<PAGE>
Information contained herein is subject to completion or amendment.
These securities may not be sold nor may offers to buy be accepted prior to
the delivery of a final Prospectus Supplement. This Prospectus Supplement and
the Prospectus to which it relates 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.
SUBJECT TO COMPLETION, DATED NOVEMBER 10, 1997
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED NOVEMBER 10, 1997)
$770,460,899 (APPROXIMATE)
MORTGAGE CAPITAL FUNDING, INC.
MULTIFAMILY/COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-MC2
The Mortgage Capital Funding, Inc., Multifamily/Commercial Mortgage
Pass-Through Certificates, Series 1997-MC2 (the "Certificates") will consist
of 14 classes (each, a "Class") of Certificates, designated as: (i) the Class
A-1 and Class A-2 Certificates (collectively, the "Class A Certificates");
(ii) the Class B, Class C, Class D, Class E, Class F, Class G, Class H, Class
J and Class K Certificates (collectively with the Class A Certificates, the
"Sequential Pay Certificates"); (iii) the Class X Certificates (collectively
with the Sequential Pay Certificates, the "REMIC Regular Certificates"); and
(iv) the Class R-I and Class R-II Certificates (collectively, the "REMIC
Residual Certificates"). Only the Class X, Class A, Class B, Class C, Class D
and Class E Certificates (collectively, the "Offered Certificates") are
offered hereby. The respective Classes of Offered Certificates will be issued
in the aggregate principal amounts (each, a "Certificate Balance") or, in the
case of the Class X Certificates, in the aggregate notional amount (a
"Notional Amount"), and will accrue interest at the per annum rates (each, a
"Pass-Through Rate"), set forth or otherwise described in the table below.
(cover page continued on following pages)
THE OFFERED CERTIFICATES DO NOT REPRESENT AN INTEREST IN OR OBLIGATION OF
CITICORP REAL ESTATE, INC., 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-30 IN THIS PROSPECTUS SUPPLEMENT AND THE
INFORMATION SET FORTH UNDER "RISK FACTORS" BEGINNING ON PAGE 14 IN THE
PROSPECTUS BEFORE PURCHASING ANY OF THE OFFERED CERTIFICATES.
<TABLE>
<CAPTION>
INITIAL
CERTIFICATE
BALANCE OR ASSUMED FINAL RATINGS RATED FINAL
NOTIONAL AMOUNT PASS-THROUGH DISTRIBUTION (MOODY'S AND DISTRIBUTION
CLASS (1) RATE DATE (2) FITCH) DATE (3)
- ------------ ----------------- -------------- ------------------ ------------- -----------------
<S> <C> <C> <C> <C> <C>
Class A-1 .. $143,471,137 % January 20, 2007 Aaa/AAA November 20, 2027
Class A-2 .. $465,932,965 % September 20, 2007 Aaa/AAA November 20, 2027
Class X ..... $870,490,231(4) %(5) November 20, 2012 Aaa/AAA November 20, 2027
Class B ..... $ 52,234,637 % October 20, 2007 Aa2/AA November 20, 2027
Class C ..... $ 43,528,864 % October 20, 2007 A2/A November 20, 2027
Class D ..... $ 39,175,978 % November 20, 2007 Baa2/BBB November 20, 2027
Class E ..... $ 26,117,318 % November 20, 2007 Baa3/NR November 20, 2027
</TABLE>
(footnotes on page S-3)
The Offered Certificates will be purchased by NationsBanc Montgomery
Securities, Inc. and Citibank, N.A. (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 Cut-off Date). Proceeds to the Sponsor from the sale of the
Offered Certificates will be an amount equal to approximately % of the
initial aggregate Certificate Balance of the Class A, Class B, Class C, Class
D and Class E Certificates, plus accrued interest on all the Offered
Certificates, 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
, 1997 (the "Delivery Date"), against payment therefor in
immediately available funds.
NATIONSBANC MONTGOMERY
SECURITIES, INC. AND [CITIBANK LOGO]
The Underwriters are acting as co-lead managers in connection with all
activities relating to this offering.
The date of this Prospectus Supplement is November , 1997
<PAGE>
MORTGAGE CAPITAL FUNDING, INC.
-------------------------------------------------------------------------
Multifamily Commercial Mortgage Pass-Through Certificates, Series 1997-MC2
Geographic Overview of Mortgage Pool
[THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE
DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE PURPOSE OF EDGAR
FILING.]
[MAP]
% OF
NUMBER OF AGGREGATE INITIAL
MORTGAGED CUT-OFF DATE POOL
STATES PROPERTIES BALANCE BALANCE
- --------------- ------------ -------------- ---------
CA.............. 11 $114,186,115 13.1%
TX ............. 25 $ 90,289,542 10.4%
FL.............. 18 $ 80,453,205 9.2%
NV.............. 11 $ 63,976,270 7.3%
VA.............. 7 $ 46,341,974 5.3%
MI.............. 3 $ 39,546,180 4.5%
NC.............. 8 $ 39,325,052 4.5%
NY.............. 11 $ 38,409,456 4.4%
IL.............. 5 $ 29,833,269 3.4%
NJ.............. 7 $ 27,160,725 3.1%
PR.............. 1 $ 26,472,765 3.0%
OH.............. 7 $ 21,725,978 2.5%
UT.............. 4 $ 21,498,550 2.5%
PA.............. 8 $ 20,240,415 2.3%
IN.............. 2 $ 19,594,710 2.3%
AZ.............. 4 $ 18,053,761 2.1%
MO.............. 3 $ 17,051,518 2.0%
WI.............. 7 $ 17,006,030 2.0%
AL.............. 5 $ 15,786,977 1.8%
AR.............. 4 $ 15,116,054 1.7%
GA.............. 5 $ 14,505,334 1.7%
MA.............. 2 $ 12,868,305 1.5%
DE.............. 3 $ 8,532,139 1.0%
MD.............. 4 $ 7,410,049 0.9%
ME.............. 4 $ 7,241,288 0.8%
NE.............. 1 $ 6,908,682 0.8%
SC.............. 2 $ 6,662,921 0.8%
CO.............. 3 $ 6,664,104 0.8%
WA.............. 2 $ 6,594,095 0.8%
IA.............. 2 $ 6,192,864 0.7%
TN.............. 2 $ 5,125,736 0.6%
CT.............. 3 $ 4,751,850 0.5%
LA.............. 2 $ 4,525,653 0.5%
NH.............. 4 $ 4,394,163 0.5%
KY.............. 1 $ 3,000,000 0.3%
NM.............. 1 $ 2,295,951 0.3%
OR.............. 1 $ 855,610 0.1%
WEIGHTED AVERAGESBY PROPERTY TYPE
- ---------------------------------
[PIE CHART]
Retail.......... 28%
Multifamily..... 41%
Healthcare...... 2%
Industrial...... 3%
Hotel........... 10%
Mixed........... 2%
Office.......... 13%
<PAGE>
(footnotes from cover)
- ------------
(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 (other than a Hyper-Amortization Loan
(as defined herein) is prepaid, in whole or in part, prior to its
stated maturity, the Hyper-Amortization Loans are not prepaid prior to,
but are paid in their entirety on, their respective Anticipated
Repayment Dates (as defined herein) 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.
(3) It is a condition to their issuance that the respective Classes of
Offered Certificates be assigned ratings by Moody's Investors Service,
Inc. ("Moody's") and/or Fitch Investors Service, L.P. ("Fitch"; and
together with Moody's, the "Rating Agencies") no lower than those set
forth above. The ratings on the Offered Certificates do not represent
any assessments of (i) the likelihood or frequency of voluntary or
involuntary 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).
The "Rated Final Distribution Date" for each Class of Offered
Certificates has been set at the first Distribution Date that follows
the end of the amortization term for the Mortgage Loan that, as of the
Cut-off Date, has the longest remaining amortization term, irrespective
of its scheduled maturity. See "Ratings" herein.
(4) The Class X Certificates will not have a Certificate Balance. The Class
X Certificates will accrue interest on a Notional Amount that is equal
to approximately 99.99% of the aggregate of the Certificate Balances of
all the Classes of Sequential Pay Certificates outstanding from time to
time.
(5) Initial Pass-Through Rate. The related Pass-Through Rate is variable
and will, in general, equal the excess, if any, of the weighted average
of the Net Mortgage Rates (as defined herein) of all the Mortgage Loans
from time to time, over the weighted average of the Pass-Through Rates
for all the Classes of Sequential Pay Certificates from time to time.
(continued from cover)
The Certificates will represent in the aggregate the entire beneficial
ownership interest in a trust (the "Trust") to be established by Mortgage
Capital Funding, Inc. (the "Sponsor"), the assets of which (such assets
collectively, the "Trust Fund") will consist primarily of a segregated pool
(the "Mortgage Pool") of 181 conventional, multifamily and commercial
mortgage loans (the "Mortgage Loans") having the characteristics described
herein. As of November 1, 1997 (the "Cut-off Date"), the Mortgage Loans had
an aggregate principal balance, after taking into account all payments of
principal due on or before such date, whether or not received, of
$870,577,289 (the "Initial Pool Balance"), subject to a variance of plus or
minus 5%.
One hundred ten of the Mortgage Loans (the "Citi Mortgage Loans"), which
represent 53.67% of the Initial Pool Balance, (i) were originated by or on
behalf of one or more affiliates of Citicorp Real Estate, Inc. (the "Mortgage
Loan Seller"), a commonly controlled affiliate of the Sponsor, pursuant to
its conduit program, and are currently held by the Mortgage Loan Seller or by
one or more of its affiliates, or (ii) were originated and are currently held
by PNC Bank, National Association ("PNC Bank"; and the Mortgage Loans
currently held thereby, the "PNC Mortgage Loans"). There are 32 PNC Mortgage
Loans, which represent 13.98% of the Initial Pool Balance. Seventy-one of the
Mortgage Loans (the "NMCC Mortgage Loans"), which represent 46.33% of the
Initial Pool Balance, are currently held by NationsBanc Mortgage Capital
Corporation ("NMCC"), a wholly-owned finance subsidiary of NationsBank
Corporation, and were originated by or on behalf of NMCC pursuant to its
conduit program. On or before the Delivery Date, the Mortgage Loan Seller
will acquire the NMCC Mortgage Loans, directly or indirectly,
S-3
<PAGE>
from NMCC and the Citi Mortgage Loans not currently held by it from its
affiliates or, in the case of the PNC Mortgage Loans, from PNC Bank. In
addition, on or before the Delivery Date, 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 holders of the Certificates (the
"Certificateholders"). See "Description of the Mortgage Pool" and "Risk
Factors--The Mortgage Loans" herein.
Distributions on the Certificates will be made, to the extent of available
funds, on the 20th day of each month or, if any such 20th day is not a
business day, then on the next succeeding business day, beginning in December
1997 (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 the Class X Certificates, the Notional Amount of such Class
outstanding immediately prior to such Distribution Date. Distributions
allocable to principal of the respective Classes of 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. Neither the Class X Certificates nor the REMIC Residual
Certificates will have a Certificate Balance or entitle the holders thereof
to receive distributions of principal. Any prepayment premiums, penalties or
fees ("Prepayment Premiums") actually collected on the Mortgage Loans will be
distributed among the respective Classes of REMIC Regular 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 respective rights of the
holders of the Class B, Class C, Class D, Class E, Class F, Class G, Class H,
Class J, Class K and REMIC Residual Certificates (collectively, the
"Subordinate Certificates") to receive distributions of amounts collected or
advanced on or in respect of the Mortgage Loans will be subordinated to those
of the holders of the Class X and Class A Certificates (collectively, the
"Senior Certificates") and, further, to those of the holders of each other
Class of Subordinate Certificates, if any, with an earlier alphabetical Class
designation. See "Description of the Certificates--Distributions" and
"--Subordination; Allocation of 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) 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, loan
extensions, defaults and liquidation) and losses on the Mortgage Loans, and
investors in the Class X Certificates should fully consider the associated
risks, including the risk that an extremely rapid rate of amortization,
prepayment and other liquidation of the Mortgage Loans could result in the
failure of such investors to recoup fully their initial investments. 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 Sequential Pay 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 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, two 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" and "REMIC II", respectively). The Offered Certificates will
evidence "regular interests" in REMIC II. 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. The
Underwriters intend to make a secondary market in the Offered Certificates,
but are not obligated to do so. There can be no assurance that such a market
will develop or, if it does develop, that it will continue. The Offered
Certificates will not be listed on any securities exchange. See "Risk
Factors--The Certificates--Limited Liquidity" herein.
S-4
<PAGE>
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.
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS MAY BE USED BY CITIBANK,
N.A., CITICORP SECURITIES, INC. OR CITIBANK INTERNATIONAL PLC, AFFILIATES OF
THE SPONSOR AND WHOLLY-OWNED SUBSIDIARIES OF CITICORP, IN CONNECTION WITH
OFFERS AND SALES RELATED TO MARKET-MAKING TRANSACTIONS IN THE CERTIFICATES.
CITIBANK, N.A., CITICORP SECURITIES, INC. OR CITIBANK INTERNATIONAL PLC MAY
ACT AS PRINCIPAL OR AGENT IN SUCH TRANSACTIONS. SUCH SALES WILL BE MADE AT
PRICES RELATED TO PREVAILING MARKET PRICES AT THE TIME OF SALE.
S-5
<PAGE>
EXECUTIVE SUMMARY
The following Executive Summary does not include all relevant information
relating to the securities and collateral described herein, particularly with
respect to the risks and special considerations involved with an investment
in such securities and 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 Executive
Summary may be defined elsewhere in this Prospectus Supplement, including in
Annex A hereto, 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.
<TABLE>
<CAPTION>
INITIAL
CERTIFICATE APPROXIMATE
BALANCE OR PERCENT OF
NOTIONAL INITIAL POOL
CLASS RATINGS (1) AMOUNT (2) BALANCE
- ------- ----------- --------------- --------------
<S> <C> <C> <C>
Offered Certificates
- ----------------------------------------------------
A-1 Aaa/AAA $143,471,137 16.48%
- ------- ----------- --------------- --------------
A-2 Aaa/AAA $465,932,965 53.52%
- ------- ----------- --------------- --------------
X Aaa/AAA $870,490,231(4) N/A
- ------- ----------- --------------- --------------
B Aa2/AA $ 52,234,637 6.00%
- ------- ----------- --------------- --------------
C A2/A $ 43,528,864 5.00%
- ------- ----------- --------------- --------------
D Baa2/BBB $ 39,175,978 4.50%
- ------- ----------- --------------- --------------
E Baa3/NR $ 26,117,318 3.00%
- ------- ----------- --------------- --------------
Private Certificates--Not Offered Hereby
- ----------------------------------------------------
F NR/BB $ 43,528,864 5.00%
- ------- ----------- --------------- --------------
G NR/BB- $ 8,705,772 1.00%
- ------- ----------- --------------- --------------
H NR/B $ 19,587,989 2.25%
- ------- ----------- --------------- --------------
J NR/B- $ 10,882,216 1.25%
- ------- ----------- --------------- --------------
K NR/NR $ 17,411,549 2.00%
- ------- ----------- --------------- --------------
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
PASS-THROUGH WEIGHTED
APPROXIMATE RATE AS AVERAGE
INITIAL CREDIT OF DELIVERY LIFE PRINCIPAL
CLASS SUPPORT DESCRIPTION DATE (YEARS)(3) WINDOW (3)
- ------- -------------- ------------- -------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Offered Certificates
- -------------------------------------------------------------------------------
A-1 30.00% Fixed Rate 5.49 12/97-1/07
- ------- -------------- ------------- -------------- ---------- -------------
A-2 30.00% Fixed Rate 9.62 1/07-9/07
- ------- -------------- ------------- -------------- ---------- -------------
X N/A Variable 9.03 12/97-11/12
Rate
(Interest
Only)
- ------- -------------- ------------- -------------- ---------- -------------
B 24.00% Fixed Rate 9.83 9/07-10/07
- ------- -------------- ------------- -------------- ---------- -------------
C 19.00% Fixed Rate 9.89 10/07-10/07
- ------- -------------- ------------- -------------- ---------- -------------
D 14.50% Fixed Rate 9.93 10/07-11/07
- ------- -------------- ------------- -------------- ---------- -------------
E 11.50% Fixed Rate 9.98 11/07-11/07
- ------- -------------- ------------- -------------- ---------- -------------
Private Certificates--Not Offered Hereby
- -------------------------------------------------------------------------------
F 6.50% Fixed Rate 9.98 11/07-11/07
- ------- -------------- ------------- -------------- ---------- -------------
G 5.50% Fixed Rate 9.98 11/07-11/07
- ------- -------------- ------------- -------------- ---------- -------------
H 3.25% Fixed Rate 9.98 11/07-11/07
- ------- -------------- ------------- -------------- ---------- -------------
J 2.00% Fixed Rate 9.98 11/07-11/07
- ------- -------------- ------------- -------------- ---------- -------------
K N/A Fixed Rate 10.06 11/07-11/12
- ------- -------------- ------------- -------------- ---------- -------------
<FN>
- ------------
(1) Ratings shown are those of Moody's and Fitch, respectively. Classes
marked "NR" will not be rated by the applicable Rating Agency.
(2) Subject to a variance of plus or minus 5%.
(3) Based on the Maturity Assumptions (as defined in "Yield and Maturity
Considerations" herein).
(4) Notional Amount.
S-6
<PAGE>
Set forth below is certain information regarding the Mortgage Loans and
the Mortgaged Properties as of the Cut-off Date (all weighted averages set
forth below are based on the respective Cut-off Date Balances (as defined
herein) of the Mortgage Loans). Such information is described, and additional
information regarding the Mortgage Loans and the Mortgaged Properties is set
forth, under "Description of the Mortgage Pool" herein and in Annex A hereto.
MORTGAGE POOL CHARACTERISTICS
</TABLE>
<TABLE>
<CAPTION>
CHARACTERISTICS ENTIRE MORTGAGE POOL
- ------------------------------------------------------------------------ --------------------
<S> <C>
Initial Pool Balance..................................................... $870,577,289
Number of Mortgage Loans ................................................ 181
Number of Mortgaged Properties........................................... 193
Average Cut-off Date Balance............................................. $4,809,819
Weighted Average Mortgage Rate........................................... 8.231%
Weighted Average Remaining Term to Maturity or Anticipated Repayment
Date.................................................................... 116 months
Weighted Average Underwriting Debt Service Coverage Ratio................ 1.50x
Weighted Average Cut-off Date Loan-to-Value Ratio........................ 70.6%
</TABLE>
"Cut-off Date Loan-to-Value Ratio" and "Underwriting Debt Service Coverage
Ratio" are calculated as described in Annex A hereto.
S-7
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
S-8
<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, including in Annex A
hereto, 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 1997-MC2 (the
"Certificates"), will consist of 14 classes
(each, a "Class"), designated as: (i) the
Class A-1 and Class A-2 Certificates
(collectively, the "Class A Certificates");
(ii) the Class B, Class C, Class D, Class E,
Class F, Class G, Class H, Class J and Class
K Certificates (collectively with the Class
A Certificates, the "Sequential Pay
Certificates"); (iii) the Class X
Certificates (collectively with the
Sequential Pay Certificates, the "REMIC
Regular Certificates"); and (iv) the Class
R-I and Class R-II Certificates
(collectively, the "REMIC Residual
Certificates"). Only the Class X, Class A,
Class B, Class C, Class D and Class E
Certificates (collectively, the "Offered
Certificates") are offered hereby.
The Class F, Class G, Class H, Class J and
Class K 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 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 the
Mortgage Loan Seller and of Citibank, N.A.,
which is the 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.
TRUSTEE ....................... LaSalle National Bank, a nationally
chartered bank. 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").
FISCAL AGENT .................. ABN AMRO Bank N.V., a Netherlands banking
corporation and the parent of the Trustee.
See "Description of the Certificates--The
Fiscal Agent" herein.
S-9
<PAGE>
MASTER SERVICER ............... Midland Loan Services, L.P., a Missouri
limited partnership. See "Servicing of the
Mortgage Loans--The Master Servicer" herein.
SPECIAL SERVICER .............. CRIIMI MAE Services Limited Partnership, a
Maryland limited partnership. See "Servicing
of the Mortgage Loans--The Special Servicer"
herein.
MORTGAGE LOAN SELLER .......... Citicorp Real Estate, Inc., a direct,
wholly-owned subsidiary of Citibank. See
"Description of the Mortgage Pool--The
Mortgage Loan Seller and NMCC" herein.
CUT-OFF DATE .................. November 1, 1997.
DELIVERY DATE ................. On or about , 1997.
RECORD DATE ................... With respect to each 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 20th day of each month or, if any such
20th day is not a business day, the next
succeeding business day, commencing in
December 1997.
DETERMINATION DATE ............ The 10th day of each month or, if any such
10th day is not a business day, the
immediately preceding business day,
commencing in December 1997.
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 and includes the Determination Date
in the calendar month in which such
Distribution Date occurs.
REGISTRATION AND
DENOMINATIONS ................ The Offered Certificates will be issued in
book-entry form in original denominations
of: (i) in the case of the Class X
Certificates, $1,000,000 notional principal
amount and in any whole dollar denomination
in excess thereof; (ii) in the case of the
Class A Certificates, $10,000 actual
principal amount and in any whole dollar
denomination in excess thereof; and (iii) 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 described herein and
in the Prospectus. See "Description of the
Certificates--Registration and
Denominations" herein and
S-10
<PAGE>
"Description of the Certificates--Book-Entry
Registration and Definitive Certificates" in
the Prospectus.
THE MORTGAGE POOL ............. The Mortgage Pool will consist of 181
conventional, multifamily and commercial
mortgage loans (the "Mortgage Loans"), with
an aggregate Cut-off Date Balance of
$870,577,289 (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. One
Mortgage Loan was originated on November 4,
1997, but accrues interest from November 1,
1997 and for all purposes of this Prospectus
Supplement its origination date will be
assumed to have been November 1, 1997. The
Cut-off Date Balances of the Mortgage Loans
range from $604,297 to $28,473,209 and the
average Cut-off Date Balance is $4,809,819.
Each Mortgage Loan is evidenced by a
promissory note (a "Mortgage Note") and is
secured by a mortgage, deed of trust or
similar security instrument (a "Mortgage")
that creates a first mortgage lien on a fee
simple and/or leasehold interest in real
property (a "Mortgaged Property") used for
commercial or multifamily residential
purposes, together with all buildings and
improvements and certain personal property
located thereon.
Seven separate sets of Mortgage Loans (the
"Cross-Collateralized Mortgage Loans") are,
solely as among the Mortgage Loans in each
such particular set, cross-defaulted and
cross-collateralized with each other,
although the cross-collateralization with
respect to each of three such sets is
limited as described herein. The largest set
of related Cross-Collateralized Mortgage
Loans represents 3.92% of the Initial Pool
Balance. See "Description of the Mortgage
Pool--General" herein and Annex A hereto.
In addition to the Cross-Collateralized
Mortgage Loans, there are eight other
Mortgage Loans, which represent 4.02% of the
Initial Pool Balance, that are, in each such
case, secured by a Mortgage or Mortgages
encumbering two or more properties.
Accordingly, the total number of Mortgage
Loans reflected herein is 181, and the total
number of Mortgaged Properties reflected
herein is 193.
S-11
<PAGE>
In general, with limited exception, 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 for
satisfaction of the borrower's obligation.
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 Mortgaged
Properties, and the approximate percentage
of the Initial Pool Balance secured by such
Mortgaged Properties, located in the five
states with the highest concentrations:
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
MORTGAGED INITIAL POOL
STATE PROPERTIES BALANCE
- -------------- -------------- -----------------
<S> <C> <C>
California..... 11 13.1%
Texas.......... 25 10.4%
Florida........ 18 9.2%
Nevada......... 11 7.3%
Virginia....... 7 5.3%
</TABLE>
The remaining Mortgaged Properties are
located throughout 31 other states and
Puerto Rico, with no more than 4.5% of the
Initial Pool Balance secured by Mortgaged
Properties located in any such other
jurisdiction.
Set forth below are the number of Mortgaged
Properties, and the approximate percentage
of the Initial Pool Balance secured by such
Mortgaged Properties, operated for each
indicated purpose:
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
MORTGAGED INITIAL POOL
PROPERTIES BALANCE(1)
------------ ---------------
<S> <C> <C>
Multifamily .. 80(2) 41.4%
Retail........ 53 27.6%
Office........ 27 12.9%
Hotel......... 14 10.3%
Industrial.... 10 2.9%
Health Care .. 3 2.2%
Other......... 6 2.7%
</TABLE>
---------------
(1) The sum of the percentages in this
column may not equal 100% due to
rounding.
(2) Includes one Mortgaged Property,
representing 0.24% of the Initial Pool
Balance, secured by a mobile home park.
S-12
<PAGE>
Each of the Mortgage Loans provides for
scheduled payments of principal and interest
("Monthly Payments") to be due on the first
day of each month (as to each such Mortgage
Loan, the "Due Date"), except that, as
described below, the Hyper-Amortization
Loans (as defined herein) may require that
certain additional amounts be paid each
month following their respective Anticipated
Repayment Dates (as defined herein).
All of the Mortgage Loans bear interest at a
rate per annum (a "Mortgage Rate") that is
fixed for the remaining term of the Mortgage
Loan, except that: (i) the Mortgage Rate for
one Mortgage Loan will step-down in the
event a specified amount of the loan is
prepaid in connection with a tenant
exercising its option to purchase a portion
of the related Mortgaged Property; and (ii)
as described below, the Hyper-Amortization
Loans will accrue interest at a 2% higher
rate after their respective Anticipated
Repayment Dates. As used herein, the term
"Mortgage Rate" does not include the
incremental increase in the rate at which
interest may accrue on any such
Hyper-Amortization Loan after such date. No
Mortgage Loan permits negative amortization
or (except for the Hyper-Amortization Loans)
the deferral of accrued interest. See
"Description of the Mortgage Pool--Certain
Terms and Conditions of the Mortgage
Loans--Amortization of Principal" herein.
One hundred thirty-six Mortgage Loans (the
"Actual/360 Mortgage Loans"), which
represent 80.47% of the Initial Pool
Balance, accrue interest on the basis of the
actual number of days elapsed in the
relevant month of accrual and a 360-day year
(an "Actual/360 Basis"). Forty-three
Mortgage Loans (the "30/360 Mortgage
Loans"), which represent 18.91% of the
Initial Pool Balance, accrue interest on the
basis of a 360-day year consisting of twelve
30-day months (a "30/360 Basis"). Two
Mortgage Loans (the "Actual/365 Mortgage
Loans"), which represent 0.62% of the
Initial Pool Balance, accrue interest on the
basis of the actual number of days elapsed
in the relevant month of accrual and a
365-day year (an "Actual/365 Basis"). See
"Description of the Mortgage Pool--Certain
Terms and Conditions of the Mortgage
Loans--Mortgage Rates; Calculations of
Interest" herein.
One hundred sixty-seven of the Mortgage
Loans (the "Balloon Loans"), which represent
83.81% of the Initial Pool Balance, provide
for monthly payments of principal based on
amortization schedules significantly longer
than the respective remaining terms thereof,
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. Thirteen Mortgage Loans,
which represents 16.08% of the Initial Pool
Balance, are Hyper-Amortization Loans. The
remaining Mortgage Loan, which represents
0.11% of the Initial Pool Balance, is fully
amortizing. See "Description of the Mortgage
Pool--
S-13
<PAGE>
Certain Terms and Conditions of the Mortgage
Loans--Amortization of Principal" herein.
A "Hyper-Amortization Loan" is a Mortgage
Loan that provides that if it is not paid in
full as of a date specified in the related
Mortgage Note (the "Anticipated Repayment
Date"), then (i) interest will accrue
thereon at a per annum rate (the "Revised
Rate") that is in excess of the related
Mortgage Rate and (ii) the related borrower
will be required to make payments thereon
each month in an amount that is equal to the
greater of the Monthly Payment and certain
net cash flow generated by the related
Mortgaged Property. If the net cash flow
referred to in clause (ii) of the preceding
sentence exceeds the Monthly Payment, the
excess would be applied to repay the
particular Hyper-Amortization Loan.
In general, a Hyper-Amortization Loan will
permit the related borrower to prepay the
related Mortgage Loan without payment of a
Prepayment Premium (as defined herein)
beginning five to six months prior to the
related Anticipated Repayment Date. The
Anticipated Repayment Date for any such
Hyper-Amortization Loan is set forth in
Annex A. The interest accrued at the excess
of the related Revised Rate over the related
Mortgage Rate (such interest, the "Excess
Interest"; and such difference in rates, the
"Excess Interest Rate") will be deferred
until the principal of such Mortgage Loan is
paid in full and, except where limited by
applicable law, will itself accrue interest
at the Revised Rate. All of the
Hyper-Amortization Loans for which a Lockbox
Account (as defined herein) has not been
established on or before the Closing Date
provide that a Lockbox Account must be
established on or prior to the applicable
Anticipated Repayment Date. If and to the
extent collected, Excess Interest will be
included as part of the applicable Available
Distribution Amount (as defined herein). See
"Description of the Mortgage Pool--Certain
Terms and Conditions of the Mortgage
Loans--Hyperamortization" herein.
All but one of the Mortgage Loans provided
as of origination for, sequentially, (a) a
period (a "Lock-out Period") during which
voluntary principal prepayments are
prohibited, followed by (b) a period (a
"Prepayment Premium Period") during which
any voluntary principal prepayment must be
accompanied by a prepayment premium, penalty
or fee (a "Prepayment Premium"), followed by
(c) a period (an "Open Period") during which
voluntary principal prepayments may be made
without an accompanying Prepayment Premium.
One Mortgage Loan, which represents 0.30% of
the Initial Pool Balance, provided as of
origination for, sequentially, a Prepayment
Premium Period, followed by an Open Period.
Voluntary principal prepayments (after any
Lock-out Period, when applicable) may be
made in full or, with respect to 71 Mortgage
Loans (representing 46.3% of the Initial
Pool Balance), in part, subject to certain
limitations and, during a Prepayment Premium
Period, payment of
S-14
<PAGE>
the applicable Prepayment Premium. As of the
Cut-off Date, with respect to the 180
Mortgage Loans that provide for Lock-out
Periods, the remaining Lock-out Periods
ranged from 10 months to 48 months, with a
weighted average remaining Lock-out Period
of 42 months. However, for one Mortgage
Loan, the borrower is required to partially
prepay the loan in an amount equal to the
purchase price that would be paid by a
tenant if and when such tenant were to
exercise its option to purchase a portion of
the Mortgaged Property (such amount
representing not more than 0.15% of the
Initial Pool Balance). The Open Period for
each Mortgage Loan begins five or six months
(or, for certain Mortgage Loans, 12 months)
prior to stated maturity or, in the case of
the Hyper-Amortization Loans, the
Anticipated Repayment Date. Prepayment
Premiums on the Mortgage Loans are generally
calculated either on the basis of a yield
maintenance formula (subject, in certain
instances, to a minimum equal to a specified
percentage of the principal amount prepaid)
or as a percentage (which may decline over
time) of the principal amount prepaid. The
prepayment terms of each of the Mortgage
Loans are more fully 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
had the following additional
characteristics: (i) Mortgage Rates ranging
from 7.300% per annum to 9.440% per annum
and a weighted average Mortgage Rate of
8.231% per annum; (ii) remaining terms to
stated maturity or, in the case of the
Hyper-Amortization Loans, to the Anticipated
Repayment Date ranging from 56 months to 180
months and a weighted average remaining term
to stated maturity or the Anticipated
Repayment Date, as the case may be, of 116
months; (iii) remaining amortization terms
(calculated, in the case of each Actual/360
Mortgage Loan and each Actual/365 Mortgage
Loan, on a 30/360 Basis for purposes of the
accrual of interest) ranging from 180 months
to 360 months and a weighted average
remaining amortization term of 327 months;
(iv) Cut-off Date Loan-to-Value Ratios
ranging from 23.5% to 84.4% and a weighted
average Cut-off Date Loan-to-Value Ratio of
70.6%; (v) except in the case of one
fully-amortizing Mortgage Loan, Maturity
Date Loan-to-Value Ratios ranging from 19.6%
to 79.2% and a weighted average Maturity
Date Loan-to-Value Ratio of 61.1%; and (vi)
Underwriting Debt Service Coverage Ratios
ranging from 1.21x to 5.57x and a weighted
average Underwriting Debt Service Coverage
Ratio of 1.50x. "Cut-off Date Loan-to-Value
Ratio," "Maturity Date Loan-to-Value Ratio"
and "Underwriting Debt Service Coverage
Ratio" are each defined in Annex A hereto.
For more detailed statistical information
regarding the Mortgage Pool, see Annex A
hereto.
S-15
<PAGE>
All of the Mortgage Loans were originated
during the eleven months preceding the
Cut-off Date.
One hundred ten of the Mortgage Loans (the
"Citi Mortgage Loans"), which represent
53.67% of the Initial Pool Balance, (i) were
originated by or on behalf of one or more
affiliates of the Mortgage Loan Seller
pursuant to its conduit program, and are
currently held by the Mortgage Loan Seller
or by one or more of its affiliates, or (ii)
were originated and are currently held by
PNC Bank, National Association ("PNC Bank";
and the Mortgage Loans currently held
thereby, the "PNC Mortgage Loans"). There
are 32 PNC Mortgage Loans, which represent
13.98% of the Initial Pool Balance.
Seventy-one of the Mortgage Loans (the "NMCC
Mortgage Loans"), which represent 46.33% of
the Initial Pool Balance, are currently held
by NationsBanc Mortgage Capital Corporation
("NMCC"), a wholly-owned finance subsidiary
of NationsBank Corporation, and were
originated by or on behalf of NMCC pursuant
to its conduit program. On or before the
Delivery Date, the Mortgage Loan Seller will
acquire the NMCC Mortgage Loans, directly or
indirectly, from NMCC and the Citi Mortgage
Loans not currently held by it from its
affiliates or, in the case of the PNC
Mortgage Loans, from PNC Bank. In addition,
on or before the Delivery Date, 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 holders of the Certificates (the
"Certificateholders"). The Mortgage Loan
Seller will make certain representations and
warranties regarding the characteristics of
the Citi Mortgage Loans, and NMCC will make
certain representations and warranties
regarding the characteristics of the NMCC
Mortgage Loans. As more particularly
described herein, the Mortgage Loan Seller
will be obligated to cure any material
breach of any such representation or
warranty made by the Mortgage Loan Seller
with respect to the Citi Mortgage Loans or
repurchase the affected Citi Mortgage Loan,
and NMCC will be obligated to cure any
material breach of any such representation
or warranty made by NMCC with respect to the
NMCC Mortgage Loans or repurchase the
affected NMCC Mortgage Loan.
The Mortgage Loans are being sold without
recourse, and neither the Mortgage Loan
Seller nor NMCC will have any 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 replace 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.
S-16
<PAGE>
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 Standby Fees, Special
Servicing Fees and Workout Fees) for their
services is described herein under
"Servicing of the Mortgage Loans--Servicing
and Other Compensation and 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 Fiscal Agent, the REMIC Administrator,
the Mortgage Loan Seller, and NMCC, as an
additional warranting party, and will
represent in the aggregate the entire
beneficial ownership interest in a trust
(the "Trust") the assets of which (such
assets collectively, the "Trust Fund") will
consist primarily of the Mortgage Pool.
A. CERTIFICATE BALANCES AND A
NOTIONAL AMOUNT ............ Upon initial issuance, each Class of Offered
Certificates will have the Certificate
Balance or Notional Amount set forth for
such Class on the cover page hereof (in each
case, subject to a variance of plus or minus
5%). Upon initial issuance, the Class F,
Class G, Class H, Class J and Class K
Certificates will have an aggregate
Certificate Balance equal to the excess of
the Initial Pool Balance over the aggregate
Certificate Balance of the Class A, Class B,
Class C, Class D and Class E Certificates.
The "Certificate Balance" of any Class of
Sequential Pay Certificates outstanding at
any time will be the then-aggregate stated
principal amount of such Class. 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 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")
allocated to such Class of Certificates on
such Distribution Date. See "Description of
the Certificates--Distributions" and
"--Subordination; Allocation of Losses and
Certain Expenses" herein.
The Class X Certificates will not have a
Certificate Balance; 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") equal
to 99.99% of the aggregate of the
Certificate Balances of all the Classes of
Sequential Pay Certificates outstanding from
time to time. THE NOTIONAL AMOUNT OF THE
CLASS X CERTIFICATES IS USED
S-17
<PAGE>
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 or a Notional
Amount.
A Class of Offered Certificates will be
considered outstanding until its Certificate
Balance or Notional Amount is reduced to
zero; provided, however, that, under very
limited circumstances, 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 a Notional Amount" and
"--Distributions" herein.
B. PASS-THROUGH RATES ......... The Pass-Through Rates applicable to the
Class A-1, Class A-2, Class B, Class C,
Class D and Class E Certificates for each
Distribution Date are set forth on the cover
page hereof.
The Pass-Through Rate applicable to the
Class X Certificates for each Distribution
Date will, in general, equal the excess, if
any, of (i) the weighted average of the Net
Mortgage Rates for all the Mortgage Loans
(weighted on the basis of their respective
Stated Principal Balances (as defined
herein) immediately following the preceding
Distribution Date or, in the case of the
initial Distribution Date, as of the Cut-off
Date), over (ii) the weighted average of the
Pass-Through Rates applicable to all the
Classes of Sequential Pay Certificates for
such Distribution Date (weighted on the
basis of their respective Certificate
Balances immediately prior to such
Distribution Date).
The Pass-Through Rates applicable to the
Class F, Class G, Class H, Class J and Class
K Certificates will, for each Distribution
Date, be equal to %, %, %, % and %
per annum, respectively.
The "Net Mortgage Rate" with respect to any
Mortgage Loan is, in general, a per annum
rate equal to the related Mortgage Rate in
effect from time to time, minus the
aggregate of the per annum rates applicable
to the calculation of the monthly fees
payable to the Master Servicer and the
Trustee with respect to such Mortgage Loan
(such monthly fees, collectively, the
"Administrative Fees"; and such aggregate
rate, the "Administrative Fee Rate");
provided that if any Mortgage Loan does not
accrue interest on the basis of a 360-day
year consisting of twelve 30-day months
(which is the basis on which interest
accrues in respect of the REMIC Regular
Certificates), then, solely for purposes of
calculating the Pass-Through Rate for the
Class X Certificates, the Net Mortgage Rate
of such Mortgage Loan for any one-month
period preceding a related Due Date will be
the annualized rate at which interest would
have to accrue in respect of such loan on
the basis of a 360-day year consisting of
twelve 30-day months in order to produce the
S-18
<PAGE>
aggregate amount of interest actually
accrued in respect of such loan during such
one-month period at the related Mortgage
Rate (net of the related Administrative Fee
Rate). The Pass-Through Rate on the Class X
Certificates will not be affected by the
step-up from the Mortgage Rate to the
Revised Rate on the Anticipated Repayment
Date for the Hyper-Amortization Loans, but
such Pass-Through Rate will be affected by
the step-down in the Mortgage Rate for one
Mortgage Loan in the event a specified
amount of the loan is prepaid in part in
connection with a tenant exercising its
option to purchase a portion of the related
Mortgaged Property. As of the Cut-off Date
(without regard to the adjustment to the
basis of accrual described in the proviso to
the second preceding sentence), the Net
Mortgage Rates for the Mortgage Loans will
range from 7.11% per annum to 9.25% per
annum, with a weighted average Net Mortgage
Rate of 8.047% per annum. See "Servicing of
the Mortgage Loans--Servicing and Other
Compensation and Payment of Expenses" and
"Description of the
Certificates--Pass-Through Rates" herein.
C. 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
Class A-1, Class A-2 and Class X
Certificates (collectively, the "Senior
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 and, to the extent not previously paid,
for all prior Distribution Dates;
(2) to pay principal first to the holders of
the Class A-1 Certificates and second to the
holders of the Class A-2 Certificates, in
each case up to an amount equal to the
lesser of (a) the then-outstanding
Certificate Balance of such Class of
Certificates and (b) the remaining portion
of the Principal Distribution Amount (as
defined below) for such Distribution Date;
(3) to reimburse the holders of the Class
A-1 and Class A-2 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
allocated to such Classes of Certificates
and for which no reimbursement has
previously been paid; and
S-19
<PAGE>
(4) to make payments on the other Classes
of Certificates (collectively, the
"Subordinate Certificates") as contemplated
below;
provided that, on each Distribution Date as
of which the aggregate Certificate Balance
of the Subordinate Certificates is to be or
has been reduced to zero, and in any event
on the final Distribution Date in connection
with a termination of the Trust (see
"Description of the Certificates--Termination"
herein), the payments of principal to be made
as contemplated by clause (2) above with
respect to the Class A Certificates will be
so made (subject to available funds) to the
holders of the respective Classes of such
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.
On each Distribution Date, following the
above-described distributions on the Senior
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 so forth in such
manner with respect to, sequentially, the
Class D, Class E, Class F, Class G, Class H,
Class J and Class K Certificates, in that
order):
(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 and, to the extent
not previously paid, for all prior
Distribution Dates;
(2) if the Certificate Balances of the Class
A Certificates and of 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
remaining portion of the Principal
Distribution Amount 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 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, the payments of principal to be made
as contemplated by clause (2) above with
respect to any Class of
S-20
<PAGE>
Sequential Pay Certificates will be so made
(subject to available funds) 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.
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.
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 Net Aggregate
Prepayment Interest Shortfall (as defined
herein) 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 "Principal Distribution Amount" for any
Distribution Date, will, in general, equal
the aggregate of the following:
(a) the principal portions of all Monthly
Payments (other than Balloon Payments) and
any Assumed Monthly Payments (as defined
below) due or deemed due, as the case may
be, in respect of the Mortgage Loans for
their respective Due Dates occurring during
the related Collection Period;
(b) all voluntary principal prepayments
received on the Mortgage Loans during the
related Collection Period;
(c) with respect to any Mortgage Loan 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 Monthly Payment
(other than a Balloon Payment) due, or the
principal portion of any Assumed Monthly
Payment deemed due, in respect of such
Mortgage Loan on a Due Date during or
S-21
<PAGE>
prior to the related Collection Period and
not previously recovered;
(d) all Liquidation Proceeds, Condemnation
Proceeds and Insurance Proceeds (each as
defined in the Prospectus) received on the
Mortgage Loans during the related Collection
Period 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
Monthly Payment (other than a Balloon
Payment) due, or the principal portion of
any Assumed Monthly Payment deemed due, in
respect of the related Mortgage Loan on a
Due Date during or prior to the related
Collection 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 the immediately
preceding Distribution Date, over (ii) the
aggregate distributions of principal made on
the Sequential Pay Certificates on such
immediately preceding Distribution Date.
For purposes of the foregoing, the "Monthly
Payment" due on any Mortgage Loan on any
related Due Date will reflect any waiver,
modification or amendment of the terms of
such Mortgage Loan, whether agreed to by the
Master Servicer or Special Servicer or
resulting from a bankruptcy, insolvency or
similar proceeding involving the related
borrower.
An "Assumed Monthly Payment" is an amount
deemed due in respect of: (i) any Mortgage
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 has 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
Monthly Payment deemed due on any such
Mortgage Loan delinquent as to its Balloon
Payment, for its stated maturity date and
for each successive Due Date that it remains
outstanding, will equal the Monthly 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 its
amortization schedule, if any, in effect
immediately prior to maturity and had
continued to accrue interest in accordance
with its terms in effect immediately prior
to maturity. The Assumed Monthly Payment
deemed due on any such Mortgage Loan as to
which the related Mortgaged Property has
become an REO Property, for each Due Date
that such REO Property remains part of the
Trust Fund, will equal the Monthly Payment
(or, in the case of a Mortgage Loan
delinquent in respect of its Balloon Payment
as described in the prior sentence, the
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<PAGE>
Assumed Monthly Payment) due on the last Due
Date prior to the acquisition of such REO
Property.
D. DISTRIBUTION OF PREPAYMENT
PREMIUMS ................... Any Prepayment Premium actually collected
with respect to a Mortgage Loan during any
particular Collection Period will, in
general, be distributed on the related
Distribution Date as follows: first, to the
holders of the Class X Certificates and the
holders of the respective Classes of
Sequential Pay Certificates then entitled to
distributions of principal in an amount
equal to, and pro rata in accordance with,
the corresponding PV Yield Loss Amounts (as
defined herein) for each such Class of
Certificates; and, second, to the holders of
the Class X Certificates in an amount equal
to the remaining portion, if any, of such
Prepayment Premium. See "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 Monthly Payments (other than Balloon
Payments) and any Assumed Monthly 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
Collection Period and (b) were not paid by
or on behalf of the related borrowers or
otherwise collected as of the close of
business on the last day of the related
Collection Period. Subject to a
recoverability determination as described
herein, if the Master Servicer fails to make
a required P&I Advance, the Trustee will be
required to make such P&I Advance, and if
the Master Servicer and the Trustee both
fail to make a required P&I Advance, the
Fiscal Agent will be required to make such
P&I Advance.
As more fully described herein, the Master
Servicer, the Trustee and the Fiscal Agent
will each be entitled to interest on any P&I
Advances made, and the Master Servicer, the
Special Servicer, the Trustee and the Fiscal
Agent 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"). Such interest on any
P&I Advance or servicing expense will be
paid: first, out of Default Interest (as
defined herein) and late payment charges
collected on the related Mortgage Loan (but
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<PAGE>
only if such items accrued after such
Mortgage Loan became a Specially Serviced
Mortgage Loan); and, second, at any time
coinciding with or following 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
Subordinate Certificates will, in the case
of each Class thereof, be subordinated with
respect to distributions of interest and
principal to the Senior Certificates and,
further, to each other Class of Subordinate
Certificates, if any, with an earlier
alphabetical Class designation.
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 K, 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 and Class A-2 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 will, in general, be the result of
Realized Losses incurred in respect of the
Mortgage Pool and/or Additional Trust Fund
Expenses. Accordingly, the foregoing
reductions in the Certificate Balances of
the respective Classes of the Sequential Pay
Certificates will 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, Standby Fees, Special
Servicing Fees and Trustee Fees generally be
treated as having remained outstanding until
S-24
<PAGE>
each such REO Property is liquidated. Among
other things, such Mortgage Loan will be
taken into account when determining the
Pass-Through Rate for the Class X
Certificates and the Principal Distribution
Amount. 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, the Trustee
and/or the Fiscal Agent, 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, the Trustee
and the Fiscal Agent will be obligated to
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.
The Controlling Class will initially be the
Class K Certificates. In addition, as more
particularly described herein, any holder or
holders 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. It is
anticipated that CRIIMI MAE Services Limited
Partnership (which is the Special Servicer)
or an entity related thereto will acquire
certain of the Certificates, including
Private Certificates that will constitute
all or a part of the initial "Controlling
Class". See "Servicing of the Mortgage
Loans--The Special Servicer" and "--Sale of
Defaulted Mortgage Loans" herein.
OPTIONAL TERMINATION .......... At its option, the Master Servicer or any
holder or holders (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
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 1.0% 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, two
separate "real estate mortgage investment
conduit" ("REMIC") elections will be made
with respect to designated portions of the
Trust Fund, the
S-25
<PAGE>
resulting REMICs being herein referred to as
"REMIC I" and "REMIC II", 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). The assets of REMIC II will
consist of the separate uncertificated
"regular interests" in REMIC I. For federal
income tax purposes, (i) the Class R-I
Certificates will be the sole class of
"residual interests" in REMIC I, (ii) the
REMIC Regular Certificates will evidence the
"regular interests" in, and generally will
be treated as debt obligations of, REMIC II,
and (iii) the Class R-II Certificates will
be the sole class of "residual interests" in
REMIC II. See "Certain Federal Income Tax
Consequences--General" herein.
For federal income tax reporting purposes,
it is anticipated that the Certificates
will not, and the Class X and Class
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 market
discount and premium, if any, for federal
income tax purposes will be that the
Mortgage Loans will not prepay (that is, a
CPR of 0%), except that the
Hyper-Amortization Loans will be repaid in
full on their respective Anticipated
Repayment Dates. However, no representation
is made 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.
Generally, except to the extent noted below,
the Offered Certificates will be treated as
"real estate assets" within the meaning of
Section 856(c)(5)(A) of the Internal Revenue
Code of 1986 (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. To the extent an
Offered Certificate represents ownership of
an interest in any Mortgage Loan that is
secured in part by the related borrower's
interest in an account containing any
holdback of loan proceeds, a portion of such
Certificate may not represent ownership of
assets described in Section 7701(a)(19)(C)
of the Code and "real estate assets" under
Section 856(c)(5)(A) of the Code and the
interest thereon may not constitute
"interest on obligations
S-26
<PAGE>
secured by mortgages on real property"
within the meaning of Section 856(c)(3)(B)
of the Code. However, if 95% or more of the
Mortgage Loans are treated as assets
described in the foregoing sections of the
Code, the Offered Certificates will be
treated as such assets in their entirety.
The Offered Certificates will be treated as
"qualified mortgages" for another REMIC
under Section 860G(a)(3)(C) of the Code.
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
Title I of 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 that 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
NationsBank Corporation an individual
prohibited transaction exemption, Prohibited
Transaction Exemption 93-31 (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, transactions relating
to the purchase, sale and holding of certain
pass-through certificates underwritten by an
underwriting syndicate or selling group of
which Citibank, N.A., as an affiliate of
Citicorp, or NationsBanc Montgomery
Securities, Inc., as a wholly-owned
subsidiary of NationsBank Corporation,
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 and
Class E Certificates. AS A RESULT, NO
TRANSFER OF A CLASS B, CLASS C, CLASS D OR
CLASS E 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, UNLESS THE PURCHASE
AND HOLDING OF ANY SUCH CERTIFICATE OR
INTEREST THEREIN IS EXEMPT FROM THE
PROHIBITED TRANSACTION PROVISIONS OF SECTION
406 OF ERISA AND SECTION 4975 OF THE CODE
UNDER PROHIBITED TRANSACTION CLASS EXEMPTION
95-60, WHICH EXEMPTION PROVIDES AN EXEMPTION
FROM THE PROHIBITED TRANSACTION RULES FOR
CERTAIN TRANSACTIONS INVOLVING AN INSURANCE
COMPANY
S-27
<PAGE>
GENERAL ACCOUNT, OR UNDER SECTION 401(C) OF
ERISA, WHICH MAY PROVIDE LIMITED RELIEF FROM
THE PROHIBITED TRANSACTION RULES FOR CERTAIN
TRANSACTIONS INVOLVING AN INSURANCE COMPANY
GENERAL ACCOUNT. See "ERISA Considerations"
herein and in the Prospectus.
RATINGS ....................... It is a condition to their issuance that the
respective Classes of Offered Certificates
receive the credit ratings indicated below
from Moody's Investors Service, Inc.
("Moody's") and/or Fitch Investors Service,
L.P. ("Fitch"; and, together with Moody's,
the "Rating Agencies"):
<TABLE>
<CAPTION>
CLASS MOODY'S FITCH
- -------------- ----------- ---------
<S> <C> <C>
Class A-1 ..... Aaa AAA
Class A-2 ..... Aaa AAA
Class X ....... Aaa AAA
Class B ....... Aa2 AA
Class C ....... A2 A
Class D ....... Baa2 BBB
Class E ....... Baa3 NR
</TABLE>
The ratings of the Offered Certificates
address the timely payment thereon of
interest on each Distribution Date and,
except in the case of the Class X
Certificates, the ultimate payment thereon
of principal on or before the Rated Final
Distribution Date. The ratings of the
Offered Certificates do not, however,
address the tax attributes thereof or of the
Trust. In addition, the ratings on the
Offered Certificates do not represent any
assessment of (i) the likelihood or
frequency of voluntary or involuntary
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
on the Mortgage Loans. 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).
The ratings of the Offered 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 Offered 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 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 constitute
"mortgage related securities" within the
meaning of the Secondary Mortgage
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<PAGE>
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.
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<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 and Additional Trust Fund Expenses and
the extent to which such losses and expenses result in the failure to pay
interest on, or 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 Net Aggregate 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, Class B, Class C, Class D and Class E Certificates (which are, in
each case, fixed), it is impossible to predict with certainty any of the
factors described in 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. 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.
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, loan extensions, defaults and liquidations) and losses on the
Mortgage Loans, and investors in the Class X Certificates should fully
consider the associated risks, including the risk that an extremely rapid
rate of amortization, prepayment or other liquidation of the Mortgage Loans
could result in the failure of such investors to recoup fully their initial
investments. Because the Notional Amount of the Class X Certificates is equal
to approximately 99.99% of the aggregate of the Certificate Balances of all
the Classes of Sequential Pay Certificates outstanding from time to time, any
payment of principal in respect of any Mortgage Loan that is applied in
reduction of the Certificate Balance of a Class of Sequential Pay
Certificates will reduce such Notional Amount.
In general, in the case of the Class X Certificates and any other Class of
Offered Certificates purchased at a premium, if principal payments on the
Mortgage Loans occur at a rate faster than anticipated at the time of
purchase, then (to the extent that the required Prepayment Premiums are not
received or are distributable to a different Class of Certificates) the
investors' actual yield to maturity will be lower than that assumed at the
time of purchase. Conversely, in the case of any Class of Offered
Certificates purchased at a discount, if principal payments on the Mortgage
Loans occur at a rate slower than anticipated at the time of purchase, then
(to the extent that the required Prepayment Premiums are not received or are
distributable to a different Class of Certificates) the investors' actual
yield to maturity
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<PAGE>
will be lower than that assumed at the time of purchase. Prepayment Premiums,
even if available and distributable on the Class X Certificates or other
Class of Offered Certificates, may not be sufficient to offset fully any loss
in yield on such Class or Classes of Certificates attributable to the related
prepayments of the Mortgage Loans.
Potential Conflicts of Interest. As described herein, the Special Servicer
will have considerable latitude in determining whether to liquidate or modify
defaulted Mortgage Loans, subject to certain limitations. See "Servicing of
the Mortgage Loans--Modifications, Waivers, Amendments and Consents" herein.
Subject to the conditions described herein, including approval from the
Rating Agencies, the holder or holders of Certificates representing a
majority interest in the Controlling Class can replace the existing Special
Servicer and substitute any such holder or an affiliate thereof 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, and may
have interests in conflict with those of the holders of the Offered
Certificates. It is anticipated that CRIIMI MAE Services Limited Partnership
(which is the Special Servicer) or an entity related thereto will acquire
certain of the Certificates, including Private Certificates that will
constitute all or part of the initial "Controlling Class". Accordingly,
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 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 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 (or, in the case of an owner occupied property, if the
owner's business declined). 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), and changes in laws (including 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 increase
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.
In the case of most Mortgage Loans, there will be existing leases at the
related Mortgaged Property that expire during the term of the Mortgage Loan
and there can be no assurance that such leases will be renewed or that the
subject space will be relet at no less than comparable rental rates. In
addition, there can be no guaranty that a commercial tenant will continue
operations throughout the term of its lease. The borrowers' income would be
adversely affected if tenants were unable to pay rent, if space were unable
to be rented on favorable terms or at all, or if a significant tenant were to
become a debtor in a bankruptcy case under the United States Bankruptcy Code.
For example, if any borrower were to relet or renew the existing leases at
rental rates significantly lower than expected rates, then such borrower's
funds from operations may be adversely affected. Changes in payment patterns
by tenants may result from a variety of social, legal and economic factors,
including, without limitation, the rate of inflation and unemployment levels
and may be reflected in the rental rates offered for comparable space. In
addition, upon reletting or renewing existing leases at commercial
properties, borrowers will likely be required to pay leasing
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commissions and tenant improvement costs which may adversely affect cash flow
from the Mortgaged Property. There can be no assurances whether, or to what
extent, economic, legal or social factors will affect future rental or
repayment patterns. See "Description of the Mortgage Pool--Additional
Mortgage Loan Information--Tenant Matters" herein.
Lending on commercial properties, which represent security for 58.6% 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. See
"--The Mortgage Loans--Risks Particular to Retail Properties", "--The
Mortgage Loans--Risks Particular to Health Care Properties", "--The Mortgage
Loans--Risks Particular to Hotels" and "--The Mortgage Loans--Risks
Particular to Office Properties" below.
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) or the business plan, as the case may
be, 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 occupancy rates/business and cash flow,
reduce operating 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. There are 28 groups of Mortgaged Properties that have
the same or related management. No group of such Mortgaged Properties with
the same or related management represents security for more than 4.38% of the
Initial Pool Balance.
Balloon Payments and Hyper-Amortization Loans. One hundred sixty-seven of
the Mortgage Loans, which represent 83.81% of the Initial Pool Balance, will
have substantial payments (that is, Balloon Payments) due at their respective
stated maturities, in each case unless the Mortgage Loan is previously
prepaid. In addition, 13 of the Mortgage Loans, which represent 16.08% of the
Initial Pool Balance, are Hyper-Amortization Loans which will have
substantial scheduled principal balances as of their respective Anticipated
Repayment Dates, in each case unless the Mortgage Loan is previously prepaid.
One hundred forty-four of the Balloon Loans and 13 of the Hyper-Amortization
Loans, representing in the aggregate 83.83% of the Initial Pool Balance, will
have Balloon Payments due or Anticipated Repayment Dates scheduled, as the
case may be, during the period from June 2007 through November 2007. Mortgage
Loans with Balloon Payments involve a greater risk to the lender than fully
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. Similarly, the ability of a borrower to
repay a Hyper-Amortization Loan on the related Anticipated Repayment Date
will depend on its ability to either refinance the Mortgage 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 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 the Mortgage Pool--Certain Terms and
Conditions of the Mortgage Loans" and "--Additional Mortgage Loan
Information" herein and "Risk Factors--Balloon Payments; Borrower Default" in
the Prospectus.
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 limitation that the maturity date of
the Mortgage Loan may not be extended beyond a date that is two years prior
to the Rated Final Distribution Date and to the other limitations described
under "Servicing of the Mortgage Loans--Modifications, Waivers, Amendments
and Consents" 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
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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" herein and in the
Prospectus.
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, a downturn in the financial
condition of a significant company or type of industry in the locale, 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 Retail Properties. In addition to risks generally
associated with income-producing real estate, retail properties are also
affected significantly by adverse changes in consumer spending patterns,
local competitive conditions (such as the supply of retail space or the
existence or construction of new competitive shopping centers or shopping
malls), 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.
Retail properties also 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. 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). 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. In addition, certain tenants at retail properties may be entitled
to terminate their leases if an anchor tenant fails to renew or terminates
its lease, becomes the subject of a bankruptcy proceeding or 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 Office Properties. Office properties may be adversely
affected if a significant tenant ceases operations at such properties (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). Ability to relet vacant office space may be
adversely affected by a general economic decline in the relevant geographic
area. In addition, there may be significant costs associated with tenant
improvements and concessions in connection with reletting office space.
Risks Particular to Hotels. Various factors, including location, quality
and franchise affiliation, affect the economic viability of a hotel. Adverse
economic conditions, either local, regional or national, may limit the amount
that may be charged for a room and may result in a reduction in occupancy
levels. The construction of competing hotels or motels can have similar
effects. Because hotel rooms generally are rented for short periods of time,
hotel properties tend to respond more quickly to adverse economic conditions
and competition than do other commercial properties. In addition, the
franchise license may be owned by an entity operating the hotel and not the
borrower or, if the franchise license is owned by the borrower, the
transferability of the related franchise license agreement may be restricted
and, in the event of a foreclosure on a hotel property, the mortgagee may not
have the right to use the franchise license without the franchisor's consent.
Furthermore, the ability of a hotel to attract customers, and some of such
hotel's revenues, may depend in large part on its having a liquor license.
Such a license may not be transferable.
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Risks of Subordinate Financing. Two Mortgaged Properties, representing
security for 1.22% of the Initial Pool Balance, are encumbered by secured
subordinated debt; however, the holders of the subordinate debt have agreed
in one such case not to foreclose for so long as the related Mortgage Loan is
outstanding and the Trust is not pursuing a foreclosure action. The one
Mortgage Loan encumbered by secured subordinate debt that does not expressly
prohibit the holder thereof from pursuing a foreclosure action requires no
payments of interest or principal for the first five years of its term and
thereafter requires payments of principal only. In addition, in the case of
two Mortgage Loans, representing 1.54% of the Initial Pool Balance, the
borrower is permitted to incur subordinated debt secured by the related
Mortgaged Property if certain conditions are satisfied. Other than in such
cases, the Mortgage Loans either prohibit the related borrower from
encumbering the Mortgaged Property with additional secured debt or require
the consent of the holder of the first lien prior to so encumbering such
property. However, a violation of such prohibition may not become evident
until the related Mortgage Loan otherwise defaults. The existence of any such
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 files for bankruptcy or is placed in involuntary
receivership, foreclosure on the Mortgaged Property could be delayed. See
"Certain Legal Aspects of Mortgage Loans--Subordinate Financing" in the
Prospectus.
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 (in many cases, the
borrower is a special purpose entity having no assets other than those
pledged to secure the related Mortgage Loan). 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 the defaulted Mortgage 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, NMCC, PNC Bank, any
originator, the Underwriters, the Master Servicer, the Special Servicer, the
Trustee, the Fiscal Agent, 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 certain of the Citi Mortgage Loans if its representations and
warranties concerning such Mortgage Loans are materially breached, and NMCC
will be obligated to repurchase certain of the NMCC Mortgage Loans if its
representations and warranties concerning such Mortgage Loans are materially
breached.
Environmental Considerations. An environmental site assessment (or an
update of a previously conducted assessment) was performed (generally in a
manner consistent with industry-wide standards) at each of the Mortgaged
Properties on or after June 1, 1996. No such assessment or update otherwise
revealed any material adverse environmental condition or circumstance at any
Mortgaged Property, except as described under "Description of the Mortgage
Pool--Certain Underwriting Matters--Environmental Assessments" herein, and
further except in those cases in which an operations and maintenance plan
(including, in several cases, in respect of asbestos containing materials,
radon and lead-based paint), periodic monitoring of nearby properties or the
establishment of an escrow reserve to cover the estimated cost of remediation
was recommended, and which recommended actions have been or are expected to
be implemented in the manner and within the time frames specified in the
related Mortgage Loan documents. There can be no assurance, however, that all
environmental conditions and risks have been identified in such environmental
assessments or that all recommended operations and maintenance plans have
been or will continue to be implemented.
Certain federal, state and local laws, regulations and ordinances govern
the management, removal, encapsulation or disturbance of asbestos-containing
materials ("ACMs"). Such laws, as well as common law standards, may impose
liability for releases of or exposure to ACMs and may provide for third
parties to seek recovery from owners or operators of real properties for
personal injuries associated with such releases.
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Recent federal legislation will in the future require owners of
residential housing constructed prior to 1978 to disclose to potential
residents or purchasers any known lead-based paint hazards and will impose
treble damages for any failure to so notify. In addition, the ingestion of
lead-based paint chips or dust particles by children can result in lead
poisoning, and the owner of a property where such circumstances exist may be
held liable for such injuries and for the costs of removal or encapsulation
of the lead-based paint. Testing for lead-based paint or lead in the water
was conducted with respect to certain of the Mortgaged Properties, generally
based on the age and/or condition thereof.
The information contained herein concerning environmental conditions at
the Mortgaged Properties is based on the environmental assessments and has
not been independently verified by the Sponsor, the Mortgage Loan Seller,
NMCC, PNC Bank, the Underwriters, the Master Servicer, the Special Servicer,
the Trustee, the Fiscal Agent, the REMIC Administrator, or 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 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
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 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. As described
under "Description of the Mortgage Pool--General" herein, the Mortgage Pool
includes seven sets of Cross-Collateralized Mortgage Loans, each of which
sets represents between 0.48% and 3.92% of the Initial Pool Balance, although
in each of three such cases the benefits of the cross-collateralization are
subject to the limitations described herein. In addition to the
Cross-Collateralized Mortgage Loans, there are eight Mortgage Loans,
representing 4.02% of the Initial Pool Balance, that are secured by a
Mortgage or Mortgages on multiple Mortgaged Properties. 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 or
any such Mortgage Loan with multiple Mortgaged Properties to generate net
operating income sufficient to pay debt service will result in defaults and
ultimate losses. However, with respect to two such sets of
Cross-Collateralized Mortgage Loans, the related Mortgaged Properties are
located in two separate states. 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. In
addition, one or more of the related Mortgaged Properties for certain sets of
related Cross-Collateralized Mortgage Loans and certain individual Mortgage
Loans with multiple Mortgaged Properties may be released from the lien of the
applicable Mortgage under the circumstances described herein under
"Description of the Mortgage Pool--Certain Terms and Conditions of the
Mortgage Loans."
Certain related Cross-Collateralized Mortgage Loans have different
borrowers (and, in the case of one set of Cross-Collateralized Mortgage
Loans, borrowers with different ownership). Cross-collateralization
arrangements involving more than one borrower could be challenged as a
fraudulent conveyance by creditors of a borrower or by the representative of
the bankruptcy estate of a borrower, if a borrower were to become a debtor in
a bankruptcy case. Accordingly, a lien granted by a borrower to secure
repayment of another borrower's Mortgage Loan could be avoided if a court
were to determine that (i) such borrower was insolvent at the time of
granting the lien, was rendered insolvent by the granting of the lien, was
left with inadequate capital, or was not able to pay its debts as they
matured and (ii) the borrower did not, when it allowed its Mortgaged Property
to be encumbered by a lien securing the entire indebtedness represented by
the other Mortgage Loan, receive fair consideration or reasonably equivalent
value for pledging such Mortgaged Property for the equal benefit of the other
borrower.
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Related Parties. Certain groups of borrowers under the Mortgage Loans are
affiliated or under common control with one another. However, no such group
of affiliated borrowers are obligors on Mortgage Loans representing more than
4.38% of the Initial Pool 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 this regard, it should be noted that
America Online is a Major Tenant (as defined herein) at two of the Mortgaged
Properties, which represent security for 3.97% of the Initial Pool Balance,
and K-Mart is a Major Tenant at two of the retail Mortgaged Properties, which
represent security for 3.36% of the Initial Pool Balance. In addition, there
are several cases in which a particular entity is a tenant at multiple
Mortgaged Properties, and although it may not be a Major Tenant at any such
property, it may be significant to the success of such properties. 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 tenant or respective affiliate 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 addition, a number of the borrowers under the
Mortgage Loans 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.
Geographic Concentration. Eleven of the Mortgaged Properties, which
constitute security for 13.1% of the Initial Pool Balance, are located in
California; 25 of the Mortgaged Properties, which constitute security for
10.4% of the Initial Pool Balance, are located in Texas; 18 of the Mortgaged
Properties, which constitute security for 9.2% of the Initial Pool Balance,
are located in Florida; 11 of the Mortgaged Properties, which constitute
security for 7.3% of the Initial Pool Balance, are located in Nevada; and 7
of the Mortgaged Properties, which constitute security for 5.3% of the
Initial Pool Balance, are 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 developments that may occur in
such state or region, conditions in the real estate market where the
Mortgaged Properties securing the related Mortgage Loans are located, changes
in governmental rules and fiscal policies, acts of nature, including floods,
tornadoes and earthquakes (which may result in uninsured losses), and other
factors which are beyond the control of the borrowers.
Other Concentrations. Fifty-seven individual Mortgage Loans, or groups of
Cross-Collateralized 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 3.27% of the
Initial Pool Balance, and the largest group of Cross-Collateralized Mortgage
Loans have Cut-off Date Balances that represent in the aggregate
approximately 3.92% of the Initial Pool Balance. The ten largest individual
Mortgage Loans, or groups of Cross-Collateralized Mortgage Loans, have
Cut-off Date Balances that represent in the aggregate approximately 25.93% 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. As payments in respect of principal
(including in the form of voluntary principal prepayments, Liquidations
Proceeds and the repurchase prices for any Mortgage Loans repurchased due to
breaches of representations or warranties) 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
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and geographic location. Because principal on the Sequential Pay Certificates
is payable in sequential order, the Classes thereof that have a lower or
later priority with respect to the payment of principal are relatively more
likely to be exposed to any risks associated with changes in concentrations
of borrower, loan or property characteristics.
Prepayment Premiums. With limited exception, all of the Mortgage Loans
require, for a specified period following the end of the related Lock-out
Period (or, in one case, the related date of origination), that any voluntary
principal prepayment be accompanied by a Prepayment Premium. Prepayment
Premiums are generally calculated either as a percentage (which may decline
over time) of the principal amount prepaid or on the basis of a yield
maintenance formula (subject, in certain instances, to a minimum equal to a
specified percentage of the amount prepaid). See "Description of the Mortgage
Pool--Certain Terms and Conditions of the Mortgage Loans--Prepayment
Provisions" herein. Any Prepayment Premiums actually collected on the
Mortgage Loans will be distributed among the respective Classes of the REMIC
Regular Certificates in the amounts and in accordance with the priorities
described herein under "Description of the Certificates--Distributions--
Distributions of Prepayment Premiums". The Sponsor, however, makes no
representation as to the collectability of any Prepayment Premium.
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, that 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. In
addition, the Special Servicer may waive a Prepayment Premium in connection
with obtaining a pay-off of a defaulted Mortgage Loan. See "Servicing of the
Mortgage Loans--Modifications, Waivers, Amendments and Consents" herein and
"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 or NMCC for a material breach of
representation or warranty on the part of the Mortgage Loan Seller or NMCC,
as the case may be, 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
any holder or holders of Certificates evidencing a majority interest in the
Controlling Class in connection with the termination of the Trust or in
connection with the purchase of defaulted Mortgage Loans by the Master
Servicer, Special Servicer or any holder or holders of Certificates
evidencing a majority interest in the Controlling Class. See "Description of
the Mortgage Pool--Assignment of the Mortgage Loans; Repurchases" and
"--Representations and Warranties; Repurchases", "Servicing of the Mortgage
Loans--Sale of Defaulted Mortgage Loans" 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 with respect to the Citi Mortgage Loans
and by or on behalf of NMCC with respect to the NMCC Mortgage Loans, (iii)
unaudited operating statements for the Mortgaged Properties supplied by the
borrowers, (iv) appraisals for the Mortgaged Properties that generally were
performed at origination (which appraisals were used in presenting
information regarding the values of the Mortgaged Properties as of the
Cut-off Date under "Description of the Mortgage Pool" and under Annex A for
illustrative purposes only) and/or (v) information supplied by entities from
which the Mortgage Loan Seller or NMCC, as the case may be, acquired, or
which currently service, certain of the Mortgage Loans. Also, several
Mortgage Loans constitute acquisition financing; and, accordingly, limited or
no operating information is available with respect to the related Mortgaged
Property. Moreover, all of the Mortgage Loans were originated during the
preceding eleven months and, consequently, there are limited or, in the case
of 45 Mortgage Loans that will make their first Monthly Payment after the
Closing Date, no payment histories with respect to the Mortgage Loans.
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Litigation. Affiliated borrowers with respect to one set of
Cross-Collateralized Mortgage Loans, representing 1.1% of the Initial Pool
Balance, were debtors in bankruptcy until early to middle 1997. The borrowers
were able to emerge from bankruptcy in part due to financing on the related
Mortgaged Properties received from NMCC. Prior to filing for bankruptcy
protection, such borrowers had been operating the related properties for more
than five years pursuant to provisional workout agreements with HUD. Another
Mortgage Loan, representing 0.4% of the Initial Pool Balance, similarly was
used to pay certain existing debt of a borrower in bankruptcy and helped such
borrower to emerge from bankruptcy. In addition, certain borrowers and the
principals of certain borrowers may have been involved in bankruptcy or
similar proceedings or have otherwise been parties to real estate-related
litigation.
There may also be legal proceedings pending and, from time to time,
threatened against the borrowers and their affiliates relating to the
business of or arising out of the ordinary course of business of the
borrowers and their affiliates. There can be no assurance that such
litigation will not have a material adverse effect on the distributions to
Certificateholders.
DESCRIPTION OF THE MORTGAGE POOL
GENERAL
The Mortgage Pool will consist of 181 conventional, multifamily and
commercial mortgage loans (the "Mortgage Loans") with an aggregate Cut-off
Date Balance of $870,577,289 (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 November 1, 1997 (the "Cut-off Date"), after application of all
payments of principal due on or before such date, whether or not received.
One Mortgage Loan was originated on November 4, 1997, but accrues interest
from November 1, 1997 and for all purposes of this Prospectus Supplement its
origination date will be assumed to have been November 1, 1997. 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.
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 and/or
leasehold interest in real property (a "Mortgaged Property"). Each Mortgaged
Property is improved by (i) an apartment building or complex consisting of
five or more rental living units or a mobile home park (a "Multifamily
Mortgaged Property"; and any Mortgage Loan secured thereby, a "Multifamily
Loan") (71 Mortgage Loans, representing 41.4% of the Initial Pool Balance),
or (ii) a retail shopping mall or center, an office building or complex, a
hotel, a health care facility, an industrial building, a self storage
facility or a mixed use facility (a "Commercial Mortgaged Property"; and any
Mortgage Loan secured thereby, a "Commercial Loan") (110 Mortgage Loans which
represent 58.6% of the Initial Pool Balance).
Seven separate sets of Mortgage Loans (the "Cross-Collateralized Mortgage
Loans") are, solely as among the Mortgage Loans in each such particular set,
cross-defaulted and cross-collateralized with each other; provided that, in
the case of each of three such sets of Cross-Collateralized Mortgage Loans,
representing 3.9%, 1.1% and 1.0%, respectively, of the Initial Pool Balance,
the benefits of the cross-collateralization are, as regards any related
Mortgaged Property, limited to the difference between the original and
current balances of the corresponding Cross-Collateralized Mortgage Loan in
the subject set. The largest set of related Cross-Collateralized Mortgage
Loans represents 3.92% of the Initial Pool Balance. Each of the
Cross-Collateralized Mortgage Loans is evidenced by a separate Mortgage Note
and secured by a separate Mortgage, which Mortgage contains provisions
creating the relevant cross-collateralization and cross-default arrangements.
Except with respect to two such sets of Cross-Collateralized Mortgage Loans
for which the related Mortgaged Properties are located in two separate
states, the Mortgaged Properties for each set of Cross-Collateralized
Mortgage Loans are located in the
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same state. 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.
In addition to the Cross-Collateralized Mortgage Loans, there are eight
other Mortgage Loans, which represent 4.02% of the Initial Pool Balance, that
are, in each such case, secured by a Mortgage or Mortgages encumbering two or
more properties. In each such case, the related Mortgaged Properties are
located in the same state. Accordingly, the total number of Mortgage Loans
reflected herein is 181, and the total number of Mortgaged Properties
reflected herein is 193.
In the case of certain sets of related Cross-Collateralized Mortgage Loans
and certain individual Mortgage Loans with multiple Mortgaged Properties, one
or more of the related Mortgaged Properties may be released from the
cross-collateralization arrangement after the related Lock-out Period
terminates upon the satisfaction of certain conditions specified in the
related Mortgage Loan documents and satisfaction of a minimum debt service
coverage ratio with respect to the remaining Mortgaged Properties and/or
payment of a release price equal to 125% of the allocated loan amount for the
Mortgaged Property to be released.
In general, with limited exception, 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.
Eleven of the Mortgaged Properties, which constitute security for 13.1% of
the Initial Pool Balance, are located in California; 25 of the Mortgaged
Properties, which constitute security for 10.4% of the Initial Pool Balance,
are located in Texas; 18 of the Mortgaged Properties, which constitute
security for 9.2% of the Initial Pool Balance, are located in Florida; 11 of
the Mortgaged Properties, which constitute security for 7.3% of the Initial
Pool Balance, are located in Nevada; and 7 of the Mortgaged Properties, which
constitute security for 5.3% of the Initial Pool Balance, are located in
Virginia. The remaining Mortgaged Properties are located throughout 31 other
states and Puerto Rico, with no more than 4.5% of the Initial Pool Balance
secured by Mortgaged Properties located in any such other jurisdiction.
One hundred ten of the Mortgage Loans (the "Citi Mortgage Loans"), which
represent 53.67% of the Initial Pool Balance, (i) were originated by or on
behalf of one or more affiliates of the Mortgage Loan Seller, a commonly
controlled affiliate of the Sponsor, pursuant to its conduit program, and are
currently held by the Mortgage Loan Seller or by one or more of its
affiliates, or (ii) were originated and are currently held by PNC Bank,
National Association ("PNC Bank"; and the Mortgage Loans currently held
thereby, the "PNC Mortgage Loans"). There are 32 PNC Mortgage Loans, which
represent 13.98% of the Initial Pool Balance. Seventy-one of the Mortgage
Loans (the "NMCC Mortgage Loans"), which represent 46.33% of the Initial Pool
Balance, are currently held by NationsBanc Mortgage Capital Corporation
("NMCC"), a wholly-owned finance subsidiary of NationsBank Corporation, and
were originated by or on behalf of NMCC pursuant to its conduit program. On
or before the Delivery Date, the Mortgage Loan Seller will acquire (i) the
Citi Mortgage Loans not currently held by the Mortgage Loan Seller from one
or more of its affiliates or, in the case of the PNC Mortgage Loans, from PNC
Bank and (ii) the NMCC Mortgage Loans from NMCC or, in the case of certain
NMCC Mortgage Loans that NMCC will transfer to the Master Servicer on or
immediately prior to the Delivery Date, from the Master Servicer. In
addition, on or before the Delivery Date (but after it has acquired those
Mortgage Loans not currently held by it), 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 NMCC" and "--Assignment of the Mortgage
Loans; Repurchase" below.
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CERTAIN TERMS AND CONDITIONS OF THE MORTGAGE LOANS
Due Dates. Each of the Mortgage Loans provides for scheduled payments of
principal and interest ("Monthly Payments") to be due on the first day of
each month (as to each such Mortgage Loan, the "Due Date"), except that, as
described below, the Hyper-Amortization Loans (as defined herein) may require
that certain additional amounts be paid each month following their respective
Anticipated Repayment Dates (as defined herein).
Mortgage Rates; Calculations of Interest. All of the Mortgage Loans bear
interest at a rate per annum (a "Mortgage Rate") that is fixed for the
remaining term of the Mortgage Loan, except that: (i) the Mortgage Rate for
one Mortgage Loan will step-down in the event a specified amount of the loan
is prepaid in part in connection with a tenant exercising its option to
purchase a portion of the related Mortgaged Property; and (ii) as described
below, the Hyper-Amortization Loans will accrue interest at a 2% higher rate
after their respective Anticipated Repayment Dates. As used in this
Prospectus Supplement, the term "Mortgage Rate" does not include the
incremental increase in the rate at which interest may accrue on any such
Hyper-Amortization Loan after such date. As of the Cut-off Date, the Mortgage
Rates of the Mortgage Loans ranged from 7.300% per annum to 9.440% per annum,
and the weighted average Mortgage Rate of the Mortgage Loans was 8.231%. No
Mortgage Loan permits negative amortization or (except for the
Hyper-Amortization Loans) the deferral of accrued interest.
One hundred thirty-six Mortgage Loans (the "Actual/360 Mortgage Loans"),
which represent 80.47% of the Initial Pool Balance, accrue interest on the
basis of the actual number of days elapsed in the relevant month of accrual
and a 360-day year (an "Actual/360 Basis"). Forty-three Mortgage Loans (the
"30/360 Mortgage Loans"), which represent 18.91% of the Initial Pool Balance,
accrue interest on the basis of a 360-day year consisting of twelve 30-day
months (a "30/360 Basis"). Two Mortgage Loans (the "Actual/365 Mortgage
Loans"), which represent 0.62% of the Initial Pool Balance, accrue interest
on the basis of the actual number of days elapsed in the relevant month of
accrual and a 365-day year (an "Actual/365 Basis"). The Monthly Payment for
each Actual/360 Mortgage Loan or Actual/365 Mortgage Loan is determined as
though the Mortgage Loan accrued interest on a 30/360 Basis, and the portion
of such Monthly Payment allocated to interest is determined based on interest
accrued in the preceding month on an Actual/360 Basis or Actual/365 Basis, as
applicable, with the balance allocated to amortize principal. As a result,
the full amortization term is longer than would be the case if calculated on
a 30/360 Basis, and the Balloon Payment on any such Mortgage Loan will be
larger than would be the case if interest accrued on a 30/360 Basis.
Hyperamortization. Thirteen of the Mortgage Loans (the "Hyper-Amortization
Loans"), which represent 16.08% of the Initial Pool Balance, provide for
changes in their payments and their accrual of interest if, in each such
case, the particular Mortgage Loan is not paid in full by a specified date
(the "Anticipated Repayment Date"). Each Hyper-Amortization Loan will bear
interest at its related Mortgage Rate until its Anticipated Repayment Date.
Commencing on the respective Anticipated Repayment Date, each
Hyper-Amortization Loan generally will bear interest at a fixed per annum
rate (the "Revised Rate") equal to the related Mortgage Rate plus 2%. The
interest accrued at the excess of the Revised Rate over the Mortgage Rate
(such interest, the "Excess Interest"; and such difference in rate, the
"Excess Interest Rate") will be deferred until the principal of such Mortgage
Loan is paid in full and, except where limited by applicable law, will itself
accrue interest at the Revised Rate. Non-payment of such Excess Interest will
not constitute a default under such Mortgage Loan prior to the related
maturity date. Prior to the Anticipated Repayment Date, borrowers under
Hyper-Amortization Loans will be required to enter into a lockbox agreement
whereby all revenue will be deposited directly into a designated account (the
"Lockbox Account") controlled by the Master Servicer. From and after the
Anticipated Repayment Date, in addition to paying interest (at the Mortgage
Rate) and principal (based on the amortization schedule), the related
borrower generally will be required to apply all remaining monthly cash flow
from the related Mortgaged Property, if any, after paying all permitted
operating expenses and capital expenditures, to pay principal on the Mortgage
Loan until the Mortgage Loan is paid in full. As described below,
Hyper-Amortization Loans generally provide that the related borrower is
prohibited from prepaying the Mortgage Loan until five to six months prior to
the Anticipated Repayment Date but, upon the commencement of such period, may
prepay the loan, in whole or in part, without payment of a Prepayment
Premium. The Anticipated Repayment Date for each Hyper-Amortization Loan is
listed in Annex A.
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Amortization of Principal. One hundred sixty-seven of the Mortgage Loans,
which represent 83.81% of the Initial Pool Balance, provide for monthly
payments of principal based on amortization schedules significantly longer
than the respective remaining terms thereof, 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. Thirteen Mortgage Loans, which
represent 16.08% of the Initial Pool Balance, are Hyper-Amortization Loans.
The remaining Mortgage Loan, which represents 0.11% of the Initial Pool
Balance, is a fully amortizing loan.
The original term to stated maturity or, in the case of the
Hyper-Amortization Loans, to the Anticipated Repayment Date of each Mortgage
Loan was between 60 and 180 months. The original amortization schedules of
the Mortgage Loans (calculated, in the case of Actual/360 Mortgage Loans and
Actual/365 Mortgage Loans, on a 30/360 Basis for the purposes of the accrual
of interest) ranged from 180 to 360 months. As of the Cut-off Date, the
remaining terms to stated maturity or, in the case of the Hyper-Amortization
Loans, to the respective Anticipated Repayment Dates of the Mortgage Loans
will range from 56 to 180 months, and the weighted average remaining term to
stated maturity or the Anticipated Repayment Date, as the case may be, of the
Mortgage Loans will be 116 months. As of the Cut-off Date, the remaining
amortization terms of the Mortgage Loans (calculated, in the case of
Actual/360 Mortgage Loans and Actual/365 Mortgage Loans, on a 30/360 Basis
for the accrual of interest) will range from 180 to 360 months, and the
weighted average remaining amortization term (calculated, in the case of
Actual/360 Mortgage Loans and Actual/365 Mortgage Loans, on a 30/360 Basis
for purposes of the accrual of interest) of the Mortgage Loans will be 327
months. See "Risk Factors--The Mortgage Loans--Balloon Payments" herein.
Prepayment Provisions. All but one of the Mortgage Loans provided as of
origination for, sequentially, (a) a period (a "Lock-out Period") during
which voluntary principal prepayments are prohibited, followed by (b) a
period (a "Prepayment Premium Period") during which any voluntary principal
prepayment be accompanied by a premium, penalty, or fee (a "Prepayment
Premium"), followed by (c) a period (an "Open Period") during which voluntary
principal prepayments may be made without an accompanying Prepayment Premium.
One Mortgage Loan, which represents 0.30% of the Initial Pool Balance,
provided as of origination for, sequentially, a Prepayment Premium Period,
followed by an Open Period. Voluntary principal prepayments (after any
Lock-out Period, when applicable) may be made in full or, with respect to 71
Mortgage Loans (representing 46.3% of the Initial Pool Balance), in part,
subject to certain limitations and, during a Prepayment Premium Period,
payment of the applicable Prepayment Premium. As of the Cut-off Date, with
respect to the 180 Mortgage Loans that provide for Lock-out Periods, the
remaining Lock-out Periods ranged from 10 months to 48 months, with a
weighted average remaining Lock-out Period of 42 months. However, for one
Mortgage Loan, the borrower is required to partially prepay the loan in an
amount equal to the purchase price that would be paid by a tenant if and when
such tenant were to exercise its option to purchase a portion of the
Mortgaged Property (such amount representing not more than 0.15% of the
Initial Pool Balance). The Open Period for each Mortgage Loan begins five or
six months (or, for certain Mortgage Loans, 12 months) prior to stated
maturity or, in the case of the Hyper-Amortization Loans, the Anticipated
Repayment Date. Prepayment Premiums on the Mortgage Loans are generally
calculated either on the basis of a yield maintenance formula (subject, in
certain instances, to a minimum equal to a specified percentage of the
principal amount prepaid) or as a percentage (which may decline over time) of
the principal amount prepaid. 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--Distributions of Prepayment Premiums"
herein. The Sponsor makes no representation as to the enforceability of the
provision of any Mortgage Loan requiring the payment of a Prepayment Premium
or as to 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.
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"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 certain limited exceptions, 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 consent of the holder
of the Mortgage. See "--Additional Mortgage Loan Information--Subordinate
Financing" herein. Certain of the Mortgage Loans permit either (i) a one-time
transfer of the related Mortgaged Property if certain specified conditions
are satisfied or if the transfer is to a borrower reasonably acceptable to
the lender, or (ii) transfers to a person that is either related to the
borrower or, in one case, a tenant that has an option to purchase a portion
of the related Mortgaged Property. 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" and with the REMIC Provisions, 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-sale" or "due-on-encumbrance" clause unless it: (i)
shall have received written confirmation from each Rating Agency that such
action would not result in the qualification, downgrade or withdrawal of the
rating then assigned by such Rating Agency to any Class of Certificates, such
confirmation to be required in the case of any waiver of rights under a
related "due-on-sale" clause only if the then-outstanding principal balance
thereof exceeds 2% of the then-outstanding principal balance of all of the
Mortgage Loans; and (ii) shall have provided, at least five days prior to the
granting of such waiver or consent, to any majority Certificateholder of the
Controlling Class and, in the case of the Master Servicer, to the Special
Servicer, written notice of the matter and a written explanation of the
surrounding circumstances and, upon request made within such five day period,
shall have discussed the matter with such majority Certificateholder of the
Controlling Class and, in the case of the Master Servicer, with the Special
Servicer. 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
General. For a detailed presentation of certain characteristics of the
Mortgage Loans and Mortgaged Properties, on an individual basis and in
tabular format, see Annex A hereto. Certain capitalized terms that appear
herein are defined in Annex A.
Delinquencies. No Mortgage Loan will be as of the Cut-off Date, or has
been since origination, 30 days or more delinquent in respect of any Monthly
Payment. All of the Mortgage Loans were originated during the 11 months prior
to the Cut-off Date. In addition, in the case of 49 Mortgage Loans,
representing 30.47% of the Initial Pool Balance, no payment history is
available because the first payment on each such Mortgage Loan is due in
November or December 1997.
Tenant Matters. Seventy Commercial Mortgaged Properties, which represent
security for 33.65% of the Initial Pool Balance, are leased in large part to
one or more Major Tenants or are wholly or in large part owner-occupied.
Eight companies are Major Tenants with respect to more than one Mortgaged
Property, with the related groups of Mortgage Loans representing 3.97%,
3.36%, 1.58%, 1.42%, 1.35%, 1.18%, 1.04% and 1.01% of the Initial Pool
Balance. America Online is a Major Tenant at two Mortgaged Properties, which
together represent security for 3.97% of the Initial Pool Balance, and K-Mart
is a Major Tenant at two of the retail Mortgaged Properties, which together
represent security for 3.36% of the Initial Pool Balance. In addition, there
are several cases in which a particular entity is a tenant at multiple
Mortgaged Properties, and although it may not be a Major Tenant at any such
property, it may be significant to the success of such properties. "Major
Tenants" means any tenant at a Commercial Mortgaged Property that rents at
least 20% of the Leasable Square Footage (as defined in Annex A) at such
property.
Certain of the Multifamily Mortgaged Properties have material
concentrations of student tenants.
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Ground Leases. Three of the Mortgage Loans, which represent 1.70% of the
Initial Pool Balance, are, in each such case, secured by a Mortgage on the
applicable borrower's leasehold interest in the related Mortgaged Property.
In the case of each such Mortgage Loan, the related ground leases expire more
than 10 years after the stated maturity of the loan. In each case, either (i)
the ground lessor has subordinated its interest in the related Mortgaged
Property to the interest of the holder of the related Mortgage Loan or (ii)
the ground lessor has agreed to give the holder of the Mortgage Loan notice
of, and has granted such holder the right to cure, any default or breach by
the lessee. See "Certain Legal Aspects of Mortgage
Loans--Foreclosure--Leasehold Risks" in the Prospectus.
Subordinate Financing. Two of the Mortgaged Properties, representing
security for 1.22% of the Initial Pool Balance, are encumbered by secured
subordinated debt; however, the holders of the subordinated debt have agreed
in one such case not to foreclose for so long as the related Mortgage Loan is
outstanding and the Trust is not pursuing a foreclosure action. The one
Mortgage Loan encumbered by secured subordinate debt that does not expressly
prohibit the holder thereof from pursuing a foreclosure action requires no
payments of interest or principal for the first five years of its term and
thereafter requires payments of principal only. In addition, in the case of
two Mortgage Loans, representing 1.54% of the Initial Pool Balance, the
borrower is permitted to incur subordinated debt secured by the related
Mortgaged Property if certain conditions are satisfied. Other than in such
cases, the Mortgage Loans either prohibit the related borrower from
encumbering the Mortgaged Property with additional secured debt or require
the consent of the holder of the first lien prior to so encumbering such
property. The existence of any such 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 files for
bankruptcy or is placed in involuntary receivership, foreclosing on the
Mortgaged Property could be delayed. See "Certain Legal Aspects of Mortgage
Loans--Subordinate Financing" in the Prospectus.
The loan documents relating to two Mortgaged Properties, representing
security for 1.54% of the Initial Pool Balance, that are operated as health
care facilities permit, without the consent of the holder of the first lien,
but subject to certain specified limits, subordinate financing that is not
secured by the Mortgaged Property in order to permit the borrower: (i) to
finance the replacement of certain equipment and fixtures related to the
operation of the property during the term of the loan, such financing to be
secured by the new equipment and fixtures but not the real property, and/or
(ii) in one case, to obtain up to $750,000 in financing for working capital,
such financing to be secured by the borrower's accounts receivable. The two
Mortgage Loans that relate to such Mortgaged Properties are the same as the
two Mortgage Loans referred to above that permit subsequent financing secured
by such Mortgaged Properties. In addition, in several cases, borrowers under
the Mortgage Loans have incurred or, under the terms of the related Mortgage
Loans may incur, unsecured indebtedness.
Health Care Properties. Three Mortgage Loans, which represent 2.2% of the
Initial Pool Balance, are secured by liens on health care properties. Health
care 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.
Lender/Borrower Relationships. NationsBank, Citibank or other affiliates
of NMCC, the Mortgage Loan Seller or the Sponsor may maintain certain banking
or other relationships with borrowers under the Mortgage Loans or their
affiliates, and proceeds of the Mortgage Loans may, in certain limited cases,
be used by such borrowers or their affiliates in whole or in part to pay
indebtedness owed to NationsBank, Citibank or such other entities.
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CERTAIN UNDERWRITING MATTERS
Environmental Assessments. Each of the Mortgaged Properties was subject to
a "Phase I" environmental assessment or an update of a previously conducted
assessment, which assessment or update was conducted generally in accordance
with industry-wide standards, on or after June 1, 1996. No such assessment or
update otherwise revealed any material adverse environmental condition or
circumstance at any Mortgaged Property, except as set forth below, and
further, except in those cases in which an operations and maintenance plan
(including, in several cases, in respect of asbestos containing materials,
lead based paint and radon), periodic monitoring of nearby properties or the
establishment of an escrow reserve to cover the estimated cost of remediation
was recommended, and which recommended actions have been or are expected to
be implemented in the manner and within the time frames specified in the
related Mortgage Loan documents. The Sponsor has been advised by NMCC that
environmental assessments revealed low levels of soil contamination at
portions of two Mortgaged Properties, which together represent security for
0.73% of the Initial Pool Balance, and that NMCC expects deed recordations
will be filed requiring the related borrower to notify the proper authorities
prior to making any significant renovations or repairs at the property.
Although the deed recordation process, which is used from time to time by
certain states to address low levels of soil contamination and determined
minimal groundwater impact, is not expected to have a material impact on the
current use of such Mortgaged Properties as retail shopping centers, there
can be no assurance as to what the future effect of such restriction may be
in the event the borrower decides or is required to undertake any significant
renovations or repairs at the properties. Further, there can be no assurance
that the environmental assessments identified all possible environmental
problems at the Mortgaged Properties or that recommended operations and
maintenance plans have been or will continue to be implemented. In many
cases, certain adverse environmental conditions were not tested for. For
example, lead based paint and radon were tested for only at Multifamily
Mortgaged Properties and only if, in the case of lead based paint, the age of
the Mortgaged Property warranted such testing and, in the case of radon,
radon is prevalent in the geographic area where the Mortgaged Property is
located.
The information contained herein regarding environmental conditions at the
Mortgaged Properties is based on the environmental assessments and has not
been independently verified by the Sponsor, the Mortgage Loan Seller, NMCC,
PNC Bank, the Underwriters, the Master Servicer, the Special Servicer, the
Trustee, the Fiscal Agent, the REMIC Administrator, or any of their
respective affiliates.
Property Condition Assessments. Inspections of all of the Mortgaged
Properties were conducted by independent licensed engineers in connection
with or subsequent to the origination of the related Mortgage Loan. 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; and, in the case of certain Mortgaged Properties, such
cost exceeded $100,000. In general, with limited exception, cash reserves
were established to fund such deferred maintenance or replacement items,
generally in an amount equal to 125% of the estimated cost of such items. In
addition, various Mortgage Loans require monthly deposits into cash reserve
accounts to fund property maintenance expenses.
Appraisals and Market Studies. An appraisal of each of the related
Mortgaged Properties was performed (or an existing appraisal updated) in
connection with or subsequent to the origination of each Mortgage Loan, by an
independent appraiser that is either a member of the Appraisal Institute
("MAI") or state-certified, in order 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 certain sets of related
Cross-Collateralized Mortgage Loans, the aggregate original principal balance
of such sets). Each such appraisal or property valuation was prepared on or
about the "Appraisal Date" indicated on Annex A hereto and 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, and are not
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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 Mortgage Loan Seller, the Underwriters, NMCC, PNC
Bank, the Master Servicer, the Special Servicer, the Trustee, the Fiscal
Agent, the REMIC Administrator, or any of their respective affiliates has
prepared or conducted its own separate appraisal or reappraisal of any
Mortgaged Property.
Zoning and Building Code Compliance. The Mortgage Loan Seller, with
respect to the Citi Mortgage Loans, and NMCC, with respect to the NMCC
Mortgage Loans, have examined whether the use and operation of the related
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 such Mortgaged
Properties at the time such Mortgage Loans were originated. Establishment of
such compliance may have been supported by 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 neither the Mortgage Loan Seller, with respect to the Citi
Mortgage Loans, nor NMCC, with respect to the NMCC Mortgage Loans, considers
them to be material. In some cases, the use, operation and/or structure of
the related Mortgaged Property constitutes a permitted nonconforming use
and/or structure that may not be rebuilt to its current state in the event of
a material casualty event. With respect to such Mortgaged Properties, the
Mortgage Loan Seller with respect to the Citi Mortgage Loans (other than the
PNC Mortgage Loans), PNC with respect to the PNC Mortgage Loans, and NMCC
with respect to the NMCC Mortgage Loans, have determined that in the event of
a material casualty affecting the Mortgaged Property that either: (i)
insurance proceeds would be available and sufficient to pay off the related
Mortgage Loan in full, (ii) the Mortgaged Property, if permitted to be
repaired or restored in conformity with current law, would constitute
adequate security for the related Mortgage Loan or (iii) the risk that the
entire Mortgaged Property would suffer a material casualty to such a
magnitude that it could not be rebuilt to its current state is remote.
Although the lender expects insurance proceeds to be available for
application to the related Mortgage Loan in the event of a material casualty,
no assurance can be given that such proceeds would be sufficient to pay off
such Mortgage Loan in full. In addition, if the Mortgaged Property were to be
repaired or restored in conformity with current law, no assurance can be
given as to what its value would be relative to the remaining balance of the
related Mortgage Loan or what would be the revenue-producing potential of the
property.
Hazard, Liability and Other Insurance. Substantially all of the Mortgages
require that each Mortgaged Property be insured by a hazard insurance policy
in an amount (subject to a customary deductible) 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, that the related hazard
insurance policy contain appropriate endorsements to avoid the application of
co-insurance and not permit reduction in insurance proceeds for depreciation;
provided that, in the case of certain of the Mortgage Loans, the hazard
insurance may be in such other amounts as was required by the related
originators. 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 required to be 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
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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 customarily required by institutional
lenders.
Each Mortgage (other than the Mortgage encumbering a mobile home park
property) 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 general, the Mortgage Loans (including those secured by Mortgaged
Properties located in California) do not require earthquake insurance.
THE MORTGAGE LOAN SELLER AND NMCC
The Mortgage Loan Seller is a Delaware corporation and is in the business
of originating loans on income-producing properties. The principal office of
the Mortgage Loan Seller is in New York, New York. The Mortgage Loan Seller
is a direct, wholly-owned subsidiary of Citibank, N.A.
NMCC is a Texas corporation and is in the business of originating,
purchasing and packaging mortgage loans for resale. The principal office of
NMCC is in Charlotte, North Carolina. NMCC is a wholly-owned finance
subsidiary of NationsBank Corporation.
The information set forth herein concerning (i) the Mortgage Loan Seller
has been provided by the Mortgage Loan Seller and (ii) NMCC has been provided
by NMCC, and neither the Sponsor nor either Underwriter makes any
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 assign, sell and 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 Citi Mortgage Loan and NMCC will be required to deliver the following
documents, among others, to the Trustee with respect to each NMCC Mortgage
Loan: (a) the original Mortgage Note, endorsed (without recourse) to the
order of the Trustee; (b) the original or a copy of the related Mortgage(s),
together with originals or copies of any intervening assignments of such
document(s), in each case (unless the particular document has not been
returned from the applicable recording office) with evidence of recording
thereon; (c) the original or a copy of any related assignment(s) of leases
and rents (if any such item is a document separate from the Mortgage),
together with originals or copies of any intervening assignments of such
document(s), in each case (unless the particular document has not been
returned from the applicable recording office) with evidence of recording
thereon; (d) an assignment of each related Mortgage in favor of the Trustee,
in recordable form (or a certified copy of such assignment as sent for
recording); (e) an assignment of any related assignment(s) of leases and
rents (if any such item is a document separate from the Mortgage) in favor of
the Trustee, in recordable form (or a certified copy of such assignment as
sent for recording); (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) an assignment in favor of the Trustee of each effective UCC
financing statement in the possession of the transferor (or a certified copy
of such assignment as sent for filing); and (h) in those cases where
applicable, the original or a copy of the related ground lease.
The Trustee will be required to review the documents delivered thereto by
the Mortgage Loan Seller with respect to each Citi Mortgage Loan and by NMCC
with respect to each NMCC Mortgage Loan
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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 time thereafter 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, then either the Mortgage Loan Seller (if, but
only if, the affected Mortgage Loan is a Citi Mortgage Loan) or NMCC (if, but
only if, the affected Mortgage Loan is an NMCC Mortgage Loan) will be
obligated, except as otherwise described below, within a period of 120 days
(or 90 days, in the event of a defect that causes the Mortgage Loan to not
constitute a "qualified mortgage" within the meaning of Section 860G(a)(3) of
the Code) following its receipt of notice of such omission or defect, to
deliver the missing documents or cure the defect in all material respects, as
the case may be, or to repurchase (or cause the repurchase of) the affected
Mortgage Loan at a price (the "Purchase Price") generally equal to the unpaid
principal balance of such Mortgage Loan, plus any accrued but unpaid interest
thereon at the related Mortgage Rate to but not including the Due Date in the
Collection Period of repurchase, plus any related unreimbursed Servicing
Advances (as defined herein). The respective cure/repurchase obligations of
the Mortgage Loan Seller (in the case of Citi Mortgage Loans) and NMCC (in
the case of NMCC Mortgage Loans) will constitute the sole remedies available
to the Certificateholders for any failure on the part of the Mortgage Loan
Seller or NMCC, as the case may be, 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 other person will be obligated to
repurchase the affected Mortgage Loan if either the Mortgage Loan Seller or
NMCC, as the case may be, defaults on its obligation to do so.
Notwithstanding the foregoing, if any of the above-described documents is not
delivered with respect to any Mortgage Loan because such document 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 neither the
Mortgage Loan Seller nor NMCC will be required to repurchase (or cause the
repurchase of) the affected Mortgage Loan on the basis of such missing
document so long as it continues in good faith attempt to obtain such
document or such copy.
The Pooling Agreement will require that the assignments in favor of the
Trustee with respect to each Mortgage Loan described in clauses (d) and (e)
of the second preceding paragraph be submitted for recording in the real
property records of the appropriate jurisdictions within a specified number
of days following the Delivery Date. 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 solely with respect to the Citi Mortgage Loans, and
NMCC will be required to represent and warrant solely with respect to the
NMCC Mortgage Loans, in each case as of the Delivery Date or as of such other
date specifically provided in the related representation or warranty, among
other things, substantially as follows: (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) each Mortgage securing a 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, (C) rights of tenants (whether under ground leases
or operating leases) at the Mortgaged Property to remain following a
foreclosure or similar proceeding (provided that such tenants are performing
under such leases), (D) exceptions and exclusions specifically referred to in
the related lender's title insurance policy issued or, as evidenced by a
"marked-up" commitment, to be issued in respect of such Mortgage Loan, (E) if
such Mortgage Loan is cross-collateralized with any other Mortgage Loan, the
lien of the Mortgage for such other Mortgage Loan and (F) with respect to the
Mortgagee securing the Mortgage Loan identified as Joliet Commons Shopping
Center, a materialman's lien in the amount of approximately $160,000, and as
to which funds sufficient to pay such amount have been escrowed with the
related title insurer (the exceptions set forth in the foregoing clauses (A),
(B), (C), (D), (E) and (F) collectively, "Permitted Encumbrances"); (iii) the
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Mortgage(s) 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; (iv) no
Mortgage Loan was, during the twelve-month period prior to, and 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; (v) there is no valid
offset, defense or counterclaim to any Mortgage Loan; (vi) it has not waived
any material default, breach, violation or event of acceleration existing
under any Mortgage or Mortgage Note; (vii) it has not received actual notice
that (A) there is any proceeding pending or threatened for the total or
partial condemnation of any Mortgaged Property, or (B) there is any material
damage at any Mortgaged Property that materially and adversely affects the
value of such Mortgaged Property; (viii) all insurance coverage required
under each Mortgage securing a Mortgage Loan is in full force and effect with
respect to the related Mortgaged Property; (ix) at origination, 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; (x) in connection with or subsequent to
the origination of the related Mortgage Loan, one or more environmental site
assessments (or an update of a previously conducted assessment) has been
performed with respect to each Mortgaged Property, and it, having made no
independent inquiry other than reviewing the resulting report(s) and/or
employing an environmental consultant to perform the assessments or updates
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); (xi) 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); (xii) the proceeds of each Mortgage Loan have been
fully disbursed, and there is no requirement for future advances thereunder;
(xiii) the terms of the Mortgage Note and Mortgage(s) for each Mortgage Loan
have not been impaired, waived, altered or modified in any material respect,
except as specifically set forth in the related Mortgage File or indicated on
the Mortgage Loan Schedule; (xiv) there are no delinquent taxes, ground
rents, water charges, sewer rents, insurance premiums, assessments,
including, without limitation, assessments payable in future installments, or
other similar outstanding charges affecting the related Mortgaged Property;
(xv) the related borrower's interest in each Mortgaged Property securing a
Mortgage Loan consists of a fee simple and/or leasehold estate or interest in
real property; (xvi) no Mortgage Loan contains any equity participation by
the lender, provides for any contingent or additional interest in the form of
participation in the cash flow of the related Mortgaged Property or provides
for the negative amortization of interest, except for the Hyper-Amortization
Loans to the extent described above under "--Certain Terms and Conditions of
the Mortgage Loans--Hyperamortization"; and (xvii) all escrow deposits
(including capital improvements and environmental remediation reserves)
relating to each Mortgage Loan that were required to be delivered to the
mortgagee under the terms of the related loan documents have been received
and, to the extent of any remaining balances of such escrow deposits, are in
the possession or under the control of the representing party or its agents
(which shall include the Master Servicer). In the Pooling Agreement, NMCC
will also be required to represent and warrant, as of the Delivery Date,
that, immediately prior to the transfer of certain of the NMCC Mortgage Loans
by NMCC to Midland Loan Services, L.P. ("Midland") and by Midland to the
Mortgage Loan Seller, and the transfer of the remaining NMCC Mortgage Loans
by NMCC to the Mortgage Loan Seller directly, each of NMCC and Midland, at
such applicable time, had good and marketable title to, and was the sole
owner of, each related NMCC Mortgage Loan and had full right and authority to
sell, assign and transfer such Mortgage Loan. In the Pooling Agreement, the
Mortgage Loan Seller will also be required to represent and warrant, as of
the Delivery Date, that, immediately prior to the transfer of the Mortgage
Loans to the Trustee, the Mortgage
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Loan Seller had good and marketable title to, and was the sole owner of, each
Mortgage Loan (including each NMCC Mortgage Loan) and had full right and
authority to sell, assign and transfer such Mortgage Loan (provided that, in
the case of NMCC Mortgage Loans, such representation and warranty will be
made on the assumption that the representation and warranty of NMCC described
in the prior sentence is true and correct).
If the Mortgage Loan Seller discovers or is notified of a breach of any of
the foregoing representations and warranties with respect to any Citi
Mortgage Loan (or, in the case of a breach of the representation and warranty
described in the last sentence of the prior paragraph, with respect to any
Mortgage Loan), or NMCC discovers or is notified of a breach of any of the
foregoing representations and warranties with respect to any NMCC Mortgage
Loan (other than the representation and warranty described in the last
sentence of the prior paragraph), and in any case such breach materially and
adversely affects the value of such Mortgage Loan or the interests of
Certificateholders therein, then either the Mortgage Loan Seller (if, but
only if, the affected Mortgage Loan is a Citi Mortgage Loan or the breach is
in respect of the representation and warranty described in the last sentence
of the prior paragraph) or NMCC (if, but only if, the affected Mortgage Loan
is an NMCC Mortgage Loan and the breach is not in respect of the
representation and warranty described in the last sentence of the prior
paragraph) will be obligated, within a period of 120 days (or 90 days, in the
event of a defect that causes the Mortgage Loan to not constitute a
"qualified mortgage" within the meaning of Section 860G(a)(3) of the Code)
following its discovery or receipt of notice of such breach, to cure such
breach in all material respects or to repurchase (or cause the repurchase of)
the affected Mortgage Loan at the applicable Purchase Price.
The foregoing cure/repurchase obligation of the Mortgage Loan Seller or
NMCC, as applicable, 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 other person will be obligated to
repurchase any affected Mortgage Loan in connection with a breach of such
representations and warranties if either the Mortgage Loan Seller or NMCC, as
applicable, defaults on its obligation to do so. The Mortgage Loan Seller and
NMCC will be the sole Warranting Parties (as defined in the Prospectus) in
respect of the Mortgage Loans, with the Mortgage Loan Seller being the sole
Warranting Party with respect to the Citi Mortgage Loans and NMCC being the
sole Warranting Party with respect to the NMCC Mortgage Loans (except as
described in the last sentence of the second preceding paragraph). 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 Securities
and Exchange Commission 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 respective
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"): (a) in the same manner in
which, and with the same care, skill, prudence and diligence with which, the
Master Servicer or Special Servicer, as the case may be, generally services
and administers similar mortgage loans or assets, as applicable, for third
parties or generally services and administers similar mortgage loans or
assets, as applicable, held in its own portfolio, whichever servicing
procedure is of a higher standard; (b) 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 if, in the
good faith and reasonable judgment of the Special Servicer, no satisfactory
arrangements can be made for the collection of the delinquent payments, the
maximization of the recovery on such Mortgage Loan to the Certificateholders
(collectively) on a present value basis; and (c) 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 any 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 to direct 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 or reimbursement of costs 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, or
the Master Servicer determines in its good faith and reasonable judgment will
continue, 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(s),
which failure has continued, or the Master Servicer determines in its good
faith and reasonable judgment will continue, unremedied for 60 days; (iii)
the Master Servicer has determined in its good faith and reasonable judgment
that a default in the making of a Monthly Payment (including a Balloon
Payment) or any other payment required under the related Mortgage Note or the
related Mortgage(s) 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
may, in the Master Servicer's good faith and reasonable judgment, materially
impair the value of the related Mortgaged Property as security for the
Mortgage Loan or otherwise materially and adversely affect the interests of
Certificateholders, which default has continued unremedied for the applicable
cure period under the terms of the Mortgage Loan (or, if no cure 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,
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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 or
Properties. 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. Unless the same entity is acting as both Master Servicer
and Special Servicer, the Master Servicer and the Special Servicer shall not
have any responsibility for the performance by each other of their respective
duties under the Pooling Agreement.
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 good faith and reasonable 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 any group 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 with which
it is cross-collateralized, 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 additional important information
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
Midland Loan Services, L.P. ("Midland"), the Master Servicer, was
organized under the laws of Missouri in 1992 as a limited partnership.
Midland is a real estate financial services company which provides loan
servicing and asset management for large pools of commercial and multifamily
real estate assets and originates commercial real estate loans. Midland's
address is 210 West 10th Street, 6th Floor, Kansas City, Missouri 64105.
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As of October 31, 1997, Midland and its affiliates were responsible for
servicing approximately 12,725 commercial and multifamily loans with an
aggregate principal balance of approximately $19.2 billion, the collateral
for which is located in all 50 states, Puerto Rico and the District of
Columbia. With respect to such loans, approximately 11,156 loans with an
aggregate principal balance of approximately $14.2 billion pertain to
commercial and multifamily mortgage-backed securities. Midland has been
approved as a master and special servicer for investment grade-rated
commercial and multifamily mortgage-backed securities by Fitch and Moody's.
The information set forth herein concerning the Master Servicer has been
provided by it and none of the Sponsor or either Underwriter makes any
representation or warranty as the accuracy or completeness of such
information.
THE SPECIAL SERVICER
The duties of Special Servicer will be performed by CRIIMI MAE Services
Limited Partnership, a Maryland limited partnership ("CRIIMI MAE"), the
general partner of which is CRIIMI MAE Management, Inc. As of September 30,
1997, CRIIMI MAE was responsible for performing certain servicing functions
with respect to approximately 2,700 commercial and multifamily loans with an
aggregate principal balance of approximately $11 billion, the real property
securing which is located in 49 states, Puerto Rico and the District of
Columbia. CRIIMI MAE has been approved as a special servicer for investment
grade-rated commercial and multifamily mortgage-backed securities by Fitch
and Moody's. The information set forth herein concerning CRIIMI MAE has been
provided by it, and none of the Sponsor or either Underwriter makes any
representation or warranty as to the accuracy or completeness of such
information.
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. A majority of the Mortgage
Loans are currently being primary serviced by third-party servicers that are
entitled to and will become Sub-Servicers of such loans on behalf of the
Master Servicer. 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 (i) assume such party's rights and obligations under such
Sub-Servicing Agreement, (ii) enter into a new Sub-Servicing Agreement with
such Sub-Servicer on such terms as the Trustee or such other successor Master
Servicer or Special Servicer and such Sub-Servicer shall mutually agree or
(iii) terminate such Sub-Servicer without cause (but only upon payment to the
Sub-Servicer of specified compensation). 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 number of days respecting which any related interest
payment on the related Mortgage Loan is computed under the terms of the
related Mortgage
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Note and applicable law, without giving effect to any Excess Interest that
may accrue on any Hyper-Amortization Loan on or after its Anticipated
Repayment Date. The "Master Servicing Fee Rate" will range from 0.110% to
0.310% per annum, on a loan-by-loan basis, with a weighted average Master
Servicing Fee Rate of 0.179% per annum as of the Cut-off Date. As additional
servicing compensation, the Master Servicer will be entitled to retain
Prepayment Interest Excesses (as described below) collected on the Mortgage
Loans. 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
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 on or before the Determination Date in any calendar month, the
amount of interest (net of related Master Servicing Fees and any Excess
Interest) accrued on such prepayment from 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 and any Excess Interest) on such prepayment will constitute a
"Prepayment Interest Shortfall". Prepayment 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 Prepayment Interest Shortfalls incurred with respect to the Mortgage
Loans during any Collection Period, but only to the extent of that portion of
its aggregate Master Servicing Fee for the related Collection Period that is,
in the case of each and every Mortgage Loan, calculated at 0.060% per annum,
together with all other of its servicing compensation for the same Collection
Period in addition to Master Servicing Fees.
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, the Workout Fee and the Liquidation 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 0.02% 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 0.25% per
annum (the "Special Servicing Fee Rate"), on the basis of the same principal
amount and for the same number of days respecting which any related interest
payment due or deemed due on such Mortgage Loan is computed under the related
Mortgage Loan and applicable law, without giving effect to any Excess
Interest that may accrue on any Hyper-Amortization Loan on or after its
Anticipated Repayment Date, and will be payable monthly from general
collections on the Mortgage Loans and any REO Properties on deposit in the
Certificate Account 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 (other than Default Interest (as defined below) and Excess 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
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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 Servicer 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 (other than any portion
thereof that represents accrued but unpaid Excess Interest or Default
Interest). Notwithstanding anything to the contrary described above, no
Liquidation Fee will be payable based on, or out of, Liquidation Proceeds
received in connection with (i) the repurchase of any Mortgage Loan by the
Mortgage Loan Seller or NMCC 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 or NMCC's, as
applicable, notice or discovery of such breach, defect or deficiency, (ii)
the purchase of any Specially Serviced Mortgage Loan or REO Property by the
Master Servicer, the Special Servicer or any holder or holders of
Certificates evidencing a majority interest in the Controlling Class or (iii)
the purchase of all of the Mortgage Loans and REO Properties by the Master
Servicer or any holder or holders of Certificates evidencing a majority
interest in the Controlling Class in connection with the termination of the
Trust. If, however, Liquidation Proceeds are received with respect to any
Corrected 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 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 each be responsible for
the fees of any Sub-Servicers retained by it (without right of reimbursement
therefor). As additional servicing compensation, the Sub-Servicers (or, to
the extent such Sub-Servicers are not entitled thereto, the Master Servicer)
with respect to Mortgage Loans that are not Specially Serviced Mortgage
Loans, and the Special Servicer with respect to Specially Serviced Mortgage
Loans, generally will be entitled to retain all assumption and modification
fees, "Default Interest" (that is, interest (other than Excess Interest) in
excess of interest at the related Mortgage Rate accrued as a result of a
default) and late payment charges (to the extent such Default Interest and/or
late payment charges are not otherwise applied to cover interest on Advances
if received on a Specially Serviced Mortgage Loan), charges for beneficiary
statements or demands and any similar fees, in each case to the extent
actually paid by the borrowers with respect to such Mortgage Loans, and such
amounts therefore will not be available for distribution to
Certificateholders. The respective Sub-Servicers (or, to the extent such
Sub-Servicers are not entitled thereto, the Master Servicer) shall be
entitled to receive all amounts collected for checks returned for
insufficient funds with respect to all Mortgage Loans (including Specially
Serviced Mortgage Loans) as additional servicing compensation. Default
Interest and late payment charges accrued in respect of any Mortgage Loan
after it has become a Specially Serviced Mortgage Loan are to be applied to
cover interest on Advances in respect of such Mortgage Loan. In addition,
collections on a Mortgage Loan are to be applied to interest (at the related
Mortgage Rate) and principal then due and owing prior to being applied to
Default Interest and late payment charges.
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, and neither will 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 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").
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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, although in such specific circumstances the Master Servicer may
advance the costs thereof). 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 (i)
is required under the Pooling Agreement to direct the Master Servicer to make
a Servicing Advance or (ii) is otherwise aware a reasonable period in advance
that it is reasonably likely that the Special Servicer will incur a cost or
expense that will, when incurred, constitute a Servicing Advance, the Special
Servicer is required to (in the case of clause (i) preceding), or is required
to use reasonable efforts to (in the case of clause (ii) preceding), 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 is
obligated to make any Servicing Advance in an emergency or in circumstances
where the failure to make the Advance in lieu of requesting that the Master
Servicer make such Advance would be inconsistent with the Servicing Standard;
and provided, further, that the Special Servicer is obligated to make any
Servicing Advance with respect to Specially Serviced Mortgage Loans and REO
Properties that it fails to timely request the Master Servicer to make. The
Master Servicer will be required to make any such Servicing Advance that it
is requested by the Special Servicer to so make within five business days of
the Master Servicer's receipt of such request. The Special Servicer will,
with limited exception as described in the preceding sentence, be relieved of
any obligations with respect to an Advance that it timely requests the Master
Servicer to make (regardless of whether or not the Master Servicer makes that
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
one more business day, the Trustee will be required to make such Servicing
Advance. If the Trustee is required, but fails, to make such Servicing
Advance, the Fiscal Agent will be required to make such Servicing Advance.
The Master Servicer, the Special Servicer, the Trustee and the Fiscal
Agent will be obligated to make Servicing Advances only to the extent that
such Servicing Advances are, in the reasonable and good faith judgment of the
Master Servicer, the Special Servicer, the Trustee or the Fiscal Agent, as
the case may be, ultimately recoverable from Related Proceeds (any Servicing
Advance not so recoverable, a "Nonrecoverable Servicing Advance").
The foregoing paragraph notwithstanding, the Master Servicer is required
(at the direction of the Special Servicer if a Specially Serviced Mortgage
Loan or an REO Property is involved) to pay directly out of the Certificate
Account any servicing expense that, if paid by the Master Servicer or the
Special Servicer, would constitute a Nonrecoverable Servicing Advance;
provided that the Master Servicer (or the Special Servicer, if a Specially
Serviced Mortgage Loan or an REO Property is involved) has determined in
accordance with the Servicing Standard that making such payment is in the
best interests of the Certificateholders (as a collective whole), as
evidenced by an officer's certificate delivered promptly to the Trustee, the
Sponsor and the Rating Agencies, setting forth the basis for such
determination and accompanied by any supporting information the Master
Servicer or the Special Servicer may have obtained.
As and to the extent described herein, the Master Servicer, the Special
Servicer, the Trustee and the Fiscal Agent are each entitled to receive
interest at the Reimbursement Rate 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.
EVIDENCE AS TO COMPLIANCE
On or before March 31 of each year, beginning March 31, 1998, the Master
Servicer, at its expense, will be required to cause a firm of independent
public accountants that is a member of the American
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Institute of Certified Public Accountants to furnish a statement to the
Sponsor and the Trustee to the effect that such firm has examined such
documents and records as it has deemed necessary and appropriate relating to
the servicing of the Mortgage Loans under the Pooling Agreement or the
servicing of mortgage loans similar to the Mortgage Loans under substantially
similar agreements for the preceding calendar year (or during the period from
the date of commencement of the Master Servicer's duties under the Pooling
Agreement until the end of such preceding calendar year in the case of the
first such certificate) and that the assertion of the management of the
Master Servicer that it maintained an effective internal control system over
servicing of the Mortgage Loans or similar mortgage loans is fairly stated in
all material respects, based upon established criteria, which statement meets
the standards applicable to accountants' reports intended for general
distribution. The Special Servicer is required to deliver an annual
accountants' report only if, and in such form as may be, requested by the
Rating Agencies.
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 or defer the payment of interest on and principal of, 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 (including as described below with respect to
Excess Interest), 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
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 (collectively) on a
present value basis than would liquidation as certified to the Trustee in
an officer's certificate;
(ii) the Special Servicer may not, in connection with any particular
extension, extend the maturity date of a Mortgage Loan beyond a date that
is two years prior to the Rated Final Distribution Date;
(iii) neither the Master Servicer nor the Special Servicer may 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 either REMIC I or REMIC II to fail to qualify as a
REMIC under the Code or result in the imposition of any tax on "prohibited
transactions" or "contributions" after the startup date of either 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 may 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
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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 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 of the above referenced
actions in respect of any term of any Mortgage Loan that is required under
the terms of such Mortgage Loan in effect on the Delivery Date, 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.
With respect to the Hyper-Amortization Loans, the Master Servicer shall be
permitted, in its discretion, to waive all or any accrued Excess Interest if,
prior to the related maturity date, the related borrower has requested the
right to prepay the Mortgage Loan in full together with all other payments
required by the Mortgage Loan in connection with such prepayment except for
all or a portion of accrued Excess Interest, provided that the Master
Servicer's determination to waive the right to such accrued Excess Interest
is reasonably likely to produce a greater payment to Certificateholders on a
present value basis than a refusal to waive the right to such Excess
Interest. Any such waiver will not be effective until such prepayment is
tendered. The Master Servicer will have no liability to the Trust, the
Certificateholders or any other person so long as such determination is based
on such criteria. With limited exceptions, the Special Servicer will have no
right to waive the payment of Excess Interest.
SALE OF DEFAULTED MORTGAGE LOANS
The Pooling Agreement grants to the Master Servicer, the Special Servicer
and any holder or holders of Certificates evidencing a majority interest in
the Controlling Class a right to purchase from the Trust 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 the subject of a foreclosure sale or similar
proceeding and that the sale of such Mortgage Loan under the circumstances
described in this paragraph is in accordance with the Servicing Standard, 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 the holder (or holders) of the
Controlling Class. A single holder or particular group of holders of
Certificates evidencing a majority interest in the Controlling Class may, at
its or their option, purchase any such defaulted Mortgage Loan from the
Trust, at a price equal to the applicable Purchase Price. If such
Certificateholder(s) has (have) 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, at a price equal to the
applicable Purchase Price.
The Special Servicer may offer to sell any defaulted Mortgage Loan that it
has determined, in its good faith and reasonable judgement, will become the
subject of a foreclosure sale or similar proceeding and that has not
otherwise been purchased as described in 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. Such offer
is to be made in a commercially reasonable manner for a period of not less
than 30 days. Unless the Special Servicer determines that acceptance of any
offer would not be in the best economic interests of the Trust, the Special
Servicer shall accept the highest cash offer received from any person that
constitutes a fair price (which may be less than the Purchase Price) for such
Mortgage Loan; provided that none of the Special Servicer, the Master
Servicer, the Sponsor, the Mortgage Loan Seller, NMCC, the holder of any
Certificate or any affiliate of any such party (each, an "Interested Person")
may purchase such Mortgage Loan (or any REO Property acquired in respect
thereof) for less than the Purchase Price unless at least two other offers
are received from independent third parties at a price that is less than the
Purchase Price and the price proposed by any Interested
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Persons; and provided, further, that none of the Trustee, the Fiscal Agent or
any affiliate of either of them may make an offer for any such Mortgage Loan.
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 not later than the
end of third calendar year following the year 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
subsequent to the end of the third calendar year following the year in which
such acquisition occurred will not result in the imposition of a tax on the
Trust or cause REMIC I or REMIC II to fail to qualify as a REMIC under the
Code. Subject to the foregoing, the Special Servicer will generally be
required to solicit cash offers 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'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 Trust's
federal income tax reporting position with respect to income it is
anticipated that the Trust 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" (generally, income not derived
from renting or selling real 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 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". The considerations will be of particular relevance
with respect to any health care facilities or hotels that become REO
Property. Any REO Tax imposed on the Trust'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
Commencing in 1998, the Master Servicer is required to perform (or cause
to be performed) physical inspections of each Mortgaged Property (other than
REO Properties and Mortgaged Properties securing Specially Serviced Mortgage
Loans) at least once every two years (or, if the related Mortgage Loan has a
then-current balance greater than $2,000,000, 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 (or cause
to be prepared) as soon as reasonably possible a written report of each such
inspection performed thereby describing the condition of the Mortgaged
Property.
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With respect to each Mortgage Loan that requires the borrower to deliver
quarterly or annual operating statements with respect to the related
Mortgaged Property, the Master Servicer or the Special Servicer, depending on
which is 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 so 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 Certificates evidencing 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 each Rating Agency 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, that the designated replacement will
be bound by the terms of the Pooling Agreement and that the Pooling Agreement
will be enforceable against such designated replacement in accordance with
its terms. 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 and Class A-2 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). It is anticipated that CRIIMI MAE Services Limited
Partnership (which is the Special Servicer) or an entity related thereto will
acquire certain of the Private Certificates, including Private Certificates
which may constitute all or part of the initial "Controlling Class".
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DESCRIPTION OF THE CERTIFICATES
GENERAL
The Mortgage Capital Funding, Inc., Multifamily/Commercial Mortgage
Pass-Through Certificates, Series 1997-MC2 (the "Certificates") will be
issued on or about , 1997 (the "Delivery Date"), 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 Fiscal Agent, the REMIC Administrator, the
Mortgage Loan Seller, and NMCC as an additional warranting party, and will
represent in the aggregate the entire beneficial ownership interest in a
trust fund (the "Trust") the assets of which (such assets collectively, the
"Trust Fund") include: (i) the Mortgage Loans and all payments thereunder and
proceeds thereof 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 14 classes (each, a "Class") to be
designated as: (i) the Class A-1 Certificates and the Class A-2 Certificates
(collectively, the "Class A Certificates"); (ii) 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,
the Class J Certificates and the Class K Certificates (collectively with the
Class A Certificates, the "Sequential Pay Certificates"); (iii) the Class X
Certificates (collectively with the Sequential Pay Certificates, the "REMIC
Regular Certificates"); and (iv) the Class R-I Certificates and the Class
R-II Certificates (collectively, the "REMIC Residual Certificates"). Only the
Class X, Class A, Class B, Class C, Class D and Class E Certificates
(collectively, the "Offered Certificates") are offered hereby.
The Class F, Class G, Class H, Class J and Class K 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
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, $1,000,000
notional principal amount and in any whole dollar denomination in excess
thereof; (ii) in the case of the Class A Certificates, $10,000 actual
principal amount and in any whole dollar denomination in excess thereof; and
(iii) 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 under
"Description of the Certificates--Book-Entry Registration and Definitive
Certificates" in the Prospectus. 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
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"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.
CERTIFICATE BALANCES AND NOTIONAL AMOUNT
Upon initial issuance, the respective classes of Sequential Pay
Certificates will have the following Certificate Balances (in each case,
subject to a variance of plus or minus 5%):
<TABLE>
<CAPTION>
INITIAL
CERTIFICATE APPROXIMATE PERCENT APPROXIMATE
BALANCE OR OF INITIAL INITIAL CREDIT
CLASS NOTIONAL AMOUNT POOL BALANCE SUPPORT
- ------------ --------------- ------------------- --------------
<S> <C> <C> <C>
Class A-1 .. $143,471,137 16.48% 30.00%
Class A-2.... $465,932,965 53.52% 30.00%
Class X...... $870,490,231 N/A N/A
Class B...... $ 52,234,637 6.00% 24.00%
Class C...... $ 43,528,864 5.00% 19.00%
Class D...... $ 39,175,978 4.50% 14.50%
Class E...... $ 26,117,318 3.00% 11.50%
Class F...... $ 43,528,864 5.00% 6.50%
Class G...... $ 8,705,772 1.00% 5.50%
Class H...... $ 19,587,989 2.25% 3.25%
Class J...... $ 10,882,216 1.25% 2.00%
Class K...... $ 17,411,549 2.00% N/A
</TABLE>
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 allocated to such Class of Certificates on such Distribution Date.
See "--Distributions" and "--Subordination; Allocation of Losses and Certain
Expenses" below.
The Class X Certificates will not have a Certificate Balance. The Class X
Certificates will represent the right to receive distributions of interest
accrued as described herein on a notional principal amount (a "Notional
Amount") equal to 99.99% of the aggregate of the Certificate Balances of all
of the Classes of Sequential Pay Certificates outstanding from time to time.
No class of REMIC Residual Certificates will have a Certificate Balance or
a Notional Amount.
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; provided, however, that, under very limited circumstances,
reimbursement of any previously allocated Realized Losses and Additional
Trust Fund Expenses may thereafter be made with respect thereto.
PASS-THROUGH RATES
The Pass-Through Rates applicable to the Class A-1, Class A-2, Class B,
Class C, Class D and Class E Certificates will, at all times, be equal to
%, %, %, %, % and % per annum, respectively.
The Pass-Through Rate applicable to the Class X Certificates for the
initial Distribution Date will equal approximately % per annum. The
Pass-Through Rate applicable to the Class X Certificates for each subsequent
Distribution Date will, in general, equal the excess, if any, of (i) the
weighted average of the Net Mortgage Rates for all the Mortgage Loans
(weighted on the basis of their respective Stated
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Principal Balances immediately following the preceding Distribution Date),
over (ii) the weighted average of the Pass-Through Rates applicable to all
the Classes of Sequential Pay Certificates for such Distribution Date
(weighted on the basis of their respective Certificate Balances immediately
prior to such Distribution Date).
The Pass-Through Rates applicable to the Class F, Class G, Class H, Class
J and Class K Certificates will, at all times, be equal to %, %, %,
% and % per annum, respectively.
The "Net Mortgage Rate" with respect to any Mortgage Loan is, in general,
a per annum rate equal to the related Mortgage Rate in effect from time to
time, minus the sum of the applicable Master Servicing Fee Rate and the per
annum rate at which the monthly Trustee Fee is calculated (such sum, the
"Administrative Fee Rate"); provided that if any Mortgage Loan does not
accrue interest on the basis of a 360-day year consisting of twelve 30-day
months (which is the basis on which interest accrues in respect of the REMIC
Regular Certificates), then, solely for purposes of calculating the
Pass-Through Rate on the Class X Certificates, the Net Mortgage Rate of such
Mortgage Loan for any one-month period preceding a related Due Date will be
the annualized rate at which interest would have to accrue in respect of such
loan on the basis of a 360-day year consisting of twelve 30-day months in
order to produce the aggregate amount of interest actually accrued in respect
of such loan during such one-month period at the related Mortgage Rate (net
of the related Administrative Fee Rate). The Pass-Through Rate on the Class X
Certificates will not be affected by the step-up from the Mortgage Rate to
the Revised Rate on the Anticipated Repayment Date for the Hyper-Amortization
Loans, but such Pass-Through Rate will be affected by the step-down in the
Mortgage Rate for one Mortgage Loan in the event a specified amount of the
loan is prepaid in part in connection with a tenant exercising its option to
purchase a portion of the related Mortgaged Property. As of the Cut-off Date
(without regard to the adjustment described in the proviso to the second
preceding sentence), the Net Mortgage Rates for the Mortgage Loans will range
from 7.110% per annum to 9.250% per annum, with a weighted average Net
Mortgage Rate of 8.047% per annum. See "Servicing of the Mortgage
Loans--Servicing and Other Compensation and Payment of Expenses" herein.
The "Stated Principal Balance" of each Mortgage Loan will initially equal
the Cut-off Date Balance thereof and will be permanently reduced (to not less
than zero) on each Distribution Date by (i) any payments or other collections
(or advances in lieu thereof) of principal on 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 Collection Period.
The "Collection Period" for each Distribution Date is 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
ends on the Determination Date in the calendar month in which such
Distribution Date occurs. The "Determination Date" will be the 10th day of
each month or, if any such 10th day is not a business day, the immediately
preceding business day.
DISTRIBUTIONS
General. Distributions on or with respect to the Certificates will be made
by the Trustee, to the extent of available funds, on the 20th day of each
month or, if any such 20th day is not a business day, then on the next
succeeding business day, commencing in December 1997 (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 written wiring instructions no less than five business days
prior to the related Record Date, 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
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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 and any Class of Certificates, the
"Record Date" will be 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 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, any Sub-Servicers, the Trustee or the Fiscal Agent
as compensation (including Trustee Fees, Master Servicing Fees, Special
Servicing Fees, Workout Fees, Liquidation Fees, Default Interest and late
payment charges (to the extent not otherwise applied to cover interest on
Advances), assumption fees and modification fees), amounts payable in
reimbursement of outstanding Advances, together with interest thereon, and
amounts payable in respect of other 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 any payments made by the
Master Servicer to cover Prepayment Interest Shortfalls incurred during the
related Collection Period.
See "Description of the Pooling Agreements--Certificate Account" in the
Prospectus.
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 Class A-1, Class A-2 and Class
X Certificates (collectively, the "Senior 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 and, to the extent not previously
paid, for all prior Distribution Dates;
(2) to pay principal first to the holders of the Class A-1 Certificates
and second to the holders of the Class A-2 Certificates, in each case, up
to an amount equal to the lesser of (a) the then outstanding Certificate
Balance of such Class of Certificates and (b) the remaining portion of the
Principal Distribution Amount for such Distribution Date;
(3) to reimburse the holders of the Class A-1 and Class A-2 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 allocated to such Classes of Certificates and
for which no reimbursement has previously been paid; and
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(4) to make payments on the other Classes of Certificates (collectively,
the "Subordinate Certificates") as contemplated below;
provided that, on each Distribution Date as of which the aggregate
Certificate Balance of the Subordinate Certificates is to be or has been
reduced to zero, and in any event on the final Distribution Date in
connection with a termination of the Trust (see "--Termination" below), the
payments of principal to be made as contemplated by clause (2) above with
respect to the Class A Certificates, will be so made (subject to available
funds) to the holders of the respective Classes of such 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.
On each Distribution Date, following the above-described distributions on
the Senior 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 and, to the extent not
previously paid, for all prior Distribution Dates;
(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
remaining portion of the Principal Distribution Amount 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 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 and, to the extent not
previously paid, for all prior Distribution Dates;
(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
remaining portion of the Principal Distribution Amount for such
Distribution Date;
(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 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 and, to the extent not
previously paid, for all prior Distribution Dates;
(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 remaining portion of the Principal Distribution Amount 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 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 and, to the extent not
previously paid, for all prior Distribution Dates;
(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 remaining portion of the Principal Distribution
Amount for such Distribution Date;
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(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 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 and, to the extent not
previously paid, for all prior Distribution Dates;
(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 remaining portion of the Principal Distribution
Amount 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 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 and, to the extent not
previously paid, for all prior Distribution Dates;
(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 remaining portion of the Principal
Distribution Amount 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 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 and, to the extent not
previously paid, for all prior Distribution Dates;
(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 remaining portion of the Principal
Distribution Amount 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 allocated to such Class of Certificates and for which no
reimbursement has previously been received;
(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 and, to the extent not
previously paid, for all prior Distribution Dates;
(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 remaining portion of the
Principal Distribution Amount 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 allocated to such Class of Certificates and for which no
reimbursement has previously been received;
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(25) to pay interest to the holders of the Class K Certificates, up to
an amount equal to all Distributable Certificate Interest in respect of
such Class of Certificates for such Distribution Date and, to the extent
not previously paid, for all prior Distribution Dates;
(26) if the Certificate Balances of the Class A, Class B, Class C, Class
D, Class E, Class F, Class G, Class H and Class J Certificates have been
reduced to zero, to pay principal to the holders of the Class K
Certificates, up to an amount equal to the lesser of (a) the then
outstanding Certificate Balance of such Class of Certificates and (b) the
remaining portion of the Principal Distribution Amount for such
Distribution Date;
(27) to reimburse the holders of the Class K Certificates, up to an
amount equal to all Realized Losses and Additional Trust Fund Expenses, if
any, previously allocated to such Class of Certificates and for which no
reimbursement has previously been received; and
(28) 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, the payments of principal to be made as
contemplated by any of clauses (2), (5), (8), (11), (14), (17), (20), (23)
and (26) above with respect to any Class of Sequential Pay Certificates, will
be so made (subject to available funds) up to an amount equal to the entire
then outstanding Certificate Balance of such Class of Certificates.
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 Net
Aggregate Prepayment Interest Shortfall 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.
To the extent of that portion of its aggregate Master Servicing Fee for
the related Collection Period that is, in the case of each and every Mortgage
Loan, calculated at 0.060% per annum, together with all other of its
servicing compensation for the same Collection Period in addition to Master
Servicing Fees, the Master Servicer is required to make a non-reimbursable
payment with respect to each Distribution Date to cover the aggregate of any
Prepayment Interest Shortfalls incurred with respect to the Mortgage Pool
during such Collection Period. The "Net Aggregate Prepayment Interest
Shortfall" for any Distribution Date will be the amount, if any, by which (a)
the aggregate of all Prepayment Interest Shortfalls incurred with respect to
the Mortgage Pool during the related Collection Period, exceeds (b) any such
payment made by the Master Servicer with respect to such Distribution Date to
cover such Prepayment Interest Shortfalls. See "Servicing of the Mortgage
Loans--Servicing and Other Compensation and Payment of Expenses" herein. The
Net Aggregate Prepayment Interest Shortfall, if any, for each Distribution
Date will be allocated on such Distribution Date: first, to the respective
Classes of REMIC Regular Certificates (other than the Senior Certificates)
sequentially in reverse alphabetical order of Class designation, in each case
up to the amount of the lesser of any remaining unallocated portion of such
Net Aggregate Prepayment Interest Shortfall and any Accrued Certificate
Interest in respect of such Class of Certificates for such Distribution Date;
and thereafter, if and to the extent that any portion of such Net Aggregate
Prepayment Interest Shortfall remains unallocated, 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" for any
Distribution Date will, in general, equal the aggregate of the following:
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(a) the principal portions of all Monthly Payments (other than Balloon
Payments) and any Assumed Monthly Payments due or deemed due, as the case
may be, in respect of the Mortgage Loans for their respective Due Dates
occurring during the related Collection Period;
(b) all voluntary principal prepayments received on the Mortgage Loans
during the related Collection Period;
(c) with respect to any Mortgage Loan 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
Monthly Payment (other than a Balloon Payment) due, or the principal
portion of any Assumed Monthly Payment deemed due, in respect of such
Mortgage Loan on a Due Date during or prior to the related Collection
Period and not previously recovered;
(d) all Liquidation Proceeds, Condemnation Proceeds and Insurance
Proceeds received on the Mortgage Loans during the related Collection
Period 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 Monthly
Payment (other than a Balloon Payment) due, or the principal portion of
any Assumed Monthly Payment deemed due, in respect of the related Mortgage
Loan on a Due Date during or prior to the related Collection 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 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.
For purposes of the foregoing, the Monthly Payment due on any Mortgage
Loan on any related Due Date will reflect any waiver, modification or
amendment of the terms of such Mortgage Loan, whether agreed to by the Master
Servicer or Special Servicer or resulting from a bankruptcy, insolvency or
similar proceeding involving the related borrower.
An "Assumed Monthly Payment" is an amount deemed due in respect of: (i)
any Mortgage 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
has become an REO Property. The Assumed Monthly Payment deemed due on any
such Mortgage Loan delinquent as to its Balloon Payment, for its stated
maturity date and for each successive Due Date that it remains outstanding,
will equal the Monthly 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 its amortization schedule,
if any, in effect immediately prior to maturity and had continued to accrue
interest in accordance with such loan's terms in effect immediately prior to
maturity. The Assumed Monthly Payment deemed due on any such Mortgage Loan as
to which the related Mortgaged Property has become an REO Property, for each
Due Date that such REO Property remains part of the Trust Fund, will equal
the Monthly Payment (or, in the case of a Mortgage Loan delinquent in respect
of its Balloon Payment as described in the prior sentence, the Assumed
Monthly Payment) due on the last Due Date prior to the acquisition of such
REO Property.
Distributions of Prepayment Premiums. In the event a borrower is required
to pay any Prepayment Premium (whether described in the related Mortgage Loan
documents as a yield maintenance amount or a fixed prepayment premium) as a
result of a prepayment of principal on a Mortgage Loan, the amount of such
payment actually collected will be distributed in respect of the REMIC
Regular Certificates outstanding on the related Distribution Date (and will
not be applied to reduce the outstanding Certificate Balance of any such
Class), in the following amount and order of priority.
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(a) first, to the holders of the Class X Certificates and the holders of
the respective Class or Classes of Sequential Pay Certificates then
entitled to distributions of principal on such Distribution Date, up to an
amount equal to the corresponding PV Yield Loss Amount (as defined below)
for each such Class of Certificates, pro rata in accordance with their
respective entitlement; and
(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 Class X Certificates.
The "PV Yield Loss Amount" for any Distribution Date means, with respect
to any Class of REMIC Regular Certificates as to which any payment of
principal is to be applied on such Distribution Date in reduction of its
Certificate Balance or Notional Amount, as the case may be, an amount equal
to the product of the applicable Annuity Factor and the applicable Lost
Coupon Amount.
For purposes of computing the PV Yield Loss Amount for any Class of REMIC
Regular Certificates for any Distribution Date, the following definitions
shall apply:
The "Annuity Factor" for any Class of Certificates is equal to the
following:
1 -(1+T)-n
--------------------
T
n = either (i) one-twelfth of the number of months from such Distribution
Date to such Class's Assumed Final Distribution Date, if the Assumed
Final Distribution Date for such Class is later than such Distribution
Date, or (ii) zero, if the Assumed Final Distribution Date for such Class
is earlier than such Distribution Date. In the case of a Class of Offered
Certificates, its Assumed Final Distribution Date is set forth on the
cover hereof. The Assumed Final Distribution Date for the Class F, Class
G, Class H and Class J Certificates is the Distribution Date in November
2007 and the Assumed Final Distribution Date for the Class K Certificates
is the Distribution Date in November 2012.
T = the Reinvestment Yield.
The "Lost Coupon Amount" means: (a) with respect to any Class of
Sequential Pay Certificates as to which a payment of principal is to be
applied on such Distribution Date in reduction of its Certificate Balance,
the product of (x) the amount, if any, by which the Pass-Through Rate for
such Class exceeds the applicable Reinvestment Yield and (y) the aggregate
amount of principal paid to such Class in reduction of its Certificate
Balance on such Distribution Date; and (b) with respect to the Class X
Certificates, the product of (x) the Pass-Through Rate applicable to such
Class for such Distribution Date and (y) the aggregate amount of the
reduction of its Notional Amount on such Distribution Date.
The "Reinvestment Yield" for any Class of Certificates and any
Distribution Date will be a rate determined by the Trustee, in its good
faith, equal to the average yield for "This Week" as most recently reported
by the Federal Reserve Board in Federal Reserve Statistical Release H.15
(519) for U.S. Treasury securities with a maturity coterminus with the
Assumed Final Distribution Date for such Class. If there is no U.S. Treasury
security listed with a maturity coterminus with the Assumed Final
Distribution Date for such Class, then the Reinvestment Yield will be a rate
determined by the Trustee, in its good faith, equal to the interpolated yield
to maturity of U.S. Treasury securities with maturities next longer and
shorter than such remaining term to maturity (such interpolated yield to be
rounded to the nearest whole multiple of 1/100 of 1% per annum, if the
interpolated yield is not such a multiple). In the event the yields of U.S.
Treasury securities are no longer published in Federal Reserve Statistical
Release H.15(519), the Trustee will be permitted to select a comparable
publication to determine the Reinvestment Yield.
The Sponsor makes no representation as to the enforceability of the
provision of any Mortgage Note requiring the payment of a Prepayment Premium
or of the collectability of any Prepayment Premium. See "Description of the
Mortgage Pool--Certain Terms and Conditions of the Mortgage Loans--Prepayment
Provisions" and "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
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Loan will be treated, 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, Standby 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 the Pass-Through Rate for the Class X
Certificates and the Principal Distribution Amount for each Distribution
Date. 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, the Trustee and/or the Fiscal Agent, 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, the Trustee and the Fiscal
Agent 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
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 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 related Certificate Balance. 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 related Certificate Balance. The
subordination of any Class of Subordinate Certificates will be accomplished
by, among other things, 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 K, 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
and Class A-2 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 will, in general, be the result of Realized
Losses incurred in respect of the Mortgage Loans and/or Additional Trust Fund
Expenses. Accordingly, the foregoing reductions in the Certificate Balances
of the respective Classes of the Sequential Pay Certificates will constitute
an allocation of any such Realized Losses and Additional Trust Fund Expenses.
Any such reduction in the Certificate Balance of a Class of Sequential Pay
Certificates will result in a corresponding reduction in the Notional Amount
of the Class X Certificates.
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"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 a borrower or a casualty of any
nature at a Mortgaged Property, to the extent not covered by insurance. The
Realized Loss in respect of a liquidated Mortgage Loan (or related REO
Property) 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 to but not including the Due Date in the Collection
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 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, Workout Fees and Liquidation Fees paid to the Special
Servicer, (ii) any interest paid to the Master Servicer, the Special
Servicer, the Trustee and/or the Fiscal Agent in respect of unreimbursed
Advances, (iii) the cost of various opinions of counsel required or permitted
to be obtained in connection with the servicing of the Mortgage Loans and the
administration of the Trust Fund, (iv) certain unanticipated, non-Mortgage
Loan specific expenses of the Trust, including certain reimbursements and
indemnifications to the Trustee as described under "Description of the
Pooling Agreements--Certain Matters Regarding the Trustee" in the Prospectus
(and certain comparable reimbursements and indemnifications to the Fiscal
Agent), 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, the
Special Servicer, the REMIC Administrator and the 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 and Other
Taxes" herein and "Material Federal Income Tax Consequences--Taxation of
Owners of REMIC Regular Certificates--Prohibited Transactions Tax and Other
Taxes" in the Prospectus, (v) if not advanced by the Master Servicer, any
amounts expended on behalf of the Trust to remediate an adverse environmental
condition at any Mortgaged Property securing a defaulted Mortgage Loan (see
"Description of the Pooling Agreements--Realization Upon Defaulted Mortgage
Loans" in the Prospectus), and (vi) any other expense of the Trust Fund not
specifically included in the calculation of "Realized Loss" for which there
is no corresponding collection from a borrower. 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 and to the extent 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 Monthly Payments (other than Balloon
Payments) and any Assumed Monthly 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 Collection
Period and that were not paid by or on behalf of the related borrowers or
otherwise collected as of the close of business on the last day of the
related Collection 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 (as defined below) 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
on such Mortgage Loan, the interest
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portion of the P&I Advance required to be made in respect of such Mortgage
Loan will be reduced (no reduction to be made in the principal portion,
however) to an amount 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.
Subject to the recoverability determination described below, if the Master
Servicer fails to make a required P&I Advance, the Trustee will be required
to make such P&I Advance, and if the Trustee fails to make such P&I Advance,
the Fiscal Agent will be required to do so. See "--The Trustee" and "--The
Fiscal Agent" below.
The Master Servicer, the Trustee and the Fiscal Agent will each be
entitled to recover any P&I Advance made out of its own funds from any
Related Proceeds. Notwithstanding the foregoing, none of the Master Servicer,
the Trustee or the Fiscal Agent 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,
together with a Nonrecoverable Servicing Advance, "Nonrecoverable Advances"),
and the Master Servicer, the Trustee and the Fiscal Agent, as applicable,
will be entitled to recover any P&I Advance that at any time 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, the Trustee and the Fiscal Agent 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, the
Trustee or the Fiscal Agent, as the case may be, first, out of Default
Interest and late payment charges collected on the related Mortgage Loan (but
only if such items accrued after such Mortgage Loan became a Specially
Serviced Mortgage Loan) and, second, at any time coinciding with or following
the reimbursement of such Advance, out of any amounts then on deposit in the
Certificate Account. Any delay between a Sub-Servicer's receipt of a late
collection of a Monthly Payment as to which a P&I Advance was made and the
forwarding of such late collection to the Master Servicer will increase the
amount of interest accrued and payable to the Master Servicer on such P&I
Advance. To the extent not offset by Default Interest and/or late payment
charges accrued and actually collected on the related Mortgage Loan while it
is a Specially Serviced Mortgage Loan, interest accrued on outstanding
Advances will result in a reduction in amounts payable on the Certificates.
APPRAISAL REDUCTIONS
Within 30 days (or within such longer period as the Master Servicer or the
Special Servicer, as applicable, is diligently and in good faith proceeding
to obtain such) after 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 the Mortgaged Property securing
any Mortgage Loan, (iv) the date on which the borrower under any Mortgage
Loan becomes the subject of bankruptcy or insolvency proceedings, and (v) the
date on which a Mortgaged Property securing any Mortgage Loan becomes an REO
Property (each such Mortgage Loan, a "Required Appraisal Loan"; and each such
date, a "Required Appraisal Date"), the Master Servicer or the Special
Servicer, as applicable, will be required 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,
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
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will, in general, be an amount (determined as of the Determination Date
immediately succeeding the later of the date on which the relevant appraisal
is obtained and the earliest relevant Required Appraisal Date) equal to the
excess, if any, of (a) the sum of (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, the Trustee or the Fiscal Agent, 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 sum of the
related Net Mortgage Rate and the per annum rate at which the Trustee Fee is
calculated, (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, the Trustee or the Fiscal Agent 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 (i) the appraised value of the related Mortgaged Property or
REO Property as determined by such appraisal, net of (ii) the amount of any
liens on such property (not otherwise arising out of the items described in
clause (a)(v) above) that are prior to the lien of the Required Appraisal
Loan; provided that, if an appraisal is required to be obtained as
contemplated by the first sentence of this paragraph but has not been
obtained within the 30-day period contemplated by such sentence, then until
(but just until) such appraisal is obtained the "Appraisal Reduction Amount"
for the subject Required Appraisal Loan will be deemed to equal 30% of the
Stated Principal Balance of such Required Appraisal Loan (after receipt of
such appraisal, the Appraisal Reduction Amount, if any, will be calculated
without regard to this proviso).
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, in which
case it will cease to be a Required Appraisal Loan), 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 advanced by the Master Servicer at the direction of the
Special Servicer and will be reimbursable as 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 to 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 be required to prepare and/or forward on each Distribution
Date to the holders of each Class of REMIC Regular Certificates and the
Rating Agencies, the following statements and reports (collectively, the
"Trustee Reports") substantially in the forms set forth in Annex B (although
such forms may be subject to change over time) 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 REMIC Regular
Certificates 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
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REMIC Regular Certificates allocable to Distributable Certificate Interest
and Prepayment Premiums; (iii) the Available Distribution Amount for such
Distribution Date; (iv) the aggregate amount of P&I Advances made in
respect of the immediately preceding Distribution Date; (v) the aggregate
Stated Principal Balance of the Mortgage Pool outstanding immediately
before and after such Distribution Date; (vi) the number, aggregate
principal balance, weighted average remaining term to maturity and
weighted average Mortgage Rate of the Mortgage Pool as of the end of the
Collection Period for the prior Distribution Date; (vii) as of the close
of business on the last day of the most recently ended 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, and (D) as to which foreclosure proceedings have been
commenced; (viii) the book value (within the meaning of 12 C.F.R. Section
571.13 or comparable provision) of any REO Property included in the Trust
Fund as of the end of the Collection Period for such Distribution Date;
(ix) the Accrued Certificate Interest and Distributable Certificate
Interest in respect of each Class of REMIC Regular Certificates for such
Distribution Date; (x) the aggregate amount of Distributable Certificate
Interest payable in respect of each Class of REMIC Regular Certificates on
such Distribution Date, including, without limitation, any Distributable
Certificate Interest remaining unpaid from prior Distribution Dates; (xi)
any unpaid Distributable Certificate Interest in respect of such Class of
REMIC Regular Certificates after giving effect to the distributions made
on such Distribution Date; (xii) the Pass-Through Rate for each Class of
REMIC Regular Certificates for such Distribution Date; (xiii) the
Principal Distribution Amount for such Distribution Date, separately
identifying the respective components of such amount; (xiv) the aggregate
of all Realized Losses incurred during the related Collection Period and,
aggregated by type, all Additional Trust Fund Expenses incurred during the
related Collection Period; (xv) the Certificate Balance of each Class of
REMIC Regular Certificates outstanding immediately before and immediately
after such Distribution Date, separately identifying any reduction therein
due to the allocation of Realized Losses and Additional Trust Fund
Expenses on such Distribution Date; (xvi) the aggregate amount of
servicing compensation paid to the Master Servicer and the Special
Servicer, collectively and separately, during the Collection Period for
the prior Distribution Date; (xvii) a brief description of any material
waiver, modification or amendment of any Mortgage Loan entered into by the
Master Servicer or Special Servicer pursuant to the Pooling Agreement
during the related Collection Period; and (xviii) any item of information
disclosed to the Trustee by the Master Servicer as described under
"--Reports to Certificateholders; Certain Available Information--Other
Information" below since the preceding Distribution Date or, in the case
of the first Distribution Date Statement, since the Closing Date. In the
case of information furnished pursuant to clauses (i) and (ii) above, the
amounts shall be expressed as a dollar amount in the aggregate for all
Certificates of each applicable Class and per a specified denomination.
(2) A report containing information regarding the Mortgage Loans as of
the close of business on the immediately preceding Determination Date,
which report shall contain certain of 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 (provided
that no information will be provided as to any repair and replacement or
other cash reserve and the only financial information to be reported on an
ongoing basis will be actual expenses, actual revenues and actual net
operating income and a debt service coverage ratio calculated on the basis
thereof).
(3) A "Delinquent Loan Status Report" setting forth, among other things,
those Mortgage Loans which, as of the close of business on the last day of
the most recently ended 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
immediately preceding Determination Date, 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 immediately preceding Determination Date, (i)
the aggregate amount of Liquidation Proceeds received, and liquidation
expenses incurred, both during the Collection Period ending on such
Determination Date and historically, and (ii) the amount of Realized
Losses occurring during such Collection Period and historically, 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 immediately preceding Determination Date, (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 the Collection
Period ending on such Determination Date 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 Determination Date (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 immediately preceding
Determination Date, (i) the aggregate principal balance of all 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. 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 within 130
days following the end of each calendar quarter, commencing with the calendar
quarter ending December 31, 1997, with respect to each Mortgaged Property and
REO Property, an "Operating Statement Analysis" containing revenue, expense
and net operating income information normalized using the methodology
described in Annex A as of the end of such calendar quarter (but only to the
extent, in the case of a Mortgaged Property, that 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
such calendar quarter. The Trustee is to forward copies of each Operating
Statement Analysis to holders of the REMIC Regular Certificates on or about
the first Distribution Date following the Trustee's receipt thereof.
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 Fiscal
Agent, 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 by
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any such holder or Certificate Owner 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 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, in each case except to
the extent the Master Servicer in its reasonable, good faith determination
believes that any item of information contained in such servicing file is of
a nature that should be conveyed to all Certificateholders at the same time,
in which case the Master Servicer is required, as soon as reasonably possible
following its receipt of any such item of information, to disclose such item
of information to the Trustee for inclusion by the Trustee as part of the
Trustee Reports referred to under "--Reports to Certificateholders; Certain
Available Information--Trustee Reports" above; provided that, until the
Trustee has either disclosed such information to all Certificateholders as
part of the Trustee Reports or has properly filed such information with the
Securities and Exchange Commission on behalf of the Trust under the
Securities Exchange Act of 1934, the Master Servicer is entitled to withhold
such item of information from any Certificateholder or Certificate Owner or
prospective transferee of a Certificate or an interest therein; and,
provided, further, that the Master Servicer is not required to make
information contained in any servicing file available to any person to the
extent that doing so is prohibited by applicable law or by any documents
related to a Mortgage Loan.
The Trustee and, subject to the last sentence of the prior paragraph, the
Master Servicer will each make available, upon reasonable advance written
notice and at the expense of the requesting party, originals or 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 and will 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, 94.0% 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 and 6.0% of the
Voting Rights shall be allocated to the holders of the Class X 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.
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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 or holders (other than the Sponsor or Mortgage Loan Seller) of
Certificates representing a majority interest in 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 the majority holder(s) 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 any Mortgage Loans as to which the related Mortgaged
Properties have become REO Properties) 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 the majority holder(s)
of the 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 1.0% of the Initial Pool Balance. The purchase price paid
by the Master Servicer or the majority holder(s) 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
LaSalle National Bank ("LaSalle") will act as Trustee of the Trust.
LaSalle is a subsidiary of LaSalle National Corporation, which is a
subsidiary of the Fiscal Agent. The Trustee is at all times to be, and will
be required to resign if it fails to be, (i) an institution insured by the
FDIC, (ii) a corporation, national bank or national banking association,
organized and doing business under the laws of the United States of America
or any state thereof, authorized under such laws to exercise corporate trust
powers, having a combined capital and surplus of not less than $50,000,000
and subject to supervision or examination by federal or state authority and
(iii) an institution whose long-term senior unsecured debt (or that of its
fiscal agent) is rated not less than Aa2 by Moody's and AA by Fitch (or such
lower rating as would not result, as confirmed in writing by each Rating
Agency, result in a qualification, downgrade or withdrawal of any of the then
current ratings assigned by such Rating Agency to the Certificates). The
corporate trust office of the Trustee responsible for administration of the
Trust Fund (the "Corporate Trust Office") is located at 135 South LaSalle
Street, Chicago, Illinois 60603. Attention: Asset Backed Trust
Services--Mortgage Capital Funding, Inc., Multifamily/ Commercial Mortgage
Pass-Through Certificates, Series 1997-MC2. As of June 30, 1997, the Trustee
had assets of approximately $15.4 billion. 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 Trustee will be entitled to a
monthly fee (the "Trustee Fee"; and, together with the Master Servicing Fee,
the "Administrative Fees") payable out of general collections on the Mortgage
Loans and any REO Properties.
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.
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THE FISCAL AGENT
ABN AMRO Bank N.V., a Netherlands banking corporation ("ABN AMRO"), will
act as Fiscal Agent for the Trust and will be obligated to make any Advance
required to be made, and not made, by the Master Servicer and the Trustee
under the Pooling Agreement, provided that the Fiscal Agent will not be
obligated to make any Advance that it deems to be a Nonrecoverable Advance.
The Fiscal Agent will be entitled (but not obligated) to rely conclusively on
any determination by the Master Servicer or the Trustee that an Advance, if
made, would be a Nonrecoverable Advance. The Fiscal Agent will be entitled to
reimbursement for each Advance made by it in the same manner and to the same
extent as, but prior to, the Master Servicer and the Trustee. See "--P&I
Advances" above. The Fiscal Agent will be entitled to various rights,
protections and indemnities similar to those afforded the Trustee. The
Trustee will be responsible for payment of the compensation of the Fiscal
Agent. As of June 30, 1997, the Fiscal Agent had assets of approximately $398
billion. In the event that LaSalle shall, for any reason, cease to act as
Trustee under the Pooling Agreement, ABN AMRO likewise shall no longer serve
in the capacity of Fiscal Agent thereunder.
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 (which is
fixed in the case of each Class of Offered Certificates other than the Class
X Certificates), (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 Appraisal Reductions and the extent
to which such losses, expenses and reductions are allocable to or otherwise
result in the nonpayment or deferred payment of interest on, or 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 Net
Aggregate 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.
Class X Certificate Pass-Through Rate. The Pass-Through Rate applicable to
the Class X Certificates will be variable and will be calculated based in
part on the weighted average of the Net Mortgage Rates on the Mortgage Loans
from time to time. Accordingly, the yield on such Certificates will be
sensitive to changes in the relative composition of the Mortgage Pool as a
result of scheduled amortization, voluntary prepayments and liquidations of
Mortgage Loans following default. The Pass-Through Rate and yield to maturity
of the Class X Certificates will be adversely affected if Mortgage Loans with
relatively higher Mortgage Rates amortize and/or prepay faster than Mortgage
Loans with relatively lower Mortgage Rates. In addition, the Pass-Through
Rate for the Class X Certificates will vary with changes in the relative
sizes of the Certificate Balances of the respective Classes of Sequential Pay
Certificates. Furthermore, the Pass-Through Rate and yield to maturity of the
Class X Certificates will be adversely affected if the Mortgage Rate (and,
accordingly, the Net Mortgage Rate) of any Mortgage Loan is reduced in
connection with a modification agreed to by the Special Servicer or in
connection with a bankruptcy or insolvency of the related borrower. See
"Description of the Certificates--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 the Class X
Certificates will be extremely sensitive to, and the yield to holders of any
other Class of Offered Certificates purchased at a discount or premium will
be affected by, the rate and timing of reductions of the Certificate Balances
or
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Notional Amount, as the case may be, of such Class of Certificates. As
described herein, the Principal Distribution Amount for each Distribution
Date will be distributable entirely in respect of the Class A Certificates
until the related Certificate Balances thereof are reduced to zero. Following
retirement of the Class A Certificates, the Principal Distribution Amount for
each Distribution Date will be distributable entirely in respect of the other
Classes of Sequential Pay Certificates, sequentially in alphabetical order of
Class designation, in each such case until the related Certificate Balance is
reduced to zero. The Notional Amount of the Class X Certificates will equal
approximately 99.99% of the aggregate of the Certificate Balances of all the
Classes of Sequential Pay Certificates outstanding from time to time.
Consequently, the rate and timing of reductions of the Certificate Balance or
Notional Amount, as the case may be, of each Class of Offered Certificates
will depend on 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 workouts 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 a 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 or otherwise results in reduction of the notional amount
of a Class X Certificate or the principal balance of any other Offered
Certificate purchased at a discount or premium, 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 occurring at a rate higher (or lower)
than the rate anticipated by the investor during any particular period may
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
Mortgage Loans could result in the failure of such investors to fully 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. As and to the
extent described herein, Realized Losses and Additional Trust Fund Expenses
will be allocated to the respective Classes of Sequential Pay Certificates
(in each case, to reduce the Certificate Balance thereof) in the following
order: first, to each Class of Sequential Pay Certificates (other than the
Class A Certificates), in reverse alphabetical order of Class designation,
until the Certificate Balance
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thereof has been reduced to zero; then, to the Class A-1 and Class A-2
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. Any such reduction in the
Certificate Balance of a Class of Sequential Pay Certificates will cause a
corresponding reduction of the Notional Amount of the Class X Certificates.
The Net Aggregate Prepayment Interest Shortfall, if any, for each
Distribution Date will be allocated to the respective Classes of REMIC
Regular Certificates (in each case, to reduce the amount of interest
otherwise payable thereon on such Distribution Date) as follows: first, to
the respective Classes of REMIC Regular Certificates (other than the Senior
Certificates) sequentially in reverse alphabetical order of Class
designation, in each case up to an amount equal to the lesser of any
remaining unallocated portion of such Net Aggregate Prepayment Interest
Shortfall and any Accrued Certificate Interest in respect of such Class of
Certificates for such Distribution Date; and, thereafter, if and to the
extent that any portion of such Net Aggregate Prepayment Interest Shortfall
remains unallocated, among the respective Classes of Senior Certificates, up
to, and pro rata in accordance with, the respective amounts of Accrued
Certificate Interest for each such Class of Senior Certificates for such
Distribution Date.
Certain Relevant Factors. The rate and timing of principal payments and
defaults and the severity of losses on or in respect of the Mortgage Loans
may be 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 retail shopping space, rental apartments, hotel rooms,
industrial space, health care facility beds, senior living units or office
space, 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--Yield and Prepayment Considerations" 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 (or, in the case of a Hyper-Amortization Loan after its
Anticipated Repayment Date, the Revised Rate) at which a Mortgage Loan
accrues interest, a borrower may have an increased incentive to refinance
such Mortgage Loan. Conversely, to the extent prevailing market interest
rates exceed the applicable Mortgage Rate (or, for Hyper-Amortization Loans
after the Anticipated Repayment Date, the Revised Rate) for any Mortgage
Loan, such Mortgage Loan may be less likely to prepay (other than, in the
case of the Hyper-Amortization Loans, out of certain net cash flow from the
related Mortgaged Property). In particular, the Revised Rate for each
Hyper-Amortization Loan generally is the Mortgage Rate therefor plus 2%, and
the primary incentive to prepay a Hyper-Amortization Loan on or before its
Anticipated Repayment Date, assuming prevailing market interest rates exceed
such Revised Rate, is to give the borrower access to excess cash flow, all of
which must be applied to pay down principal of the Mortgage Loan.
Accordingly, there can be no assurance that any Hyper-Amortization Loan will
be prepaid on or before its Anticipated Repayment Date or on any other date
prior to maturity.
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.
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 or a sale of the related Mortgaged Property. See
"Description of the Mortgage Pool--Certain Terms and Conditions of the
Mortgage Loans" herein.
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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.
WEIGHTED AVERAGE LIVES
The weighted average life of any Offered Certificate (other than a Class X
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. For
purposes of this Prospectus Supplement, the weighted average life of any such
Offered Certificate is determined by (i) multiplying the amount of each
principal distribution thereon by the number of years from the assumed
Settlement Date (as defined below) 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. Accordingly, the
weighted average life of any such Offered 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 Offered
Certificate belongs. As described herein, the Principal Distribution Amount
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 other
Classes of Sequential Pay Certificates, sequentially in alphabetical order of
Class designation, in each such case until the related Certificate Balance is
reduced to zero. As a consequence of the foregoing, the weighted average
lives of the Class A Certificates may 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 for each
Distribution Date was being distributed on a pro rata basis among the
respective Classes of Sequential Pay Certificates.
Prepayments on mortgage loans may be measured by a prepayment standard or
model. The model used in this Prospectus Supplement is the CPR model (as
described in the Prospectus). As used in each of the following tables, the
column headed "0%" assumes that none of the Mortgage Loans is prepaid before
maturity. The columns headed "4%", "8%", "12%" and "16%" assume that no
prepayments are made on any Mortgage Loan during such Mortgage Loan's
Lock-out Period, if any, or during such Mortgage Loan's yield maintenance
period, if any, and are otherwise made on each of the Mortgage Loans at the
indicated CPRs. There is no assurance, however, that prepayments of the
Mortgage Loans (whether or not in a 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 Lock-out Period or a yield
maintenance period will not prepay as a result of involuntary liquidations
upon default or otherwise. 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 tables indicate the percentages of the initial Certificate
Balances of the Class A-1, Class A-2, Class B, Class C, Class D and Class E
Certificates that would be outstanding after each of the dates shown at
various CPRs, and the corresponding weighted average lives of such Classes of
Certificates, under the following assumptions (the "Maturity Assumptions"):
(i) the Mortgage Loans have the characteristics set forth on Annex A and the
Initial Pool Balance is $870,577,289, (ii) the Pass-Through Rate and the
initial Certificate Balance or Notional Amount, as the case may be, of each
Class of Offered Certificates are as described herein, (iii) the scheduled
Monthly Payments for each Mortgage Loan that accrues interest on the basis of
a 360-day year consisting of twelve 30-day months (a "30/360 basis"), are
based on such Mortgage Loan's Cut-off Date Balance, calculated remaining
amortization term as of the Cut-off Date and Mortgage Rate as of the Cut-off
Date, and Monthly Payments for each Mortgage Loan that accrues interest on
the basis of actual number of days elapsed during the month of accrual in a
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360-day year or the actual number of days elapsed during the month of accrual
in a 365-day year, are the actual contractual Monthly Payments, (iv) there
are no delinquencies or losses in respect of the Mortgage Loans, there are no
modifications, extensions, waivers or amendments affecting the payment by
borrowers of principal or interest on the Mortgage Loans, there are no
Appraisal Reduction Amounts with respect to the Mortgage Loans and there are
no casualties or condemnations affecting the Mortgaged Properties, (v)
scheduled Monthly Payments on the Mortgage Loans are timely received on the
first day of each month, (vi) no voluntary or involuntary prepayments are
received as to any Mortgage Loan during such Mortgage Loan's Lock-out Period
("LOP"), if any, or yield maintenance period ("YMP"), if any, each
Hyper-Amortization Loan is paid in full on its related Anticipated Repayment
Date, and, otherwise, prepayments are made on each of the Mortgage Loans at
the indicated CPRs set forth in the tables (without regard to any limitations
in such Mortgage Loans on partial voluntary principal prepayments), (vii)
neither the Master Servicer nor any majority holder(s) of the Controlling
Class exercises its or exercise their right of optional termination described
herein, (viii) no Mortgage Loan is required to be repurchased by the Mortgage
Loan Seller or NMCC, (ix) no Prepayment Interest Shortfalls are incurred and
no Prepayment Premiums are collected, (x) there are no Additional Trust Fund
Expenses, (xi) distributions on the Offered Certificates are made on the 20th
day of each month, commencing in December 1997, and (xii) the Offered
Certificates are settled on November 28, 1997 (the "Settlement Date"). 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-2,
Class B, Class C, Class D and /or Class E 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.
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)
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION (CPR)
-----------------------------------------------
DATE 0% 4% 8% 12% 16%
- ---------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Delivery Date ..................... % % % % %
November 20, 1998 .................
November 20, 1999 .................
November 20, 2000 .................
November 20, 2001 .................
November 20, 2002 .................
November 20, 2003 .................
November 20, 2004 .................
November 20, 2005 .................
November 20, 2006 .................
November 20, 2007 .................
Weighted Average Life (years) ....
</TABLE>
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<PAGE>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS A-2 CERTIFICATES AT THE SPECIFIED CPRS
(PREPAYMENTS LOCKED OUT THROUGH LOP AND YMP, THEN THE FOLLOWING CPR)
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION (CPR)
-----------------------------------------------
DATE 0% 4% 8% 12% 16%
- ---------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Delivery Date ..................... % % % % %
November 20, 1998 .................
November 20, 1999 .................
November 20, 2000 .................
November 20, 2001 .................
November 20, 2002 .................
November 20, 2003 .................
November 20, 2004 .................
November 20, 2005 .................
November 20, 2006 .................
November 20, 2007 .................
Weighted Average Life (years) ....
</TABLE>
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)
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION (CPR)
-----------------------------------------------
DATE 0% 4% 8% 12% 16%
- ---------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Delivery Date ..................... % % % % %
November 20, 1998 .................
November 20, 1999 .................
November 20, 2000 .................
November 20, 2001 .................
November 20, 2002 .................
November 20, 2003 .................
November 20, 2004 .................
November 20, 2005 .................
November 20, 2006 .................
November 20, 2007 .................
Weighted Average Life (years) ....
</TABLE>
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)
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION (CPR)
-----------------------------------------------
DATE 0% 4% 8% 12% 16%
- ---------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Delivery Date ..................... % % % % %
November 20, 1998 .................
November 20, 1999 .................
November 20, 2000 .................
November 20, 2001 .................
November 20, 2002 .................
November 20, 2003 .................
November 20, 2004 .................
November 20, 2005 .................
November 20, 2006 .................
November 20, 2007 .................
Weighted Average Life (years) ....
</TABLE>
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<PAGE>
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)
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION (CPR)
-----------------------------------------------
DATE 0% 4% 8% 12% 16%
- ---------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Delivery Date ..................... % % % % %
November 20, 1998 .................
November 20, 1999 .................
November 20, 2000 .................
November 20, 2001 .................
November 20, 2002 .................
November 20, 2003 .................
November 20, 2004 .................
November 20, 2005 .................
November 20, 2006 .................
November 20, 2007 .................
Weighted Average Life (years) ....
</TABLE>
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)
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION (CPR)
-----------------------------------------------
DATE 0% 4% 8% 12% 16%
-------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Delivery Date ..................... % % % % %
November 20, 1998 .................
November 20, 1999 .................
November 20, 2000 .................
November 20, 2001 .................
November 20, 2002 .................
November 20, 2003 .................
November 20, 2004 .................
November 20, 2005 .................
November 20, 2006 .................
November 20, 2007 .................
Weighted Average Life (years) ....
</TABLE>
YIELD SENSITIVITY OF THE CLASS X 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, loan extensions, defaults and liquidations) and losses on or in
respect of the Mortgage Loans. Investors in the Class X Certificates should
fully consider the associated risks, including the risk that an extremely
rapid rate of amortization, prepayment or other liquidation of the Mortgage
Loans could result in the failure of such investors to recoup fully their
initial investments.
The following tables indicate 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 Maturity Assumptions. In addition, it was
assumed, when specifically indicated in a particular table, that 50% (or, if
so specified, 100%) of any Prepayment Premium calculated as a declining
percentage of the amount prepaid (a "Decl. % Premium") is collected in
connection with each prepayment as to which such a Prepayment Premium is
applicable. It was further assumed that the purchase price of the Class X
Certificates is as specified below, expressed in 32nds (i.e., means %)
as a percentage of the initial Notional Amount of such Certificates, without
accrued interest.
The yields set forth in the following tables were calculated by
determining the monthly discount rates that, when applied to the assumed
streams of cash flows to be paid on the Class X Certificates, would
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<PAGE>
cause the discounted present value of such assumed stream of cash flows to
equal the assumed purchase price thereof, and by converting such monthly
rates to semi-annual 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, accordingly, 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 tables below. 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 tables or at any other particular rate, that the cash
flows on the Class X Certificates will correspond to the cash flows shown
herein or that the aggregate purchase price of the 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 Class X Certificates.
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 --------------------------------------------------
PRICE 0% 4% 8% 12% 16%
- -------- ------------- -------- -------- -------- -------
% % % % %
PRE-TAX YIELD TO MATURITY (CBE)
OF THE CLASS X CERTIFICATES (50% RECOVERY OF DECL. % PREMIUMS)
(PREPAYMENTS LOCKED OUT THROUGH LOP AND YMP, THEN THE FOLLOWING CPR)
ASSUMED PREPAYMENT ASSUMPTION (CPR)
PURCHASE --------------------------------------------------
PRICE 0% 4% 8% 12% 16%
- -------- ------------- -------- -------- -------- -------
% % % % %
PRE-TAX YIELD TO MATURITY (CBE)
OF THE CLASS X CERTIFICATES (100% RECOVERY OF DECL. % PREMIUMS)
(PREPAYMENTS LOCKED OUT THROUGH LOP AND YMP, THEN THE FOLLOWING CPR)
ASSUMED PREPAYMENT ASSUMPTION (CPR)
PURCHASE --------------------------------------------------
PRICE 0% 4% 8% 12% 16%
- -------- ------------- -------- -------- -------- -------
% % % % %
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<PAGE>
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
For federal income tax purposes, two separate "real estate mortgage
investment conduit" ("REMIC") elections will be made with respect to
designated portions of the Trust Fund, the resulting REMICs being herein
referred to as "REMIC I" and "REMIC II", 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). The assets of REMIC II will consist of the separate,
noncertificated "regular interests" in REMIC I. For federal income tax
purposes, (i) the Class R-I Certificates will be the sole class of "residual
interests" in REMIC I, (ii) the REMIC Regular Certificates will evidence the
"regular interests" in, and generally will be treated as debt obligations of,
REMIC II, and (iii) the Class R-II Certificates will be the sole class of
"residual interests" in REMIC II. Upon issuance of the Offered Certificates,
Sidley & Austin, 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 and REMIC II will
each qualify as a REMIC under the Code. See "Material Federal Income Tax
Consequences--REMICs" in the Prospectus.
DISCOUNT AND PREMIUM; PREPAYMENT PREMIUMS
For federal income tax reporting purposes, it is anticipated that the
Certificates will, and the Class X and Class 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 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
Mortgage Loans will not prepay (that is, a CPR of 0%), except that the
Hyper-Amortization Loans will be repaid in full on their respective
Anticipated Repayment Dates. However, no representation is made that the
Mortgage Loans will not prepay or that, if they do, 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 Certificateholders 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.
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
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<PAGE>
Certificateholder. 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.
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. The Internal Revenue
Service may nevertheless seek to require that an assumed amount of Prepayment
Premiums be included in distributions projected to be made on the
Certificates and that taxable income be reported based on the projected
constant yield to maturity of the Certificates, including such projected
Prepayment Premiums prior to their actual receipt. In the event that such
projected Prepayment Premiums were not actually received, presumably the
holder of a Certificate would be allowed to claim a deduction or reduction in
gross income at the time such unpaid Prepayment Premiums had been projected
to be received. Moreover, 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.
CHARACTERIZATION OF INVESTMENTS IN OFFERED CERTIFICATES
Generally, except to the extent noted below, the Offered Certificates will
be "real estate assets" within the meaning of Section 856(c)(5)(A) of the
Code in the same proportion that the assets of the Trust 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.
To the extent an Offered Certificate represents ownership of an interest
in any Mortgage Loan that is secured in part by the related borrower's
interest in an account containing any holdback of loan proceeds, a portion of
such Certificate may not represent ownership of assets described in Section
7701(a)(19)(C) of the Code and "real estate assets" under Section
856(c)(5)(A) of the Code and the interest thereon may not constitute
"interest on obligations secured by mortgages on real property" within the
meaning of Section 856(c)(3)(B) of the Code. However, if 95% or more of the
Mortgage Loans are treated as assets described in the foregoing sections of
the Code, the Offered Certificates will be treated as such assets in their
entirety. The Offered Certificates will be treated as "qualified mortgages"
for another REMIC under Section 860G(a)(3)(C) of the Code. See "Description
of the Mortgage Pool" herein and "Material Federal Income Tax
Consequences--REMICs--Characterization of Investments in REMIC Certificates"
in the Prospectus.
POSSIBLE TAXES ON INCOME FROM FORECLOSURE PROPERTY AND OTHER TAXES
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'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 Trust's
federal income tax reporting position with respect to income it is
anticipated that the Trust 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" (generally, income not derived
from renting or selling real 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 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
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<PAGE>
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". These considerations will
be of particular relevance with respect to any health care facilities or
hotels that become REO Property. Any REO Tax imposed on the Trust'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.
To the extent permitted by then applicable laws, any Prohibited
Transactions Tax (as defined in the Prospectus), Contributions Tax (also as
defined in the Prospectus) or tax on "net income from foreclosure property"
that may be imposed on either REMIC I or REMIC II will be borne by the REMIC
Administrator, the Trustee, the Fiscal Agent, the Master Servicer or the
Special Servicer, 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 Pooling Agreement and in
respect of compliance with applicable laws and regulations. Any such tax not
borne by the REMIC Administrator, the Trustee, the Fiscal Agent, the Master
Servicer or the Special Servicer will be charged against the Trust resulting
in a reduction in amounts available for distribution to the Certificateholders.
See "Material Federal Income Tax Consequences--REMICs--Prohibited Transactions
Tax and Other Taxes" in the Prospectus.
REPORTING AND OTHER ADMINISTRATIVE MATTERS
Reporting of interest income, including any original issue discount, if
any, 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 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 Administrator 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 created under the Pooling
Agreement will be the holder of REMIC Residual Certificates evidencing the
largest percentage interest in such REMIC's Class of REMIC Residual
Certificates. All holders of REMIC Residual Certificates will irrevocably
designate the REMIC Administrator as agent for such "tax matters persons" in
all respects.
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<PAGE>
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, including insurance company
general accounts, that is subject to Title I of 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. Certain fiduciary and prohibited
transaction issues arise only if the assets of the Trust constitute "plan
assets" for purposes of Part 4 of Title I of ERISA and Section 4975 of the
Code ("Plan Assets"). Whether the assets of the Trust will constitute Plan
Assets at any time will depend on a number of factors, including the portion
of any Class of Certificates that are held by "benefit plan investors" (as
defined in U.S. Department of Labor Regulation Section 2510.3-101).
The U.S. Department of Labor issued to Citicorp an individual prohibited
transaction exemption, Prohibited Transaction Exemption ("PTE") 90-88, and to
NationsBank Corporation an individual prohibited transaction exemption, PTE
93-31 (the "Exemptions"), which generally exempt from the application of the
prohibited transaction provisions of Sections 406(a) and (b) and 407(a) of
ERISA, and the excise taxes imposed on such prohibited transactions pursuant
to Sections 4975(a) and (b) of the Code, 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
Exemption-Favored Party (as hereinafter defined), provided that certain
conditions set forth in the Exemptions are satisfied. "Exemption-Favored
Party" shall include (a) Citicorp, (b) NationsBank Corporation, (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 NationsBank Corporation (such as NationsBanc Montgomery
Securities, Inc.), 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 Senior 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 Senior Certificate must not be subordinated to the rights
and interests evidenced by the other Certificates. Third, such Senior
Certificate at the time of acquisition by the Plan must be rated in one of
the three highest generic rating categories by Fitch, Moody's, Duff & Phelps
Credit Rating Co. ("DCR") or Standard & Poor's Ratings Services, a Division
of the McGraw-Hill Companies, Inc. ("S&P"). Fourth, the Trustee cannot be an
affiliate of any other member of the "Restricted Group", which (in addition
to the Trustee) consists of any Exemption-Favored Party, the Sponsor, the
Master Servicer, the Special Servicer, any sub-servicer, the Mortgage Loan
Seller, NMCC, 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 and any affiliate of
any of the aforementioned persons. Fifth, the sum of all payments made to and
retained by the Exemption-Favored Parties 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 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
Commission under the Securities Act.
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<PAGE>
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
each Class of Senior Certificates be rated not lower than "Aaa" by Moody's
and "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 and
fifth general conditions set forth above will be satisfied with respect to
such Certificate as of the date of such purchase. A Plan's authorizing
fiduciary will be deemed to make a representation regarding satisfaction of
the sixth general condition set forth above in connection with the purchase
of a Senior Certificate.
The Exemptions also require that the Trust 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
evidencing interests in such other investment pools must have been rated in
one of the three highest categories of Fitch, Moody's, S&P or DCR for at
least one year prior to the Plan's acquisition of a Senior Certificate; and
(iii) certificates evidencing interests in such other investment pools must
have been purchased by investors other than Plans for at least one year prior
to 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 Exemption-Favored Party and a Plan when the Sponsor, an
Exemption-Favored Party, the Trustee, the Master Servicer, the Special
Servicer, a sub-servicer, the Mortgage Loan Seller, NMCC or a borrower is a
party in interest (within the meaning of Section 3(14) of ERISA) or a
disqualified person (within the meaning of Section 4975(e)(2) of the Code) (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 continued 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 (as defined in
the next sentence) 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.
Moreover, if the general conditions of the Exemptions, as well as certain
other specific conditions set forth in the Exemptions, are satisfied, the
Exemptions may also provide an exemption from the restrictions imposed by
Sections 406(b)(1) and (b)(2) of ERISA, and the excise taxes imposed by
Sections 4975(a) and (b) of the Code by reason of 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 Exemption-Favored Party 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 continued holding of Senior Certificates by a Plan.
Further, if the general conditions of the Exemptions, as well as certain
other conditions set forth in 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 excise taxes imposed by Sections 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.
Lastly, if the general conditions of the Exemptions are satisfied, the
Exemptions also may provide an exemption from the restrictions imposed by
Sections 406(a) and 407(a) of ERISA, and the excise taxes
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<PAGE>
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 class
exemptions. See "ERISA Considerations" in the Prospectus. There can be no
assurance that any such class exemptions will apply with respect to any
particular Plan investment in the Offered Certificates or, even if it were
deemed to apply, that any exemption would apply to all transactions that may
occur in connection with such transaction. 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.
THE CHARACTERISTICS OF THE CLASS B, CLASS C, CLASS D AND CLASS E
CERTIFICATES DO NOT MEET THE REQUIREMENTS OF THE EXEMPTIONS. ACCORDINGLY, THE
CERTIFICATES OF THOSE CLASSES MAY NOT BE ACQUIRED BY A PLAN, OTHER THAN AN
INSURANCE COMPANY GENERAL ACCOUNT, WHICH MAY BE ABLE TO RELY ON SECTION III
OF PTCE 95-60 OR SECTION 401(C) OF ERISA (DISCUSSED BELOW).
Section III of Prohibited Transaction Class Exemption 95-60 ("PTCE 95-60")
exempts from the application of the prohibited transaction provisions of
Sections 406(a), 406(b) and 407(a) of ERISA and Section 4975 of the Code
transactions in connection with the servicing, management and operation of a
trust (such as the Trust) in which an insurance company general account has
an interest as a result of its acquisition of certificates issued by the
trust, provided that certain conditions are satisfied. If these conditions
are met, insurance company general accounts would be allowed to purchase
certain Classes of Certificates (such as the Class B, Class C, Class D and
Class E Certificates (which do not meet the requirements of the Exemptions
solely because they (i) are subordinated to other Classes of Certificates in
the Trust and/or (ii) have not received a rating at the time of the
acquisition in one of the three highest rating categories from S&P, Moody's,
DCR or Fitch. All other conditions of the Exemptions would have to be
satisfied in order for PTCE 95-60 to be available. Before purchasing Class B,
Class C, Class D or Class E Certificates, an insurance company general
account seeking to rely on Section III of PTCE 95-60 should itself confirm
that all applicable conditions and other requirements have been satisfied.
The Small Business Job Protection Act of 1996 added a new Section 401(c)
to ERISA, which provides certain exemptive relief from the provisions of Part
4 of Title I of ERISA and Section 4975 of the Code, including the prohibited
transaction restrictions imposed by ERISA and the related excise taxes
imposed by the Code, for transactions involving an insurance company general
account. Pursuant to Section 401(c) of ERISA, the DOL is required to issue
final regulations ("401(c) Regulations") no later than December 31, 1997
which are to provide guidance for the purpose of determining, in cases where
insurance policies supported by an insurer's general account are issued to or
for the benefit of a Plan on or before December 31, 1998, which general
account assets constitute Plan Assets. Section 401(c) of ERISA generally
provides that, until the date which is 18 months after the 401(c) Regulations
become final, no person shall be subject to liability under Part 4 of Title I
of ERISA and Section 4975 of the Code on the basis of a claim that the assets
of an insurance company general account constitute Plan Assets, unless (i) as
otherwise provided by the Secretary of Labor in the 401(c) Regulations to
prevent avoidance of the regulations or (ii) an action is brought by the
Secretary of Labor for certain breaches of fiduciary duty which would also
constitute a violation of federal or state criminal law. Any assets of an
insurance company general account which support insurance policies issued to
a Plan after December 31, 1998 or issued to Plans on or before December 31,
1998 for which the insurance company does not comply with the 401(c)
Regulations may be treated as Plan Assets. In addition, because Section
401(c) does not relate to insurance company separate accounts, separate
account assets are still treated as Plan Assets of any Plan invested in such
separate account. Insurance companies contemplating the investment of general
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<PAGE>
account assets in the Offered Certificates should consult with their legal
counsel with respect to the applicability of Section 401(c) of ERISA,
including the general account's ability to continue to hold the Offered
Certificates after the date which is 18 months after the date the 401(c)
Regulations become final.
A governmental plan as defined in Section 3(32) of ERISA is not subject to
Title I of ERISA or Section 4975 of the Code. However, such a governmental
plan may be subject to a federal, state or local law which is, to a material
extent, similar to the foregoing provisions of ERISA or the Code ("Similar
Law"). A fiduciary of a governmental plan should make its own determination
as to the need for and the availability of any exemptive relief under Similar
Law.
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.
The sale of Offered Certificates to a Plan is in no respect a
representation by the Sponsor or the Underwriters that this investment meets
all relevant legal requirements with respect to investments by Plans
generally or by any particular Plan, or that this investment is appropriate
for Plans generally or for any particular Plan.
LEGAL INVESTMENT
The Offered Certificates will not constitute "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 an amount equal to approximately % of the initial
aggregate Certificate Balance of the Class A, Class B, Class C, Class D and
Class E Certificates, plus accrued interest on all the Offered Certificates,
before deducting expenses payable by the Sponsor.
Citibank, N.A. and NationsBanc Montgomery Securities, Inc. have agreed in
the Underwriting Agreement to purchase approximately % and %,
respectively, of the aggregate principal balance or notional amount, as the
case may be, 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 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
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<PAGE>
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--The Certificates--Limited Liquidity" herein and "Risk
Factors--Certain Factors Adversely Affecting Resale of the Offered
Certificates" in the Prospectus.
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
certain liabilities under the Securities Act. Each of the Mortgage Loan
Seller and NMCC has agreed to indemnify the Sponsor, its officers and
directors, the Underwriters, and each person, if any, who controls the
Sponsor or either Underwriter within the meaning of Section 15 of the
Securities Act, with respect to certain liabilities, including certain
liabilities under the Securities Act, relating to certain of the Mortgage
Loans. NMCC has agreed to indemnify the Mortgage Loan Seller with respect to
certain liabilities, including certain liabilities under the Securities Act,
relating to the NMCC Mortgage Loans. PNC Bank has agreed to indemnify the
Mortgage Loan Seller with respect to certain liabilities, including certain
liabilities under the Securities Act, with respect to the Mortgage Loans sold
by it to the Mortgage Loan Seller.
LEGAL MATTERS
Certain legal matters will be passed upon for the Sponsor by Sidley &
Austin, New York, New York and by Stephen E. Dietz, as an Associate General
Counsel of Citibank, N.A., and for the Underwriters by Cadwalader, Wickersham
& Taft, 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.
RATINGS
It is a condition to their issuance that the Offered Certificates receive
the credit ratings indicated below from Moody's Investors Service, Inc.
("Moody's") and/or Fitch Investors Service, L.P. ("Fitch"; and, together with
Moody's, the "Rating Agencies"):
<TABLE>
<CAPTION>
CLASS MOODY'S FITCH
- -------------- ----------- ---------
<S> <C> <C>
Class A-1...... Aaa AAA
Class A-2 ..... Aaa AAA
Class X........ Aaa AAA
Class B........ Aa2 AA
Class C........ A2 A
Class D........ Baa2 BBB
Class E ....... Baa3 NR
</TABLE>
The ratings of the Offered Certificates address the likelihood of the
timely receipt by holders thereof of all payments of interest to which they
are entitled on each Distribution Date and, except in the case of the Class X
Certificates, the ultimate receipt by holders thereof of all payments of
principal to which they are entitled by the Distribution Date in November
2027 (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/or interest, as applicable, required under the Offered Certificates. The
ratings of the Offered Certificates do not, however, represent any
assessments of (i) the likelihood or frequency of voluntary or involuntary
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 collected on the Mortgage
Loans in connection with such
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<PAGE>
prepayments or the corresponding effect on yield to investors. 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 and/or other liquidations of the Mortgage Loans. In
general, the ratings thus address credit risk and not prepayment risk. As
described herein, the amounts payable with respect to the Class X
Certificates consist only of interest (and, to the extent described herein,
may consist of a portion of the Prepayment Premiums actually collected on the
Mortgage Loans). If the entire pool were to prepay in the initial month, with
the result that the Class X Certificateholders receive only a single month's
interest 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 received on the Class X
Certificates. The Notional Amount upon which interest is calculated with
respect to the Class X Certificates is subject to reduction in connection
with each reduction in the Certificate Balance of a Class of Sequential Pay
Certificates, whether as a result of principal payments or the allocation of
Realized Losses. The ratings on the Class X Certificates do not address the
timing or magnitude of reduction of such Notional Amount, but only the
obligation to pay interest timely on such Notional Amount as so reduced from
time to time. Accordingly, the ratings on the Class X Certificates should be
evaluated independently from similar ratings on other types of securities.
There is no assurance that any rating assigned to the Offered Certificates
by a Rating Agency will not be lowered, qualified or withdrawn by such Rating
Agency, if, in its judgment, circumstances so warrant. 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 Fitch and/or Moody's.
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.
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<PAGE>
INDEX OF PRINCIPAL DEFINITIONS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1995 Expenses ............................... A-3
1995 NOI .................................... A-3
1995 Revenues ............................... A-3
1996 Debt Service Coverage Ratio ............ A-3
1996 DSCR ................................... A-3
1996 Expenses ............................... A-3
1996 NOI .................................... A-2
1996 Revenues ............................... A-3
30/360 Basis ......................... S-13, S-40
30/360 Mortgage Loans ................ S-13, S-40
401(c) Regulations ......................... S-90
ABN AMRO ................................... S-77
Accrued Certificate Interest ............... S-66
ACMs ....................................... S-34
Actual/360 Basis ..................... S-13, S-40
Actual/360 Mortgage Loans ............ S-13, S-40
Actual/365 Basis ..................... S-13, S-40
Actual/365 Mortgage Loans ............ S-13, S-40
Additional Trust Fund Expenses ...... S-17, S-70
Administrative Fee Rate ............... S-62, A-4
Administrative Fees ........................ S-18
Advances ................................... S-54
Annual Debt Service ......................... A-4
Anticipated Loan Balance at Maturity ....... A-4
Anticipated Repayment Date ................. S-14
Appraisal Reduction Amount ................. S-71
Appraisal Value ............................. A-4
Assumed Monthly Payment .............. S-22, S-67
Available Distribution Amount ....... S-19, S-63
Balloon Loans .............................. S-13
Balloon Payment ............................ S-41
Beds ........................................ A-4
CBE ........................................ S-83
Certificate Balance ......................... S-1
Certificate Owner .................... S-10, S-60
Certificate Registrar ...................... S-61
Certificateholders ......................... S-16
Certificates ..................... S-1, S-9, S-60
Citi Mortgage Loans .................. S-16, S-39
Class ............................ S-1, S-9, S-60
Class A Certificates ............. S-1, S-9, S-60
Code ................................. S-26, S-85
Commercial Loan ............................ S-38
Commercial Mortgaged Property .............. S-38
Controlling Class .................... S-25, S-59
Corporate Trust Office ..................... S-76
Corrected Mortgage Loan .................... S-51
CRIIMI MAE ................................. S-52
Cross-Collateralized Mortgage Loans . S-11, S-38
Cut-off Date ............................... S-38
Cut-off Date Balance ....................... S-38
Cut-off Date Loan-to-Value Ratio ...... S-7, A-4
Cut-off Date LTV ............................ A-4
Cut-off Date LTV Ratio ...................... A-4
DCR ........................................ S-88
Definitive Certificate ............... S-10, S-60
Delivery Date ......................... S-1, S-60
Description of the Mortgage Pool ........... S-37
Distributable Certificate Interest .. S-21, S-66
Distribution Date .......................... S-62
Distribution Date Statement ................ S-72
DTC ............................. S-1, S-10, S-60
Due Date ............................. S-13, S-40
ERISA ................................ S-27, S-88
Excess Interest ...................... S-14, S-40
Excess Interest Rate ................. S-14, S-40
Exemptions ........................... S-27, S-88
FIRREA ..................................... S-44
Fitch ........................... S-3, S-28, S-92
Form 8-K ................................... S-49
FREE ........................................ A-4
GAAP ........................................ A-2
Grtr ........................................ A-4
Hyper-Amortization Loan .................... S-14
Hyper-Amortization Loans ................... S-40
Initial Pool Balance ............ S-3, S-11, S-38
Interested Person .......................... S-57
IRS ........................................ S-85
LaSalle .................................... S-76
Leasable Square Footage ..................... A-4
Lockbox Account ............................ S-40
Lock-out Period ...................... S-14, S-41
LOP ........................................ S-81
MAI ........................................ S-44
Master Servicing Fee ....................... S-52
Master Servicing Fee Rate .................. S-53
Maturity Assumptions ....................... S-80
Maturity Date Loan-to-Value Ratio ........... A-4
Maturity Date LTV ........................... A-4
Midland .............................. S-48, S-51
Modified Mortgage Loan ..................... S-72
Monthly Payments ..................... S-13, S-40
Moody's ......................... S-3, S-28, S-92
Mortgage ............................. S-11, S-38
Mortgage Loan Schedule ..................... S-47
Mortgage Loan Seller ........................ S-3
Mortgage Loans .................. S-3, S-11, S-38
Mortgage Note ........................ S-11, S-38
Mortgage Pool ............................... S-3
Mortgage Rate ........................ S-13, S-40
Mortgaged Property ................... S-11, S-38
Multifamily Loan ........................... S-38
Multifamily Mortgaged Property ............. S-38
Net Aggregate Prepayment Interest Shortfall
........................................... S-66
Net Mortgage Rate .................... S-18, S-62
Net Rentable Area (SF) ...................... A-4
NMCC ................................. S-16, S-39
NMCC Mortgage Loans .................. S-16, S-39
Nonrecoverable Advances .................... S-71
Nonrecoverable P&I Advance ................. S-71
Nonrecoverable Servicing Advance ........... S-55
Notional Amount ................. S-1, S-17, S-61
Occupancy Percent ........................... A-4
Offered Certificates ............. S-1, S-9, S-60
OID Regulations ............................ S-85
Open Period .......................... S-14, S-41
Participants ............................... S-60
Party in Interest .......................... S-89
Pass-Through Rate ........................... S-1
Permitted Encumbrances ..................... S-47
Permitted Investments ...................... S-53
P&I Advance .......................... S-23, S-70
Plan ................................. S-27, S-88
Plan Assets ................................ S-88
PNC Bank ............................. S-16, S-39
PNC Mortgage Loans ......................... S-39
S-94
<PAGE>
PAGE
----
Pooling Agreement .................... S-17, S-60
Prepayment Premium ................... S-14, S-41
Prepayment Premium Period ............ S-14, S-41
Prepayment Premiums ......................... S-4
Principal Distribution Amount ....... S-21, S-66
Private Certificates .................. S-9, S-60
PTCE 95-60 ................................. S-90
PTE ........................................ S-88
Purchase Price ............................. S-47
Rated Final Distribution Date .............. S-92
Rating Agencies ................. S-3, S-28, S-92
Realized Losses ...................... S-17, S-70
Record Date ................................ S-63
Reimbursement Rate ................... S-23, S-71
Related Loans ............................... A-4
Related Proceeds ........................... S-54
REMIC ........................... S-4, S-25, S-85
REMIC Administrator ................... S-9, S-76
REMIC I ..................................... S-4
REMIC II .................................... S-4
REMIC Regular Certificates ...... S-1, S-9, S-60
REMIC Residual Certificates ..... S-1, S-9, S-60
REO Extension .............................. S-58
REO Property ......................... S-22, S-50
REO Status Report .......................... S-74
REO Tax .............................. S-58, S-86
Required Appraisal Date .................... S-71
Required Appraisal Loan .................... S-71
Restricted Group ........................... S-88
Revised Rate ......................... S-14, S-40
Rooms ....................................... A-4
Senior Certificates .................. S-19, S-63
Sequential Pay Certificates ..... S-1, S-9, S-60
Servicing Advances ......................... S-54
Servicing Standard ......................... S-50
Settlement Date ............................ S-81
Similar Law ................................ S-91
S&P ........................................ S-88
Special Servicing Fee Rate ................. S-53
Specially Serviced Mortgage Loan ........... S-50
Sponsor ..................................... S-3
Subordinate Certificates ............. S-20, S-64
Sub-Servicer ............................... S-52
Sub-Servicing Agreement .................... S-52
Sub-Servicing Fee Rate ...................... A-4
Trust ........................... S-3, S-17, S-60
Trust Fund ........................... S-17, S-60
Trustee Reports ............................ S-72
Underwriters ................................ S-1
Underwriting Debt Service Coverage Ratio .. S-7,
A-2
Underwriting DSCR ........................... A-2
Underwriting Expenses ....................... A-1
Underwriting NOI ....................... A-1, A-2
Underwriting Revenues ....................... A-1
Units ....................................... A-4
UPB ......................................... A-4
'U/W DSCR ................................... A-2
U/W Expenses ................................ A-1
U/W NOI ................................ A-1, A-2
U/W Reserves ................................ A-4
U/W Revenues ................................ A-1
Voting Rights .............................. S-75
YM .......................................... A-4
YMP ........................................ S-81
</TABLE>
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ANNEX A
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
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, made at origination 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 U/W Revenues
over U/W Expenses, each of which was generally derived in the following
manner:
(i) "Underwriting Revenues" or "U/W Revenues" were generally assumed to
equal (subject to the assumptions and adjustments specified in the
following three sentences): (a) the actual amounts of gross rents (in the
case of the Multifamily Mortgaged Properties) received during the latest
full calendar year (on a rolling 12-month basis, or annualized or
estimated in certain cases); (b) monthly contractual base rents (in the
case of the Commercial Mortgaged Properties other than the health care and
hotel Mortgaged Properties) that either are annualized based on leases in
effect as reflected on a rent roll provided by the borrower in connection
with the origination of the related Mortgage Loan or are based on a prior
12 month period; and (c) annual revenues consistent with historical
operating trends and market and competitive conditions, in the case of
health care and hotel Mortgaged Properties. Such Underwriting 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, office and industrial 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,
office 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. Also, in the case of certain Mortgaged Properties that are
operated as nursing home or hotel properties and are subject to an
operating lease with a single operator, Underwriting Revenues were
calculated as described above based on revenues received by the operator
rather than rental payments received by the related borrower under the
operating lease; provided that such rental payments are sufficient to pay
debt service on the related Mortgage Loan.
Underwriting Revenues generally include: (v) for the Multifamily
Mortgaged Properties, rental and other revenues; (w) for the Commercial
Mortgaged Properties (other than the health care related and hotel
Mortgaged Properties), base rent (less mark-to-market adjustments in some
cases), percentage rent, expense reimbursements and other revenues; (x)
for the health care Mortgaged Properties, resident charges, Medicaid and
Medicare payments, and other revenues; and (y) for the hotel Mortgaged
Properties, guest room rates, food and beverage charges, telephone charges
and other revenues.
(ii) "Underwriting Expenses" or "U/W Expenses" were generally assumed to
be equal to historical annual 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 0% and 10% 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 the case of certain retail, office and industrial Mortgaged
Properties, adjustments may have been made to account for
A-1
<PAGE>
tenant improvements and leasing commissions at costs consistent with
historical trends or prevailing market conditions and, in other cases,
operating expenses did not include such costs).
Underwriting 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 therefor
(except as described above). In the case of certain retail, office and/or
industrial Mortgaged Properties, Underwriting Expenses may have included
leasing commissions and tenant improvements. In the case of hotel
Mortgaged Properties, Underwriting Expenses included such departmental
expenses relating to guest rooms, food and beverage, telephone bills, and
rental and other expenses, and such undistributed operating expenses as
general and administrative, marketing and franchise fee. In the case of
health care Mortgaged Properties, Underwriting Expenses included routine
and ancillary contractual expenses, nursing expenses, dietary expenses,
laundry/housekeeping expenses, activities/social service expenses,
equipment rental expenses and other expenses.
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, and/or (z) by reviewing the
amounts of expenses for periods prior to the latest full calendar year
where such information was available.
The management fees used in calculating Underwriting NOI differ in many
cases from the management fees 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. 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.
In some cases, "Underwriting NOI" or "U/W NOI" describes the cash flow
available before deductions for capital expenditures such as tenant
improvements, leasing commissions and structural reserves. "Underwriting NOI"
or "U/W NOI" has been calculated without including U/W Reserves or any other
reserves among Underwriting Expenses. Had such reserves been so included,
"Underwriting NOI" or "U/W NOI" would have been lower. Even in those cases
where such "reserves" were so included, no cash may have been actually
escrowed. No representation is made as to the future net cash flow of the
properties, nor is "Underwriting NOI" or "U/W NOI" set forth herein intended
to represent such future net cash flow.
Underwriting NOI and the Underwriting Revenues and Underwriting 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. "Underwriting Debt Service Coverage Ratio", "Underwriting DSCR" or
"U/W DSCR" as used herein with respect to any Mortgage Loan means (a) the
Underwriting NOI for the related Mortgaged Property or Properties, divided by
(b) the Annual Debt Service for such Mortgage Loan.
3. "1996 NOI" means, with respect to any Mortgaged Property, the net
operating income derived therefrom for 1996 (equal to 1996 Revenues less 1996
Expenses) that was available for debt service, as
A-2
<PAGE>
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. 1996
NOI does not necessarily reflect accrual of certain costs such as capital
expenditures and leasing commissions 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 1996 Expenses to reflect normalized 1996 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. 1996 NOI was not necessarily determined in
accordance with GAAP. Moreover, 1996 NOI is not a substitute for net income
determined in accordance with GAAP 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 GAAP as a measure of liquidity and
in certain cases may reflect partial-year annualizations.
(i) "1996 Revenues" are the gross revenues received in respect of a
Mortgaged Property for the year ended December 31, 1996 (or annualized or
estimated in certain cases) or for a fiscal year primarily overlapping
with calendar year 1996, as reflected in the operating statements and
other information furnished by the related borrower, and such revenues
generally include: (a) for the Multifamily Mortgaged Properties, gross
rental and other revenues; (b) for the retail, office and industrial
Mortgaged Properties, base rent, percentage rent, expense reimbursements
and other revenues; (c) for the health care Mortgaged Properties, resident
charges, Medicaid and Medicare payments and other revenues; and (d) for
the hotel Mortgaged Properties, guest room, food and beverage, telephone
and other revenues. In addition, in the case of certain Mortgaged
Properties that are operated as nursing homes or hotels and are subject to
an operating lease with a single operator, 1996 Revenues were calculated
as described above based on revenues received by the operators rather than
rental payments received by the related borrower under the operating
lease.
(ii) "1996 Expenses" are the operating expenses incurred for a Mortgaged
Property for the year ended December 31, 1996 (or annualized or estimated
in certain cases) or for a fiscal year primarily overlapping with calendar
year 1996, as reflected in the operating statements and other information
furnished by the related borrower, and such 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). In the case of
certain retail, office, and/or industrial Mortgaged Properties, 1996
Expenses may have included leasing commissions and tenant improvements. In
the case of hotel Mortgaged Properties, 1996 Expenses included such
departmental expenses as guest room, food and beverage, telephone, and
rental and other expenses, and such undistributed operating expenses as
marketing and franchise fees. In the case of health care Mortgaged
Properties, 1996 Expenses included routine and ancillary contractual
expenses, nursing expenses, dietary expenses, laundry/housekeeping,
activities/social service expenses, equipment rental expenses and other
expenses.
4. "1996 Debt Service Coverage Ratio" or "1996 DSCR" means, with respect
to any Mortgage Loan, (a) the 1996 NOI for the related Mortgaged Property or
Properties, divided by (b) the Annual Debt Service for such Mortgage Loan.
5. "1995 NOI" means, with respect to any Mortgaged Property, the net
operating income derived therefrom for 1995, equal to 1995 Revenues less 1995
Expenses and calculated in a manner consistent with 1996 NOI.
(i) "1995 Revenues" are the revenues for a Mortgaged Property for the
year ended December 31, 1995, calculated in a manner consistent with 1996
Revenues.
(ii) "1995 Expenses" are the actual expenses incurred for a Mortgaged
Property for the year ended December 31, 1995, calculated in a manner
consistent with 1996 Expenses.
A-3
<PAGE>
6. "Annual Debt Service" means, for any Mortgage Loan, twelve times the
amount of the Monthly Payment under such Mortgage Loan as of the Cut-off
Date.
7. "Appraisal Value" means, for any Mortgaged Property, the appraiser's
value as stated in the appraisal available to the Sponsor as of the date
specified on the schedule.
8. "Cut-off Date Loan-to-Value Ratio", "Cut-off Date LTV Ratio" or
"Cut-off Date LTV" means, with respect to any Mortgage Loan, the Cut-off Date
Balance of such Mortgage Loan divided by the Appraisal Value of the related
Mortgaged Property. "Maturity Date Loan-to-Value Ratio" or "Maturity Date
LTV" means, with respect to any Mortgage Loan, the Anticipated Loan Balance
at Maturity, divided by the Appraisal Value of the related Mortgaged
Property.
9. "Leasable Square Footage" or "Net Rentable Area (SF)" means, in the
case of a Mortgaged Property operated as a retail center, office complex or
industrial facility, the square footage of the net leasable area.
10. "Units", "Rooms" and "Beds", respectively, mean: (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 (referred to
in the schedule as "Units") and, in the case of a Mortgaged Property operated
as a mobile home park, the number of pads (also referred to in the schedule
as "Units"); (ii) in the case of a Mortgaged Property operated as a hotel,
the number of rooms (referred to in the schedule as "Rooms"); and (iii) in
the case of a Mortgaged Property operated as a health care facility, the
number of beds (referred to in the schedule as "Beds").
11. "U/W Reserves" means: (i) in the case of a Mortgaged Property operated
as a retail center, office complex or industrial facility, on-going reserves
required to be maintained on a net leaseable area basis; (ii) in the case of
a Mortgaged Property operated as multifamily housing or a mobile home park,
on-going reserves required to be maintained on a per Unit basis; (iii) in the
case of a Mortgaged Property operated as a hotel calculated as a percentage
of U/W Revenues; and (iv) in the case of a Mortgaged Property operated as a
health care facility, on-going reserves required to be maintained on a per
Bed basis; however, in each case, actual reserves may be less than the amount
of required reserves or no reserves may have been escrowed.
12. "Occupancy %" or "Occupancy Percent" means the percentage of Leasable
Square Footage or Total Units/Rooms/Pads, 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.
13. "Administrative Fee Rate" means the sum of the Master Servicing Fee
Rate (including the per annum rates at which the monthly sub-servicing fee is
payable to the related Sub-Servicer (the "Sub-Servicing Fee Rate") and the
Standby Fee is payable to the Special Servicer), plus the per annum rate
applicable to the calculation of the Trustee Fee.
14. "Related Loans" means two or more Mortgage Loans with respect to which
the related Mortgaged Properties are either owned by the same entity or owned
by two or more entities controlled by the same key principals.
15. "Anticipated Loan Balance at Maturity" means, with respect to any
Mortgage Loan, the balance due at maturity or, in the case of a
Hyper-Amortization Loan, the related Anticipated Repayment Date pursuant to
the payment schedule for such Mortgage Loan and assuming no prepayments,
defaults or extensions.
16. "UPB" means, with respect to any Mortgage Loan, its unpaid principal
balance.
17. "YM" means, with respect to any Mortgage Loan, a yield maintenance
premium.
18. "Grtr" means "the greater of".
19. "FREE" means, with respect to any Mortgage Loan, that such Mortgage
Loan may be voluntarily prepaid without a Prepayment Premium.
A-4
<PAGE>
ANNEX A
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
CONTROL LOAN ZIP PROPERTY ORIGINAL
NUMBER NUMBER PROPERTY NAME PROPERTY ADDRESS CITY STATE CODE TYPE BALANCE
- ------- -------- -------------------------- -------------------------- ------------------ ----- ----- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
N001 50071 Saddle Creek Apartments 43398 Citation Dr. Novi MI 48375 Multifamily $21,824,000
N002 50169 Suerte Apartments 9904-9988 Kika Court San Diego CA 92129 Multifamily $19,000,000
N003 50003 Springs Pointe Apartments 5010 Indian River Drive Las Vegas NV 89103 Multifamily $17,753,000
N004 50008 The Landings at Cypress 16812 North Dale Mabry Tampa FL 33618 Multifamily $17,000,000
Meadows Highway
N005 50018 Sun Harbor Suites 1500 Stardust Rd. Las Vegas NV 89109 Multifamily $16,750,000
------ -------- -------------------------- -------------------------- ------------------ ----- ----- ----------- -----------
N006 50004 Westwood Pointe Apartments 5070 River Glen Drive Las Vegas NV 89103 Multifamily $16,580,000
N007 50070 Briar Cove Apartments 650 Way Market St. Ann Arbor MI 48103 Multifamily $16,400,000
C008 655411-6 Chesapeake Landing Apts 3640 Beluga Lane Indianapolis IN 46214 Multifamily $13,400,000
N009 50058 College Park Apartments 1620 West University Gainesville FL 32603 Multifamily $13,400,000
C010 655342-1 Lakeland Apartments 2020 East Park Place Milwaukee WI 53211 Multifamily $ 1,160,376
------ -------- -------------------------- -------------------------- ------------------ ----- ----- ----------- -----------
C011 655342-1 Lake Terrace Apartments 2616 North Frederick Milwaukee WI 53211 Multifamily $ 2,538,322
Avenue
C012 655342-1 Maryland Park Apartments 2720 North Frederick Milwaukee WI 53211 Multifamily $ 3,843,745
Avenue
C013 655342-1 Riverland Apartments 2332 North Oakland Avenue Milwaukee WI 53211 Multifamily $ 703,478
C014 655342-1 River Terrace Apartments 2333 North Oakland Avenue Milwaukee WI 53211 Multifamily $ 551,179
C015 655342-1 Lake Park Apartments 2645 North Farwell Avenue Milwaukee WI 53211 Multifamily $ 1,232,899
------ -------- -------------------------- -------------------------- ------------------ ----- ----- ----------- -----------
C016 655467-9 Hampton Meadows 906 McKnight Circle Rockford IL 61107 Multifamily $ 9,150,000
N017 50029 Lost Creek Apartments 4950 South State Street Murray UT 84107 Multifamily $ 7,675,000
N018 50088 Sands Point Apartments 8100 Sands Point Dr. Houston TX 77036 Multifamily $ 7,600,000
N019 50010 Debaliviere Place IV 5501 Perishing Ave. St. Louis MO 63112 Multifamily $ 7,150,000
C020 655386-1 Vantage Point Apartments 2300 Rebsamen Park Road Little Rock AR 72202 Multifamily $ 6,925,000
------ -------- -------------------------- -------------------------- ------------------ ----- ----- ----------- -----------
N021 50031 The Summit Apartments 3904 370 Plaza Bellevue NE 68123 Multifamily $ 6,925,000
C022 655317-5 Oaks of Northgate 8000 Oakdell Way San Antonio TX 78240 Multifamily $ 6,350,000
C023 655396-8 Hunters Crossing 3001 Kemp Blvd Wichita Falls TX 76308 Multifamily $ 6,000,000
C024 655318-8 Lakeshire Place Apartments 503 El Dorado Blvd Webster TX 77598 Multifamily $ 5,600,000
N025 50184 Heritage Oaks Apartments 1000 S. Glendora Ave. Glendora CA 91740 Multifamily $ 5,560,000
------ -------- -------------------------- -------------------------- ------------------ ----- ----- ----------- -----------
N026 50100 Woodcrest Apartments 2414 N. McArthur Blvd. Irving TX 75062 Multifamily $ 5,520,000
C027 655446-2 Piccadilly Apartments 2220 SW 34th Street Gainesville FL 32608 Multifamily $ 5,070,000
N028 50097 Centennial Apartments 380 North & 1020 East Provo UT 84604 Multifamily $ 5,000,000
N029 50084 Runnymede Apartments 1101 Rutland Rd. Austin TX 78758 Multifamily $ 5,000,000
C030 655312-0 Arlington Oaks Apartments 1111 Honeysuckle Way Arlington TX 76011 Multifamily $ 4,950,000
------ -------- -------------------------- -------------------------- ------------------ ----- ----- ----------- -----------
C031 655302-3 Forest Creek Crossing 2751 Hammondton Road Marietta GA 30060 Multifamily $ 4,500,000
Apartments
N032 50102 Windridge Apartments 2346 N. MacArthur Blvd. Irving TX 75062 Multifamily $ 4,140,000
C033 655455-6 Columbia Courts Apartments 818 & 903-939 Thurstin Bowling Green OH 43402 Multifamily $ 2,805,000
Avenue
C034 655455-6 Frazee Avenue Apartments 624-670 Frazee Avenue Bowling Green OH 43402 Multifamily $ 1,102,500
N035 50030 Lauder Ridge Apartments 5600 Southwest 12th St. North Lauderdale FL 33068 Multifamily $ 3,798,000
------ -------- -------------------------- -------------------------- ------------------ ----- ----- ----------- -----------
C036 655471-8 Bellvue Garden Apartments 210 Hale Street Harrisburg PA 17104 Multifamily $ 2,022,222
C037 655471-8 Bellvue Towers Apartments 2400 Market Street Harrisburg PA 17104 Multifamily $ 1,477,778
N038 50050 Latham Park Manor West Bessemer Ave & Hill Greensboro NC 27401 Multifamily $ 3,500,000
St.
C039 655445-9 Point West Apartments 500 SW 34th Street Gainesville FL 32607 Multifamily $ 3,430,000
N040 50101 Kingsley Creek Apartments 7218 Skillman Street Dallas TX 75231 Multifamily $ 3,209,900
------ -------- -------------------------- -------------------------- ------------------ ----- ----- ----------- -----------
C041 655322-7 Sundance Apartments 4615 Gardendale Drive San Antonio TX 78240 Multifamily $ 3,105,000
N042 50074 Bienville Towers 2100 College Drive Baton Rouge LA 70808 Multifamily $ 3,105,000
C043 655340-5 Chapelwood Place 100 Chapelwood Place Henderson KY 42420 Multifamily $ 3,000,000
Apartments
N044 50086 Crosspointe Apartments 9902 Cranberry Lane NW Silverdale WA 98383 Multifamily $ 3,000,000
C045 655334-0 Village Apartments 867 Fendley Drive Conway AR 72032 Multifamily $ 3,000,000
------ -------- -------------------------- -------------------------- ------------------ ----- ----- ----------- -----------
C046 655323-0 Logan Place Apartments 2608 El Toro Drive Huntsville TX 77340 Multifamily $ 2,963,000
C047 650776-5 Village Club Apartments 500 N.E 2nd Street Dania FL 33004 Multifamily $ 2,800,000
N048 50103 Rochelle Plaza Apartments 306 W. Rochelle Road Irving TX 75062 Multifamily $ 2,760,000
C049 655444-6 Hunter's Creek Apartments 9231 Hunter's Creek Drive Cincinnati OH 45242 Multifamily $ 2,737,500
C050 655456-9 DeVille Court Apartments 15-3 DeVille Circle Mill Creek Hundred DE 19808 Multifamily $ 2,700,000
------ -------- -------------------------- -------------------------- ------------------ ----- ----- ----------- -----------
C051 655466-6 Brittania Sherman 234 Sherman Avenue Meriden CT 06450 Multifamily $ 2,640,000
Apartments
N052 50016 Park East Apartments 456 South Ironton St. Aurora CO 80012 Multifamily $ 2,624,100
C053 655301-0 559-607 W.191st Street 559-607 W.191st Street New York NY 10040 Multifamily $ 2,400,000
</TABLE>
<PAGE>
ANNEX A
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
ANTICIPATED SUB- ORIGINAL ORIGINAL
LOAN MORTGAGE ADMINI- SERVICING NET FIRST INTEREST TERM TO AMORTIZATION
CUT-OFF BALANCE AT RATE MORTGAGE STRATIVE FEE MORTGAGE NOTE PAYMENT ACCRUAL MONTHLY MATURITY TERM
DATE BALANCE MATURITY TYPE RATE FEE RATE RATE RATE DATE DATE METHOD PAYMENT (MONTHS) (MONTHS)(i)
- ------------ ----------- -------- -------- -------- --------- -------- -------- ------- ---------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$21,780,750 $19,220,068 Fixed 8.110% 0.115% 0.050% 7.995% 7/15/97 9/1/97 30/360 $161,813.46 120 360
$19,000,000 $16,810,963 Fixed 7.515% 0.125% 0.060% 7.390% 10/9/97 12/1/97 Actual/360 $133,045.97 120 360
$17,660,210 $15,976,030 Fixed 8.240% 0.190% 0.125% 8.050% 1/7/97 3/1/97 Actual/360 $133,247.58 120 360
$16,902,254 $15,280,446 Fixed 8.180% 0.190% 0.125% 7.990% 12/30/96 2/1/97 Actual/360 $126,879.71 120 360
$16,707,961 $15,269,579 Fixed 8.770% 0.190% 0.125% 8.580% 4/30/97 6/1/97 Actual/360 $132,011.65 120 360
- ------------ ----------- -------- -------- -------- --------- -------- -------- ------- ---------- ----------- -------- ---------
$16,493,341 $14,920,442 Fixed 8.240% 0.190% 0.125% 8.050% 1/7/97 3/1/97 Actual/360 $124,443.46 120 360
$16,367,499 $14,443,232 Fixed 8.110% 0.115% 0.050% 7.995% 7/15/97 9/1/97 30/360 $121,597.36 120 360
$13,400,000 $11,822,251 Fixed 7.400% 0.190% 0.125% 7.210% 10/30/97 12/1/97 Actual/360 $ 92,778.89 120 360
$13,369,840 $12,177,950 Fixed 8.650% 0.190% 0.125% 8.460% 5/28/97 7/1/97 Actual/360 $104,462.26 120 360
$1,158,990 $ 1,033,142 Fixed 7.770% 0.190% 0.125% 7.580% 8/22/97 10/1/97 Actual/360 $ 8,329.12 120 360
- ------------ ----------- -------- -------- -------- --------- -------- -------- ------- ---------- ----------- -------- ---------
$2,535,290 $ 2,259,998 Fixed 7.770% 0.190% 0.125% 7.580% 8/22/97 10/1/97 Actual/360 $ 18,219.95 120 360
$3,839,153 $ 3,422,283 Fixed 7.770% 0.190% 0.125% 7.580% 8/22/97 10/1/97 Actual/360 $ 27,590.21 120 360
$702,637 $ 626,342 Fixed 7.770% 0.190% 0.125% 7.580% 8/22/97 10/1/97 Actual/360 $ 5,049.53 120 360
$550,520 $ 490,742 Fixed 7.770% 0.190% 0.125% 7.580% 8/22/97 10/1/97 Actual/360 $ 3,956.33 120 360
$1,231,426 $ 1,097,713 Fixed 7.770% 0.190% 0.125% 7.580% 8/22/97 10/1/97 Actual/360 $ 8,849.69 120 360
- ------------ ----------- -------- -------- -------- --------- -------- -------- ------- ---------- ----------- -------- ---------
$9,144,788 $ 8,055,238 Fixed 7.300% 0.190% 0.125% 7.110% 9/30/97 11/1/97 Actual/360 $ 62,729.74 120 360
$7,656,169 $ 6,930,780 Fixed 8.365% 0.190% 0.125% 8.175% 5/28/97 7/1/97 Actual/360 $ 58,281.38 120 360
$7,584,517 $ 6,807,868 Fixed 8.000% 0.165% 0.100% 7.835% 6/25/97 8/1/97 Actual/360 $ 55,766.11 120 360
$7,129,849 $ 6,466,101 Fixed 8.410% 0.190% 0.125% 8.220% 4/11/97 6/1/97 Actual/360 $ 54,521.91 120 360
$6,925,000 $ 6,136,984 Fixed 7.580% 0.190% 0.125% 7.390% 10/3/97 12/1/97 Actual/360 $ 48,800.52 120 360
- ------------ ----------- -------- -------- -------- --------- -------- -------- ------- ---------- ----------- -------- ---------
$6,908,682 $ 6,272,546 Fixed 8.500% 0.190% 0.125% 8.310% 5/22/97 7/1/97 Actual/360 $ 53,247.26 120 360
$6,339,643 $ 5,671,031 Fixed 7.890% 0.170% 0.105% 7.720% 8/7/97 9/1/97 Actual/360 $ 46,108.04 120 360
$6,000,000 $ 5,285,568 Fixed 7.340% 0.190% 0.125% 7.150% 10/31/97 12/1/97 Actual/360 $ 41,297.48 120 360
$5,590,867 $ 5,001,226 Fixed 7.890% 0.170% 0.105% 7.720% 8/7/97 9/1/97 Actual/360 $ 40,662.21 120 360
$5,551,089 $ 4,972,586 Fixed 7.950% 0.190% 0.125% 7.760% 7/17/97 9/1/97 Actual/360 $ 40,603.68 120 360
- ------------ ----------- -------- -------- -------- --------- -------- -------- ------- ---------- ----------- -------- ---------
$5,511,436 $ 5,173,130 Fixed 8.060% 0.155% 0.090% 7.905% 7/31/97 9/1/97 Actual/360 $ 40,734.93 84 360
$5,045,808 $ 4,174,916 Fixed 8.680% 0.190% 0.125% 8.490% 5/12/97 7/1/97 30/360 $ 41,441.83 120 300
$4,992,381 $ 4,489,629 Fixed 8.120% 0.190% 0.125% 7.930% 7/11/97 9/1/97 Actual/360 $ 37,107.36 120 360
$4,990,314 $ 4,521,979 Fixed 8.160% 0.215% 0.150% 7.945% 6/24/97 8/1/97 Actual/360 $ 37,247.45 116 360
$4,941,927 $ 4,420,726 Fixed 7.890% 0.170% 0.105% 7.720% 8/7/97 9/1/97 Actual/360 $ 35,942.49 120 360
- ------------ ----------- -------- -------- -------- --------- -------- -------- ------- ---------- ----------- -------- ---------
$4,486,343 $ 3,997,974 Fixed 8.560% 0.190% 0.125% 8.370% 5/19/97 7/1/97 30/360 $ 34,792.64 120 360
$4,133,577 $ 3,879,848 Fixed 8.060% 0.155% 0.090% 7.905% 7/31/97 9/1/97 Actual/360 $ 30,551.20 84 360
$2,802,117 $ 2,279,876 Fixed 8.140% 0.190% 0.125% 7.950% 9/19/97 11/1/97 30/360 $ 21,910.23 120 300
$1,101,367 $ 896,101 Fixed 8.140% 0.190% 0.125% 7.950% 9/19/97 11/1/97 30/360 $ 8,611.78 120 300
$3,789,869 $ 3,463,708 Fixed 8.810% 0.215% 0.150% 8.595% 5/2/97 7/1/97 Actual/360 $ 30,041.78 120 360
- ------------ ----------- -------- -------- -------- --------- -------- -------- ------- ---------- ----------- -------- ---------
$2,021,146 $ 1,789,684 Fixed 7.510% 0.190% 0.125% 7.320% 9/24/97 11/1/97 Actual/360 $ 14,153.52 120 360
$1,476,992 $ 1,307,846 Fixed 7.510% 0.190% 0.125% 7.320% 9/24/97 11/1/97 Actual/360 $ 10,342.96 120 360
$3,483,829 $ 2,959,440 Fixed 8.820% 0.215% 0.150% 8.605% 4/14/97 6/1/97 Actual/360 $ 28,941.67 120 300
$3,413,634 $ 2,824,450 Fixed 8.680% 0.190% 0.125% 8.490% 5/12/97 7/1/97 30/360 $ 28,036.58 120 300
$3,206,194 $ 3,000,647 Fixed 7.900% 0.155% 0.090% 7.745% 8/1/97 10/1/97 Actual/360 $ 23,329.73 84 360
- ------------ ----------- -------- -------- -------- --------- -------- -------- ------- ---------- ----------- -------- ---------
$3,099,936 $ 2,773,001 Fixed 7.890% 0.170% 0.105% 7.720% 8/7/97 9/1/97 Actual/360 $ 22,545.74 120 360
$3,099,362 $ 2,804,693 Fixed 8.360% 0.215% 0.150% 8.145% 6/10/97 8/1/97 Actual/360 $ 23,567.37 120 360
$3,000,000 $ 2,670,940 Fixed 7.770% 0.190% 0.125% 7.580% 10/8/97 12/1/97 Actual/360 $ 21,533.84 120 360
$2,994,095 $ 2,694,271 Fixed 8.110% 0.215% 0.150% 7.895% 6/25/97 8/1/97 Actual/360 $ 22,243.42 120 360
$2,993,048 $ 2,648,119 Fixed 8.170% 0.190% 0.125% 7.980% 6/25/97 8/1/97 Actual/365 $ 22,369.50 120 360
- ------------ ----------- -------- -------- -------- --------- -------- -------- ------- ---------- ----------- -------- ---------
$2,963,000 $ 2,653,095 Fixed 8.010% 0.190% 0.125% 7.820% 10/23/97 12/1/97 Actual/360 $ 21,762.10 120 360
$2,795,552 $ 2,505,958 Fixed 7.980% 0.190% 0.125% 7.790% 7/15/97 9/1/97 Actual/360 $ 20,506.38 120 360
$2,755,407 $ 2,577,204 Fixed 7.820% 0.155% 0.090% 7.665% 7/21/97 9/1/97 Actual/360 $ 19,906.65 84 360
$2,730,754 $ 2,615,906 Fixed 8.470% 0.190% 0.125% 8.280% 6/5/97 8/1/97 30/360 $ 20,990.83 60 360
$2,689,764 $ 2,224,371 Fixed 8.700% 0.190% 0.125% 8.510% 6/30/97 8/1/97 30/360 $ 22,106.23 120 300
- ------------ ----------- -------- -------- -------- --------- -------- -------- ------- ---------- ----------- -------- ---------
$2,640,000 $ 2,345,883 Fixed 7.690% 0.190% 0.125% 7.500% 10/27/97 12/1/97 Actual/360 $ 18,803.94 120 360
$2,617,360 $ 2,482,807 Fixed 8.700% 0.190% 0.125% 8.510% 4/24/97 6/1/97 Actual/360 $ 20,550.17 84 360
$2,392,893 $ 2,137,049 Fixed 8.680% 0.190% 0.125% 8.490% 5/16/97 7/1/97 30/360 $ 18,760.95 120 360
(i) For Mortgage Loans which accrue interest on the basis of actual days elapsed each calendar month and a 360-day year or a
365-day year, the amortization term is the term over which the Mortgage Loans would amortize if interest accrued and was paid on
the basis of a 360-day year consisting of twelve 30-day months. The actual amortization term would be longer.
</TABLE>
<PAGE>
ANNEX A
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
CONTROL LOAN ZIP PROPERTY ORIGINAL
NUMBER NUMBER PROPERTY NAME PROPERTY ADDRESS CITY STATE CODE TYPE BALANCE
- ------- -------- -------------------------- -------------------------- ------------------ ----- ----- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
C054 655279-4 Baypoint Manor Apartments 2701 13th Avenue North Texas City TX 77590 Multifamily $ 2,400,000
N055 50011 Caroline Apartments 2729 Park Street St. Louis MO 63104 Multifamily $ 2,210,000
- ------- -------- -------------------------- -------------------------- ------------------ ----- ----- ----------- -----------
C056 655453-0 Hillcrest Apartments 617 Hilltop Drive Bordentown NJ 08620 Multifamily $ 2,122,500
C057 655339-5 Arcadia Park Apartments 3426 North 32nd Street Phoenix AZ 85018 Multifamily $ 2,120,000
C058 655462-4 Holly Hill Estates U.S. Route 13 Smyrna DE 19977 Multifamily $ 2,100,000
C059 655310-4 Wadsworth Apartments 28-32 Preble Street Portland ME 04101 Multifamily $ 1,312,000
C060 655310-4 Earl Apartments 341 Cumberland Avenue Portland ME 04101 Multifamily $ 652,000
- ------- -------- -------------------------- -------------------------- ------------------ ----- ----- ----------- -----------
C061 655347-6 3631 Broadway 3631 Broadway New York NY 10031 Multifamily $ 1,950,000
N062 50119 Cypress Trace 11767 NW 30 Street Coral Springs FL 33065 Multifamily $ 1,900,000
C063 655443-3 Imperial House 250 Prospect Street East Orange NJ 07017 Multifamily $ 1,900,000
N064 50075 Arden's Place Apartments 9610 White Bluff Road Savannah GA 31406 Multifamily $ 1,800,000
N065 50077 Dutchtown Villas 1036 Dutchtown Rd. Savannah GA 31419 Multifamily $ 1,700,000
- ------- -------- -------------------------- -------------------------- ------------------ ----- ----- ----------- -----------
C066 655227-3 Knollwood Apartments 856 North Leak Southern Pines NC 28387 Multifamily $ 1,051,648
C067 655227-3 Academy Manor Apartments 302-308 Reece Avenue Randleman NC 27317 Multifamily $ 598,352
C068 655368-3 Cedar Bluff Apartments 5930 Red Bluff Road Pasedena TX 77505 Multifamily $ 1,500,000
N069 50098 Kingbridge Apartments 29910-30040 Kingsbridge Gibralter MI 48173 Multifamily $ 1,400,000
Rd.
N070 50082 Cinnamon Tree Apartments 6100 Westcreek Dr. Fort Worth TX 76135 Multifamily $ 1,400,000
- ------- -------- -------------------------- -------------------------- ------------------ ----- ----- ----------- -----------
C071 655335-3 Bel Aire Apartments 3200 West Pioneer Drive Irving TX 75061 Multifamily $ 1,400,000
N072 50015 Fifty-Five Plus Apartments 825 S. Union Blvd. Colorado Springs CO 80910 Multifamily $ 1,240,000
N073 50017 Woodman Place Apartments 6210 Woodman Place Van Nuys CA 91405 Multifamily $ 1,200,000
C074 655369-6 Country Club Apartments 7100 South Gessner Drive Houston TX 77036 Multifamily $ 1,000,000
C075 655468-2 Townhouse Road Apartments 35 Townhouse Road Manchester NH 03108 Multifamily $ 1,000,000
- ------- -------- -------------------------- -------------------------- ------------------ ----- ----- ----------- -----------
N076 50133 Forest Hills Apartments 3800 5th Avenue South Birmingham AL 35224 Multifamily $ 1,000,000
C077 655451-4 Perry Hill Estates 52 Perry Hill Road Ashford CT 06278 Multifamily $ 920,000
N078 50232 Vintage Plaza Apartments 3046-3056 N.E. Holladay Portland OR 97232 Multifamily $ 858,000
Street
C079 655457-2 196 North River Road 196 North River Road Manchester NH 03104 Multifamily $ 800,000
Apartments
C080 655186-3 Dunn's Bridge Apartments 7 Durham Road Dover NH 03820 Multifamily $ 606,933
- ------- -------- -------------------------- -------------------------- ------------------ ----- ----- ----------- -----------
C081 655346-3 Aguadilla Mall State Road No. 2, KM 126.5Aguadilla PR 00603 Retail $26,500,000
C082 655353-1 University Square Shopping 5801-5985 University Ave. San Diego CA 92115 Retail $18,000,000
Center
N083 50139 Joliet Commons Shopping 2621 Joliet-Plainfield Joliet IL 60431 Retail $14,700,000
Center Road
N084 50135 Victorville Valley Retail 14555,14601,14689 Valley Victorville CA 92393 Retail $ 9,600,000
Center Center Dr.
N085 50026 Burlington Outlet Center 2389 Corporation Pkwy Burlington NC 27215 Retail $ 9,144,000
- ------- -------- -------------------------- -------------------------- ------------------ ----- ----- ----------- -----------
N086 50114 Van Owen Marketplace 18300-18330 Vanowen StreetReseda CA 91335 Retail $ 8,750,000
N087 50273 Jumbo Sports #30 9880 West Broad Street Richmond VA 23294 Retail $ 3,600,000
N088 50285 Jumbo Sports #36 9530 Midlothian Turnpike Richmond VA 23235 Retail $ 3,400,000
N089 50274 Jumbo Sports #14 6428 Burnt Poplar Road Greensboro NC 27409 Retail $ 1,750,000
N090 50083 Preston Parkway Center 1501 Preston Road Plano TX 75093 Retail $ 6,900,000
- ------- -------- -------------------------- -------------------------- ------------------ ----- ----- ----------- -----------
C091 655458-5 Willow Lake Shopping West 86th Street and Indianapolis IN 46268 Retail $ 6,200,000
Center Township Line Road
C092 655413-2 Ogden City Plaza 2233 Grant Avenue Ogden UT 84401 Retail $ 6,100,000
C093 655367-0 Fox Plaza Retail 5515-89 Alameda Avenue El Paso TX 79905 Retail $ 6,000,000
C094 655440-4 Stonehedge Square Shopping 950 Walnut Bottom Road Carlisle PA 17013 Retail $ 5,670,000
Center
N095 50076 St. Andrews Crossing 817 St. Andrews Road Columbia SC 29210 Retail $ 5,250,000
- ------- -------- -------------------------- -------------------------- ------------------ ----- ----- ----------- -----------
C096 655450-1 Princeton Meadows Shopping 660 Plainsboro Road Plainsboro NJ 08536 Retail $ 5,000,000
Center
N097 50068 Troy Marketplace Shopping US Highway 231 and Troy AL 36079 Retail $ 4,750,000
Center Franklin Drive
C098 655305-2 Food Emporium 200 East 32nd Street New York NY 11120 Retail $ 4,750,000
N099 50118 Northridge Shopping Center 8331 Roswell Rd. Atlanta GA 30350 Retail $ 4,650,000
C100 655388-7 USA Outlet Center Fox Run Avenue Opelika AL 36801 Retail $ 4,500,000
- ------- -------- -------------------------- -------------------------- ------------------ ----- ----- ----------- -----------
C101 655324-3 The Galeria 119 North Park Road Cambridge MA 02138 Retail $ 4,400,000
C102 655452-7 Timberlake Plaza Shopping 7701-7703 Timberlake Road Lynchburg VA 24502 Retail $ 4,300,000
Center
N103 50096 Hillsborough Commons 113 Mayo St. Hillsborough NC 27278 Retail $ 4,250,000
C104 655364-1 North Park Shopping Center Hwy 425 Monticello AR 71655 Retail $ 4,000,000
N105 50193 Best Buy Store 20 4650 First Avenue N.E. Cedar Rapids IA 52402 Retail $ 3,799,600
- ------- -------- -------------------------- -------------------------- ------------------ ----- ----- ----------- -----------
</TABLE>
<PAGE>
ANNEX A
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
ANTICIPATED SUB- ORIGINAL ORIGINAL
LOAN MORTGAGE ADMINI- SERVICING NET FIRST INTEREST TERM TO AMORTIZATION
CUT-OFF BALANCE AT RATE MORTGAGE STRATIVE FEE MORTGAGE NOTE PAYMENT ACCRUAL MONTHLY MATURITY TERM
DATE BALANCE MATURITY TYPE RATE FEE RATE RATE RATE DATE DATE METHOD PAYMENT (MONTHS) (MONTHS)(i)
- ------------ ----------- -------- -------- -------- --------- -------- -------- ------- ---------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$2,392,657 $ 2,130,639 Fixed 8.520% 0.190% 0.125% 8.330% 5/7/97 7/1/97 30/360 $ 18,487.95 120 360
$2,203,772 $ 1,998,613 Fixed 8.410% 0.190% 0.125% 8.220% 4/11/97 6/1/97 Actual/360 $ 16,852.23 120 360
- ------------ ----------- -------- -------- -------- --------- -------- -------- ------- ---------- ----------- -------- ----------
$2,118,309 $ 1,736,459 Fixed 8.407% 0.190% 0.125% 8.217% 8/18/97 10/1/97 30/360 $ 16,958.13 120 300
$2,116,711 $ 1,900,940 Fixed 8.060% 0.190% 0.125% 7.870% 7/1/97 9/1/97 Actual/360 $ 15,644.57 120 360
$2,100,000 $ 1,730,120 Fixed 7.910% 0.190% 0.125% 7.720% 10/15/97 12/1/97 Actual/360 $ 16,083.14 120 300
$1,310,188 $ 1,186,733 Fixed 8.440% 0.190% 0.125% 8.250% 7/24/97 9/1/97 Actual/360 $ 10,032.41 120 360
$651,100 $ 589,748 Fixed 8.440% 0.190% 0.125% 8.250% 7/24/97 9/1/97 Actual/360 $ 4,985.62 120 360
- ------------ ----------- -------- -------- -------- --------- -------- -------- ------- ---------- ----------- -------- ----------
$1,945,899 $ 1,580,200 Fixed 8.020% 0.190% 0.125% 7.830% 8/22/97 10/1/97 30/360 $ 15,076.26 120 300
$1,897,795 $ 1,696,131 Fixed 7.880% 0.190% 0.125% 7.690% 8/14/97 10/1/97 Actual/360 $ 13,782.91 120 360
$1,893,976 $ 1,539,295 Fixed 8.010% 0.190% 0.125% 7.820% 7/24/97 9/1/97 30/360 $ 14,677.10 120 300
$1,796,502 $ 1,618,070 Fixed 8.150% 0.190% 0.125% 7.960% 6/11/97 8/1/97 Actual/360 $ 13,396.47 120 360
$1,696,696 $ 1,528,178 Fixed 8.150% 0.190% 0.125% 7.960% 6/11/97 8/1/97 Actual/360 $ 12,652.22 120 360
- ------------ ----------- -------- -------- -------- --------- -------- -------- ------- ---------- ----------- -------- ----------
$1,050,108 $ 947,143 Fixed 8.250% 0.190% 0.125% 8.060% 7/29/97 9/1/97 Actual/360 $ 7,900.68 120 360
$597,475 $ 538,891 Fixed 8.250% 0.190% 0.125% 8.060% 7/29/97 9/1/97 Actual/360 $ 4,495.22 120 360
$1,500,000 $ 1,231,544 Fixed 7.790% 0.190% 0.125% 7.600% 10/27/97 12/1/97 Actual/360 $ 11,369.36 120 300
$1,397,930 $ 1,260,009 Fixed 8.220% 0.215% 0.150% 8.005% 7/11/97 9/1/97 Actual/360 $ 10,488.22 120 360
$1,397,279 $ 1,258,500 Fixed 8.150% 0.190% 0.125% 7.960% 6/24/97 8/1/97 Actual/360 $ 10,419.47 120 360
- ------------ ----------- -------- -------- -------- --------- -------- -------- ------- ---------- ----------- -------- ---------
$1,397,117 $ 1,228,201 Fixed 7.920% 0.190% 0.125% 7.730% 7/31/97 9/1/97 30/360 $ 10,194.73 120 360
$1,236,815 $ 1,173,233 Fixed 8.700% 0.190% 0.125% 8.510% 4/22/97 6/1/97 Actual/360 $ 9,710.84 84 360
$1,196,898 $ 1,091,785 Fixed 8.680% 0.215% 0.150% 8.465% 4/4/97 6/1/97 Actual/360 $ 9,380.47 120 360
$1,000,000 $ 821,030 Fixed 7.790% 0.190% 0.125% 7.600% 10/27/97 12/1/97 Actual/360 $ 7,579.57 120 300
$1,000,000 $ 31,905 Fixed 7.920% 0.190% 0.125% 7.730% 10/22/97 12/1/97 Actual/360 $ 9,510.39 180 180
- ------------ ----------- -------- -------- -------- --------- -------- -------- ------- ---------- ----------- -------- ---------
$998,164 $ 883,981 Fixed 7.470% 0.165% 0.100% 7.305% 7/31/97 9/1/97 Actual/360 $ 6,971.61 120 360
$915,745 $ 760,932 Fixed 8.870% 0.315% 0.250% 8.555% 5/16/97 7/1/97 30/360 $ 7,638.87 120 300
$855,610 $ 706,858 Fixed 7.900% 0.315% 0.250% 7.585% 7/31/97 9/1/97 Actual/360 $ 6,565.45 120 300
$798,496 $ 708,172 Fixed 8.370% 0.315% 0.250% 8.055% 7/25/97 9/1/97 30/360 $ 6,077.75 120 360
$604,297 $ 506,318 Fixed 9.250% 0.190% 0.125% 9.060% 5/1/97 7/1/97 30/360 $ 5,197.66 120 300
- ------------ ----------- -------- -------- -------- --------- -------- -------- ------- ---------- ----------- -------- ---------
$26,472,765 $23,934,278 Fixed 8.330% 0.190% 0.125% 8.140% 8/12/97 10/1/97 Actual/360 $200,578.00 119 360
$17,977,797 $15,952,338 Fixed 8.430% 0.190% 0.125% 8.240% 8/5/97 10/1/97 30/360 $137,512.45 120 360
$14,692,889 $13,099,058 Fixed 7.790% 0.190% 0.125% 7.600% 9/30/97 11/1/97 Actual/360 $105,719.22 120 360
$9,586,321 $ 8,663,805 Fixed 8.340% 0.190% 0.125% 8.150% 7/23/97 9/1/97 Actual/360 $ 72,729.89 120 360
$9,105,265 $ 7,809,627 Fixed 9.200% 0.190% 0.125% 9.010% 4/22/97 6/1/97 Actual/360 $ 77,992.31 120 300
- ------------ ----------- -------- -------- -------- --------- -------- -------- ------- ---------- ----------- -------- ---------
$8,739,409 $ 7,781,167 Fixed 7.720% 0.165% 0.100% 7.555% 8/12/97 10/1/97 Actual/360 $ 62,504.77 120 360
$3,600,000 $ 2,998,260 Fixed 8.295% 0.165% 0.100% 8.130% 10/3/97 12/1/97 Actual/360 $ 28,492.54 120 300
$3,400,000 $ 2,831,690 Fixed 8.295% 0.165% 0.100% 8.130% 10/3/97 12/1/97 Actual/360 $ 26,909.62 120 300
$1,750,000 $ 1,457,488 Fixed 8.295% 0.165% 0.100% 8.130% 10/3/97 12/1/97 Actual/360 $ 13,850.54 120 300
$6,879,289 $ 5,827,742 Fixed 8.780% 0.290% 0.225% 8.490% 6/23/97 8/1/97 Actual/360 $ 56,868.62 120 300
- ------------ ----------- -------- -------- -------- --------- -------- -------- ------- ---------- ----------- -------- ---------
$6,194,710 $ 5,105,765 Fixed 7.880% 0.190% 0.125% 7.690% 9/26/97 11/1/97 Actual/360 $ 47,360.79 120 300
$6,100,000 $ 5,429,601 Fixed 7.760% 0.190% 0.125% 7.570% 10/14/97 12/1/97 Actual/360 $ 43,743.31 120 360
$6,000,000 $ 4,951,671 Fixed 7.970% 0.190% 0.125% 7.780% 10/29/97 12/1/97 Actual/360 $ 46,189.80 120 300
$5,663,260 $ 5,042,189 Fixed 8.610% 0.190% 0.125% 8.420% 8/11/97 10/1/97 30/360 $ 44,040.18 120 360
$5,242,262 $ 4,726,118 Fixed 8.230% 0.190% 0.125% 8.040% 7/2/97 9/1/97 Actual/360 $ 39,367.71 120 360
- ------------ ----------- -------- -------- -------- --------- -------- -------- ------- ---------- ----------- -------- ---------
$4,993,496 $ 4,408,713 Fixed 8.170% 0.190% 0.125% 7.980% 8/25/97 10/1/97 30/360 $ 37,282.50 120 360
$4,743,399 $ 4,294,547 Fixed 8.420% 0.190% 0.125% 8.230% 7/28/97 9/1/97 Actual/360 $ 36,254.42 120 360
$4,735,302 $ 3,862,667 Fixed 8.160% 0.190% 0.125% 7.970% 7/16/97 9/1/97 30/360 $ 37,166.15 120 300
$4,644,744 $ 4,160,900 Fixed 7.980% 0.265% 0.200% 7.715% 8/11/97 10/1/97 Actual/360 $ 34,055.24 120 360
$4,500,000 $ 3,754,568 Fixed 8.360% 0.190% 0.125% 8.170% 10/27/97 12/1/97 Actual/360 $ 35,811.66 120 300
- ------------ ----------- -------- -------- -------- --------- -------- -------- ------- ---------- ----------- -------- --------
$4,383,127 $ 3,618,940 Fixed 8.630% 0.190% 0.125% 8.440% 6/27/97 8/1/97 30/360 $ 35,816.29 120 300
$4,289,619 $ 3,821,007 Fixed 8.570% 0.190% 0.125% 8.380% 6/26/97 8/1/97 30/360 $ 33,276.84 120 360
$4,245,112 $ 3,797,133 Fixed 7.915% 0.190% 0.125% 7.725% 8/6/97 10/1/97 Actual/360 $ 30,933.53 120 360
$4,000,000 $ 3,565,532 Fixed 7.820% 0.190% 0.125% 7.630% 11/4/97 12/1/97 Actual/360 $ 28,850.23 120 360
$3,794,359 $ 2,730,670 Fixed 8.410% 0.165% 0.100% 8.245% 9/11/97 11/1/97 Actual/360 $ 32,757.70 120 240
- ------------ ----------- -------- -------- -------- --------- -------- -------- ------- ---------- ----------- -------- --------
(i) For Mortgage Loans which accrue interest on the basis of actual days elapsed each calendar month and a 360-day year or a
365-day year, the amortization term is the term over which the Mortgage Loans would amortize if interest accrued and was paid
on the basis of a 360-day year consisting of twelve 30-day months. The actual amortization term would be longer.
</TABLE>
<PAGE>
ANNEX A
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
CONTROL LOAN ZIP PROPERTY ORIGINAL
NUMBER NUMBER PROPERTY NAME PROPERTY ADDRESS CITY STATE CODE TYPE BALANCE
- ------- -------- -------------------------- -------------------------- ------------------ ----- ----- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
C106 655274-9 State Line Plaza US Route 13 and County Delmar DE 19940 Retail $ 3,750,000
Route 54
C107 655405-1 Alta Loma Plaza 6701-6799 Carnelian StreetRancho Cucamonga CA 91701 Retail $ 3,600,000
N108 50040 Landmark Village Shopping 2301 N. Collins St Arlington TX 76011 Retail $ 3,572,977
Center
N109 50069 Douglas Square Shopping Douglas Ave/Hwy 31 Brewton AL 36426 Retail $ 3,300,000
Center
C110 655243-5 Old Pueblo Plaza 4140 West Ina Road Marana AZ 85714 Retail $ 3,250,000
- ------- -------- -------------------------- -------------------------- ------------------ ----- ----- ----------- -----------
C111 655393-9 Cheyenne Crossing Shopping 3250 N. Tenaya Way Las Vegas NV 89129 Retail $ 3,125,000
Center
N112 50041 University Hills West 2553 S. Colorado Blvd. Denver CO 80222 Retail $ 2,800,000
Shopping Center
C113 655299-8 Apple Blossom Mall 601-625 East Jubal Early Winchester VA 22601 Retail $ 2,800,000
Drive
C114 655373-5 Uintah Plaza Shopping 1147-1169 West Highway 40 Vernal UT 84078 Retail $ 2,750,000
Center
C115 655164-3 Wind Gap Shopping Center 487 East Moorestown Road Wind Gap PA 18091 Retail $ 2,625,000
- ------- -------- -------------------------- -------------------------- ------------------ ----- ----- ----------- -----------
C116 655357-3 Babylon Plaza/Genovese 369 Little East Neck Road West Babylon NY 11702 Retail $ 2,500,000
Plaza
N117 50001 Taylors Creek Commons U.S. 1 & North Beach Ft. Pierce FL 34946 Retail $ 2,475,000
Causeway
C118 655338-2 Builders Design Center 15125 N. Hayden Road Scottsdale AZ 85260 Retail $ 2,350,000
C119 655351-5 Agora Shopping Center 7 Avenida Vista Grande Santa Fe NM 87505 Retail $ 2,300,000
C120 655361-2 Orchard Business Park 8800-8850 Orchard Tree Towson MD 21204 Retail $ 2,200,000
Lane
- ------- -------- -------------------------- -------------------------- ------------------ ----- ----- ----------- -----------
C121 655320-1 Northgate Village Shopping 5500 Babcock Road San Antonio TX 78240 Retail $ 2,180,000
Center
C122 655442-0 25th & Butler Shopping 25th Street and Butler Wilson PA 18042 Retail $ 2,175,000
Center Avenue
C123 655319-1 Northgate Plaza Shopping 5450 Babcock Road San Antonio TX 78240 Retail $ 2,035,000
Center
C124 655259-0 54 West 47th Street 54 West 47th Street New York NY 10036 Retail $ 2,000,000
N125 50112 Eckerd at Smyrna 2393 Spring Rd. Smyrna GA 30080 Retail $ 1,890,000
- ------- -------- -------------------------- -------------------------- ------------------ ----- ----- ----------- -----------
N126 50129 College Plaza 2305 N. Gateway Ave. Rockwood TN 37854 Retail $ 1,875,000
C127 655382-9 Woodforest Emporium 12700 Woodforest Blvd. Houston TX 77015 Retail $ 1,700,000
Shopping Center
C128 655306-5 Country Brook Village 3046 Lavon Drive Garland TX 76015 Retail $ 1,650,000
N129 50194 Hill Country Square 1313 S. Main Street Boerne TX 78006 Retail $ 1,510,000
Shopping Center
N130 50044 Caroline Square Shopping 2702 Emanuel Church Rd. West Columbia SC 29170 Retail $ 1,424,000
Center
- ------- -------- -------------------------- -------------------------- ------------------ ----- ----- ----------- -----------
N131 50187 Jacksonville Plaza West Main Street & South Jacksonville AR 72076 Retail $ 1,200,000
Shopping Center James Street
C132 655278-1 Southside Shopping Center 2526 Monroe Street Tallahassee FL 32301 Retail $ 1,050,000
C133 655331-1 Westcliff Office -building 201-401 N. Buffalo Dr. Las Vegas NV 89128 Retail $ 620,000
12
C134 655403-5 America Online Building 12100 Sunrise Valley DriveReston VA 22091 Office $28,500,000
C135 655344-7 International Jewelry 550 South Hill Street Los Angeles CA 90013 Office $25,000,000
Exchange
- ------- -------- -------------------------- -------------------------- ------------------ ----- ----- ----------- -----------
N136 50039 The Daniel and Henry 2350 Market St. St. Louis MO 63103 Office $ 7,746,200
Building
C137 655237-0 Morton West Associates 96 Morton Street New York NY 10014 Office $ 5,300,000
C138 655470-5 Scarborough Court 482 Payne Road Scarborough ME 04074 Office $ 2,878,267
C139 655470-5 95-97 Darling Avenue 95-97 Darling Avenue South Portland ME 04106 Office $ 2,401,733
C140 655326-9 Westcliff Office -building 201-401 N. Buffalo Dr. Las Vegas NV 89128 Office $ 4,825,000
9(ii)
- ------- -------- -------------------------- -------------------------- ------------------ ----- ----- ----------- -----------
C141 655380-3 Crown Plaza Office 114 West Magnolia Street Bellingham WA 98225 Office $ 3,600,000
Building
C142 655461-1 Mt. Arlington Corporate 111 Howard Boulevard Mt. Arlington NJ 07856 Office $ 3,290,000
Center
C143 655363-8 Oak Hall Office Building 555 Perkins Extended Memphis TN 38117 Office $ 3,260,000
C144 655454-3 Eastgate Commerce Center 4440 Glen Cincinnati OH 45245 Office $ 3,150,000
Este-Withamsville Road
C145 655309-4 Midtown Plaza 1300 Baxter Street Charlotte NC 28204 Office $ 2,400,000
- ------- -------- -------------------------- -------------------------- ------------------ ----- ----- ----------- -----------
C146 655379-3 Jamacha Center I 850-860 Jamacha Rd. El Cajon CA 92020 Office $ 2,300,000
C147 655360-9 West Oxmoor Tower 11 West Oxmoor Road Birmingham AL 35209 Office $ 2,250,000
C148 655371-9 The Oviatte Building 617 South Olive Street Los Angelos CA 90014 Office $ 2,000,000
C149 655449-1 1520 Locust Street 1518-1520 Locust Street Philadelphia PA 19107 Office $ 1,575,000
C150 655377-7 Office 66 3297 Rt 66 Neptune NJ 07753 Office $ 1,500,000
- ------- -------- -------------------------- -------------------------- ------------------ ----- ----- ----------- -----------
C151 655314-6 Highland Plaza 910 Pierremont Road Shreveport LA 71106 Office $ 1,430,000
N152 50125 Bellona Commons 1300-1306 Bellona Ave. Lutherville MD 21093 Office $ 1,400,000
C153 655341-8 31 Inwood Road 31 Inwood Road Rocky Hill CT 06067 Office $ 1,200,000
C154 655327-2 Westcliff Office
-building 3 201-401 N. Buffalo Dr. Las Vegas NV 89128 Office $ 1,080,000
C155 655325-6 Westcliff Office
-building 2 201-401 N. Buffalo Dr. Las Vegas NV 89128 Office $ 1,025,000
<PAGE>
- ------- -------- -------------------------- -------------------------- ------------------ ----- ----- ----------- -----------
C156 655265-5 80 Maple Avenue 80 Maple Ave. Smithtown NY 11787 Office $ 850,000
C157 655329-8 Westcliff Office
-building 5 201-401 N. Buffalo Dr. Las Vegas NV 89128 Office $ 840,000
C158 655330-8 Westcliff Office
-building 6 201-401 N. Buffalo Dr. Las Vegas NV 89128 Office $ 830,000
</TABLE>
<PAGE>
ANNEX A
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
ANTICIPATED SUB- ORIGINAL ORIGINAL
LOAN MORTGAGE ADMINI- SERVICING NET FIRST INTEREST TERM TO AMORTIZATION
CUT-OFF BALANCE AT RATE MORTGAGE STRATIVE FEE MORTGAGE NOTE PAYMENT ACCRUAL MONTHLY MATURITY TERM
DATE BALANCE MATURITY TYPE RATE FEE RATE RATE RATE DATE DATE METHOD PAYMENT (MONTHS) (MONTHS)(i)
- ------------ ----------- -------- -------- -------- --------- -------- -------- ------- ---------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$3,742,374 $ 3,431,699 Fixed 8.970% 0.190% 0.125% 8.780% 5/19/97 7/1/97 Actual/360 $ 30,092.44 120 360
$3,600,000 $ 3,202,808 Fixed 7.740% 0.190% 0.125% 7.550% 10/31/97 12/1/97 Actual/360 $ 25,765.97 120 360
$3,558,262 $ 3,061,063 Fixed 9.320% 0.190% 0.125% 9.130% 4/30/97 6/1/97 Actual/360 $ 30,771.09 120 300
$3,295,414 $ 2,983,581 Fixed 8.420% 0.190% 0.125% 8.230% 7/28/97 9/1/97 Actual/360 $ 25,187.28 120 360
$3,241,220 $ 2,777,001 Fixed 9.220% 0.190% 0.125% 9.030% 6/16/97 8/1/97 Actual/360 $ 27,765.16 120 300
- ------------ ----------- -------- -------- -------- --------- -------- -------- ------- ---------- ----------- -------- -----------
$3,125,000 $ 2,768,716 Fixed 7.570% 0.190% 0.125% 7.380% 10/30/97 12/1/97 Actual/360 $ 22,000.44 120 360
$2,789,929 $ 2,390,744 Fixed 9.210% 0.190% 0.125% 9.020% 5/14/97 7/1/97 Actual/360 $ 23,901.45 120 300
$2,782,125 $ 1,974,812 Fixed 8.580% 0.190% 0.125% 8.390% 6/26/97 8/1/97 30/360 $ 24,441.01 120 240
$2,750,000 $ 2,472,700 Fixed 8.190% 0.190% 0.125% 8.000% 10/22/97 12/1/97 Actual/360 $ 20,543.95 120 360
$2,613,785 $ 2,194,664 Fixed 9.350% 0.190% 0.125% 9.160% 5/27/97 7/1/97 30/360 $ 22,661.43 120 300
- ------------ ----------- -------- -------- -------- --------- -------- -------- ------- ---------- ----------- -------- -----------
$2,498,135 $ 2,090,877 Fixed 8.430% 0.190% 0.125% 8.240% 9/12/97 11/1/97 Actual/360 $ 20,012.88 120 300
$2,463,996 $ 2,102,229 Fixed 8.990% 0.265% 0.200% 8.725% 4/14/97 6/1/97 Actual/360 $ 20,753.16 120 300
$2,345,829 $ 2,091,360 Fixed 8.650% 0.190% 0.125% 8.460% 7/21/97 9/1/97 30/360 $ 18,319.87 120 360
$2,295,951 $ 2,048,386 Fixed 8.690% 0.190% 0.125% 8.500% 7/30/97 9/1/97 30/360 $ 17,995.64 120 360
$2,193,238 $ 1,571,911 Fixed 8.250% 0.190% 0.125% 8.060% 8/25/97 10/1/97 Actual/360 $ 18,745.44 120 240
- ------------ ----------- -------- -------- -------- --------- -------- -------- ------- ---------- ----------- -------- -----------
$2,174,525 $ 1,820,915 Fixed 8.390% 0.170% 0.105% 8.220% 8/7/97 9/1/97 Actual/360 $ 17,392.65 120 300
$2,164,857 $ 1,796,868 Fixed 8.820% 0.190% 0.125% 8.630% 5/16/97 7/1/97 30/360 $ 17,985.18 120 300
$2,029,889 $ 1,699,799 Fixed 8.390% 0.170% 0.105% 8.220% 8/7/97 9/1/97 Actual/360 $ 16,235.80 120 300
$1,994,294 $ 1,444,319 Fixed 9.410% 0.190% 0.125% 9.220% 8/13/97 10/1/97 30/360 $ 18,525.24 120 240
$1,881,049 $ 1,551,804 Fixed 7.920% 0.190% 0.125% 7.730% 7/9/97 9/1/97 Actual/360 $ 15,714.75 84 240
- ------------ ----------- -------- -------- -------- --------- -------- -------- ------- ---------- ----------- -------- ---------
$1,871,724 $ 1,565,787 Fixed 8.390% 0.190% 0.125% 8.200% 8/7/97 10/1/97 Actual/360 $ 14,959.27 120 300
$1,696,884 $ 1,410,204 Fixed 8.150% 0.165% 0.100% 7.985% 8/21/97 10/1/97 Actual/360 $ 13,290.25 120 300
$1,639,558 $ 1,166,114 Fixed 8.650% 0.190% 0.125% 8.460% 6/27/97 8/1/97 30/360 $ 14,476.11 120 240
$1,507,265 $ 1,245,365 Fixed 8.210% 0.190% 0.125% 8.020% 8/15/97 10/1/97 Actual/360 $ 11,865.26 123 300
$1,420,659 $ 1,199,535 Fixed 8.700% 0.190% 0.125% 8.510% 7/2/97 9/1/97 Actual/360 $ 11,658.99 120 300
- ------------ ----------- -------- -------- -------- --------- -------- -------- ------- ---------- ----------- -------- ---------
1,198,005 $ 1,008,821 Fixed 8.635% 0.190% 0.125% 8.445% 8/8/97 10/1/97 Actual/360 $ 9,772.14 120 300
$1,045,401 $ 874,965 Fixed 9.200% 0.190% 0.125% 9.010% 5/30/97 7/1/97 30/360 $ 8,955.81 120 300
$619,363 $ 559,299 Fixed 8.330% 0.170% 0.105% 8.160% 8/8/97 10/1/97 Actual/360 $ 4,692.75 120 360
$28,473,209 $23,183,600 Fixed 7.460% 0.140% 0.075% 7.320% 9/30/97 11/1/97 Actual/360 $209,871.52 120 300
$24,934,600 $20,772,045 Fixed 8.200% 0.190% 0.125% 8.010% 7/28/97 9/1/97 Actual/360 $196,277.95 120 300
- ------------ ----------- -------- -------- -------- --------- -------- -------- ------- ---------- ----------- -------- ---------
$7,717,897 $ 6,601,989 Fixed 9.140% 0.190% 0.125% 8.950% 5/14/97 7/1/97 Actual/360 $ 65,750.06 120 300
$5,280,331 $ 4,508,881 Fixed 9.070% 0.190% 0.125% 8.880% 5/13/97 7/1/97 Actual/360 $ 44,731.74 120 300
$2,878,267 $ 2,578,459 Fixed 8.030% 0.190% 0.125% 7.840% 10/10/97 12/1/97 Actual/360 $ 21,179.79 120 360
$2,401,733 $ 2,151,561 Fixed 8.030% 0.190% 0.125% 7.840% 10/10/97 12/1/97 Actual/360 $ 17,673.21 120 360
$4,820,077 $ 4,355,157 Fixed 8.356% 0.170% 0.105% 8.186% 8/8/97 10/1/97 Actual/360 $ 36,609.43 120 360
- ------------ ----------- -------- -------- -------- --------- -------- -------- ------- ---------- ----------- -------- ---------
$3,600,000 $ 2,992,011 Fixed 8.220% 0.190% 0.125% 8.030% 10/6/97 12/1/97 Actual/360 $ 28,312.07 120 300
$3,286,450 $ 2,653,946 Fixed 7.840% 0.190% 0.125% 7.650% 9/30/97 11/1/97 30/360 $ 25,045.03 120 300
$3,254,012 $ 2,703,514 Fixed 8.140% 0.190% 0.125% 7.950% 8/20/97 10/1/97 Actual/360 $ 25,464.30 120 300
$3,142,487 $ 2,685,890 Fixed 8.580% 0.190% 0.125% 8.390% 7/7/97 9/1/97 30/360 $ 25,009.01 120 324
$2,393,263 $ 1,964,160 Fixed 8.390% 0.190% 0.125% 8.200% 7/17/97 9/1/97 Actual/365 $ 19,147.87 120 300
- ------------ ----------- -------- -------- -------- --------- -------- -------- ------- ---------- ----------- -------- ---------
$2,300,000 $ 1,890,004 Fixed 7.820% 0.190% 0.125% 7.630% 10/29/97 12/1/97 Actual/360 $ 17,478.40 120 300
$2,250,000 $ 1,855,818 Fixed 7.950% 0.190% 0.125% 7.760% 10/29/97 12/1/97 Actual/360 $ 17,291.42 120 300
$2,000,000 $ 1,651,026 Fixed 7.980% 0.190% 0.125% 7.790% 10/29/97 12/1/97 Actual/360 $ 15,409.84 120 300
$1,570,189 $ 1,283,308 Fixed 8.240% 0.190% 0.125% 8.050% 7/22/97 9/1/97 30/360 $ 12,407.57 120 300
$1,500,000 $ 1,347,501 Fixed 8.150% 0.190% 0.125% 7.960% 10/3/97 12/1/97 Actual/360 $ 11,163.72 120 360
- ------------ ----------- -------- -------- -------- --------- -------- -------- ------- ---------- ----------- -------- ---------
$1,426,291 $ 1,189,491 Fixed 8.240% 0.170% 0.105% 8.070% 8/7/97 9/1/97 Actual/360 $ 11,265.28 120 300
$1,398,910 $ 1,165,389 Fixed 8.260% 0.265% 0.200% 7.995% 9/11/97 11/1/97 Actual/360 $ 11,047.66 120 300
$1,196,105 $ 841,613 Fixed 8.390% 0.190% 0.125% 8.200% 8/14/97 10/1/97 30/360 $ 10,330.49 120 240
$1,078,890 $ 974,257 Fixed 8.330% 0.170% 0.105% 8.160% 8/8/97 10/1/97 Actual/360 $ 8,174.50 120 360
$1,023,947 $ 924,649 Fixed 8.330% 0.170% 0.105% 8.160% 8/8/97 10/1/97 Actual/360 $ 7,758.17 120 360
- ------------ ----------- -------- -------- -------- --------- -------- -------- ------- ---------- ----------- -------- ---------
$846,908 $ 704,326 Fixed 8.950% 0.190% 0.125% 8.760% 6/20/97 8/1/97 30/360 $ 7,104.09 120 300
$839,137 $ 757,760 Fixed 8.330% 0.170% 0.105% 8.160% 8/8/97 10/1/97 Actual/360 $ 6,357.92 120 360
$829,147 $ 748,735 Fixed 8.330% 0.170% 0.105% 8.160% 8/8/97 10/1/97 Actual/360 $ 6,282.25 120 360
(i) For Mortgage Loans which accrue interest on the basis of actual days elapsed each calendar month and a 360-day year or a
365-day year, the amortization term is the term over which the Mortgage Loans would amortize if interest accrued and was paid
on the basis of a 360-day year consisting of twelve 30-day months. The actual amortization term would be longer.
(ii) A portion of this Mortgage Loan is prepayable during the LOCK-OUT period. The prepayable portion has an original balance of
$1,262,000 and accrues interest at 8.43%; the balance of the Mortgage Loan accrued interest at 8.33%.
</TABLE>
<PAGE>
ANNEX A
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
CONTROL LOAN ZIP PROPERTY ORIGINAL
NUMBER NUMBER PROPERTY NAME PROPERTY ADDRESS CITY STATE CODE TYPE BALANCE
- ------- -------- -------------------------- -------------------------- ------------------ ----- ----- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
C159 655328-5 Westcliff Office -building 201-401 N. Buffalo Dr. Las Vegas NV 89128 Office $ 780,000
4
C160 655374-8 The Commons Office 2006-A Morton Drive Charlottesville VA 22903 Office $ 771,429
Building
- ------- -------- -------------------------- -------------------------- ------------------ ----- ----- ----------- -----------
C161 655389-0 Fisherman's Wharf Ramada 590 Bay Street San Francisco CA 94133 Hotel $ 19,300,000
Plaza
C162 655469-5 Embassy Suites 2800 Tryon Charlotte NC 28217 Hotel $ 16,700,000
N163 50036 Days Inn -St. Petersburg 6200 Gulf Blvd. St. Petersburg FL 33706 Hotel $ 7,689,750
C164 655448-8 Courtyard by Marriott 35 West Spring Street Columbus OH 43215 Hotel $ 7,400,000
N165 50142 Residence Inn Brookfield 950 South Pinehurst Court Brookfield WI 53005 Hotel $ 7,000,000
- ------- -------- -------------------------- -------------------------- ------------------ ----- ----- ----------- -----------
C166 655372-2 Strathallan Hotel 550 East Avenue Rochester NY 14607 Hotel $ 6,750,000
N167 50025 Best Western Oceanside Inn 1180 Seabreeze Blvd. Ft. Lauderdale FL 33316 Hotel $ 5,330,850
N168 50034 Ramada Inn -Fort Myers 1160 Estero Blvd Fort Myers FL 33931 Hotel $ 4,933,750
C169 655374-8 English Inn 2000 Morton Drive Charlottesville VA 22903 Hotel $ 3,028,571
N170 50033 Hampton Inn -Ben Salem 1329 Bristol Pike Ben Salem PA 19020 Hotel $ 3,000,000
- ------- -------- -------------------------- -------------------------- ------------------ ----- ----- ----------- -----------
N171 50035 Days Inn -Fort Myers 1130 Estero Blvd Ft. Myers FL 33931 Hotel $ 2,921,100
C172 655349-9 Sioux City Holiday Inn 140 Zenith Drive Sioux City IA 51103 Hotel $ 2,400,000
N173 50037 Howard Johnson -Fort Myers 1100 Estero Blvd Fort Myers FL 33931 Hotel $ 1,738,950
C174 655410-3 Knights Inn 4320 Groves Road Columbus OH 43223 Hotel $ 1,500,000
N175 50145 Toxikon 15 Wiggins Ave. Bedford MA 01730 Industrial $ 8,500,000
- ------- -------- -------------------------- -------------------------- ------------------ ----- ----- ----------- -----------
C176 655459-8 Lavergne Court 6502-40 S. Lavergne Ave. Bedford Park IL 60638 Industrial $ 3,005,333
C177 655459-8 Harbor Court 5301-19 W. 65th Street Bedford Park IL 60638 Industrial $ 1,894,667
C178 655463-7 Harney Road Industrial 6401-6403 Harney Road Tampa FL 33610 Industrial $ 2,700,000
Center
C179 655441-7 26 Clinton Drive 26 Clinton Drive Hollis NH 03049 Industrial $ 2,000,000
C180 655333-7 Alhambra 4815 NW 79 Ave Miami FL 33166 Industrial $ 1,600,000
- ------- -------- -------------------------- -------------------------- ------------------ ----- ----- ----------- -----------
C181 655356-0 3220 Warehouse 3220 SW 2nd Avenue Fort Lauderdale FL 33315 Industrial $ 1,575,000
C182 655464-0 Wanalda Warehouse 12140-12160 Parklawn DriveRockville MD 20852 Industrial $ 1,430,000
C183 655355-7 541 Warehouse 541 NE 32nd Street Oakland Park FL 33334 Industrial $ 1,350,000
C184 655460-8 5235 W. 65th Street 5235 W. 65th Street Bedford Park IL 60638 Industrial $ 1,100,000
N185 50157 Voorhees Pediatric Center 1304 Laurel Oak Road Voorhees NJ 08043 Healthcare $ 9,400,000
- ------- -------- -------------------------- -------------------------- ------------------ ----- ----- ----------- -----------
N186 50032 Franklin Nursing Home 142-27 Franklin Ave. Flushing NY 11355 Healthcare $ 6,000,000
N187 50089 Ditmas Park Care Center 2107 Ditmas Ave. Brooklyn NY 11226 Healthcare $ 4,000,000
C188 655394-2 Lakeview Village Shopping N. Val Vista Drive and E. Gilbert AZ 85234 Mixed $ 10,350,000
Center (iii) Baseline Rd
C189 655447-5 Montgomery Pointe Plaza 8740 Montgomery Road Cincinnati OH 45236 Mixed $ 3,075,000
C190 655343-4 Le Madri 168 West 18th Street New York NY 10011 Mixed $ 2,000,000
- ------- -------- -------------------------- -------------------------- ------------------ ----- ----- ----------- -----------
C191 655465-3 Lackland Self Storage 1555 Livingston Avenue North Brunswick NJ 08902 Self-Storage$ 4,000,000
N192 50047 Frederick Mini-Storage 7315 Industry Lane Frederick MD 21704 Self-Storage$ 2,400,000
N193 50046 York Mini-Storage, Inc. 154 Leader Heights Rd. York PA 17403 Self-Storage$ 1,755,500
- ------- -------- -------------------------- -------------------------- ------------------ ----- ----- ----------- -----------
Totals/Weighted Averages $872,255,110
=========================================== ========================== ================== ===== ===== =========== ===========
</TABLE>
<PAGE>
ANNEX A
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
ANTICIPATED SUB- ORIGINAL ORIGINAL
LOAN MORTGAGE ADMINI- SERVICING NET FIRST INTEREST TERM TO AMORTIZATION
CUT-OFF BALANCE AT RATE MORTGAGE STRATIVE FEE MORTGAGE NOTE PAYMENT ACCRUAL MONTHLY MATURITY TERM
DATE BALANCE MATURITY TYPE RATE FEE RATE RATE RATE DATE DATE METHOD PAYMENT (MONTHS) (MONTHS)(i)
- ------------ ----------- -------- -------- -------- --------- -------- -------- ------- ---------- ----------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$779,198 $ 703,626 FIXED 8.330% 0.170% 0.105% 8.160% 8/8/97 10/1/97 ACTUAL/360 $ 5,903.83 120 360
$770,824 $ 641,615 FIXED 8.230% 0.190% 0.125% 8.040% 9/24/97 11/1/97 ACTUAL/360 $ 6,072.02 120 300
- ------------ ----------- -------- -------- -------- --------- -------- -------- ------- ---------- ----------- -------- ------------
$19,300,000 $16,040,501 FIXED 8.220% 0.190% 0.125% 8.030% 10/23/97 12/1/97 ACTUAL/360 $151,784.16 120 300
$16,700,000 $ 8,085,173 FIXED 7.630% 0.190% 0.125% 7.440% 10/24/97 12/1/97 ACTUAL/360 $156,047.33 120 180
$7,662,588 $ 6,579,355 FIXED 9.290% 0.190% 0.125% 9.100% 5/16/97 7/1/97 ACTUAL/360 $ 66,066.00 120 300
$7,385,514 $ 6,061,816 FIXED 8.460% 0.190% 0.125% 8.270% 8/29/97 10/1/97 30/360 $ 59,387.46 120 300
$6,988,014 $ 6,312,985 FIXED 8.490% 0.125% 0.060% 8.365% 8/29/97 10/1/97 ACTUAL/360 $ 56,318.73 84 300
- ------------ ----------- -------- -------- -------- --------- -------- -------- ------- ---------- ----------- -------- ------------
$6,750,000 $ 5,592,751 FIXED 8.110% 0.190% 0.125% 7.920% 10/31/97 12/1/97 ACTUAL/360 $ 52,590.42 120 300
$5,290,360 $ 3,963,733 FIXED 9.440% 0.190% 0.125% 9.250% 4/16/97 6/1/97 ACTUAL/360 $ 49,481.83 120 240
$4,916,323 $ 4,221,320 FIXED 9.290% 0.190% 0.125% 9.100% 5/16/97 7/1/97 ACTUAL/360 $ 42,388.00 120 300
$3,026,196 $ 2,518,933 FIXED 8.230% 0.190% 0.125% 8.040% 9/24/97 11/1/97 ACTUAL/360 $ 23,838.32 120 300
$2,979,628 $ 2,201,630 FIXED 9.050% 0.190% 0.125% 8.860% 5/29/97 7/1/97 ACTUAL/360 $ 27,088.32 120 240
- ------------ ----------- -------- -------- -------- --------- -------- -------- ------- ---------- ----------- -------- ------------
$2,910,782 $ 2,499,296 FIXED 9.290% 0.190% 0.125% 9.100% 5/16/97 7/1/97 ACTUAL/360 $ 25,096.44 120 300
$2,398,506 $ 2,044,145 FIXED 9.110% 0.190% 0.125% 8.920% 9/17/97 11/1/97 ACTUAL/360 $ 20,321.80 120 300
$1,734,333 $ 1,488,558 FIXED 9.290% 0.190% 0.125% 9.100% 6/4/97 8/1/97 ACTUAL/360 $ 14,940.08 120 240
$1,500,000 $ 1,249,793 FIXED 8.310% 0.190% 0.125% 8.120% 10/22/97 12/1/97 ACTUAL/360 $ 11,886.96 120 300
$8,485,178 $ 7,100,184 FIXED 8.400% 0.275% 0.210% 8.125% 8/11/97 10/1/97 ACTUAL/360 $ 67,872.45 120 300
- ------------ ----------- -------- -------- -------- --------- -------- -------- ------- ---------- ----------- -------- ------------
$3,003,125 $ 2,517,656 FIXED 8.490% 0.190% 0.125% 8.300% 9/11/97 11/1/97 ACTUAL/360 $ 24,179.51 120 300
$1,893,275 $ 1,587,218 FIXED 8.490% 0.190% 0.125% 8.300% 9/11/97 11/1/97 ACTUAL/360 $ 15,243.60 120 300
$2,697,809 $ 2,236,831 FIXED 8.090% 0.190% 0.125% 7.900% 9/2/97 11/1/97 ACTUAL/360 $ 21,000.27 120 300
$1,991,370 $ 1,669,924 FIXED 9.290% 0.190% 0.125% 9.100% 5/21/97 7/1/97 30/360 $ 17,182.87 120 300
$1,599,321 $ 1,437,940 FIXED 8.150% 0.190% 0.125% 7.960% 9/10/97 11/1/97 ACTUAL/360 $ 11,907.97 120 360
- ------------ ----------- -------- -------- -------- --------- -------- -------- ------- ---------- ----------- -------- ------------
$1,571,902 $ 1,289,253 FIXED 8.430% 0.190% 0.125% 8.240% 8/22/97 10/1/97 30/360 $ 12,608.12 120 300
$1,424,659 $ 1,180,568 FIXED 8.790% 0.190% 0.125% 8.600% 6/20/97 8/1/97 30/360 $ 11,795.54 120 300
$1,345,641 $ 947,940 FIXED 8.430% 0.190% 0.125% 8.240% 8/22/97 10/1/97 30/360 $ 11,655.87 120 240
$1,099,192 $ 921,502 FIXED 8.490% 0.190% 0.125% 8.300% 9/11/97 11/1/97 ACTUAL/360 $ 8,850.09 120 300
$9,381,655 $ 7,726,972 FIXED 7.830% 0.165% 0.100% 7.665% 8/13/97 10/1/97 ACTUAL/360 $ 71,495.33 120 300
- ------------ ----------- -------- -------- -------- --------- -------- -------- ------- ---------- ----------- -------- ------------
$5,981,525 $ 5,052,600 FIXED 8.670% 0.215% 0.150% 8.455% 6/4/97 8/1/97 ACTUAL/360 $ 49,002.92 120 300
$3,986,756 $ 3,338,979 FIXED 8.350% 0.265% 0.200% 8.085% 6/23/97 8/1/97 ACTUAL/360 $ 31,805.76 120 300
$10,350,000 $ 9,169,988 FIXED 7.570% 0.190% 0.125% 7.380% 10/30/97 12/1/97 ACTUAL/360 $ 72,865.45 120 360
$3,063,739 $ 2,545,672 FIXED 8.910% 0.190% 0.125% 8.720% 6/19/97 8/1/97 30/360 $ 25,616.04 120 300
$1,997,413 $ 1,455,531 FIXED 8.790% 0.190% 0.125% 8.600% 9/2/97 11/1/97 ACTUAL/360 $ 17,725.29 120 240
- ------------ ----------- -------- -------- -------- --------- -------- -------- ------- ---------- ----------- -------- ------------
$3,986,839 $ 2,796,184 FIXED 8.280% 0.190% 0.125% 8.090% 8/4/97 10/1/97 30/360 $ 34,157.99 120 240
$2,393,243 $ 2,041,628 FIXED 9.050% 0.190% 0.125% 8.860% 6/6/97 8/1/97 ACTUAL/360 $ 20,222.95 120 300
$1,750,557 $ 1,493,365 FIXED 9.050% 0.190% 0.125% 8.860% 6/6/97 8/1/97 ACTUAL/360 $ 14,792.25 120 300
- ------------ ----------- -------- -------- -------- --------- -------- -------- ------- ---------- ----------- -------- ------------
$870,577,289 $748,480,064 8.231% 8.047% $ 6,732,137 119 329.8
============ =========== ======== ======== ======== ========= ======== ======== ======= ========== =========== ======== ============
(i) For Mortgage Loans which accrue interest on the basis of actual days elapsed each calendar month and a 360-day year or a
365-day year, the amortization term is the term over which the Mortgage Loans would amortize if interest accrued and was paid
on the basis of a 360-day year consisting of twelve 30-day months. The actual amortization term would be longer.
(iii) The collateral for this Mortgage Loan includes four non-contiguous retail buildings (92,141 sf), one office building
(19,520 sf) and a medical office building (8,100 sf).
</TABLE>
<PAGE>
ANNEX A
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
REMAINING CROSS-
TERM TO COLLATER- LOCKOUT
CONTROL LOAN SEASONING MATURITY MATURITY ALIZED RELATED EXPIRATION PREPAYMENT PENALTY
NUMBER NUMBER PROPERTY NAME (MONTHS) (MONTHS) DATE LOANS LOANS DATE DESCRIPTION (MONTHS)
- ------- -------- ------------------------------- --------- -------- -------------- ------- ---------- --------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
N001 50071 Saddle Creek 3 117 8/1/07 No Yes(a) 7/31/01 LO(48) / Grtr1%UPBorYM(66)
Apartments / Free(6)
N002 50169 Suerte Apartments 0 120 11/1/07 No No 10/31/01 LO(48) / Grtr1%UPBorYM(66)
/ Free(6)
N003 50003 Springs Pointe 9 111 2/1/07 Yes(1) Yes(b) 3/1/00 LO(37) / Grtr1%UPBorYM(48)
Apartments / 3%(12) / 2%(12) /
1%(5) / Free(6)
N004 50008 The Landings at 10 110 1/1/07 No No 2/1/00 LO(37) / Grtr1%UPBorYM(48)
Cypress Meadows / 3%(12) / 2%(12) /
1%(5) / Free(6)
N005 50018 Sun Harbor Suites 6 114 5/1/07 No No 4/30/01 LO(48) / Grtr1%UPBorYM(66)
/ Free(6)
------ -------- ------------------------------- --------- -------- -------------- ------- ---------- --------------------------
N006 50004 Westwood Pointe 9 111 2/1/07 Yes(1) Yes(b) 3/1/00 LO(37) / Grtr1%UPBorYM(48)
Apartments / 3%(12) / 2%(12) /
1%(5) / Free(6)
N007 50070 Briar Cove Apartments 3 117 8/1/07 No Yes(a) 7/31/01 LO(48) / Grtr1%UPBorYM(66)
/ Free(6)
C008 655411-6 Chesapeake Landing 0 120 11/1/07 No No 10/31/01 LO(48) / YM(66) / Free(6)
Apts
N009 50058 College Park 5 115 6/1/07 No No 5/31/01 LO(48) / Grtr1%UPBorYM(66)
Apartments / Free(6)
C010 655342-1 Lakeland Apartments 2 118 9/1/07 No No 8/31/01 LO(48) / YM(66) / Free(6)
------ -------- ------------------------------- --------- -------- -------------- ------- ---------- --------------------------
C011 655342-1 Lake Terrace 2 118 9/1/07 No No 8/31/01 LO(48) / YM(66) / Free(6)
Apartments
C012 655342-1 Maryland Park 2 118 9/1/07 No No 8/31/01 LO(48) / YM(66) / Free(6)
Apartments
C013 655342-1 Riverland Apartments 2 118 9/1/07 No No 8/31/01 LO(48) / YM(66) / Free(6)
C014 655342-1 River Terrace 2 118 9/1/07 No No 8/31/01 LO(48) / YM(66) / Free(6)
Apartments
C015 655342-1 Lake Park Apartments 2 118 9/1/07 No No 8/31/01 LO(48) / YM(66) / Free(6)
------ -------- ------------------------------- --------- -------- -------------- ------- ---------- --------------------------
C016 655467-9 Hampton Meadows 1 119 10/1/07 No No 9/30/01 LO(48) / Grtr1%UPBorYM(66)
/ Free(6)
N017 50029 Lost Creek Apartments 5 115 6/1/07 No No 5/31/01 LO(48) / Grtr1%UPBorYM(66)
/ Free(6)
N018 50088 Sands Point Apartments 4 116 7/1/07 No No 6/30/01 LO(48) / Grtr1%UPBorYM(66)
/ Free(6)
N019 50010 Debaliviere Place IV 6 114 5/1/07 Yes(2) Yes(c) 4/30/01 LO(48) / Grtr1%UPBorYM(66)
/ Free(6)
C020 655386-1 Vantage Point 0 120 11/1/07 No No 10/31/01 LO(48) / YM(66) / Free(6)
Apartments
------ -------- ------------------------------- --------- -------- -------------- ------- ---------- --------------------------
N021 50031 The Summit Apartments 5 115 6/1/07 No No 5/31/00 LO(36) / Grtr1%UPBorYM(48)
/ 3%(12) / 2%(12) /
1%(6) / Free(6)
C022 655317-5 Oaks of Northgate 3 117 8/1/07 No Yes(d) 7/31/01 LO(48) / YM(66) / Free(6)
C023 655396-8 Hunters Crossing 0 120 11/1/07 No No 10/31/00 LO(36) / YM(36) / 3%(12) /
2%(12) / 1%(12) /
Free(12)
C024 655318-8 Lakeshire Place 3 117 8/1/07 No Yes(d) 7/31/01 LO(48) / YM(66) / Free(6)
Apartments
N025 50184 Heritage Oaks 3 117 8/1/07 No No 7/31/01 LO(48) / Grtr1%UPBorYM(66)
Apartments / Free(6)
------ -------- ------------------------------- --------- -------- -------------- ------- ---------- --------------------------
N026 50100 Woodcrest Apartments 3 81 8/1/04 No Yes(e) 7/31/00 LO(36) / Grtr1%UPBorYM(42)
/ Free(6)
C027 655446-2 Piccadilly Apartments 5 115 6/1/07 No Yes(f) 5/31/01 LO(48) / YM(60) / Free(12)
N028 50097 Centennial Apartments 3 117 8/1/07 No No 7/31/01 LO(48) / Grtr1%UPBorYM(66)
/ Free(6)
N029 50084 Runnymede Apartments 4 112 3/1/07 No No 6/30/01 LO(48) / Grtr1%UPBorYM(62)
/ Free(6)
C030 655312-0 Arlington Oaks 3 117 8/1/07 No Yes(d) 7/31/01 LO(48) / YM(66) / Free(6)
Apartments
------ -------- ------------------------------- --------- -------- -------------- ------- ---------- --------------------------
C031 655302-3 Forest Creek Crossing 5 115 6/1/07 No No 5/31/01 LO(48) / YM(72)
Apartments
N032 50102 Windridge Apartments 3 81 8/1/04 No Yes(e) 7/31/00 LO(36) / Grtr1%UPBorYM(42)
/ Free(6)
C033 655455-6 Columbia Courts 1 119 10/1/07 No No 9/30/01 LO(48) / Grtr1%UPBorYM(66)
Apartments / Free(6)
C034 655455-6 Frazee Avenue 1 119 10/1/07 No No 9/30/01 LO(48) / Grtr1%UPBorYM(66)
Apartments / Free(6)
N035 50030 Lauder Ridge 5 115 6/1/07 No No 5/31/01 LO(48) / Grtr1%UPBorYM(66)
Apartments / Free(6)
------ -------- ------------------------------- --------- -------- -------------- ------- ---------- --------------------------
C036 655471-8 Bellvue Garden 1 119 10/1/07 No No 9/30/01 LO(48) / Grtr1%UPBorYM(66)
Apartments / Free(6)
C037 655471-8 Bellvue Towers 1 119 10/1/07 No No 9/30/01 LO(48) / Grtr1%UPBorYM(66)
Apartments / Free(6)
N038 50050 Latham Park Manor 6 114 5/1/07 No No 4/30/01 LO(48) / Grtr1%UPBorYM(66)
/ Free(6)
C039 655445-9 Point West Apartments 5 115 6/1/07 No Yes(f) 5/31/01 LO(48) / YM(60) / Free(12)
N040 50101 Kingsley Creek 2 82 9/1/04 No Yes(e) 8/30/00 LO(36) / Grtr1%UPBorYM(42)
Apartments / Free(6)
------ -------- ------------------------------- --------- -------- -------------- ------- ---------- --------------------------
C041 655322-7 Sundance Apartments 3 117 8/1/07 No Yes(d) 7/31/01 LO(48) / YM(66) / Free(6)
N042 50074 Bienville Towers 4 116 7/1/07 No No 6/30/01 LO(48) / Grtr1%UPBorYM(66)
/ Free(6)
C043 655340-5 Chaplewood Place 0 120 11/1/07 No No 10/31/01 LO(48) / YM(66) / Free(6)
Apartments
N044 50086 Crosspointe Apartments 4 116 7/1/07 No No 6/30/01 LO(48) / Grtr1%UPBorYM(66)
/ Free(6)
C045 655334-0 Village Apartments 4 116 7/1/07 No No 6/30/01 LO(48) / YM(66) / Free(6)
------ -------- ------------------------------- --------- -------- -------------- ------- ---------- --------------------------
C046 655323-0 Logan Place Apartments 0 120 11/1/07 No No 10/31/01 LO(48) / YM(66) / Free(6)
C047 650776-5 Village Club 3 117 8/1/07 No No 7/31/01 LO(48) / YM(66) / Free(6)
Apartments
N048 50103 Rochelle Plaza 3 81 8/1/04 No Yes(e) 7/31/00 LO(36) / Grtr1%UPBorYM(42)
Apartments / Free(6)
C049 655444-6 Hunter's Creek 4 56 7/1/02 No No n/a Grtr1%UPBorYM(54) /
Apartments Free(6)
C050 655456-9 DeVille Court 4 116 7/1/07 No No 6/30/01 LO(48) / Grtr1%UPBorYM(66)
Apartments / Free(6)
------ -------- ------------------------------- --------- -------- -------------- ------- ---------- --------------------------
C051 655466-6 Brittania Sherman 0 120 11/1/07 No Yes(h) 10/31/01 LO(48) / Grtr1%UPBorYM(66)
Apartments / Free(6)
N052 50016 Park East Apartments 6 78 5/1/04 No Yes(g) 4/30/99 LO(24) / Grtr1%UPBorYM(36)
/ 2%(12) / 1%(6) /
Free(6)
C053 655301-0 559-607 W.191st Street 5 115 6/1/07 No No 5/31/01 LO(48) / YM(66) / Free(6)
</TABLE>
<PAGE>
ANNEX A
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
TOTAL SF/ NET LOAN
CUT-OFF UNITS/ UNIT/ RENTABLE BALANCE PER OCCUPANCY
CONTROL APPRAISAL APPRAISAL DATE LTV YEAR BUILT/ ROOM ROOM/ AREA SF/UNIT/ OCCUPANCY AS OF U/W U/W
NUMBER VALUE DATE RATIO RENOVATED BED BED (SF) ROOM/BED PERCENT DATE REVENUES EXPENSES
- ------- ----------- --------- -------- ----------- ------ ----- -------- ----------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
N001 $27,300,000 12/16/96 79.8% 1988 400 Unit 355,640 $54,451.88 96% 5/30/97 $3,711,543 $1,321,340
N002 $26,500,000 8/31/97 71.7% 1990 272 Unit 267,792 $69,852.94 96% 7/31/97 $3,100,940 $1,062,380
N003 $22,252,500 7/10/97 79.4% 1982 484 Unit 407,120 $36,488.04 96% 6/20/97 $3,305,326 $1,115,041
N004 $23,500,000 11/21/96 71.9% 1996 470 Unit 430,240 $35,962.24 96% 10/3/97 $3,199,672 $1,247,026
N005 $29,200,000 4/22/97 57.2% 1990 638 Unit 238,824 $26,188.03 96% 4/1/97 $6,050,380 $3,594,124
------ ----------- --------- -------- ----------- ------ ----- -------- ----------- --------- --------- ---------- ----------
N006 $21,478,500 7/10/97 76.8% 1984 468 Unit 392,072 $35,242.18 95% 6/20/97 $3,171,209 $1,139,990
N007 $20,500,000 12/23/96 79.8% 1989 272 Unit 287,184 $60,174.63 93% 5/30/97 $2,918,048 $1,081,203
C008 $17,600,000 9/8/97 76.1% 1978 478 Unit 387,280 $28,033.47 97% 7/1/97 $2,783,086 $1,277,859
N009 $16,750,000 4/1/97 79.8% 1927/1996 452 Unit 277,827 $29,579.29 99% 7/31/97 $2,748,702 $1,046,824
C010 $ 1,600,000 6/20/97 72.4% 1966 42 Unit 28,455 $27,594.99 100% 5/6/97 $ 285,271 $ 133,552
------ ----------- --------- -------- ----------- ------ ----- -------- ----------- --------- --------- ---------- ----------
C011 $ 3,500,000 6/25/97 72.4% 1968 84 Unit 53,700 $30,182.02 100% 5/6/97 $ 565,340 $ 245,561
C012 $ 5,300,000 6/25/97 72.4% 1973 130 Unit 85,030 $29,531.95 100% 5/6/97 $ 901,173 $ 350,701
C013 $ 970,000 6/18/97 72.4% 1967 30 Unit 20,310 $23,421.25 100% 5/6/97 $ 195,312 $ 117,559
C014 $ 760,000 6/18/97 72.4% 1967 24 Unit 15,815 $22,938.34 100% 5/6/97 $ 149,355 $ 77,929
C015 $ 1,700,000 6/24/97 72.4% 1968 50 Unit 30,255 $24,628.53 100% 5/6/97 $ 301,115 $ 141,210
------ ----------- --------- -------- ----------- ------ ----- -------- ----------- --------- --------- ---------- ----------
C016 $11,735,000 9/4/97 77.9% 1991/1997 152 Unit 176,984 $60,163.08 95% 9/16/97 $1,389,660 $ 411,581
N017 $11,330,000 2/25/97 67.6% 1984 300 Unit 169,185 $25,520.56 94% 6/30/97 $1,601,499 $ 572,552
N018 $ 9,000,000 5/12/97 84.3% 1981/1996 495 Unit 398,970 $15,322.26 92% 6/20/97 $2,181,646 $1,222,409
N019 $10,180,000 1/21/97 70.0% 1915/1985 219 Unit 197,402 $32,556.39 96% 7/24/97 $1,560,425 $ 656,497
C020 $ 9,000,000 8/22/97 76.9% 1973 228 Unit 263,000 $30,372.81 95% 8/15/97 $1,420,215 $ 600,896
------ ----------- --------- -------- ----------- ------ ----- -------- ----------- --------- --------- ---------- ----------
N021 $ 9,335,000 3/14/97 74.0% 1989 222 Unit 192,207 $31,120.19 87% 6/25/97 $1,359,449 $ 486,256
C022 $ 8,300,000 4/7/97 76.4% 1984 276 Unit 217,784 $22,969.72 93% 4/30/97 $1,419,954 $ 657,615
C023 $ 7,300,000 8/25/97 82.2% 1986 228 Unit 179,180 $26,315.79 91% 6/4/97 $1,381,538 $ 663,284
C024 $ 7,000,000 4/15/97 79.9% 1979/1995 304 Unit 216,656 $18,391.01 87% 4/29/97 $1,557,349 $ 785,467
N025 $ 7,000,000 4/15/97 79.3% 1991 157 Unit 82,902 $35,357.26 97% 7/8/97 $1,014,360 $ 361,617
------ ----------- --------- -------- ----------- ------ ----- -------- ----------- --------- --------- ---------- ----------
N026 $ 7,050,000 4/23/97 78.2% 1964/1997 304 Unit 307,584 $18,129.72 88% 6/30/97 $1,881,069 $1,190,522
C027 $ 7,200,000 3/7/97 70.1% 1972 234 Unit 168,320 $21,563.28 98% 3/18/97 $1,246,025 $ 533,498
N028 $ 6,260,000 4/15/97 79.8% 1976 78 Unit 79,498 $64,004.88 94% 6/30/97 $ 960,355 $ 333,395
N029 $ 6,700,000 3/26/97 74.5% 1972 252 Unit 186,860 $19,802.83 96% 6/27/97 $1,555,012 $ 922,046
C030 $ 6,100,000 4/8/97 81.0% 1981 202 Unit 151,052 $24,464.98 94% 4/29/97 $1,134,618 $ 542,460
------ ----------- --------- -------- ----------- ------ ----- -------- ----------- --------- --------- ---------- ----------
C031 $ 6,200,000 2/21/97 72.4% 1972/1996 257 Unit 354,875 $17,456.59 92% 5/8/97 $1,426,860 $ 827,160
N032 $ 4,900,000 4/23/97 84.4% 1964/1997 250 Unit 239,284 $16,534.31 92% 6/30/97 $1,487,163 $ 952,191
C033 $ 3,740,000 4/23/97 74.9% 1982 72 Unit 79,920 $38,918.29 92% 4/23/97 $ 536,085 $ 134,766
C034 $ 1,470,000 4/23/97 74.9% 1975 43 Unit 45,396 $25,613.18 100% 4/23/97 $ 248,548 $ 93,885
N035 $ 5,350,000 3/7/97 70.8% 1974 152 Unit 131,800 $24,933.35 92% 6/30/97 $1,067,042 $ 580,336
------ ----------- --------- -------- ----------- ------ ----- -------- ----------- --------- --------- ---------- ----------
C036 $ 2,860,000 8/8/97 70.7% 1950 114 Unit 69,810 $17,729.35 94% 8/31/97 $ 595,608 $ 293,567
C037 $ 2,090,000 8/8/97 70.7% 1942 118 Unit 84,006 $12,516.88 83% 8/31/97 $ 609,932 $ 379,449
N038 $ 4,900,000 11/20/96 71.1% 1949 140 Unit 145,156 $24,884.49 95% 7/31/97 $ 760,716 $ 263,483
C039 $ 5,100,000 3/7/97 66.9% 1969 146 Unit 137,888 $23,381.05 100% 3/18/97 $ 836,328 $ 354,625
N040 $ 4,500,000 4/22/97 71.2% 1979/1996 248 Unit 176,984 $12,928.20 92% 6/10/97 $1,057,505 $ 663,272
------ ----------- --------- -------- ----------- ------ ----- -------- ----------- --------- --------- ---------- ----------
C041 $ 4,000,000 4/7/97 77.5% 1971 184 Unit 149,664 $16,847.48 96% 4/30/97 $ 818,315 $ 433,363
N042 $ 4,140,000 4/10/97 74.9% 1970 136 Unit 125,571 $22,789.43 96% 5/28/97 $ 787,035 $ 374,495
C043 $ 4,000,000 5/23/97 75.0% 1979 160 Unit 129,416 $18,750.00 94% 6/1/97 $ 669,897 $ 285,493
N044 $ 4,280,000 3/17/97 70.0% 1986 107 Unit 85,796 $27,982.20 97% 7/25/97 $ 672,796 $ 293,652
C045 $ 4,190,000 2/17/97 71.4% 1987 102 Unit 85,616 $29,343.61 90% 6/30/97 $ 554,215 $ 189,111
------ ----------- --------- -------- ----------- ------ ----- -------- ----------- --------- --------- ---------- ----------
C046 $ 3,950,000 1/10/97 75.0% 1972/1993 187 Unit 141,125 $15,844.92 96% 8/13/97 $ 897,274 $ 506,300
C047 $ 4,400,000 3/4/97 63.5% 1977 112 Unit 182,249 $24,960.29 97% 6/11/97 $ 789,769 $ 414,420
N048 $ 3,450,000 4/23/97 79.9% 1978 120 Unit 106,272 $22,961.72 91% 6/30/97 $ 757,036 $ 413,559
C049 $ 5,500,000 3/10/97 49.7% 1980 146 Unit 125,000 $18,703.80 95% 3/10/97 $ 887,544 $ 430,588
C050 $ 4,100,000 4/18/97 65.6% 1964/1987 173 Unit 110,601 $15,547.77 98% 6/30/97 $ 901,388 $ 466,823
------ ----------- --------- -------- ----------- ------ ----- -------- ----------- --------- --------- ---------- ----------
C051 $ 3,500,000 8/18/97 75.4% 1990/1996 88 Unit 101,417 $30,000.00 90% 6/30/97 $ 726,624 $ 409,401
N052 $ 3,550,000 3/6/97 73.7% 1974 112 Unit 93,748 $23,369.29 89% 10/27/97 $ 691,900 $ 351,010
C053 $ 3,300,000 4/1/97 72.5% 1925 138 Unit 98,388 $17,339.81 98% 5/6/97 $ 773,648 $ 429,956
</TABLE>
<PAGE>
ANNEX A
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
REMAINING
TERM TO CROSS- LOCKOUT
CONTROL LOAN SEASONING MATURITY MATURITY COLLATERALIZED RELATED EXPIRATION PREPAYMENT PENALTY
NUMBER NUMBER PROPERTY NAME (MONTHS) (MONTHS) DATE LOANS LOANS DATE DESCRIPTION (MONTHS)
- ------- -------- ------------------------------- --------- -------- -------------- ------- ---------- --------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
C054 655279-4 Baypoint Manor 5 115 6/1/07 No No 5/31/01 LO(48) / YM(66) / Free(6)
Apartments
N055 50011 Caroline Apartments 6 114 5/1/07 Yes(2) Yes(c) 4/30/01 LO(48) / Grtr1%UPBorYM(66)
/ Free(6)
- ------- -------- ------------------------------- --------- -------- -------------- ------- ---------- --------------------------
C056 655453-0 Hillcrest Apartments 2 118 9/1/07 No No 8/31/98 LO(12) / YM(102) / Free(6)
C057 655339-5 Arcadia Park 3 117 8/1/07 No No 7/31/01 LO(48) / YM(66) / Free(6)
Apartments
C058 655462-4 Holly Hill Estates 0 120 11/1/07 No No 10/31/01 LO(48) / YM(66) / Free(6)
C059 655310-4 Wadsworth Apartments 3 117 8/1/07 No No 7/31/01 LO(48) / YM(66) / Free(6)
C060 655310-4 Earl Apartments 3 117 8/1/07 No No 7/31/01 LO(48) / YM(66) / Free(6)
- ------- -------- ------------------------------- --------- -------- -------------- ------- ---------- --------------------------
C061 655347-6 3631 Broadway 2 118 9/1/07 No No 8/31/01 LO(48) / YM(66) / Free(6)
N062 50119 Cypress Trace 2 118 9/1/07 No No 8/31/01 LO(48) / Grtr1%UPBorYM(66)
/ Free(6)
C063 655443-3 Imperial House 3 117 8/1/07 No No 7/31/01 LO(48) / YM(66) / Free(6)
N064 50075 Arden's Place 4 116 7/1/07 No Yes(i) 6/30/01 LO(48) / Grtr1%UPBorYM(66)
Apartments / Free(6)
N065 50077 Dutchtown Villas 4 116 7/1/07 No Yes(i) 6/30/01 LO(48) / Grtr1%UPBorYM(66)
/ Free(6)
- ------- -------- ------------------------------- --------- -------- -------------- ------- ---------- --------------------------
C066 655227-3 Knollwood Apartments 3 117 8/1/07 No No 7/31/01 LO(48) / YM(66) / Free(6)
C067 655227-3 Academy Manor 3 117 8/1/07 No No 7/31/01 LO(48) / YM(66) / Free(6)
Apartments
C068 655368-3 Cedar Bluff Apartments 0 120 11/1/07 No No 10/31/01 LO(48) / YM(66) / Free(6)
N069 50098 Kingbridge Apartments 3 117 8/1/07 No No 7/31/01 LO(48) / Grtr1%UPBorYM(66)
/ Free(6)
N070 50082 Cinnamon Tree 4 116 7/1/07 No No 6/30/01 LO(48) / Grtr1%UPBorYM(66)
Apartments / Free(6)
- ------- -------- ------------------------------- --------- -------- -------------- ------- ---------- --------------------------
C071 655335-3 Bel Aire Apartments 3 117 8/1/07 No No 7/31/01 LO(48) / YM(66) / Free(6)
N072 50015 Fifty-Five Plus 6 78 5/1/04 No Yes(g) 4/30/99 LO(24) / Grtr1%UPBorYM(36)
Apartments / 2%(12) / 1%(6) /
Free(6)
N073 50017 Woodman Place 6 114 5/1/07 No No 4/30/01 LO(48) / Grtr1%UPBorYM(66)
Apartments / Free(6)
C074 655369-6 Country Club 0 120 11/1/07 No No 10/31/01 LO(48) / YM(66) / Free(6)
Apartments
C075 655468-2 Townhouse Road 0 180 11/1/12 No No 10/31/01 LO(48) /
Apartments Grtr1%UPBorYM(120) /
Free(12)
- ------- -------- ------------------------------- --------- -------- -------------- ------- ---------- --------------------------
N076 50133 Forest Hills 3 117 8/1/07 No No 7/31/01 LO(48) / Grtr1%UPBorYM(66)
Apartments / Free(6)
C077 655451-4 Perry Hill Estates 5 115 6/1/07 No Yes(h) 5/31/01 LO(48) / YM(66) / Free(6)
N078 50232 Vintage Plaza 3 117 8/1/07 No No 7/31/01 LO(48) / Grtr1%UPBorYM(66)
Apartments / Free(6)
C079 655457-2 196 North River Road 3 117 8/1/07 No No 7/31/01 LO(48) / Grtr1%UPBorYM(66)
Apartments / Free(6)
C080 655186-3 Dunn's Bridge 5 115 6/1/07 No No 5/31/01 LO(48) / YM(66) / Free(6)
Apartments
- ------- -------- ------------------------------- --------- -------- -------------- ------- ---------- --------------------------
C081 655346-3 Aguadilla Mall 2 117 8/1/07 No No 9/1/01 LO(48) / Grtr2%UPBorYM(66)
/ Free(5)
C082 655353-1 University Square 2 118 9/1/07 No No 8/31/99 LO(24) / YM(90) / Free(6)
Shopping Center
N083 50139 Joliet Commons 1 119 10/1/07 No Yes(j) 9/30/01 LO(48) / Grtr1%UPBorYM(66)
Shopping Center / Free(6)
N084 50135 Victorville Valley 3 117 8/1/07 No Yes(j) 7/31/01 LO(48) / Grtr1%UPBorYM(66)
Retail Center / Free(6)
N085 50026 Burlington Outlet 6 114 5/1/07 No No 4/30/00 LO(36) / Grtr1%UPBorYM(48)
Center / 3%(12) / 2%(12) /
1%(6) / Free(6)
- ------- -------- ------------------------------- --------- -------- -------------- ------- ---------- --------------------------
N086 50114 Van Owen Marketplace 2 118 9/1/07 No No 8/31/01 LO(48) / Grtr1%UPBorYM(66)
/ Free(6)
N087 50273 Jumbo Sports #30 0 120 11/1/07 Yes(3)(iv) Yes(s) 10/31/01 LO(48) / Grtr1%UPBorYM(66)
/ Free(6)
N088 50285 Jumbo Sports #36 0 120 11/1/07 Yes(3)(iv) Yes(s) 10/31/01 LO(48) / Grtr1%UPBorYM(66)
/ Free(6)
N089 50274 Jumbo Sports #14 0 120 11/1/07 Yes(3)(iv) Yes(s) 10/31/01 LO(48) / Grtr1%UPBorYM(66)
/ Free(6)
N090 50083 Preston Parkway Center 4 116 7/1/07 No No 6/30/01 LO(48) / Grtr1%UPBorYM(66)
/ Free(6)
- ------- -------- ------------------------------- --------- -------- -------------- ------- ---------- --------------------------
C091 655458-5 Willow Lake Shopping 1 119 10/1/07 No No 9/30/01 LO(48) / YM(66) / Free(6)
Center
C092 655413-2 Ogden City Plaza 0 120 11/1/07 No No 9/30/01 LO(47) / YM(66) / Free(7)
C093 655367-0 Fox Plaza Retail 0 120 11/1/07 No No 10/31/01 LO(48) / YM(66) / Free(6)
C094 655440-4 Stonehedge Square 2 118 9/1/07 No No 8/31/01 LO(48) / YM(66) / Free(6)
Shopping Center
N095 50076 St Andrews Crossing 3 117 8/1/07 No Yes(k) 7/31/01 LO(48) / Grtr1%UPBorYM(66)
/ Free(6)
- ------- -------- ------------------------------- --------- -------- -------------- ------- ---------- --------------------------
C096 655450-1 Princeton Meadows 2 118 9/1/07 No No 8/31/01 LO(48) / YM(66) / Free(6)
Shopping Center
N097 50068 Troy Marketplace 3 117 8/1/07 No Yes(l) 7/31/01 LO(48) / Grtr1%UPBorYM(66)
Shopping Center / Free(6)
C098 655305-2 Food Emporium 3 117 8/1/07 No No 6/30/01 LO(47) / YM(66) / Free(7)
N099 50118 Northridge Shopping 2 118 9/1/07 No Yes(k) 8/31/01 LO(48) / Grtr1%UPBorYM(66)
Center / Free(6)
C100 655388-7 USA Outlet Center 0 120 11/1/07 No No 10/31/01 LO(48) / YM(66) / Free(6)
- ------- -------- ------------------------------- --------- -------- -------------- ------- ---------- --------------------------
C101 655324-3 The Galeria 4 116 7/1/07 No No 6/30/01 LO(48) / YM(66) / Free(6)
C102 655452-7 Timberlake Plaza 4 116 7/1/07 No No 6/30/99 LO(24) / Grtr1%UPBorYM(90)
Shopping Center / Free(6)
N103 50096 Hillsborough Commons 2 118 9/1/07 No No 8/31/00 LO(36) / Grtr1%UPBorYM(78)
/ Free(6)
C104 655364-1 North Park Shopping 0 120 11/1/07 No No 10/31/01 LO(48) / YM(66) / Free(6)
Center
N105 50193 Best Buy Store 20 1 119 10/1/07 No No 9/30/01 LO(48) / Grtr1%UPBorYM(66)
/ Free(6)
- ------- -------- ------------------------------- --------- -------- -------------- ------- ---------- --------------------------
</TABLE>
<PAGE>
ANNEX A
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
TOTAL SF/ NET LOAN
CUT-OFF UNITS/ UNIT/ RENTABLE BALANCE PER OCCUPANCY
CONTROL APPRAISAL APPRAISAL DATE LTV YEAR BUILT/ ROOM ROOM/ AREA SF/UNIT/ OCCUPANCY AS OF U/W U/W
NUMBER VALUE DATE RATIO RENOVATED BED BED (SF) ROOM/BED PERCENT DATE REVENUES EXPENSES
- ------- ----------- --------- -------- ----------- ------ ----- -------- ----------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
C054 $ 3,600,000 2/18/97 66.5% 1982 169 Unit 124,298 $14,157.73 86% 4/29/97 $ 781,336 $ 454,123
N055 $ 2,850,000 1/14/97 77.3% 1980 112 Unit 80,880 $19,676.53 96% 7/25/97 $ 580,546 $ 307,908
- ------- ----------- --------- -------- ----------- ------ ----- -------- ----------- --------- --------- ---------- ----------
C056 $ 2,830,000 4/25/97 74.9% 1967 100 Unit 60,868 $21,183.09 100% 4/23/97 $ 648,861 $ 340,038
C057 $ 2,650,000 6/11/97 79.9% 1973/1997 73 Unit 53,830 $28,996.04 96% 6/30/97 $ 510,824 $ 261,527
C058 $ 4,400,000 6/10/97 47.7% 1984 277 Unit 2,160,489 $ 7,581.23 100% 7/31/97 $ 739,689 $ 315,915
C059 $ 1,640,000 4/8/97 79.9% 1920/1986 64 Unit 32,500 $20,471.69 89% 6/30/97 $ 355,896 $ 183,712
C060 $ 815,000 4/8/97 79.9% 1920/1980 22 Unit $29,595.44 100% 6/30/97 $ 149,164 $ 57,424
- ------- ----------- --------- -------- ----------- ------ ----- -------- ----------- --------- --------- ---------- ----------
C061 $ 3,000,000 5/23/97 64.9% 1920 40 Unit 57,612 $48,647.47 100% 7/1/97 $ 573,579 $ 250,281
N062 $ 2,380,000 6/18/97 79.7% 1984/1995 53 Unit 43,516 $35,807.44 100% 7/26/97 $ 395,270 $ 162,183
C063 $ 2,800,000 2/25/97 67.6% 1962 93 Unit 99,291 $20,365.34 97% 3/1/97 $ 712,133 $ 426,412
N064 $ 2,360,000 4/21/97 76.1% 1992 48 Unit 43,296 $37,427.12 98% 5/1/97 $ 284,585 $ 70,690
N065 $ 2,360,000 4/21/97 71.9% 1992 48 Unit 43,296 $35,347.84 98% 8/31/97 $ 277,199 $ 67,212
- ------- ----------- --------- -------- ----------- ------ ----- -------- ----------- --------- --------- ---------- ----------
C066 $ 1,450,000 1/20/97 72.4% 1951/1986 62 Unit 45,182 $16,937.22 95% 5/25/97 $ 289,119 $ 141,241
C067 $ 825,000 1/27/97 72.4% 1986 32 Unit 21,200 $18,671.10 100% 5/25/97 $ 120,927 $ 34,026
C068 $ 2,000,000 7/21/97 75.0% 1971 105 Unit 91,928 $14,285.71 93% 8/25/97 $ 476,626 $ 280,141
N069 $ 1,900,000 4/1/97 73.6% 1972 81 Unit 62,270 $17,258.40 99% 3/31/97 $ 403,020 $ 221,603
N070 $ 1,950,000 4/29/97 71.7% 1979/1991 104 Unit 72,648 $13,435.38 98% 6/1/97 $ 415,438 $ 219,938
- ------- ----------- --------- -------- ----------- ------ ----- -------- ----------- --------- --------- ---------- ----------
C071 $ 1,850,000 6/9/97 75.5% 1973 77 Unit 61,236 $18,144.37 99% 6/10/97 $ 432,100 $ 260,065
N072 $ 1,550,000 3/3/97 79.8% 1980 60 Unit 44,232 $20,613.59 98% 7/22/97 $ 288,235 $ 127,192
N073 $ 1,510,000 1/14/97 79.3% 1985 33 Unit 27,294 $36,269.63 91% 6/30/97 $ 267,170 $ 109,469
C074 $ 1,325,000 3/10/97 75.5% 1968/1996 88 Unit 93,090 $11,363.64 96% 7/1/97 $ 418,472 $ 276,310
C075 $ 2,150,000 8/6/97 46.5% 1975 65 Unit 62,590 $15,384.62 94% 8/12/97 $ 382,530 $ 158,440
- ------- ----------- --------- -------- ----------- ------ ----- -------- ----------- --------- --------- ---------- ----------
N076 $ 1,250,000 6/18/97 79.9% 1979 53 Unit 34,800 $18,833.27 94% 7/23/97 $ 207,253 $ 83,331
C077 $ 1,260,000 4/8/97 72.7% 1969/1996 48 Unit 40,779 $19,078.02 98% 4/15/97 $ 290,043 $ 127,618
N078 $ 1,305,000 5/10/97 65.6% 1930 33 Unit 13,775 $25,927.57 97% 7/25/97 $ 172,622 $ 68,151
C079 $ 1,070,000 5/14/97 74.6% 1985 36 Unit 27,360 $22,180.45 97% 5/1/97 $ 196,357 $ 86,501
C080 $ 960,000 9/10/96 62.9% 1989 24 Unit 24,180 $25,179.02 100% 4/23/97 $ 149,625 $ 65,060
- ------- ----------- --------- -------- ----------- ------ ----- -------- ----------- --------- --------- ---------- ----------
C081 $39,900,000 7/1/97 66.3% 1993 n/a SF 271,412 $ 97.54 97% 10/1/97 $4,680,476 $1,312,782
C082 $22,500,000 2/28/97 79.9% 1969/1993 n/a SF 197,862 $ 90.86 91% 8/4/97 $2,840,358 $ 661,307
N083 $18,900,000 3/10/97 77.7% 1996 n/a SF 159,184 $ 92.30 100% 6/16/97 $2,245,821 $ 599,994
N084 $12,900,000 4/17/97 74.3% 1988/1991 n/a SF 184,883 $ 51.85 100% 6/30/97 $1,579,915 $ 385,203
N085 $13,000,000 2/12/97 70.0% 1983 n/a SF 220,566 $ 41.28 96% 6/16/97 $2,043,002 $ 667,252
- ------- ----------- --------- -------- ----------- ------ ----- -------- ----------- --------- --------- ---------- ----------
N086 $12,600,000 6/25/97 69.4% 1997 n/a SF 76,841 $ 113.73 100% 7/1/97 $1,479,769 $ 280,156
N087 $ 4,800,000 8/11/97 75.0% 1994 n/a SF 40,485 $ 88.92 100% 6/30/97 $ 564,079 $ 108,114
N088 $ 4,700,000 8/11/97 72.3% 1994 n/a SF 40,205 $ 84.57 100% 6/30/97 $ 541,271 $ 126,375
N089 $ 2,475,000 8/15/97 70.7% 1990 n/a SF 40,253 $ 43.48 100% 6/30/97 $ 331,376 $ 111,878
N090 $ 9,500,000 3/30/97 72.4% 1996 n/a SF 61,470 $ 111.91 97% 6/9/97 $1,356,447 $ 367,055
- ------- ----------- --------- -------- ----------- ------ ----- -------- ----------- --------- --------- ---------- ----------
C091 $ 9,000,000 8/7/97 68.8% 1987 n/a SF 85,954 $ 72.07 90% 7/17/97 $1,042,206 $ 262,923
C092 $ 7,650,000 5/21/97 79.7% 1979 n/a SF 95,107 $ 64.14 100% 8/31/97 $ 923,468 $ 193,032
C093 $ 8,525,000 8/1/97 70.4% 1962/1987 n/a SF 184,055 $ 32.60 100% 8/1/97 $1,293,455 $ 476,473
C094 $ 7,500,000 12/15/96 75.5% 1990 n/a SF 87,860 $ 64.46 100% 10/17/96 $ 936,872 $ 183,006
N095 $ 7,000,000 4/30/97 74.9% 1993 n/a SF 67,910 $ 77.19 100% 8/4/97 $ 816,596 $ 168,492
- ------- ----------- --------- -------- ----------- ------ ----- -------- ----------- --------- --------- ---------- ----------
C096 $ 6,700,000 4/17/97 74.5% 1982 n/a SF 66,042 $ 75.61 100% 4/1/97 $1,052,889 $ 366,144
N097 $ 6,300,000 4/14/97 75.3% 1988 n/a SF 131,255 $ 36.14 100% 6/25/97 $ 676,880 $ 96,735
C098 $ 6,400,000 4/30/97 74.0% 1990/1992 n/a SF 20,262 $ 233.70 100% 5/1/97 $ 692,300 $ 60,400
N099 $ 6,300,000 6/5/97 73.7% 1982 n/a SF 75,159 $ 61.80 95% 7/31/97 $ 811,292 $ 234,475
C100 $ 6,000,000 8/5/97 75.0% 1989 n/a SF 102,301 $ 43.99 100% 8/12/97 $1,089,614 $ 434,626
- ------- ----------- --------- -------- ----------- ------ ----- -------- ----------- --------- --------- ---------- ----------
C101 $ 7,000,000 4/15/97 62.6% 1975 n/a SF 30,528 $ 143.58 100% 4/22/97 $1,171,719 $ 580,601
C102 $ 5,700,000 4/29/97 75.3% 1973/1997 n/a SF 80,847 $ 53.06 93% 4/1/97 $ 663,003 $ 127,067
N103 $ 5,900,000 7/9/97 72.0% 1989 n/a SF 108,540 $ 39.11 100% 7/18/97 $ 639,493 $ 109,028
C104 $ 5,600,000 8/6/97 71.4% 1996 n/a SF 71,188 $ 56.19 99% 7/25/97 $ 631,692 $ 110,073
N105 $ 5,040,000 8/1/97 75.3% 1996 n/a SF 46,790 $ 81.09 100% 7/1/97 $ 626,307 $ 152,248
- ------- ----------- --------- -------- ----------- ------ ----- -------- ----------- --------- --------- ---------- ----------
</TABLE>
(iv) Limited Cross-Collateralization as described herein.
<PAGE>
ANNEX A
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
REMAINING
TERM TO CROSS- LOCKOUT
CONTROL LOAN SEASONING MATURITY MATURITY COLLATERALIZED RELATED EXPIRATION PREPAYMENT PENALTY
NUMBER NUMBER PROPERTY NAME (MONTHS) (MONTHS) DATE LOANS LOANS DATE DESCRIPTION (MONTHS)
- ------- -------- ------------------------------- --------- -------- -------------- ------- ---------- --------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
C106 655274-9 State Line Plaza 5 115 6/1/07 No No 5/31/01 LO(48) / YM(66) / Free(6)
C107 655405-1 Alta Loma Plaza 0 120 11/1/07 No No 10/31/01 LO(48) / YM(66) / Free(6)
N108 50040 Landmark Village 6 114 5/1/07 No No 4/30/01 LO(48) / Grtr1%UPBorYM(66)
Shopping Center / Free(6)
N109 50069 Douglas Square 3 117 8/1/07 No Yes(l) 7/31/01 LO(48) / Grtr1%UPBorYM(54)
Shopping Center / Free(18)
C110 655243-5 Old Pueblo Plaza 4 116 7/1/07 No No 6/30/01 LO(48) / YM(66) / Free(6)
- ------- -------- ------------------------------- --------- -------- -------------- ------- ---------- --------------------------
C111 655393-9 Cheyenne Crossing 0 120 11/1/07 Yes(4) No 10/31/01 LO(48) / YM(66) / Free(6)
Shopping Center
N112 50041 University Hills West 5 115 6/1/07 No No 5/31/00 LO(36) / Grtr1%UPBorYM(48)
Shopping Cent / 3%(12) / 2%(12) /
1%(6) / Free(6)
C113 655299-8 Apple Blossom Mall 4 116 7/1/07 No No 6/30/01 LO(48) / YM(66) / Free(6)
C114 655373-5 Uintah Plaza Shopping 0 120 11/1/07 No No 10/31/01 LO(48) / YM(66) / Free(6)
Center
C115 655164-3 Wind Gap Shopping 5 115 6/1/07 No No 5/31/01 LO(48) / YM(66) / Free(6)
Center
- ------- -------- ------------------------------- --------- -------- -------------- ------- ---------- --------------------------
C116 655357-3 Babylon Plaza/Genovese 1 119 10/1/07 No No 9/30/01 LO(48) / YM(66) / Free(6)
Plaza
N117 50001 Taylors Creek Commons 6 114 5/1/07 No No 4/30/00 LO(36) / Grtr1%UPBorYM(48)
/ 3%(12) / 2%(12) /
1%(6) / Free(6)
C118 655338-2 Builders Design Center 3 117 8/1/07 No No 7/31/00 LO(36) / YM(78) / Free(6)
C119 655351-5 Agora Shopping Center 3 117 8/1/07 No No 7/31/01 LO(48) / YM(66) / Free(6)
C120 655361-2 Orchard Business Park 2 118 9/1/07 No No 8/31/01 LO(48) / YM(66) / Free(6)
- ------- -------- ------------------------------- --------- -------- -------------- ------- ---------- --------------------------
C121 655320-1 Northgate Village 3 117 8/1/07 Yes(5) Yes(d) 7/31/01 LO(48) / YM(66) / Free(6)
Shopping Center
C122 655442-0 25th & Butler Shopping 5 115 6/1/07 No No 5/31/01 LO(48) / YM(66) / Free(6)
Center
C123 655319-1 Northgate Plaza 3 117 8/1/07 Yes(5) Yes(d) 7/31/01 LO(48) / YM(66) / Free(6)
Shopping Center
C124 655259-0 54 West 47th Street 2 118 9/1/07 No No 8/31/01 LO(48) / YM(66) / Free(6)
N125 50112 Eckerd at Smyrna 3 81 8/1/04 No No 7/31/00 LO(36) / Grtr1%UPBorYM(42)
/ Free(6)
- ------- -------- ------------------------------- --------- -------- -------------- ------- ---------- --------------------------
N126 50129 College Plaza 2 118 9/1/07 No No 8/31/01 LO(48) / Grtr1%UPBorYM(66)
/ Free(6)
C127 655382-9 Woodforest Emporium 2 118 9/1/07 No No 8/31/01 LO(48) / YM(66) / Free(6)
Shopping Center
C128 655306-5 Country Brook Village 4 116 7/1/07 No No 12/31/00 LO(42) / YM(72) / Free(6)
N129 50194 Hill Country Square 2 121 12/1/07 No No 8/31/01 LO(48) / Grtr1%UPBorYM(69)
Shopping Center / Free(6)
N130 50044 Caroline Square 3 117 8/1/07 No No 7/31/01 LO(48) / Grtr1%UPBorYM(66)
Shopping Center / Free(6)
- ------- -------- ------------------------------- --------- -------- -------------- ------- ---------- --------------------------
N131 50187 Jacksonville Plaza 2 118 9/1/07 No No 8/31/01 LO(48) / Grtr1%UPBorYM(66)
Shopping Center / Free(6)
C132 655278-1 Southside Shopping 5 115 6/1/07 No No 5/31/01 LO(48) / YM(66) / Free(6)
Center
C133 655331-1 Westcliff Office 2 118 9/1/07 Yes(6) Yes(m) 8/31/01 LO(48) / YM(69) / Free(3)
-building 12
C134 655403-5 America Online 1 119 10/1/07 No No 9/30/01 LO(48) / YM(66) / Free(6)
Building
C135 655344-7 International Jewelry 3 117 8/1/07 No Yes(q) 7/31/01 LO(48) / YM(66) / Free(6)
Exchange
- ------- -------- ------------------------------- --------- -------- -------------- ------- ---------- --------------------------
N136 50039 The Daniel and Henry 5 115 6/1/07 No No 5/31/01 LO(48) / Grtr1%UPBorYM(66)
Building / Free(6)
C137 655237-0 Morton West Associates 5 115 6/1/07 No No 5/31/01 LO(48) / YM(67) / Free(5)
C138 655470-5 Scarborough Court 0 120 11/1/07 No No 10/31/01 LO(48) / Grtr1%UPBorYM(66)
/ Free(6)
C139 655470-5 95-97 Darling Avenue 0 120 11/1/07 No No 10/31/01 LO(48) / Grtr1%UPBorYM(66)
/ Free(6)
C140 655326-9 Westcliff Office 2 118 9/1/07 No Yes(m) 8/31/01 LO(48) / YM(69) / Free(3)
-building 9
- ------- -------- ------------------------------- --------- -------- -------------- ------- ---------- --------------------------
C141 655380-3 Crown Plaza Office 0 120 11/1/07 No No 10/31/01 LO(48) / YM(66) / Free(6)
Building
C142 655461-1 Mt. Arlington 1 119 9/30/07 No No 9/30/00 LO(36) / Grtr1%UPBorYM(78)
Corporate Center / Free(6)
C143 655363-8 Oak Hall Office 2 118 9/1/07 No No 8/31/01 LO(48) / YM(66) / Free(6)
Building
C144 655454-3 Eastgate Commerce 3 117 8/1/07 No No 7/31/01 LO(48) / Grtr1%UPBorYM(66)
Center / Free(6)
C145 655309-4 Midtown Plaza 3 117 8/1/07 No No 7/31/01 LO(48) / YM(66) / Free(6)
- ------- -------- ------------------------------- --------- -------- -------------- ------- ---------- --------------------------
C146 655379-3 Jamacha Center I 0 120 11/1/07 No No 10/31/01 LO(48) / YM(66) / Free(6)
C147 655360-9 West Oxmoor Tower 0 120 11/1/07 No No 10/31/01 LO(48) / YM(66) / Free(6)
C148 655371-9 The Oviatte Building 0 120 11/1/07 No Yes(q) 10/31/01 LO(48) / YM(66) / Free(6)
C149 655449-1 1520 Locust Street 3 117 8/1/07 No No 7/31/01 LO(48) / Grtr1%UPBorYM(66)
/ Free(6)
C150 655377-7 Office 66 0 120 11/1/07 No No 10/31/99 LO(24) / YM(90) / Free(6)
- ------- -------- ------------------------------- --------- -------- -------------- ------- ---------- --------------------------
C151 655314-6 Highland Plaza 3 117 8/1/07 No Yes(d) 7/31/01 LO(48) / YM(66) / Free(6)
N152 50125 Bellona Commons 1 119 10/1/07 No No 9/30/01 LO(48) / Grtr1%UPBorYM(66)
/ Free(6)
C153 655341-8 31 Inwood Road 2 118 9/1/07 No No 8/31/01 LO(48) / YM(66) / Free(6)
C154 655327-2 Westcliff Office 2 118 9/1/07 Yes(6) Yes(m) 8/31/01 LO(48) / YM(69) / Free(3)
-building 3
C155 655325-6 Westcliff Office 2 118 9/1/07 No Yes(m) 8/31/01 LO(48) / YM(69) / Free(3)
-building 2
- ------- -------- ------------------------------- --------- -------- -------------- ------- ---------- --------------------------
C156 655265-5 80 Maple Avenue 4 116 7/1/07 No No 6/30/01 LO(48) / YM(66) / Free(6)
C157 655329-8 Westcliff Office 2 118 9/1/07 Yes(6) Yes(m) 8/31/01 LO(48) / YM(69) / Free(3)
-building 5
C158 655330-8 Westcliff Office 2 118 9/1/07 Yes(6) Yes(m) 8/31/01 LO(48) / YM(69) / Free(3)
-building 6
</TABLE>
<PAGE>
ANNEX A
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
TOTAL SF/ NET LOAN
CUT-OFF UNITS/ UNIT/ RENTABLE BALANCE PER OCCUPANCY
CONTROL APPRAISAL APPRAISAL DATE LTV YEAR BUILT/ ROOM ROOM/ AREA SF/UNIT/ OCCUPANCY AS OF U/W U/W
NUMBER VALUE DATE RATIO RENOVATED BED BED (SF) ROOM/BED PERCENT DATE REVENUES EXPENSES
- ------- ----------- --------- -------- ----------- ------ ----- -------- ----------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
C106 $ 5,175,000 1/7/97 72.3% 1990 n/a SF 68,701 $ 54.47 100% 12/31/96 $ 614,721 $ 139,477
C107 $ 5,200,000 6/18/97 69.2% 1980 n/a SF 75,009 $ 47.99 98% 7/21/97 $ 675,679 $ 195,490
N108 $ 5,000,000 4/1/97 71.2% 1985 n/a SF 72,822 $ 48.86 88% 4/28/97 $ 805,011 $ 265,911
N109 $ 4,400,000 4/14/97 74.9% 1990 n/a SF 104,736 $ 31.46 99% 6/25/97 $ 489,211 $ 84,499
C110 $ 4,550,000 2/7/97 71.2% 1981 n/a SF 61,225 $ 52.94 100% 3/1/97 $ 669,741 $ 177,732
- ------- ----------- --------- -------- ----------- ------ ----- -------- ----------- --------- --------- ---------- ----------
C111 $ 3,950,000 9/9/97 79.1% 1996 n/a SF 23,100 $135.28 95% 8/1/97 $ 471,036 $ 75,040
N112 $ 4,400,000 1/7/97 63.4% 1979 n/a SF 42,284 $ 65.98 100% 5/1/97 $ 613,330 $ 190,114
C113 $ 4,075,000 3/1/97 68.3% 1983 n/a SF 55,100 $ 50.49 100% 5/27/97 $ 496,841 $ 91,724
C114 $ 3,700,000 6/27/97 74.3% 1983/1990 n/a SF 125,584 $ 21.90 99% 5/1/97 $ 413,869 $ 62,825
C115 $ 3,800,000 9/26/96 68.8% 1972/1989 n/a SF 114,238 $ 22.88 100% 5/7/97 $ 519,711 $ 139,209
- ------- ----------- --------- -------- ----------- ------ ----- -------- ----------- --------- --------- ---------- ----------
C116 $ 4,150,000 6/23/97 60.2% 1967/1992 n/a SF 36,270 $ 68.88 100% 6/25/97 $ 607,040 $ 203,377
N117 $ 3,300,000 1/8/97 74.7% 1990 n/a SF 51,495 $ 47.85 100% 6/30/97 $ 487,905 $ 158,809
C118 $ 4,800,000 4/14/97 48.9% 1986 n/a SF 52,441 $ 44.73 100% 6/1/97 $ 707,347 $ 310,107
C119 $ 3,600,000 5/15/97 63.8% 1994 n/a SF 32,300 $ 71.08 93% 7/1/97 $ 393,688 $ 98,814
C120 $ 3,350,000 5/24/97 65.5% 1974 n/a SF 65,700 $ 33.38 100% 7/22/97 $ 524,146 $ 144,435
- ------- ----------- --------- -------- ----------- ------ ----- -------- ----------- --------- --------- ---------- ----------
C121 $ 3,350,000 4/9/97 64.9% 1984 n/a SF 68,957 $ 31.53 80% 5/31/97 $ 460,253 $ 150,043
C122 $ 3,460,000 2/7/97 62.6% 1967/1991 n/a SF 54,486 $ 39.73 92% 2/6/97 $ 466,461 $ 138,293
C123 $ 3,300,000 4/9/97 61.5% 1985 n/a SF 66,862 $ 30.36 75% 3/27/97 $ 445,768 $ 159,168
C124 $ 4,100,000 10/24/96 48.6% 1925/1995 n/a SF 9,135 $218.31 100% 7/1/97 $ 508,604 $ 204,223
N125 $ 2,530,000 5/1/97 74.3% 1997 n/a SF 10,908 $172.45 100% 5/12/97 $ 237,660 $ 2,377
- ------- ----------- --------- -------- ----------- ------ ----- -------- ----------- --------- --------- ---------- ----------
N126 $ 2,500,000 3/28/97 74.9% 1980 n/a SF 68,039 $ 27.51 100% 6/30/97 $ 367,477 $ 89,542
C127 $ 2,350,000 7/10/97 72.2% 1984 n/a SF 53,269 $ 31.85 88% 7/15/97 $ 349,028 $ 111,665
C128 $ 3,180,000 3/11/97 51.6% 1986 n/a SF 41,921 $ 39.11 92% 5/11/97 $ 416,190 $ 139,310
N129 $ 2,200,000 3/24/97 68.5% 1987 n/a SF 66,174 $ 22.78 100% 8/11/97 $ 306,742 $ 70,388
N130 $ 2,000,000 1/23/97 71.0% 1984 n/a SF 40,175 $ 35.36 100% 5/31/97 $ 245,118 $ 52,794
- ------- ----------- --------- -------- ----------- ------ ----- -------- ----------- --------- --------- ---------- ----------
N131 $ 1,770,000 2/10/97 67.7% 1957/1987 n/a SF 37,862 $ 31.64 100% 7/29/97 $ 228,800 $ 42,796
C132 $ 1,375,000 1/20/97 76.0% 1969 n/a SF 55,300 $ 18.90 100% 10/31/96 $ 262,070 $ 111,694
C133 $ 1,075,000 5/13/97 57.6% 1995 n/a SF 5,184 $119.48 100% 7/10/97 $ 93,900 $ 18,363
C134 $39,100,000 6/23/97 72.8% 1982/1995 n/a SF 272,480 $104.50 100% 10/1/97 $5,177,120 $1,771,120
C135 $35,650,000 6/12/97 69.9% 1982 n/a SF 370,595 $ 67.28 78% 10/1/97 $7,565,472 $3,718,382
- ------- ----------- --------- -------- ----------- ------ ----- -------- ----------- --------- --------- ---------- ----------
N136 $11,800,000 1/15/97 65.4% 1990 n/a SF 84,351 $ 91.50 99% 3/31/97 $1,851,896 $ 690,162
C137 $ 9,500,000 12/12/96 55.6% 1917/1985 n/a SF 122,000 $ 43.28 100% 5/8/97 $1,656,438 $ 843,030
C138 $ 3,775,000 8/6/97 76.2% 1990 n/a SF 38,736 $ 74.30 100% 5/30/97 $ 597,511 $ 192,993
C139 $ 3,150,000 8/6/97 76.2% 1980/1994 n/a SF 42,000 $ 57.18 100% 5/30/97 $ 403,536 $ 125,463
C140 $ 7,500,000 5/13/97 64.3% 1995 n/a SF 37,644 $128.04 100% 7/10/97 $ 731,898 $ 149,037
- ------- ----------- --------- -------- ----------- ------ ----- -------- ----------- --------- --------- ---------- ----------
C141 $ 5,700,000 7/14/97 63.2% 1920/1992 n/a SF 64,377 $ 55.92 100% 7/16/97 $ 845,446 $ 319,876
C142 $ 4,900,000 6/10/97 67.1% 1986/1995 n/a SF 70,029 $ 46.93 99% 6/2/97 $ 882,057 $ 399,350
C143 $ 4,100,000 6/25/97 79.4% 1966 n/a SF 52,177 $ 62.36 100% 6/10/97 $ 699,271 $ 254,945
C144 $ 4,300,000 4/10/97 73.1% 1988 n/a SF 54,675 $ 57.48 94% 6/25/97 $ 577,013 $ 146,912
C145 $ 3,550,000 4/11/97 67.4% 1960/1995 n/a SF 60,493 $ 39.56 96% 7/8/97 $ 706,936 $ 355,729
- ------- ----------- --------- -------- ----------- ------ ----- -------- ----------- --------- --------- ---------- ----------
C146 $ 3,050,000 8/26/97 75.4% 1989 n/a SF 18,591 $123.72 100% 9/1/97 $ 370,644 $ 73,988
C147 $ 3,060,000 8/29/97 73.5% 1976 n/a SF 85,327 $ 26.37 97% 9/11/97 $ 763,996 $ 431,104
C148 $ 4,500,000 8/7/97 44.4% 1928/1993 n/a SF 96,305 $ 20.77 70% 8/31/97 $1,027,570 $ 674,353
C149 $ 2,100,000 3/26/97 74.8% 1925/1995 n/a SF 52,365 $ 29.99 92% 3/31/97 $ 569,208 $ 301,117
C150 $ 2,065,000 7/1/97 72.6% 1990 n/a SF 19,875 $ 75.47 100% 7/24/97 $ 274,969 $ 74,654
- ------- ----------- --------- -------- ----------- ------ ----- -------- ----------- --------- --------- ---------- ----------
C151 $ 2,810,000 4/7/97 50.8% 1983 n/a SF 78,241 $ 18.23 90% 4/30/97 $ 697,498 $ 411,338
N152 $ 3,450,000 5/15/97 40.5% 1969 n/a SF 44,600 $ 31.37 100% 7/31/97 $ 608,813 $ 260,239
C153 $ 1,600,000 4/29/97 74.8% 1955/1988 n/a SF 30,473 $ 39.25 100% 5/31/97 $ 227,525 $ 3,413
C154 $ 1,715,000 5/13/97 62.9% 1995 n/a SF 11,682 $ 92.35 77% 7/10/97 $ 170,840 $ 37,137
C155 $ 1,650,000 5/13/97 62.1% 1995 n/a SF 11,682 $ 87.65 100% 7/10/97 $ 164,160 $ 36,898
- ------- ----------- --------- -------- ----------- ------ ----- -------- ----------- --------- --------- ---------- ----------
C156 $ 1,150,000 1/9/97 73.6% 1967 n/a SF 14,162 $ 59.80 100% 6/6/97 $ 278,083 $ 144,604
C157 $ 1,200,000 5/13/97 69.9% 1995 n/a SF 8,986 $ 93.38 66% 7/10/97 $ 132,287 $ 28,609
C158 $ 1,350,000 5/13/97 61.4% 1995 n/a SF 8,986 $ 92.27 100% 7/10/97 $ 131,878 $ 28,589
</TABLE>
<PAGE>
ANNEX A
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
REMAINING
TERM TO CROSS- LOCKOUT
CONTROL LOAN SEASONING MATURITY MATURITY COLLATERALIZED RELATED EXPIRATION PREPAYMENT PENALTY
NUMBER NUMBER PROPERTY NAME (MONTHS) (MONTHS) DATE LOANS LOANS DATE DESCRIPTION (MONTHS)
- ------- -------- ------------------------------- --------- -------- -------------- ------- ---------- --------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
C159 655328-5 Westcliff Office 2 118 9/1/07 Yes(6) Yes(m) 8/31/01 LO(48) / YM(69) / Free(3)
-building 4
C160 655374-8 The Commons Office 1 119 10/1/07 No No 9/30/01 LO(48) / 5%(12) / 4%(12) /
Building 3%(12) / 2%(12) / 1%(18)
/ Free(6)
- ------- -------- ------------------------------- --------- -------- -------------- ------- ---------- --------------------------
C161 655389-0 Fisherman's Wharf 0 120 11/1/07 No No 10/31/01 LO(48) / YM(66) / Free(6)
Ramada Plaza
C162 655469-5 Embassy Suites 0 120 11/1/07 No No 10/31/01 LO(48) / Grtr1%UPBorYM(66)
/ Free(6)
N163 50036 Days Inn -St. 5 115 6/1/07 No Yes(n) 5/31/01 LO(48) / Grtr1%UPBorYM(66)
Petersburg / Free(6)
C164 655448-8 Courtyard by Marriott 2 118 9/1/07 No No 8/31/01 LO(48) / YM(66) / Free(6)
N165 50142 Residence Inn 2 82 9/1/04 No No 8/31/00 LO(36) / Grtr1%UPBorYM(42)
Brookfield / Free(6)
- ------- -------- ------------------------------- --------- -------- -------------- ------- ---------- --------------------------
C166 655372-2 Strathallan Hotel 0 120 11/1/07 No No 10/31/01 LO(48) / YM(66) / Free(6)
N167 50025 Best Western Oceanside 6 114 5/1/07 No No 4/30/00 LO(36) / Grtr1%UPBorYM(48)
Inn / 3%(12) / 2%(12) /
1%(6) / Free(6)
N168 50034 Ramada Inn -Fort Myers 5 115 6/1/07 No Yes(n) 5/31/01 LO(48) / Grtr1%UPBorYM(66)
/ Free(6)
C169 655374-8 English Inn 1 119 10/1/07 No No 9/30/01 LO(48) / 5%(12) / 4%(12) /
3%(12) / 2%(12) / 1%(18)
/ Free(6)
N170 50033 Hampton Inn -Ben Salem 5 115 6/1/07 No No 5/31/00 LO(36) / Grtr1%UPBorYM(48)
/ 3%(12) / 2%(12) /
1%(6) / Free(6)
- ------- -------- ------------------------------- --------- -------- -------------- ------- ---------- --------------------------
N171 50035 Days Inn -Fort Myers 5 115 6/1/07 No Yes(n) 5/31/01 LO(48) / Grtr1%UPBorYM(66)
/ Free(6)
C172 655349-9 Sioux City Holiday Inn 1 119 10/1/07 No No 9/30/99 LO(24) / 5%(24) / 4%(12) /
3%(12) / 2%(12) / 1%(30)
/ Free(6)
N173 50037 Howard Johnson-Fort 4 116 7/1/07 No Yes(n) 6/30/01 LO(48) / Grtr1%UPBorYM(66)
Myers / Free(6)
C174 655410-3 Knights Inn 0 120 11/1/07 No No 10/31/01 LO(48) / YM(66) / Free(6)
N175 50145 Toxikon 2 118 9/1/07 No No 8/31/00 LO(36) / Grtr1%UPBorYM(48)
/ 3%(12) / 2%(12) /
1%(6) / Free(6)
- ------- -------- ------------------------------- --------- -------- -------------- ------- ---------- --------------------------
C176 655459-8 Lavergne Court 1 119 10/1/07 Yes(7) Yes(o) 9/30/01 LO(48) / Grtr1%UPBorYM(66)
/ Free(6)
C177 655459-8 Harbor Court 1 119 10/1/07 Yes(7) Yes(o) 9/30/01 LO(48) / Grtr1%UPBorYM(66)
/ Free(6)
C178 655463-7 Harney Road Industrial 1 119 10/1/07 No No 9/30/01 LO(48) / Grtr1%UPBorYM(66)
Center / Free(6)
C179 655441-7 26 Clinton Drive 5 115 6/1/07 No Yes(h) 5/31/01 LO(48) / YM(66) / Free(6)
C180 655333-7 Alhambra 1 119 10/1/07 No No 9/30/01 LO(48) / YM(60) / Free(12)
- ------- -------- ------------------------------- --------- -------- -------------- ------- ---------- --------------------------
C181 655356-0 3220 Warehouse 2 118 9/1/07 No Yes(r) 8/31/01 LO(48) / YM(66) / Free(6)
C182 655464-0 Wanalda Warehouse 4 116 7/1/07 No No 6/30/01 LO(48) / Grtr1%UPBorYM(66)
/ Free(6)
C183 655355-7 541 Warehouse 2 118 9/1/07 No Yes(r) 8/31/01 LO(48) / YM(66) / Free(6)
C184 655460-8 5235 W. 65th Street 1 119 10/1/07 Yes(7) Yes(o) 9/30/01 LO(48) / Grtr1%UPBorYM(66)
/ Free(6)
N185 50157 Voorhees Pediatric 2 118 9/1/07 No No 8/31/01 LO(48) / Grtr1%UPBorYM(66)
Center / Free(6)
- ------- -------- ------------------------------- --------- -------- -------------- ------- ---------- --------------------------
N186 50032 Franklin Nursing Home 4 116 7/1/07 No No 6/30/00 LO(36) / Grtr1%UPBorYM(48)
/ 3%(12) / 2%(12) /
1%(6) / Free(6)
N187 50089 Ditmas Park Care 4 116 7/1/07 No No 6/30/00 LO(36) / Grtr1%UPBorYM(48)
Center / 3%(12) / 2%(12) /
1%(6) / Free(6)
C188 655394-2 Lakeview Village 0 120 11/1/07 Yes(4) No 10/31/01 LO(48) / YM(66) / Free(6)
Shopping Center
C189 655447-5 Montgomery Pointe 4 116 7/1/07 No No 6/30/01 LO(48) / Grtr1%UPBorYM(66)
Plaza / Free(6)
C190 655343-4 Le Madri 1 119 10/1/07 No No 9/30/01 LO(48) / YM(66) / Free(6)
- ------- -------- ------------------------------- --------- -------- -------------- ------- ---------- --------------------------
C191 655465-3 Lackland Self Storage 2 118 9/1/07 No No 8/31/01 LO(48) / YM(66) / Free(6)
N192 50047 Frederick Mini-Storage 4 116 7/1/07 No Yes(p) 6/30/00 LO(36) / Grtr1%UPBorYM(48)
/ 3%(12) / 2%(12) /
1%(6) / Free(6)
N193 50046 York Mini-Storage, 4 116 7/1/07 No Yes(p) 6/30/00 LO(36) / Grtr1%UPBorYM(48)
Inc. / 3%(12) / 2%(12) /
1%(6) / Free(6)
- ------- -------- ------------------------------- --------- -------- -------------- ------- ---------- --------------------------
Totals/Weighted Averages 2.9 115.8
================================================ ========= ======== ============== ======= ========== ==========================
</TABLE>
<PAGE>
ANNEX A
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
TOTAL SF/ NET LOAN
CUT-OFF UNITS/ UNIT/ RENTABLE BALANCE PER OCCUPANCY
CONTROL APPRAISAL APPRAISAL DATE LTV YEAR BUILT/ ROOM ROOM/ AREA SF/UNIT/ OCCUPANCY AS OF U/W U/W
NUMBER VALUE DATE RATIO RENOVATED BED BED (SF) ROOM/BED PERCENT DATE REVENUES EXPENSES
- ------- ----------- --------- -------- ----------- ------ ----- -------- ----------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
C159 $ 1,240,000 5/13/97 62.8% 1995 n/a SF 8,986 $ 86.71 100% 7/10/97 $ 125,091 $ 28,250
C160 $ 1,080,000 7/15/97 71.4% 1983 n/a SF 12,000 $ 64.24 100% 7/1/97 $ 141,045 $ 22,094
- ------- ----------- --------- -------- ----------- ------ ----- -------- ----------- --------- --------- ---------- ----------
C161 $31,500,000 8/22/97 61.3% 1976/1997 232 Room 135,560 $83,189.66 87% 4/30/97 $ 9,181,844 $ 6,341,417
C162 $37,000,000 6/24/97 45.1% 1989 274 Room 230,000 $60,948.91 74% 8/1/97 $ 8,250,815 $ 4,910,236
N163 $10,500,000 2/24/97 73.0% 1954/1993 102 Room 59,210 $75,123.41 82% 3/31/97 $ 3,382,277 $ 2,145,193
C164 $10,000,000 4/4/97 73.9% 1910/1994 149 Room 93,822 $49,567.21 81% 3/31/97 $ 3,962,530 $ 2,744,010
N165 $10,300,000 5/1/97 67.8% 1989 104 Room 67,704 $67,192.44 78% 5/1/97 $ 2,672,839 $ 1,596,753
- ------- ----------- --------- -------- ----------- ------ ----- -------- ----------- --------- --------- ---------- ----------
C166 $ 9,300,000 8/18/97 72.6% 1975 150 Room 117,250 $45,000.00 72% 12/31/96 $ 4,706,089 $ 3,641,637
N167 $ 8,800,000 3/1/97 60.1% 1975/1983 101 Room 82,242 $52,379.80 90% 6/30/97 $ 2,747,175 $ 1,746,609
N168 $ 8,300,000 2/12/97 59.2% 1971/1993 70 Room 23,604 $70,233.18 78% 4/22/97 $ 1,779,905 $ 1,019,593
C169 $ 4,240,000 7/15/97 71.4% 1983/1997 88 Room 93,998 $34,388.60 100% 4/11/97 $ 1,307,959 $ 866,509
N170 $ 8,300,000 1/7/97 35.9% 1986/1993 141 Room 43,710 $21,132.11 67% 6/30/97 $ 2,756,311 $ 2,117,942
- ------- ----------- --------- -------- ----------- ------ ----- -------- ----------- --------- --------- ---------- ----------
N171 $ 4,900,000 2/12/97 59.4% 1953/1991 33 Room 8,956 $88,205.51 86% 12/31/96 $ 1,387,018 $ 926,870
C172 $ 4,000,000 6/9/97 60.0% 1961/1996 156 Room $15,375.04 52% 12/31/96 $ 2,474,032 $ 2,016,961
N173 $ 2,800,000 2/12/97 61.9% 1968/1993 24 Room 10,016 $72,263.86 78% 12/31/96 $ 687,610 $ 417,823
C174 $ 2,000,000 8/14/97 75.0% 1987 107 Room $14,018.69 58% 8/14/97 $ 940,679 $ 686,112
N175 $12,000,000 6/11/97 70.7% 1979/1994 n/a SF 73,500 $ 115.44 100% 10/1/97 $ 2,066,526 $ 961,636
- ------- ----------- --------- -------- ----------- ------ ----- -------- ----------- --------- --------- ---------- ----------
C176 $ 4,600,000 6/24/97 65.3% 1928/1989 n/a SF 113,196 $ 26.53 95% 7/11/97 $ 587,185 $ 177,052
C177 $ 2,900,000 6/24/97 65.3% 1931/1991 n/a SF 67,682 $ 27.97 100% 7/11/97 $ 362,448 $ 89,640
C178 $ 3,800,000 6/30/97 71.0% 1988 n/a SF 58,500 $ 46.12 100% 8/15/97 $ 452,897 $ 90,060
C179 $ 2,640,000 12/19/96 75.4% 1987 n/a SF 108,215 $ 18.40 100% 5/12/97 $ 477,471 $ 164,687
C180 $ 2,550,000 12/7/96 62.7% 1988 n/a SF 27,550 $ 58.05 98% 4/1/97 $ 396,521 $ 135,624
- ------- ----------- --------- -------- ----------- ------ ----- -------- ----------- --------- --------- ---------- ----------
C181 $ 2,100,000 6/17/97 74.9% 1972/1995 n/a SF 35,000 $ 44.91 100% 8/22/97 $ 253,762 $ 28,750
C182 $ 2,300,000 3/24/97 61.9% 1965 n/a SF 46,183 $ 30.85 100% 5/1/97 $ 285,706 $ 71,472
C183 $ 1,800,000 6/17/97 74.8% 1961/1993 n/a SF 64,325 $ 20.92 100% 10/1/97 $ 291,225 $ 68,352
C184 $ 2,000,000 6/24/97 55.0% 1932/1989 n/a SF 53,820 $ 20.42 100% 7/11/97 $ 231,070 $ 74,099
N185 $22,000,000 7/1/97 42.6% 1986 107 Bed 51,864 $87,679.02 98% 8/1/97 $18,355,083 $15,022,805
- ------- ----------- --------- -------- ----------- ------ ----- -------- ----------- --------- --------- ---------- ----------
N186 $13,500,000 2/1/97 44.3% 1974 320 Bed 98,960 $18,692.27 97% 8/15/97 $19,481,369 $17,978,001
N187 $17,000,000 2/1/97 23.5% 1975/1995 200 Bed 73,410 $19,933.78 96% 6/30/97 $12,172,460 $10,045,604
C188 $13,230,000 9/1/97 78.2% 1995 n/a SF 119,761 $ 86.42 91% 10/1/97 $ 1,840,022 $ 645,848
C189 $ 4,100,000 3/18/97 74.7% 1989 n/a SF 43,358 $ 70.66 100% 12/1/96 $ 559,085 $ 111,797
C190 $ 2,650,000 6/4/97 75.4% 1920/1997 n/a SF 17,075 $ 116.98 100% 6/29/97 $ 399,000 $ 19,950
- ------- ----------- --------- -------- ----------- ------ ----- -------- ----------- --------- --------- ---------- ----------
C191 $ 6,200,000 4/28/97 64.3% 1985/1995 812 Unit 78,220 $ 4,909.90 92% 7/13/97 $ 777,505 $ 168,590
N192 $ 3,250,000 4/18/97 73.6% 1987/1994 n/a SF 43,840 $ 54.59 91% 5/30/97 $ 503,962 $ 186,044
N193 $ 2,700,000 3/31/97 64.8% 1988/1994 n/a SF 63,335 $ 27.64 81% 5/31/97 $ 400,176 $ 172,727
- ------- ----------- --------- -------- ----------- ------ ----- -------- ----------- --------- --------- ---------- ----------
Totals/Weighted Averages 70.5% 94%
============================= ======== =========== ====== ===== ======== =========== ========= ========= ========== ==========
</TABLE>
<PAGE>
ANNEX A
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
U/W U/W
CONTROL LOAN U/W NOI U/W RESERVES 1996 1996 1996 1996 1996 1995
NUMBER NUMBER PROPERTY NAME NOI DSCR RESERVES PER UNIT REVENUES EXPENSES NOI DSCR DATE REVENUES
- ------- -------- -------------------------------- ----- -------- -------- --------- --------- --------- ----- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
N001 50071 Saddle Creek $2,390,203 1.23x 60,000 $150.00 3,716,233 1,456,017 2,260,216 1.16x 12/31/96 3,631,075
Apartments
N002 50169 Suerte Apartments $2,038,560 1.28x 40,800 $150.00 2,915,840 1,051,800 1,864,040 1.17x 12/31/96 2,864,206
N003 50003 Springs Pointe $2,190,285 1.37x 106,480 $220.00 3,314,577 1,262,048 2,052,529 1.28x 12/31/96 3,249,064
Apartments
N004 50008 The Landings at $1,952,646 1.28x 70,500 $150.00 2,438,679 986,065 1,452,614 0.95x 12/31/96 778,167
Cypress Meadows
N005 50018 Sun Harbor Suites $2,456,256 1.55x 159,750 $250.39 6,184,672 3,479,510 2,705,162 1.71x 12/31/96 6,221,931
------ -------- -------------------------------- ----- -------- -------- --------- --------- --------- ----- -------- ---------
N006 50004 Westwood Pointe $2,031,219 1.36x 102,960 $220.00 3,046,625 1,328,879 1,717,746 1.15x 12/31/96 3,041,036
Apartments
N007 50070 Briar Cove Apartments $1,836,845 1.26x 60,112 $221.00 2,819,979 1,131,336 1,688,643 1.16x 12/31/96 2,731,497
C008 655411-6 Chesapeake Landing $1,505,227 1.35x 119,500 $250.00 2,754,114 1,274,903 1,479,211 1.33x 12/31/96 2,674,053
Apts
N009 50058 College Park $1,701,878 1.36x 113,000 $250.00 2,733,484 1,054,238 1,679,246 1.34x 12/31/96 2,831,684
Apartments
C010 655342-1 Lakeland Apartments $ 151,719 1.52x 12,600 $300.00 295,247 116,688 178,559 1.79x 12/31/96 287,643
------ -------- -------------------------------- ----- -------- -------- --------- --------- --------- ----- -------- ---------
C011 655342-1 Lake Terrace $ 319,779 1.46x 25,200 $300.00 590,054 202,233 387,821 1.77x 12/31/96 571,285
Apartments
C012 655342-1 Maryland Park $ 550,472 1.66x 39,000 $300.00 939,562 339,423 600,139 1.81x 12/31/96 893,560
Apartments
C013 655342-1 Riverland Apartments $ 77,753 1.28x 9,000 $300.00 200,041 99,874 100,167 1.65x 12/31/96 192,594
C014 655342-1 River Terrace $ 71,426 1.50x 7,200 $300.00 155,052 75,343 79,709 1.68x 12/31/96 153,943
Apartments
C015 655342-1 Lake Park Apartments $ 159,905 1.51x 15,000 $300.00 309,556 129,357 180,199 1.70x 12/31/96 299,377
------ -------- -------------------------------- ----- -------- -------- --------- --------- --------- ----- -------- ---------
C016 655467-9 Hampton Meadows $ 978,079 1.30x 30,400 $200.00 924,958 309,641 615,317 0.82x 6/30/97 708,621
N017 50029 Lost Creek Apartments $1,028,947 1.47x 120,000 $400.00 1,639,730 540,024 1,099,706 1.57x 12/31/96 1,562,242
N018 50088 Sands Point Apartments $ 959,237 1.43x 95,535 $193.00 1,966,343 1,129,788 836,555 1.25x 12/31/96
N019 50010 Debaliviere Place IV $ 903,928 1.38x 75,117 $343.00 1,605,806 663,036 942,770 1.44x 12/31/96 1,459,872
C020 655386-1 Vantage Point $ 819,319 1.40x 68,400 $300.00 1,407,270 546,461 860,809 1.47x 12/31/96
Apartments
------ -------- -------------------------------- ----- -------- -------- --------- --------- --------- ----- -------- ---------
N021 50031 The Summit Apartments $ 873,193 1.37x 44,400 $200.00 1,383,595 428,164 955,431 1.50x 12/31/96 1,315,982
C022 655317-5 Oaks of Northgate $ 762,339 1.38x 69,000 $250.00 1,386,580 655,728 730,852 1.32x 12/31/96 1,444,964
C023 655396-8 Hunters Crossing $ 718,254 1.45x 114,912 $504.00 1,336,731 600,753 735,978 1.49x 12/31/96 1,325,194
C024 655318-8 Lakeshire Place $ 771,882 1.58x 76,000 $250.00 1,544,836 734,232 810,604 1.66x 12/31/96 1,499,520
Apartments
N025 50184 Heritage Oaks $ 652,743 1.34x 28,260 $180.00 991,065 366,095 624,970 1.28x 12/31/96 997,402
Apartments
------ -------- -------------------------------- ----- -------- -------- --------- --------- --------- ----- -------- ---------
N026 50100 Woodcrest Apartments $ 690,547 1.41x 79,040 $260.00 1,913,993 1,170,738 743,255 1.52x 12/31/96 1,749,490
C027 655446-2 Piccadilly Apartments $ 712,527 1.43x 79,560 $340.00 1,185,093 531,061 654,032 1.32x 12/31/96 1,112,240
N028 50097 Centennial Apartments $ 626,960 1.41x 31,200 $400.00 1,001,242 311,936 689,306 1.55x 12/31/96 966,779
N029 50084 Runnymede Apartments $ 632,966 1.42x 53,928 $214.00 1,566,283 981,043 585,240 1.31x 12/31/96 1,585,494
C030 655312-0 Arlington Oaks $ 592,158 1.37x 50,500 $250.00 1,128,780 526,507 602,273 1.40x 12/31/96 1,050,027
Apartments
------ -------- -------------------------------- ----- -------- -------- --------- --------- --------- ----- -------- ---------
C031 655302-3 Forest Creek Crossing $ 599,700 1.44x 77,100 $300.00 1,396,198 867,083 529,115 1.27x 12/31/96 1,169,083
Apartments
N032 50102 Windridge Apartments $ 534,972 1.46x 65,000 $260.00 1,521,275 930,801 590,474 1.61x 12/31/96 1,452,933
C033 655455-6 Columbia Courts $ 401,319 1.53x 25,200 $350.00 563,506 116,494 447,012 1.70x 12/31/96 552,244
Apartments
C034 655455-6 Frazee Avenue $ 154,663 1.50x 15,050 $350.00 262,181 86,125 176,056 1.70x 12/31/96 263,202
Apartments
N035 50030 Lauder Ridge $ 486,706 1.35x 36,024 $237.00 1,044,798 541,818 502,980 1.40x 8/31/96 1,002,674
Apartments
------ -------- -------------------------------- ----- -------- -------- --------- --------- --------- ----- -------- ---------
C036 655471-8 Bellvue Garden $ 302,041 1.78x 28,500 $250.00 536,100 296,009 240,091 1.41x 12/31/95
Apartments
C037 655471-8 Bellvue Towers $ 230,483 1.86x 29,500 $250.00 557,752 486,733 71,019 0.57x 12/31/96
Apartments
N038 50050 Latham Park Manor $ 497,233 1.43x 35,000 $250.00 752,196 217,535 534,661 1.54x 12/31/96 749,532
C039 655445-9 Point West Apartments $ 481,703 1.43x 53,436 $366.00 836,308 354,624 481,684 1.43x 12/31/96 787,971
N040 50101 Kingsley Creek $ 394,233 1.41x 58,280 $235.00 997,222 637,608 359,614 1.28x 12/31/96 840,518
Apartments
------ -------- -------------------------------- ----- -------- -------- --------- --------- --------- ----- -------- ---------
C041 655322-7 Sundance Apartments $ 384,952 1.42x 46,000 $250.00 803,030 425,342 377,688 1.40x 12/31/96 796,748
N042 50074 Bienville Towers $ 412,540 1.46x 34,000 $250.00 769,795 345,011 424,784 1.50x 12/31/96 707,241
C043 655340-5 Chaplewood Place $ 384,404 1.49x 48,640 $304.00 660,638 254,425 406,213 1.57x 12/31/96 613,410
Apartments
N044 50086 Crosspointe Apartments $ 379,144 1.42x 19,046 $178.00 680,888 291,220 389,668 1.46x 12/31/96 693,773
C045 655334-0 Village Apartments $ 365,104 1.36x 28,050 $275.00 579,750 193,149 386,601 1.44x 12/31/96 569,039
------ -------- -------------------------------- ----- -------- -------- --------- --------- --------- ----- -------- ---------
C046 655323-0 Logan Place Apartments $ 390,974 1.50x 42,075 $225.00 812,834 452,628 360,206 1.38x 12/31/96 814,767
C047 650776-5 Village Club $ 375,349 1.53x 31,360 $280.00 813,010 375,681 437,329 1.78x 12/31/96 779,824
Apartments
N048 50103 Rochelle Plaza $ 343,477 1.44x 28,800 $240.00 720,115 400,119 319,996 1.34x 12/31/96 676,559
Apartments
C049 655444-6 Hunter's Creek $ 456,956 1.81x 46,244 $316.74 897,593 399,669 497,924 1.98x 12/31/96 899,177
Apartments
C050 655456-9 DeVille Court $ 434,565 1.64x 43,250 $250.00 899,790 506,214 393,576 1.48x 12/31/96 852,300
Apartments
------ -------- -------------------------------- ----- -------- -------- --------- --------- --------- ----- -------- ---------
C051 655466-6 Brittania Sherman $ 317,223 1.41x 22,000 $250.00 652,530 485,059 167,471 0.74x 12/31/96
Apartments
N052 50016 Park East Apartments $ 340,890 1.38x 32,637 $291.40 671,037 351,299 319,738 1.30x 12/31/96 654,703
C053 655301-0 559-607 W.191st Street $ 343,692 1.53x 34,500 $250.00 792,163 455,993 336,170 1.49x 12/31/96 729,670
</TABLE>
<PAGE>
ANNEX A
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
LARGEST SECOND SECOND
TENANT LARGEST LARGEST LARGEST SECOND
LARGEST % OF TENANT TENANT TENANT LARGEST TENANT
CONTROL 1995 1995 LARGEST TENANT TOTAL LEASE SECOND LEASED % OF LEASE
NUMBER EXPENSES NOI TENANT LEASED SF SF EXPIRATION LARGEST TENANT SF TOTAL SF EXPIRATION
- ------- --------- --------- -------------------- ------- ---------- ------------------- ------- -------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
N001 1,248,497 2,382,578
N002 1,022,768 1,841,438
N003 1,225,464 2,023,600
N004 354,469 423,698
N005 3,694,994 2,526,937
------ --------- --------- -------------------- ------- ---------- ------------------- ------- -------- --------------
N006 1,113,545 1,927,491
N007 1,065,105 1,666,392
C008 1,217,585 1,456,468
N009 1,101,940 1,729,744
C010 139,041 148,602
------ --------- --------- -------------------- ------- ---------- ------------------- ------- -------- --------------
C011 250,525 320,760
C012 499,932 393,629
C013 97,558 95,035
C014 86,888 67,055
C015 135,212 164,165
------ --------- --------- -------------------- ------- ---------- ------------------- ------- -------- --------------
C016 320,457 388,164
N017 484,466 1,077,776
N018
N019 631,547 828,325
C020
------ --------- --------- -------------------- ------- ---------- ------------------- ------- -------- --------------
N021 410,819 905,163
C022 738,917 706,047
C023 625,022 700,172
C024 889,099 610,421
N025 355,597 641,805
------ --------- --------- -------------------- ------- ---------- ------------------- ------- -------- --------------
N026 1,177,071 572,419
C027 478,147 634,093
N028 288,508 678,271
N029 931,650 653,844
C030 571,783 478,244
------ --------- --------- -------------------- ------- ---------- ------------------- ------- -------- --------------
C031 770,692 398,391
N032 965,990 486,943
C033 128,899 423,345
C034 101,954 161,248
N035 529,025 473,649
------ --------- --------- -------------------- ------- ---------- ------------------- ------- -------- --------------
C036
C037
N038 199,007 550,525
C039 343,873 444,098
N040 591,019 249,499
------ --------- --------- -------------------- ------- ---------- ------------------- ------- -------- --------------
C041 496,603 300,145
N042 335,230 372,011
C043 227,313 386,097
N044 270,645 423,128
C045 150,648 418,391
------ --------- --------- -------------------- ------- ---------- ------------------- ------- -------- --------------
C046 397,514 417,253
C047 387,125 392,699
N048 410,803 265,756
C049 396,802 502,375
C050 468,173 384,127
------ --------- --------- -------------------- ------- ---------- ------------------- ------- -------- --------------
C051
N052 350,645 304,058
C053 359,349 370,321
</TABLE>
<PAGE>
ANNEX A
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
U/W U/W
CONTROL LOAN U/W NOI U/W RESERVES 1996 1996 1996 1996 1996 1995
NUMBER NUMBER PROPERTY NAME NOI DSCR RESERVES PER UNIT REVENUES EXPENSES NOI DSCR DATE REVENUES
- ------- -------- -------------------------------- ----- -------- -------- --------- --------- --------- ----- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
C054 655279-4 Baypoint Manor $ 327,213 1.47x 42,250 $250.00 782,830 459,325 323,505 1.46x 12/31/96 850,866
Apartments
N055 50011 Caroline Apartments $ 272,638 1.35x 22,512 $201.00 573,890 310,976 262,914 1.30x 12/31/96 524,583
- ------- -------- -------------------------------- ----- -------- -------- --------- --------- --------- ----- -------- ---------
C056 655453-0 Hillcrest Apartments $ 308,823 1.52x 25,000 $250.00 614,239 324,769 289,470 1.42x 12/31/96 621,762
C057 655339-5 Arcadia Park $ 249,297 1.33x 14,600 $200.00 12/31/96
Apartments
C058 655462-4 Holly Hill Estates $ 423,774 2.20x 18,282 $ 66.00 749,273 278,931 470,342 2.44x 12/31/96 738,269
C059 655310-4 Wadsworth Apartments $ 172,184 1.43x 16,000 $250.00 360,398 182,579 177,819 1.48x 12/31/96 346,937
C060 655310-4 Earl Apartments $ 91,740 1.53x 5,500 $250.00 153,454 55,856 97,598 1.63x 12/31/96 133,986
- ------- -------- -------------------------------- ----- -------- -------- --------- --------- --------- ----- -------- ---------
C061 655347-6 3631 Broadway $ 323,298 1.79x 10,600 $265.00
N062 50119 Cypress Trace $ 233,087 1.41x 20,140 $380.00 361,445 133,166 228,279 1.38x 12/31/96 264,368
C063 655443-3 Imperial House $ 285,721 1.62x 26,940 $289.68 706,300 392,607 313,693 1.78x 12/31/96 674,608
N064 50075 Arden's Place $ 213,895 1.33x 8,400 $175.00 283,791 50,389 233,402 1.45x 12/31/96 282,211
Apartments
N065 50077 Dutchtown Villas $ 209,987 1.38x 8,400 $175.00 283,600 46,951 236,649 1.56x 12/31/96 261,224
- ------- -------- -------------------------------- ----- -------- -------- --------- --------- --------- ----- -------- ---------
C066 655227-3 Knollwood Apartments $ 147,878 1.56x 18,600 $300.00 294,031 138,778 155,253 1.64x 12/31/96 293,453
C067 655227-3 Academy Manor $ 86,901 1.61x 8,960 $280.00 125,647 34,611 91,036 1.69x 12/31/96
Apartments
C068 655368-3 Cedar Bluff Apartments $ 196,485 1.44x 26,250 $250.00 470,835 269,425 201,410 1.48x 12/31/96 457,755
N069 50098 Kingbridge Apartments $ 181,417 1.44x 18,225 $225.00 395,953 196,921 199,032 1.58x 12/31/96 379,421
N070 50082 Cinnamon Tree $ 195,500 1.56x 31,720 $305.00 420,737 204,136 216,601 1.73x 12/31/96 370,635
Apartments
- ------- -------- -------------------------------- ----- -------- -------- --------- --------- --------- ----- -------- ---------
C071 655335-3 Bel Aire Apartments $ 172,035 1.41x 20,020 $260.00 421,192 304,897 116,295 0.95x 12/31/96 399,568
N072 50015 Fifty-Five Plus $ 161,043 1.38x 15,000 $250.00 282,905 124,645 158,260 1.36x 12/31/96 259,108
Apartments
N073 50017 Woodman Place $ 157,701 1.40x 7,687 $232.94 267,802 109,838 157,964 1.40x 12/31/96 266,600
Apartments
C074 655369-6 Country Club $ 142,162 1.56x 24,200 $275.00 422,432 273,154 149,278 1.64x 12/31/96 413,731
Apartments
C075 655468-2 Townhouse Road $ 224,090 1.96x 19,250 $296.15 370,010 171,343 198,667 1.74x 12/31/96 345,000
Apartments
- ------- -------- -------------------------------- ----- -------- -------- --------- --------- --------- ----- -------- ---------
N076 50133 Forest Hills $ 123,922 1.48x 10,600 $200.00 189,910 78,059 111,851 1.34x 12/31/96 182,068
Apartments
C077 655451-4 Perry Hill Estates $ 162,425 1.77x 14,400 $300.00 229,152 77,170 151,982 1.66x 12/31/96
N078 50232 Vintage Plaza $ 104,471 1.33x 4,946 $149.88 162,147 76,820 85,327 1.08x 12/31/96 152,532
Apartments
C079 655457-2 196 North River Road $ 109,856 1.51x 9,000 $250.00 188,406 76,905 111,501 1.53x 12/31/96 190,128
Apartments
C080 655186-3 Dunn's Bridge $ 84,565 1.36x 6,600 $275.00 158,020 71,185 86,835 1.39x 12/31/96 159,281
Apartments
- ------- -------- -------------------------------- ----- -------- -------- --------- --------- --------- ----- -------- ---------
C081 655346-3 Aguadilla Mall $3,367,694 1.40x 40,869 $ 0.15 4,011,059 1,300,483 2,710,576 1.13x 1/31/97 3,399,441
C082 655353-1 University Square $2,179,051 1.32x 27,300 $ 0.14 2,688,580 681,789 2,006,791 1.22x 12/31/96 2,628,551
Shopping Center
N083 50139 Joliet Commons $1,645,827 1.30x 15,918 $ 0.10 1,701,014 475,479 1,225,535 0.97x 12/31/96 198,336
Shopping Center
N084 50135 Victorville Valley $1,194,712 1.37x 40,058 $ 0.22 1,639,763 338,085 1,301,678 1.49x 12/31/96 1,550,741
Retail Center
N085 50026 Burlington Outlet $1,375,750 1.47x 68,559 $ 0.31 2,045,868 699,774 1,346,094 1.44x 12/31/96 1,922,089
Center
- ------- -------- -------------------------------- ----- -------- -------- --------- --------- --------- ----- -------- ---------
N086 50114 Van Owen Marketplace $1,199,613 1.60x 7,684 $ 0.10
N087 50273 Jumbo Sports #30 $ 455,965 1.33x 2,834 $ 0.07 226,050 94,813 131,237 0.38x 1/31/97
N088 50285 Jumbo Sports #36 $ 414,896 1.28x 2,814 $ 0.07 233,662 99,606 134,056 0.42x 1/31/97
N089 50274 Jumbo Sports #14 $ 219,498 1.32x 2,013 $ 0.05 226,538 108,253 118,285 0.71x 1/31/97
N090 50083 Preston Parkway Center $ 989,392 1.45x 9,343 $ 0.15 1,092,839 539,212 553,627 0.81x 5/31/97
- ------- -------- -------------------------------- ----- -------- -------- --------- --------- --------- ----- -------- ---------
C091 655458-5 Willow Lake Shopping $ 779,283 1.37x 12,893 $ 0.15 1,103,379 257,707 845,672 1.49x 12/31/96 1,070,073
Center
C092 655413-2 Ogden City Plaza $ 730,436 1.39x 8,560 $ 0.09 957,815 188,626 769,189 1.47x 12/31/96
C093 655367-0 Fox Plaza Retail $ 816,982 1.47x 27,608 $ 0.15 1,208,000 431,000 777,000 1.40x 12/31/96 1,108,000
C094 655440-4 Stonehedge Square $ 753,866 1.43x 13,129 $ 0.15 947,700 162,448 785,252 1.49x 12/31/96 862,099
Shopping Center
N095 50076 St Andrews Crossing $ 648,104 1.37x 10,037 $ 0.15 826,246 154,946 671,300 1.42x 6/30/97 822,732
- ------- -------- -------------------------------- ----- -------- -------- --------- --------- --------- ----- -------- ---------
C096 655450-1 Princeton Meadows $ 686,745 1.54x 9,906 $ 0.15 1,139,618 352,961 786,657 1.76x 12/31/96 1,031,423
Shopping Center
N097 50068 Troy Marketplace $ 580,145 1.33x 19,688 $ 0.15 708,935 113,932 595,003 1.37x 3/31/97 690,559
Shopping Center
C098 655305-2 Food Emporium $ 631,900 1.42x 3,039 $ 0.15 697,295 40,526 656,769 1.47x 12/31/96
N099 50118 Northridge Shopping $ 576,817 1.41x 15,032 $ 0.20 819,351 254,265 565,086 1.38x 6/30/97 820,711
Center
C100 655388-7 USA Outlet Center $ 654,988 1.52x 15,345 $ 0.15 1,057,124 404,586 652,538 1.52x 12/31/96 1,065,768
- ------- -------- -------------------------------- ----- -------- -------- --------- --------- --------- ----- -------- ---------
C101 655324-3 The Galeria $ 591,118 1.38x 4,518 $ 0.15 1,101,881 542,667 559,214 1.30x 12/31/96 1,068,725
C102 655452-7 Timberlake Plaza $ 535,936 1.34x 12,127 $ 0.15 329,361 101,951 227,410 0.57x 12/31/96 190,443
Shopping Center
N102 50096 Hillsborough Commons $ 530,465 1.43x 10,854 $ 0.10 653,360 150,309 503,051 1.36 12/31/96 671,386
C104 655364-1 North Park Shopping $ 521,619 1.51x 7,062 $ 0.10
Center
N105 50193 Best Buy Store 20 $ 474,059 1.21x 2,340 $ 0.05
- ------- -------- -------------------------------- ----- -------- -------- --------- --------- --------- ----- -------- ---------
</TABLE>
<PAGE>
ANNEX A
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
LARGEST SECOND SECOND
TENANT LARGEST LARGEST LARGEST SECOND
LARGEST % OF TENANT TENANT TENANT LARGEST TENANT
CONTROL 1995 1995 TENANT TOTAL LEASE SECOND LARGEST LEASED % OF LEASE
NUMBER EXPENSES NOI LARGEST TENANT LEASED SF SF EXPIRATION TENANT SF TOTAL SF EXPIRATION
- ------- --------- --------- --------------- --------- ------- ---------- ------------------- ------- -------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
C054 410,096 440,770
N055 298,159 226,424
- ------- --------- --------- --------------- --------- ------- ---------- ------------------- ------- -------- --------------
C056 327,723 294,039
C057
C058 271,578 466,691
C059 189,025 157,912
C060 64,772 69,214
- ------- --------- --------- --------------- --------- ------- ---------- ------------------- ------- -------- --------------
C061
N062 127,129 137,239
C063 395,845 278,763
N064 48,756 233,455
N065 52,796 208,428
- ------- --------- --------- --------------- --------- ------- ---------- ------------------- ------- -------- --------------
C066 152,155 141,298
C067
C068 274,917 182,838
N069 195,321 184,100
N070 212,469 158,166
- ------- --------- --------- --------------- --------- ------- ---------- ------------------- ------- -------- --------------
C071 222,440 177,128
N072 111,004 148,104
N073 113,977 152,623
C074 328,040 85,691
C075 159,549 185,451
- ------- --------- --------- --------------- --------- ------- ---------- ------------------- ------- -------- --------------
N076 49,492 132,576
C077
N078 63,726 88,806
C079 77,038 113,090
C080 72,771 86,510
- ------- --------- --------- --------------- --------- ------- ---------- ------------------- ------- -------- --------------
C081 1,348,216 2,051,225 K-Mart 87,449 31% 12/31/17 Amigo Supermarket 39,393 14% 10/31/16
C082 591,516 2,037,035 Food 4 Less 53,000 27% 1/4/15 Pacific Theatre 25,600 13% 9/30/09
N083 52,452 145,884 Cinemark 35,152 22% 2/28/16 PetsMart, Inc. 25,425 16% 8/5/10
N084 319,855 1,230,886 HomeBase 136,909 74% 5/30/08 Drug Emporium 24,860 13% 2/28/02
N085 732,191 1,189,898 Burlington Coat 45,765 21% 11/30/03 West Point 22,500 10% 6/30/99
Factory Pepperell
- ------- --------- --------- --------------- --------- ------- ---------- ------------------- ------- -------- --------------
N086 Ralph's Grocery 45,441 59% 11/30/16 PetsMart, Inc. 24,900 32% 11/30/11
N087 Jumbo Sports 40,485 100% 9/30/22
N088 Jumbo Sports 40,205 100% 9/30/22
N089 Jumbo Sports 40,253 100% 9/30/22
N090 Ebby Halliday 6,000 10% 2/28/05 Popolo's Restaurant 5,001 8% 4/30/05
Realtors
- ------- --------- --------- --------------- --------- ------- ---------- ------------------- ------- -------- --------------
C091 235,808 834,265 Factory Card 10,660 12% 7/31/03 Paul Harris Stores 7,980 9% 6/30/04
Outlets
C092 America Online 47,300 50% 12/21/02 Carmike Cinemas 13,191 14% 11/15/09
C093 413,000 695,000 J.C. Penney 35,000 19% 8/1/01 50% Off Store 25,710 14% 2/28/02
C094 151,557 710,542 Nell's 36,615 42% 6/30/10 Thrift Drug 8,468 10% 6/30/05
N095 147,315 675,417 Kroger 52,710 78% 10/31/13 Jewelry Warehouse 5,000 7% 12/31/99
- ------- --------- --------- --------------- --------- ------- ---------- ------------------- ------- -------- --------------
C096 348,255 683,168 Shop'n Bag 28,560 43% 9/30/01 Thrift Drugs 6,000 9% 1/31/99
N097 112,042 578,517 Wal-Mart 65,930 50% 1/31/09 Winn Dixie 30,625 23% 9/30/09
C098 Great Atlantic 20,262 100% 9/30/22
& Pacific
N099 225,717 594,994 Kroger 41,584 55% 2/28/02 Bird in the Hand 4,637 6% 7/31/01
C100 439,802 625,966 Springmaid 6,700 7% 3/1/02 Carter's Children 6,500 6% 7/1/97
Wamsutta
- ------- --------- --------- --------------- --------- ------- ---------- ------------------- ------- -------- --------------
C101 541,194 527,531 Lexington Jewel 4,585 15% 12/31/00 India House 4,321 14% 5/31/02
C102 84,556 105,887 Winn Dixie 44,000 54% 6/30/16 Family Dollar 6,890 9% 12/31/06
N102 42,241 629,145 Wal-Mart 65,930 61% 6/23/09 Byrd's Foods 25,200 23% 7/15/09
C104 Van-Atkins 14,180 20% 11/30/06 Traditions 9,500 13% 11/30/01
N105 Best Buy 46,790 100% 7/15/12
- ------- --------- --------- --------------- --------- ------- ---------- ------------------- ------- --------
</TABLE>
2 <PAGE>
ANNEX A
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
U/W U/W
CONTROL LOAN U/W NOI U/W RESERVES 1996 1996 1996 1996 1996 1995
NUMBER NUMBER PROPERTY NAME NOI DSCR RESERVES PER UNIT REVENUES EXPENSES NOI DSCR DATE REVENUES
- ------- -------- -------------------------------- ----- -------- -------- --------- --------- --------- ----- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
C106 655274-9 State Line Plaza $ 475,244 1.32x 10,305 $0.15 583,963 137,098 446,865 1.24x 12/31/96 605,506
C107 655405-1 Alta Loma Plaza $ 480,189 1.55x 11,225 $0.15 660,815 170,518 490,297 1.59x 12/31/96 620,674
N108 50040 Landmark Village $ 539,100 1.46x 10,923 $0.15 616,736 242,259 374,477 1.01x 12/31/96 648,655
Shopping Center
N109 50069 Douglas Square $ 404,712 1.34x 15,710 $0.15 500,480 106,403 394,077 1.30x 3/31/97 470,652
Shopping Center
C110 655243-5 Old Pueblo Plaza $ 492,009 1.48x 15,261 $0.25 689,007 166,374 522,633 1.57x 12/31/96 535,351
- ------- -------- -------------------------------- ----- -------- -------- --------- --------- --------- ----- -------- ---------
C111 655393-9 Cheyenne Crossing $ 395,996 1.50x 3,465 $0.15
Shopping Center
N112 50041 University Hills West $ 423,216 1.48x 13,531 $0.32 673,338 184,748 488,590 1.70x 12/31/96 315,023
Shopping Cent
C113 655299-8 Apple Blossom Mall $ 405,117 1.38x 8,265 $0.15 485,640 88,159 397,481 1.36x 12/31/96 465,246
C114 655373-5 Uintah Plaza Shopping $ 351,044 1.42x 26,373 $0.21 443,537 57,165 386,372 1.57x 12/31/96 443,674
Center
C115 655164-3 Wind Gap Shopping $ 380,502 1.40x 17,136 $0.15 534,507 151,598 382,909 1.41x 12/31/96 473,365
Center
- ------- -------- -------------------------------- ----- -------- -------- --------- --------- --------- ----- -------- ---------
C116 655357-3 Babylon Plaza/Genovese $ 403,663 1.68x 5,441 $0.15 576,547 193,319 383,228 1.60x 12/31/96 572,556
Plaza
N117 50001 Taylors Creek Commons $ 329,096 1.32x 5,150 $0.10 486,095 138,086 348,009 1.40x 12/31/96 449,246
C118 655338-2 Builders Design Center $ 397,240 1.81x 7,867 $0.15 700,378 249,295 451,083 2.05x 12/31/96 679,426
C119 655351-5 Agora Shopping Center $ 294,874 1.37x 4,845 $0.15 407,734 83,906 323,828 1.50x 12/31/96
C120 655361-2 Orchard Business Park $ 379,711 1.69x 19,053 $0.29 517,482 153,559 363,923 1.62x 12/31/96 490,010
- ------- -------- -------------------------------- ----- -------- -------- --------- --------- --------- ----- -------- ---------
C121 655320-1 Northgate Village $ 310,210 1.49x 20,687 $0.30 243,921 136,835 107,086 0.51x 12/31/96 151,323
Shopping Center
C122 655442-0 25th & Butler Shopping $ 328,168 1.52x 8,215 $0.15 485,227 142,074 343,153 1.59x 12/31/96 454,769
Center
C123 655319-1 Northgate Plaza $ 286,600 1.47x 16,716 $0.25 301,425 125,963 175,462 0.90x 12/31/96 255,154
Shopping Center
C124 655259-0 54 West 47th Street $ 304,381 1.37x 1,500 $0.16 528,572 154,402 374,170 1.68x 12/31/96 585,100
N125 50112 Eckerd at Smyrna $ 235,283 1.25x 545 $0.05
- ------- -------- -------------------------------- ----- -------- -------- --------- --------- --------- ----- -------- ---------
N126 50129 College Plaza $ 277,935 1.55x 22,396 $0.33 351,151 86,152 264,999 1.48x 12/31/96 336,913
C127 655382-9 Woodforest Emporium $ 237,363 1.49x 8,960 $0.17 276,002 104,858 171,144 1.07x 12/31/96 211,613
Shopping Center
C128 655306-5 Country Brook Village $ 276,880 1.59x 9,626 $0.23 394,254 159,013 235,241 1.35x 12/31/96 308,260
N129 50194 Hill Country Square $ 236,354 1.66x 13,235 $0.20 319,881 86,896 232,985 1.64x 12/31/96 325,465
Shopping Center
N130 50044 Caroline Square $ 192,324 1.37x 8,031 $0.20 280,705 61,653 219,052 1.57x 12/31/96 282,264
Shopping Center
- ------- -------- -------------------------------- ----- -------- -------- --------- --------- --------- ----- -------- ---------
N131 50187 Jacksonville Plaza $ 186,004 1.59x 9,466 $0.25 236,801 40,913 195,888 1.67x 12/31/96 216,085
Shopping Center
C132 655278-1 Southside Shopping $ 150,376 1.40x 8,295 $0.15 413,405 155,246 258,159 2.40x 12/31/96 413,373
Center
C133 655331-1 Westcliff Office $ 75,537 1.34x 838 $0.16 27,239 8,334 18,905 0.34x 12/31/97
-building 12
C134 655403-5 America Online $3,406,000 1.35x 40,872 $0.15
Building
C135 655344-7 International Jewelry $3,847,090 1.63x 94,340 $0.25 7,301,042 3,449,810 3,851,232 1.64x 12/31/96 6,951,610
Exchange
- ------- -------- -------------------------------- ----- -------- -------- --------- --------- --------- ----- -------- ---------
N136 50039 The Daniel and Henry $1,161,734 1.47x 8,806 $0.10 1,948,883 688,889 1,259,994 1.60x 12/31/96 1,857,054
Building
C137 655237-0 Morton West Associates $ 813,408 1.52x 17,100 $0.14 2,110,692 1,119,479 991,213 1.85x 10/31/96 2,013,893
C138 655470-5 Scarborough Court $ 404,518 1.59x 5,818 $0.15 599,993 171,033 428,960 1.69x 12/31/96 562,602
C139 655470-5 95-97 Darling Avenue $ 278,073 1.31x 6,300 $0.15 420,853 95,576 325,277 1.53x 12/31/96 346,475
C140 655326-9 Westcliff Office $ 582,861 1.33x 5,647 $0.15 867,587 24,289 843,298 1.92x 12/31/96
-building 9
- ------- -------- -------------------------------- ----- -------- -------- --------- --------- --------- ----- -------- ---------
C141 655380-3 Crown Plaza Office $ 525,570 1.55x 12,875 $0.20 831,510 307,567 523,943 1.54x 12/31/96 831,685
Building
C142 655461-1 Mt. Arlington $ 482,707 1.61x 10,504 $0.15 751,926 402,785 349,141 1.16x 12/31/96 424,113
Corporate Center
C143 655363-8 Oak Hall Office $ 444,326 1.45x 8,785 $0.17 549,347 248,920 300,427 0.98x 12/31/96 468,848
Building
C144 655454-3 Eastgate Commerce $ 430,101 1.43x 8,201 $0.15 578,018 138,482 439,536 1.46x 12/31/96 482,553
Center
C145 655309-4 Midtown Plaza $ 351,207 1.53x 12,075 $0.20 705,545 348,746 356,799 1.55x 12/31/96 587,640
- ------- -------- -------------------------------- ----- -------- -------- --------- --------- --------- ----- -------- ---------
C146 655379-3 Jamacha Center I $ 296,656 1.41x 3,718 $0.20 321,715 64,552 257,163 1.23x 12/31/96 325,098
C147 655360-9 West Oxmoor Tower $ 332,892 1.60x 17,065 $0.20 790,055 422,284 367,771 1.77x 12/31/96
C148 655371-9 The Oviatte Building $ 353,217 1.91x 14,445 $0.15
C149 655449-1 1520 Locust Street $ 268,091 1.80x 12,504 $0.24 524,840 217,152 307,688 2.07x 12/31/96
C150 655377-7 Office 66 $ 200,315 1.50x 2,981 $0.15 180,831 75,634 105,197 0.79x 12/31/96 193,034
- ------- -------- -------------------------------- ----- -------- -------- --------- --------- --------- ----- -------- ---------
C151 655314-6 Highland Plaza $ 286,160 2.12x 62,593 $0.80 767,072 394,358 372,714 2.76x 12/31/96 654,909
N152 50125 Bellona Commons $ 348,574 2.63x 11,077 $0.25 533,937 222,100 311,837 2.35x 12/31/96 699,505
C153 655341-8 31 Inwood Road $ 224,112 1.81x 4,500 $0.15
C154 655327-2 Westcliff Office $ 133,703 1.36x 1,752 $0.15 136,679 17,839 118,840 1.21x 12/31/96
-building 3
C155 655325-6 Westcliff Office $ 127,262 1.37x 1,758 $0.15 183,200 17,142 166,058 1.78x 12/31/96
-building 2
- ------- -------- -------------------------------- ----- -------- -------- --------- --------- --------- ----- -------- ---------
C156 655265-5 80 Maple Avenue $ 133,479 1.57x 4,673 $0.33 295,293 162,580 132,713 1.56x 12/31/96 286,007
C157 655329-8 Westcliff Office $ 103,678 1.36x 1,348 $0.15 73,665 14,081 59,584 0.78x 12/31/96
-building 5
C158 655330-8 Westcliff Office $ 103,289 1.37x 1,348 $0.15 150,302 13,489 136,813 1.81x 12/31/97
-building 6
</TABLE>
<PAGE>
ANNEX A
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
LARGEST SECOND SECOND
TENANT LARGEST LARGEST LARGEST SECOND
LARGEST % OF TENANT TENANT TENANT LARGEST TENANT
CONTROL 1995 1995 TENANT TOTAL LEASE SECOND LARGEST LEASED % OF LEASE
NUMBER EXPENSES NOI LARGEST TENANT LEASED SF SF EXPIRATION TENANT SF TOTAL SF EXPIRATION
- ------- --------- --------- --------------- --------- ------- ---------- ------------------- ------- -------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
C106 123,208 482,298 Food Lion 26,171 38% 10/31/10 Family Dollar 7,000 10% 12/31/99
C107 149,613 471,061 Ralphs Grocery 35,250 47% 10/31/99 Super Video 7,385 10% 5/30/02
N108 247,445 401,210 YMCA of 10,986 15% 12/15/01 Wizard's Billiards 7,124 10% 8/28/01
Arlington
N109 112,051 358,601 Wal-Mart 71,159 68% 11/9/10 B.C. Moore 16,777 16% 11/30/08
C110 169,490 365,861 Desert Sports & 25,000 41% 4/30/01 Goodwill Industries 6,840 11% 12/31/99
Fitness
- ------- --------- --------- --------------- --------- ------- ---------- ------------------- ------- -------- --------------
C111 Leslies's Pool 3,850 17% 10/1/01 Deluca Pizza 2,450 11% 8/1/01
Supplies
N112 201,763 113,260 Colorado 12,000 28% 12/28/00 Hollywood Video 7,740 18% 11/30/05
National Bank
C113 69,756 395,490 Carmike Cinema 33,000 60% 3/29/10 Valley Health 8,450 15% 3/31/98
Systems
C114 55,630 388,044 K-Mart 85,288 68% 10/31/08 Christensen's 22,000 18% 7/31/04
C115 113,633 359,732 Laneco 111,800 98% 2/5/03 Sal's Pizza 1,480 1% 1/31/07
- ------- --------- --------- --------------- --------- ------- ---------- ------------------- ------- -------- --------------
C116 162,364 410,192 Genovese 20,960 58% 6/30/05 Zaher Video 3,200 9% 10/31/04
N117 136,702 312,544 Food Lion 29,000 56% 6/30/10 Eckerd Drug 6,720 13% 6/30/99
C118 265,140 414,286 Regal Lighting 7,406 14% 12/1/97 Frazee Paintq 5,894 11% 6/1/01
C119 Eldorado 14,000 43% 4/30/05 Wee Wonders 3,600 11% 9/30/99
Supermarket
C120 122,591 367,419 Landmark Homes 6,300 10% 12/31/97 Brookhart 5,400 8% 10/31/01
Enterprises, Inc.
- ------- --------- --------- --------------- --------- ------- ---------- ------------------- ------- -------- --------------
C121 134,409 16,914 Yucatan Liquor 15,536 23% 12/30/99 Gymnastics of SA 8,400 12% 12/31/99
Stand
C122 110,322 344,447 Laneco 22,520 41% 2/5/03 Rite-Aid 6,500 12% 2/28/01
C123 167,884 87,270 Seniors Plus 8,125 12% 6/15/00 Quality Kids Day 6,500 10% 12/31/97
Care
C124 157,034 428,066 Ross Metals 3,325 48% 7/31/26 A. Balanevsky 1,000 14% 3/31/99
N125 Eckerd Drug 10,908 100% 1/1/17
- ------- --------- --------- --------------- --------- ------- ---------- ------------------- ------- -------- --------------
N126 74,488 262,425 Kroger 31,170 46% 10/31/01 Super X (Kroger) 10,069 15% 10/31/01
C127 122,099 89,514 Showdowns Night 6,972 13% 12/31/99 Woodforest Health & 6,820 13% 12/31/01
Club Fitness
C128 182,287 125,973 Kiddie Academy 6,875 16% 2/28/07 Blockbuster Video 5,882 14% 9/30/97
N129 71,044 254,421 Wal-mart 53,945 82% 11/13/07 Margarita's 5,074 8% 2/28/98
N130 55,326 226,938 Piggly Wiggly 21,600 54% 11/6/04 Dollar General 6,400 16% 1/31/00
- ------- --------- --------- --------------- --------- ------- ---------- ------------------- ------- -------- --------------
N131 42,078 174,007 Hastings Books 13,727 36% 4/30/03 Family Dollar 6,532 17% 12/30/01
C132 124,469 288,904 Harvey's 20,500 37% 5/14/99 Family Dollar 12,000 22% 12/31/99
C133 Bagel Cafe, 5,184 100% 6/15/03
Inc.
C134 America Online 272,480 100% 9/29/22
C135 3,877,668 3,073,942 Bank of America 18,744 5% 10/1/02 Citideli 5,322 1% 3/31/04
- ------- --------- --------- --------------- --------- ------- ---------- ------------------- ------- -------- --------------
N136 674,712 1,182,342 Daniel & Henry 45,180 54% 1/4/01 Department of 33,389 40% 7/18/01
Agriculture
C137 891,924 1,121,969 DF King & Co, 32,500 27% 3/31/06 Ammann & Whitney, 26,000 21% 12/31/01
Inc. Inc.
C138 177,468 385,134 Neil & Gunter 19,344 50% 3/31/04 MMC Medical 9,696 25% 7/31/02
C139 102,637 243,838 Wright Express 42,000 100% 12/31/04
C140 Hunsaker & 13,909 37% 11/24/03 Edwards, Morse, 9,271 25% 10/8/06
Associates, Olson, Waite &
Inc. Winterton
- ------- --------- --------- --------------- --------- ------- ---------- ------------------- ------- -------- --------------
C141 302,201 529,484 DIS -Suite 500 14,908 23% 6/30/00 Crown Plaza 14,908 23% 12/31/99
Executive Suites
-Suite 40
C142 311,534 112,579 Enviro Science 17,424 25% 5/26/03 Watkins Engineering 15,220 22% 3/31/00
C143 221,776 247,072 Memphis 12,000 23% 4/30/01 Hollywood 8,000 15% 7/7/06
Insurance Entertainment
Company
C144 144,189 338,364 CT&E 7,550 14% 12/31/98 Clermont Chamber of 4,680 9% 5/31/01
Environmental Comm
Ser
C145 353,212 234,428 McCracken & 8,205 14% 5/31/01 Centralina Council 8,194 14% 6/30/01
Lopez of Governments
- ------- --------- --------- --------------- --------- ------- ---------- ------------------- ------- -------- --------------
C146 55,962 269,136 Family Practice 15,328 82% 9/30/04 Hofer Beauty Salon 1,463 8% 8/31/00
Association
C147 DHR -3rd, 4th 23,248 27% 10/31/01 DHR State of 21,364 25% 8/20/00
Alabama
C148 Cicada 13,937 14% 5/31/07 Los Angeles County 7,219 8% 1/31/00
Restaurant Bar Assn.
C149 M. Davis & Co. 4,365 9% 5/31/06 TLA Video 4,215 8% 5/21/00
C150 63,201 129,833 Kiddie Academy 9,052 46% 5/31/06 Neptune Artificial 5,246 26% 3/1/05
Kidney
- ------- --------- --------- --------------- --------- ------- ---------- ------------------- ------- -------- --------------
C151 336,421 318,488 IDS/American 5,549 7% 12/31/00 Met Life 4,593 6% 12/31/99
Express
N152 221,315 478,190 Americom Info & 11,246 25% 4/30/03 Automobile Club of 9,317 21% 1/31/00
Communucations MD
C153 Ricoh Dealer 20,000 66% 4/1/04 Integrated Loan S 10,473 34% 5/1/07
C154 Charles J. 5,635 48% 9/30/01 Deetta Ewing dba 2,160 18% 10/31/99
Hoskin, Robert Ewing Design
& Linda Graham
C155 NLVH, Inc. dba 11,721 100% 7/31/10
Lake Mead
Hospital
- ------- --------- --------- --------------- --------- ------- ---------- ------------------- ------- -------- --------------
C156 144,715 141,292 Albert 3,270 23% 11/30/01 Cohen & Warren 1,906 13% 11/30/01
Trachtenberg
C157 PRJ Enterprises 4,617 51% 12/31/00 Tom Collins 1,327 15% 12/31/01
Enterprises, Inc.
C158 Martin J. 3,775 42% 5/31/01 Curtis Poindexter, 3,119 35% 7/31/02
Safko,M.D. M.D.
</TABLE>
<PAGE>
ANNEX A
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
U/W U/W
CONTROL LOAN U/W NOI U/W RESERVES 1996 1996 1996 1996 1996 1995
NUMBER NUMBER PROPERTY NAME NOI DSCR RESERVES PER UNIT REVENUES EXPENSES NOI DSCR DATE REVENUES
- ------- -------- -------------------------------- ----- -------- -------- --------- --------- --------- ----- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
C159 655328-5 Westcliff Office $ 96,841 1.37x 1,348 $ 0.15 67,428 14,151 53,277 0.75x 12/31/96
-building 4
C160 655374-8 The Commons Office $ 118,951 1.63x 3,600 $ 0.30 133,882 17,997 115,885 1.59x 12/31/96 118,145
Building
- ------- -------- -------------------------------- ----- -------- -------- --------- --------- --------- ----- -------- ---------
C161 655389-0 Fisherman's Wharf $2,840,427 1.56x 275,455 $1,187.31 9,331,683 6,471,490 2,860,193 1.57x 12/31/96 7,973,177
Ramada Plaza
C162 655469-5 Embassy Suites $3,340,579 1.78x 412,541 $1,505.62 8,773,366 5,099,627 3,673,739 1.96x 12/31/96 8,204,939
N163 50036 Days Inn -St. $1,237,084 1.56x 135,291 $1,326.38 3,472,710 2,163,977 1,308,733 1.65x 10/31/96 3,398,331
Petersburg
C164 655448-8 Courtyard by Marriott $1,218,520 1.71x 158,501 $1,063.77 4,089,952 2,809,114 1,280,838 1.80x 12/31/96 3,790,932
N165 50142 Residence Inn $1,076,086 1.59x 106,914 $1,028.02 2,846,977 1,651,277 1,195,700 1.77x 12/31/96 2,840,964
Brookfield
- ------- -------- -------------------------------- ----- -------- -------- --------- --------- --------- ----- -------- ---------
C166 655372-2 Strathallan Hotel $1,064,452 1.69x 164,713 $1,098.09 4,727,318 3,590,425 1,136,893 1.80x 12/31/96 4,905,164
N167 50025 Best Western Oceanside $1,000,566 1.69x 109,887 $1,087.99 2,749,785 1,616,042 1,133,743 1.91x 12/31/96 2,736,416
Inn
N168 50034 Ramada Inn -Fort Myers $ 760,312 1.49x 53,397 $ 762.81 1,794,046 1,025,781 768,265 1.51x 10/31/96 1,780,586
C169 655374-8 English Inn $ 441,450 1.54x 52,318 $ 594.52 1,331,731 837,653 494,078 1.73x 12/31/96 1,189,638
N170 50033 Hampton Inn -Ben Salem $ 638,369 1.96x 110,252 $ 781.93 2,860,109 1,993,820 866,289 2.67x 12/31/96 2,693,627
- ------- -------- -------------------------------- ----- -------- -------- --------- --------- --------- ----- -------- ---------
N171 50035 Days Inn -Fort Myers $ 460,148 1.53x 41,611 $1,260.94 1,389,806 890,367 499,439 1.66x 10/31/96 1,269,111
C172 655349-9 Sioux City Holiday Inn $ 457,071 1.87x 83,460 $ 535.00 2,481,105 2,027,682 453,423 1.86x 12/31/96 3,149,258
N173 50037 Howard Johnson-Fort $ 269,787 1.50x 20,628 $ 859.50 680,929 395,672 285,257 1.59x 10/31/96 644,250
Myers
C174 655410-3 Knights Inn $ 254,567 1.78x 37,627 $ 351.65 976,995 650,934 326,061 2.29x 12/31/96 924,971
N175 50145 Toxikon $1,104,890 1.36x 11,025 $ 0.15 2,143,898 747,398 1,396,500 1.71x 12/31/96
- ------- -------- -------------------------------- ----- -------- -------- --------- --------- --------- ----- -------- ---------
C176 655459-8 Lavergne Court $ 410,133 1.41x 16,979 $ 0.15 607,887 153,711 454,176 1.57x 12/31/96 561,265
C177 655459-8 Harbor Court $ 272,808 1.49x 10,152 $ 0.15 327,039 78,150 248,889 1.36x 12/31/96 280,200
C178 655463-7 Harney Road Industrial $ 362,837 1.44x 8,775 $ 0.15 473,478 64,021 409,457 1.62x 12/31/96 494,652
Center
C179 655441-7 26 Clinton Drive $ 312,784 1.52x 15,752 $ 0.15 464,013 195,675 268,338 1.30x 12/31/96 524,730
C180 655333-7 Alhambra $ 260,897 1.83x 29,521 $ 1.07 386,803 122,902 263,901 1.85x 12/31/96 346,458
- ------- -------- -------------------------------- ----- -------- -------- --------- --------- --------- ----- -------- ---------
C181 655356-0 3220 Warehouse $ 225,012 1.49x 7,000 $ 0.20 231,000 19,886 211,114 1.40x 12/31/96 138,036
C182 655464-0 Wanalda Warehouse $ 214,234 1.51x 6,927 $ 0.15 276,276 58,139 218,137 1.54x 12/31/96 309,179
C183 655355-7 541 Warehouse $ 222,873 1.59x 9,649 $ 0.15 276,539 56,258 220,281 1.57x 12/31/96 250,758
C184 655460-8 5235 W. 65th Street $ 156,971 1.48x 8,213 $ 0.15 237,235 63,867 173,368 1.63x 12/31/96 223,177
N185 50157 Voorhees Pediatric $3,332,278 3.88x 26,250 $ 245.3317,624,74213,557,655 4,067,087 4.74x 12/31/9616,341,418
Center
- ------- -------- -------------------------------- ----- -------- -------- --------- --------- --------- ----- -------- ---------
N186 50032 Franklin Nursing Home $1,503,368 2.56x 80,000 $ 250.0023,647,98321,472,712 2,175,271 3.70x 12/31/9619,363,559
N187 50089 Ditmas Park Care $2,126,856 5.57x 50,000 $ 250.0013,211,105 9,977,080 3,234,025 8.47x 12/31/9612,367,848
Center
C188 655394-2 Lakeview Village $1,194,174 1.37x 17,964 $ 0.15 1,607,912 587,348 1,020,564 1.17x 12/31/96
Shopping Center
C189 655447-5 Montgomery Pointe $ 447,288 1.46x 6,804 $ 0.16 588,569 83,843 504,726 1.64x 12/31/96 529,901
Plaza
C190 655343-4 Le Madri $ 379,050 1.78x 2,391 $ 0.14 380,860
- ------- -------- -------------------------------- ----- -------- -------- --------- --------- --------- ----- -------- ---------
C191 655465-3 Lackland Self Storage $ 608,915 1.49x 13,221 $ 16.28 752,144 134,972 617,172 1.51x 12/31/96 661,909
N192 50047 Frederick Mini-Storage $ 317,918 1.31x 7,740 $ 0.18 525,489 150,971 374,518 1.54x 12/31/96 440,998
N193 50046 York Mini-Storage, $ 227,449 1.28x 5,555 $ 0.09 401,764 160,399 241,365 1.36x 12/31/96 324,875
Inc.
- ------- -------- -------------------------------- ----- -------- -------- --------- --------- --------- ----- -------- ---------
Totals/Weighted Averages 1.50x
================================================= ===== ======== ======== ========= ========= ========= ===== ======== =========
</TABLE>
<PAGE>
ANNEX A
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
LARGEST SECOND SECOND
TENANT LARGEST LARGEST LARGEST SECOND
LARGEST % OF TENANT TENANT TENANT LARGEST TENANT
CONTROL 1995 1995 TENANT TOTAL LEASE SECOND LARGEST LEASED % OF LEASE
NUMBER EXPENSES NOI LARGEST TENANT LEASED SF SF EXPIRATION TENANT SF TOTAL SF EXPIRATION
- ------- --------- --------- --------------- --------- ------- ---------- ------------------- ------- -------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
C159 Sklar, Warren & 6,086 68% 9/30/02 Stanley Weiner 2,900 32% 8/31/00
Sylvester, Ltd. Adele Duranso&
Carol Boeh
C160 21,749 96,396 Virginia School 5,000 42% 6/30/98 St. John 2,000 17% 6/30/00
of Massage Properties, Ltd.
- ------- --------- --------- --------------- --------- ------- ---------- ------------------- ------- -------- --------------
C161 5,968,285 2,004,892
C162 4,819,840 3,385,099
N163 2,154,548 1,243,783
C164 2,427,022 1,363,910
N165 1,690,342 1,150,622
- ------- --------- --------- --------------- --------- ------- ---------- ------------------- ------- -------- --------------
C166 3,576,963 1,328,201
N167 1,681,566 1,054,850
N168 981,708 798,878
C169 800,247 389,391
N170 2,194,286 499,341
- ------- --------- --------- --------------- --------- ------- ---------- ------------------- ------- -------- --------------
N171 880,254 388,857
C172 2,415,775 733,483
N173 324,749 319,501
C174 592,833 332,138
N175 Toxikon 73,500 100% 7/31/22
- ------- --------- --------- --------------- --------- ------- ---------- ------------------- ------- -------- --------------
C176 206,521 354,744 Chicago Motor 15,300 14% 8/31/98 Corrugated Supplies 12,500 12% 11/30/03
Club Corporation
C177 83,772 196,428 Beitunia 4,300 7% 11/30/97 APS 4,300 7% 9/30/99
Corporation
C178 75,109 419,543 Zephyrhills 26,500 45% 9/30/08 Kash N' Karry 19,900 34% 1/31/03
C179 185,874 338,856 Source 29,295 27% 1/30/00 LDI 25,000 23% 11/30/98
C180 154,675 191,783 Keynoox, Inc. 2,508 10% 12/31/98 Biscayne 1,254 5% 3/31/98
Contractors, Inc.
- ------- --------- --------- --------------- --------- ------- ---------- ------------------- ------- -------- --------------
C181 35,827 102,209 Service Cold 35,000 100% 1/18/98
Storage, Inc.
C182 57,947 251,232 Second Story 16,450 36% 8/31/99 PVI Business 15,000 32% 4/30/01
C183 57,145 193,613 Dixie 10,000 16% Gold Coast T-Shirt 8,000 12%
C184 109,870 113,307 I.E.S.C.O. 19,800 37% 8/31/99 Jaffa Candies, Inc. 10,300 19% 2/28/98
N185 12,477,040 3,864,378
- ------- --------- --------- --------------- --------- ------- ---------- ------------------- ------- -------- --------------
N186 18,316,799 1,046,760
N187 9,133,557 3,234,291
C188 World Gym of 18,681 16% 9/1/04 Oasis Waterbed 10,380 9% 2/12/01
Gilbert
C189 70,830 459,071 Hoffman & 9,114 21% 2/28/99 Genetica DNA Labs 6,379 15% 7/31/99
Albers
C190 262,172 118,688 Toscorp 11,625 68% 4/23/17 127 Restaurant 5,450 32% 4/23/17
Corp.
- ------- --------- --------- --------------- --------- ------- ---------- ------------------- ------- -------- --------------
C191 151,082 510,827
N192 113,610 327,388
N193 139,862 185,013
- ------- --------- --------- --------------- --------- ------- ---------- ------------------- ------- -------- --------------
============================= =============== ========= ======= ========== =================== ======= ======== ==============
</TABLE>
<PAGE>
PREPAYMENT LOCK-OUT/PREPAYMENT PREMIUM ANALYSIS
OUTSTANDING PRINCIPAL BALANCE ANALYSIS (1)
ALL LOANS
<TABLE>
<CAPTION>
NOV-1997 NOV-1998 NOV-1999 NOV-2000 NOV-2001
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
LOCKED OUT.................. 99.69% 99.44% 95.98% 79.44% 0.00%
Greater of 2% of UPB or YM . 0.00% 0.00% 0.00% 0.00% 3.09%
Greater of 1% of UPB or YM . 0.31% 0.31% 1.26% 16.82% 54.86%
Yield Maintenance........... 0.00% 0.24% 2.49% 3.46% 41.34%
5.00--5.99%................. 0.00% 0.00% 0.28% 0.28% 0.43%
4.00--4.99%................. 0.00% 0.00% 0.00% 0.00% 0.28%
3.00--3.99%................. 0.00% 0.00% 0.00% 0.00% 0.00%
2.00--2.99%................. 0.00% 0.00% 0.00% 0.00% 0.00%
1.00--1.99%................. 0.00% 0.00% 0.00% 0.00% 0.00%
No Penalty.................. 0.00% 0.00% 0.00% 0.00% 0.00%
---------- ---------- ---------- ---------- ----------
Total....................... 100.00% 100.00% 100.00% 100.00% 100.00%
========== ========== ========== ========== ==========
Aggregate Principal Balance
of the Mortgage Loans
($Millions)................ $870.58 $861.91 $852.50 $842.44 $831.35
Percentage of Cut-off Date
Balance of the Mortgage
Loans Outstanding.......... 100.00% 99.00% 97.92% 96.77% 95.49%
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
NOV-2002 NOV-2003 NOV-2004 NOV-2005 NOV-2006 NOV-2007
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
LOCKED OUT.................. 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Greater of 2% of UPB or YM . 3.11% 3.13% 3.26% 3.28% 3.30% 0.00%
Greater of 1% of UPB or YM . 54.28% 54.29% 40.85% 40.86% 35.59% 27.98%
Yield Maintenance........... 41.45% 40.72% 42.07% 42.03% 40.82% 0.00%
5.00--5.99%................. 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
4.00--4.99%................. 0.43% 0.00% 0.00% 0.00% 0.00% 0.00%
3.00--3.99%................. 0.28% 1.13% 12.36% 0.00% 0.00% 0.00%
2.00--2.99%................. 0.45% 0.28% 1.17% 12.38% 0.00% 0.00%
1.00--1.99%................. 0.00% 0.00% 0.29% 1.46% 4.88% 0.00%
No Penalty.................. 0.00% 0.46% 0.00% 0.00% 15.42% 72.02%
---------- ---------- ---------- ---------- ---------- ----------
Total....................... 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
========== ========== ========== ========== ========== ==========
Aggregate Principal Balance
of the Mortgage Loans
($Millions)................ $816.69 $803.63 $763.59 $748.64 $732.40 $ 1.73
Percentage of Cut-off Date
Balance of the Mortgage
Loans Outstanding.......... 93.81% 92.31% 87.71% 85.99% 84.13% 0.20%
</TABLE>
- ------------
(1) Prepayment provisions in effect as a percentage of loans outstanding as
of the date indicated assuming no prepayments.
A-5
<PAGE>
PREPAYMENT LOCK-OUT/PREPAYMENT PREMIUM ANALYSIS
CUT-OFF DATE BALANCE ANALYSIS (1)
ALL LOANS
<TABLE>
<CAPTION>
NOV-1997 NOV-1998 NOV-1999 NOV-2000 NOV-2001
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
LOCKED OUT.................. 99.69% 98.45% 93.99% 76.88% 0.00%
Greater of 2% of UPB or YM . 0.00% 0.00% 0.00% 0.00% 2.95%
Greater of 1% of UPB or YM . 0.31% 0.31% 1.23% 16.28% 52.39%
Yield Maintenance........... 0.00% 0.24% 2.44% 3.35% 39.48%
5.00--5.99%................. 0.00% 0.00% 0.27% 0.27% 0.41%
4.00--4.99%................. 0.00% 0.00% 0.00% 0.00% 0.26%
3.00--3.99%................. 0.00% 0.00% 0.00% 0.00% 0.00%
2.00--2.99%................. 0.00% 0.00% 0.00% 0.00% 0.00%
1.00--1.99%................. 0.00% 0.00% 0.00% 0.00% 0.00%
No Penalty.................. 0.00% 0.00% 0.00% 0.00% 0.00%
Paid Down (2)............... 0.00% 1.00% 2.08% 3.23% 4.51%
---------- ---------- ---------- ---------- ----------
Total....................... 100.00% 100.00% 100.00% 100.00% 100.00%
========== ========== ========== ========== ==========
Aggregate Principal Balance
of the Mortgage Loans
($Millions)................ $870.58 $861.91 $852.50 $842.44 $831.35
Percentage of Cut-off Date
Balance of the Mortgage
Loans Outstanding.......... 100.00% 99.00% 97.92% 96.77% 95.49%
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
NOV-2002 NOV-2003 NOV-2004 NOV-2005 NOV-2006 NOV-2007
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
LOCKED OUT.................. 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Greater of 2% of UPB or YM . 2.92% 2.89% 2.86% 2.82% 2.78% 0.00%
Greater of 1% of UPB or YM . 50.92% 50.11% 35.83% 35.13% 29.94% 0.06%
Yield Maintenance........... 38.88% 37.59% 36.90% 36.14% 34.34% 0.00%
5.00--5.99%................. 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
4.00--4.99%................. 0.41% 0.00% 0.00% 0.00% 0.00% 0.00%
3.00--3.99%................. 0.26% 1.05% 10.85% 0.00% 0.00% 0.00%
2.00--2.99%................. 0.43% 0.26% 1.03% 10.64% 0.00% 0.00%
1.00--1.99%................. 0.00% 0.00% 0.25% 1.26% 4.10% 0.00%
No Penalty.................. 0.00% 0.42% 0.00% 0.00% 12.97% 0.14%
Paid Down (2)............... 6.19% 7.69% 12.29% 14.01% 15.87% 99.80%
---------- ---------- ---------- ---------- ---------- ----------
Total....................... 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
========== ========== ========== ========== ========== ==========
Aggregate Principal Balance
of the Mortgage Loans
($Millions)................ $816.69 $803.63 $763.59 $748.64 $732.40 $ 1.73
Percentage of Cut-off Date
Balance of the Mortgage
Loans Outstanding.......... 93.81% 92.31% 87.71% 85.99% 84.13% 0.20%
</TABLE>
- ------------
(1) Prepayment provisions in effect as a percentage of loans outstanding as
of the date indicated assuming no prepayments.
(2) Scheduled amortization and balloon payments only.
A-6
<PAGE>
UNDERWRITING DEBT SERVICE COVERAGE RATIO
<TABLE>
<CAPTION>
RANGE OF NUMBER OF % OF NUMBER OF AGGREGATE
UNDERWRITING MORTGAGE MORTGAGE MORTGAGED CUT-OFF DATE
DSCR LOANS LOANS PROPERTIES BALANCE
- --------------- ----------- ---------- ------------ --------------
<S> <C> <C> <C> <C>
1.20 -1.29...... 8 4.4% 8 $ 84,876,468
1.30 -1.39...... 49 27.1% 49 $277,096,376
1.40 -1.49...... 56 30.9% 59 $231,332,081
1.50 -1.59...... 35 19.3% 43 $139,200,987
1.60 -1.69...... 11 6.1% 11 $ 62,033,197
1.70 -1.79...... 6 3.3% 6 $ 30,444,571
1.80 -1.89...... 7 3.9% 8 $ 15,338,843
1.90 -1.99...... 3 1.7% 3 $ 5,979,628
2.00 -2.99...... 4 2.2% 4 $ 10,906,726
3.00 -5.57...... 2 1.1% 2 $ 13,368,412
----------- ---------- ------------ --------------
Total/Wtd Avg .. 181 100.0% 193 $870,577,289
=========== ========== ============ ==============
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
% OF WEIGHTED WEIGHTED WEIGHTED
RANGE OF INITIAL AVERAGE AVERAGE AVERAGE
UNDERWRITING POOL UNDERWRITING CUT-OFF DATE MORTGAGE
DSCR BALANCE DSCR LTV RATIO RATE
- --------------- --------- -------------- -------------- ----------
<S> <C> <C> <C> <C>
1.20 -1.29...... 9.7% 1.26x 75.5% 8.027%
1.30 -1.39...... 31.8% 1.35x 74.9% 8.128%
1.40 -1.49...... 26.6% 1.44x 72.2% 8.357%
1.50 -1.59...... 16.0% 1.54x 67.5% 8.392%
1.60 -1.69...... 7.1% 1.64x 68.4% 8.227%
1.70 -1.79...... 3.5% 1.77x 57.6% 8.003%
1.80 -1.89...... 1.8% 1.82x 61.8% 8.316%
1.90 -1.99...... 0.7% 1.95x 40.5% 8.503%
2.00 -2.99...... 1.3% 2.44x 45.3% 8.415%
3.00 -5.57...... 1.5% 4.39x 36.9% 7.985%
--------- -------------- -------------- ----------
Total/Wtd Avg .. 100.0% 1.50x 70.6% 8.231%
========= ============== ============== ==========
</TABLE>
CUT-OFF DATE LOAN-TO-VALUE RATIO
<TABLE>
<CAPTION>
NUMBER OF % OF % OF AGGREGATE
RANGE OF CUT-OFF MORTGAGE MORTGAGE MORTGAGED CUT-OFF DATE
DATE LTV LOANS LOANS PROPERTIES BALANCE
- ---------------- ----------- ---------- ------------ --------------
<S> <C> <C> <C> <C>
0.0% -24.9%...... 1 0.6% 1 $ 3,986,756
25.0% -49.9%..... 11 6.1% 11 $ 48,612,596
50.0% -59.9%..... 8 4.4% 8 $ 34,599,800
60.0% -64.9%..... 24 13.3% 24 $ 73,297,994
65.0% -69.9%..... 22 12.2% 23 $125,258,872
70.0% -74.9%..... 64 35.4% 73 $291,066,483
75.0% -79.9%..... 47 26.0% 49 $271,094,767
80.0% -84.4%..... 4 2.2% 4 $ 22,660,021
----------- ---------- ------------ --------------
Total/Wtd Avg ... 181 100.0% 193 $870,577,289
=========== ========== ============ ==============
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED WEIGHTED
% OF AVERAGE AVERAGE AVERAGE
RANGE OF CUT-OFF INITIAL POOL UNDERWRITING CUT-OFF DATE MORTGAGE
DATE LTV BALANCE DSCR LTV RATIO RATE
- ---------------- -------------- -------------- -------------- ----------
<S> <C> <C> <C> <C>
0.0% -24.9%...... 0.5% 5.57x 23.5% 8.350%
25.0% -49.9%..... 5.6% 2.33x 44.5% 8.104%
50.0% -59.9%..... 4.0% 1.55x 56.8% 8.889%
60.0% -64.9%..... 8.4% 1.53x 62.4% 8.515%
65.0% -69.9%..... 14.4% 1.51x 67.7% 8.318%
70.0% -74.9%..... 33.4% 1.43x 72.5% 8.247%
75.0% -79.9%..... 31.1% 1.36x 78.0% 8.069%
80.0% -84.4%..... 2.6% 1.43x 83.0% 7.812%
-------------- -------------- -------------- ----------
Total/Wtd Avg ... 100.0% 1.50x 70.6% 8.231%
============== ============== ============== ==========
</TABLE>
<PAGE>
PROPERTY TYPE
<TABLE>
<CAPTION>
% OF
NUMBER OF AGGREGATE INITIAL
MORTGAGED CUT-OFF DATE POOL
PROPERTY TYPE PROPERTIES BALANCE BALANCE
- --------------- ------------ -------------- ---------
<S> <C> <C> <C>
Multifamily..... 80 $360,768,120 41.4%
Retail.......... 53 $240,271,857 27.6%
Office.......... 27 $111,991,872 12.9%
Hotel........... 14 $ 89,542,243 10.3%
Industrial...... 10 $ 25,111,470 2.9%
Health Care..... 3 $ 19,349,937 2.2%
Mixed........... 3 $ 15,411,152 1.8%
Self Storage ... 3 $ 8,130,639 0.9%
------------ -------------- ---------
Total/Wtd Avg .. 193 $870,577,289 100.0%
============ ============== =========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
UNDERWRITING CUT-OFF DATE MORTGAGE
PROPERTY TYPE DSCR LTV RATIO RATE
- --------------- -------------- -------------- ----------
<S> <C> <C> <C>
Multifamily..... 1.41x 74.4% 8.109%
Retail.......... 1.42x 71.6% 8.355%
Office.......... 1.52x 68.8% 8.117%
Hotel........... 1.65x 61.1% 8.474%
Industrial...... 1.46x 68.8% 8.468%
Health Care..... 3.82x 39.2% 8.197%
Mixed........... 1.44x 77.2% 7.995%
Self Storage ... 1.39x 67.2% 8.672%
-------------- -------------- ----------
Total/Wtd Avg .. 1.50x 70.6% 8.231%
============== ============== ==========
</TABLE>
A-7
<PAGE>
GEOGRAPHIC DISTRIBUTION
<TABLE>
<CAPTION>
% OF WEIGHTED WEIGHTED WEIGHTED
NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
MORTGAGED CUT-OFF DATE POOL UNDERWRITING CUT-OFF DATE MORTGAGE
STATES PROPERTIES BALANCE BALANCE DSCR LTV RATIO RATE
- --------------- ------------ -------------- --------- -------------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
CA.............. 11 $114,186,115 13.1% 1.47x 70.9% 8.067%
TX ............. 25 $ 90,289,542 10.4% 1.46x 75.6% 8.093%
FL.............. 18 $ 80,453,205 9.2% 1.43x 70.7% 8.690%
NV.............. 11 $ 63,976,270 7.3% 1.42x 70.4% 8.362%
VA.............. 7 $ 46,341,974 5.3% 1.36x 72.8% 7.819%
MI.............. 3 $ 39,546,180 4.5% 1.25x 79.6% 8.114%
NC.............. 8 $ 39,325,052 4.5% 1.60x 59.7% 8.232%
NY.............. 11 $ 38,409,456 4.4% 2.15x 58.6% 8.533%
IL.............. 5 $ 29,833,269 3.4% 1.33x 74.9% 7.780%
NJ.............. 7 $ 27,160,725 3.1% 2.35x 60.6% 8.035%
PR.............. 1 $ 26,472,765 3.0% 1.40x 66.3% 8.330%
OH.............. 7 $ 21,725,978 2.5% 1.62x 71.1% 8.474%
UT.............. 4 $ 21,498,550 2.5% 1.43x 74.7% 8.114%
PA.............. 8 $ 20,240,415 2.3% 1.60x 65.6% 8.612%
IN.............. 2 $ 19,594,710 2.3% 1.36x 73.8% 7.552%
AZ.............. 4 $ 18,053,761 2.1% 1.44x 73.4% 8.064%
MO.............. 3 $ 17,051,518 2.0% 1.42x 68.9% 8.740%
WI.............. 7 $ 17,006,030 2.0% 1.56x 70.5% 8.066%
AL.............. 5 $ 15,786,977 1.8% 1.44x 75.2% 8.276%
AR.............. 4 $ 15,116,054 1.7% 1.43x 73.7% 7.844%
GA.............. 5 $ 14,505,334 1.7% 1.38x 73.5% 8.193%
MA.............. 2 $ 12,868,305 1.5% 1.36x 68.0% 8.478%
DE.............. 3 $ 8,532,139 1.0% 1.63x 64.1% 8.624%
MD.............. 4 $ 7,410,049 0.9% 1.71x 62.7% 8.614%
ME.............. 4 $ 7,241,288 0.8% 1.46x 77.2% 8.141%
NE.............. 1 $ 6,908,682 0.8% 1.37x 74.0% 8.500%
SC.............. 2 $ 6,662,921 0.8% 1.37x 74.1% 8.330%
CO.............. 3 $ 6,664,104 0.8% 1.42x 70.5% 8.914%
WA.............. 2 $ 6,594,095 0.8% 1.49x 66.2% 8.170%
IA.............. 2 $ 6,192,864 0.7% 1.46x 69.4% 8.681%
TN.............. 2 $ 5,125,736 0.6% 1.49x 77.7% 8.231%
CT.............. 3 $ 4,751,850 0.5% 1.58x 74.7% 8.094%
LA.............. 2 $ 4,525,653 0.5% 1.67x 67.3% 8.322%
NH.............. 4 $ 4,394,163 0.5% 1.59x 67.0% 8.806%
KY.............. 1 $ 3,000,000 0.3% 1.49x 75.0% 7.770%
NM.............. 1 $ 2,295,951 0.3% 1.37x 63.8% 8.690%
OR.............. 1 $ 855,610 0.1% 1.33x 65.6% 7.900%
------------ -------------- --------- -------------- -------------- ----------
Totals/Wtd Avg 193 $870,577,289 100.0% 1.50x 70.6% 8.231%
============ ============== ========= ============== ============== ==========
</TABLE>
A-8
<PAGE>
MORTGAGE RATES
<TABLE>
<CAPTION>
% OF WEIGHTED WEIGHTED WEIGHTED
RANGE OF % OF NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
MORTGAGE NUMBER OF MORTGAGE MORTGAGED CUT-OFF DATE POOL UNDERWRITING CUT-OFF DATE MORTGAGE
RATES MORTGAGE LOANS LOANS PROPERTIES BALANCE BALANCE DSCR LTV RATIO RATE
- --------------- -------------- ---------- ------------ -------------- --------- -------------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
7.00% -7.49% ... 5 2.8% 5 $ 58,016,161 6.7% 1.36x 75.5% 7.409%
7.50% -7.99% ... 39 21.5% 45 $198,603,308 22.8% 1.59x 69.7% 7.763%
8.00% -8.49% ... 83 45.9% 89 $413,605,972 47.5% 1.48x 72.0% 8.253%
8.50% -8.99% ... 34 18.8% 34 $128,373,480 14.7% 1.50x 68.4% 8.700%
9.00% -9.49% ... 20 11.0% 20 $ 71,978,369 8.3% 1.52x 64.3% 9.227%
-------------- ---------- ------------ -------------- --------- -------------- -------------- ----------
Total/Wtd Avg .. 181 100.0% 193 $870,577,289 100.0% 1.50x 70.6% 8.231%
============== ========== ============ ============== ========= ============== ============== ==========
</TABLE>
CUT-OFF DATE BALANCES
<TABLE>
<CAPTION>
% OF WEIGHTED WEIGHTED WEIGHTED
RANGE OF NUMBER OF % OF NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
CUT-OFF DATE MORTGAGE MORTGAGE MORTGAGED CUT-OFF DATE POOL UNDERWRITING CUT-OFF DATE MORTGAGE
BALANCES LOANS LOANS PROPERTIES BALANCE BALANCE DSCR LTV RATIO RATE
- ------------------------- ----------- ---------- ------------ -------------- --------- -------------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$0 - $999,999............. 10 5.5% 10 $ 8,086,063 0.9% 1.45x 68.8% 8.377%
$1,000,000 -$2,499,999 ... 62 34.3% 64 $109,405,107 12.6% 1.56x 67.7% 8.427%
$2,500,000 -$4,999,999 ... 59 32.6% 63 $213,383,558 24.5% 1.53x 70.2% 8.349%
$5,000,000 -$7,499,999 ... 22 12.2% 23 $134,037,640 15.4% 1.52x 71.9% 8.256%
$7,500,000 -$9,999,999 ... 10 5.5% 10 $ 85,063,788 9.8% 1.71x 69.2% 8.336%
$10,000,000 -$14,999,999 . 5 2.8% 10 $ 61,830,746 7.1% 1.37x 77.1% 7.851%
$15,000,000 -$28,473,210 . 13 7.2% 13 $258,770,386 29.7% 1.41x 70.3% 8.090%
----------- ---------- ------------ -------------- --------- -------------- -------------- ---------
Total/Wtd Avg............. 181 100.0% 193 $870,577,289 100.0% 1.50x 70.6% 8.231%
=========== ========== ============ ============== ========= ============== ============== =========
</TABLE>
YEAR OF MORTGAGE ORIGINATION
<TABLE>
<CAPTION>
% OF WEIGHTED WEIGHTED WEIGHTED
NUMBER OF % OF NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
YEAR OF MORTGAGE MORTGAGE MORTGAGED CUT-OFF DATE POOL UNDERWRITING CUT-OFF DATE MORTGAGE
ORIGINATION LOANS LOANS PROPERTIES BALANCE BALANCE DSCR LTV RATIO RATE
- --------------- ----------- ---------- ------------ -------------- --------- -------------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1996 ........... 1 0.6% 1 16,902,254 1.9% 1.28x 71.9% 8.180%
1997............ 180 99.4% 192 853,675,036 98.1% 1.51x 70.5% 8.232%
----------- ---------- ------------ -------------- --------- -------------- -------------- ----------
Total/Wtd Avg .. 181 100.0% 193 $870,577,289 100.0% 1.50x 70.6% 8.231%
=========== ========== ============ ============== ========= ============== ============== ==========
</TABLE>
ORIGINAL TERM TO MATURITY
<TABLE>
<CAPTION>
% OF WEIGHTED WEIGHTED WEIGHTED
ORIGINAL TERM NUMBER OF % OF NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
TO MATURITY MORTGAGE MORTGAGE MORTGAGED CUT-OFF DATE POOL UNDERWRITING CUT-OFF DATE MORTGAGE
(MONTHS) LOANS LOANS PROPERTIES BALANCE BALANCE DSCR LTV RATIO RATE
- -------------- ----------- ---------- ------------ -------------- --------- -------------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
60............. 1 0.6% 1 $ 2,730,754 0.3% 1.81x 49.7% 8.470%
84............. 8 4.4% 8 $ 28,329,852 3.3% 1.45x 75.3% 8.202%
116............ 1 0.6% 1 $ 4,990,314 0.6% 1.42x 74.5% 8.160%
119............ 1 0.6% 1 $ 26,472,765 3.0% 1.40x 66.3% 8.330%
120............ 168 92.8% 180 $805,546,339 92.5% 1.51x 70.6% 8.229%
123............ 1 0.6% 1 $ 1,507,265 0.2% 1.66x 68.5% 8.210%
180............ 1 0.6% 1 $ 1,000,000 0.1% 1.96x 46.5% 7.920%
----------- ---------- ------------ -------------- --------- -------------- -------------- ----------
Total/Wtd Avg 181 100.0% 193 $870,577,289 100.0% 1.50x 70.6% 8.231%
=========== ========== ============ ============== ========= ============== ============== ==========
</TABLE>
A-9
<PAGE>
ORIGINAL AMORTIZATION TERM (1)
<TABLE>
<CAPTION>
ORIGINAL % OF WEIGHTED WEIGHTED WEIGHTED
AMORTIZATION NUMBER OF % OF NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
TERM MORTGAGE MORTGAGE MORTGAGED CUT-OFF DATE POOL UNDERWRITING CUT-OFF DATE MORTGAGE
(MONTHS) LOANS LOANS PROPERTIES BALANCE BALANCE DSCR LTV RATIO RATE
- --------------- ----------- ---------- ------------ -------------- --------- -------------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
180 ............ 2 1.1% 2 $ 17,700,000 2.0% 1.79x 45.2% 7.646%
240 ............ 13 7.2% 13 $ 32,814,942 3.8% 1.55x 63.1% 8.737%
300 ............ 77 42.5% 80 $317,357,373 36.5% 1.66x 66.9% 8.401%
324 ............ 1 0.6% 1 $ 3,142,487 0.4% 1.43x 73.1% 8.580%
360 ............ 88 48.6% 97 $499,562,488 57.4% 1.39x 74.3% 8.109%
----------- ---------- ------------ -------------- --------- -------------- -------------- ----------
Total/Wtd Avg .. 181 100.0% 193 $870,577,289 100.0% 1.50x 70.6% 8.231%
=========== ========== ============ ============== ========= ============== ============== ==========
</TABLE>
[FN]
- ------------
(1) For Mortgage Loans which accrue interest on the basis of actual days
elapsed during each calendar month and a 360-day year or 365-day year,
the amortization term is the term in which the loan would amortize if
interest paid on the basis of a 30-day month and a 360-day year. The
actual amortization term would be longer.
YEAR OF MORTGAGE MATURITY
<TABLE>
<CAPTION>
% OF WEIGHTED WEIGHTED WEIGHTED
NUMBER OF % OF NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
YEAR OF MORTGAGE MORTGAGE MORTGAGED CUT-OFF DATE POOL UNDERWRITING CUT-OFF DATE MORTGAGE
MATURITY LOANS LOANS PROPERTIES BALANCE BALANCE DSCR LTV RATE
- --------------- ----------- ---------- ------------ -------------- --------- -------------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
2002............ 1 0.6% 1 $ 2,730,754 0.3% 1.81x 49.7% 8.470%
2004............ 8 4.4% 8 $ 28,329,852 3.3% 1.45x 75.3% 8.202%
2007............ 171 94.5% 183 $838,516,683 96.3% 1.50x 70.5% 8.232%
2012............ 1 0.6% 1 $ 1,000,000 0.1% 1.96x 46.5% 7.920%
----------- ---------- ------------ -------------- --------- -------------- -------------- ----------
Total/Wtd Avg .. 181 100.0% 193 $870,577,289 100.0% 1.50x 70.6% 8.231%
=========== ========== ============ ============== ========= ============== ============== ==========
</TABLE>
REMAINING TERM TO MATURITY
<TABLE>
<CAPTION>
RANGE OF
REMAINING % OF WEIGHTED WEIGHTED WEIGHTED
TERMS TO NUMBER OF % OF NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
MATURITY MORTGAGE MORTGAGE MORTGAGED CUT-OFF DATE POOL UNDERWRITING CUT-OFF DATE MORTGAGE
(MONTHS) LOANS LOANS PROPERTIES BALANCE BALANCE DSCR LTV RATIO RATE
- --------------- ----------- ---------- ------------ -------------- --------- -------------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
40 -59.......... 1 0.6% 1 $ 2,730,754 0.3% 1.81x 49.7% 8.470%
60 -83.......... 8 4.4% 8 $ 28,329,852 3.3% 1.45x 75.3% 8.202%
84 -119......... 139 76.8% 150 $668,126,418 76.7% 1.51x 70.8% 8.336%
120 -360........ 33 18.2% 34 $171,390,265 19.7% 1.50x 69.3% 7.822%
----------- ---------- ------------ -------------- --------- -------------- -------------- ----------
Total/Wtd Avg .. 181 100.0% 193 $870,577,289 100.0% 1.50x 70.6% 8.231%
=========== ========== ============ ============== ========= ============== ============== ==========
</TABLE>
A-10
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
ABN AMRO MORTGAGE CAPITAL FUNDING, INC. Statement Date: 12/22/97
LaSalle National Bank CITICORP REAL ESTATE, INC. Payment Date: 12/22/97
NATIONSBANC MORTGAGE CAPITAL CORPORATION Prior Payment: NA
Administrator: MIDLAND LOAN SERVICES, LP Record Date: 11/28/97
SERIES 1997-MC2
135 S. LaSalle Street Suite 1740 ABN AMRO ACCT: 99-9999-99-9 WAC:
Chicago, IL 60603 WAMM:
NUMBER OF PAGES
Table Of Contents 1
REMIC Certificate Report 1
Other Related Information 3
Asset Backed Facts Sheets 1
Delinquency Loan Detail 1
Mortgage Loan Characteristics 2
Loan Level Listing 1
TOTAL PAGES INCLUDED IN THIS PACKAGE 10
Specially Serviced Loan Detail Appendix A
Modified Loan Detail Appendix B
Realized Loss Detail Appendix C
Page 1 of 10
</TABLE>
B-1
<PAGE>
<TABLE>
<CAPTION>
ABN AMRO MORTGAGE CAPITAL FUNDING, INC. Statement Date: 12/22/97
LaSalle National Bank CITICORP REAL ESTATE, INC. Payment Date: 12/22/97
NATIONSBANC MORTGAGE CAPITAL CORPORATION Prior Payment: NA
Administrator: MIDLAND LOAN SEVICES, LP Record Date: 11/28/97
SERIES 1997-MC2
135 S. LaSalle Street Suite 1740 ABN AMRO ACCT: 99-9999-99-9 WAC:
Chicago, IL 60603 WAMM:
<S> <C> <C> <C> <C> <C> <C> <C>
ORIGINAL OPENING PRINCIPAL PRINCIPAL NEGATIVE CLOSING INTEREST
CLASS FACE VALUE (1) BALANCE PAYMENT ADJ. OR LOSS AMORTIZATION BALANCE PAYMENT
CUSIP Per $1,000 Per $1,000 Per $1,000 Per $1,000 Per $1,000 Per $1,000 Per $1,000
TOTAL P&I PAYMENT
</TABLE>
(RESTUBBED TABLE FROM ABOVE)
<TABLE>
<CAPTION>
<S> <C>
INTEREST PASS-THROUGH
ADJUSTMENT RATE (2)
Per $1,000 Next Rate (3)
Page 2 of 10
Notes: (1) N denotes notional balance not included in total (2) Interest Paid minus Interest Adjustment minus Deferred Interest
equals Accrual (3) Estimated
</TABLE>
B-2
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
ABN AMRO MORTGAGE CAPITAL FUNDING, INC. Statement Date: 12/22/97
LaSalle National Bank CITICORP REAL ESTATE, INC. Payment Date: 12/22/97
NATIONSBANC MORTGAGE CAPITAL CORPORATION Prior Payment: NA
Administrator: MIDLAND LOAN SERVICES, LP Record Date: 12/22/97
SERIES 1997-MC2
135 S. LaSalle Street Suite 1740 ABN AMRO ACCT: 99-9999-99-9
Chicago, IL 60603 OTHER RELATED INFORMATION
AGGREGATE POOL INFORMATION
Beginning loan count:
Ending loan count:
Beginning scheduled balance of mortgage loans:
LESS:
1. Scheduled principal received:
2. Unscheduled principal:
3. Prepayments in full:
4. Other principal proceeds:
5. Principal realized losses:
Ending scheduled balance of mortgage loans:
COMPONENT TOTAL RATE
Gross Interest:
LESS:
1. Servicing fee :
2. Special Servicing fee :
3. Trustee fee :
Remittance
LESS:
1. Net aggregate prepay interest shortfall:
2. Non-recoverable advances
3. Other interest reductions:
(1) NET POOL INTEREST REMITTANCE:
CURRENT PRINCIPAL DISTRIBUTION AMOUNT:
AVAILABLE DISTRIBUTION AMOUNT FOR THE CURRENT DISTRIBUTION DATE:
(1)Does not include prepayment premiums or other penalty related interest
PAGE 3 OF 10
</TABLE>
B-3
<PAGE>
<TABLE>
<CAPTION>
ABN AMRO MORTGAGE CAPITAL FUNDING, INC. Statement Date: 12/22/97
LaSalle National Bank CITICORP REAL ESTATE, INC. Payment Date: 12/22/97
NATIONSBANC MORTGAGE CAPITAL CORPORATION Prior Payment: NA
Administrator: MIDLAND LOAN SERVICES, LP Record Date: 11/28/97
SERIES 1997-MC2
135 S. LaSalle Street Suite 1740 ABN AMRO ACCT: 99-9999-99-9
Chicago, IL 60603 OTHER RELATED INFORMATION
<S> <C> <C> <C> <C> <C> <C> <C>
ACCRUED NET PRIOR ENDING OTHER ACTUAL
CERTIFICATE PREPAYMENT PREPAYMENT UNPAID UNPAID INTEREST DISTRIBUTION
CLASS INTEREST INT. SHORTFALLS PREMIUMS INTEREST INTEREST SHORTFALLS OF INTEREST
TOTALS: 0.00 0.00 0.00 0.00 0.00 0.00 0.00
SERVICING COMPENSATION
TYPE OF MASTER SUB SPECIAL
COMPENSATION SERVICER SERVICER SERVICER
Current Accrued Fees: 0.00 0.00 0.00
Prepayment Interest Excess: 0.00 0.00 0.00
Penalty Charges: 0.00 0.00 0.00
Assumption Fees: 0.00 0.00 0.00
Modification Fees: 0.00 0.00 0.00
Workout Fees: 0.00 0.00 0.00
Interest on Servicing Advances: 0.00 0.00 0.00
Other Fees: 0.00 0.00 0.00
TOTALS: 0.00 0.00 0.00
</TABLE>
PAGE 4 OF 10
B-4
<PAGE>
<TABLE>
<CAPTION>
ABN AMRO MORTGAGE CAPITAL FUNDING, INC. Statement Date: 12/22/97
LaSalle National Bank CITICORP REAL ESTATE, INC. Payment Date: 12/22/97
NATIONSBANC MORTGAGE CAPITAL CORPORATION Prior Payment: NA
Administrator: MIDLAND LOAN SERVICES, LP Record Date: 11/28/97
SERIES 1997-MC2
135 S. LaSalle Street Suite 1740 ABN AMRO ACCT: 99-9999-99-9
Chicago, IL 60603 OTHER RELATED INFORMATION
REO PROPERTY INFORMATION
<S> <C> <C> <C> <C> <C> <C>
Principal Date of Amount of
# Collateral Id Date of REO Balance Book Value Final Recovery Proceeds
1.
2.
3.
4.
5.
NO REO PROPERTIES TO REPORT AS OF THE CURRENT PREPAYMENT PERIOD
Cumulative realized losses on the Mortgage Pool as of Cutoff: 0.00
Cumulative realized losses on the Certificates as of Cutoff: 0.00
*Cumulative additional trust fund expenses applied to the Certificates since the closing date: 0.00
*INCLUDED IN CUMULATIVE LOSSES ON THE CERTIFICATES
PAGE 5 OF 10
</TABLE>
B-5
<PAGE>
<TABLE>
<CAPTION>
ABN AMRO MORTGAGE CAPITAL FUNDING, INC. Statement Date: 12/22/97
LaSalle National Bank CITICORP REAL ESTATE, INC. Payment Date: 12/22/97
NATIONSBANC MORTGAGE CAPITAL CORPORATION Prior Payment: NA
Administrator: MIDLAND LOAN SERVICES, LP Record Date: 11/28/97
SERIES 1997-MC2
135 S. LaSalle Street Suite 1740 ABN AMRO ACCT: 99-9999-99-9
Chicago, IL 60603
<S> <C> <C> <C> <C> <C>
Distribution Delinq 1 Month Delinq 2 Months Delinq 3+ Months Foreclosure/Bankruptcy REO
Date # Balance # Balance # Balance # Balance # Balance
</TABLE>
(RESTUBBED TABLE FROM ABOVE)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Distribution Modifications Prepayments Curr Weighted Avg.
Date # Balance # Balance Coupon Remit
PAGE 6 OF 10
Note: Foreclosure and REO Totals are Included in the Appropriate Delinquency Aging Category
</TABLE>
B-6
<PAGE>
<TABLE>
<CAPTION>
ABN AMRO MORTGAGE CAPITAL FUNDING, INC. Statement Date: 12/22/97
LaSalle National Bank CITICORP REAL ESTATE, INC. Payment Date: 12/22/97
NATIONSBANC MORTGAGE CAPITAL CORPORATION Prior Payment: NA
Administrator: MIDLAND LOAN SERVICES, LP Record Date: 11/28/97
SERIES 1997-MC2
135 S. LaSalle Street Suite 1740 ABN AMRO ACCT: 99-9999-99-9
Chicago, IL 60603
DELINQUENT LOAN DETAIL
<S> <C> <C> <C> <C> <C> <C>
Paid Outstanding Out. Property Special
Disclosure Doc Thru Current P&I P&I Protection Advance Servicer
Control # Date Advance Advances** Advances Description (1) Transfer Date
</TABLE>
(RESTUBBED TABLE FROM ABOVE)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Disclosure Doc Foreclosure Bankruptcy REO
Control # Date Date Date
Total
A. P&I Advance - Loan in Grace Period
B. P&I Advance - Late Payment but < one month delinq
1. P&I Advance - Loan delinquent 1 month 3. P&I Advance - Loan delinquent 3 months or More
2. P&I Advance - Loan delinquent 2 months 4. Matured Balloon/Assumed Scheduled Payment
** Outstanding P&I Advances include the current period P&I Advance
PAGE 7 OF 10
</TABLE>
B-7
<PAGE>
<TABLE>
<CAPTION>
ABN AMRO MORTGAGE CAPITAL FUNDING, INC. Statement Date: 12/22/97
LaSalle National Bank CITICORP REAL ESTATE, INC. Payment Date: 12/22/97
NATIONSBANC MORTGAGE CAPITAL CORPORATION Prior Payment: NA
Administrator: MIDLAND LOAN SERVICES, LP Record Date: 11/28/97
SERIES 1997-MC2
135 S. LaSalle Street Suite 1740 ABN AMRO ACCT: 99-9999-99-9
Chicago, IL 60603 POOL TOTAL
DISTRIBUTION OF PRINCIPAL BALANCES DISTRIBUTION OF PROPERTY TYPES
- --------------------------------------------------------------- -------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Current Scheduled Number Scheduled Based on Number Scheduled Based on
Balances of Balance Balance Property Types of Balance Balance
Loans Loans
=============================================================== =================================================
$0 to $999,999
$1,000,000 to $1,249,999
$1,250,000 to $1,499,999
$1,500,000 to $1,999,999
$2,000,000 to $2,499,999
$2,500,000 to $2,999,999
$3,000,000 to $3,499,999
$3,500,000 to $3,999,999
$4,000,000 to $4,499,999
$4,500,000 to $4,999,999
$5,000,000 to $5,999,999
$6,000,000 to $6,999,999
-------------------------------------------------
$7,000,000 to $7,499,999 Total 0 0 0.00%
-------------------------------------------------
$7,500,000 to $8,499,999
$8,500,000 to $9,999,999 DISTRIBUTION OF MORTGAGE INTEREST RATES
-------------------------------------------------
$10,000,000 to $12,499,999 Current
Mortgage Number Scheduled Based on
$12,500,000 to $14,999,999 Interest Rate of Loans Balance Balance
=================================================
$15,000,000 to $17,999,999 7.500% or less
$18,000,000 to $19,999,999 7.500% to 8.000%
$20,000,000 & Above 8.000% to 8.125%
- ---------------------------------------------------------------
Total 0 0 0.00% 8.125% to 8.250%
- ---------------------------------------------------------------
Average Scheduled Balance is 0 8.250% to 8.375%
Maximum Scheduled Balance is 0 8.375% to 8.500%
Minimum Scheduled Balance is 0 8.500% to 8.625%
8.625% to 8.750%
8.750% to 9.000%
9.000% to 9.125%
9.125% to 9.500%
9.500% to 9.900%
9.900% to #####
##### to #####
##### & Above
-------------------------------------------------
Total 0 0 0.00%
-------------------------------------------------
W/Avg Mortgage Interest Rate is 0.0000%
Minimum Mortgage Interest Rate is 0.0000%
Maximum Mortgage Interest Rate is 0.0000%
GEOGRAPHIC DISTRIBUTION
- -----------------------------------------------------
Geographic Number Scheduled Based on
Location of Loans Balance Balance
=====================================================
- -----------------------------------------------------
Total 0 0 0.00%
- -----------------------------------------------------
PAGE 8 OF 10
</TABLE>
B-8
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
ABN AMRO MORTGAGE CAPITAL FUNDING, INC. Statement Date: 12/22/97
LaSalle National Bank CITICORP REAL ESTATE, INC. Payment Date: 12/22/97
NATIONSBANC MORTGAGE CAPITAL CORPORATION Prior Payment: NA
Administrator: MIDLAND LOAN SERVICES, LP Record Date: 11/28/97
SERIES 1997-MC2
135 S. LaSalle Street Suite 1740 ABN AMRO ACCT: 99-9999-99-9
Chicago, IL 60603 POOL TOTAL
LOAN SEASONING
- ----------------------------------------------------------------- DISTRIBUTION OF REMAINING TERM
FULLY AMORTIZING
---------------------------------------------------
Number Scheduled Based on Fully
Number of Years of Loans Balance Balance Amortizing Number Scheduled Based on
================================================================= Mortgage Loans of Loans Balance Balance
1 year or less ===================================================
1+ to 2 years 60 months or less
2+ to 3 years 61 to 120 months
3+ to 4 years 121 to 180 months
4+ to 5 years 181 to 240 months
5+ to 6 years 241 to 360 months
-------------------------------------------------
6+ to 7 years Total 0 0 0.00%
-------------------------------------------------
7+ to 8 years Weighted Average Months to Maturity is NA
8+ to 9 years
9+ to 10 years
10 years or more
- ---------------------------------------------------------------
Total 0 0 0.00%
- ---------------------------------------------------------------
Weighted Average Seasoning is 0.0
<PAGE>
DISTRIBUTION OF AMORTIZATION TYPE
- ---------------------------------------------------------------
DISTRIBUTION OF REMAINING TERM
Number Scheduled Based on BALLOON LOANS
Amortization Type of Loans Balance Balance
================================================================
---------------------------------------------------
Balloon
Mortgage Number Scheduled Based on
Loans of Loans Balance Balance
===================================================
12 months or less
13 to 24 months
25 to 36 months
37 to 48 months
49 to 60 months
61 to 120 months
121 to 180 months
181 to 240 months
- --------------------------------------------------------------- -------------------------------------------------
Total 0 0 0.00% Total 0 0 0.00%
- --------------------------------------------------------------- -------------------------------------------------
Weighted Average Months to Maturity is 0
DISTRIBUTION OF DSCR
- -------------------------------------------------------------------
Debt Service
Coverage Number Scheduled Based on
Ratio (1) of Loans Balance Balance
===================================================================
1.000 or less
1.001 to 1.125
1.126 to 1.250
1.251 to 1.375
1.376 to 1.500
1.501 to 1.625
1.626 to 1.750
1.751 to 1.875
1.876 to 2.000
2.001 to 2.125
2.126 to 2.250
2.251 to 2.375
2.376 to 2.500
2.501 to 2.625
2.626 & above
Unknown
- -----------------------------------------------------
Total 0 0 0.00%
- -----------------------------------------------------
Weighted Average Debt Service Coverage
Ratio is 0.000
NOI AGING
- -------------------------------------------------------------------
Number Scheduled Based on
NOI Date of Loans Balance Balance
===================================================================
1 year or less
1 to 2 years
2 Years or More
Unknown
- ------------------------------------------------------------------
Total 0 0 0.00%
- ------------------------------------------------------------------
(1) Debt Service Coverage Ratios are calculated as described in the prospectus, values are updated periodically as new NOI
figures became available from borrowers on an asset level. Neither the Trustee, Servicer, Special Servicer or Underwriter
makes any representation as to the accuracy of the data provided by the borrower for this calculation.
PAGE 9 OF 10
</TABLE>
B-9
<PAGE>
<TABLE>
<CAPTION>
ABN AMRO MORTGAGE CAPITAL FUNDING, INC. Statement Date: 12/22/97
LaSalle National Bank CITICORP REAL ESTATE, INC. Payment Date: 12/22/97
NATIONSBANC MORTGAGE CAPITAL CORPORATION Prior Payment: NA
Administrator: MIDLAND LOAN SERVICES, LP Record Date: 11/28/97
SERIES 1997-MC2
135 S. LaSalle Street Suite 1740 ABN AMRO ACCT: 99-9999-99-9
Chicago, IL 60603
LOAN LEVEL DETAIL
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Property Operating Ending
Disclosure Type Maturity Statement Principal Note Scheduled
Control # Group Code Date DSCR Date State Balance Rate P&I
=================================================================================================================================
PAGE 10 OF 10
</TABLE>
(RESTUBBED TABLE FROM ABOVE)
<TABLE>
<CAPTION>
=======================================================
<S> <C> <C> <C>
Loan
Disclosure Prepayment Status
Control # Prepayment Date Code (1)
=======================================================
===================================================================================================================================
* NOI and DSCR, if available and reportable under the terms of the trust agreement, are based on information obtained from the
related borrower, and no other party to the agreement shall be held liable for the
accuracy or methodology used to determine such figures.
- -----------------------------------------------------------------------------------------------------------------------------------
(1) Legend: A. P&I Adv - in Grace 1. P&I Adv - 3. P&I Adv - delinquent 5. Prepaid in Full 7. Foreclosure
Period delinquent 1 month 3+ months
B. P&I Adv - < one 2. P&I Adv - 4. Mat. Balloon/Assumed 6. Specially Serviced 8. Bankruptcy
month delinq delinquent 2 months P&I
===================================================================================================================================
PAGE 10 OF 10
</TABLE>
B-10
<PAGE>
<TABLE>
<CAPTION>
ABN AMRO MORTGAGE CAPITAL FUNDING, INC. Statement Date: 12/22/97
LaSalle National Bank CITICORP REAL ESTATE, INC. Payment Date: 12/22/97
NATIONSBANC MORTGAGE CAPITAL CORPORATION Prior Payment: NA
Administrator: MIDLAND LOAN SERVICES, LP Record Date: 11/28/97
SERIES 1997-MC2
135 S. LaSalle Street Suite 1740 ABN AMRO ACCT: 99-9999-99-9
Chicago, IL 60603
SPECIALLY SERVICED LOAN DETAIL
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Beginning Specially
Disclosure Scheduled Interest Maturity Property Serviced
Control # Balance Rate Date Type Status Code Comments
(1)
===================================================================================================================================
===================================================================================================================================
(1) Legend :
1) Request for waiver of Prepayment Penalty 4) Loan with Borrower Bankruptcy 7) Loans Paid Off
2) Payment default 5) Loan in Process of Foreclosure 8) Loans Returned to
3) Request for Loan Modification or Workout 6) Loan now REO Property Master Servicer
===================================================================================================================================
APPENDIX A
</TABLE>
B-11
<PAGE>
<TABLE>
<CAPTION>
ABN AMRO Statement Date: 12/22/97
LaSalle National Bank CITICORP REAL ESTATE, INC. Payment Date: 12/22/97
NATIONSBANC MORTGAGE CAPITAL CORPORATION Prior Payment: NA
Administrator: MIDLAND LOAN SERVICES, LP Record Date: 11/28/97
SERIES 1997-MC2
135 S. LaSalle Street Suite 1740 ABN AMRO ACCT: 99-9999-99-9
Chicago, IL 60603
MODIFIED LOAN DETAIL
===================================================================================================================================
<S> <C> <C>
Disclosure Modification Modification
Control # Date Description
===================================================================================================================================
===================================================================================================================================
APPENDIX B
</TABLE>
B-12
<PAGE>
<TABLE>
<CAPTION>
ABN AMRO MORTGAGE CAPITAL FUNDING, INC. Statement Date: 12/22/97
LaSalle National Bank CITICORP REAL ESTATE, INC. Payment Date: 12/22/97
NATIONSBANC MORTGAGE CAPITAL CORPORATION Prior Payment: NA
Administrator: MIDLAND LOAN SERVICES, LP Record Date: 11/28/97
SERIES 1997-MC2
135 S. LaSalle Street Suite 1740 ABN AMRO ACCT: 99-9999-99-9
Chicago, IL 60603
REALIZED LOSS DETAIL
==========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Beginning Gross Proceeds Aggregate
Dist. Disclosure Appraisal Appraisal Scheduled Gross as a % of Liquidation
Date Control # Date Value Balance Proceeds Sched Principal Expenses *
==========================================================================================================================
==========================================================================================================================
CURRENT TOTAL 0.00 0.00 0.00
CUMULATIVE 0.00 0.00 0.00
==========================================================================================================================
APPENDIX C
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
==============================================================
<S> <C> <C> <C>
Net Net Proceeds
Dist. Liquidation as a % of Realized
Date Proceeds Sched. Balance Loss
==============================================================
==============================================================
CURRENT TOTAL 0.00 0.00
CUMULATIVE 0.00 0.00
==============================================================
* Aggregate liquidation expenses also include outstanding P&I
advances and unpaid servicing fees, unpaid trustee fees, etc..
</TABLE>
APPENDIX C
B-13
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
P R O S P E C T U S
MORTGAGE CAPITAL FUNDING, INC.
(SPONSOR)
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 or participations therein (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)
---------------
FOR A DISCUSSION OF CERTAIN RISKS ASSOCIATED WITH AN INVESTMENT IN THE
SECURITIES, SEE THE INFORMATION UNDER "RISK FACTORS" ON PAGE 14 AND
SUCH INFORMATION AS MAY BE SET FORTH UNDER THE CAPTION "RISK
FACTORS" IN THE RELATED PROSPECTUS SUPPLEMENT.
---------------
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.
---------------
NOVEMBER 10, 1997
<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".
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.
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
2
<PAGE>
Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549, and at its
Regional Offices located as follows: Midwest Regional Office, Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511;
and Northeast Regional Office, Seven World Trade Center, Suite 1300, New
York, New York 10048. The Commission maintains a Web site at
http://www.sec.gov containing reports, proxy and information statements and
other information regarding registrants, including the Sponsor, that file
electronically with the Commission.
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, 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 or the Trustee 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.
3
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
PROSPECTUS SUPPLEMENT 2
AVAILABLE INFORMATION 2
INCORPORATION OF CERTAIN INFORMATION BY
REFERENCE 3
SUMMARY OF PROSPECTUS 6
RISK FACTORS 14
Certain Factors Adversely Affecting Resale of
the Offered Certificates 14
Limited Assets for Payment of Certificates 14
Prepayments; Average Life of Certificates;
Yields 15
Limited Nature of Credit Ratings 16
Certain Risks Associated with Mortgage Loans
Secured by Commercial and Multifamily
Properties 16
Balloon Payments; Borrower Default 17
Credit Support Limitations 18
Enforceability 18
Leases and Rents as Security for a Mortgage
Loan 18
Environmental Risks 19
Special Hazard Losses 19
ERISA Considerations 19
Certain Federal Tax Considerations Regarding
REMIC Residual Certificates 19
Book-Entry Registration 20
Potential Conflicts of Interest 20
Delinquent and Non-Performing Mortgage Loans 20
DESCRIPTION OF THE TRUST FUNDS 21
General 21
Mortgage Loans 21
MBS 23
Certificate Accounts 24
Credit Support 24
Cash Flow Agreements 24
YIELD AND MATURITY CONSIDERATIONS 25
General 25
Pass-Through Rate 25
Payment Delays 25
Certain Shortfalls in Collections of Interest 25
Yield and Prepayment Considerations 26
Weighted Average Life and Maturity 27
Controlled Amortization Classes and Companion
Classes 28
Other Factors Affecting Yield, Weighted
Average Life and Maturity 28
MORTGAGE CAPITAL FUNDING, INC 30
USE OF PROCEEDS 30
DESCRIPTION OF THE CERTIFICATES 30
General 30
Distributions 31
Distributions of Interest on the Certificates 31
Distributions of Principal of the
Certificates 32
Distributions on the Certificates in Respect
of Prepayment Premiums or in Respect of
Equity Participations 33
Allocation of Losses and Shortfalls 33
Advances in Respect of Delinquencies 33
Reports to Certificateholders 34
Voting Rights 35
Termination 35
Book-Entry Registration and Definitive
Certificates 35
DESCRIPTION OF THE POOLING AGREEMENTS 37
General 37
Assignment of Mortgage Loans; Repurchases 37
Representations and Warranties; Repurchases 38
Collection and Other Servicing Procedures 39
Sub-Servicers 40
Certificate Account 40
Escrow Accounts 43
Modifications, Waivers and Amendments of
Mortgage Loans 43
Realization Upon Defaulted Mortgage Loans 43
Hazard Insurance Policies 45
Due-on-Sale and Due-on-Encumbrance Provisions 46
Servicing Compensation and Payment of
Expenses 46
Evidence as to Compliance 47
Certain Matters Regarding the Master
Servicer, the Special Servicer, the REMIC
Administrator and the Sponsor 47
Events of Default 48
Rights Upon Event of Default 49
Amendment 49
List of Certificateholders 50
The Trustee 50
Duties of the Trustee 50
Certain Matters Regarding the Trustee 50
Resignation and Removal of the Trustee 51
DESCRIPTION OF CREDIT SUPPORT 51
General 51
Subordinate Certificates 51
Cross-Support Provisions 52
Insurance or Guarantees with Respect to
Mortgage Loans 52
Letter of Credit 52
Certificate Insurance and Surety Bonds 52
Reserve Funds 52
Credit Support with Respect to MBS 53
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS 53
General 53
4
<PAGE>
PAGE
--------
Types of Mortgage Instruments 53
Leases and Rents 54
Personalty 54
Foreclosure 54
Bankruptcy Laws 57
Environmental Risks 58
Due-on-Sale and Due-on-Encumbrance 59
Subordinate Financing 60
Default Interest and Limitations on
Prepayments 60
Applicability of Usury Laws 60
Soldiers' and Sailors' Civil Relief Act of
1940 60
Americans with Disabilities Act 61
Forfeitures in Drug and RICO Proceedings 61
MATERIAL FEDERAL INCOME TAX CONSEQUENCES 61
General 61
REMICs 62
Taxation of Owners of REMIC Regular
Certificates 63
Taxation of Owners of REMIC Residual
Certificates 67
Grantor Trust Funds 75
Characterization of Investments in Grantor
Trust Certificates 76
Taxation of Owners of Grantor Trust
Fractional Interest Certificates 76
Taxation of Owners of Stripped Interest
Certificates 81
STATE AND OTHER TAX CONSEQUENCES 83
ERISA CONSIDERATIONS 84
General 84
Plan Asset Regulations 84
LEGAL INVESTMENT 85
METHOD OF DISTRIBUTION 86
FINANCIAL INFORMATION 87
RATING 88
</TABLE>
5
<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 ......... 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
"Mortgage Capital Funding, Inc."
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,
including participations therein
(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 facilities, 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
6
<PAGE>
governmental agency or instrumentality or
by any other person. If so specified in
the related Prospectus Supplement, 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 and/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) 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 Government 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.
<PAGE>
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) 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
7
<PAGE>
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 (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 Cash Flow Agreement. See
"Description of the Trust Funds--Cash Flow
Agreements".
<PAGE>
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 distributions of interest
(collectively, "Stripped Principal
Certificates"); (iii) are entitled to
8
<PAGE>
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".
<PAGE>
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--Prepayments; Average Life of
Certificates; Yields", "Yield and Maturity
Considerations", and "Description of the
Certificates--Distributions of Interest on
the Certificates".
9
<PAGE>
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 of the Certificates of
such class. See "Description of the
Certificates--Distributions of Principal
of the Certificates".
<PAGE>
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 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
10
<PAGE>
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 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."
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.
<PAGE>
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 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 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
11
<PAGE>
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 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, (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 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 856(c)(5)(A) and 856(c)(3)(B) of
the Code. 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
12
<PAGE>
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.
13
<PAGE>
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,
thereafter, by the remaining classes of Certificates in the priority and
manner and subject to the limitations specified in such Prospectus
Supplement.
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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 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
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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".
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
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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.
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 either
reasonably foreseeable or imminent. In addition, if any such Mortgage Loan
thereafter comes current in accordance with its modified terms, the Special
Servicer may receive a workout fee based on receipts from or proceeds of such
Mortgage Loans. While a Master Servicer and/or Special Servicer generally
will be required to determine
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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 (particularly taking
account of the payment of a workout fee to the Special Servicer) 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".
ENFORCEABILITY
Mortgages may contain a due-on-sale clause, which permits the lender to
accelerate the maturity of the Mortgage Loan if the mortgagor sells,
transfers or conveys the related Mortgaged Property or its interest in the
Mortgaged Property. Mortgages may also include a debt-acceleration clause,
which permits the lender to accelerate the debt upon a monetary or
non-monetary default of the mortgagor. Such clauses are generally enforceable
subject to certain exceptions. The courts of all states will generally
enforce clauses providing for acceleration in the event of a material payment
default. The equity courts of any state, however, may refuse the foreclosure
of a mortgage or deed of trust when an acceleration of the indebtedness would
be inequitable or unjust or the circumstances would render the acceleration
unconscionable.
Notes and mortgages may contain provisions that obligate the Mortgagor 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 Mortgagor'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 Mortgagor
for delinquent payments. Certain states also limit the amounts that a lender
may collect from a Mortgagor 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.
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".
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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 on 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 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 Risks".
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". REMIC Residual Certificates may have "phantom income"
associated with them, which is to say that taxable income may be reportable
with respect to a REMIC Residual Certificate early in the term of the related
REMIC with a corresponding amount of tax losses reportable in later years of
that REMIC's term. Under these circumstances, the present value of the tax
detriments with respect to the related REMIC Residual Certificates exceeds
the present value of the related tax benefits accruing later. 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, and certain REMIC Residual Certificates may have a negative
"value". 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. All or a portion of such a
Certificateholder's share of the REMIC taxable income may
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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. Moreover, because an amount of gross income equal to the fees and
non-interest expenses of each REMIC will be allocated to the REMIC Residual
Certificates, but such expenses will be deductible by holders of REMIC
Residual Certificates who are individuals only as miscellaneous itemized
deductions, REMIC Residual Certificates will generally not be appropriate
investments for individuals, estates or trusts or for pass-through entities
(including partnerships and S corporations) beneficially owned by, or having
as partners or shareholders, one or more individuals, estates or trusts. In
addition, REMIC Residual Certificates are subject to certain restrictions on
transfer, including, but not limited to, a prohibition to investors that are
not United States Persons (as defined herein).
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 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".
POTENTIAL CONFLICTS OF INTEREST
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. Also, as specified in the related Prospectus Supplement, the holders of
interests in a specified class or classes of Subordinate Certificates may
have the ability to replace the Special Servicer or direct the Special
Servicer's actions in connection with liquidating or modifying defaulted
Mortgage Loans. Accordingly, investors in those Classes of Offered
Certificates more senior thereto 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 therein,
it may have interests when dealing with defaulted Mortgage Loans that are in
conflict with those of holders of the Offered Certificates.
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
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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 or participations
therein (the "Mortgage Loans"), (ii) mortgage 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.
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
facilities, 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 by at least ten years. 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.
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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
facilities. 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 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 pari passu therewith or 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
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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") and/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 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 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 current Loan-to-Value Ratios
of the Mortgage Loans, or the range thereof, and the weighted average current
Loan-to-Value Ratio of the Mortgage Loans, in each case based on an appraisal
done at origination or, in some instances, a more recent appraisal, (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 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.
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Any MBS will have been issued pursuant to 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.
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
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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 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
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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.
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 or otherwise result 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
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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 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
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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 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
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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 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.
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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 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) 559-6899. All inquiries, requests and other
communications to the Sponsor regarding the matters described herein should
be made or sent to the attention of "Real Estate Capital Markets". 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.
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
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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 certain 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 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 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.
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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 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
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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. Alternatively, payments in respect of Equity
Participations received on or in respect of any Mortgage Asset in any Trust
Fund may be retained by the Sponsor or another prior owner of such Mortgage
Asset.
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 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.
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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;
(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.
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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.
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.
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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
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
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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 also 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."
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
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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 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 (each 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.
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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, 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
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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 ("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;
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(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;
(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
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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);
(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";
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(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, (iii) will not adversely affect the coverage under
any applicable instrument of Credit Support or (iv) will not adversely affect
the Trust Fund's status as a REMIC or grantor trust, as the case may be.
Unless otherwise provided in the related Prospectus Supplement, a Special
Servicer also may agree to any other modification, waiver or amendment that
would have the effect described in clauses (i) and (ii) of the proviso to the
preceding sentence 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 basis than
would liquidation, (iii) such modification, waiver or amendment will not
adversely affect the coverage under any applicable instrument of Credit
Support and (iv) such modification, waiver or amendment would not adversely
affect the Trust Fund's status as a REMIC or grantor trust, as the case may
be.
If described in the related Prospectus Supplement, the holders of
interests in a specified class or classes of Subordinate Certificates may
have the ability to direct the Special Servicer's actions in connection with
liquidating or modifying defaulted Mortgage Loans or to replace the Special
Servicer and substitute any such holder or an affiliate thereof as the
successor. See "Risk Factors--Potential Conflicts of Interest." The
Prospectus Supplement will describe, however, whether and to what extent
holders of Offered Certificates may object to the Special Servicer extending
the maturity of a defaulted Mortgage Loan beyond a certain date.
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
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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
(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 Risks".
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 beyond the end of the third taxable year
following the taxable year in which the property was acquired will not result
in the imposition of a tax on the Trust
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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 cash 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. The Special Servicer may be authorized to conduct
activities with respect to a Mortgaged Property acquired by a Trust Fund that
cause the Trust Fund to incur a federal income or other tax, provided that
doing so would, in reasonable discretion of the Special Servicer, maximize
net after-tax proceeds to Certificateholders.
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 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
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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 to 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. 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.
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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 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,
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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 willful 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 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,
marshaling 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
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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.
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 without such
holder's consent or adversely affect the status of the Trust Fund as either a
REMIC or grantor trust, as the case may be, for federal income tax purposes;
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
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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 amendment 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.
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.
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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
1/3% (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.
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
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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
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.
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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 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,
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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 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
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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 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. Section 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
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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--Certain Risks
Associated with Mortgage Loans Secured by Commercial and Multifamily
Properties".) 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.
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
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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 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.
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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 (except potentially to the
extent of any security deposit) 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 (a) 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, plus (b) unpaid rent to the earlier of
the surrender of the property or the lessee's bankruptcy filing. 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 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 contribute to the contamination and regardless of
whether or not 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. This is the
so called "secured creditor exemption".
The Asset Conservation, Lender Liability and Deposit Insurance Act of 1996
(the "Act") amended, among other things, the provisions of CERCLA with
respect to lender liability and the secured creditor exemption. The Act
offers substantial protection to lenders by defining the activities in which
a lender can engage and still have the benefit of the secured creditor
exemption. In order for a lender to be deemed to have participated in the
management of a mortgaged property, the lender must actually participate in
the operational affairs of the property of the borrower. The Act provides
that "merely having the capacity to influence, or unexercised right to
control" operations does not constitute participation in management. A lender
will lose the protection of the secured creditor exemption only if it
exercises decision-making control over the borrower's environmental
compliance and hazardous substance handling and disposal practices, or
assumes day-to-day management of operational functions of the mortgaged
property. The Act also provides that a lender will continue to have the
benefit of the secured creditor exemption even if it forecloses on a
mortgaged property, purchases it at a foreclosure sale or accepts a
deed-in-lieu of foreclosure provided that the lender seeks to sell the
mortgaged property at the earliest practicable commercially reasonable time
on commercially reasonable terms.
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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
hazardous waste and underground storage tanks pursuant to Subtitle I of the
federal Resource Conservation and Recovery Act ("RCRA").
In addition, the definition of "hazardous substances" under CERCLA
specifically excludes petroleum products. Subtitle I of RCRA governs
underground petroleum storage tanks. Under the Act the protections accorded
to lenders under CERCLA are also accorded to the holders of security
interests in underground storage tanks. It should be noted, however, that
liability for cleanup of petroleum contamination may be governed by state
law, which may not provide for any specific protection for secured creditors.
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
certain conditions relating to environmental matters, as described under
"Description of the Pooling Agreements--Realization Upon Defaulted Mortgage
Loans", have been satisfied.
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 carrying out 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
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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.
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
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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
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 is based on the advice of the special tax counsel to
the Sponsor specified in the related Prospectus Supplement. 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 below 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
treatment of any item on their tax return, even where the anticipated tax
consequences have been discussed herein. In addition to the federal income
tax consequences described herein,
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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".
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.
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 and certain other documents (and subject to certain
assumptions set forth therein), 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 entity may lose its status as a REMIC for such year and
thereafter. In that event, such entity may be taxable as a corporation 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 "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
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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 in the hands of another REMIC and will be "permitted assets" under
Section 860L(c)(1)(G) for a "financial asset securitization investment
trust", or "FASIT". 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. Treasury Regulations do provide, however, that payments on
Mortgage Loans held pending distribution are considered part of the Mortgage
Loans for purposes of Section 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 separate 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.
Solely for purposes of determining whether the REMIC Certificates will be
"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 the cash method of accounting will be required to report
income with respect to REMIC Regular Certificates under the accrual method.
Original Issue Discount. Certain classes of 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, however, 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 or that such
Prepayment Assumption will not be challenged by the Internal Revenue Service
(the "IRS") on audit.
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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", at a combination of a
single fixed rate and one or more "qualified floating rates" or one
"qualified inverse floating rate", or at 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 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 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.
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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 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.
If the foregoing method for computing original issue discount results in a
negative amount of original issue discount as to any accrual period with
respect to a REMIC Regular Certificate, the amount of original issue discount
allocable to such accrual period will be zero. That is, no current deduction
of such negative amount will be allowed to the holder of such Certificate.
The holder will instead only be permitted to offset such negative amount
against future positive original issue discount (if any) attributable to such
a Certificate. Although not free from doubt, it is possible that a
Certificateholder may be permitted to deduct a loss to the extent his or her
basis in the Certificate exceeds the maximum amount of payments such
Certificateholder could ever receive with respect to such Certificate.
However, any such loss may be a capital loss, which is limited in its
deductibility. The foregoing considerations are particularly relevant to
Stripped Interest Certificates which can have negative yields under certain
circumstances that are not default related. See "Risk Factors--Prepayments;
Average Life of Certificates; Yields" herein.
Market Discount. A Certificateholder that purchases a REMIC Regular
Certificate at a market discount (other than a de minimis amount), 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 some or all of
the 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
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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.
The OID Regulations also 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 the elections in this and the preceding
paragraph 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 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, however, has elected to include market discount in income currently
as it accrues, the interest deferral rule described above would not apply.
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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. On June 27, 1996, the
IRS published in the Federal Register proposed regulations on the
amortization of bond premium. Under those regulations, if a holder elects to
amortize bond premium, bond premium would be amortized on a constant yield
method and would be applied against qualified stated interest. The proposed
regulations generally would be effective for Certificates acquired on or
after the date 60 days after the date final regulations are published in the
Federal Register. If made, such an election will apply to all debt
instruments having amortizable bond premium that the holder owns or
subsequently acquires. 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.
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
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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. REMIC Residual Certificates may
in some instances have negative "value". See "Risk Factors--Certain Federal
Tax Considerations Regarding REMIC Residual Certificates".
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), for amortization of any premium on the Mortgage Loans, for 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 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
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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.
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
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
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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 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. Although it has not done
so, the Treasury has the 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." Unless otherwise stated in the related Prospectus
Supplement, no REMIC Residual Certificate will have "significant value" for
these purposes.
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," below. Furthermore, for purposes of the
alternative minimum tax, (i) excess inclusions will not be permitted to be
offset by the alternative tax net operating loss deduction and (ii)
alternative minimum taxable income may not be less than the taxpayer's excess
inclusions. This last rule has the effect of preventing nonrefundable tax
credits from reducing the taxpayer's income tax to an amount lower than the
alternative minimum tax on excess inclusions.
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
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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, and the Sponsor will make no representation that a
REMIC Residual Certificate will not be considered "noneconomic" for purposes
of the above-described rules.
Unless otherwise stated in the related Prospectus Supplement, transfers of
REMIC Residual Certificates to investors that are not United States Persons
(as defined below in "--Foreign Investors in REMIC Certificates") will be
prohibited under the related Pooling Agreement. If transfers of REMIC
Residual Certificates to investors that are not United States Persons are
permitted pursuant to the related Pooling Agreement, the related Prospectus
Supplement will describe additional restrictions applicable to transfers of
certain REMIC Residual Certificates to such persons.
Mark-to-Market Rules. On December 24, 1996, the IRS released regulations
under Section 475 of the Code (the "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 Mark-to-Market Regulations
provide that a REMIC residual interest issued 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
Mark-to-Market Regulations.
Possible Pass-Through of Miscellaneous Itemized Deductions. Fees and other
non-interest 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
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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 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 described
below, 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
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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.
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. Unless otherwise disclosed in the related Prospectus
Supplement, it is not anticipated that any REMIC will engage in any
prohibited transactions as to which it would be subject to a material
Prohibited Transaction Tax.
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 income from foreclosure property other
than qualifying rents and other qualifying income for a real estate
investment trust. Under certain circumstances, the Special Servicer may be
authorized to conduct activities with respect to a Mortgaged Property
acquired by a Trust Fund that causes the Trust Fund to incur a tax, provided
that doing so would, in reasonable discretion of the Special Servicer,
maximize net after-tax proceeds to Certificateholders.
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. Any
such tax not borne by a REMIC Administrator, Master Servicer, Special
Servicer or Trustee would 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.
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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) 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
capital loss equal to the amount of such difference.
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's
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
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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 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 whose income is subject to United States
federal income tax regardless of its source, or a trust if a court within the
United States is able to exercise primary supervision over the administration
of the trust and one or more United States fiduciaries have the authority to
control all substantial decisions of the trust. 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
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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 underlying 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
interest thereon at a specified 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) "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); (ii) "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 (iii) "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. It is unclear whether 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, 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. Counsel to
the Sponsor will not deliver any opinion on this question. 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
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Code may be substantial. Further, Certificateholders (other than
corporations) subject to the alternative minimum tax may not deduct
miscellaneous itemized deductions in determining such 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. The servicing fees paid with respect to the Mortgage Loans
for certain series of Grantor Trust Fractional Interest Certificates 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.
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, but have not been, adopted
applying those provisions to the Grantor Trust Fractional Interest
Certificates. It is unclear 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 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.
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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 or that the
Prepayment Assumption will not be challenged by the IRS on audit.
Certificateholders also 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 1.1286-1, 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. In that
case, the original issue discount rules will apply to a Grantor Trust
Fractional Interest Certificate only 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 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
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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.
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.
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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 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
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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
General. 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 such
Section 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 Contingent Payment Rules" below
and assumes that the holder of a Stripped Interest Certificate will not own
any Grantor Trust Fractional Interest Certificates.
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 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.
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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 or that the
Prepayment Assumption will not be challenged by the IRS on audit.
Certificateholders also 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 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 Stripped Interest Certificates would cease if the Mortgage
Loans were prepaid in full, Stripped Interest 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. Regulations have been promulgated regarding contingent payment debt
instruments (the "Contingent Payment Regulations"), but it appears that
Stripped Interest Certificates due to their similarity to other
mortgage-backed securities (such as REMIC regular interests and debt
instruments subject to Section 1272(a)(6) of the Code) that are expressly
excepted from the application of the Contingent Payment Regulations, may be
excepted from such regulations. Like the OID Regulations, the Contingent
Payment Regulations do not specifically address securities, such as the
Stripped Interest Certificates, that are subject to the stripped bond rules
of Section 1286 of the Code.
If the contingent payment rules under the Contingent Payment Regulations
were to apply, the holder of a Stripped Interest Certificate would be
required to apply the "noncontingent bond method." Under the "noncontingent
bond method", the issuer of a Stripped Interest Certificate determines a
projected payment schedule on which interest will accrue. Holders of Stripped
Interest Certificates are bound by the issuer's projected payment schedule.
The projected payment schedule consists of all noncontingent payments and a
projected amount for each contingent payment based on the projected yield (as
described below) of the Stripped Interest Certificate. The projected amount
of each payment is determined so that the projected payment schedule reflects
the projected yield. The projected amount of each payment must reasonably
reflect the relative expected values of the payments to be received by the
holders of a Stripped Interest Certificate. The projected yield referred to
above is a reasonable rate, not less than the "applicable Federal rate" that,
as of the issue date, reflects general market conditions, the credit quality
of the issuer, and the terms and conditions of the Mortgage Loans. The holder
of a Stripped Interest Certificate would be required to include as interest
income in each month the adjusted issue price of the Stripped Interest
Certificate at the beginning of the period multiplied by the projected yield.
Assuming that a prepayment assumption were used, if the Continent Payment
Regulations or their principles were applied to Stripped Interest
Certificates, the amount of income reported with respect thereto would be
substantially similar to that described under "Taxation of Owners of Stripped
Interest Certificates".
Certificateholders should consult their tax advisors concerning the
possible application of the contingent payment rules to the Striped Interest
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
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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 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 "--Taxation of
Owners of REMIC Residual Certificates--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
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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 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. The types of transactions
between Plans and Parties in Interest that are prohibited include: (a) sales,
exchanges or leases of property, (b) loans or other extensions of credit and
(c) the furnishing of goods and services. 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. In addition, the persons involved in
the prohibited transaction may have to rescind the transaction and pay an
amount to the Plan for any losses realized by the Plan or profits realized by
such persons, individual retirement accounts involved in the transaction may
be disqualified resulting in adverse tax consequences to the owner of such
account and certain other liabilities could result that have a significant
adverse effect on such person.
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 apply, including that 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 (determined by not including the investments of
persons with discretionary authority or control over the assets of such
entity, of any person who provides investment advice for a fee (direct or
indirect) with respect to such assets, and of "affiliates" (as defined in the
Plan Asset Regulations) of such persons). 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 (determined by not including the investments
of the Sponsor, the Trustee, the Master Servicer, the Special Servicer, any
other parties with discretionary authority over the assets of a Trust Fund
and their respective affiliates).
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, a Special Servicer, any Sub-Servicer, a Trustee,
the obligor under any credit enhancement mechanism, or certain affiliates
thereof, may be deemed to be a Plan "fiduciary" with respect to the investing
Plan, and thus subject to the fiduciary responsibility provisions of ERISA.
In addition, if the underlying assets of a Trust Fund constitute Plan assets,
the Sponsor, the REMIC Administrator, any borrower, as well as each of the
parties described in
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the preceding sentence, may become Parties in Interest with respect to an
investing Plan (or of a Plan holding an interest in an investing entity).
Thus, if the Trust Assets constitute Plan assets, the operation of the Trust
Fund may involve a prohibited transaction under ERISA and the Code. For
example, if a person who is a Party in Interest with respect to an investing
Plan is borrower, the purchase of Certificates by the Plan could constitute a
prohibited loan between a Plan and a Party in Interest.
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.
Prior to December 31, 1996, only classes of Offered Certificates that (i)
were rated in one of the two highest rating categories by one or more Rating
Agencies and (ii) were part of a series evidencing interests in a Trust Fund
consisting of loans secured by 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). However, under SMMEA
as originally enacted, if a state enacted legislation prior to October 3,
1991 that specifically limited the legal investment authority of any such
entities with respect to "mortgage related securities" under such definition,
Offered Certificates would constitute legal investments for entities subject
to such legislation only to the extent provided in such legislation.
Effective December 31, 1996, the definition of "mortgage related
securities" was modified 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.
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. In this
connection, effective December 31, 1996, the Office of the Comptroller of the
Currency (the "OCC") amended 12 C.F.R. Part 1 to authorize national banks to
purchase and sell for their own account, without limitation as to a
percentage of the bank's capital and surplus (but subject to compliance with
certain general standards concerning "safety and soundness" and retention of
credit information in 12 C.F.R. Section 1.5), certain "Type IV securities",
defined in 12 C.F.R. Section 1.2(1) to include certain "commercial
mortgage-related securities" and "residential mortgage-related securities".
As so defined, "commercial mortgage-related security" and "residential
mortgage-related security" mean, in relevant part, "mortgage related
security" within the meaning of SMMEA, provided that, in the case of a
"commercial mortgage-related security," it "represents ownership of a
promissory note or certificate of interest or participation that is directly
secured by a first lien on one or more parcels of real estate upon which one
or more commercial structures are located and that is fully secured by
interests in a pool of loans to
85
<PAGE>
numerous obligors." In the absence of any rule or administrative
interpretation by the OCC defining the term "numerous obligors," no
representation is made as to whether any class of Offered Certificates will
qualify as "commercial mortgage-related securities", and thus as "Type IV
securities", for investment by national banks. Federal credit unions should
review NCUA Letter to Credit Unions No. 96, as modified by Letter to Credit
Unions No. 108, which includes guidelines to assist federal credit unions in
making investment decisions for mortgage related securities. The NCUA has
adopted rules, codified as 12 C.F.R. Section 703.5(f)-(k), which prohibit
federal credit unions from investing in certain mortgage related securities
(including securities such as certain classes of Offered Certificates),
except under limited circumstances.
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. Except as to the status of certain classes of Offered
Certificates as "mortgage related securities", 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 (and any
unfavorable future determinations concerning legal investment or financial
institution regulatory characteristics of the Offered Certificates) 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 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:
(i) By negotiated firm commitment underwriting and public offering by
one or more underwriters specified in the related Prospectus Supplement;
(ii) by placements through one or more placement agents specified in the
related Prospectus Supplement primarily with institutional investors and
dealers; and
(iii) through offerings by the Sponsor.
86
<PAGE>
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 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.
Affiliates of the Sponsor may act as principals or agents in connection
with market-making transactions relating to the Offered Certificates. This
Prospectus and the related Prospectus Supplement may be used by such
affiliates in connection with offers and sales related to market-making
transactions in the Offered Certificates. Such sales will be made at prices
related to prevailing market prices at the time of sale.
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.
87
<PAGE>
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.
88
<PAGE>
INDEX OF PRINCIPAL TERMS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Accrual Certificates ........................... 9,32
Act ............................................ 58
ADA ............................................ 61
ARM Loans ...................................... 23
Bankruptcy Code ................................ 55
Book-Entry Certificates ........................ 11,31
Cash Flow Agreement ............................ 8,25
Cash Flow Agreements ........................... 1
CERCLA ......................................... 19,58
Certificate Account ............................ 7,24,40
Certificate Balance ............................ 2,9
Certificate Owner .............................. 11,36
Certificateholders ............................. 2
Certificates ................................... 6
Closing Date ................................... 64
Code ........................................... 11,61
Commercial Properties .......................... 6,21
Commission ..................................... 2
Committee Report ............................... 63
Companion Class ................................ 10,33
Condemnation Proceeds .......................... 41
Contingent Payment Regulations ................. 82
Contributions Tax .............................. 73
Controlled Amortization Class .................. 10,33
Cooperatives ................................... 21
CPR ............................................ 27
Credit Support ................................. 1,8,24
Cut-off Date ................................... 10
Definitive Certificate ......................... 11
Definitive Certificates ........................ 31,36
Determination Date ............................. 25,31
Distribution Date .............................. 9
Distribution Date Statement .................... 34
DOL ............................................ 84
DTC ............................................ 3,11,31,35
Due Dates ...................................... 23
Equity Participation ........................... 23
ERISA .......................................... 13,84
Exchange Act ................................... 3
FAMC ........................................... 7
FHLMC .......................................... 7
FNMA ........................................... 7
Garn Act ....................................... 59
GNMA ........................................... 7
Grantor Trust Certificates ..................... 11,62
Grantor Trust Fractional Interest Certificates . 12
Grantor Trust Fund ............................. 62
Indirect Participants .......................... 36
89
<PAGE>
PAGE
--------
Insurance Proceeds ............................. 41
IRS ............................................ 63
Issue Premium .................................. 69
L/C Bank ....................................... 52
Liquidation Proceeds ........................... 41
Lock-out Date .................................. 23
Lock-out Period ................................ 23
Mark-to-Market Regulations ..................... 71
Master Servicer ................................ 2,6
MBS ............................................ 1,21
MBS Agreement .................................. 24
MBS Issuer ..................................... 24
MBS Servicer ................................... 24
MBS Trustee .................................... 24
Mortgage Asset Pool ............................ 1
Mortgage Asset Seller .......................... 7,21
Mortgage Assets ................................ 1,21
Mortgage Loans ................................. 1,6,21
Mortgage Notes ................................. 21
Mortgage Rate .................................. 7,23
Mortgaged Properties ........................... 21
Mortgages ...................................... 21
Multifamily Properties ......................... 6,21
Net Leases ..................................... 22
Nonrecoverable Advance ......................... 33
Notional Amount ................................ 9,32
OCC ............................................ 85
Offered Certificates ........................... 1
OID Regulations ................................ 62
Originator ..................................... 21
OTS ............................................ 86
PAC ............................................ 28
Participants ................................... 20,31,36
Parties in Interest ............................ 84
Pass-Through Rate .............................. 2,9
Permitted Investments .......................... 40
Plans .......................................... 84
Policy Statement ............................... 86
Pooling Agreement .............................. 8,37
Prepayment Assumption .......................... 63,78
Prepayment Interest Shortfall .................. 25
Prepayment Premium ............................. 23
Prohibited Transactions Tax .................... 73
Prospectus Supplement .......................... 1
Rating Agency .................................. 13
RCRA ........................................... 59
Record Date .................................... 31
Related Proceeds ............................... 33
Relief Act ..................................... 60
REMIC .......................................... 2,11,62
90
<PAGE>
PAGE
--------
REMIC Administrator ............................ 2,6
REMIC Certificates ............................. 62
REMIC Provisions ............................... 62
REMIC Regular Certificates ..................... 11,62
REMIC Regulations .............................. 62
REMIC Residual Certificates .................... 11,62
REO Property ................................... 39
RICO ........................................... 61
Securities Act ................................. 87
Senior Certificates ............................ 8,30
Servicing Standard ............................. 39
SMMEA .......................................... 85
SPA ............................................ 27
Special Servicer ............................... 2,6
Sponsor ........................................ 21
Stripped Interest Certificates ................. 9,31
Stripped Principal Certificates ................ 8,31
Subordinate Certificates ....................... 8,31
Sub-Servicer ................................... 40
Sub-Servicing Agreement ........................ 40
TAC ............................................ 28
Tiered REMICs .................................. 63
Title V ........................................ 60
Trust Assets ................................... 2
Trust Fund ..................................... 1
Trustee ........................................ 2,6
UCC ............................................ 54
Voting Rights .................................. 35
Warranting Party ............................... 38
</TABLE>
91
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[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
This diskette contains a spreadsheet file that can be put on a user-specified
hard drive or network drive. The file is "MCF97s2.xls". The file
"MCF97s2.xls" is a Microsoft Excel(1), Version 5.0 spreadsheet. The file
provides, in electronic format, certain loan level information shown in ANNEX
A of the Prospectus Supplement.
Open the file as you would normally open any spreadsheet in Microsoft
Excel. After the file is opened, a securities law legend will be displayed.
READ THE LEGEND CAREFULLY. To view the ANNEX A data, "click" on the worksheet
labeled "Sheet 2."
- ------------
(1) Microsoft Excel is a registered trademark of Microsoft Corporation.
<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 SUBSEQUENT TO THE DATE OF THIS PROSPECTUS SUPPLEMENT
OR THE ACCOMPANYING PROSPECTUS.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Summary of Prospectus Supplement ............. S-9
Risk Factors ................................. S-30
Description of the Mortgage Pool ............. S-38
Servicing of the Mortgage Loans .............. S-50
Description of the Certificates .............. S-60
Yield and Maturity Considerations ............ S-77
Use of Proceeds .............................. S-85
Certain Federal Income Tax Consequences ..... S-85
ERISA Considerations ......................... S-88
Legal Investment ............................. S-91
Method of Distribution ....................... S-91
Legal Matters ................................ S-92
Ratings ...................................... S-92
Index of Principal Definitions ............... S-94
Annex A ...................................... A-1
Annex B ...................................... B-1
PROSPECTUS
Prospectus Supplement......................... 2
Available Information......................... 2
Incorporation of Certain Information by
Reference.................................... 3
Summary of Prospectus ........................ 6
Risk Factors ................................. 14
Description of the Trust Funds ............... 21
Yield and Maturity Considerations ............ 25
Mortgage Capital Funding, Inc ................ 30
Use of Proceeds .............................. 30
Description of the Certificates .............. 30
Description of the Pooling Agreements ....... 37
Description of Credit Support ................ 51
Certain Legal Aspects of Mortgage Loans ..... 53
Material Federal Income Tax Consequences .... 61
State and Other Tax Considerations ........... 83
ERISA Considerations ......................... 84
Legal Investment ............................. 85
Method of Distribution ....................... 86
Financial Information ........................ 87
Rating ....................................... 88
Index of Principal Terms...................... 89
</TABLE>
THROUGH AND INCLUDING , 1997, 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.
<PAGE>
$770,460,899
(APPROXIMATE)
MORTGAGE CAPITAL
FUNDING, INC.
(SPONSOR)
CITICORP REAL ESTATE, INC.
(MORTGAGE LOAN SELLER)
CLASS A-1, CLASS A-2, CLASS X, CLASS B,
CLASS C, CLASS D AND CLASS E
MORTGAGE CAPITAL FUNDING, INC.
MULTIFAMILY/COMMERCIAL
MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1997-MC2
PROSPECTUS SUPPLEMENT
NATIONSBANC MONTGOMERY
SECURITIES, INC.
AND
[CITIBANK LOGO]
NOVEMBER , 1997
