears that no loss may be available as a
result of any particular prepayment unless prepayments occur at a rate faster
than the Prepayment Assumption. However, if a Stripped Interest Certificate is
treated as an interest in discrete Mortgage Loans, or if the Prepayment
Assumption is not used, then when a Mortgage Loan is prepaid, the holder of a
Stripped Interest Certificate should be able to recognize a loss equal to the
portion of the adjusted issue price of the Stripped Interest Certificate that is
allocable to such Mortgage Loan.
Possible Application of Proposed Contingent Payment Rules. The coupon
stripping rules' general treatment of stripped coupons is to regard them as
newly issued debt instruments in the hands of each purchaser. To the extent that
payments on the Grantor Trust Strip Certificates would cease if the Mortgage
Loans were prepaid in full, the Grantor Trust Strip Certificates could be
considered to be debt instruments providing for contingent payments. Under the
OID Regulations, debt instruments providing for contingent payments are not
subject to the same rules as debt instruments providing for noncontingent
payments, but no final regulations have been promulgated with respect to
contingent payment debt instruments. Proposed regulations were promulgated in
1994 regarding contingent payment debt instruments, but have not been made final
and are likely to be substantially revised before being made final. Moreover,
like the OID Regulations, such proposed regulations do not specifically address
securities, such as the Grantor Trust Strip Certificates, that are subject to
the stripped bond rules of Section 1286 of the Code.
Certificateholders should consult their tax advisors concerning the
possible application of the contingent payment rules to the Grantor Trust Strip
Certificates.
Sales of Grantor Trust Certificates. Any gain or loss, equal to the
difference between the amount realized on the sale or exchange of a Grantor
Trust Certificate and its adjusted basis, recognized on such sale or exchange of
a Grantor Trust Certificate by an investor who holds such Grantor Trust
Certificate as a capital asset, will be capital gain or loss, except to the
extent of accrued and unrecognized market discount, which will be treated as
ordinary income, and (in the case of banks and other financial institutions)
except as provided under Section 582(c) of the Code. The adjusted basis of a
Grantor Trust Certificate generally will equal its cost, increased by any income
reported by the seller (including original issue discount and market discount
income) and reduced (but not below zero) by any previously reported losses, any
amortized premium and by any distributions with respect to such Grantor Trust
Certificate. The Code as of the date of this Prospectus provides a top marginal
tax rate of 39.6% for individuals and a maximum marginal rate for long-term
capital gains of individuals of 28%. No such rate differential exists for
corporations. In addition, the distinction between a capital gain or loss and
ordinary income or loss remains relevant for other purposes.
Gain or loss from the sale of a Grantor Trust Certificate may be partially
or wholly ordinary and not capital in certain circumstances. Gain attributable
to accrued and unrecognized market discount will be treated as ordinary
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income, as will gain or loss recognized by the banks and other financial
institutions subject to Section 582(c) of the Code. Furthermore, a portion of
any gain that might otherwise be capital gain may be treated as ordinary income
to the extent that the Grantor Trust Certificate is held as part of a
"conversion transaction" within the meaning of Section 1258 of the Code. A
conversion transaction generally is one in which the taxpayer has taken two or
more positions in the same or similar property that reduce or eliminate market
risk, if substantially all of the taxpayer's return is attributable to the time
value of the taxpayer's net investment in such transaction. The amount of gain
realized in a conversion transaction that is recharacterized as ordinary income
generally will not exceed the amount of interest that would have accrued on the
taxpayer's net investment at 120% of the appropriate "applicable Federal rate"
(which rate is computed and published monthly by the IRS) at the time the
taxpayer enters into the conversion transaction, subject to appropriate
reduction for prior inclusion of interest and other ordinary income items from
the transaction. Finally, a taxpayer may elect to have net capital gain taxed at
ordinary income rates rather than capital gains rates in order to include such
net capital gain in total net investment income for that taxable year, for
purposes of the rule that limits the deduction of interest on indebtedness
incurred to purchase or carry property held for investment to a taxpayer's net
investment income.
Grantor Trust Reporting. Unless otherwise provided in the related
Prospectus Supplement, the Trustee or Master Servicer, as applicable, will
furnish to each holder of a Grantor Trust Certificate with each distribution a
statement setting forth the amount of such distribution allocable to principal
on the underlying Mortgage Loans and to interest thereon at the related
Pass-Through Rate. In addition, within a reasonable time after the end of each
calendar year, the Trustee or Master Servicer, as applicable, will furnish to
each Certificateholder during such year such customary factual information as
the Sponsor or the reporting party deems necessary or desirable to enable
holders of Grantor Trust Certificates to prepare their tax returns and will
furnish comparable information to the IRS as and when required by law to do so.
Because the rules for accruing discount and amortizing premium with respect to
the Grantor Trust Certificates are uncertain in various respects, there is no
assurance the IRS will agree with the Trustee's or Master Servicer's, as the
case may be, information reports of such items of income and expense. Moreover,
such information reports, even if otherwise accepted as accurate by the IRS,
will in any event be accurate only as to the initial Certificateholders that
bought their Certificates at the representative initial offering price used in
preparing such reports.
Backup Withholding. In general, the rules described in "--REMICs--Backup
Withholding with Respect to REMIC Certificates" will also apply to Grantor Trust
Certificates.
Foreign Investors. In general, the discussion with respect to REMIC Regular
Certificates in "--REMICs--Foreign Investors in REMIC Certificates" applies to
Grantor Trust Certificates except that Grantor Trust Certificates will, unless
otherwise disclosed in the related Prospectus Supplement, be eligible for
exemption from United States withholding tax, subject to the conditions
described in such discussion, only to the extent the related Mortgage Loans were
originated after July 18, 1984.
To the extent that interest on a Grantor Trust Certificate would be exempt
under Sections 871(h)(1) and 881(c) of the Code from United States withholding
tax, and the Grantor Trust Certificate is not held in connection with a
Certificateholder's trade or business in the United States, such Grantor Trust
Certificate will not be subject to U.S. estate taxes in the estate of
non-resident alien individual.
STATE AND OTHER TAX CONSEQUENCES
In addition to the federal income tax consequences described in "Material
Federal Income Tax Consequences", potential investors should consider the state
and local tax consequences of the acquisition, ownership, and disposition of the
Offered Certificates. State tax law may differ substantially from the
corresponding federal law, and the discussion above does not purport to describe
any aspect of the tax laws of any state or other jurisdiction. Therefore,
prospective investors should consult their own tax advisors with respect to the
various tax consequences of investments in the Offered Certificates.
ERISA CONSIDERATIONS
GENERAL
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and the Code impose certain requirements on employee benefit plans, and on
certain other retirement plans and arrangements, including
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individual retirement accounts and annuities, Keogh plans and collective
investment funds and separate accounts in which such plans, accounts or
arrangements are invested that are subject to the fiduciary responsibility
provisions of ERISA and Section 4975 of the Code (all of which are hereinafter
referred to as "Plans"), and on persons who are fiduciaries with respect to
Plans, in connection with the investment of Plan assets. 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 Section 3(33) of ERISA) are not subject to ERISA requirements.
Accordingly, assets of such plans may be invested in Offered Certificates
without regard to the ERISA considerations described below, subject to the
provisions of other applicable federal and state law. Any such plan which is
qualified and exempt from taxation under Sections 401(a) and 501(a) of the Code,
however, is subject to the prohibited transaction rules set forth in Section 503
of the Code.
ERISA generally imposes on Plan fiduciaries certain general fiduciary
requirements, including those of investment prudence and diversification and the
requirement that a Plan's investments be made in accordance with the documents
governing the Plan. In addition, ERISA and the Code prohibit a broad range of
transactions involving assets of a Plan and persons ("Parties in Interest") who
have certain specified relationships to the Plan, unless a statutory or
administrative exemption is available. Certain Parties in Interest that
participate in a prohibited transaction may be subject to an excise tax imposed
pursuant to Section 4975 of the Code, unless a statutory or administrative
exemption is available. These prohibited transactions generally are set forth in
Section 406 of ERISA and Section 4975 of the Code.
PLAN ASSET REGULATIONS
A Plan's investment in Certificates may cause the Trust Assets to be deemed
Plan assets. Section 2510.3-101 of the regulations of the United States
Department of Labor ("DOL") provides that when a Plan acquires an equity
interest in an entity, the Plan's assets include both such equity interest and
an undivided interest in each of the underlying assets of the entity, unless
certain exceptions not applicable to this discussion apply, or unless the equity
participation in the entity by "benefit plan investors" (that is, Plans and
certain employee benefit plans not subject to ERISA) is not "significant". For
this purpose, in general, equity participation in a Trust Fund will be
"significant" on any date if, immediately after the most recent acquisition of
any Certificate, 25% or more of any class of Certificates is held by benefit
plan investors.
Any person who has discretionary authority or control respecting the
management or disposition of Plan assets, and any person who provides investment
advice with respect to such assets for a fee, is a fiduciary of the investing
Plan. If the Trust Assets constitute Plan assets, then any party exercising
management or discretionary control regarding those assets, such as a Master
Servicer, Special Servicer or any Sub-Servicer, may be deemed to be a Plan
"fiduciary" with respect to the investing Plan, and thus subject to the
fiduciary responsibility provisions and prohibited transaction provisions of
ERISA and the Code. In addition, if the Trust Assets constitute Plan assets, the
purchase of Certificates by a Plan, as well as the operation of the Trust Fund,
may constitute or involve a prohibited transaction under ERISA and the Code.
Any Plan fiduciary that proposes to cause such Plan to purchase Offered
Certificates should consult with its counsel with respect to the potential
applicability of ERISA and the Code, in particular the fiduciary responsibility
and prohibited transaction provisions, to such investment and the availability
of (and scope of relief provided by) any prohibited transaction exemption in
connection therewith. The Prospectus Supplement with respect to a series of
Certificates may contain additional information regarding the application of any
exemption with respect to the Certificates offered thereby. In addition, any
Plan fiduciary that proposes to cause a Plan to purchase Stripped Interest
Certificates should consider the federal income tax consequences of such
investment.
LEGAL INVESTMENT
The Offered Certificates will constitute "mortgage related securities" for
purposes of the Secondary Mortgage Market Enhancement Act of 1984 ("SMMEA") only
if so specified in the related Prospectus Supplement. Accordingly, investors
whose investment authority is subject to legal restrictions should consult their
own legal advisors to determine whether and to what extent the Offered
Certificates constitute legal investments for them.
Generally, only classes of Offered Certificates that (i) are rated in one
of the two highest rating categories by one or more Rating Agencies and (ii) are
part of a series evidencing interests in a Trust Fund consisting of loans
secured by
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a single parcel of real estate upon which is located a dwelling or mixed
residential and commercial structure, such as certain Multifamily Loans, and
originated by types of Originators specified in SMMEA, will be "mortgage related
securities" for purposes of SMMEA. "Mortgage related securities" are legal
investments to the same extent that, under applicable law, obligations issued by
or guaranteed as to principal and interest by the United States or any agency or
instrumentality thereof constitute legal investments for persons, trusts,
corporations, partnerships, associations, business trusts and business entities
(including depository institutions, insurance companies and pension funds
created pursuant to or existing under the laws of the United States or of any
state, the authorized investments of which are subject to state regulation).
Under SMMEA, if a state enacted legislation prior to October 3, 1991 that
specifically limits the legal investment authority of any such entities with
respect to "mortgage related securities", Offered Certificates would constitute
legal investments for entities subject to such legislation only to the extent
provided in such legislation.
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 with "mortgage
related securities" without limitation as to the percentage of their assets
represented thereby, federal credit unions may invest in such securities, and
national banks may purchase such securities 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 such regulations as the applicable
federal regulatory authority may prescribe.
Upon the issuance of final implementing regulations under the Riegle
Community Development and Regulatory Improvement Act of 1994 and subject to any
limitations those regulations may impose, a modification of the definition of
"mortgage related securities" will become effective to include among the types
of loans to which such securities may relate loans secured by "one or more
parcels of real estate upon which is located one or more commercial structures".
In addition, the related legislative history states that this expanded
definition includes multifamily loans secured by more than one parcel of real
estate upon which is located more than one structure. Until September 23, 2001,
any state may enact legislation limiting the extent to which "mortgage related
securities" under this expanded definition would constitute legal investments
under that state's laws.
The Federal Financial Institutions Examination Council has issued a
supervisory policy statement (the "Policy Statement") applicable to all
depository institutions, setting forth guidelines for and significant
restrictions on investments in "high-risk mortgage securities". The Policy
Statement has been adopted by the Federal Reserve Board, the Office of the
Comptroller of the Currency, the FDIC and the OTS. The Policy Statement
generally indicates that a mortgage derivative product will be deemed to be high
risk if it exhibits greater price volatility than a standard fixed rate
thirty-year mortgage security. According to the Policy Statement, prior to
purchase, a depository institution will be required to determine whether a
mortgage derivative product that it is considering acquiring is high-risk, and
if so that the proposed acquisition would reduce the institution's overall
interest rate risk. Reliance on analysis and documentation obtained from a
securities dealer or other outside party without internal analysis by the
institution would be unacceptable. There can be no assurance as to which classes
of Certificates, including Offered Certificates, will be treated as high-risk
under the Policy Statement.
The predecessor to the Office of Thrift Supervision (the "OTS") issued a
bulletin, entitled, "Mortgage Derivative Products and Mortgage Swaps", which is
applicable to thrift institutions regulated by the OTS. The bulletin established
guidelines for the investment by savings institutions in certain "high-risk"
mortgage derivative securities and limitations on the use of such securities by
insolvent, undercapitalized or otherwise "troubled" institutions. According to
the bulletin, such "high-risk" mortgage derivative securities include securities
having certain specified characteristics, which may include certain classes of
Offered Certificates. In addition, the National Credit Union Administration has
issued regulations governing federal credit union investments which prohibit
investment in certain specified types of securities, which may include certain
classes of Offered Certificates. Similar policy statements have been issued by
regulators having jurisdiction over other types of depository institutions.
There may be other restrictions on the ability of certain investors either
to purchase certain classes of Offered Certificates or to purchase any class of
Offered Certificates representing more than a specified percentage of the
investor's assets. The Sponsor will make no representations as to the proper
characterization of any class of Offered Certificates for legal investment or
other purposes, or as to the ability of particular investors to purchase any
class of Offered Certificates under applicable legal investment restrictions.
These uncertainties may adversely affect the liquidity of any class of Offered
Certificates. Accordingly, all investors whose investment activities are subject
to legal investment laws and regulations, regulatory capital requirements or
review by regulatory authorities should
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consult with their own legal advisors in determining whether and to what extent
the Offered Certificates of any class constitute legal investments or are
subject to investment, capital or other restrictions.
METHOD OF DISTRIBUTION
The Offered Certificates offered hereby and by Prospectus Supplements
hereto will be offered in series through one or more of the methods described
below. The Prospectus Supplement prepared for each series will describe the
method of offering being utilized for that series and will state the net
proceeds to the Sponsor from such sale.
The Sponsor intends that Offered Certificates will be offered through the
following methods from time to time and that offerings may be made concurrently
through more than one of these methods or that an offering of a particular
series of Certificates may be made through a combination of two or more of these
methods.
Such methods are as follows:
1. by negotiated firm commitment underwriting and public offering by
one or more underwriters specified in the related Prospectus Supplement;
2. by placements through one or more placement agents specified in the
related Prospectus Supplement primarily with institutional investors and
dealers; and
3. through offerings by the Sponsor.
The Prospectus Supplement for each series of Offered Certificates will, as
to each class of such Certificates, describe the method of offering being used
for that class and either the price at which such class is being offered, the
nature and amount of any underwriting discounts or additional compensation to
underwriters and the proceeds of the offering to the Sponsor, or the method for
determining the price at which such class will be sold to the public. A firm
commitment underwriting and public offering by underwriters may be done through
underwriting syndicates led by one or more managing underwriters or through one
or more underwriters acting alone. The managing underwriter or underwriters with
respect to the offer and sale of a particular series of Offered Certificates
will be set forth on the cover of the Prospectus Supplement relating to such
series and the members of the underwriting syndicate, if any, will be named in
such Prospectus Supplement. The firms acting as underwriters with respect to the
Offered Certificates of any series may include Citicorp Securities, Inc. and
Citibank, N.A., each of which is an affiliate of the Sponsor. Any of the
above-named firms not named in the related Prospectus Supplement will not be
parties to the Underwriting Agreement in respect of a series of Offered
Certificates, will not be purchasing any such Certificates from the Sponsor and
will have no direct or indirect participation in the underwriting of such
Certificates, although any of such firms may participate in the distribution of
such Certificates under circumstances entitling it to a dealer's commission.
Each Prospectus Supplement for an underwritten offering will also contain
information regarding the nature of the underwriters' obligations, any material
relationships between the Sponsor 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 a firm commitment underwritten offering, the
underwriters will be obligated to purchase all of the Offered Certificates of a
series if any such Certificates are purchased. Offered 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.
In connection with the sale of the Offered Certificates of any series,
underwriters may receive compensation from the Sponsor or from purchasers of
such Certificates in the form of discounts, concessions or commissions. The
related Prospectus Supplement will describe any such compensation paid by the
Sponsor.
In underwritten offerings, the underwriters and their agents may be
entitled, under agreements entered into with the Sponsor, to indemnification
from the Sponsor against certain civil liabilities, including liabilities under
the Securities Act of 1933, as amended (the "Securities Act"), or to
contribution with respect to payments which such underwriters or agents may be
required to make in respect thereof. Such rights to indemnification or
contribution may also extend to each person, if any, who controls any such
underwriter within the meaning of the Securities Act.
If a series or class of Offered Certificates is offered otherwise than
through underwriters, the Prospectus Supplement relating thereto will contain
information regarding the nature of such offering and any agreements to be
entered into between the Sponsor and purchasers of such Certificates. It is
contemplated that Citicorp Securities, Inc. or Citibank, N.A. will act as
placement agent on behalf of the Sponsor in such offerings of a series or class
of Offered
90
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Certificates. If Citicorp Securities, Inc. does act as placement agent in the
sale of Offered Certificates, it will receive a selling commission which will be
disclosed in the related Prospectus Supplement. Citicorp Securities, Inc. or
Citibank, N.A. may also purchase Offered Certificates acting as principal.
It is expected that the Sponsor will from time to time form Mortgage Asset
Pools and cause series of Offered Certificates evidencing an ownership interest
in such Mortgage Asset Pools to be issued to the related Mortgage Asset Sellers.
Thereafter, and pending final sale of such a series of Offered Certificates, the
related Mortgage Asset Seller may enter into repurchase arrangements or secured
lending arrangements with institutions that may include Citicorp Securities,
Inc. or any of its affiliates for purposes of financing the holding of such
series. Prior to any sales of such Certificates to investors, the related
Mortgage Asset Seller will prepare and deliver a Prospectus Supplement
containing updated information regarding the Mortgage Asset Pool as of the first
day of the month in which such sale occurs.
FINANCIAL INFORMATION
A new Trust Fund will be formed with respect to each series of
Certificates, and no Trust Fund will engage in any business activities or have
any assets or obligations prior to the issuance of the related series of
Certificates. Accordingly, no financial statements with respect to any Trust
Fund will be included in this Prospectus or in the related Prospectus
Supplement.
RATING
It is a condition to the issuance of any class of Offered Certificates that
they shall have been rated not lower than investment grade, that is, in one of
the four highest rating categories, by at least one Rating Agency.
Ratings on mortgage pass-through certificates address the likelihood of
receipt by the holders thereof of all collections on the underlying mortgage
assets to which such holders are entitled. These ratings address the structural,
legal and issuer-related aspects associated with such certificates, the nature
of the underlying mortgage assets and the credit quality of the guarantor, if
any. Ratings on mortgage pass-through certificates do not represent any
assessment of the likelihood of principal prepayments by borrowers or of the
degree by which such prepayments might differ from those originally anticipated.
As a result, Certificateholders might suffer a lower than anticipated yield,
and, in addition, holders of stripped interest certificates in extreme cases
might fail to recoup their initial 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.
91
<PAGE>
INDEX OF PRINCIPAL DEFINITIONS
Page
-----------
Accrual Certificates ........................................ 12, 35
Accrued Certificate Interest ................................ 35
ARM Loans ................................................... 26
Available Distribution Amount ............................... 34
Book-Entry Certificates ..................................... 12, 34
Cash Flow Agreement ......................................... 1, 11, 27
CERCLA ...................................................... 21, 61
Certificate ................................................. 9
Certificate Account ......................................... 10, 27, 43
Certificate Balance ......................................... 3, 12, 35
Certificate Owner ........................................... 14, 39
Certificateholders .......................................... 2
Code ........................................................ 14, 65
Commercial Properties ....................................... 9, 24
Commission .................................................. 3
Companion Class ............................................. 13, 36
Condemnation Proceeds ....................................... 44
Controlled Amortization Class ............................... 13, 36
Cooperatives ................................................ 24
CPR ......................................................... 30
Credit Support .............................................. 1, 11, 27
Cut-off Date ................................................ 13
Debt Service Coverage Ratio ................................. 24
Definitive Certificate ...................................... 14, 40
Determination Date .......................................... 28
Direct Participants ......................................... 39
Distribution Date ........................................... 12
Distribution Date Statement ................................. 37
DTC ......................................................... 3
Due Dates ................................................... 25
Due Period .................................................. 28
Equity Participation ........................................ 26
ERISA ....................................................... 16, 87
Exchange Act ................................................ 4
FAMC ........................................................ 10
FHLMC ....................................................... 10
FNMA ........................................................ 10
GNMA ........................................................ 10
Grantor Trust Certificates .................................. 14, 65
Grantor Trust Fractional Interest Certificate ............... 15, 80
Grantor Trust Fund .......................................... 14, 65
Indirect Participants ....................................... 39
Insurance Proceeds .......................................... 44
IRS ......................................................... 67
Issue Premium ............................................... 72
L/C Bank .................................................... 55
Liquidation Proceeds ........................................ 44
Loan-to-Value Ratio ......................................... 25
Lock-out Date ............................................... 25
Lock-out Period ............................................. 25
Master Servicer ............................................. 9
92
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Page
-----------
MBS ......................................................... 10
MBS Agreement ............................................... 26
MBS Issuer .................................................. 26
MBS Servicer ................................................ 26
MBS Trustee ................................................. 26
Mortgage .................................................... 24
Mortgage Asset Pool ......................................... 1
Mortgage Asset Seller ....................................... 23
Mortgage Assets ............................................. 23
Mortgage Loans .............................................. 23
Mortgage Notes .............................................. 24
Mortgage Rate ............................................... 25
Mortgaged Properties ........................................ 24
Multifamily Properties ...................................... 9, 24
Net Leases .................................................. 25
Net Operating Income ........................................ 24
Nonrecoverable Advance ...................................... 37
Notional Amount ............................................. 35
Offered Certificates ........................................ 1
OID Regulations ............................................. 65
Originator .................................................. 24
PAC ......................................................... 30
Participants ................................................ 23, 34
Pass-Through Rate ........................................... 12
Permitted Investments ....................................... 44
Plans ....................................................... 88
Pooling Agreement ........................................... 40
Prepayment Assumption ....................................... 67, 88
Prepayment Interest Shortfall ............................... 28
Prepayment Premium .......................................... 25
Prospectus Supplement ....................................... 1
Rating Agency ............................................... 16
Record Date ................................................. 34
Related Proceeds ............................................ 37
Relief Act .................................................. 64
REMIC ....................................................... 65
REMIC Administrator ......................................... 3, 9
REMIC Certificates .......................................... 65
REMIC Provisions ............................................ 65
REMIC Regular Certificates .................................. 66
REMIC Regulations ........................................... 65
REMIC Residual Certificates ................................. 66
REO Property ................................................ 43
Securities Act .............................................. 90
Senior Certificates ......................................... 34
Servicing Standard .......................................... 42
SMMEA ....................................................... 88
SPA ......................................................... 30
Special Servicer ............................................ 9
Sponsor ..................................................... 23
Stripped Interest Certificates .............................. 34
Stripped Principal Certificates ............................. 34
Sub-Servicer ................................................ 43
93
<PAGE>
Page
-----------
Sub-Servicing Agreement ..................................... 43
Subordinate Certificates .................................... 34
TAC ......................................................... 30
Title V ..................................................... 64
Trust Assets ................................................ 3
Trust Fund .................................................. 1
Trustee ..................................................... 9
UCC ......................................................... 57
Value ....................................................... 25
Voting Rights ............................................... 38
Warranting Party ............................................ 42
94
<PAGE>
This diskette contains two spreadsheet files that can be put on a
user-specified hard drive or network drive. These two files are "MCF.xls" and
"MCF.wk1." The file MCF.xls" is a Microsoft Excel(1), Version 5.0 spreadsheet,
and the file "MCF.wk1" is a Lotus 123(1), Version 2.0 spreadsheet. Each file
provides, in electronic format, certain loan level information shown in ANNEX A
of the Prospectus Supplement.
Open either file as you would normally open any spreadsheet in either
Microsoft Excel or Lotus 123. Before either file is displayed, a message will
appear notifying you that the file is Reserved and Read Only. In the case of the
Microsoft Excel file, click the "READ ONLY" button, and in the case of the Lotus
123 file, click the "OK" button. After either file is opened, a securities law
legend will be displayed. READ THE LEGEND CAREFULLY. To view the ANNEX A data,
in the case of the Microsoft Excel file, the data appears on the worksheet
labeled "Annex A," and in the case of the Lotus 123 file, the data appears
directly to the left of the legend.
- ------------
(1) Microsoft Excel and Lotus 123 are registered trademarks of Microsoft
Corporation and Lotus Development Corporation, respectively.
<PAGE>
================================================================================
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE SPONSOR OR BY THE UNDERWRITERS. THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF
AN OFFER TO BUY, THE SECURITIES OFFERED HEREBY TO ANYONE IN ANY JURISDICTION IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR
TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION
THAT INFORMATION HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SINCE THE DATE OF
THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS.
-----------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
Page
----
Summary ................................................................ S-4
Risk Factors ........................................................... S-24
Description of the Mortgage Pool ....................................... S-31
Servicing of the Mortgage Loans ........................................ S-43
Description of the Certificates ........................................ S-52
Yield and Maturity Considerations ...................................... S-67
Use of Proceeds ........................................................ S-85
Certain Federal Income Tax Consequences ................................ S-85
ERISA Considerations ................................................... S-87
Legal Investment ....................................................... S-89
Method of Distribution ................................................. S-89
Legal Matters .......................................................... S-90
Rating ................................................................. S-90
Index of Principal Definitions ......................................... S-92
Annex A ................................................................ A-1
Annex B ................................................................ B-1
PROSPECTUS
Prospectus Supplement .................................................. 3
Available Information .................................................. 3
Incorporation of Certain Information by
Reference ............................................................ 4
Summary of Prospectus .................................................. 9
Risk Factors ........................................................... 17
Description of the Trust Funds ......................................... 23
Yield and Maturity Considerations ...................................... 27
Mortgage Capital Funding, Inc .......................................... 33
Use of Proceeds ........................................................ 33
Description of the Certificates ........................................ 34
Description of the Pooling Agreements .................................. 40
Description of Credit Support .......................................... 54
Certain Legal Aspects of Mortgage Loans ................................ 56
Material Federal Income Tax Consequences ............................... 65
State and Other Tax Considerations ..................................... 87
ERISA Considerations ................................................... 87
Legal Investment ....................................................... 88
Method of Distribution ................................................. 90
Financial Information .................................................. 91
Rating ................................................................. 91
Index of Principal Definitions ......................................... 92
THROUGH AND INCLUDING _____, 1996 (THE 90TH DAY AFTER THE DATE OF THIS
PROSPECTUS SUPPLEMENT), ALL DEALERS EFFECTING TRANSACTIONS IN THE OFFERED
CERTIFICATES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS. THIS DELIVERY REQUIREMENT IS
IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS SUPPLEMENT AND
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
================================================================================
================================================================================
$414,824,951
(APPROXIMATE)
MORTGAGE CAPITAL FUNDING, INC.
SPONSOR
CITIBANK, N.A.
MORTGAGE LOAN SELLER
CLASS X-1, CLASS X-2, CLASS A-1,
CLASS A-2A, CLASS A-2B, CLASS B,
CLASS C, CLASS D, CLASS E AND CLASS F
MULTIFAMILY/COMMERCIAL
MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1996-MC1
----------
PROSPECTUS SUPPLEMENT
----------
CITIBANK [LOGO]
GOLDMAN, SACHS & CO.
JUNE __, 1996
================================================================================
