<PAGE>
Filed Pursuant to Rule 424(b)(3)
Registration File No.: 33-24489
THE INFORMATION CONTAINED IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY
BE CHANGED. WE MAY NOT SELL THESE SECURITIES, NOR MAY WE ACCEPT YOUR OFFER TO
BUY, BEFORE A FINAL PROSPECTUS AND PROSPECTUS SUPPLEMENT ARE DELIVERED. THIS
PROSPECTUS SUPPLEMENT IS NOT AN OFFER TO SELL THESE SECURITIES, AND IT IS NOT
SOLICITING AN OFFER TO BUY THESE SECURITIES, IN ANY STATE WHERE THE OFFER OR
SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED DECEMBER 16, 1998
PROSPECTUS SUPPLEMENT DATED DECEMBER , 1998
TO PROSPECTUS DATED DECEMBER 16, 1998
$805,992,000 (APPROXIMATE)
[CITIBANK LOGO]
MORTGAGE CAPITAL FUNDING, INC., THE SPONSOR
SALOMON BROTHERS REALTY CORP. AND CITICORP REAL ESTATE, INC.,
THE MORTGAGE LOAN SELLERS
MULTIFAMILY/COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES,
SERIES 1998-MC3
<TABLE>
<CAPTION>
<S> <C>
THE CERTIFICATES WILL CONSIST OF:
YOU SHOULD FULLY CONSIDER THE RISK FACTORS o The seven (7) classes of "Offered Certificates"
BEGINNING ON PAGE S-25 IN THIS PROSPECTUS described in the table below. The Offered Cer-
SUPPLEMENT PRIOR TO INVESTING IN THE tificates are the only securities offered pursuant
OFFERED CERTIFICATES. to this Prospectus Supplement.
Neither the Federal Deposit Insurance o Nine (9) additional classes of "Private Certifi-
Corporation nor any other governmental cates", all of which are subordinated to, and
agency or instrumentality has insured or provide credit enhancement for, the Offered
guaranteed the Offered Certificates or Certificates. The Private Certificates are not of-
the underlying mortgage loans. fered by this Prospectus Supplement.
The Offered Certificates will represent THE ASSETS UNDERLYING THE CERTIFICATES WILL INCLUDE:
interests in the Trust only and will not
represent an interest in or obligations of o A pool of 232 fixed rate, monthly pay mortgage
any other party. loans secured by first priority liens on 265 com-
mercial and multifamily residential properties.
This Prospectus Supplement may be used The mortgage pool will have an "Initial Pool
to offer and sell the Offered Certificates Balance" of approximately $908,161,006.
only if accompanied by the Sponsor's
Prospectus dated December 16, 1998.
</TABLE>
<TABLE>
<CAPTION>
======================================================================================================================
APPROXIMATE
INITIAL ASSUMED
CERTIFICATE INITIAL PASS-THROUGH ANTICIPATED FINAL
BALANCE OR PASS-THROUGH RATE RATINGS(5) DISTRIBUTION
OFFERED CERTIFICATES NOTIONAL AMOUNT(1) RATE(3) DESCRIPTION(4) (MOODY'S/S&P) DATE(6)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A-1 ............ $ 214,494,000 % Fixed Aaa/AAA
Class A-2 ............ $ 416,677,000 % Fixed Aaa/AAA
Class X .............. $ 908,161,005 (2) % Variable Aaa/AAAr
(Interest only)
Class B .............. $ 40,867,000 % Fixed Aa2/AA
Class C .............. $ 43,138,000 % Fixed A2/A
Class D .............. $ 61,301,000 % WAC Baa2/BBB
Class E .............. $ 29,515,000 % WAC Baa3/NR
======================================================================================================================
(footnotes to table are on page S-3)
</TABLE>
The Sponsor does not intend to list the Certificates on any national
securities exchange or on any automated quotation system of any registered
securities association, such as NASDAQ.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED THE CERTIFICATES OR DETERMINED THAT THIS PROSPECTUS
SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Salomon Smith Barney Inc. (the "Underwriter") will purchase the Offered
Certificates from the Sponsor, subject to the satisfaction of certain
conditions. The Underwriter intends to sell the Offered Certificates from time
to time in negotiated transactions or otherwise at varying prices to be
determined at the time of sale. Proceeds to the Sponsor will be equal to
approximately % of the initial aggregate Certificate Balance of the Offered
Certificates, plus accrued interest, less expenses payable by the Sponsor.
SALOMON SMITH BARNEY
<PAGE>
[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.]
MORTGAGE CAPITAL FUNDING, INC.
------------------------------
Multifamily/Commercial Mortgage Pass-Through Certificates, Series 1998-MC3
Geographic Overview of Mortgage Pool
[Map of the United States]
WASHINGTON
6 properties
$16,546,390
1.8% of total
IDAHO
2 properties
$3,483,567
0.4% of total
KANSAS
1 property
$4,341,062
0.5% of total
MISSOURI
4 properties
$25,711,486
2.8% of total
IOWA
3 properties
$11,673,228
1.3% of total
NORTH DAKOTA
1 property
$1,486,039
0.2% of total
MINNESOTA
1 property
$1,785,533
0.2% of total
ILLINOIS
6 properties
$15,392,495
1.7% of total
WISCONSIN
2 properties
$3,253,042
0.4% of total
MICHIGAN
2 properties
$9,943,116
1.1% of total
INDIANA
1 property
$1,478,124
0.2% of total
OHIO
9 properties
$24,486,911
2.7% of total
D.C.
2 properties
$22,750,914
2.5% of total
PENNSYLVANIA
3 properties
$19,632,279
2.2% of total
NEW YORK
29 properties
$97,916,411
10.8% of total
MASSACHUSETTS
5 properties
$30,716,607
3.4% of total
RHODE ISLAND
2 properties
$5,382,196
0.6% of total
CONNECTICUT
3 properties
$11,869,150
1.3% of total
NEW JERSEY
13 properties
$47,738,084
5.3% of total
DELAWARE
1 property
$7,488,705
0.8% of total
MARYLAND
12 properties
$43,914,576
4.8% of total
WEST VIRGINIA
4 properties
$15,418,378
1.7% of total
VIRGINIA
18 properties
$35,741,941
3.9% of total
NORTH CAROLINA
1 property
$3,775,647
0.4% of total
SOUTH CAROLINA
3 properties
$7,161,490
0.8% of total
FLORIDA
27 properties
$92,949,769
10.2% of total
GEORGIA
17 properties
$80,799,194
8.9% of total
TENNESSEE
11 properties
$34,141,612
3.8% of total
MISSISSIPPI
5 properties
$26,159,960
2.9% of total
LOUISIANA
3 properties
$13,709,279
1.5% of total
TEXAS
17 properties
$40,482,704
4.5% of total
COLORADO
6 properties
$13,267,506
1.5% of total
NEW MEXICO
1 property
$1,109,072
0.1% of total
ARIZONA
5 properties
$13,510,370
1.5% of total
WYOMING
1 property
$1,280,190
0.1% of total
CALIFORNIA
26 properties
$98,195,075
10.8% of total
NEVADA
5 properties
$9,966,188
1.1% of total
UTAH
7 properties
$13,526,719
1.5% of total
[PIE CHART]
% OF AGGREGATE CUT-OFF DATE BALANCE BY PROPERTY TYPE
Office/Retail 1.0%
Health Care 0.3%
Other 0.2%
Anchored Retail 24.0%
Office 18.4%
Hotel 16.1%
Multi-Family 15.5%
Industrial 11.5%
Retail 7.7%
Mixed Use 3.8%
Mobile Home Park 1.5%
LEGEND
[ ] (less than or equal to) 1.0% of Aggregate Cut-off
Date Balance
[ ] 1.1% - 5.0% of Aggregate Cut-off Date Balance
[ ] 5.1% - 10.0% of Aggregate Cut-off Date Balance
[ ] >10.0% of Aggregate Cut-off Date Balance
<PAGE>
[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.]
[PHOTO]
<PAGE>
[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.]
[PHOTO]
<PAGE>
FOOTNOTES TO THE TABLE ON THE COVER OF THIS PROSPECTUS SUPPLEMENT:
(1) The initial Certificate Balance or Notional Amount of any class of Offered
Certificates may be increased or decreased by as much as 10%. In addition,
the relative sizes of such Certificate Balances may change. The terms
"Certificate Balance" and "Notional Amount" are described in this
Prospectus Supplement under "Description of the Offered
Certificates--General".
(2) The Class X Certificates will not have a Certificate Balance and will not
entitle their holders to any distributions of principal. The Class X
Certificates will accrue interest on a Notional Amount that is equal to
the aggregate of the Certificate Balances outstanding from time to time of
those classes of Certificates that do have Certificate Balances.
(3) The "Pass-Through Rate" for each class of interest-bearing Certificates is
the annual rate at which such class will accrue interest. The Pass-Through
Rates for the Class A-1, Class A-2, Class B and Class C Certificates are
fixed at the rates shown in the table on the cover page. However, the
Pass-Through Rates shown in the table on the cover page for the Class X,
Class D and Class E Certificates are the rates applicable for
distributions to be made in January 1999. The Pass-Through Rates for the
Class X, Class D and Class E Certificates are variable and will be
calculated pursuant to the formulas described under "Description of the
Offered Certificates--Distributions--Calculation of Pass-Through Rates" in
this Prospectus Supplement.
(4) In addition to distributions of interest, holders of certain classes of the
Offered Certificates may receive from time to time a portion of the
prepayment fees, charges and premiums received on the mortgage loans. See
"Description of the Offered Certificates--Distributions--Distributions of
Prepayment Premiums" in this Prospectus Supplement.
(5) By Moody's Investors Service, Inc. ("Moody's") and/or Standard & Poor's
Ratings Services, a Division of the McGraw-Hill Companies, Inc. ("S&P"
and, together with Moody's, the "Rating Agencies"). "NR" means not rated.
See "Ratings" in this Prospectus Supplement.
(6) The Assumed Final Distribution Date is described under "Summary of
Prospectus Supplement--Relevant Dates and Periods" in this Prospectus
Supplement. The Rated Final Distribution Date, which is also defined under
that heading, is .
IMPORTANT NOTICE ABOUT THE INFORMATION CONTAINED IN THIS PROSPECTUS SUPPLEMENT
AND THE ACCOMPANYING PROSPECTUS
THE PHOTOGRAPHS OF THE MORTGAGED PROPERTIES INCLUDED IN THIS PROSPECTUS
SUPPLEMENT ARE NOT REPRESENTATIVE OF ALL THE MORTGAGED PROPERTIES OR OF ANY
PARTICULAR TYPE OF MORTGAGED PROPERTY.
Information about the Offered Certificates is contained in two separate
documents, each of which provides summary information in the front part thereof
and more detailed information in the text that follows: (a) the accompanying
prospectus dated December 16, 1998 (the "Prospectus"), which provides general
information, some of which may not apply to the Offered Certificates; and (b)
this prospectus supplement dated December , 1998 (this "Prospectus
Supplement"), which describes the specific terms of the Offered Certificates.
YOU ARE URGED TO READ BOTH THE PROSPECTUS AND THIS PROSPECTUS SUPPLEMENT
IN FULL TO OBTAIN MATERIAL INFORMATION CONCERNING THE OFFERED CERTIFICATES. If
the descriptions of the Offered Certificates vary between this Prospectus
Supplement and the Prospectus, you should rely on the information contained in
this Prospectus Supplement. You should only rely on the information contained
in this Prospectus Supplement and the Prospectus. The Sponsor has not
authorized any person to give any information or to make any representation
that is different.
This Prospectus Supplement and the Prospectus include cross-references to
sections in these materials where you can find further related discussions. The
Table of Contents in this Prospectus Supplement and the Prospectus identify the
pages where these sections are located.
This Prospectus Supplement uses certain capitalized terms that are defined
either in a different section of this Prospectus Supplement or in the
Prospectus. Each of this Prospectus Supplement and the Prospectus includes an
"Index of Principal Definitions" that identifies where to locate the
definitions for those capitalized terms that are most significant or are most
commonly used.
This Prospectus Supplement and the Prospectus include words such as
"expects", "intends", "anticipates", "estimates" and similar words and
expressions. Such words and expressions are intended to identify
forward-looking statements. Any forward-looking statements are made subject to
risks and uncertainties which could cause actual results to differ materially
from those stated. Such risks and uncertainties include, among other things,
declines in general economic and business conditions, increased competition,
changes in demographics, changes in political and social conditions, regulatory
initiatives and changes in customer preferences, many of which are beyond the
control of the Master Servicer, the Trustee or any related borrower. The
forward-looking statements made in this Prospectus Supplement are accurate as
of the date stated on the cover of this Prospectus Supplement. The Sponsor has
no obligation to update or revise any such forward-looking statement.
S-3
<PAGE>
----------------
The Sponsor has filed with the Securities and Exchange Commission (the
"SEC") a registration statement (of which this Prospectus Supplement and the
Prospectus form a part) under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the Offered Certificates. This Prospectus
Supplement and the Prospectus do not contain all of the information contained
in the registration statement. For further information regarding the documents
referred to in this Prospectus Supplement and the Prospectus, you should refer
to the registration statement and exhibits. The registration statement and
exhibits can be inspected and copied at prescribed rates at the public
reference facilities maintained by the SEC at its Public Reference Section, 450
Fifth Street, N.W., Washington, D.C. 20549, and at its Regional Offices located
at: Chicago Regional Office, Citicorp Center, 500 West Madison Street, Chicago,
Illinois 6066; and New York Regional Office, Seven World Trade Center, New
York, New York 10048. Such materials can also be obtained electronically
through the SEC's Internet Web Site (http://www.sec.gov).
----------------
It is expected that the Offered Certificates will be delivered in
book-entry form only through the facilities of The Depository Trust Company, in
New York, New York, on or about December 29, 1998, against payment in
immediately available funds.
----------------
S-4
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
IMPORTANT NOTICE ABOUT THE INFORMATION CONTAINED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS ............................ S-3
EXECUTIVE SUMMARY ................................................................. S-7
SUMMARY OF PROSPECTUS SUPPLEMENT .................................................. S-8
RISK FACTORS ...................................................................... S-25
Risks Related to the Offered Certificates ........................................ S-25
Risks Related to the Mortgage Loans .............................................. S-27
DESCRIPTION OF THE MORTGAGE POOL .................................................. S-44
General .......................................................................... S-44
Certain Terms and Conditions of the Mortgage Loans ............................... S-48
Additional Mortgage Loan Information ............................................. S-52
Certain Underwriting Matters ..................................................... S-53
Significant Mortgage Loans ....................................................... S-56
The Mortgage Loan Sellers ........................................................ S-72
Assignment of the Mortgage Loans ................................................. S-72
Representations and Warranties ................................................... S-73
Cures and Repurchases ............................................................ S-75
Changes in Mortgage Pool Characteristics ......................................... S-76
SERVICING OF THE MORTGAGE LOANS ................................................... S-77
General .......................................................................... S-77
The Master Servicer and the Special Servicer ..................................... S-79
Sub-Servicers .................................................................... S-79
Servicing and Other Compensation and Payment of Expenses ......................... S-80
Evidence as to Compliance ........................................................ S-84
Modifications, Waivers, Amendments and Consents .................................. S-84
Sale of Defaulted Mortgage Loans ................................................. S-86
REO Properties ................................................................... S-86
Inspections; Collection of Operating Information ................................. S-87
Termination of the Special Servicer .............................................. S-88
Resignation of Master Servicer or Special Servicer Upon Adverse Rating Events .... S-88
DESCRIPTION OF THE OFFERED CERTIFICATES ........................................... S-89
General .......................................................................... S-89
Registration and Denominations ................................................... S-90
Seniority ........................................................................ S-91
Certain Relevant Characteristics of the Mortgage Loans ........................... S-93
Distributions .................................................................... S-93
Allocation of Losses and Certain Other Shortfalls and Expenses ................... S-100
P&I Advances ..................................................................... S-101
Appraisal Reductions ............................................................. S-103
Reports to Certificateholders; Certain Available Information ..................... S-104
Voting Rights .................................................................... S-109
Termination ...................................................................... S-109
The Trustee ...................................................................... S-110
The Fiscal Agent ................................................................. S-110
YIELD AND MATURITY CONSIDERATIONS ................................................. S-111
Yield Considerations ............................................................. S-111
Weighted Average Lives ........................................................... S-114
Yield Sensitivity of the Class X Certificates .................................... S-118
</TABLE>
S-5
<PAGE>
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
USE OF PROCEEDS .......................................................... S-120
CERTAIN FEDERAL INCOME TAX CONSEQUENCES .................................. S-120
General ................................................................. S-120
Discount and Premium; Prepayment Premiums ............................... S-120
Constructive Sales of Class X Certificates .............................. S-121
Characterization of Investments in Offered Certificates ................. S-121
Possible Taxes on Income From Foreclosure Property and Other Taxes ...... S-122
Reporting and Other Administrative Matters .............................. S-122
CERTAIN ERISA CONSIDERATIONS ............................................. S-123
LEGAL INVESTMENT ......................................................... S-126
METHOD OF DISTRIBUTION ................................................... S-127
LEGAL MATTERS ............................................................ S-127
RATINGS .................................................................. S-128
INDEX OF PRINCIPAL DEFINITIONS ........................................... S-130
</TABLE>
S-6
<PAGE>
EXECUTIVE SUMMARY
This Executive Summary summarizes selected information relating to the
Offered Certificates. It does not contain all of the information you need to
consider in making your investment decision. TO UNDERSTAND ALL OF THE TERMS OF
THE OFFERING OF THE OFFERED CERTIFICATES, YOU SHOULD READ CAREFULLY THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS IN FULL.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
INITIAL
CERTIFICATE APPROX. PASS- INITIAL WEIGHTED
BALANCE OR % OF APPROX. THROUGH PASS- AVERAGE
NOTIONAL INITIAL POOL INITIAL CREDIT RATE THROUGH LIFE PRINCIPAL
CLASS RATINGS(1) AMOUNT(2) BALANCE SUPPORT(3) DESCRIPTION RATE (YEARS)(4) WINDOW(4)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Offered Certificates
- ----------------------------------------------------------------------------------------------------------------------------------
A-1 ... Aaa/AAA $ 214,494,000 23.62% 30.50% Fixed % 5.50 01/99-09/07
- ----------------------------------------------------------------------------------------------------------------------------------
A-2 ... Aaa/AAA $ 416,677,000 45.88% 30.50% Fixed % 9.26 09/07-07/08
- ----------------------------------------------------------------------------------------------------------------------------------
Variable
X ..... Aaa/AAAr $ 908,161,005(5) N/A N/A (Interest Only) % N/A N/A
- ----------------------------------------------------------------------------------------------------------------------------------
B ..... Aa2/AA $ 40,867,000 4.50% 26.00% Fixed % 9.55 07/08-07/08
- ----------------------------------------------------------------------------------------------------------------------------------
C ..... A2/A $ 43,138,000 4.75% 21.25% Fixed % 9.55 07/08-07/08
- ----------------------------------------------------------------------------------------------------------------------------------
D ..... Baa2/BBB $ 61,301,000 6.75% 14.50% WAC(6) % 9.62 07/08-09/08
- ----------------------------------------------------------------------------------------------------------------------------------
E ..... Baa3/NR $ 29,515,000 3.25% 11.25% WAC % 9.72 09/08-09/08
- ----------------------------------------------------------------------------------------------------------------------------------
Private Certificates--Not Offered Hereby (7)
- ----------------------------------------------------------------------------------------------------------------------------------
F ..... (8) $ % % WAC %
- ----------------------------------------------------------------------------------------------------------------------------------
G ..... (8) $ % % Fixed %
- ----------------------------------------------------------------------------------------------------------------------------------
H ..... (8) $ % % Fixed %
- ----------------------------------------------------------------------------------------------------------------------------------
J ..... (8) $ % % Fixed %
- ----------------------------------------------------------------------------------------------------------------------------------
K ..... (8) $ % % Fixed %
- ----------------------------------------------------------------------------------------------------------------------------------
L ..... (8) $ % % Fixed %
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
(1) Ratings shown are those of Moody's and S&P, respectively. Classes marked
"NR" will not be rated by the applicable rating agency.
(2) Depending on the actual size of the Initial Pool Balance and the final
subordination levels received from the Rating Agencies, the initial
Certificate Balance or Notional Amount of any class of Certificates may
be increased or decreased by as much as 10%.
(3) Represents the aggregate initial Certificate Balance (expressed as a
percentage of the Initial Pool Balance) of all classes of Certificates
subordinate to the indicated class. These percentages may be increased or
decreased, depending on the actual mortgage loans underlying the
Certificates and final Rating Agency subordination levels.
(4) "Principal Window" represents the time period during which the indicated
class receives payments of principal. The Principal Window and Weighted
Average Life are each calculated based on--
o the assumption that each borrower timely makes all payments on its
mortgage loan,
o the assumption that each mortgage loan with an Anticipated Repayment
Date (as defined under "Summary of Prospectus Supplement--The Mortgage
Loans and Mortgaged Properties") is paid in full on such date,
o the assumption that no mortgage loan is otherwise prepaid prior to
stated maturity, and
o the other Maturity Assumptions (as described under "Yield and Maturity
Considerations--Weighted Average Lives" in this Prospectus
Supplement).
(5) Notional Amount. The Class X Certificates have no Certificate Balance.
(6) "WAC" refers to a Pass-Through Rate that is, from time to time, equal to
a weighted average coupon derived from rates on the mortgage loans.
(7) The Private Certificates will also include three (3) classes of
certificated REMIC residual interests that are not shown above. None of
these three (3) classes of Private Certificates has a Certificate
Balance, Notional Amount or Pass-Through Rate.
(8) Not presented.
S-7
<PAGE>
SUMMARY OF PROSPECTUS SUPPLEMENT
This summary contains selected information that is discussed in greater
detail elsewhere in this Prospectus Supplement or in the Prospectus. It does
not contain all of the information you need to consider in making your
investment decision. TO UNDERSTAND ALL OF THE TERMS OF THE OFFERING OF THE
OFFERED CERTIFICATES, YOU SHOULD READ CAREFULLY THIS PROSPECTUS SUPPLEMENT AND
THE PROSPECTUS IN FULL.
OVERVIEW OF THE TRANSACTION
ESTABLISHMENT OF THE TRUST... The Sponsor is establishing a trust, to be
designated as Multifamily/Commercial Mortgage
Trust 1998-MC3 (the "Trust"). The assets of the
Trust (collectively, the "Trust Fund") will
primarily consist of a pool of certain
multifamily and commercial mortgage loans having
the characteristics described in this Prospectus
Supplement (collectively, the "Mortgage Loans").
ISSUANCE OF
THE CERTIFICATES............ The Sponsor is establishing the Trust for the
purpose of issuing the Series 1998-MC3
Multifamily/Commercial Mortgage Pass-Through
Certificates (the "Certificates") in multiple
classes (each, a "Class"). The Certificates
will, in the aggregate, represent the entire
beneficial ownership of the Trust. The
registered holders of the Certificates are
called "Holders" or "Certificateholders".
THE GOVERNING DOCUMENT...... The governing document for purposes of
establishing the Trust and issuing the
Certificates will be a Pooling and Servicing
Agreement to be dated as of the Cut-off Date,
among the Sponsor, the Trustee, the Master
Servicer, the Special Servicer and the Mortgage
Loan Sellers (the "Pooling Agreement"). The
Pooling Agreement will also govern the servicing
and administration of the Mortgage Loans and the
other assets of the Trust. The Sponsor will file
a copy of the Pooling Agreement with the SEC as
an exhibit to a Current Report on Form 8-K (the
"Form 8-K"), within 15 days after the initial
issuance of the Offered Certificates. The Form
8-K and its exhibits will thereafter be available
to the public for inspection.
RELEVANT PARTIES
SPONSOR..................... Mortgage Capital Funding, Inc., a Delaware
corporation. The Sponsor is a direct, wholly
owned subsidiary of Citicorp and an affiliate of
the Underwriter. The Sponsor's address is 399
Park Avenue, New York, New York 10043, and its
telephone number is (212) 559-0217.
MASTER SERVICER............. AMRESCO Services, L.P., a Delaware limited
partnership.
SPECIAL SERVICER............ Allied Capital Corporation, a Maryland
corporation.
The Holder (or Holders) of Certificates
representing a majority interest in the
Controlling Class will have the right, subject
to certain conditions, to replace the Special
Servicer. At any time, the "Controlling Class"
will, in general, be the most subordinate Class
of Certificates then outstanding with a
then-current Certificate Balance that is at
least equal to 25% of its initial
S-8
<PAGE>
Certificate Balance. In no event, however, may
the Class X, Class R-I, Class R-II or Class
R-III Certificates be the Controlling Class. See
"Servicing of the Mortgage Loans--Termination of
the Special Servicer" in this Prospectus
Supplement.
TRUSTEE..................... LaSalle National Bank, a national banking
association. 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.
MORTGAGE LOAN SELLERS....... Citicorp Real Estate, Inc. ("CREI"), a direct,
wholly owned subsidiary of Citibank, N.A., and
Salomon Brothers Realty Corp. ("SBRC"), a direct,
wholly owned subsidiary of Salomon Brothers
Holding Company Inc. Both of the Mortgage Loan
Sellers are affiliates of the Sponsor and the
Underwriter.
<TABLE>
<CAPTION>
% OF
MORTGAGE INITIAL NUMBER OF
LOAN SELLER POOL BALANCE MORTGAGE LOANS
- ---------------- -------------- ---------------
<S> <C> <C>
SBRC ......... 57.53% 125
CREI ......... 42.47% 107
</TABLE>
RELEVANT DATES AND PERIODS
CUT-OFF DATE................ December 1, 1998. The Cut-off Date is the date
as of which the Sponsor will establish the Trust
and as of which, unless otherwise indicated, all
information and data relating to the Mortgage
Loans are given.
DELIVERY DATE............... On or about December 29, 1998. The Delivery
Date is the date on which the Offered
Certificates will initially be issued.
DISTRIBUTION DATE........... The 18th day of each month or, if such 18th day
is not a business day, then the next succeeding
business day. The first Distribution Date will be
January 18, 1999. Distribution Dates are the
dates on which payments are made on the
Certificates.
RECORD DATE................. For any Distribution Date, the last business
day of the prior calendar month, On each Record
Date, the Trustee establishes which Holders of
the Certificates are entitled to receive payments
on the following Distribution Date.
DETERMINATION DATE.......... For any Distribution Date, the 11th day of the
calendar month in which such Distribution Date
occurs or, if such 11th day is not a business
day, then the immediately preceding business day.
The Determination Date establishes the end of the
Collection Period for the following Distribution
Date.
COLLECTION PERIOD........... For any Distribution Date, the period that
begins immediately following the Determination
Date in the prior calendar month and continues
through and includes the Determination Date in
the calendar month in which such Distribution
Date occurs, except that the first Collection
Period begins immediately following the Cut-off
Date. Amounts available for distribution on any
Distribution Date will depend on the payments and
other collections received, and any advances of
payments due, on the Mortgage Loans during the
related Collection Period.
S-9
<PAGE>
INTEREST ACCRUAL PERIOD..... For any Distribution Date, the calendar month
preceding the month in which such Distribution
Date occurs. The amount of interest payable with
respect to the interest-bearing Certificates on
any Distribution Date will be a function of the
interest accrued through the end of the related
Interest Accrual Period.
RATED FINAL
DISTRIBUTION DATE........... The Distribution Date in November, 2031. The
Rated Final Distribution Date is set as the first
Distribution Date following the third (3)
anniversary of the end of the amortization term
for the Mortgage Loan with the longest remaining
amortization term as of the Delivery Date. The
ratings assigned to the Offered Certificates
address the likelihood of timely receipt by the
Holders of all interest to which they are
entitled on each Distribution Date and, except in
the case of the Class X Certificates, the
ultimate receipt by the Holders of all principal
to which they are entitled by the Rated Final
Distribution Date.
ASSUMED FINAL
DISTRIBUTION DATE........... For any Class, the Distribution Date on which the
Holders of such Class would expect to receive
their last payment based upon--
o The assumption that each borrower timely
makes all payments on its Mortgage Loan.
o The assumption that each Mortgage Loan
with an Anticipated Repayment Date is paid
in full on that date.
o The assumption that no Mortgage Loan is
otherwise prepaid prior to stated
maturity.
o The other Maturity Assumptions described
under "Yield and Maturity
Considerations--Weighted Average Lives" in
this Prospectus Supplement.
The Assumed Final Distribution Date for each
Class of Offered Certificates is set forth
below.
<TABLE>
<CAPTION>
ASSUMED FINAL
CLASS DISTRIBUTION DATE
- ----- -----------------
<S> <C>
Class A-1 .........
Class A-2 .........
Class X ...........
Class B ...........
Class C ...........
Class D ...........
Class E ...........
</TABLE>
S-10
<PAGE>
OVERVIEW OF THE CERTIFICATES
GENERAL..................... The Certificates will consist of sixteen (16)
Classes, only seven (7) of which are being
offered to you pursuant to this Prospectus
Supplement and the Prospectus. These seven (7)
Classes of Certificates are called the "Offered
Certificates". The Class designations for the
Offered Certificates are set forth in the table
on the cover page.
The Sponsor does not intend to register any of
the remaining Classes of Certificates
(collectively, the "Private Certificates") under
the Securities Act and is not offering such
Certificates to you pursuant to this Prospectus
Supplement or the Prospectus. The Sponsor has
included information regarding the Private
Certificates in this Prospectus Supplement
because of its potential relevance to an
investment decision on the Offered Certificates.
CERTAIN CHARACTERISTICS
OF THE CERTIFICATES
A. THE
OFFERED CERTIFICATES........ Each Class of Offered Certificates will have the
approximate initial Certificate Balance or
Notional Amount, and will initially accrue
interest at the Pass-Through Rate, set forth on
each of the cover page and page S-7.
The Pass-Through Rates for the Class A-1, Class
A-2, Class B and Class C Certificates are fixed
at the rates set forth on each of the cover page
and page S-7.
The Pass-Through Rates shown on each of the
cover page and page S-7 for the Class D and
Class E Certificates are the rates applicable
for the Distribution Date in January 1999. The
Pass-Through Rate for each such Class for each
subsequent Distribution Date will be variable
and will be determined pursuant to a formula
described under "Description of the Offered
Certificates--Distributions--Calculation of
Pass-Through Rates" in this Prospectus
Supplement. Based on such formula, the
Pass-Through Rate for each such Class will
generally equal the weighted average of the
interest rates on the Mortgage Loans (in some
cases, adjusted as described in this Prospectus
Supplement and, in all cases, reduced by the
rates applicable to the calculation of certain
fees).
The Pass-Through Rate shown on each of the cover
page and page S-7 for the Class X Certificates
is the rate applicable for the Distribution Date
in January 1999. The Pass-Through Rate for such
Class for each subsequent Distribution Date will
be variable and will be determined pursuant to a
formula described under "Description of the
Offered Certificates--Distributions--Calculation
of Pass-Through Rates" in this Prospectus
Supplement. Based on such formula, the
Pass-Through Rate for such Class will generally
be a function of the excess of (i) the weighted
average of the interest rates on the Mortgage
Loans (in some cases, adjusted as described in
this Prospectus Supple-
S-11
<PAGE>
ment and, in all cases, reduced by the rates
applicable to the calculation of certain fees)
over (ii) the weighted average of the
Pass-Through Rates for the other Classes of
interest-bearing Certificates (including the
Private Certificates that bear interest).
B. THE
PRIVATE CERTIFICATES........ Each Class of the Private Certificates will have
the approximate initial Certificate Balance and
will initially accrue interest at the
Pass-Through Rate set forth on page S-7.
The Pass-Through Rate shown on page S-7 for the
Class F Certificates is the rate applicable for
the Distribution Date in January 1999. The
Pass-Through Rate for such Class for each
subsequent Distribution Date will be subject to
change and will be determined pursuant to a
formula described under "Description of the
Offered Certificates--Distributions--Calculation
of Pass-Through Rates" in this Prospectus
Supplement. Based on such formula, the
Pass-Through Rate for such Class will generally
equal the weighted average of the interest rates
on the Mortgage Loans (in some cases, adjusted
as described in this Prospectus Supplement and,
in all cases, reduced by the rates applicable to
the calculation of certain fees).
The Pass-Through Rates for the Class G, Class H,
Class J, Class K and Class L Certificates are
fixed at the rates set forth on page S-7.
The Class R-I, Class R-II and Class R-III
Certificates are REMIC residual interests and do
not have Certificate Balances or Pass-Through
Rates.
REGISTRATION AND
DENOMINATIONS............... The Trust will issue the Offered Certificates in
book-entry form in original denominations of: (i)
in the case of the Class X Certificates,
$1,000,000 initial notional amount and in any
higher whole dollar denomination; and (ii) in the
case of the other Classes of Offered
Certificates, $10,000 initial principal amount
and in any higher whole dollar denomination. 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"). As a result, you will not
receive a fully registered physical certificate
representing your interest in any Offered
Certificate, except under limited circumstances.
See "Description of the Offered
Certificates--Registration and Denominations" in
this Prospectus Supplement and "Description of
the Certificates--Book-Entry Registration and
Definitive Certificates" in the Prospectus.
OPTIONAL TERMINATION........ The Holders of the Controlling Class or the
Master Servicer may terminate the Trust when the
aggregate Stated Principal Balance (as defined in
this Prospectus Supplement under "Description of
the Offered Certificates--Certain Relevant
Characteristics of the Mortgage Loans") of the
Mortgage Pool is less than approximately 1.0% of
the Initial Pool Balance. See "Description of the
Offered Certificates--Termination" in this
Prospectus Supplement.
S-12
<PAGE>
CERTAIN FEDERAL INCOME TAX
CONSEQUENCES............... The REMIC Administrator will make elections to
treat designated portions of the Trust Fund as
three separate "real estate mortgage investment
conduits" (each, a "REMIC"). The designations for
such REMICs are as follows:
o "REMIC I", which holds, among other
things, the Mortgage Loans, as well as any
underlying real properties that have been
acquired by the Trust following a borrower
default.
o "REMIC II", which holds the "regular
interests" in REMIC I.
o "REMIC III", which holds the "regular
interests" in REMIC II.
The Offered Certificates will be treated as
"regular interests" in REMIC III. This means
that they will be treated as newly issued debt
instruments for federal income tax purposes. You
will have to report income on your Certificates
in accordance with the accrual method of
accounting even if you are otherwise a cash
method taxpayer.
The Class , Class , Class , Class and Class
Certificates will not, the Class
Certificates may, and the Class and Class X
Certificates will, be issued with original issue
discount ("OID"). If you own a Certificate
issued with original issue discount, you may be
required to report original issue discount
income before receiving a corresponding amount
of cash.
For tax information reporting purposes, the
Trustee will compute the accrual of discount and
amortization of premium on the Certificates
based on the assumptions that each Mortgage Loan
with an Anticipated Repayment Date will be paid
in full on such date and that no borrower will
otherwise prepay its Mortgage Loan prior to
stated maturity.
The Sponsor anticipates that any prepayment fee,
charge or premium allocable to a Class of
Offered Certificates will be ordinary income to
the Holders of such Class as such amounts become
due to the Trust. See "Description of the
Offered Certificates--
Distributions--Distributions of Prepayment
Premiums" in this Prospectus Supplement.
For a more detailed discussion of the federal
income aspects of investing in the Certificates,
see "Certain Federal Income Tax Consequences" in
this Prospectus Supplement and "Material Federal
Income Tax Consequences" in the Prospectus.
ERISA....................... The Sponsor anticipates that certain employee
benefit plans and other retirement arrangements
subject to Title I of ERISA or Section 4975 of
the Code will be able to invest in the Class A-1,
Class A-2 and Class X Certificates, without
giving rise to a prohibited transaction, based
upon an individual prohibited transaction
exemption granted to a predecessor in interest to
S-13
<PAGE>
the Underwriter by the U.S. Department of Labor.
However, investments in the other Offered
Certificates by, on behalf of or with assets of
such entities, will be restricted as described
under "Certain ERISA Considerations" in this
Prospectus Supplement.
If you are a fiduciary of any employee benefit
plan or other retirement arrangement subject to
Title I of ERISA or section 4975 of the Code,
you should consult with your own legal advisors
to determine whether your purchase or holding of
the Offered Certificates could give rise to a
transaction that is prohibited under ERISA or
Section 4975 of the Code. See "Certain ERISA
Considerations" in this Prospectus Supplement
and "ERISA Considerations" in the Prospectus.
LEGAL INVESTMENT............ The Offered Certificates will not be "mortgage
related securities" within the meaning of the
Secondary Mortgage Market Enhancement Act of
1984. You should consult your legal advisors to
determine whether and to what extent the Offered
Certificates constitute legal investments for
you. See "Legal Investment" in this Prospectus
Supplement and in the Prospectus.
CERTAIN YIELD
CONSIDERATIONS.............. The yield to maturity on any Offered Certificate
will be affected by the rate and timing of
prepayments and other collections of principal on
the Mortgage Loans. In the case of Offered
Certificates purchased at a discount, a slower
than anticipated rate of prepayments could result
in a lower than anticipated yield. For the Class
X Certificates or any other Offered Certificates
purchased at a premium, a faster than anticipated
rate of prepayments could result in a lower than
anticipated yield. If you are contemplating the
purchase of Class X Certificates, you should be
aware that the yield to maturity on the Class X
Certificates will be highly sensitive to the rate
and timing of principal prepayments and other
liquidations of Mortgage Loans and that an
extremely rapid rate of prepayments and/or other
liquidations in respect of the Mortgage Loans
could result in a complete or partial loss of
your initial investment. See "Yield and Maturity
Considerations" in this Prospectus Supplement and
in the Prospectus.
RATINGS..................... It is a condition to the issuance of the
Offered Certificates that the various Classes of
such Certificates receive these credit ratings:
<TABLE>
<CAPTION>
CLASS MOODY'S RATING S&P RATING
- ----- -------------- ----------
<S> <C> <C>
Class A-1 .......... Aaa AAA
Class A-2 .......... Aaa AAA
Class X ............ Aaa AAAr
Class B ............ Aa2 AA
Class C ............ A2 A
Class D ............ Baa2 BBB
Class E ............ Baa3 NR*
</TABLE>
------------
* "NR" means not rated.
S-14
<PAGE>
The ratings of the Offered Certificates address
the timely payment of interest and, except for
the Class X Certificates, the ultimate payment
of principal on or before the Rated Final
Distribution Date. Such ratings do not, however,
address--
o The tax attributes of the Offered
Certificates or of the Trust.
o The likelihood or frequency of voluntary
or involuntary principal prepayments on
the Mortgage Loans.
o The degree to which prepayments on the
Mortgage Loans might differ from those
originally anticipated.
o The likelihood that prepayment fees,
charges and premiums will be received with
respect to the Mortgage Loans.
o The likelihood that any Mortgage Loan with
an Anticipated Repayment Date will remain
outstanding past such date and will
thereafter accrue any interest in excess
of its current mortgage interest rate.
A security rating is not a recommendation to
buy, sell or hold securities and the assigning
rating agency may revise or withdraw its rating
at any time.
For a description of the limitations of the
ratings of the Offered Certificates, see
"Ratings" in this Prospectus Supplement and
"Risk Factors--Limited Nature of Credit Ratings"
in the Prospectus.
REPORTS TO
CERTIFICATEHOLDERS.......... On each Distribution Date, the following reports
will be available to you:
o Distribution Date Statement
o Delinquent Loan Status Report
o Historical Loan Modification Report
o Historical Loss Estimate Report
o REO Status Report
o Special Servicer Loan Status Report
o Operating Statement Analysis
o Comparative Financial Status Report
o Watchlist
o CSSA Report
The contents of such reports, and the sources
from which these reports may be obtained, are
described in this Prospectus Supplement under
"Description of the Offered Certificates--Reports
to Certificateholders; Certain Available
Information".
Upon reasonable prior notice, the Trustee will
permit you to review at its offices during
normal business hours a variety of information
and documents that pertain to the Mortgage Loans
and Mortgaged Properties, including loan
documents, borrower operating statements, rent
rolls and property inspection reports.
S-15
<PAGE>
THE CERTIFICATES: A STRUCTURAL SUMMARY
SENIORITY................... The following chart sets forth the relative
seniority of the Classes of Certificates for
purposes of--
o Making payments of interest and, if
applicable, payments of principal.
o Allocating losses and other shortfalls on
the Mortgage Loans, as well as certain
default-related and other unanticipated
expenses of the Trust.
Each Class of Certificates will, for the above
purposes, be subordinate to each other Class of
Certificates, if any, listed above it in the
following chart.
SUMMARY SENIORITY CHART
------------------------------------------------
Class A-1, Class A-2 and Class X
------------------------------------------------
|
--------------------------------
Class B
--------------------------------
|
--------------------------------
Class C
--------------------------------
|
--------------------------------
Class D
--------------------------------
|
--------------------------------
Class E
--------------------------------
|
------------------------------------------------
Classes of Private Certificates
------------------------------------------------
THE ONLY FORM OF CREDIT SUPPORT FOR ANY CLASS OF
OFFERED CERTIFICATES WILL BE THE SUBORDINATION
OF THE OTHER CLASSES OF CERTIFICATES TO WHICH IT
IS SENIOR, INCLUDING ALL OF THE PRIVATE
CERTIFICATES.
See "Description of the Offered
Certificates--General", "--
Seniority", "--Distributions--Priority of
Payments" and "--
Allocation of Losses and Certain Other
Shortfalls and Expenses" in this Prospectus
Supplement.
S-16
<PAGE>
DISTRIBUTIONS
A. GENERAL.................. Payments of interest and principal will be made
to the Holders of the various Classes of
Certificates entitled thereto, sequentially based
upon their relative seniority as depicted in the
Summary Seniority Chart above.
B. PAYMENTS OF INTEREST..... Each Class of Certificates (other than the
Class R-I, Class R-II and Class R-III
Certificates) will bear interest. In the case of
each such Class, interest will accrue during each
Interest Accrual Period based upon--
o the then-applicable Pass-Through Rate for
such Class,
o the Certificate Balance or Notional
Amount, as the case may be, of such Class
outstanding immediately prior to the
related Distribution Date, and
o the assumption that each year consists of
twelve 30-day months.
A whole or partial prepayment on a Mortgage Loan
may not be accompanied by the amount of one full
month's interest on such prepayment. The amount
of such shortfall (net of the portion thereof
attributable to the fee of the Master Servicer
and certain other items), will be allocated to
reduce the amount of accrued interest otherwise
payable to the Holders of the Classes of
interest-bearing Certificates, generally in
reverse order of their seniority as depicted in
the Summary Seniority Chart above.
On each Distribution Date, subject to available
funds and the payment priorities described
above, you will be entitled to receive your
proportionate share of all unpaid distributable
interest accrued on your Class of Offered
Certificates through the end of the related
Interest Accrual Period.
See "Description of the Offered
Certificates--Distributions--
Calculations of Interest",
"--Distributions--Priority of Payments" and
"--Allocations of Losses and Certain Other
Shortfalls and Expenses" in this Prospectus
Supplement.
C. PAYMENTS OF PRINCIPAL.... The Classes of Certificates with Certificate
Balances are called the "Principal Balance
Certificates". In general, subject to available
funds and the payment priorities described above,
the Holders of each Class of Principal Balance
Certificates will be entitled to receive an
aggregate amount of principal over time equal to
its Certificate Balance. However, the Pooling
Agreement requires the Trustee to make payments
of principal in a specified sequential order such
that--
o No payments of principal will be made on
any Class of Private Certificates until
the Certificate Balance of each Class of
Offered Certificates (other than the Class
X Certificates, which have no Certificate
Balance) is reduced to zero.
o No payments of principal will be made on
the Class B, Class C, Class D or Class E
Certificates until, in the case
S-17
<PAGE>
of each such Class, the Certificate
Balance of each more senior Class of
Offered Certificates (other than the Class
X Certificates, which have no Certificate
Balance) is reduced to zero.
o No payments of principal will be made on
the Class A-2 Certificates until either:
(i) the Certificate Balance of the Class
A-1 Certificates is reduced to zero;
or
(ii) the Class A-1 and Class A-2
Certificates are the only outstanding
Classes of Principal Balance
Certificates (in which case, payments
of principal will be made to the
Holders of the Class A-1 and Class A-2
Certificates proportionately based on
their then-current Certificate
Balances).
The aggregate principal payment to be made on
the Principal Balance Certificates on any
Distribution Date will depend on--
o the amount of all scheduled payments of
principal due on the Mortgage Loans during
the related Collection Period that are
either received by the related
Determination Date or advanced by the
Master Servicer, and
o the amount of any prepayments and other
unscheduled collections of previously
unadvanced principal on the Mortgage Loans
that are received during the related
Collection Period.
See "Description of the Offered
Certificates--Calculation of the Principal
Distribution Amount" and "--Distributions--
Priority of Payments" in this Prospectus
Supplement.
D. DISTRIBUTIONS OF PREPAYMENT
PREMIUMS................. Any prepayment fee, charge or premium collected
on a Mortgage Loan will be distributed to the
Holders of the Class X Certificates and/or to the
Holders of any other Class or Classes of Offered
Certificates then entitled to receive payments of
principal. See "Description of the Offered
Certificates--Distributions--Distributions of
Prepayment Premiums" in this Prospectus
Supplement.
ALLOCATION OF LOSSES AND CERTAIN
OTHER SHORTFALLS
AND EXPENSES................ Losses on the Mortgage Loans, together with
certain default- related and other unanticipated
expenses of the Trust, may cause the aggregate
Stated Principal Balance of the Mortgage Loans to
be less than the aggregate Certificate Balance of
the Principal Balance Certificates (any such
deficit being referred to in this Prospectus
Supplement as a "Mortgage Pool Deficit"). If a
Mortgage Pool Deficit exists following the
payments made on the Certificates on any
Distribution Date, then the Certificate Balances
of the Classes of Principal Balance Certificates
will be successively reduced, in the reverse
order of their seniority as depicted in the
Summary Seniority Chart on page S-16, until
S-18
<PAGE>
such Mortgage Pool Deficit is eliminated. If a
Mortgage Pool Deficit exists at any time after
the Certificate Balances of all the other
Classes of Principal Balance Certificates have
been reduced to zero, then the Certificate
Balances of the Class A-1 and Class A-2
Certificates will be reduced proportionately,
until the Mortgage Pool Deficit is eliminated.
In addition, a whole or partial prepayment on a
Mortgage Loan may not be accompanied by the
amount of one full month's interest on such
prepayment. The amount of such shortfall (net of
the portion attributable to the fees of the
Master Servicer and certain other items) will be
allocated to reduce the amount of accrued
interest otherwise payable to the Holders of the
Classes of interest-bearing Certificates in the
reverse order of their seniority as depicted in
the Summary Seniority Chart above. Any
allocations of such shortfalls among the Holders
of the Class A-1, Class A-2 and Class X
Certificates will be made proportionately.
See "Description of the Offered
Certificates--Certain Relevant Characteristics
of the Mortgage Loans" and "--Allocation of
Losses and Certain Other Shortfalls and
Expenses" and "Servicing of the Mortgage
Loans--Servicing and Other Compensation and
Payment of Expenses" in this Prospectus
Supplement.
ADVANCES.................... The Master Servicer will generally be required
to make advances (each, a "P&I Advance") in the
amount of any delinquent monthly payments (other
than balloon payments) of principal and interest
due (net of certain fees) on the Mortgage Loans.
The Master Servicer and, in some cases, the
Special Servicer will also generally be required
to make advances (each, a "Servicing Advance") to
cover certain costs and expenses relating to the
servicing and administration of the Mortgage
Loans. P&I Advances and Servicing Advances are
collectively called "Advances". If the Master
Servicer or Special Servicer fails to make any
Advance that it is required to make, the Trustee
will be required to make such Advance. If the
Trustee fails to make any Advance that it is
required to make, the Fiscal Agent will be
required to make such Advance. None of the Master
Servicer, the Special Servicer, the Fiscal Agent
or the Trustee, however, will be required to make
any Advance that it determines, in its good faith
and reasonable judgment, will not be recoverable
from proceeds of the related Mortgage Loan. Any
party that makes an Advance will be entitled to
receive interest thereon.
See "Description of the Offered
Certificates--P&I Advances" and "Servicing of
the Mortgage Loans--Servicing and Other
Compensation and Payment of Expenses" in this
Prospectus Supplement and "Description of the
Certificates--Advances in Respect of
Delinquencies" and "Description of the Pooling
Agreements--Certificate Account" in the
Prospectus.
S-19
<PAGE>
APPRAISAL REDUCTIONS........ If certain adverse events or circumstances,
called "Appraisal Trigger Events", occur or exist
with respect to a Mortgage Loan or the related
Mortgaged Property, the Pooling Agreement will
require the Master Servicer or the Special
Servicer to obtain a new appraisal of such
Mortgaged Property. The new appraised value may
reflect an "Appraisal Reduction Amount", which
will, in general, be equal to any excess of (a)
the principal balance of, and certain other
amounts due under, the related Mortgage Loan,
over (b) 90% of such new appraised value. If an
Appraisal Reduction Amount does exist, the amount
otherwise required to be advanced as accrued
interest on the related Mortgage Loan will be
reduced, generally in the same proportion that
the Appraisal Reduction Amount bears to the
principal balance of such Mortgage Loan. Due to
the payment priorities, this reduction in
advances will reduce the cash available to pay
interest on the most subordinate Class of
Certificates then outstanding. See "Description
of the Offered Certificates--Appraisal
Reductions" in this Prospectus Supplement.
THE MORTGAGE LOANS AND MORTGAGED PROPERTIES
THE MORTGAGE POOL........... The Trust Fund will primarily consist of the
pool of Mortgage Loans (the "Mortgage Pool").
Each Mortgage Loan constitutes an obligation of
one or more persons (individually and
collectively, the "Borrower") to repay a
specified sum with interest. Each Mortgage Loan
will be secured by a first lien on the fee and/or
leasehold interest of the Borrower or another
person in one or more commercial or multifamily
residential properties (each, a "Mortgaged
Property").
For more detailed information on the Mortgage
Loans, see the following sections in this
Prospectus Supplement:
o "Description of the Mortgage Pool"
o "Risk Factors--Risks Related to the
Mortgage Loans"
o Annex A--Certain Characteristics of the
Mortgage Loans
Set forth below is certain statistical
information on the Mortgage Loans and the
Mortgaged Properties. In reviewing such
information, as well as the statistical
information on the Mortgage Loans and the
Mortgaged Properties contained elsewhere in this
Prospectus Supplement, you should be aware
that--
o All numerical information provided with
respect to the Mortgage Loans is provided
on an approximate basis.
o All weighted average information provided
with respect to the Mortgage Loans
reflects weighting of the Mortgage Loans
by their Cut-off Date Balances.
o When information on the Mortgaged
Properties is expressed as a percentage of
the Initial Pool Balance, such percentages
are based upon the Cut-off Date Balances
S-20
<PAGE>
of the related Mortgage Loans. Except
where otherwise specified in the
respective loan documents, the Cut-off
Date Balances attributed to the properties
collateralizing a multi-property Mortgage
Loan were derived by allocating to each
such property a portion of the related
Mortgage Loan's Cut-off Date Balance, pro
rata, based upon the Appraised Values of
such Mortgaged Properties.
o Whenever loan level information such as
loan-to-value ratios or debt service
coverage ratios are presented in the
context of Mortgaged Properties, the loan
level statistic attributed to the
Mortgaged Property is the same as the
statistic for the related Mortgage Loan.
o Statistical information on the Mortgage
Loans may change prior to the date of
issuance of the Certificates due to
changes in the composition of the Mortgage
Pool after the Cut-off Date but prior to
the Delivery Date.
o Certain capitalized terms used with
respect to the Mortgage Loans are defined
under "Description of the Mortgage Pool"
in, or on Annex A to, this Prospectus
Supplement.
GENERAL CHARACTERISTICS..... The Mortgage Pool will have the following
general characteristics as of the Cut-off Date:
<TABLE>
<S> <C>
Initial Pool Balance(1) .......................................... $908,161,006
Number of Mortgage Loans ......................................... 232
Number of Mortgaged Properties ................................... 265
Maximum Cut-off Date Balance(2) .................................. $ 65,804,538
Minimum Cut-off Date Balance ..................................... $ 282,536
Average Cut-off Date Balance ..................................... $ 3,914,487
Maximum Mortgage Rate ............................................ 10.00%
Minimum Mortgage Rate ............................................ 6.35%
Weighted Average Mortgage Rate ................................... 7.51%
Maximum Original Term to Maturity or Anticipated Repayment
Date ............................................................ 120 months
Minimum Original Term to Maturity or Anticipated Repayment Date... 72 months
Weighted Average Original Term to Maturity or Anticipated
Repayment Date .................................................. 118 months
Maximum Remaining Term to Maturity or Anticipated Repayment
Date ............................................................ 119 months
Minimum Remaining Term to Maturity or Anticipated Repayment
Date ............................................................ 36 months
(footnotes on next page)
</TABLE>
S-21
<PAGE>
<TABLE>
<S> <C>
Weighted Average Remaining Term to Maturity or Anticipated
Repayment Date .................................................... 110 months
Maximum Underwritten NCF Debt Service Coverage Ratio(3) ............ 4.73x
Minimum Underwritten NCF Debt Service Coverage Ratio ............... 1.16x
Weighted Average Underwritten NCF Debt Service Coverage Ratio ...... 1.39x
Maximum Cut-off Date Loan-to-Value Ratio(4) ........................ 82.22%
Minimum Cut-off Date Loan-to-Value Ratio ........................... 21.23%
Weighted Average Cut-off Date Loan-to-Value Ratio .................. 70.13%
Maximum Maturity Date/ARD Loan-to-Value Ratio(5) ................... 72.37%
Minimum Maturity Date/ARD Loan-to-Value Ratio ...................... 14.87%
Weighted Average Maturity Date/ARD Loan-to-Value Ratio ............. 59.34%
</TABLE>
------------
(1) The "Initial Pool Balance" is equal to the aggregate Cut-off Date
Balance of the Mortgage Pool and is subject to a permitted variance
of plus or minus 5%.
(2) The "Cut-off Date Balance" of each Mortgage Loan is equal to its
unpaid principal balance as of the Cut-off Date, after application of
all payments of principal due on such Mortgage Loan on or before such
date, whether or not received by that date.
(3) The "Underwritten NCF Debt Service Coverage Ratio" is as defined in
Annex A to this Prospectus Supplement.
(4) The "Cut-off Date Loan-to-Value Ratio is as defined in Annex A to
this Prospectus Supplement."
(5) The "Maturity Date/ARD Loan-to-Value Ratio" is as defined in Annex A
to this Prospectus Supplement.
SIGNIFICANT MORTGAGE LOANS
A. KRANZCO PORTFOLIO........ Set forth below is certain loan and property
information on the Mortgage Loan identified in
this Prospectus Supplement as the "Kranzco Loan".
See "Description of the Mortgage Pool--
Significant Mortgage Loans" in this Prospectus
Supplement.
<TABLE>
<S> <C>
Cut-off Date Balance ................................. $65,804,538
% of Initial Pool Balance ............................ 7.25%
Number of Mortgaged Properties ....................... 9
Property Types ....................................... 100% Anchored Retail
Mortgage Rate ........................................ 7.00%
Scheduled P&I Payment ................................ $ 438,434
Anticipated Repayment Date ........................... October 1, 2008
Maturity Date ........................................ October 1, 2028
Appraised Value ...................................... $91,870,000
Appraisal Date ....................................... August 3, 1998
Underwritten NCF Debt Service Coverage Ratio ......... 1.24x
Cut-off Date Loan-to-Value Ratio ..................... 71.63%
Maturity Date/ARD Loan-to-Value Ratio ................ 62.57%
</TABLE>
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<PAGE>
B. OCEANSIDE CALDOR/GOLD COAST
PLAZA & SWAN NURSERY
COMMONS PORTFOLIO....... Set forth below is certain loan and property
information on the Mortgage Loan identified in
this Prospectus Supplement as the "Oceanside/Swan
Loan". See "Description of the Mortgage
Pool--Significant Mortgage Loans" in this
Prospectus Supplement.
<TABLE>
<S> <C>
Cut-off Date Balance ................................. $48,831,053
% of Initial Pool Balance ............................ 5.38%
Number of Mortgaged Properties ....................... 2
Property Types ....................................... 100% Anchored Retail
Mortgage Rate ........................................ 7.12%
Scheduled P&I Payment ................................ $ 329,957
Maturity Date ........................................ July 1, 2008
Appraised Value ...................................... $62,900,000
Appraisal Date ....................................... April 21, 1998
Underwritten NCF Debt Service Coverage Ratio ......... 1.39x
Cut-off Date Loan-to-Value Ratio ..................... 77.63%
Maturity Date/ARD Loan-to-Value Ratio ................ 68.18%
</TABLE>
PAYMENT TERMS............... Each Mortgage Loan accrues interest at the
annual rate (its "Mortgage Rate") set forth for
it on Annex A to this Prospectus Supplement. The
Mortgage Rate for each Mortgage Loan is fixed for
the entire term of such Mortgage Loan.
Each Mortgage Loan provides for scheduled
payments of principal and/or interest
("Scheduled P&I Payments") to be due on the
first day of each month (its monthly "Due
Date").
Mortgage Loans identified as "Balloon Loans"
provide either for monthly payments of interest
only prior to their stated maturity or for
amortization schedules that are significantly
longer than their respective remaining terms to
stated maturity. In either case, a Balloon Loan
will require a substantial payment of principal
on its maturity date (such payment, together
with the corresponding interest payment, a
"Balloon Payment").
Mortgage Loans identified in this Prospectus
Supplement as "ARD Loans" provide material
disincentives to the related Borrower to allow
its Mortgage Loan to remain outstanding past a
specified date (the "Anticipated Repayment Date"
or "ARD"). Such disincentives, which in each
case will become effective as of the Anticipated
Repayment Date, include:
o An increase in the interest rate.
o The application of certain excess cash
flow from the related Mortgaged Property
to pay down the principal of the Mortgage
Loan. Such payment of principal will be in
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<PAGE>
addition to the principal portion of the
Scheduled P&I Payment or scheduled
interest-only payment, as applicable.
ARD Loans may provide for amortizing Scheduled
P&I Payments or, in certain cases, scheduled
payments of interest only, prior to the
Anticipated Repayment Date.
The remaining Mortgage Loans, referred to as
"Fully Amortizing Loans", have amortization
schedules that amortize such Mortgage Loans in
full or substantially in full by their
respective maturity dates.
DELINQUENCY STATUS.......... No Mortgage Loan was more than 30 days
delinquent in respect of any Scheduled P&I
Payment as of the Cut-off Date or at any time
during the 12-month period preceding the Cut-off
Date, except for one Mortgage Loan as to which
the November 1998 payment was collected in early
December 1998.
PREPAYMENT TERMS............ Currently in effect for each Mortgage Loan is a
prepayment lockout or a requirement that the
Borrower, in connection with a prepayment, pay a
Prepayment Premium (including, in certain cases,
a yield maintenance charge). See "Description of
the Mortgage Pool--Certain Terms and Conditions
of the Mortgage Loans" in this Prospectus
Supplement.
Set forth below is information regarding the
remaining lockout periods for those Mortgage
Loans that currently prohibit whole or partial
prepayments:
<TABLE>
<S> <C>
Maximum Remaining Lockout
Period: .................. 55 months
Minimum Remaining Lockout
Period: .................. 12 months
Weighted Average Remaining
Lockout Period: .......... 36 months
</TABLE>
The prepayment restrictions for each Mortgage
Loan are more fully described on Annex A to this
Prospectus Supplement.
DEFEASANCE.................. Certain Mortgage Loans identified as
"Defeasance Loans" permit the Borrower, no
earlier than the second anniversary of the
Delivery Date, to obtain a release of the related
Mortgaged Property (or, where applicable, one or
more of the related Mortgaged Properties) from
the lien of the mortgage or other security
instrument by delivering U.S. Treasury
obligations as substitute collateral.
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<PAGE>
RISK FACTORS
You should consider the following factors (as well as the factors set
forth under "Risk Factors" in the Prospectus) in deciding whether to purchase
the Offered Certificates of any Class.
RISKS RELATED TO THE OFFERED CERTIFICATES
The Offered Certificates are Supported by Limited Assets. If the assets of
the Trust are insufficient to make payments on your Certificates, no other
assets will be available to you for payment of the deficiency.
Risks Associated With Lack of Liquidity and Changes in Market Value. There
is currently no secondary market for the Offered Certificates. The Underwriter
intends to make a secondary market in the Offered Certificates, but it has no
obligation to do so. There can be no assurance that a secondary market for the
Offered Certificates will develop. Even if a secondary market does develop for
the Offered Certificates, there is no assurance that it will provide you with
liquidity of investment or that the market will continue for the life of the
Offered Certificates. The Sponsor does not intend to list the Offered
Certificates on any securities exchange or any automated quotation system, such
as NASDAQ. Lack of liquidity could result in a significant reduction in the
market value of your Certificates. In addition, the market value of your
Certificates at any time may be affected by many factors, including then
prevailing interest rates and the then perceived riskiness of commercial
mortgage-backed securities relative to other investments. See "Risk
Factors--Certain Factors Adversely Affecting Resale of the Offered
Certificates" in the Prospectus.
Uncertain Yields to Maturity. The yield on your Certificates will depend
on (a) the price you paid for such Certificates and (b) the rate, timing and
amount of distributions on such Certificates. The rate, timing and amount of
distributions on your Certificates will, in turn, depend on:
o the Pass-Through Rate(s) for your Certificates;
o the rate and timing of payments and other collections of principal on
the Mortgage Loans;
o the rate and timing of defaults, and the severity of any losses on the
Mortgage Loans;
o the rate, timing, severity and allocation of other shortfalls and
expenses that reduce amounts available for distribution on the
Certificates; and
o the collection and distribution of prepayment fees, charges and
premiums on the Mortgage Loans.
The latter four factors cannot be predicted with any certainty. Accordingly,
you may find it difficult to analyze the effect that such factors might have on
the yield to maturity of your Certificates. See "Description of the Mortgage
Pool", "Description of the Offered Certificates--Distributions" and
"--Allocation of Losses and Certain Other Shortfalls and Expenses" and "Yield
and Maturity Considerations" in this Prospectus Supplement. See also "Yield and
Maturity Considerations" in the Prospectus.
Risks Related to the Rate of Prepayment. If you purchase your Certificates
at a premium, and if payments and other collections of principal on the
Mortgage Loans occur at a rate faster than you anticipated at the time of your
purchase, then your actual yield to maturity may be lower than you had assumed
at the time of your purchase. Conversely, if you purchase your Certificates at
a discount, and if payments and other collections of principal on the Mortgage
Loans occur at a rate slower than you anticipated at the time of your purchase,
then your actual yield to maturity may be lower than you had assumed at the
time of your purchase. You should consider that prepayment fees, charges and
premiums, even if available and distributable on your Certificates, may not be
sufficient to offset fully any loss in yield on your Certificates.
The investment performance of your Certificates may vary materially and
adversely from your expectations due to the rate of prepayments and other
unscheduled collections of principal on the Mortgage Loans being faster or
slower than you anticipated. Your actual yield may not be equal to the
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<PAGE>
yield you anticipated at the time of your purchase, and the total return on
investment that you expected may not be realized. In deciding whether to
purchase any Offered Certificates, you should make an independent decision as
to the appropriate prepayment assumptions to be used.
If you purchase Class X Certificates, your yield to maturity will be
highly sensitive to the rate and timing of principal payments and losses on the
Mortgage Loans. Each dollar of principal paid, or principal losses realized, on
the Mortgage Loans will reduce the Notional Amount of the Class X Certificates
in an equal amount. Prior to investing in the Class X Certificates, you 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 your failure to recoup fully your initial investment. As of the
Cut-off Date, seven (7) Mortgage Loans, representing 2.13% of the Initial Pool
Balance, are not subject to prepayment lockouts or defeasance and may be the
source of relatively large principal payments. In some of such cases, the
related Mortgage Loan Seller has received notice that the Borrowers are
considering prepaying the Mortgage Loans. Any associated prepayment premiums
may not be sufficient to compensate you for your loss of yield.
See "Yield and Maturity Considerations" in this Prospectus Supplement and
in the Prospectus.
Risks Associated with Borrower Defaults; Delinquencies and Defaults by
Borrowers May Delay Payments to You. The rate and timing of delinquencies and
defaults on the Mortgage Loans will affect the amount of distributions on your
Certificates, the yield to maturity of your Certificates, the rate of principal
payments on your Certificates and the weighted average life of your
Certificates. Delinquencies on the Mortgage Loans, unless covered by P&I
Advances, may result in shortfalls in distributions of interest and/or
principal on your Certificates for the current month. Although any such
shortfalls may be made up on future Distribution Dates, no interest would
accrue on such shortfalls. Thus, any such shortfalls would adversely affect the
yield to maturity of your Certificates.
If you calculate the anticipated yield to maturity for your Certificates
based on an assumed rate of default and amount of losses on the Mortgage Loans
that is lower than the default rate and amount of losses actually experienced
and such additional losses result in a reduction of the distributions on or the
aggregate principal balance or notional amount of your Certificates, your
actual yield to maturity will be lower than you calculated and could, under
certain scenarios, be negative. The timing of any loss on a liquidated Mortgage
Loan that results in a reduction of the distributions on or the aggregate
principal balance or notional amount of your Certificates will also affect the
actual yield to maturity of your Certificates, even if the rate of defaults and
severity of losses are consistent with your expectations. In general, the
earlier a loss occurs, the greater the negative effect on your yield to
maturity.
Even if losses on the Mortgage Loans do not result in a reduction of the
distributions on or the aggregate principal balance or notional amount of your
Certificates, such losses may still affect the timing of distributions on (and,
accordingly, the weighted average life and yield to maturity of) your
Certificates. See "Yield and Maturity Considerations" in this Prospectus
Supplement.
Potential Conflicts of Interest. The Special Servicer will have
considerable latitude in determining whether to liquidate or modify defaulted
Mortgage Loans. See "Servicing of the Mortgage Loans--Modifications, Waivers,
Amendments and Consents" in this Prospectus Supplement. In certain
circumstances, the existing Special Servicer may be replaced by the Holder or
Holders of Certificates representing a majority interest in the Controlling
Class. The interests of the Holders of the Controlling Class (which, unless
there are significant losses on the Mortgage Pool, will be a Class of Private
Certificates) may be in conflict with your interests as an owner of Offered
Certificates. In addition, the Sponsor anticipates that the initial Special
Servicer or an affiliate thereof will acquire certain of the Private
Certificates. There is no restriction on the Master Servicer, the Special
Servicer or any of their respective affiliates acquiring Certificates,
including Private Certificates. Each of the Master Servicer and the Special
Servicer is obligated to perform its servicing duties in accordance with the
Pooling Agreement, including the servicing standard described in this
Prospectus Supplement. As a Holder of Private Certificates, however, each of
the Master Servicer and Special Servicer could have interests when dealing with
defaulted Mortgage Loans or otherwise performing its duties under the Pooling
Agreement that are
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<PAGE>
in conflict with your interests as an owner of Offered Certificates. As an
example, the Special Servicer could determine to liquidate a defaulted Mortgage
Loan and realize any loss thereon at a time when you, as a Certificateholder,
might prefer the continuation of Advances and the postponement of any realized
losses.
In addition, each of the Master Servicer and the Special Servicer services
(and will, in the future, service) existing and new loans for third parties,
including portfolios of loans similar to the Mortgage Loans, in the ordinary
course of its business. The properties securing these mortgage loans may be in
the same markets as certain of the Mortgaged Properties. Consequently,
personnel of the Master Servicer or the Special Servicer, as applicable, may
perform services, on behalf of the Trust, with respect to the Mortgage Loans at
the same time as they are performing services, on behalf of other persons, with
respect to other mortgage loans secured by properties that compete with the
Mortgaged Properties. This may pose inherent conflicts for the Master Servicer
or the Special Servicer. As an example, sales of real properties obtained upon
foreclosure of defaulted mortgage loans of third parties might compete with
contemporaneous sales of Mortgaged Properties obtained upon foreclosure of
defaulted Mortgage Loans, and this could result in lower sales proceeds
received on such Mortgaged Properties.
Certain Rights to Payment that are Senior to Distributions on the
Certificates. The Master Servicer, the Special Servicer and the Trustee are
each entitled to receive out of payments on or proceeds of specific Mortgage
Loans (or, in some cases, out of general collections on the Mortgage Pool)
certain payments or reimbursements for or in respect of compensation, Advances
(with interest thereon) and indemnities, prior to distributions on the
Certificates. In particular, Advances are intended to provide liquidity not
credit support, and the advancing party is entitled to receive interest on its
Advances to offset its cost of funds. A large amount of reimbursements of such
sums in a particular month could result in insufficient cash to pay all amounts
payable on the Certificates on the next Distribution Date.
ERISA Considerations. The regulations that govern pension and other
employee benefit plans subject to ERISA and plans and other retirement
arrangements subject to Section 4975(c) of the Code are complex. Accordingly,
if you are using the assets of such plans or arrangements to acquire Offered
Certificates, you are urged to consult legal counsel regarding consequences
under ERISA and the Code of the acquisition, ownership and disposition of
Offered Certificates. In particular, the purchase or holding of the Class B,
Class C, Class D and Class E Certificates by any such plan or arrangement may
result in a prohibited transaction or the imposition of excise taxes or civil
penalties. As a result, such Certificates should not be acquired by, on behalf
of, or with assets of any such plan or arrangement, unless the purchase and
continued 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 Sections I and III of Prohibited Transaction Class Exemption
("PTCE") 95-60. Sections I and III of PTCE 95-60 provide an exemption from the
prohibited transaction rules for certain transactions involving an insurance
company general account. See "Certain ERISA Considerations" in this Prospectus
Supplement and "ERISA Considerations" in the Prospectus.
Risk of Year 2000. The transition from the year 1999 to the year 2000 may
disrupt the ability of computerized systems to process information. The
collection of payments on the Mortgage Loans, the servicing of the Mortgage
Loans and the distributions on your Certificates are highly dependent upon
computer systems of the Master Servicer, the Special Servicer, the Trustee, the
Borrowers and other third parties. The Master Servicer, the Special Servicer
and the Trustee are currently modifying their computer systems and applications
and expect that they will be year 2000 ready. They are also assessing the year
2000 readiness of key vendors and subcontractors to determine whether key
processes and business activity will be interrupted. If the Master Servicer,
the Special Servicer, the Trustee or any of their respective key vendors and
subcontractors do not have by the year 2000 computerized systems which are able
to correctly interpret data involving dates, the ability of such party to
service the Mortgage Loans (in the case of the Master Servicer and the Special
Servicer) or make distributions with respect to the Certificates (in the case
of the Trustee) may be materially and adversely affected.
RISKS RELATED TO THE MORTGAGE LOANS
Repayment of the Mortgage Loans Depends on the Successful Operation of the
Mortgaged Properties.
The Mortgage Loans are secured by first mortgage liens on interests in, among
others, the following types of real property:
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<PAGE>
o Retail
o Office
o Hospitality
o Multifamily
o Industrial
o Mixed-Use
o Mobile Home Park
o Health Care
Lending on multifamily and commercial properties is generally perceived as
involving greater risk than lending on the security of single-family
residential properties. This is because multifamily and commercial real estate
lending involves larger loans, and repayment is dependent upon the successful
operation of the related real estate project.
The ability of a Mortgaged Property to generate net cash flow may be
adversely affected by a number of factors, including:
o the age, design and construction quality of the property;
o perceptions regarding the safety, convenience and attractiveness of the
property;
o the proximity and attractiveness of competing properties;
o new construction;
o the adequacy of the property's management and maintenance;
o an increase in operating expenses;
o an increase in the capital expenditures needed to maintain the property
or make improvements;
o a decline in the financial condition of a major tenant;
o an increase in vacancy rates; and
o a decline in rental rates as leases are renewed or replaced.
Other factors that may adversely affect the ability of a Mortgaged
Property to generate net cash flow are more general in nature, such as:
o national, regional or local economic conditions (including plant
closings, industry slowdowns and unemployment rates);
o local real estate conditions (such as an oversupply of retail space,
office space or multifamily housing);
o demographic factors;
o customer tastes and preferences; and
o retroactive changes in building codes.
The volatility of net cash flow generated by a Mortgaged Property will be
influenced by many of the foregoing factors, as well as by:
o the length of tenant leases;
o the creditworthiness of tenants;
o the rate at which new rentals occur;
o the percentage of total property expenses in relation to revenue;
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<PAGE>
o the ratio of fixed operating expenses to those that vary with revenues;
and
o the level of capital expenditures required to maintain the property and
to maintain or replace tenants.
Therefore, Mortgaged Properties with short-term or less creditworthy sources of
revenue and/or relatively high operating costs, such as those operated as
health care facilities and hotel properties, can be expected to have more
volatile cash flows than Mortgaged Properties with medium to long-term leases
from creditworthy tenants and/or relatively low operating costs. A decline in
the real estate market will tend to have a more immediate effect on the net
cash flow of such Mortgaged Properties with short-term revenue sources and may
lead to higher rates of delinquency or defaults.
Although no Mortgage Loan has an Underwritten NCF Debt Service Coverage
Ratio below 1.0x, nine (9) Mortgage Loans, which in the aggregate represent
2.94% of the Initial Pool Balance, had for their respective Mortgaged
Properties' most recently reported operating period (identified as "Recent
Year" in Annex A) a Debt Service Coverage Ratio based on Net Operating Income
below 1.0x. See "Annex A" hereto. In general, this was a result of new
construction or significant renovations at the related Mortgaged Property, a
substantial nonrecurring expense with respect to the related Mortgaged Property
or a lease-up period with respect to the related Mortgaged Property having
occurred during the relevant operating period. When the debt service coverage
ratio of a Mortgage Loan is below 1.0x, the revenue derived from the use and
operation of the respective Mortgaged Property is insufficient to cover the
operating expenses of such Mortgaged Property and to pay debt service on such
Mortgage Loan. In such cases, the related Borrower will be required to pay a
portion of such items from sources other than cash flow from the related
Mortgaged Property. If the Borrower ceases to use such alternative cash sources
at a time when operating revenue from the related Mortgaged Property is still
insufficient to cover such items, deferred maintenance at the related Mortgaged
Property and/or a default under the subject Mortgage Loan may occur.
Tenant Concentration Entails Risk. In those cases where a Mortgaged
Property is leased to a single tenant or is primarily leased to one or a small
number of major tenants, a deterioration in the financial condition or a change
in the plan of operations of such a tenant can have particularly significant
effect on the net cash flow generated by such Mortgaged Property. If any such
tenant defaults under or fails to renew its lease, the resulting adverse
financial effect on the operation of such Mortgaged Property will be
substantially more severe than would otherwise be the case with respect to a
property occupied by a large number of less significant tenants. Thirty-eight
(38) of the Mortgaged Properties, representing security for 12.21% of the
Initial Pool Balance, are leased to a single tenant. One hundred forty-five
(145) Mortgaged Properties, representing security for 54.49% of the Initial
Pool Balance, each have at least one tenant that occupies 20% or more of the
net rentable area at the Mortgaged Property.
In addition, Mortgaged Properties operated for retail, office or
industrial properties also may be adversely affected if there is a
concentration of tenants in a particular business or industry at any such
property and that particular business or industry declines.
These adverse financial effects could result in insufficient cash flow
received by a Borrower with respect to a Mortgaged Property which could, in
turn, result in the inability of such Borrower to make required payments on its
Mortgage Loan.
Tenant Bankruptcy Entails Special Risks. The bankruptcy or insolvency of a
major tenant, or a number of smaller tenants, at any particular Mortgaged
Property may adversely affect the income produced by such property. Under the
federal Bankruptcy Code, a tenant has the option of assuming or rejecting any
unexpired lease. If the tenant rejects the lease, the landlord's claim for
breach of the lease would be a general unsecured claim against the tenant
(absent collateral securing the claim). The claim would be limited to the
unpaid rent reserved under the lease for the periods prior to the bankruptcy
petition (or earlier surrender of the leased premises) which are unrelated to
the rejection, plus the greater of one year's rent or 15% of the remaining
reserved rent (but not more than three years' rent).
Such a bankruptcy or insolvency of a tenant could result in a substantial
delay in receipt by the landlord of the amount of its claim, as well as a
substantial delay in the ability of the landlord to relet the tenant's space.
In addition, depending on the assets of the bankrupt tenant, the full amount of
the landlord's claim for breach of the lease may never be ultimately paid.
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Certain Additional Risks Relating to Tenants. The Mortgaged Properties
will be affected by the expiration of leases and the ability of the respective
Borrowers to renew the leases or relet the space on comparable terms. Most of
the Mortgaged Properties are in whole or in part occupied under leases that
expire during the respective terms of the related Mortgage Loans. Even if
vacated space is successfully relet, the costs associated with reletting,
including tenant improvements and leasing commissions in the case of Mortgaged
Properties operated for retail or office purposes, can be substantial and could
reduce cash flow from the Mortgaged Properties. Moreover, if a tenant at any
Mortgaged Property defaults in its lease obligations, the Borrower may incur
substantial costs and experience significant delays associated with enforcing
its rights and protecting its investment, including costs incurred in
renovating and reletting the property.
Property Value May Be Adversely Affected Even When Current Operating
Income Is Not. Various factors may adversely affect the value of the Mortgaged
Properties without affecting their current net cash flow, including:
o changes in interest rates;
o the availability of refinancing sources;
o changes in governmental regulations or fiscal policy;
o zoning or tax laws; and
o potential environmental or other legal liabilities.
A decrease in the value of a Mortgaged Property could result in the Mortgaged
Property not fully securing the amount of the related Mortgage Loan.
Property Management May Affect Property Value. The successful operation of
a Mortgaged Property will depend upon the property manager's performance and
viability. The property manager generally is responsible for:
o operating the property and providing building services;
o responding to changes in the local market;
o planning and implementing the rental structure;
o managing operating expenses; and
o ensuring that maintenance and capital improvements are carried out in a
timely fashion.
Mortgaged Properties deriving revenues primarily from short-term sources,
such as those operated as health care facilities and hotel properties, are
generally more management intensive than properties leased to tenants under
long-term leases.
By controlling costs, providing appropriate services 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 Mortgaged Property.
Factors Affecting the Successful Operation of Retail Sales and Service
Properties. Seventy-nine (79) Mortgaged Properties, securing 31.65% of the
Initial Pool Balance, are retail properties, either anchored or unanchored, at
which customers may purchase consumer goods and other products or may obtain
various entertainment, recreational or personal services (such Mortgaged
Properties, the "Retail Sales and Service Properties").
The Retail Sales and Service Properties consist of--
o Malls.
o Shopping centers.
o Power centers.
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o Individual stores and businesses.
The types of stores and businesses located at the Retail Sales and Service
Properties include--
o Department stores.
o Grocery stores
o Convenience stores.
o Specialty shops and stores.
o Automotive sales and service centers.
o Gasoline stations.
o Movie theaters.
o Salons.
o Bowling alleys.
o Food courts (in the case of certain malls and shopping centers).
The value and successful operation of a Retail Sales and Service Property
depend on the qualities and success of its tenants. The success of tenants at a
Retail Sales and Service Property will be affected by--
o competition from other retail properties;
o perceptions regarding the safety, convenience and attractiveness of the
property;
o demographics of the surrounding area;
o traffic patterns and access to major thoroughfares;
o availability of parking;
o customer tastes and preferences; and
o the drawing power of other tenants (some tenants may have clauses in
their leases that permit them to cease operations at the property if
certain other stores are not operated at the property).
A Retail Sales and Service Property generally must compete with comparable
properties for tenants. Such competition is generally based on--
o rent (the owner of a Retail Sales and Service Property may be required
to offer a potential tenant a "free rent" period);
o tenant improvements (the owner of a Retail Sales and Service Property
may at its own expense significantly renovate and/or adapt space at the
property to meet a particular tenant's needs); and
o the age and location of the property.
Issues Involving Anchor Tenants. The presence or absence of an "anchor
tenant" in a mall or shopping center also can be important, because anchors
play a key role in generating customer traffic and making the mall or center
desirable for other tenants. An "anchor tenant" is a retail tenant whose space
is substantially larger in size than that of other tenants at the same retail
mall or shopping center and whose operation is vital in attracting customers to
the property. Thirty-four (34) Mortgaged Properties, securing 23.98% of the
Initial Pool Balance, are retail properties that the Sponsor considers to be
"anchored". However, two (2) anchor tenants at Mortgaged Properties securing
the Kranzco Loan, as well as anchor tenants of Mortgaged Properties securing
certain other Mortgage Loans, are no longer operating at those sites, though
they continue to pay rent.
The economic performance of an "anchored" Retail Sales and Service
Property will be adversely affected by various factors, including:
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o an anchor tenant's failure to renew its lease;
o termination of an anchor tenant's lease;
o the bankruptcy or economic decline of an anchor tenant or a self-owned
anchor;
o the cessation of the business of a self-owned anchor or of an anchor
tenant (notwithstanding its continued payment of rent); or
o a loss of an anchor tenant's ability to attract shoppers.
New Forms of Competition. The Retail Sales and Service Properties may also
face competition from sources outside a given real estate market or with lower
operating costs. For example, all of the following compete with more
traditional department stores and specialty shops for consumer dollars:
o factory outlet centers;
o discount shopping centers and clubs;
o catalogue retailers;
o home shopping networks;
o internet web sites; and
o telemarketing.
Factors Affecting the Successful Operation of Office Properties.
Forty-seven (47) Mortgaged Properties, securing 18.42% of the Initial Pool
Balance, are office properties (such Mortgaged Properties, the "Office
Properties"). A number of factors will affect the value and successful
operation of an Office Property, including:
o the number and quality of tenants in the building;
o the physical attributes of the building in relation to competing
buildings;
o access to transportation;
o the strength and stability of the local economy;
o the availability of tax benefits;
o the desirability of the location of business; and
o the cost of refitting office space for a new tenant (which is often
significantly higher than the cost of refitting other types of
properties for new tenants).
Factors Affecting the Successful Operation of Hospitality Properties.
Thirty-seven (37) Mortgaged Properties, securing 16.09% of the Initial Pool
Balance, are full service hotels, limited service hotels or motels (such
Mortgaged Properties, the "Hospitality Properties"). Certain of the Hospitality
Properties are associated with national or regional franchise chains, while
others are not affiliated with any franchise chain but may have their own brand
identity.
Various factors may adversely affect the economic performance of a
Hospitality Property, including:
o adverse economic or social conditions, either local, regional or
national (which may limit the amount that can be charged for a room and
reduce occupancy levels);
o the construction of competing hotels or resorts;
o continuing expenditures for modernizing, refurbishing and maintaining
existing facilities prior to the expiration of their anticipated useful
lives (to satisfy such costs, the related Mortgage Loans generally
require the Borrowers to fund reserves for furniture, fixtures and
equipment);
o a deterioration in the financial strength or managerial capabilities of
the owner and operator of a Hospitality Property; and
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<PAGE>
o changes in travel patterns caused by changes in access, energy prices,
labor strikes, relocation of highways, the construction of additional
highways or other factors.
In addition, because hotel and motel rooms generally are rented for short
periods of time, such types of properties tend to respond more quickly to
adverse economic conditions and competition than do other commercial
properties.
Certain Hospitality Properties may be located in areas where the
attraction is a particular business or military base. The economic success of a
Hospitality Property in such an area may depend upon the continued existence of
the particular business or military base.
Risks Relating to Affiliation with a Franchise or Hotel Management
Company. The performance of a Hospitality Property that is affiliated with a
franchise or hotel management company depends in part on:
o the continued existence and financial strength of the franchisor or
hotel management company;
o the public perception of the franchise or hotel chain service mark; and
o the duration of the franchise licensing or management agreements.
Franchise agreements for certain of the Hospitality Properties may
terminate prior to the maturity date of the related Mortgage Loan. Replacement
franchises may require significantly higher fees.
The transferability of franchise license agreements is restricted. In the
event of a foreclosure of a Hospitality Property, neither the Trustee nor the
Special Servicer would have the right to use any franchise license applicable
to such property without the franchisor's consent. Conversely, in the case of
certain Mortgage Loans, the Trustee and Special Servicer may be unable to
remove a franchisor or a hotel management company that it desires to replace
following a foreclosure.
Some states require that liquor licenses be held by a natural person
and/or prohibit the transfer of liquor licenses to any person without the prior
approval of the relevant licensing authority. In the event of a foreclosure of
a Hospitality Property, it is unlikely that the Trustee (or the Special
Servicer on its behalf) or any other purchaser in the foreclosure sale would be
entitled to the rights under any liquor license for such property. If such is
the case, it is possible that a new liquor license could not be obtained.
Factors Affecting the Successful Operation of Multifamily Rental
Properties. Forty-seven (47) Mortgaged Properties, securing 15.48% of the
Initial Pool Balance, are multifamily apartment buildings (such Mortgaged
Properties, the "Multifamily Rental Properties"). Factors that will affect the
value and successful operation of a Multifamily Rental Property include:
o the physical attributes of the apartment building (e.g., its age,
appearance, amenities and construction quality);
o the location of the property;
o the characteristics of the surrounding neighborhood (which may change
over time);
o the ability of management to provide adequate maintenance and
insurance;
o the property's reputation;
o the level of mortgage interest rates (which may encourage tenants to
purchase rather than lease housing);
o the presence of competing properties;
o the tenant mix (e.g., the tenant population may be predominantly
students or may be heavily dependent on workers from a particular
business or personnel from a local military base);
o adverse local or national economic conditions (which may limit the rent
that may be charged and may result in a reduction in timely rent
payments or a reduction in occupancy levels); and
o state and local regulations (which may affect the building owner's
ability to increase rent to the market rent for an equivalent
apartment).
S-33
<PAGE>
Effects of State and Local Regulations. Certain states where the
Multifamily Rental Properties are located regulate the relationship between
owner and tenants and require a written lease, good cause for eviction,
disclosure of fees and notification to residents of changed land use. Certain
states where the Multifamily Rental Properties are located also prohibit
retaliatory evictions, limit the reasons for which a landlord may terminate a
tenancy, limit the reasons for which a landlord may increase rent and prohibit
a landlord from terminating a tenancy solely because the building has been
sold. In addition, numerous counties and municipalities impose rent control
regulations on apartment buildings. These regulations may limit rent increases
to fixed percentages, to percentages of increases in the consumer price index,
to increases set or approved by a governmental agency, or to increases
determined through mediation or binding arbitration. In many cases, the rent
control laws do not permit vacancy decontrol. Any limitations on a Borrower's
ability to raise property rents may impair such Borrower's ability to repay its
Mortgage Loan from its net cash flow or the proceeds of a sale or refinancing
of the related Multifamily Rental Property.
Factors Affecting the Successful Operations of Industrial
Properties. Thirty-five (35) Mortgaged Properties, securing 11.47% of the
Initial Pool Balance, are industrial properties (such Mortgaged Properties, the
"Industrial Properties"). In general, the same factors that affect Office
Properties also affect the value and operation of Industrial Properties,
although any particular factor may affect the two types of properties in
different ways.
For example, Industrial Properties may depend to a greater extent on the
following:
o location, the desirability of which in a particular instance may
depend on:
(i) availability of labor services;
(ii) proximity to supply sources and customers;
(iii) accessibility to various modes of transportation and shipping
(including railways, roadways, airline terminals and ports)
o building design, the desirability of which in a particular instance
may depend on:
(i) ceiling heights;
(ii) column spacing;
(iii) number and depth of loading bays;
(iv) adaptability of the property, because industrial tenants
often need space that is acceptable for highly specialized
activities; and
(v) the quality and creditworthiness of individual tenants,
because Industrial Properties frequently have higher tenant
concentrations.
Some of the Mortgaged Properties May Not Be Readily Convertible to
Alternative Uses. Some of the Mortgaged Properties (in particular, those
operated as health care facilities and mobile home parks and those operated for
industrial purposes) may not be converted to alternative uses without
substantial capital expenditures. If a Mortgaged Property is not readily
adaptable to other uses, its liquidation value may be substantially less than
would otherwise be the case.
Risks Associated with Related Parties. Certain groups of Borrowers under
the Mortgage Loans are under common control. The largest of these groups of
affiliated Borrowers are obligors under Mortgage Loans representing 2.93% of
the Initial Pool Balance. See Annex A to this Prospectus Supplement for
identification of the various groups of related Borrowers. In addition, certain
tenants lease space at more than one Mortgaged Property, and certain tenants
are related to or affiliated with a Borrower under a Mortgage Loan. Also see
Annex A to this Prospectus Supplement for a list of the most significant
tenants at each of the Mortgaged Properties used primarily for commercial
purposes. The bankruptcy or insolvency of, or other financial problems with
respect to, any such Borrower or tenant 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. See "Certain Legal Aspects of Mortgage
Loans--Bankruptcy Laws" in the Prospectus.
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<PAGE>
Risks Relating to Borrowers that are not Special Purpose Entities. The
business activities of certain of the Borrowers are not limited to owning their
respective Mortgaged Properties. Accordingly, the financial success of each
such Borrower may be affected by the performance of its other business
activities, including other real estate interests. Such other business
activities increase the possibility that any such Borrower may become bankrupt
or insolvent.
Loan Concentration Entails Risk. In general, the inclusion in a mortgage
pool of one or more loans that have outstanding principal balances that are
substantially larger than the other mortgage loans in the pool 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 distributed more evenly.
Several of the individual Mortgage Loans and groups of cross-collateralized
Mortgage Loans have Cut-off Date Balances that are substantially higher than
the average Cut-off Date Balance, which is $3,914,487. The following table sets
forth Cut-off Date Balances for the fifteen (15) largest individual Mortgage
Loans and groups of cross-collateralized Mortgage Loans.
TOP 15 INDIVIDUAL LOANS/CROSS-COLLATERALIZED GROUPS
<TABLE>
<CAPTION>
LOAN CUT-OFF
DATE BALANCE/
CROSS- CUT-OFF CROSS-COLLATERALIZED % OF
COLLATERALIZED DATE GROUP CUT-OFF DATE INITIAL POOL
PORTFOLIO / PROPERTY NAME GROUP (1) BALANCE BALANCE BALANCE
- ------------------------- --------- ------- ------- -------
<S> <C> <C> <C> <C>
Kranzco Portfolio .................... $ 65,804,538 $ 65,804,538 7.25%
Oceanside Caldor/Gold Coast Plaza
and Swan Nursery Commons
Portfolio ........................... 48,831,053 48,831,053 5.38
515 22nd Street NW ................... 21,067,759 21,067,759 2.32
Master Realty Portfolio .............. 19,437,074 19,437,074 2.14
Shrewsbury Commons Shopping
Center .............................. 17,416,003 17,416,003 1.92
Ocean City Factory Outlets ........... 16,048,097 16,048,097 1.77
Parcfront Apartments ................. 13,979,720 13,979,720 1.54
850 Boylston Street .................. 13,933,312 13,933,312 1.53
Hollywood Bldgs. 1,2,3,4A&B,
5A&B ................................ Yes (c) 5,492,121
Dixie Business Center ................ Yes (c) 2,185,280
I-95 Building ........................ Yes (c) 893,762
Parkwood Tract ....................... Yes (c) 908,817
Building V ........................... Yes (c) 1,218,622
Buildings S,T, andU .................. Yes (c) 1,585,080
Buildings E,F,G ...................... Yes (c) 1,533,975 13,817,658 1.52
Racanelli Portfolio II ............... 12,871,571 12,871,571 1.42
Waterford Wedgwood Facility .......... 11,000,000 11,000,000 1.21
Hampton Inn & Suites-Jackson ......... Yes (e) 6,067,492
Courtyard by Marriott-Tupelo ......... Yes (e) 4,625,219 10,692,711 1.18
200 Valley Road - Mt. Arlington
Corporate Center .................... Yes (a) 6,839,418
100 Valley Road - Mount Arlington
Corporate Center .................... Yes (a) 3,419,043 10,258,461 1.13
Victorville Towne Center ............. 10,336,405 10,336,405 1.14
University Park Towers ............... 9,643,621 9,643,621 1.06
------------ ------------ -----
Totals .............................. $295,137,982 $295,137,982 32.50%
============ ============ =====
</TABLE>
- ----------
(1) All related Mortgage Loans within a particular Cross-Collateralized Group
are identified by the same letter in parenthesis.
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<PAGE>
Geographic Concentration Entails Risks. A concentration of Mortgaged
Properties in a particular locale, state or region increases the exposure of
the Mortgage Pool to various factors including:
o any adverse local, state or regional economic developments, which could
affect, among other things, the economic viability of tenants, the
market values of Mortgaged Properties and the demand for rental space;
o changes in the relevant real estate market, which could affect, among
other things, the market values of Mortgaged Properties;
o changes in governmental rules and fiscal policies in the jurisdiction
where the Mortgaged Properties are located, which could affect, among
other things, the cost of doing business of such Mortgaged Properties;
and
o acts of nature, including floods, tornadoes and earthquakes, which
could result in significant property damage to Mortgaged Properties
located in the affected areas and general disruption of business and the
local economies.
The Mortgaged Properties are located in thirty-seven (37) states and the
District of Columbia. The following states represent 3% or more of the Initial
Pool Balance:
STATES REPRESENTING MORE THAN THREE PERCENT OF THE INITIAL POOL BALANCE
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
-------------------------------------------------
% OF CUMULATIVE
NUMBER OF AGGREGATE INITIAL % OF STATED U/W CUT-OFF DATE
MORTGAGED CUT-OFF DATE POOL INITIAL POOL MORTGAGE REMAINING NCF LOAN-TO-VALUE
STATES PROPERTIES BALANCE BALANCE BALANCE RATE TERM (MO.) DSCR RATIO
- ----------------- ------------ -------------- ----------- -------------- ---------- ------------ ---------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CA .............. 26 $ 98,195,075 10.81% 10.81% 7.26% 114 1.45x 68.35%
NY .............. 29 97,916,411 10.78 21.59 7.35 112 1.54 70.71
FL .............. 27 92,949,769 10.23 31.83 7.72 110 1.39 71.01
GA .............. 17 80,799,194 8.90 40.73 7.63 102 1.32 70.26
NJ .............. 13 47,738,084 5.26 45.98 7.54 101 1.36 72.09
MD .............. 12 43,914,576 4.84 50.82 7.91 110 1.33 67.55
TX .............. 17 40,482,704 4.46 55.28 7.81 101 1.37 71.24
VA .............. 18 35,741,941 3.94 59.21 7.35 113 1.36 69.82
TN .............. 11 34,144,612 3.76 62.97 7.36 114 1.42 71.88
MA .............. 5 30,716,607 3.38 66.35% 7.30 113 1.34 61.92
-- ------------ ----- ---- --- ---- -----
Totals ......... 175 $602,598,971 66.35% 7.51% 109 1.40x 69.79%
=== ============ ===== ==== === ==== =====
</TABLE>
Risk of Changes in Mortgage Pool Composition. The Mortgage Loans amortize
at different rates and mature over a period of 119 months. In addition, certain
Mortgage Loans may be prepaid or liquidated. As a result of the foregoing, the
relative composition of the Mortgage Pool will change over time.
If you purchase Certificates with a Pass-Through Rate that is equal to or
calculated based upon a weighted average of interest rates on the Mortgage
Loans, your Pass-Through Rate will be affected (and may decline) as the
relative composition of the Mortgage Pool changes.
In addition, as payments and other collections of principal are received
with respect to the Mortgage Loans, the remaining Mortgage Pool may exhibit an
increased concentration with respect to property type, number and affiliation
of Borrowers and geographic location. The later the Assumed Final Distribution
Date for your Certificates (that is, the more subordinate that your
Certificates are relative to other Offered Certificates), the more likely you
are to be exposed to any risks associated with changes in concentrations of
Borrower, loan or property characteristics.
Extension and Default Risks Associated With Balloon Loans and ARD Loans.
Two hundred twenty-eight (228) Mortgage Loans, representing 89.39% of the
Initial Pool Balance, are Balloon Loans, and three (3) Mortgage Loans,
representing 10.37% of the Initial Pool Balance, are ARD Loans. The ability of
a Borrower under a Balloon Loan to make the required Balloon Payment at
maturity, and the
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<PAGE>
ability of a Borrower under an ARD Loan to repay such Mortgage Loan on or
before the related Anticipated Repayment Date, in each case depends upon its
ability either to refinance the loan or to sell the related Mortgaged Property.
The ability of a Borrower to refinance its Mortgage Loan or sell the related
Mortgaged Property will be affected by a number of factors occurring at the
time of attempted refinancing or sale, including:
o the level of available mortgage rates;
o the fair market value of the related Mortgaged Property;
o the Borrower's equity in the related Mortgaged Property;
o the financial condition of the Borrower;
o operating history of the related Mortgaged Property;
o tax laws;
o prevailing general and regional economic conditions; and
o the availability of credit for multifamily or commercial properties.
See "Description of the Mortgage Pool--Certain Terms and Conditions of the
Mortgage Loans" and "--Additional Mortgage Loan Information" in this Prospectus
Supplement and "Risk Factors--Balloon Payments; Borrower Default" in the
Prospectus.
Any failure of a Borrower under a Balloon Loan to timely pay its Balloon
Payment will be a default. Subject to certain limitations, the Special Servicer
may extend, modify or otherwise deal with Mortgage Loans that are in material
default or on which a payment default is reasonably foreseeable. See "Servicing
of the Mortgage Loans--Modifications, Waivers, Amendments and Consents" in this
Prospectus Supplement. There can be no assurance that any extension or
modification will increase the recoveries in a given case.
The failure of a Borrower under an ARD Loan to repay such Mortgage Loan by
the related Anticipated Repayment Date will not constitute a default. Although
an ARD Loan includes several provisions that give the Borrower an incentive to
repay such Mortgage Loan by the related Anticipated Repayment Date, there can
be no assurance that such Borrower will be sufficiently motivated or able to do
so.
If any Balloon Loan remains outstanding past its stated maturity, or if
any ARD Loan remains outstanding past its Anticipated Repayment Date, the
weighted average lives of certain outstanding Classes of the Offered
Certificates may be extended. See "Yield and Maturity Considerations" in this
Prospectus Supplement and in the Prospectus.
Risks of Subordinate and Other Additional Financing. One (1) Mortgaged
Property, representing 0.26% of the Initial Pool Balance, is encumbered by
secured subordinated debt. However, the holder of the subordinate debt has
agreed not to foreclose for so long as the related Mortgage Loan is outstanding
and the Special Servicer is not pursuing a foreclosure action. While all of the
Mortgage Loans either (i) prohibit the related Borrower from encumbering the
Mortgaged Property with additional secured debt or (ii) require the consent of
the holder of the first lien prior to so encumbering such property, a violation
of such prohibition may not become evident until the related Mortgage Loan
otherwise defaults. The existence of any subordinated indebtedness increases
the difficulty of refinancing the related Mortgage Loan at maturity, and the
related Borrower may have difficulty repaying multiple loans. See "Certain
Legal Aspects of Mortgage Loans--Subordinate Financing" in the Prospectus.
Furthermore, certain of the Mortgage Loans permit, and certain Borrowers have
incurred, additional indebtedness for operating costs or similar purposes. For
example, certain Mortgage Loans relating to Hospitality Properties permit the
related Borrower to incur trade debt and other payables. Additional debt, in
any form, may cause a diversion of funds from property maintenance and increase
the likelihood that the Borrower will become the subject of a bankruptcy
proceeding. The Sponsor has not been able to confirm the existence of any other
debt of the respective Borrowers under the Mortgage Loans.
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<PAGE>
Owners of certain Borrowers under the Mortgage Loans may incur so-called
"mezzanine debt" that is secured by their ownership interests in such
Borrowers. Such financing effectively reduces the indirect equity interest of
any such owner in the related Mortgaged Property.
Limited Recourse. You should consider all of the Mortgage Loans to be
nonrecourse loans (i.e., in the event of a default, recourse will be limited to
the Mortgaged Property securing the defaulted Mortgage Loan). 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
such Borrower or guarantor. Consequently, payment on each Mortgage Loan prior
to maturity is dependent on one or more of the following:
o the sufficiency of the net cash flow from the Mortgaged Property;
o the market value of the Mortgaged Property at maturity; or
o the ability of the Borrower to refinance the Mortgaged Property.
None of the Mortgage Loans is insured or guaranteed by any governmental
agency.
Environmental Risks. A third-party environmental consultant conducted an
environmental site assessment (or updated a previously conducted assessment)
with respect to each Mortgaged Property within the 24-month period preceding
the Cut-off Date (or, in the case of eleven (11) Mortgaged Properties,
representing 3.89% of the Initial Pool Balance, for which such assessments or
updates were obtained in connection with origination, during the period 25 to
54 months preceding the Cut-off Date). Each such environmental site assessment
or update generally complied with industry-wide standards. In the case of
certain Mortgaged Properties, a "Phase II" environmental assessment was also
performed. If any such assessment or update revealed a material adverse
environmental condition or circumstance at any Mortgaged Property, then
(depending on the nature of the condition or circumstance) one of the following
actions has been or is expected to be taken--
o an environmental indemnity was obtained from an affiliate of the
Borrower;
o an operations and maintenance plan (including, in several cases, in
respect of asbestos-containing materials ("ACMs"), lead-based paint
and/or radon) or periodic monitoring of nearby properties has been or is
expected to be implemented in the manner and within the time frames
specified in the related Mortgage Loan documents; or
o an escrow reserve was established to cover the estimated cost of
remediation.
There can be no assurance, however, that the environmental assessments
identified all environmental conditions and risks or that the related Borrowers
will implement all recommended operations and maintenance plans. In addition,
the current environmental condition of the Mortgaged Properties could be
adversely affected by tenants or by the condition of land or operations in the
vicinity of the Mortgaged Properties (such as underground storage tanks).
Liability of the Trust Under Environmental Laws. Various environmental
laws may make a current or previous owner or operator of real property liable
for the costs of removal or remediation of hazardous or toxic substances on,
under or adjacent to such property. Those laws often impose liability whether
or not the owner or operator knew of, or was responsible for, the presence of
such hazardous or toxic substances. For example, certain laws impose liability
for release of ACMs into the air or require the removal or containment of ACMs.
The owner's liability for any required remediation generally is not limited by
law and accordingly could exceed the value of the property and/or the aggregate
assets of the owner. In addition, the presence of hazardous or toxic
substances, or the failure to remediate the adverse environmental condition,
may adversely affect the owner's or operator's ability to use such property. In
certain states, contamination of a property may give rise to a lien on the
property to ensure the costs of cleanup. In some states this lien has priority
over the lien of an existing mortgage. In addition, third parties may seek
recovery from owners or operators of real property for personal injury
associated with exposure to hazardous substances. Persons who arrange for the
disposal or treatment of hazardous or toxic substances may be liable for the
costs of removal or remediation of such substances at the disposal or treatment
facility.
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<PAGE>
The federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA"), as well as certain other federal
and state laws, provide that a secured lender (such as the Trust) may be
liable, as an "owner" or "operator" of the real property, regardless of whether
the Borrower or a previous owner caused the environmental damage, if (i) agents
or employees of the lender are deemed to have participated in the management of
the Borrower or (ii) under certain conditions the lender actually takes
possession of a Borrower's property or control of its day-to-day operations (as
for example, through the appointment of a receiver or foreclosure). Although
recently enacted legislation clarifies the activities in which a lender may
engage without becoming subject to liability under CERCLA and similar federal
laws, such legislation has no applicability to state environmental laws.
Moreover, future laws, ordinances or regulations could impose material
environmental liability.
See "Certain Legal Aspects of the Mortgage Loans--Environmental Risks" in
the Prospectus.
Risks Related to Lead-Based Paint at Multifamily Properties. Federal law
requires owners of residential housing constructed prior to 1978 to disclose to
potential residents or purchasers any condition on the property that causes
exposure to lead-based paint and the potential hazards to pregnant women and
young children, including that the ingestion of lead-based paint chips and/or
the inhalation of dust particles from lead-based paint by children can cause
permanent injury, even at low levels of exposure. Property owners can be held
liable for injuries to their tenants resulting from exposure under various laws
that impose affirmative obligations on property owners of residential housing
containing lead-based paint. The environmental assessments revealed the
existence of lead-based paint at certain of the Multifamily Properties.
Generally, the Borrowers have either implemented operations and maintenance
programs or are in the process of removing the lead-based paint.
Risks Related to Off-Site LUSTs. Certain of the Mortgaged Properties are
in the vicinity of sites containing leaking underground storage tanks ("LUSTs")
or other potential sources of groundwater contamination. In at least one such
instance, the party responsible for the groundwater contamination has been
identified. Although the owners of those Mortgaged Properties and the Trust may
not have legal liability for contamination of the Mortgaged Properties from
such off-site sources, the enforcement of rights against third parties may
result in additional transaction costs.
Risks Related to ACMs. At a number of the Mortgaged Properties, ACMs have
been detected through sampling by environmental consultants. The ACMs found at
these Mortgaged Properties are not expected to present a significant risk as
long as the related Mortgaged Property continues to be properly managed. In
connection therewith, the related Borrowers have agreed to establish and
maintain operations and maintenance or abatement programs, have funded
environmental reserves and/or have delivered or caused the delivery of an
environmental indemnity. Nonetheless, there can be no assurance that the value
of a Mortgaged Property as collateral for the Mortgage Loan will not be
adversely affected by the presence of ACMs.
Risks Related to the Special Servicer Obtaining an Environmental
Assessment Prior to taking Remedial Action. The Pooling Agreement will provide
that before the Special Servicer acquires title to a Mortgaged Property on
behalf of the Trust or assumes operation of a Mortgaged Property, it must
obtain an environmental assessment of the property. Although this requirement
will decrease the likelihood that the Trust will become liable under any
environmental law, it will effectively preclude foreclosure until a
satisfactory environmental assessment is obtained (or until any required
remedial action is thereafter taken or a determination is made that such action
need not be taken or need not be taken prior to foreclosure). Accordingly,
there is some risk that the Mortgaged Property will decline in value while this
assessment is being obtained. Moreover, there is no assurance that this
requirement will effectively insulate the Trust from potential liability under
environmental laws. See "Description of the Pooling Agreements--Realization
Upon Defaulted Mortgage Loans" in the Prospectus.
Risks Related to Property Condition. Professional engineers inspected
substantially all of the Mortgaged Properties during the 24-month period
preceding the Cut-off Date (except for thirteen (13) Mortgaged Properties,
representing 6.22% of the Initial Pool Balance, the Mortgage Loans secured by
which were originated more than 24 months prior to the Cut-off Date) to assess
the structure, exterior
S-39
<PAGE>
walls, roofing, interior construction, mechanical and electrical systems and
general condition of the site, buildings and other improvements located at each
such Mortgaged Property. For fifteen (15) Mortgaged Properties, representing
8.10% of the Initial Pool Balance, the inspections identified conditions at a
particular Mortgaged Property requiring repairs or replacements estimated to
cost in excess of $100,000. In such cases, the related Mortgage Loan Seller or
other originator generally required the related Borrower to fund reserves, or
deliver letters of credit or other instruments, to cover such costs. With
respect to four (4) of such Mortgaged Properties, representing 2.21% of the
Initial Pool Balance, the Mortgage Loans related to which were originated prior
to April, 1998, the related Mortgage Loan Seller has been advised that all
required repairs have been completed. There is no assurance, however, that all
conditions requiring repair or replacement were identified or that such
reserves, letters of credit or other instruments will be adequate to cover the
corresponding costs.
Reserves May Be Insufficient. Most of the Mortgage Loans require that
reserves be funded on a monthly basis from cash flow generated by the related
Mortgaged Property to cover ongoing monthly, semi-annual or annual expenses
such as taxes and/or insurance. Most of the Mortgage Loans also required
reserves to be established, or letters of credit or other instruments to be
delivered, upon the closing of the Mortgage Loan to fund identified capital
expenditure items, certain leasing costs, identified environmental remediation
costs or identified engineering remediation costs when such needs were
identified. Such reserves, letters of credit or other instruments may not be
sufficient to offset the actual costs of the items which they were intended to
cover. In addition, cash flow from the Mortgaged Properties may not be
sufficient to fund fully the ongoing monthly reserve requirements. Any such
insufficiency may have an adverse effect on the operations or physical
condition of the Mortgaged Property, as applicable.
Limitations on Enforceability of Cross-Collateralization. Six (6) separate
groups of Mortgage Loans, representing 1.52%, 1.18%, 1.13%, 0.36%, 0.32% and
0.20%, respectively, of the Initial Pool Balance, provide for some form of
cross-collateralization between the Mortgage Loans in each such group (such
Mortgage Loans, collectively, the "Cross-Collateralized Mortgage Loans"; and
each such group, a "Cross-Collateralized Group"). In addition, twelve (12)
individual Mortgage Loans, representing 7.25%, 5.38%, 2.14%, 1.42%, 0.85%,
0.83%, 0.51%, 0.43%, 0.36%, 0.29%, 0.16% and 0.15%, respectively, of the
Initial Pool Balance, are secured by multiple Mortgaged Properties (each such
individual Mortgage Loan, a "Multi-Property Loan"). The purpose of these
arrangements is to reduce the risk of default or ultimate loss as a result of
an inability of a Mortgaged Property to generate sufficient net cash flow to
pay debt service. However, certain of the Cross-Collateralized Groups provide
for a full or partial termination of the applicable cross-collateralization,
and certain of the Cross-Collateralized Groups and Multi-Property Loans permit
the release of one or more of the related Mortgaged Properties from the related
mortgage lien, upon the satisfaction of the conditions described under
"Description of the Mortgage Pool--Certain Terms and Conditions of the Mortgage
Loans" in this Prospectus Supplement. Multi-Property Loans and
Cross-Collateralized Groups collectively represent 24.48% of the Initial Pool
Balance.
Certain of the Multi-Property Loans and Cross-Collateralized Groups are,
in each such case, secured by Mortgaged Properties located in two or more
states. Such Multi-Property Loans and Cross-Collateralized Groups collectively
represent 11.09% of the Initial Pool Balance. Foreclosure actions are brought
in state court and the courts of one state cannot exercise jurisdiction over
property in another state. Therefore, upon a default under any such Mortgage
Loan or group of Mortgage Loans, it may not be possible to foreclose on all
related Mortgaged Properties simultaneously.
Certain of the Multi-Property Loans and most of the Cross-Collateralized
Groups involve, in each such case, multiple Borrowers. 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. A lien granted by a Borrower to secure repayment of another
Borrower's Mortgage Loan (or portion of a single Multi-Property Loan allocated
to another Borrower) could be avoided if a court were to determine that (i) the
Borrower/debtor 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/debtor did not,
when it allowed its Mortgaged Property to be encumbered by a lien securing the
entire indebtedness represented by the other Mortgage Loan (or another portion
of such
S-40
<PAGE>
Multi-Property Loan), receive fair consideration or reasonably equivalent value
for pledging such Mortgaged Property for the equal benefit of the other
Borrower. Among other things, a legal challenge to the granting of the liens
may focus on the benefits realized by such Borrower from the respective
Mortgage Loan proceeds, as well as the benefit to it from the
cross-collateralization. If a court were to conclude that the granting of the
liens was an avoidable fraudulent conveyance, that court could nullify the lien
or mortgage effecting the cross-collateralization and nullify or subordinate
all or part of the pertinent Mortgage Loan to existing or future indebtedness
of that Borrower. The court could also allow the Borrower to recover payments
it made pursuant to the avoided cross-collateralization.
Limitations on Enforceability and Collectability of Prepayment
Premiums. With limited exceptions, all of the Mortgage Loans require that
during some portion of the loan term any voluntary principal prepayment be
accompanied by a prepayment fee, charge or premium (a "Prepayment Premium").
The Prepayment Premiums are generally calculated either as a percentage of the
principal amount prepaid or on the basis of a yield maintenance formula. See
"Description of the Mortgage Pool--Certain Terms and Conditions of the Mortgage
Loans--Prepayment Provisions" in this Prospectus Supplement. Any Prepayment
Premiums collected on the Mortgage Loans will be distributed to the persons, in
the amounts and in accordance with the priorities described in this Prospectus
Supplement under "Description of the Offered
Certificates--Distributions--Distributions of Prepayment Premiums". The Sponsor
makes no representation or warranty, however, as to the collectability of any
Prepayment Premium.
The enforceability of provisions providing for the payment of a Prepayment
Premium upon an involuntary prepayment is unclear under the laws of a number of
states. Accordingly, the obligation of any Borrower to pay a Prepayment Premium
in connection with an involuntary prepayment may not be enforceable under
applicable law. In addition, even if the obligation is enforceable, any related
liquidation proceeds may not be sufficient to make such payment. Liquidation
proceeds are generally applied to cover outstanding servicing expenses and
unpaid principal and interest prior to being applied to cover any Prepayment
Premium. Furthermore, the Special Servicer has authority to 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" in this Prospectus Supplement and "Certain Legal Aspects of Mortgage
Loans--Default Interest and Limitations on Prepayments" in the Prospectus.
In certain circumstances involving the sale of Mortgage Loans by the
Trust, no Prepayment Premium will be payable. See "Description of the Mortgage
Pool--Cures and Repurchases", "Servicing of the Mortgage Loans--Sale of
Defaulted Mortgage Loans" and "Description of the Offered Certificates--
Termination" in this Prospectus Supplement.
Limitations on Enforceability of Other Provisions. All of the Mortgage
Loans contain due-on-sale clauses, each of which permits the lender (with
limited exceptions) to accelerate the maturity of the Mortgage Loan upon the
sale, transfer or conveyance of (i) the related Mortgaged Property or (ii)
certain interests in the related Borrower. All of the Mortgage Loans also
include debt-acceleration clauses, each of which permits the lender to
accelerate the debt upon specified monetary or non-monetary defaults by the
Borrower. The courts of all states will enforce acceleration clauses in the
event of a material payment default. A state equity court, however, may refuse
to allow the foreclosure of a mortgage or deed of trust or to permit the
acceleration of the indebtedness if--
o the default is deemed to be immaterial,
o the exercise of such remedies would be inequitable or unjust, or
o the circumstances would render the acceleration unconscionable.
Most of the Mortgage Loans are secured by, in each such case, an
assignment of leases and rents pursuant to which the related Borrower assigned
its right, title and interest as landlord under the leases on the related
Mortgaged Property and the income derived therefrom to the lender as further
security for the related Mortgage Loan, while retaining a license to collect
rents for so long as there is no default. In the event the Borrower defaults,
the license terminates and the lender is entitled to collect rents. In some
cases, such assignments may not be perfected as security interests prior to
actual possession of the cash flow. In some cases, state law may require that
the lender take possession of the Mortgaged Property and
S-41
<PAGE>
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 mortgagor, the lender's ability to collect the rents may
be delayed or otherwise adversely affected.
Limitations of Appraisals. Appraisals were obtained for all of the
Mortgaged Properties. Appraisals represent the analysis and opinion of an
appraiser. They are not guaranties 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. Moreover, 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. Information regarding the appraised values of the Mortgaged Properties is
presented, for illustrative purposes only, on Annex A to this Prospectus
Supplement.
Tax Considerations Related to Foreclosure. If the Trust were to acquire a
Mortgaged Property pursuant to a foreclosure or deed in lieu of foreclosure,
the Special Servicer would be required to retain an independent contractor to
operate and manage the Mortgaged Property. Any net income from such operation
and management, other than qualifying "rents from real property" (as defined in
Section 865(d) of the Code), or any rental income based on the net profits of a
tenant or sub-tenant or allocable to a service that is non-customary in the
area and for the type of building involved, will subject the Trust to federal
(and possibly state or local) tax on such income at the highest marginal
corporate tax rate (currently 35% for federal purposes), thereby reducing net
proceeds available for distribution on the Certificates.
Uninsured Loss; Sufficiency of Insurance. The Borrowers under the Mortgage
Loans are generally required to maintain comprehensive liability insurance,
"all-risk" fire, casualty and hazard insurance, flood insurance (if required by
applicable law) and rental income insurance on the Mortgaged Properties with
policy specifications, limits and deductibles customarily carried for similar
properties. Certain types of losses, however, may be either uninsurable or not
economically insurable, such as losses due to riots or acts of war or
earthquakes. Should an uninsured loss occur, the Borrower could lose both its
investment in and its anticipated profits and cash flow from its Mortgaged
Property, which would adversely affect the Borrower's ability to make payments
under its Mortgage Loan. Although, in general, the Borrowers have agreed to
insure their respective Mortgaged Properties as described under "Description of
the Mortgage Pool--Certain Underwriting Matters--Hazard, Liability and Other
Insurance" in this Prospectus Supplement, there is a possibility of casualty
losses on a Mortgaged Property for which insurance proceeds may not be
adequate. Consequently, there can be no assurance that any loss incurred will
not exceed the limits of policies obtained. In addition, earthquake insurance
is generally not required to be maintained by a Borrower, even in respect of
Mortgaged Properties located in California. Mortgage Loans, representing
approximately 10.81% of the Initial Pool Balance, are secured by Mortgaged
Properties located in California.
Risks Particular to Ground Leases. Several of the Mortgage Loans are
secured by first mortgage liens on the related Borrower's leasehold interest in
all or a portion of the related Mortgaged Property. Upon the bankruptcy of a
lessor or a lessee under a ground lease, the debtor entity has the right to
assume (continue) or reject (breach and vacate the premises) the ground lease.
If a debtor lessor rejects the lease, the lessee has the right to remain in
possession of its leased premises under the rent reserved in the lease for the
term (including renewals). If a debtor lessee/Borrower rejects any or all of
its leases, the Borrower's lender may not be able to succeed to the
lessee/Borrower's position under the lease unless the lessor has specifically
granted the lender such right. If both the lessor and the lessee/Borrowers are
involved in bankruptcy proceedings, the Trustee may be unable to enforce the
bankrupt lessee/Borrower's obligation to refuse to treat as terminated a ground
lease rejected by a bankrupt lessor. In such circumstances, it is possible that
the Trustee could be deprived of its security interest in the leasehold estate,
notwithstanding lender protection provisions contained in the lease or
mortgage. See "Certain Legal Aspects of Mortgage Loans--Foreclosure--Leasehold
Risks" in the Prospectus.
Risks Associated With Zoning Compliance. Certain of the Mortgaged
Properties may not comply with current zoning laws due to changes in zoning
requirements since construction, including density, use,
S-42
<PAGE>
parking and set back requirements. The operation of these properties is
considered to be a "permitted non-conforming use" and/or the improvements
thereon are considered to be legal non-conforming improvements. This means that
the Borrower is not required to alter its structure to comply with the new law;
however, the Borrower may be limited in its ability to rebuild the premises "as
is" in the event of a substantial casualty loss or may be required to rebuild
within a specified time period. This may adversely affect the cash flow
available following such loss. If a substantial casualty were to occur,
insurance proceeds may not be sufficient to pay the Mortgage Loan in full. In
addition, if the Mortgaged Property were repaired or restored in conformity
with the current law, the value of the Mortgaged Property or the
revenue-producing potential of the Mortgaged Property may be less than that
which existed before the casualty, or the costs of repair and restoration, to
the extent not covered by insurance, may impair the Borrower's ability
thereafter to operate the Mortgaged Property and/or make required payments on
the related Mortgage Loan.
Costs Associated With Compliance With ADA. Under the Americans with
Disabilities Act of 1990 (the "ADA"), all public accommodations are required to
meet certain federal requirements related to access and use by disabled
persons. If a Mortgaged Property does not currently comply with the ADA, the
related Borrower may be required to incur significant costs in order to bring
the property into compliance. In addition, noncompliance could result in the
imposition of fines by the federal government or an award or damages to private
litigants.
Litigation. You should be aware that there may be legal proceedings
pending and, from time to time, threatened against the Borrowers. The Sponsor
cannot provide any assurance that such litigation will not have a material
adverse effect on the payments to you.
S-43
<PAGE>
DESCRIPTION OF THE MORTGAGE POOL
GENERAL
The Mortgage Pool has an Initial Pool Balance of $908,161,006, subject to
a variance of plus or minus 5%. The Initial Pool Balance is equal to the
aggregate Cut-off Date Balance of the Mortgage Loans. The "Cut-off Date
Balance" of each Mortgage Loan is equal to its unpaid principal balance as of
the Cut-off Date, after application of all payments due in respect of such
Mortgage Loan on or before such date, whether or not received by such date. The
Cut-off Date Balances of the Mortgage Loans range from $282,536 to $65,804,538,
and the Mortgage Loans have an average Cut-off Date Balance of $3,914,487.
This "Description of the Mortgage Pool" section contains certain
statistical information on the Mortgage Loans and the Mortgaged Properties. In
reviewing such information, as well as the statistical information on the
Mortgage Loans and the Mortgaged Properties contained elsewhere in this
Prospectus Supplement, you should be aware that--
o All numerical information provided on the Mortgage Loans is provided on
an approximate basis.
o All weighted average information provided on the Mortgage Loans reflects
weighting of the Mortgage Loans by their Cut-off Date Balances.
o When information on the Mortgaged Properties is expressed as a percentage
of the Initial Pool Balance, such percentage is based upon the Cut-off
Date Balances of the related Mortgage Loans. Except where otherwise
specified in the respective loan documents, the Cut-off Date Balances
attributed to the properties collateralizing a Multi-Property Loan were
derived by allocating to each such property a portion of the related
Mortgage Loan's Cut-off Date Balance, pro rata based upon the Appraised
Values of such Mortgaged Properties.
o Whenever loan level information such as loan-to-value or debt service
coverage ratio is presented in the context of Mortgaged Properties, the
loan level statistic attributed to the Mortgaged Property is the same as
the statistic for the related Mortgage Loan.
o Statistical information on the Mortgage Loans may change prior to the
date of issuance of the Certificates due to changes in the composition of
the Mortgage Pool after the Cut-off Date.
o Certain capitalized terms used with respect to the Mortgage Loans are
defined under "Summary of Prospectus Supplement--The Mortgage Loans and
Mortgaged Properties" in, or on Annex A to, this Prospectus Supplement.
Each Mortgage Loan constitutes the obligation of the Borrower to repay a
specified sum with interest. Each Mortgage Loan is evidenced by a promissory
note (a "Mortgage Note") and secured by a mortgage, deed of trust, deed to
secure debt or other similar security instrument (a "Mortgage") that creates a
first mortgage lien on the fee simple and/or leasehold interest of the Borrower
or another party in one or more Mortgaged Properties.
S-44
<PAGE>
The table below shows the number of, and the approximate percentage of the
Initial Pool Balance secured by, Mortgaged Properties operated for each
indicated purpose:
PROPERTY TYPES
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
------------------------------------------------
% OF
NUMBER OF AGGREGATE INITIAL MAXIMUM STATED U/W CUT-OFF DATE
MORTGAGED CUT-OFF POOL CUT-OFF MORTGAGE REMAINING NCF LOAN-TO-
PROPERTY TYPES PROPERTIES DATE BALANCE BALANCE DATE BALANCE RATE TERM (MO.) DSCR VALUE RATIO
- -------------------------- ------------ -------------- ----------- -------------- ---------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Anchored Retail .......... 34 $217,773,052 23.98% $39,862,084 7.30% 113 1.31x 73.00%
Office ................... 47 167,246,897 18.42 21,067,759 7.35 113 1.37 69.42
Hotel .................... 37 146,144,543 16.09 7,931,838 7.59 113 1.47 67.61
Multi-family ............. 47 140,563,364 15.48 13,979,720 7.63 104 1.33 74.16
Industrial ............... 35 104,129,598 11.47 11,000,000 7.49 106 1.41 70.92
Retail ................... 45 69,640,363 7.67 4,702,414 7.99 108 1.43 67.47
Mixed Use ................ 9 34,467,696 3.80 6,288,362 7.40 113 1.48 58.44
Mobile Home Park ......... 6 13,979,680 1.54 4,616,425 7.25 111 1.32 71.07
Office/Retail ............ 3 9,432,009 1.04 4,920,639 9.21 96 1.38 62.85
Health Care .............. 1 2,781,052 0.31 2,781,052 7.61 116 4.73 21.23
Other .................... 1 2,002,751 0.22 $ 2,002,751 7.70 114 1.31 66.76
-- ------------ ------ ---- --- ---- -----
Totals ................. 265 $908,161,006 100.00% 7.51% 110 1.39x 70.13%
=== ============ ====== ==== === ==== =====
</TABLE>
The table below shows the number of, and the approximate percentage of the
Initial Pool Balance secured by, first mortgage liens on each of the specified
interests in the related Mortgaged Properties.
OWNERSHIP INTEREST
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
-----------------------------------------------
AGGREGATE % OF MAXIMUM CUT-OFF
NUMBER OF CUT-OFF INITIAL CUT-OFF STATED U/W DATE
MORTGAGED DATE POOL DATE MORTGAGE REMAINING NCF LOAN-TO-
OWNERSHIP INTEREST PROPERTIES BALANCE BALANCE BALANCE RATE TERM (MO.) DSCR VALUE RATIO
- -------------------- ------------ --------------- ----------- -------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fee Simple ......... 257 $866,714,835 95.44% $39,862,084 7.51% 110 1.39x 70.34%
Leasehold .......... 7 37,703,051 4.15 16,048,097 7.30 114 1.41 65.48
Both Fee Simple and
Leasehold ......... 1 3,743,120 0.41 $ 3,743,120 7.80 111 1.43 69.32
--- ------------ ------ ---- --- ---- -----
Totals ........... 265 $908,161,006 100.00% 7.51% 110 1.39x 70.13%
=== ============ ====== ==== === ==== =====
</TABLE>
S-45
<PAGE>
The table below shows the number of, and the approximate percentage of the
Initial Pool Balance secured by, Mortgaged Properties located in the indicated
states.
STATES REPRESENTING MORE THAN THREE PERCENT OF THE INITIAL POOL BALANCE
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
--------------------------------------------------
% OF CUMULATIVE
NUMBER OF AGGREGATE INITIAL % OF STATED U/W CUT-OFF
MORTGAGED CUT-OFF DATE POOL INITIAL POOL MORTGAGE REMAINING NCF DATE LOAN-
STATES PROPERTIES BALANCE BALANCE BALANCE RATE TERM (MO.) DSCR TO-VALUE RATIO
- ----------------- ------------ -------------- ----------- -------------- ---------- ------------ ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CA .............. 26 $ 98,195,075 10.81% 10.81% 7.26% 114 1.45x 68.35%
NY .............. 29 97,916,411 10.78 21.59 7.35 112 1.54 70.71
FL .............. 27 92,949,769 10.23 31.83 7.72 110 1.39 71.01
GA .............. 17 80,799,194 8.90 40.73 7.63 102 1.32 70.26
NJ .............. 13 47,738,084 5.26 45.98 7.54 101 1.36 72.09
MD .............. 12 43,914,576 4.84 50.82 7.91 110 1.33 67.55
TX .............. 17 40,482,704 4.46 55.28 7.81 101 1.37 71.24
VA .............. 18 35,741,941 3.94 59.21 7.35 113 1.36 69.82
TN .............. 11 34,144,612 3.76 62.97 7.36 114 1.42 71.88
MA .............. 5 30,716,607 3.38 66.35 7.30 113 1.34 61.92
-- ------------ ----- ---- --- ---- -----
Totals ......... 175 $602,598,971 66.35% 7.51% 109 1.40x 69.79%
=== ============ ===== ==== === ==== =====
</TABLE>
The remaining Mortgaged Properties are located throughout twenty-seven
(27) other states and the District of Columbia. No more than 3% of the Initial
Pool Balance is secured by Mortgaged Properties located in any such other
jurisdiction.
The Mortgage Pool includes six (6) Cross-Collateralized Groups. Each
Cross-Collateralized Group consists of two or more Mortgage Loans that are
cross-collateralized and cross-defaulted with each other. The Mortgage Pool
also includes twelve (12) Multi-Property Loans. One distinction between a
Multi-Property Loan and a Cross-Collateralized Group is that a Multi-Property
Loan is evidenced by a single Mortgage Note and a Cross-Collateralized Group is
evidenced by multiple Mortgage Notes (typically, one for each Mortgage Loan in
the group). Certain Cross-Collateralized Groups and Multi-Property Loans permit
the release of one or more of the related Mortgaged Properties or, in the case
of a Cross-Collateralized Group, a termination of the applicable
cross-collateralization, subject, in each such case, to the fulfillment of one
or more of the following conditions--
o the satisfaction of certain Mortgaged Property performance criteria;
o the satisfaction of certain debt service coverage and loan-to-value
tests; and/or
o the payment by the related Borrower of a release price equal to a
specified percentage (generally between 100% and 125%) of the allocated
loan amount for the Mortgaged Property to be released.
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<PAGE>
Set forth below are the number of Mortgaged Properties securing, and the
approximate percentage of the Initial Pool Balance represented by, each
Multi-Property Loan and Cross-Collateralized Group:
MULTI-PROPERTY LOANS AND CROSS-COLLATERALIZED GROUPS
<TABLE>
<CAPTION>
LOAN CUT-OFF
DATE BALANCE/
CROSS CROSS-COLLATERALIZED % OF
COLLATERALIZED CUT-OFF DATE GROUP INITIAL POOL
PORTFOLIO / PROPERTY NAME GROUP(1) BALANCE CUT-OFF DATE BALANCE BALANCE
- --------------------------------------------- ---------------- -------------- ---------------------- -------------
<S> <C> <C> <C> <C>
Kranzco Portfolio (Multi-Property Loan) ..... $ 65,804,538 $ 65,804,538 7.25%
Oceanside Caldor/Gold Coast Plaza and
Swan Nursery Commons Portfolio
(Multi-Property Loan) ...................... 48,831,053 48,831,053 5.38
Master Realty Portfolio (Multi-Property
Loan) ...................................... 19,437,074 19,437,074 2.14
Hollywood Bldgs. 1, 2, 3, 4A&B, 5A&B ........ Yes (c) 5,492,121
Dixie Business Center ....................... Yes (c) 2,185,280
I-95 Building ............................... Yes (c) 893,762
Parkwood Tract .............................. Yes (c) 908,817
Building V .................................. Yes (c) 1,218,622
Buildings S, T, and U ....................... Yes (c) 1,585,080
Buildings E, F, G ........................... Yes (c) 1,533,975 13,817,658 1.52
Racanelli Portfolio II (Multi-Property
Loan) ...................................... 12,871,571 12,871,571 1.42
Hampton Inn & Suites-Jackson ................ Yes (e) 6,067,492
Courtyard by Marriott-Tupelo ................ Yes (e) 4,625,219 10,692,711 1.18
200 Valley Road - Mt. Arlington
Corporate Center ........................... Yes (a) 6,839,418
100 Valley Road - Mount Arlington
Corporate Center ........................... Yes (a) 3,419,043 10,258,461 1.13
Day Care Centers Portfolio
(Multi-Property Loan) ...................... 7,748,097 7,748,097 0.85
Distribution Portfolio (Multi-Property
Loan) ...................................... 7,566,905 7,566,905 0.83
HTW Portfolio ............................... 4,665,729 4,665,729 0.51
Racanelli Portfolio I ....................... 3,943,314 3,943,314 0.43
Stoffel Seals-GA ............................ Yes (f) 1,492,738
Stoffel Seals-NY ............................ Yes (f) 1,791,286 3,284,024 0.36
Sierra Center Portfolio ..................... 3,253,042 3,253,042 0.36
Deerwood I Apartments ....................... Yes (b) 1,945,462
Deerwood II Apartments ...................... Yes (b) 972,237 2,917,699 0.32
University Plaza/Winding River Plaza
Portfolio (Multi-Property Loan) ............ 2,618,172 2,618,172 0.29
Bardin Square Shopping Center ............... Yes (d) 1,044,961
Country Day Plaza Shopping Center ........... Yes (d) 756,353 1,801,314 0.20
Bennett Apartments/Edgepark Apartments
Portfolio (Multi-Property Loan) ............ 1,463,198 1,463,198 0.16
Willowgrove Apartments/Lin-Nor
Apartments Portfolio (Multi-Property
Loan) ...................................... $ 1,364,828 1,364,828 0.15
------------ ------------ -----
Totals ................................... $222,339,386 $222,339,386 24.48%
============ ============ =====
</TABLE>
- ----------
(1) All related loans within a particular Cross-Collateralized Group are
identified by the same letter in parenthesis.
S-47
<PAGE>
The Mortgage Pool includes one group of three (3) Mortgage Loans,
representing 1.58% of the Initial Pool Balance, that are cross-defaulted but
not cross-collerateralized.
You should consider each Mortgage Loan to be a nonrecourse obligation of
the Borrower (i.e., in the event of a payment default by the Borrower, recourse
will be limited to the related Mortgaged Property or Properties for
satisfaction of the Borrower's obligations). In those cases where recourse to a
Borrower or guarantor is permitted under the related Mortgage Loan documents,
the Sponsor has not undertaken an evaluation of the financial condition of any
such person. None of the Mortgage Loans is insured or guaranteed by any
governmental entity or by any other person.
CERTAIN TERMS AND CONDITIONS OF THE MORTGAGE LOANS
Due Dates. All of the Mortgage Loans provide for Scheduled P&I Payments to
be due on the first day of each month.
Mortgage Rates; Calculations of Interest. Each Mortgage Loan bears
interest at a Mortgage Rate that is fixed for the remaining term of such
Mortgage Loan. As described below, however, each ARD Loan will accrue interest
after its Anticipated Repayment Date at a rate that is at least two percentage
points in excess of its Mortgage Rate prior to such Anticipated Repayment Date
and, in the case of one (1) Mortgage Loan, representing 1.21% of the Initial
Pool Balance, at least five percentage points in excess of its Mortgage Rate
prior to the Anticipated Repayment Date. The term "Mortgage Rate" does not
include the incremental increase in the rate at which interest may accrue on
any Mortgage Loan due to a default or on any ARD Loan after its Anticipated
Repayment Date. As of the Cut-off Date, the Mortgage Rates of the Mortgage
Loans ranged from 6.35% per annum to 10.00% per annum, and the weighted average
Mortgage Rate of the Mortgage Loans was 7.51%.
No Mortgage Loan provides for negative amortization or for the deferral of
interest.
Each Mortgage Loan will accrue interest on the basis of one of the
following conventions:
o Actual number of days elapsed during each one-month accrual period (an
"Actual/360 Basis"). Mortgage Loans that accrue interest on an
Actual/360 Basis are referred to in this Prospectus Supplement as
"Actual/360 Mortgage Loans".
o A 360-day year consisting of 12 30-day months (a "30/360 Basis").
Mortgage loans that accrue interest on a 30/360 Basis are referred to in
this Prospectus Supplement as "30/360 Mortgage Loans".
Set forth below is the number of Mortgage Loans that accrue interest based
on each of the foregoing conventions and the percentage of the Initial Pool
Balance that such Mortgage Loans represent.
ACCRUAL TYPE
<TABLE>
<CAPTION>
% OF
AGGREGATE INITIAL
NUMBER OF CUT-OFF DATE POOL
ACCRUAL TYPE MORTGAGE LOANS BALANCE BALANCE
- -------------------- ---------------- -------------- -----------
<S> <C> <C> <C>
Actual/360 ......... 152 $689,617,971 75.94%
30/360 ............. 80 218,543,034 24.06
--- ------------ ------
Totals .......... 232 $908,161,006 100.00%
=== ============ ======
<CAPTION>
WEIGHTED AVERAGES
----------------------------------------------------
MAXIMUM STATED U/W CUT-OFF DATE
CUT-OFF DATE MORTGAGE REMAINING TERM NCF LOAN-TO-
ACCRUAL TYPE BALANCE RATE (MO.) DSCR VALUE RATIO
- -------------------- -------------- ---------- ---------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Actual/360 ......... $65,804,538 7.27% 114 1.40x 70.45%
30/360 ............. 16,048,097 8.24 98 1.36 69.13
---- --- ---- -----
Totals .......... 7.51% 110 1.39x 70.13%
==== === ==== =====
</TABLE>
<PAGE>
ARD Loans. Three (3) Mortgage Loans, representing 10.37% of the Initial
Pool Balance, are ARD Loans. An "ARD Loan" is characterized by the following
features:
o A maturity date that is approximately 25 to 30 years following the date
of origination of such Mortgage Loan. The ARD Loans generally have an
amortization schedule (on which payments prior to the Anticipated
Repayment Date are based) corresponding to such maturity date, except
that one (1) Mortgage Loan, representing 1.21% of the Initial Pool
Balance, pays interest only until its Anticipated Repayment Date.
S-48
<PAGE>
o The designation of an Anticipated Repayment Date that is approximately
6 to 10 years following the date of origination of such Mortgage Loan.
The Anticipated Repayment Date for each ARD Loan is listed on Annex A to
this Prospectus Supplement.
o The ability of the Borrower to prepay such Mortgage Loan, without
restriction (including without any obligation to pay a Prepayment
Premium), at any time on or after its Anticipated Repayment Date (and,
in the case of certain ARD Loans, at any time on or after a date which
may be up to 12 months prior to its Anticipated Repayment Date).
o Until its Anticipated Repayment Date, the accrual of interest at its
fixed Mortgage Rate.
o From and after its Anticipated Repayment Date, the accrual of interest
at a fixed annual rate (the "Revised Rate") equal to the sum of (i) its
Mortgage Rate, plus (ii) a margin (such margin, the "Additional Interest
Rate") of at least two percentage points. Interest accrued on such
Mortgage Loan from and after its Anticipated Repayment Date that is in
excess of interest at the related Mortgage Rate is called "Additional
Interest".
o From and after its Anticipated Repayment Date, the accelerated
amortization of such Mortgage Loan out of all or a portion of monthly
cash flow from the related Mortgaged Property which remains after
payment of the applicable Scheduled P&I Payment and permitted operating
expenses and capital expenditures. Such additional monthly payments of
principal are called "Accelerated Amortization Payments". Accelerated
Amortization Payments and Additional Interest are considered separate
from Scheduled P&I Payments due on any ARD Loan.
One (1) of the ARD Loans, representing 1.21% of the Initial Pool Balance,
provides for payments of interest only prior to its Anticipated Repayment Date.
By the Anticipated Repayment Date, the Borrower under an ARD Loan will be
required to enter into a lockbox agreement whereby all revenue from the related
Mortgaged Property will be deposited directly into a designated account (the
"Lockbox Account") controlled by the Master Servicer.
Balloon Loans. Two hundred twenty-eight (228) Mortgage Loans, representing
89.39% of the Initial Pool Balance, are Balloon Loans.
A "Balloon Loan" is characterized by either--
o a lack of amortization (i.e., a requirement that the related Borrower
make only payments of interest) prior to stated maturity, or
o an amortization schedule that is significantly longer than the actual
term of such Mortgage Loan,
which in either case results in a Balloon Payment being due on such Mortgage
Loan on its stated maturity date.
Fully Amortizing Loans. One (1) Mortgage Loan representing 0.24% of the
Initial Pool Balance, is a Fully Amortizing Loan.
A "Fully Amortizing Loan" is characterized by:
o substantially equal Scheduled P&I Payments throughout the term of such
Mortgage Loan, and
o an amortization schedule that is approximately equal to the actual term
of such Mortgage Loan.
Amortization of Principal. The tables below shows selected information on
the Mortgage Loan types discussed above (or the specified sub-groups thereof)
as of the Cut-off Date.
S-49
<PAGE>
MORTGAGE LOAN TYPE
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
-----------------------------------------------
% OF CUT-OFF
AGGREGATE INITIAL MAXIMUM STATED U/W DATE
NUMBER OF CUT-OFF DATE POOL CUT-OFF DATE MORTGAGE REMAINING NCF LOAN-TO-
LOAN TYPE MORTGAGE LOANS BALANCE BALANCE BALANCE RATE TERM (MO.) DSCR VALUE RATIO
- ---------------------- ---------------- -------------- ----------- -------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Amortizing ARD ....... 2 $ 83,220,541 9.16% $65,804,538 7.04% 117 1.22x 73.06%
Interest Only ARD..... 1 11,000,000 1.21 11,000,000 7.51 58 1.43 72.37
Amortizing
Balloon ............. 228 811,802,820 89.39 48,831,053 7.56 110 1.41 69.86
Fully Amortizing ..... 1 2,137,645 0.24 $ 2,137,645 7.18 115 1.55 46.47
--- ------------ ------ ---- --- ---- -----
Totals ............ 232 $908,161,006 100.00% 7.51% 110 1.39x 70.13%
=== ============ ====== ==== === ==== =====
</TABLE>
Certain Mortgage Loans provide for a reamortization of their unpaid
principal balance and an adjustment of their Scheduled P&I Payments upon
application of specified amounts of condemnation proceeds or insurance proceeds
to pay down the unpaid principal balance of any such Mortgage Loan following a
condemnation or casualty on the related Mortgaged Property.
Prepayment Provisions. In general, as of the Cut-off Date, the Mortgage
Loans provided for:
o a period (a "Lock-out Period") during which voluntary principal
prepayments are prohibited, followed by
o a period (a "Prepayment Premium Period") during which any voluntary
principal prepayment must be accompanied by a Prepayment Premium,
followed by
o a period (an "Open Period") during which voluntary principal
prepayments may be made without an accompanying Prepayment Premium.
Exceptions to the foregoing include--
o seven (7) Mortgage Loans, representing 2.13% of the Initial Pool
Balance, that as of the Cut-off Date were in a Prepayment Premium
Period.
In the case of the Two hundred twenty-five (225) Mortgage Loans that
provide for Lock-out Periods as of the Cut-off Date--
o the maximum remaining Lock-out Period as of the Cut-off Date is 55
months,
o the minimum remaining Lock-out Period as of the Cut-off Date is 12
months, and
o the weighted average remaining Lock-out Period as of the Cut-off Date
is 36 months.
Where an Open Period is provided for, the Open Period generally begins 2
to 12 months prior to stated maturity of the related Mortgage Loan (or, in the
case of an ARD Loan, prior to its Anticipated Repayment Date).
Prepayment Premiums on the Mortgage Loans are 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.
Prepayment Premiums actually collected on the Mortgage Loans will be
distributed to you in the amounts and priorities described under "Description
of the Offered Certificates--Distributions--Distributions of Prepayment
Premiums" in this Prospectus Supplement. The Sponsor makes no representation or
warranty 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--Risks Related to the Mortgage
Loans--Prepayment Premiums" in this Prospectus Supplement and "Certain Legal
Aspects of Mortgage Loans--Default Interest and Limitations on Prepayments" in
the Prospectus.
The prepayment terms of each of the Mortgage Loans are more particularly
described in Annex A to this Prospectus Supplement.
S-50
<PAGE>
Defeasance Loans. Thirty-eight (38) Mortgage Loans, representing 19.01% of
the Initial Pool Balance, are Defeasance Loans. A "Defeasance Loan" is a
Mortgage Loan that, during specified periods and subject to certain conditions,
permits the Borrower to pledge to the holder of such Mortgage Loan the
requisite amount of direct, non-callable United States Treasury obligations
(the "Defeasance Collateral") and thereby obtain a release of the related
Mortgaged Property (or, in the case of a Cross-Collateralized Group or a
Multi-Property Loan, one or more of the related Mortgaged Properties). In
general, the Defeasance Collateral must provide for a series of payments that--
o will be made prior, but as close as possible, to all successive Due
Dates through and including the scheduled maturity date (or, in the case
of an ARD Loan, its Anticipated Repayment Date) for such Mortgage Loan,
and
o will, in the case of each such Due Date, be in an aggregate amount
equal to or greater than (with any excess to be returned to the
Borrower) the Scheduled P&I Payment due on such date (or, in the case of
an ARD Loan on its Anticipated Repayment Date, the then remaining unpaid
principal balance of such Mortgage Loan).
If less than all the Mortgaged Properties securing any Cross-Collateralized
Group or Multi-Property Loan are to be released in connection with any such
defeasance, however, the amount of the Defeasance Collateral will be calculated
based on the allocated loan amount for the Mortgaged Properties to be released
and the portion of the Scheduled P&I Payments attributable to such allocated
loan amount.
In connection with any defeasance, the Borrower will be required to
deliver a security agreement granting the Trust a first priority security
interest in the Defeasance Collateral, together with an opinion of counsel
confirming the first priority status of such security interest.
No defeasance will be permitted prior to the second anniversary of the
Delivery Date.
"Due-on-Sale" and "Due-on-Encumbrance" Provisions. All of the Mortgage
Loans contain both a "due-on-sale" clause and a "due-on-encumbrance" clause. In
general, these clauses either permit the holder of the Mortgage to accelerate
the maturity of the related Mortgage Loan if the Borrower sells or otherwise
transfers or encumbers the related Mortgaged Property or prohibit the Borrower
from doing so without the consent of the holder of the Mortgage. See
"--Additional Mortgage Loan Information--Subordinate Financing" in this
Prospectus Supplement. However, certain of the Mortgage Loans permit limited
transfers of interests in the Mortgaged Property or the Borrower entity for
estate planning purposes or subject to the lender's reasonable credit review of
the proposed transferee. In addition, certain Mortgage Loans permit the release
of a portion of the Mortgaged Properties (or of some of the Mortgaged
Properties securing a Cross-Collateralized Group) upon satisfaction of certain
underwriting tests or payment of a specified release price. Certain Mortgage
Loans also permit the release of portions of the related Mortgaged Properties
deemed not material to the underwriting analysis performed by the originator.
The Master Servicer or the Special Servicer, as applicable, will be
required to determine, in a manner consistent with the servicing standard
described in this Prospectus Supplement under "Servicing of the Mortgage
Loans--General" and with the REMIC Provisions (as defined in the Prospectus),
whether to exercise any right the holder of any Mortgage may have under either
a "due-on-sale" or "due-on-encumbrance clause" to accelerate payment of the
related Mortgage Loan. However, neither the Master Servicer nor the Special
Servicer may waive its rights or grant its consent under any "due-on-sale" or
"due-on-encumbrance" clause unless:
o The Master Servicer or the Special Servicer, as the case may be, has
received written confirmation from each of Moody's and S&P that such
action would not result in the qualification, downgrade or withdrawal of
the rating then assigned by such rating agency to any outstanding Class
of Certificates. This requirement will not be applicable, however, in
the case of a waiver of a "due-on-sale" clause, if the outstanding
principal balance of the subject Mortgage Loan (together with the
aggregate outstanding principal balance of all other Mortgage Loans that
are cross-collateralized with the subject Mortgage Loan or have been
made to the same Borrower or affiliated Borrowers) is less than a
specified percentage of the then aggregate principal balance of the
Mortgage Pool.
o In the case of a waiver of a "due-on-sale" clause, the Special
Servicer has consented.
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.
S-51
<PAGE>
ADDITIONAL MORTGAGE LOAN INFORMATION
General. A detailed presentation of certain characteristics of the
Mortgage Loans and Mortgaged Properties, on an individual basis and in tabular
format, is set out in Annex A to this Prospectus Supplement. Certain
capitalized terms that appear in this Prospectus Supplement are defined in
Annex A.
Delinquencies. No Mortgage Loan will be as of the Cut-off Date, or has
been at any time during the 12-month period preceding the Cut-off Date, 30 days
or more delinquent in respect of any Scheduled P&I Payment, except for one
Mortgage Loan as to which the November 1998 payment was collected in early
December 1998.
Tenant Matters. Thirty-eight (38) Mortgaged Properties, securing 12.21% of
the Initial Pool Balance, are each wholly owner-occupied or occupied by a
single tenant. One hundred forty-five (145) Mortgaged Properties, securing
54.49% of the Initial Pool Balance, have one or more Major Tenants. 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
Tenant" means any tenant that rents at least 20% of the Leasable Square Footage
(as defined in Annex A) at such property. Major Tenants at certain Mortgaged
Properties no longer occupy their space, although they continue to pay rent.
Certain of the Multifamily Rental Properties have material concentrations
of student tenants.
Ground Leases. Eight (8) of the Mortgaged Properties, securing 4.56% of
the Initial Pool Balance, are, in whole or in part, subject to a ground lease
as to which the applicable Borrower is the tenant. In each such case, the
related ground lease expires more than 10 years after the stated maturity of
the subject Mortgage Loan, and either:
o the ground lessor has subordinated its interest in the related
Mortgaged Property to the interest of the holder of the related Mortgage
Loan; or
o the ground lessor has agreed to give the holder of the Mortgage Loan
notice of, and 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. One (1) Mortgaged Property, which constitutes
security for a Mortgage Loan representing 0.26% of the Initial Pool Balance, is
encumbered by secured subordinated debt. In such case, however the holder of
the subordinated debt has agreed not to foreclose for so long as the Mortgage
Loan is outstanding and the Trust is not pursuing a foreclosure action.
In addition, notwithstanding that each Mortgage Loan contains a
"due-on-encumbrance" clause, a violation of such clause may not become evident
until the Borrower defaults under such Mortgage Loan.
The existence of subordinated indebtedness that encumbers any Mortgaged
Property may result in:
o difficulty refinancing the related Mortgage Loan at maturity;
o a deferral of maintenance expenses in response to the reduction in cash
flow; or
o in the event that the holder of the subordinated debt files for
bankruptcy or is placed in involuntary receivership, a delay in any
foreclosure proceeding brought on behalf of the Trust against such
Mortgaged Property.
See "Certain Legal Aspects of Mortgage Loans--Subordinate Financing" in the
Prospectus.
Certain of the Mortgage Loans (in particular, Mortgage Loans secured by
Hospitality Properties) also permit, and certain Borrowers have incurred,
additional indebtedness for operating or similar purposes. For example, certain
Mortgage Loans secured by Hospitality Properties permit the related Borrower to
incur trade debt and other payables. The additional indebtedness is, in some
cases, substantial. Additional debt, in any form, may cause a diversion of
funds from property maintenance. The Sponsor has not been able to confirm the
existence of any other debt.
S-52
<PAGE>
Owners of certain Borrowers under the Mortgage Loans may incur so-called
"mezzanine debt" that is secured by their ownership interests in such
Borrowers. Such financing effectively reduces the indirect equity interest of
any such owner in the related Mortgaged Property.
Lender/Borrower Relationships. The Sponsor, CREI, SBRC and their
respective banking or finance affiliates maintain banking or other
relationships with certain Borrowers or their affiliates, proceeds of the
Mortgage Loans may, in certain limited cases, be used to pay indebtedness owed
to the Sponsor, CREI, SBRC and their respective affiliates.
CERTAIN UNDERWRITING MATTERS
Environmental Assessments. A third-party environmental consultant
conducted an environmental site assessment (or updated a previously conducted
assessment) with respect to each Mortgaged Property during the 24-month period
preceding the Cut-off Date (or, in the case of eleven (11) Mortgaged
Properties, representing 3.89% of the Initial Pool Balance, for which such
assessments or updates were obtained in connection with origination, during the
period between 25 to 54 months preceding the Cut-off Date). Each such
environmental assessment or update generally complied with industry-wide
standards. Certain Mortgaged Properties were also subject to a "Phase II"
environmental assessment. If any such assessment or update revealed a material
adverse environmental condition or circumstance at any Mortgaged Property, then
(depending on the nature of the condition or circumstance) one of the following
actions has been or is expected to be taken--
o an environmental indemnity was obtained;
o an operations and maintenance plan (including, in several cases, in
respect of asbestos-containing materials ("ACMs"), lead-based paint
and/or radon) or periodic monitoring of nearby properties has been or is
expected to be implemented in the manner and within the time frames
specified in the related Mortgage Loan documents; or
o an escrow reserve was established to cover the estimated cost of
remediation.
There can be no assurance, however, that the above-referenced
environmental assessments identified all possible environmental conditions and
risks at the Mortgaged Properties or that the related Borrowers will continue
to implement all recommended operations and maintenance plans. Additionally,
certain potentially adverse environmental conditions were not tested for. For
example, tests for lead based paint, lead in water and radon were conducted
only at certain of the Multifamily Rental Properties. Tests for lead based
paint and lead in water were conducted if the age of the Mortgaged Property
warranted such testing. In the case of radon, testing was undertaken if radon
is prevalent in the geographic area where the Mortgaged Property is located and
if deemed necessary.
The information contained in this Prospectus Supplement regarding
environmental conditions at the Mortgaged Properties is based on the
above-referenced environmental assessments or updates and has not been
independently verified by the Sponsor, the Mortgage Loan Sellers, the
Underwriter, or any of their respective affiliates.
Property Condition Assessments. Professional engineers inspected
substantially all of the Mortgaged Properties (except for thirteen (13)
Mortgaged Properties) during the 24-month period preceding the Cut-off Date to
assess the structure, exterior walls, roofing, interior construction,
mechanical and electrical systems and general condition of the site, buildings
and other improvements located at each such Mortgaged Property. In certain
instances, the resulting reports indicated a variety of deferred maintenance
items and recommended capital improvements. The related property condition
assessment report included an estimate of the cost of any necessary repairs or
replacements at each Mortgaged Property. Generally, cash reserves were
established (or, in some cases, letters of credit or other instruments were
delivered) to cover the estimated cost of such deferred maintenance or
replacement items. In addition, various Mortgage Loans require monthly deposits
into cash reserve accounts to fund property maintenance expenses.
Appraisals and Market Studies. An independent appraiser that is
state-certified and/or a member of the Appraisal Institute, conducted an
appraisal of each Mortgaged Property in connection with
S-53
<PAGE>
origination in order to establish the property value of such Mortgaged
Property. Such appraisals (collectively, the "Appraisals") constitute the basis
for the "Appraised Values" set forth for the respective Mortgaged Properties on
Annex A to this Prospectus Supplement. The date of each Appraisal (the
"Appraisal Date") is indicated on Annex A to this Prospectus Supplement.
Generally, each Appraisal conforms to the appraisal guidelines set forth in
Title XI of the Federal Financial Institutions Reform, Recovery and Enforcement
Act of 1989 (although some do not).
Generally, the Appraisals represent the analysis and opinions of the
respective appraisers at or before the time made. The Appraisals are not
guarantees of, and may not be indicative of, the present or future value of any
Mortgaged Property. There is 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 subject Mortgaged Property.
Appraisals seek to establish the amount a typically motivated buyer would pay a
typically motivated seller. This 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 Sellers, the Underwriter 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. Each Mortgage Loan Seller has, with
respect to its Mortgage Loans, examined whether the use and operation of the
related Mortgaged Properties were in material compliance with all zoning and
land-use ordinances, rules, regulations and orders applicable to such Mortgaged
Properties at the time of origination. The Mortgage Loan Sellers may have
considered legal opinions, certifications from government officials,
information contained in appraisals, title insurance endorsements,
representations by the related Borrower contained in the related Mortgage Loan
documents or property condition assessments undertaken by independent licensed
engineers in determining whether the Mortgaged Properties were in compliance.
Neither Mortgage Loan Seller has notice of any material existing violations
with respect to the Mortgaged Properties securing its Mortgage Loans.
In some cases, the use, operation or structure of a Mortgaged Property
constitutes a permitted nonconforming use or structure. Generally, the
improvements on such Mortgaged Property may not be rebuilt to their current
state in the event that such improvements are materially damaged or destroyed.
Where a Mortgaged Property constitutes a permitted nonconforming use or
structure and the improvements thereon may not be rebuilt to their current
specifications in the event of a major casualty, the related Mortgage Loan
Seller has determined that--
o insurance proceeds would be available in an amount sufficient to
restore the Mortgaged Property in accordance with then-applicable
requirements, and the Mortgaged Property, if permitted to be repaired or
restored in conformity with current law, would constitute adequate
security for the related Mortgage Loan; and/or
o the risk that the Mortgaged Property would suffer a material casualty
to such a magnitude that it could not be rebuilt to its current state,
is remote.
There is no assurance, however, that the conclusions of either Mortgage Loan
Seller in this regard are correct.
Hazard, Liability and Other Insurance. Although exceptions exist, the
Mortgages generally require that the following insurance coverage be maintained
with respect to each Mortgaged Property or otherwise by each Borrower--
S-54
<PAGE>
o Hazard insurance in an amount that is (subject to a customary
deductible) at least equal to the lesser of the outstanding principal
balance of the related Mortgaged Loan and 100% of the full insurable
replacement cost of the improvements located on the such Mortgaged
Property. In general, the standard form of hazard insurance policy
covers physical damage to, or destruction of, the improvements on a
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.
o If any portion of a Mortgaged Property was in an area identified in the
Federal Register by the Flood Emergency Management Agency as having
special flood hazards, flood insurance meeting the requirements of the
Federal Insurance Administration guidelines, if available, in an amount
that is not less than: (i) the outstanding principal balance of such
Mortgage Loan; (ii) the full insurable value of such Mortgaged Property;
(iii) the maximum amount of insurance available under the National Flood
Insurance Act of 1968, as amended; and (iv) 100% of the replacement cost
of the improvements located on the related Mortgaged Property.
o Comprehensive general liability insurance against claims for personal
and bodily injury, death or property damage occurring on, in or about
such Mortgaged Property, in an amount customarily required by
institutional lenders.
o Except in the case of a Mortgaged Property operated as a mobile home
park, business interruption or rent loss insurance in an amount not less
than 100% of the projected rental income or revenue from such Mortgaged
Property for a period of not less than twelve months.
In general, the Mortgaged Properties (including those located in
California) are not insured against earthquake risks. In addition, even if a
Mortgaged Property is located in California, the related originator did not in
all cases conduct seismic studies to assess the "probable maximum loss" for
such Mortgaged Property.
S-55
<PAGE>
SIGNIFICANT MORTGAGE LOANS
KRANZCO PORTFOLIO LOAN: NINE WAL-MART ANCHORED SHOPPING CENTERS
<TABLE>
<CAPTION>
LOAN INFORMATION
- ---------------------------------------------------------------
<S> <C>
Original Principal Balance: $65,900,000
Cut-off Date Balance: $65,804,538
Origination Date: September 29, 1998
Mortgage Rate: 7.00% per annum until the
Anticipated Repayment Date;
thereafter 9.0% per annum
Anticipated Repayment October 1, 2008
Date:
Maturity Date: October 1, 2028
Borrower: KR Douglasville, Inc., a
Georgia corporation,
KR Snellville, Inc., a Georgia
corporation,
KR Tifton, Inc., a Georgia
corporation,
KR Vidalia, Inc., a Georgia
corporation,
KR Staunton, Inc., a Virginia
corporation,
KR Circleville, Inc., an Ohio
corporation,
KR Jefferson City, L.P., a
Tennessee limited
partnership,
KR Summerville, Inc., a
Georgia corporation
KR Pensacola, Inc., a Florida
corporation
Amortization Term: The term of the Mortgage
Loan is thirty (30) years.
Equal payments of principal
and interest are required in
an amount sufficient to fully
amortize the Mortgage Loan
over a thirty (30) year
schedule
Annual Debt Service: $ 5,261,212
Collection Account: Manager deposits rents into
lockbox throughout loan
term; tenants deposit directly
to lockbox only upon an
event of default or if the loan
is not repaid prior to its
Anticipated Repayment Date.
Prepayment Terms/ No defeasance. No
Defeasance/Provisions: prepayment permitted before
the 5th loan year. Thereafter,
prepayment permitted with
the payment of Prepayment
Premium in the amount of the
greater of 1% of prepayment
amount or yield maintenance,
except for a 60-day window
immediately preceding the
Anticipated Repayment Date.
See loan description for
detail.
</TABLE>
<TABLE>
<CAPTION>
PROPERTY INFORMATION
- -----------------------------------------------------------
<S> <C>
Single Asset/Portfolio: One (1) note, nine (9)
borrowers (joint and several);
nine (9) properties
Property Types: 100% Anchored Retail
Number of Properties: 9
Property Description:
- ---------------------
Douglasville Crossing, Douglasville, GA ("Douglasville
Property")
Tifton Corners, Tifton, GA ("Tifton Property")
Snellville Oaks, Snellville, GA ("Snellville Property")
Village Oaks, Pensacola, FL ("Village Oaks Property")
Statler Crossing, Staunton, VA ("Statler Property")
Pickaway Crossing, Circleville, OH ("Pickaway Property")
Vidalia Wal-Mart, Vidalia, GA ("Vidalia Property")
Meeting Square, Jefferson City, TN ("Meeting Square
Property")
Summerville Center, Summerville, GA ("Summerville
Property")
Year Built/Renovated:
- ---------------------
Douglasville Property 1990
Snellville Property 1991
Tifton Property 1987/1995
Village Oaks Property 1987/1993
Statler Property 1989
Pickaway Property 1990
Vidalia Property 1985/1993
Meeting Square Property 1984
Summerville Property 1984/1992
Property Management: Kranzco Realty Trust
Occupancy Rate per Property as of August 1, 1998:
- -------------------------------------------------
Douglasville Property 100%
Snellville Property 97%
Tifton Property 100%
Village Oaks Property 100%
Statler Property 97%
Pickaway Property 96%
Vidalia Property 100%
Meeting Square Property 100%
Summerville Property 100%
Aggregate Occupancy: 99%
</TABLE>
S-56
<PAGE>
KRANZCO: PORTFOLIO LOAN NINE WAL-MART ANCHORED SHOPPING CENTERS
<TABLE>
<CAPTION>
LOAN INFORMATION
- ----------------
<S> <C>
Up Front Reserves: $300,000 for tenant
improvement and leasing
commission escrow related to
the Statler and Meeting
Square Properties
Ongoing Reserves: An annual replacement
reserve of $251,805 ($0.18 psf)
is allocated to each property
based on square footage.
Additional reserves were
made for property taxes and
insurance for all properties.
Original Allocated Loan Amount:
- -------------------------------
Douglasville Property $15,167,000
Snellville Property 12,372,000
Tifton Property 8,702,000
Village Oaks Property 7,986,000
Statler Property 6,359,000
Pickaway Property 6,263,000
Vidalia Property 4,315,000
Meeting Square Property 2,431,000
Summerville Property 2,305,000
</TABLE>
<TABLE>
<CAPTION>
1997 Net
Operating Underwritten
Income NCF
Property ------------- ------------------
<S> <C> <C>
Douglasville Property $1,809,334 $ 1,501,052
Snellville Property $1,421,461 $ 1,224,786
Tifton Property $ 998,692 $ 861,067
Village Oaks Property $1,016,728 $ 790,208
Statler Property $ 867,361 $ 629,567
Pickaway Property $ 720,474 $ 620,006
Vidalia Property $ 451,821 $ 427,165
Meeting Square Property $ 385,675 $ 240,710
Summerville Property $ 284,980 $ 228,217
---------- ---------------
Total $7,956,526 $ 6,522,778
========== ===============
Ratio of Underwritten
NCF to Annual Debt
Service 1.24 x
Mortgaged Properties
Appraised Values
- ----------------
Douglasville Property $ 21,640,000
Snellville Property $ 16,700,000
Tifton Property $ 12,400,000
Village Oaks Property $ 11,700,000
Statler Property $ 8,700,000
Pickaway Property $ 8,400,000
Vidalia Property $ 5,400,000
Meeting Square Property $ 3,600,000
Summerville Property $ 3,330,000
Aggregate Final
Appraised Value: $ 91,870,000
Aggregate Cut-off Date
Loan-to-Value Ratio: 71.63%
Appraisal Date: August 3, 1998
Aggregate Appraised $ 65.67
Value per Net square foot
as of August 3, 1998:
</TABLE>
DESCRIPTION OF UNDERWRITTEN NET CASH FLOW
Underwritten revenues were based upon the lower of current contractual
rents in place or comparable market rents. Rents from month-to-month tenants
were generally excluded. Percentage rents were included for anchor tenants with
long-term leases only. In these cases, percentage rent was underwritten to the
minimum amount paid by these tenants over the past three years. A vacancy
factor equal to the greater of 10% or actual vacancy was applied to the in-line
tenant space. Expense reimbursements were modelled in accordance with the
Wal-Mart's specific lease terms. Underwritten expenses were based upon
historical expenses, in accordance with industry standards. Expenses were
further modified to include a management fee of 4.0% (no contractual fee is
paid currently), a tenant improvement and leasing commission reserve of $1.00
per occupied square foot for all tenants (with the exception of credit tenants)
and an annual replacement reserve of $0.18 per net rentable square foot
("psf"), which is collected on a monthly basis.
Furthermore, a number of adjustments were made to take into consideration
the vacant Wal-Mart stores at the "Meeting Square" and "Statler Crossing"
properties in Jefferson City, Tennessee and Staunton, Virginia, respectively.
Specifically, among other adjustments, at "Meeting Square" revenue from in-line
tenants was excluded from Underwritten Revenues and a 10% economic vacancy was
applied to the gross revenue attributable to Eckerd Drugs. With respect to
"Statler Crossing", a 10% vacancy was
S-57
<PAGE>
applied to Wal-Mart, in addition to the non-credit tenants. Tenant improvement
and leasing commission reserves for these two (2) Wal-Mart spaces were
underwritten and escrowed at $.85 psf, although neither lease expires prior to
2009.
For the "Tifton Corners" property in Tifton, Georgia, an additional
adjustment was made to the tenant improvement and leasing commission reserve as
a result of the bankruptcy of the parent of Bruno's, one of the property's
anchor tenants. Specifically, the space's square footage of 47,982 square feet,
representing 25.7% of the NRSF, was included in the property's underwritten
$1.00 psf tenant improvement and leasing commission reserve.
THE KRANZCO PORTFOLIO LOAN
The "Kranzco Portfolio Loan" has a Cut-off Date Balance of approximately
$65,804,538 and is evidenced by a single Promissory Note issued to SBRC (the
"Lender") in the original principal amount of $65,900,000 (the "Note") issued
by KR Vidalia, Inc., a Georgia corporation, KR Staunton, Inc., a Virginia
corporation, KR Summerville, Inc., a Georgia corporation, KR Tifton, Inc., a
Georgia corporation, KR Douglasville, Inc., a Georgia corporation, KR
Circleville, Inc., an Ohio corporation, KR Snellville, Inc., a Georgia
corporation, KR Pensacola, Inc., a Florida corporation, and KR Jefferson City,
L.P., a Tennessee limited partnership (the "Borrowers") jointly and severally.
The Loan is secured by five (5) Mortgages/Deeds of Trusts, four (4) of which
secure one property, each, and one (1) of which secures five (5) separate
properties in Georgia (the "Mortgages"), encumbering nine (9) separate anchored
retail properties located in the states of Virginia, Ohio, Tennessee, Florida
and Georgia (collectively the "Properties").
THE BORROWERS
Each entity comprising the Borrowers is a recently formed special purpose
corporation or limited partnership organized under the laws of the state where
the respective property is located, the purpose of which is (i) to purchase,
own, operate, manage, lease, sell, exchange, mortgage, encumber, finance and
otherwise deal, directly or indirectly, with the respective property it owns;
(ii) to enter into contractual arrangements for the management and operation of
such property; and (iii) to engage only in such activities and exercise only
such powers permitted to corporations or limited partnerships under the laws of
the state of its organization that are necessarily incident to the foregoing
purposes or necessary to accomplish the foregoing purposes. Each entity
comprising the Borrowers is controlled by Kranzco Realty Trust ("Kranzco"), a
publicly-owned, self-administered, self-managed real estate investment trust
listed on the New York Stock Exchange.
The Properties. The nine (9) properties are located in the following
cities and states: Douglasville, Georgia; Snellville, Georgia; Tifton, Georgia;
Pensacola, Florida; Staunton, Virginia; Circleville, Ohio; Vidalia, Georgia;
Jefferson City, Tennessee, and Summerville, Georgia. The properties were built
between 1984 and 1991 and four properties (the Tifton Property, Village Oaks
Property, Vidalia Property and the Summerville Property) were renovated in
1995, 1993, 1993 and 1992, respectively. The properties are anchored, with one
or more of the following as major tenants: Wal-Mart, Food Lion, Eckerd Drug
and/or CVS.
PROPERTY OVERVIEW.
Douglasville Crossing (5983 Stewart Parkway, Douglasville, GA). The
subject property consists of a 267,800 square foot shopping center located on
33.4 acres of land, that was constructed in 1990 and consists of one
single-story, "L" shaped center anchored by Wal-Mart (114,760 square feet),
Rhodes Furniture (32,400 square feet) and Cub Foods (63,070 square feet). As of
August 1998, the property was 100% leased.
Snellville Oaks (2135 East Main Street, Snellville, GA). The subject
property consists of a 220,885 square foot shopping center located on 34.81
acres of land at the intersection of East Main Street and Oak Road. The
property was constructed in 1991, consists of three attached single-story
buildings, and is anchored by Wal-Mart (114,513 SF), Snellville Oaks (34,500
square feet) and Food Lion (29,000 square feet). As of August 1998, the
property was 97% leased.
S-58
<PAGE>
Tifton Corners (121 S. Virginia Avenue, Tifton, GA). The subject property
consists of a 186,629 square foot shopping center located on 19.15 acres of
land at the intersection of Virginia Avenue and 7th Street. The property was
constructed in 1987 and expanded by 35,000 square feet in 1995 to its current
size. The property consists of four single-story buildings situated in a "U"
shaped configuration and anchored by Wal-Mart (101,047 square feet) and Bruno's
(47,982 square feet). As of August 1998, the property was 100% leased. The
parent of Bruno's is in bankruptcy, however the tenant continues to occupy the
47,982 square feet at this property.
Village Oaks (6242-51 N. Davis Highway, Pensacola, FL). The subject
property consists of a 171,653 square foot shopping center located on 14.81
acres at the intersection of N. Davids Highway and Burgess Road. The property
was constructed in 1987 and expanded in 1993 to its current size, consists of
three single-story buildings and is anchored by Wal-Mart (108,217 square feet)
and Haverty Furniture (45,000 square feet). As of August 1998, the property was
100% leased.
Statler Crossing (851 Statler Boulevard, Staunton, VA). The subject
property consists of a 166,944 square foot shopping center located on 21 acres
at the intersection of U.S. Route 11 and Statler Boulevard. The property was
constructed in 1989, and consists of four attached single-story buildings. The
center is anchored by Fresh Farm (60,000 square feet) and a Wal-Mart (86,944
SF) that has gone dark; however 20,000 square feet of the Wal-Mart space has
been sublet to Sun Electronics. As of August 1998, the property was 97% leased
(excluding the dark Wal-Mart portion, the property was 57% occupied).
Pickaway Crossing (23625 U.S. Route 23, Circleville, OH). The subject
property consists of a 127,130 square foot shopping center located on 23.49
acres at the intersection of U.S. Route 23 and South Court Street. The property
was constructed in 1990, and consists of one single-story building anchored by
a Wal-Mart (91,990 square feet). As of August 1998, the property was 96%
leased.
Vidalia Wal-Mart (2305 Lyons Highway, Vidalia, GA). The subject property
consists of a single-tenant, 97,096 square foot Wal-Mart located on 7.4 acres
of land, at the intersection of Lyons Highway and McNatt Street. The property
was constructed in 1985 and expanded by 28,000 square feet in 1993 to its
current size. The property is attached to a shopping center (anchored by Food
Lion and Belk Matthews) that is not part of the collateral. As of August 1998,
the property was 100% leased.
Meeting Square (1200 S. Russell Street, Jefferson City, TN). The subject
property consists of a 92,968 square foot shopping center located on 9.43 acres
at the intersection of Russell Street and Broadway Boulevard. The property was
constructed in 1984, and consists of one single-story building. The center is
anchored by a Wal-Mart (47,638 square feet) that has gone dark, a Food Lion
(29,123 square feet) and an Eckerd Drug (8,640 square feet) which is sublet to
Dollar General. As of August 1998, the property was 100% leased (excluding the
dark Wal-Mart portion, the property was 49% occupied).
Summerville Center (14 Trion Road, Summerville, GA). The subject property
consists of a 67,809 square foot shopping center located on 9.07 acres at the
intersection of U.S. Highway 27 and Farrar Road. The property was constructed
in 1984 and expanded in 1992 to its current size, and consists of one
single-story retail property anchored by Wal-Mart (50,059 square feet) and Big
B (8,450 square feet). As of August 1998, the property was 100% leased.
LEASE INFORMATION
DOUGLASVILLE PROPERTY, DOUGLASVILLE, GA
<TABLE>
<CAPTION>
% OF
LEASE TOTAL ANNUAL ANNUAL BASE
TENANT LEASE TYPE EXPIRATION BASE RENT RENT BASE RENT PSF
- ------ ---------- ---------- --------- ---- -------------
<S> <C> <C> <C> <C> <C>
Cub Foods ................ Net 08/10 27.9% $526,004 $ 8.34
Wal-Mart ................. Net 01/10 25.8% $486,582 $ 4.24
Rhodes Furniture ......... Net 05/00 12.5% $234,900 $ 7.25
</TABLE>
- ----------
S-59
<PAGE>
SNELLVILLE PROPERTY, SNELLVILLE, GA
<TABLE>
<CAPTION>
% OF
TOTAL ANNUAL
TENANT LEASE TYPE LEASE EXPIRATION BASE RENT ANNUAL BASE RENT BASE RENT PSF
- ------ ---------- ---------------- --------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
Wal-Mart ................ Net 12/11 38.1% $606,919 $ 5.30
Snellville Oaks ......... Net 03/15 19.5% $310,500 $ 9.00
Food Lion ............... Net 12/11 12.7% $203,000 $ 7.00
</TABLE>
- ----------
TIFTON PROPERTY, TIFTON GA
<TABLE>
<CAPTION>
% OF
LEASE TOTAL ANNUAL ANNUAL BASE
TENANT LEASE TYPE EXPIRATION BASE RENT RENT BASE RENT PSF
- ------ ---------- ---------- --------- ---- -------------
<S> <C> <C> <C> <C> <C>
Wal-Mart ............. Net 01/11 49.3% $547,385 $ 5.42
Bruno's Inc. ......... Net 07/10 18.9% $210,000 $ 4.38
</TABLE>
- ----------
VILLAGE OAKS PROPERTY, PENSACOLA, FL
<TABLE>
<CAPTION>
% OF
LEASE TOTAL ANNUAL ANNUAL BASE
TENANT LEASE TYPE EXPIRATION BASE RENT RENT BASE RENT PSF
- ------ ---------- ---------- --------- ---- -------------
<S> <C> <C> <C> <C> <C>
Wal-Mart .................. Net 05/08 57.8% $579,215 $ 5.35
Haverty Furniture ......... Net 09/03 16.7% $167,750 $ 6.71
Haverty Furniture ......... Net 09/03 6.0% $ 60,000 $ 3.00
</TABLE>
- ----------
STATLER PROPERTY, STAUNTON, VA
<TABLE>
<CAPTION>
% OF
LEASE TOTAL ANNUAL ANNUAL BASE
TENANT LEASE TYPE EXPIRATION BASE RENT RENT BASE RENT PSF
- ------ ---------- ---------- --------- ---- -------------
<S> <C> <C> <C> <C> <C>
Fresh Farm ............. Net 07/13 39.4% $360,000 $ 6.00
Wal-Mart (dark)(1) ..... Net 12/09 39.0% $355,601 $ 4.09
</TABLE>
- ----------
(1) Tenant is not required to continuously operate its business during the
term and Tenant has ceased operation. Wal-Mart went dark in 1995 and
relocated closer to Interstate 81 as a Super Center. They have subleased
20,000 square feet of their space to Sun Electronics.
PICKAWAY PROPERTY, CIRCLEVILLE, OH
<TABLE>
<CAPTION>
% OF
LEASE TOTAL ANNUAL ANNUAL BASE
TENANT LEASE TYPE EXPIRATION BASE RENT RENT BASE RENT PSF
- ------ ---------- ---------- --------- ---- -------------
<S> <C> <C> <C> <C> <C>
Wal-Mart ......... Net 10/09 62.2% $481,005 $ 5.23
</TABLE>
- ----------
VIDALIA PROPERTY, VIDALIA, GA
<TABLE>
<CAPTION>
% OF
LEASE TOTAL ANNUAL ANNUAL BASE
TENANT LEASE TYPE EXPIRATION BASE RENT RENT BASE RENT PSF
- ------ ---------- ---------- --------- ---- -------------
<S> <C> <C> <C> <C> <C>
Wal-Mart ......... Net 10/05 100.0% $396,105 $ 4.08
</TABLE>
- ----------
S-60
<PAGE>
MEETING SQUARE PROPERTY, JEFFERSON CITY, TN
<TABLE>
<CAPTION>
% OF
LEASE TOTAL ANNUAL ANNUAL BASE
TENANT LEASE TYPE EXPIRATION BASE RENT RENT BASE RENT PSF
- ------ ---------- ---------- --------- ---- -------------
<S> <C> <C> <C> <C> <C>
Wal-Mart(dark)(1) ...... Net 12/08 40.0% $166,871 $ 3.50
Food Lion .............. Net 11/09 28.5% $119,000 $ 4.09
Eckerd Drug/
Dollar General(2) ..... Net 11/04 17.1% $ 71,283 $ 8.25
</TABLE>
- ----------
(1) Went dark in 1995. There is no subtenant currently in place.
(2) Eckerd Drug has co-tenancy provision with Wal-Mart and Food Lion. The
Eckerd Drug premises are sublet by Dollar General.
SUMMERVILLE PROPERTY, SUMMERVILLE, GA
<TABLE>
<CAPTION>
% OF
LEASE TOTAL ANNUAL ANNUAL BASE
TENANT LEASE TYPE EXPIRATION BASE RENT RENT BASE RENT PSF
- ------ ---------- ---------- --------- ---- -------------
<S> <C> <C> <C> <C> <C>
Wal-Mart ......... Net 04/04 57.6% $178,672 $ 3.57
Big B ............ Net 06/01 17.2% $ 53,235 $ 6.30
</TABLE>
ENVIRONMENTAL REPORT
A "Phase I" environmental assessment was performed by EMG, a third-party
due diligence firm, on each of the nine (9) Properties between September 14 and
September 16, 1998. The assessments revealed a variety of potential
contamination concerns and environmental problems, some of which could have an
adverse effect on the Borrowers' businesses, assets, or results of operations
taken as whole. The Village Oaks Property, had no apparent contamination. The
remaining Properties were found to have suspect asbestos-containing materials
in one or more of the following places: roof, ceiling, floor tiles, wallboard
and drywall. These asbestos containing materials were found to be in good
condition and can be maintained in place with an Operations and Maintenance
Plan. Additionally, the Douglasville Property formerly had a dry cleaner as
tenant, and concerns were raised by EMG at the conclusion of its Phase I
evaluation that future contamination may be found. Further, the Tifton Property
and the Pickaway Property both were found to have nearby leaking underground
storage tanks that were determined to be of little danger to the local
population due to the use of municipal water and sewage.
ENGINEERING REPORT
EMG also prepared property inspection site reports on each of the nine (9)
Properties, dated between July 14 and July 16, 1998. The reports state that,
overall, the Properties are in good condition. The report identified
approximately $22,299 in immediate repairs to be made to the Properties in the
next 12 months.
PROPERTY MANAGEMENT
Kranzco Realty Trust (the "Property Manager") manages the Properties
pursuant to a single management agreement, which expires September 30, 2003 and
is automatically renewed for successive one (1) year periods, unless either the
Borrowers or the Property Manager with thirty (30) days written notice elects
to terminate the agreement. The management agreement provides for a
"reasonable" but unspecified management fee. The terms of the management
agreement give the Property Manager control over the operation of the
Properties. Major decisions, which must be approved by the Borrowers, are
summarized in the agreement. Pursuant to an Acknowledgment of the Property
Manager, the Property Manager has agreed to subordinate all payment obligations
of the Borrowers for services rendered by the Property Manager under the
management agreement to the amounts due under the Loan documents. The Property
Manager is the parent of the Borrowers.
LOAN TERMS
Recourse. The Loan is non-recourse except for liability of the Borrowers
to the Lender for standard exculpation limitations, which require the Borrowers
to indemnify the Lender for the following:
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<PAGE>
o certain environmental liability;
o violations of due-on-sale and due-on-encumbrance covenants of the
Mortgage;
o misapplication or misappropriation of funds;
o other customary items related to preservation of the Properties.
The Lender also has recourse to Kranzco with respect to all such matters except
environmental liability. In the event of fraud in connection with the Loan, or
failure to make the first scheduled payment under the Loan, the Loan becomes
recourse.
The Note is secured by five (5) Mortgages, one for each of the single
properties located in the States of Florida, Ohio, Tennessee, and Virginia, and
one document, executed and recorded, in the various counties of the State of
Georgia, where the five (5) Georgia properties are located. The Florida
mortgage (Pensacola) limits the recovery of the Lender against the Village Oaks
Property to $10,621,380, an amount that is less than the Appraised Value. In
addition, the title policies, while limiting the amount of the Lender's
policies on the face of each, are tied together by Aggregation Endorsements,
which increase the amount of title insurance available to the Lender for only
one claim to the total amount of all title insurance on the portfolio.
Payment Terms. The Kranzco Loan matures on October 1, 2028, and Borrowers
must pay a level payment of $438,434.34 on the first day of each calendar month
(a "Payment Date"), up to and including October 2008 (such date, the
"Anticipated Repayment Date"). If the Loan is not paid in full on the
Anticipated Repayment Date, the payment due in November 2008 and in each
calendar month thereafter, through October 2028 will equal the sum of (x) the
constant payment amount sufficient to amortize fully on the Payment Date in
October 2028, the initial principal balance of the Note, based on a 360-month
level amortization plus accrued interest, and (y) the entire amount remaining
after such payment and deposits to a reserve for operating expenses ("Remaining
Available Funds"), to be applied toward the reduction of the principal sum.
Interest is calculated on an actual/360 basis.
Interest Rate. The interest rate, from the date of the Note through and
including the Anticipated Repayment Date is a rate of seven percent (7.00%) per
annum and thereafter, is nine percent (9.00%) per annum.
Prepayment. Provided no Event of Default (as hereinafter defined) exists,
the Kranzco Portfolio Loan is locked out from prepayment through October 31,
2002. From November 1, 2002 to July 31, 2008, the Kranzco Portfolio Loan
provides for prepayment in whole, but not in part, on a date specified by the
Borrowers ("Prepayment Date") and upon payment of (i) accrued interest to and
including the Prepayment Date together with a payment of all interest which
would have accrued on the principal balance of the Note to and including the
first day of the calendar month immediately following the Prepayment Date, if
such prepayment occurs on a date which is not the first day of a month (the
"Interest Shortfall Payment"), (ii) all other sums due under the Note, the
Mortgage and the other loan documents, and (iii) any Prepayment Consideration
(defined below). Notwithstanding the foregoing, the Borrowers may prepay the
entire principal balance of the Note at any time after July 31, 2008, without
any Prepayment Consideration, but provided the Borrower makes the Interest
Shortfall Payment, if applicable.
The term "Prepayment Consideration" means an amount equal to the greater
of (i) one percent (1%) of the amount prepaid, or (ii)(a) the present value as
of the Prepayment Date of the remaining scheduled payments of principal and
interest from the Prepayment Date through the Anticipated Repayment Date
(including any Balloon Payment) determined by discounting such payments at the
Reinvestment Yield, less (b) the amount of principal being prepaid. The term
"Reinvestment Yield" as used herein is equal to the mortgage equivalent yield
on the "on-the-run" U.S. Treasury issue, with a maturity date closest to, but
not earlier than, the Anticipated Repayment Date, with such yield being based
on the bid price for such issue as published in The Wall Street Journal, on a
date fourteen (14) days prior to the date of prepayment.
Events of Default. The Lender can accelerate the entire Loan balance upon
occurrence of certain "Events of Default" without notice to the Borrowers,
including the following:
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<PAGE>
o failure to make a payment within ten (10) days from the due date;
o failure to comply with various covenants concerning operation and
maintenance of the Properties; or
o Borrower bankruptcy.
Loan Servicing and Escrow Accounts. The loan documents require an annual
Replacement Reserve of $251,805 ($.18 psf). This annual Replacement Reserve is
allocated to each property based on square footage. Additional reserves were
implemented for property taxes and insurance for all properties.
Additionally, $300,000 was collectively escrowed from KR Staunton, Inc.
and K.R. Jefferson City, L.P., Borrowers for the Statler Property and Meeting
Square Property, respectively, for use in a tenant improvement and leasing
commission escrow.
Transfer of Property and Interest in the Borrowers; Encumbrances; Other
Debt. Except for permitted transfers (described below), without the prior
written consent of the Lender, neither the Borrowers nor any other person
having an ownership or beneficial interest in the Borrowers shall:
o directly or indirectly transfer any interest in any of the Properties or
any part thereof (including any partnership or any other ownership
interest in the Borrowers);
o further encumber any of the Properties or any part thereof (including
any partnership or any other ownership interest in the Borrowers);
o enter into any easement or other agreement concerning any of the
Properties.
Generally, except for the permitted transfers, there shall be no change in
control in the ownership of the Borrowers. Kranzco Realty Trust may not own
less than 51% of the beneficial interest in the Borrowers and the Properties or
less than 100% of the voting stock in the corporate general partner of the
Borrowers. Kranzco Realty Trust will not have the power to direct the affairs
of Borrowers. A one time transfer of each of the Properties is permitted,
subject to no Event of Default existing under the loan documents, normal credit
underwriting of the transferee, rating agency affirmation that such transfer
will not result in a qualification, reduction or withdrawal of any rating
assigned in a secondary market transaction and required participation of the
transferee in the Cash Management, Collateral and Security Agreement amongst
other loan documents.
Cash Management; Reserve Accounts. All of the Borrowers entered into a
Cash Management, Collateral and Security Agreement prior to the occurrence and
continuance of an Event of Default and prior to the Anticipated Repayment Date,
all rents from each Property are required to be deposited by the respective
Borrower in a deposit account pledged to the Lender. Funds are swept from such
account to a central collection account controlled by the Lender at LaSalle
National Bank ("LaSalle") on a weekly basis. Following the occurrence and
during the continuance of an Event of Default or after the Anticipated
Repayment Date, all such rents are required to be deposited directly by the
tenants into the account controlled by the Lender at LaSalle. Funds received in
the account will be applied on the date immediately following the payment date
as follows:
o first, to required deposits held in escrow for the payment of taxes and
insurance premiums;
o then, to debt service on the Kranzco Portfolio Loan;
o if any of the Properties was sold during the related collection period,
then, to principal payments on the Kranzco Portfolio Loan in an amount
equal to the greater of 125% of the portion of the Loan allocated to
such Property or 90% of the sale proceeds;
o then, to LaSalle's fees;
o then, required deposits to the replacement reserve fund;
o prior to the Anticipated Repayment Date, to the Borrowers in an amount
equal to remaining available funds (the "Remaining Available Funds") or,
after the Anticipated Repayment Date, first to required deposits to the
operating expenses reserve based upon the budget approved by the Lender
and, then to principal payments on the Loan.
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<PAGE>
The loan-to-value ratio requires that (1) the outstanding principal
balance of the Kranzco Portfolio Loan following the sale be less than 80% of
the market value of the remaining Properties as determined by the Lender and
(2) the ratio of the outstanding principal balance of the Kranzco Portfolio
Loan to such market value following the sale is equal to or less than such
ratio prior to the sale. The debt service coverage ratio requires (1) the
adjusted property net cash flow of the Properties following the sale be equal
to or greater than 1.20 times the debt service amount (calculated as the
product of the outstanding principal balance of the Kranzco Portfolio Loan and
a constant equal to the greater of 8.25% and the current rate on the Kranzco
Portfolio Loan adjusted to reflect a thirty year amortization schedule) and (2)
the ratio of adjusted property net cash flow to the debt service amount is
equal to or greater than such coverage prior to the sale. For purposes of the
Kranzco Portfolio Loan, "adjusted property net cash flow" generally equals the
adjusted operating revenues minus the adjusted operating expense for the
Properties. For purposes of this calculation, adjusted operating revenues
equals the sum of (i) base rents projected pursuant to executed leases for the
next twelve months on a pro forma basis based on a current rent roll for
tenants which are not in monetary or other material default and (ii) the lesser
of actual recoveries and other recurring income from the Properties during the
prior twelve month period or projected recoveries and other recurring income
determined on the same basis as base rents in the preceding clause (i), as
adjusted by the Lender to reflect (1) a credit loss/vacancy allowance equal to
the greatest of 10.0% on non-credit tenants as such tenants are determined by
the lender, actual vacancy or market vacancy as determined by the Lender and
(2) reduction of above market rents to market as determined by the Lender, and
adjusted operating expenses equals expenses during the prior twelve month
period, as adjusted by the Lender to reflect (a) management fees equal to the
greater of actual management fees and 4.0% of total revenues, (b) material
increases in future expenses as determined by the Lender, (c) an annual minimum
replacement reserve in an amount determined by the Lender (but not less than
the product of $0.18 and the rentable square footage of the Properties), (d) a
normalized annual tenant improvement costs and leasing commissions reserve as
determined by the Lender (but not less than $477,000) and (e) any other matters
deemed necessary by the Lender.
Insurance. Borrowers must keep the Properties insured under (a) a standard
"all-risk" or "special causes of loss" form and a standard extended coverage
insurance policy; (b) flood insurance for the various Properties that are
located in a flood hazard area; (c) comprehensive General Liability or
Commercial General Liability insurance; (d) rental loss and/or business
interruption insurance for a period of 12 months; and (e) insurance against
loss of damage from explosion of steam boilers, and similar equipment, pressure
vessels or apparatus.
A third party due diligence firm determined the flood zone status of each
of the Properties as follows:
o the Meeting Square Property and the Douglasville Property were both
found to be in Zone C, defined by the Flood Insurance Rate Map as an
area of minimal flooding;
o the Vidalia Property was evaluated without a Flood Insurance Rate Map
and determined to be in Zone C based on topography and distance to
nearest body of water;
o the Snellville Property and the Village Oaks Property were found to
be in Zone X, defined by the Flood Insurance Rate Map as an area
outside of the 500 Year Flood Plain;
o the Tifton Property was found to be partially in Zone X, and
partially in Zone AE, defined by the Flood Insurance Rate Map as being
within the 100 Year Flood Plain;
o the Pickaway Property, based on the Flood Boundary Map, was not found
to be located in a floodway; and
o the Summerville Property was found to be in Zone C, defined by the
Flood Insurance Rate Map as an area of minimal flooding.
Condemnation. The Borrowers must promptly notify the Lender in writing of
any action or proceeding relating to any condemnation or taking by eminent
domain, and shall deliver to the Lender copies of any and all papers served in
connection with such proceedings. Notwithstanding any taking by eminent domain
by any governmental or quasi-governmental authority, the Borrowers are
obligated to
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<PAGE>
continue to pay on the Note and the proceeds received from any condemning
authority shall be paid directly to the Lender. In the event of a partial
condemnation, provided the Kranzco Portfolio Loan is not in default, the
payment shall still be paid to the Lender in full and the Lender and the
Borrowers shall determine jointly how the funds are to be spent to restore the
improvement.
Casualty. In the event of a casualty, the Borrowers shall notify the
Lender and repair promptly, provided the Lender makes casualty funds available
as follows:
(a) if the loss is $250,000 or less, the Borrowers may settle the
claim and collect the proceeds;
(b) if the loss exceeds $250,000, the Lender shall settle the claim
and collect the proceeds. If (i) the loss is in an aggregate
less than 25% of the original principal of the Note allocated to
the damaged Property; (ii) in the Lender's reasonable judgment
the Property can be restored in 9 months or less; and (iii) no
Event of Default exists, the Borrower may apply the proceeds to
rebuild. Disbursements are subject to Lender's approval of
plans, the Borrower's diligent pursuit of the repair, a 10%
holdback until satisfactory completion, and other typical
provisions relating to reconstruction with casualty proceeds.
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<PAGE>
OCEANSIDE CALDOR/GOLD COAST PLAZA & SWAN NURSERY COMMONS PORTFOLIO LOAN
<TABLE>
<CAPTION>
LOAN INFORMATION
- ----------------
<S> <C>
Original Principal Balance:$49,000,000
Cut-Off Date Balance: $48,831,053
Origination Date: June 9, 1998
Mortgage Rate: 7.12%
Maturity Date: July 1, 2008
Borrowers: 3600 Long Beach Road, LLC,
owner of Oceanside
Caldor/Gold Coast Plaza, and
655 Montauk, LLC, owner of
Swan Nursery Commons,
each a New York limited
liability company
Amortization Term: The term of the mortgage
loan is ten (10) years. Equal
payments of principal and
interest are required in an
amount sufficient to fully
amortize the mortgage loan
over a thirty (30) year
schedule.
Annual Debt Service: $ 3,959,481
Prepayment Terms/ The mortgage loan may be
Defeasance/Provisions: prepaid in whole, but not in
part, according to the
following schedule:
Years 1-4: Not prepayable
Years 5-9.4: With yield
maintenance
Years 9.4-maturity:
Prepayable without
penalty
Defeasance is not permitted
Up-Front Reserves: $763,758.16 for tenant
improvements and leasing
commissions
$395,837.41 for real estate
taxes and insurance
Ongoing Reserves: Monthly payments for the
following reserves/escrows:
$8,333.33 for tenant
improvements and leasing
commissions reserves;
$154,619.33 real estate tax and
insurance escrow;
$5,424.83 replacements and
repairs reserve.
Collection Account: Lockbox account effective if
loan not paid in full on
Anticipated Repayment Date.
Original Allocated Loan
Amount:
- -------
Oceanside Caldor/Gold $40,000,000
Coast Plaza Property
Swan Nursery Commons $ 9,000,000
Property
</TABLE>
<TABLE>
<CAPTION>
PROPERTY INFORMATION
- --------------------
<S> <C>
Single Asset/Portfolio: Portfolio, one (1) note, two
(2) borrowers, two (2)
properties
Property Types: 100% anchored retail
Number of Properties: 2
Property Description : Oceanside Caldor/Goldcoast
Plaza, Oceanside, NY
("Oceanside Caldor/Gold
Coast Plaza Property")
Swan Nursery Commons,
Patchogue, NY ("Swan
Nursery Commons Property")
Year Built/Renovated:
- ---------------------
Oceanside Caldor/Gold 1974/1991
Coast Plaza Property
Swan Nursery Commons 1989
Property
Property Management: Nathan L. Serota d/b/a
NLS Company
Occupancy Rate per Property as of 6/8/98:
Oceanside Caldor/Gold 99%
Coast Plaza Property
Swan Nursery Commons 77%
Property
</TABLE>
<TABLE>
<CAPTION>
1997 Net
Operating Underwritten
Income NCF
------------- --------------------
<S> <C> <C>
Oceanside Caldor/Gold $5,217,645 $ 4,559,793
Coast Plaza Property
Swan Nursery Commons $1,170,416 $ 952,116
Property
Total: $6,388,061 $ 5,511,909
Underwritten NCF Debt
Service Coverage Ratio: 1.39 x
Final Appraised Value per Property:
Oceanside Caldor/Gold $50,000,000
Coast Plaza Property
Swan Nursery Commons $12,900,000
Property
Aggregate Final
Appraised Value: $62,900,000
Appraisal Date: April 21, 1998
Aggregate Cut-off Date
Loan-to-Value Ratio: 77.6%
Aggregate Appraised $ 151.53
Value per Net square
foot as of April 21, 1998
</TABLE>
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<PAGE>
DESCRIPTION OF UNDERWRITTEN NET CASH FLOW
Each of the two (2) properties were subject to downward adjustments to
cash flow. Rents were marked to market based on recent executed leases, and
certain in-line tenant CAM special assessments on a formula basis were reduced.
As vacancy rates apply to Swan Nursery, in light of the 77% occupancy
(excluding the 10,888 square feet to be occupied by Tutor Time, which will
result in a 86% occupancy level), no further vacancy allowance was taken other
than a 1% credit loss factor reflecting the center's local tenant orientation.
For the Oceanside Caldor/Gold Coast Plaza Property, a vacancy factor only was
applied to the in-line space since all anchor leases expire after the
Anticipated Repayment Date.
Underwritten expenses include a 4% Management Fee expense, notwithstanding
the 3% contracted rate in place with affiliates of the Borrowers. Also, actual
invoices for real estate taxes and insurance during the next 12 months resulted
in an all-in upward modification to supplement the historical expense line
items.
Tenant improvements and leasing commissions of $100,000 are reserved
annually. If the reserved amount exceeds $300,000, then the Borrowers may
refrain from paying the monthly amount of $8,333 until the reserve declines to
below $300,000. The special reserve of $750,000 relating to the Caldor lease is
separately held by the lender pending satisfactory resolution of the Caldor
bankruptcy. An approximate amount of $65,100 is reserved for replacements and
repairs annually. Once the reserved amount exceeds $200,000, then the Borrowers
may refrain from paying the monthly amount of $5,425 until the reserve declines
to below $200,000.
THE OCEANSIDE/SWAN LOAN
The "Oceanside/Swan Loan" has a Cut-off Date Balance of approximately
$48,831,053 and is evidenced by a Consolidated and Amended Fixed Rate Note in
the original principal amount of $49,000,000 (the "Oceanside/Swan Note") issued
by 3600 Long Beach Road, LLC (the "Oceanside Caldor/Gold Coast Plaza Property
Borrower") and 655 Montauk, LLC (the "Swan Nursery Commons Property Borrower"),
each a New York limited liability company (together the "Oceanside/Swan
Borrowers"). The Oceanside/Swan Loan is secured by a Consolidated, Amended and
Restated Mortgage, Assignment of Leases and Rents and Security Agreement (the
"Oceanside/Swan Mortgage") encumbering the two (2) grocery store-anchored
retail properties described below (the "Oceanside/Swan Properties"). The
obligations and liabilities of the Oceanside/Swan Borrowers are joint and
several under the Oceanside/Swan Mortgage.
The Oceanside/Swan Borrowers. Each entity comprising the Oceanside/Swan
Borrowers is a recently formed New York special purpose limited liability
company established solely for the purpose of ownership and management of the
respective Oceanside/Swan Properties. The operating agreement of each
Oceanside/Swan Borrower provides that, as long as the Oceanside/Swan Loan is
outstanding, its activities are limited to those necessary for the ownership,
management and operation of the Oceanside/Swan Properties. The Oceanside/Swan
Borrowers own no material assets other than the Oceanside/Swan Properties and
related interests. Nathan L. Serota, an individual, controls each of the
Oceanside/Swan Borrowers.
The Oceanside/Swan Properties. The Oceanside/Swan Properties consist of
two (2) grocery store-anchored retail centers known as Oceanside Caldor/Gold
Coast Plaza and Swan Nursery Commons, which are located in Oceanside, New York
and East Patchogue, New York, respectively. Oceanside Caldor/Gold Coast Plaza
is a one-story power shopping center together with an adjacent one-story
detached retail strip center located at the northwest corner of Daly Boulevard
and Long Beach Road. The power center contains 234,442 square feet of rentable
space and the strip center contains 58,866 square feet of rentable space for a
total leasable area of 293,308 square feet. The buildings are situated on an
irregularly shaped parcel containing 20.04 acres. The power center is
considered a Class A building, and the strip center is considered a Class C
building. Construction on the power center was completed in 1974 and it was
renovated in 1991. The strip center was built in 1959. There are 2,500 parking
spaces on the site.
The power center contains three (3) anchor tenants: Pergament occupies
82,471 square feet, Waldbaums Supermarket occupies 55,550 square feet and
Caldor occupies 94,421 square feet. The strip
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<PAGE>
center has thirteen tenants with the largest tenant occupying 31,550 square
feet. The center was 99% occupied as of the June 8, 1998 rent roll. Because of
Caldor's reorganization in bankruptcy, $750,000 was held back at closing as
described below. Once Caldor delivers a tenant estoppel and reaffirms its
leases, the funds will be released to the Swan/Oceanside Borrowers.
Swan Nursery Commons consists of four (4) connected buildings, which
comprise a one-story community shopping center that was constructed in 1989 and
contains a gross leasable area of 121,794 square feet. The center contains
three (3) anchor tenants: Waldbaums Supermarket, with 50,000 square feet,
Walgreens, with 11,466 square feet and Hollywood Video with 7,200 square feet.
In addition, there are fourteen (14) satellite tenants. The center was 77%
occupied as of June 8, 1998. In addition, Tutor Time Child Care has executed a
lease to occupy approximately 10,800 square feet of space. The Swan Nursery
Commons Property Borrowers and this tenant are in the process of obtaining
required building permits. Upon this tenant's occupancy, the total occupancy
rate is expected to be approximately 86%. The underwritten cash flow excludes
the pending Tutor Time Child Care lease.
Location/Access. The Oceanside Caldor/Gold Coast Plaza Property is located
on Long Island, in Oceanside, Nassau County, New York and is bounded by Daly
Boulevard, Long Beach Road and Lawson Boulevard. The site has access for
ingress and egress to Daly Boulevard and Long Beach Road. Swan Nursery Commons
is located on Long Island, in Patchogue, Suffolk County, New York and is
bounded by Montauk Highway, Lake Drive, Swan Lake Park and privately owned
land. The site has access for ingress and egress to Montauk Highway, a public
highway.
LEASES
The following table provides certain lease terms for the largest tenants
of each of the Oceanside/
Swan Properties.
<TABLE>
<CAPTION>
% OF
LEASE LEASE TOTAL ANNUAL ANNUAL BASE RENT
TYPE EXPIRATION BASE RENT BASE RENT PSF
------- ---------------- -------------- ------------- ----------
<S> <C> <C> <C> <C> <C>
OCEANSIDE CALDOR/GOLD COAST PLAZA
Caldor .......................... Net January, 2012 33.5% $1,628,760 17.25
Pergament ....................... Net June, 2011 22.2% 1,082,541 13.13
Waldbaums Supermarket ........... Net June, 2011 18.3% 888,800 16.00
SWAN NURSERY COMMONS
Waldbaums Supermarket ........... Net June, 2010 46.2% $ 600,000 12.00
Walgreens ....................... Net July, 2020 12.4% 160,524 14.00
Hollywood Video ................. Net February, 2008 8.2% 106,200 14.75
</TABLE>
- ----------
Environmental Reports. "Phase I" environmental assessments, performed by a
third-party due diligence firm on each of the Oceanside/Swan Properties in June
1998, did not reveal any environmental liability that the Mortgage Loan Seller
believes would have a material adverse effect on the Oceanside/ Swan
Borrowers' business, assets, or results of operations taken as whole. The Phase
I report for Oceanside Caldor/Gold Coast Plaza Property indicated that
non-friable potential asbestos-containing material was found on the premises,
for which an Asbestos Operations and Management Plan ("O&M") was recommended.
The O&M sets forth suggested remediation efforts. Nevertheless, there can be no
assurance that such environmental assessment identified all of the
environmental conditions and risks.
Engineering Reports. A third-party due diligence firm prepared property
inspection site reports, dated June 3, 1998, relating to the Oceanside/Swan
Properties. Immediate repairs with estimated costs of $6,500 for the Oceanside
Caldor/Gold Coast Plaza Property and $500 for Swan Nursery Commons were
recommended. All necessary repairs were made by the Oceanside/Swan Borrowers
prior to the Swan/Oceanside Loan closing.
Property Management. Nathan L. Serota d/b/a NLS Company (the
"Oceanside/Swan Manager") manages the Oceanside/Swan Properties pursuant to
one-year management agreements, which are
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<PAGE>
automatically renewed for successive one-year periods, unless either the
Oceanside/Swan Borrower or the Oceanside/Swan Manager elects to terminate the
agreement. The management agreements each provide for a management fee equal to
3% of the monthly gross receipts from the operation of each Oceanside
Caldor/Gold Coast Plaza Property. The terms of each management agreement give
the Oceanside Caldor/Gold Coast Plaza Property Manager control over the
operation of the Oceanside/Swan Properties. Each of the management agreements
may be terminated by either the owner of the respective Oceanside/Swan Property
or the Oceanside/Swan Manager at any time upon thirty days' notice to the other
party.
Guarantor. Nathan L. Serota, principal of both of the Oceanside/Swan
Borrowers (the "Oceanside/
Swan Guarantor"), has executed a limited guaranty (the "Oceanside/Swan
Guaranty") in favor of the lender guaranteeing payment of losses due to certain
acts of fraud and certain breaches of the Mortgage Loan documents.
LOAN TERMS
Payment Terms. The Oceanside/Swan Loan Maturity Date is July 1, 2008 (the
"Oceanside/Swan Maturity Date"). On the first day of each calendar month, up to
and including June 1, 2008, the Oceanside/Swan Borrower is required to pay
equal monthly installments of $329,956.76, representing interest accrued and
principal amortization based upon a thirty (30) year level payment amortization
schedule. The mortgage rate for the Oceanside/Swan Loan is fixed at 7.12% per
annum (the "Oceanside/ Swan Interest Rate"). Interest on the Oceanside/Swan
Loan accrues on an Actual/360 Basis.
Prepayment. Provided no Event of Default exists, the principal balance of
the Oceanside/Swan Note may be prepaid in whole, but, except as described below
with respect to dispositions, not in part at any time after July 31, 2002. If
such prepayment occurs on or prior to December 31, 2007 (the "Oceanside/Swan
Yield Maintenance Expiration Date"), the lender will be entitled to receive a
Prepayment Premium in an amount equal to the greater of (i) 1.00% of the amount
prepaid or (ii)(a) the present value as of the prepayment date of the remaining
scheduled payments of principal and interest from the prepayment date through
the Maturity Date (including any Balloon Payment) determined by discounting
such payments at the Reinvestment Yield, less (b) the amount of principal being
prepaid. The term "Reinvestment Yield" as used herein is equal to the mortgage
equivalent yield on the "on-the-run" U.S. Treasury issue, with a maturity date
closest to, but not earlier than, the Maturity Date (the "Oceanside/Swan
Prepayment Premium").
No Prepayment Premium shall be due or payable in connection with any
prepayment of the indebtedness evidenced by the Oceanside/Swan Note after the
Oceanside/Swan Yield Maintenance Expiration Date, or a prepayment resulting
from application of insurance or condemnation proceeds as provided in the
Oceanside/Swan Mortgage at any time during the loan term. Partial prepayments
of the Oceanside/Swan Note are not permitted, except partial prepayments
resulting from the application of insurance or condemnation proceeds, to reduce
the outstanding principal balance of the Oceanside/Swan Note as provided in the
Oceanside/Swan Mortgage, in which event, no Prepayment Premium shall be due.
Events of Default. The Oceanside/Swan Loan documents provide that the
lender has the option to accelerate the maturity of Oceanside/Swan Loan upon
the occurrence of certain "Events of Default," including the following:
o the Oceanside/Swan Borrowers' failure to pay any portion of the
indebtedness under the Oceanside/Swan Loan, within ten (10) days from
the date when the same is due;
o failure to comply with various covenants concerning operation and
maintenance of the Swan/Oceanside Properties; or
o a Oceanside/Swan Borrower bankruptcy.
Loan Servicing & Escrow Accounts. The Oceanside/Swan Borrowers have
established an on-going tax and insurance reserve account as well as a
replacement reserve fund and a tenant improvement and leasing commissions
reserve. The Oceanside/Swan Borrowers are required, at the option of the
lender, to fund reserves for estimated annual property taxes and insurance
premiums.
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<PAGE>
The Oceanside/Swan Borrower is required to deposit monthly payment of
$5,424.83 into a replacement reserve fund, to a maximum of $200,000, which must
be maintained if there are later withdrawals. Provided that no Oceanside/Swan
Event of Default has occurred and is continuing, disbursements from the
replacement reserve fund will be made by the lender as requested by the
Oceanside/Swan Borrower and approved by the lender.
The Oceanside/Swan Borrower deposited $750,000 in an upfront tenant
improvement and leasing commissions reserve and are required to deposit monthly
payments of approximately $8,333 in such reserve to be used to reimburse the
cost of providing tenant improvements and leasing commissions on future leases
as permitted by the Oceanside/Swan Loan documents. If Caldor, a tenant of the
Oceanside Caldor/Gold Coast Plaza Property affirms its lease, the lender will
release $750,000 plus interest to the Oceanside Caldor/Gold Coast Plaza
Property Borrower; if Caldor rejects such lease, then upon the Oceanside
Caldor/Gold Coast Plaza Property Borrower's execution of leases that satisfy
the conditions set forth in the Oceanside/Swan Loan documents for the entire
Caldor space to tenants acceptable to the lender and the Rating Agencies and
such tenants' taking occupancy and commencing to pay rent, the lender will pay
to the Oceanside Caldor/Gold Coast Plaza Property Borrower from the tenant
improvement and leasing commissions reserve an amount equal to $750,000 minus
the cost of tenant improvements and leasing commissions with respect to such
leases.
Transfer of Property and Interest in the Oceanside/Swan Borrowers;
Encumbrances; Other Debt.
Without the prior written consent of the lender, the Oceanside/Swan Borrowers
may not:
o directly or indirectly sell or transfer any interest in the
Oceanside/Swan Properties or any part thereof (including any partnership
or any other ownership interest in the Oceanside/Swan Borrowers, or
either of them);
o further encumber, alienate, grant a lien or grant any other interest in
the Oceanside/Swan Properties or any part thereof (including any
partnership or other ownership interest in the Oceanside/Swan Borrowers,
or either of them), whether voluntarily or involuntarily; or
o enter into any easement or other agreement granting rights in or
restricting the use or development of the Oceanside/Swan Properties;
and
o no new general partner, member, or limited partner having the ability
to control the affairs of the Oceanside/Swan Borrowers, or either of
them, shall be admitted to or created in either of the Oceanside/Swan
Borrowers (nor shall any existing general partner or member or
controlling limited partner withdraw from either Oceanside/Swan
Borrower), and no change in either Oceanside/Swan Borrower's
organizational documents relating to control over such borrower and/or
the Oceanside/Swan Properties shall be effected; and
o no transfer shall be permitted which would cause Nathan L. Serota to
(i) own less than 50% of the beneficial interest in each Oceanside/Swan
Borrower and the Oceanside/Swan Properties, (ii) own less than 100% of
the voting stock in the corporate managing member of the 3600 Long Beach
Road, LLC and (iii) not have the power to direct the affairs of the
Oceanside/Swan Borrowers.
Except for permitted indebtedness, the Oceanside/Swan Borrowers may not
incur, create or assume any indebtedness without the prior written consent of
the lender.
Partial Releases. At any time after the fourth anniversary of the
Oceanside/Swan Mortgage, the Oceanside/Swan Borrowers may sell or dispose of
either of the Oceanside/Swan Properties or portions thereof provided that:
o the lender shall not release the lien of the Oceanside/Swan Mortgage
with respect to the portion of the Oceanside/Swan Properties that is
being transferred until the Oceanside/Swan Borrowers have delivered
evidence of their receipt and deposit with the lender of the proceeds of
the disposition, together with any contributions from the Oceanside/Swan
Borrowers to cause the full amount of the Release Price (as defined
below) with respect to such disposition to be deposited with the lender;
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<PAGE>
o the disposition is made to an independent third party;
o debt service coverage based on adjusted net cash flow of the remaining
portion of the Oceanside/Swan Properties after such disposition and the
application of the Release Price is equal to or exceeds the debt service
coverage based on the adjusted net cash flow of the Oceanside/Swan
Properties prior to the disposition; and
o the disposition proceeds shall equal or exceed an amount equal to 115%
of the allocated loan amount of the portion of the Oceanside/Swan
Properties subject to the disposition (the "Release Price"). As of the
date of Oceanside/Swan Mortgage, the original allocated loan amounts
with respect to Oceanside Caldor/Gold Coast Plaza and Swan Nursery
Commons were $40,000,000 and $9,000,000, respectively.
Insurance. The Oceanside/Swan Loan documents require that the
Oceanside/Swan Borrowers maintain the following types of insurance in respect
of the Oceanside/Swan Properties: (a) standard "all-risk" or "special causes of
loss" insurance; (b) comprehensive general liability insurance; (c) rental loss
and/or business interruption insurance for a period of 12 months and (d)
insurance against loss or damage from explosion of steam boilers, air
conditioning equipment or similar apparatus.
Casualty. In the case of loss or damage covered by such insurance
policies, the following provisions shall apply:
o if a casualty occurs that does not exceed $100,000, the Oceanside/Swan
Borrowers may settle and adjust any claim without the consent of the
lender; and
o if a casualty occurs where (i) the total loss is less than 25% of the
allocated loan amount for the damaged Oceanside/Swan Property and (ii)
in the judgment of the lender, the property can be restored within nine
months after insurance proceeds are made available and such restoration
can be completed prior, on, or before six months prior to the maturity
date of the loan and (iii) no Oceanside/Swan Event of Default has
occurred and is continuing, then the insurance proceeds shall be applied
to reimburse the Oceanside/Swan Borrowers for the cost of repairing the
damaged property.
Condemnation. The Oceanside/Swan Borrowers shall cause the award or
payment made in any condemnation or taking, which is payable to the
Oceanside/Swan Borrowers or either of them, to be paid directly to the lender.
Except as described below, the lender may apply any such award or payment to
the reduction or discharge of the indebtedness whether or not then due and
payable, such application to be without any Prepayment Premium, except that if
an Event of Default has occurred or is imminent, then such application shall be
subject to the Prepayment Premium (computed in accordance with the
Swan/Oceanside Note).
Notwithstanding the above, in the event of a condemnation of less than all
of the Oceanside/Swan Properties where: (i) no Event of Default shall have
occurred and be continuing, (ii) the condemnation will not, in lender's sole
discretion, result in a material adverse effect on the use or operation of the
Oceanside/Swan Properties, the Oceanside/Swan Borrowers' ability to make
payments, or the operating income from the Oceanside/Swan Properties, and (iii)
the amount of any award or payment that is uncontested shall have been paid to
the lender, then the lender and the Oceanside/Swan Borrowers shall jointly make
any such compromise or settlement under the Oceanside/Swan Mortgage or
otherwise adjudicate such claim, and such award or payment shall be paid by the
lender to the Oceanside/Swan Borrowers to restore the Oceanside/Swan Properties
to an architecturally and functionally compatible condition. In addition,
notwithstanding the provisions above, the Oceanside/Swan Borrowers are
authorized to negotiate, compromise and settle, without participation by
lender, condemnation awards of up to $100,000 in connection with a condemnation
of less than all of the Oceanside/Swan Properties.
Lockbox Account. Following an Event of Default, the lender has the right
to establish a non-interest bearing lockbox account, which account will be
controlled by the lender or its agent. The Oceanside/Swan Loan documents
provide that the lender may require that all rents, revenue, and receipts from
the Oceanside/Swan Properties be deposited directly into the lockbox account,
pursuant to the Assignment of Leases and Rents.
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<PAGE>
Environmental Indemnity. The Oceanside/Swan Borrower has provided an
environmental indemnity with respect to environmental hazards and liabilities
associated with the Oceanside/Swan Properties.
THE MORTGAGE LOAN SELLERS
General. CREI currently holds one hundred seven (107) Mortgage Loans,
representing 42.47% of the Initial Pool Balance. Such Mortgage Loans are
collectively referred to as the "CREI Mortgage Loans". All of the CREI Mortgage
Loans were originated during the 12-month period preceding the Cut-off Date
either by CREI directly or on its behalf pursuant to its conduit program.
SBRC currently holds the remaining one hundred twenty-five (125) Mortgage
Loans, which represent 57.53% of the Initial Pool Balance. Such Mortgage Loans
are collectively referred to as the "SBRC Mortgage Loans". SBRC originated
sixteen (16) of the SBRC Mortgage Loans, representing 26.38% of the Initial
Pool Balance. The remaining one hundred nine (109) SBRC Mortgage Loans,
representing in the aggregate 31.15% of the Initial Pool Balance, were
originated by eighteen (18) other originators and purchased by SBRC. No
originator other than CREI and SBRC originated Mortgage Loans representing more
than 11% of the Initial Pool Balance.
CREI. CREI is a Delaware corporation engaged in the business of
originating loans on income-producing properties. Its principal offices are
located in New York, New York. CREI is a direct, wholly owned subsidiary of
Citibank and an affiliate of the Sponsor and the Underwriter.
SBRC. SBRC is a New York corporation primarily engaged in the business of
purchasing and originating commercial mortgage loans. Its principal offices are
located in New York, New York. SBRC is a direct, wholly owned subsidiary of
Salomon Brothers Holding Inc and an affiliate of the Sponsor and the
Underwriter.
The information set forth in this Prospectus Supplement concerning the
Mortgage Loan Sellers has, in each case, been provided by the particular
Mortgage Loan Seller, and neither the Sponsor nor the Underwriter makes any
representation or warranty as to the accuracy or completeness of such
information.
ASSIGNMENT OF THE MORTGAGE LOANS
On or before the Delivery Date, each Mortgage Loan Seller shall assign its
Mortgage Loans, without recourse, to the Sponsor. Each Mortgage Loan Seller
will be required to deliver the following documents to the Trustee for each of
such Mortgage Loan Seller's Mortgage Loans--
o the original Mortgage Note, endorsed (without recourse) to the order of
the Trustee (or, if such original Mortgage Note has been lost, a copy
thereof, together with a lost note affidavit);
o the original or a copy of the 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;
o the original or a copy of any related assignment(s) of leases and
rents, 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;
o a completed assignment of each Mortgage in favor of the Trustee, in
recordable form (or a certified copy of such assignment as sent for
recording);
o a completed assignment of any related assignment(s) of leases and rents
in favor of the Trustee, in recordable form (or a certified copy of such
assignment as sent for recording);
o an original or copy of any related loan agreement;
o 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);
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o 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
o in those cases where applicable, the original or a copy of the related
ground lease.
The Pooling Agreement will require the Trustee to hold all of these
documents delivered to it in trust for the benefit of the Certificateholders
and, within a specified period of time following such delivery, to conduct a
review of such documents. If any of the above-described documents required to
be delivered to the Trustee is not so delivered or is otherwise defective, and
such omission or defect materially and adversely affects the value of the
related Mortgage Loan or the interests of the Certificateholders therein, such
omission or defect will constitute a "Material Document Defect" with respect to
the related Mortgage Loan. The rights of the Trust against the related Mortgage
Loan Seller with respect to any Material Document Defect are described under
"--Cures and Repurchases" below. All of the above-described documents actually
delivered to the Trustee for a Mortgage Loan will collectively constitute the
"Mortgage File" for such Mortgage Loan.
The Pooling Agreement will further require the Trustee, within a specified
period following the Delivery Date, to submit for recording in the real
property records of the appropriate jurisdictions all of the assignments of
recorded loan documents in its favor that were delivered by the Mortgage Loan
Sellers with respect to the Mortgage Loans as described above.
CREI WILL NOT HAVE ANY DOCUMENT DELIVERY REQUIREMENTS WITH RESPECT TO THE
SBRC MORTGAGE LOANS, AND SBRC WILL NOT HAVE ANY DOCUMENT DELIVERY REQUIREMENTS
WITH RESPECT TO THE CREI MORTGAGE LOANS.
REPRESENTATIONS AND WARRANTIES
Each Mortgage Loan Seller will make the following representations and
warranties, among others, solely with respect to its Mortgage Loans as of the
Delivery Date or as of such other date specified in the particular
representation and warranty:
o The information set forth in the schedule of Mortgage Loans (the
"Mortgage Loan Schedule") attached to the Pooling Agreement was true and
correct in all material respects as of the Cut-off Date.
o Immediately prior to its transfer of its Mortgage Loans to the Trustee
(at the direction of the Sponsor), such Mortgage Loan Seller was the
sole owner of, and had full right and authority to sell, assign and
transfer, each such Mortgage Loan.
o Each Mortgage securing a Mortgage Loan is a valid first lien on the
Borrower's interest in the related Mortgaged Property subject only to
the following (collectively, the "Permitted Encumbrances"):
(a) the lien of current real estate taxes and assessments not yet due
and payable;
(b) covenants, conditions and restrictions, rights of way, easements
and other matters of public record, and other matters to which like
properties are commonly subject, which do not materially and
adversely affect the current use of the Mortgaged Property, the
security interest of the lender or the value of the Mortgaged
Property;
(c) rights of tenants (whether under ground leases or space leases) at
the Mortgaged Property to remain following a foreclosure or similar
proceeding (provided that such tenants are performing under such
leases);
(d) with respect to three (3) Mortgage Loans, representing 8.54% of
the Initial Pool Balance, purchase options affecting outparcels or
other portions included in the Mortgaged Property and with respect
to one (1) Mortgage Loan, representing 0.44% of the Initial Pool
Balance, a purchase option affecting the Mortgage Property;
(e) 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; and
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(f) if such Mortgage Loan is cross-collateralized with any other
Mortgage Loan, the lien of the Mortgage for such other Mortgage
Loan.
o The 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 nonrecourse provisions 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, redemption, fraudulent
conveyance, receivership, moratorium or other laws relating to or
affecting the rights of creditors generally and by general principles of
equity, and except that certain provisions of such Mortgage Loan
documents are or may be unenforceable in whole or in part under
applicable state or federal laws, but the inclusion of such provisions
does not render any of the Mortgage Loan documents invalid as a whole,
and such Mortgage Loan documents taken as a whole are enforceable to the
extent necessary and customary for the practical realization of the
rights and benefits afforded thereby.
o No Mortgage Loan was as of the Cut-off Date, or during the prior
twelve-month period, more than 30 days delinquent in respect of any
Scheduled P&I Payment, without giving effect to any applicable grace
period, except for one Mortgage Loan as to which the November 1998
payment was collected in early December 1998.
o There is no valid offset, defense or counterclaim to any Mortgage Loan.
o Such Mortgage Loan Seller has not waived any material default, breach,
violation or event of acceleration existing under any Mortgage or
Mortgage Note, except that certain post-closing conditions or
requirements may not have yet been completed.
o Such Mortgage Loan Seller has not received actual notice that (a) there
is any proceeding pending or threatened for condemnation affecting all
or a material portion 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 (except in those cases
where there is an escrow of funds, or an effective insurance policy
provides coverage, sufficient to effect the necessary repairs and
maintenance).
o All insurance coverage required under each Mortgage securing a Mortgage
Loan is in full force and effect with respect to the related Mortgaged
Property.
o 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.
o One or more environmental site assessments (or an update of a
previously conducted assessment) has been performed with respect to each
Mortgaged Property not more than 24 months prior to the Delivery Date
(except in the case of eleven (11) Mortgaged Properties representing
3.89% of the Initial Pool Balance, as to which such assessments or
updates were performed as of an earlier date), and such Mortgage Loan
Seller 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).
o 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 Mortgage Loan).
o The proceeds of each Mortgage Loan have been fully disbursed, and there
is no requirement for future advances thereunder.
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o 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.
o There are no delinquent taxes, ground rents, water charges, sewer
rents, or other similar outstanding charges affecting the related
Mortgaged Property that are not otherwise covered by an escrow of funds
sufficient to pay such charges.
o 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.
o 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.
o 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.
If there exists a breach of any of the above-described representations and
warranties made by either Mortgage Loan Seller, and such breach materially and
adversely affects the value of the subject Mortgage Loan or the interests of
the Certificateholders therein, such breach will constitute a "Material Breach"
of such representation and warranty. The rights of the Trust against the
applicable Mortgage Loan Seller with respect to any Material Breach are
described under "--Cures and Repurchases" below.
SBRC WILL NOT MAKE ANY REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE
CREI MORTGAGE LOANS; AND CREI WILL NOT MAKE ANY REPRESENTATIONS AND WARRANTIES
WITH RESPECT TO THE SBRC MORTGAGE LOANS.
CURES AND REPURCHASES
If either Mortgage Loan Seller discovers or receives notice of (i) a
Material Document Defect with respect to any of its Mortgage Loans as described
under "--Assignment of the Mortgage Loans" above or (ii) a Material Breach of
any representation and warranty made by it as described under
"--Representations and Warranties" above, then such Mortgage Loan Seller will
be obligated to--
o remedy such Material Document Defect or Material Breach in all material
respects, or
o repurchase the affected Mortgage Loan at a price (the "Purchase Price")
generally equal to the sum of (i) the unpaid principal balance of such
Mortgage Loan at the time of purchase, plus (ii) all unpaid interest in
respect of such Mortgage Loan through the Due Date in the Collection
Period of purchase (exclusive of any portion thereof that constitutes
Default Interest or Additional Interest), plus (iii) all unreimbursed
Servicing Advances in respect of such Mortgage Loan.
The time period within which such Mortgage Loan Seller must complete such
remedy or repurchase will be limited to 90 days (or, if it is diligently
attempting to correct the problem, 180 days) following the earlier of its
discovery or receipt of notice of the Material Document Defect or Material
Breach, as the case may be.
The foregoing cure/repurchase obligation of the applicable Mortgage Loan
Seller will constitute the sole remedy available to the Certificateholders in
connection with a Material Document Defect or a Material Breach with respect to
any Mortgage Loan. Neither the Sponsor nor any other person will be obligated
to repurchase any affected Mortgage Loan in connection with a Material Document
Defect or a Material Breach if the applicable Mortgage Loan Seller defaults on
its obligation to do so. SBRC will not have any cure/repurchase obligations in
respect of any CREI Mortgage Loan; and CREI will not have any cure/repurchase
obligations in respect of any SBRC Mortgage Loan. See "Description of the
Pooling Agreements--Assignment of Mortgage Loans; Repurchases" and
"--Representations and Warranties; Repurchases" in the Prospectus.
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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 it is as expected to be
constituted at the time the Offered Certificates are issued, with adjustments
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 in this Prospectus
Supplement. The Sponsor believes that the information set forth in this
Prospectus Supplement 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 in this Prospectus
Supplement, may vary.
A Current Report on Form 8-K will be available to purchasers of the
Offered Certificates after the Delivery Date. Such Current Report on Form 8-K
will be filed, together with the Pooling Agreement, with the SEC within fifteen
days after the initial issuance of the Offered Certificates and will be
available on the SEC's Internet web site at http://www.sec.gov. In the event
Mortgage Loans are removed from or added to the Mortgage Pool such removal or
addition will be noted in such Current Report on Form 8-K.
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SERVICING OF THE MORTGAGE LOANS
GENERAL
The Pooling Agreement provides that the Master Servicer and Special
Servicer must each service and administer the Mortgage Loans and other assets
for which it is responsible, directly or through sub-servicers, in the best
interests and for the benefit of the Certificateholders, in accordance with all
applicable laws, the express terms of the Pooling Agreement and the respective
Mortgage Loans and, to the extent consistent with the foregoing, the Servicing
Standard. The "Servicing Standard" requires that the Master Servicer and
Special Servicer must each service and administer the Mortgage Loans and other
assets for which it is responsible:
o 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 other third parties(giving due
consideration to customary and usual standards of practice of prudent
institutional commercial mortgage lenders) 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;
o with a view to the timely collection of all Scheduled P&I Payments due
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, with a view to the
maximization of the recovery on such Mortgage Loan to the
Certificateholders (as a collective whole) on a present value basis);
and
o without regard to:
(a) 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 or any other party to the Pooling Agreement;
(b) the ownership of any Certificate by the Master Servicer or the
Special Servicer, as the case may be, or any affiliate thereof;
(c) the Master Servicer's obligation to make Advances;
(d) the Special Servicer's obligation to make (or to direct the Master
Servicer to make) Servicing Advances;
(e) the right of the Master Servicer or the Special Servicer, as the
case may be, or any affiliate thereof to receive compensation for
its services or reimbursement of costs under the Pooling Agreement
generally or with respect to any particular transaction;
(f) the management and/or servicing of mortgage loan portfolios for
other third parties; and
(g) any indemnity or repurchase obligation on the part of the Master
Servicer or the Special Servicer, as the case may be, or any of
their respective affiliates with respect to the Mortgage Loans.
In general, the Master Servicer will be responsible for the servicing and
administration of--
o all Mortgage Loans as to which no Servicing Transfer Event (as defined
below) has occurred, and
o all Corrected Mortgage Loans (also as defined below).
The Special Servicer, on the other hand, will be responsible for the
servicing and administration of--
o 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
o each Mortgaged Property that has been acquired by the Trust in respect
of a defaulted Mortgage Loan through foreclosure, deed-in-lieu of
foreclosure or otherwise (each, upon acquisition, an "REO Property").
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Despite the foregoing, the Pooling Agreement will require the Master
Servicer to continue to collect information and prepare all reports to the
Trustee required thereunder with respect to any Specially Serviced Mortgage
Loans and REO Properties and, otherwise, to render certain incidental services
with respect to any Specially Serviced Mortgage Loans and REO Properties.
Neither the Master Servicer nor the Special Servicer will have any
responsibility for the performance by the other of its respective obligations
and duties under the Pooling Agreement.
A Mortgage Loan will become a Specially Serviced Mortgage Loan (if it has
not already done so) upon the occurrence of a Servicing Transfer Event. Each of
the following events will constitute a "Servicing Transfer Event" in respect of
any Mortgage Loan:
(1) the failure of the related Borrower to make when due any Balloon
Payment, which failure continues, or the Master Servicer determines in
its good faith and reasonable judgment will continue, unremedied for 30
days;
(2) the failure of the related Borrower to make when due any Scheduled P&I
Payment (other than a Balloon Payment) or any other payment required
under the related Mortgage Note or the related Mortgage(s), which
failure continues, or the Master Servicer determines in its good faith
and reasonable judgment will continue, unremedied for 60 days;
(3) the determination by the Master Servicer in its good faith and
reasonable judgment that a default in the making of a Scheduled P&I
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;
(4) any default under the related loan documents, other than a payment
default, 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 continues
unremedied for the applicable cure period under the terms of the
Mortgage Loan (or, if no cure period is specified, 60 days);
(5) certain events of bankruptcy, insolvency, readjustment of debt,
marshalling of assets and liabilities, or similar proceedings in respect
of or pertaining to the related Borrower; and certain actions by or on
behalf of the related Borrower indicating its bankruptcy, insolvency or
inability to pay its obligations;
(6) the Master Servicer shall have received notice of the commencement of
foreclosure or similar proceedings with respect to the related Mortgaged
Property or Properties.
So long as no other Servicing Transfer Event then exists, 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) if and when:
(a) with respect to the circumstances described in clauses (1) and (2) of
the preceding paragraph, the related Borrower has made three consecutive
full and timely Scheduled P&I Payments under the terms of such Mortgage
Loan (as such terms may be changed or modified in connection with a
bankruptcy or similar proceeding or by reason of a modification, waiver
or amendment granted or agreed to by the Special Servicer);
(b) with respect to the circumstances described in clauses (3) and (5) of
the preceding paragraph, such circumstances cease to exist in the good
faith and reasonable judgment of the Special Servicer; and
(c) with respect to the circumstances described in clause (4) of the
preceding paragraph, such default is cured;
(d) with respect to the circumstances described in clause (6) of the
preceding paragraph, such proceedings are terminated.
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The Master Servicer and Special Servicer will each be required to service
and administer any related Cross-Collateralized Group 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. You should
also refer to the Prospectus, in particular 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.
THE MASTER SERVICER AND THE SPECIAL SERVICER
The Master Servicer. AMRESCO Services, L.P., a Delaware limited
partnership, will serve as master servicer (the "Master Servicer") and in such
capacity will be responsible for servicing the Mortgage Loans (other than
Specially Serviced Mortgage Loans and REO Properties). The Master Servicer is a
wholly owned subsidiary of AMRESCO, INC. ("AMRESCO"), a diversified financial
services company which is publicly traded on NASDAQ. The Master Servicer's
principal offices are located at 235 Peachtree Street, NE, Suite 900, Atlanta,
Georgia 30303.
As of September 30, 1998, AMRESCO serviced approximately 18,680 commercial
and multi-family loans, totaling approximately $39.4 billion in aggregate
outstanding principal amount, including approximately 6,890 loans representing
$26.3 billion that are currently included in 68 securitized transactions. The
portfolio is significantly diversified both geographically and by product type.
The Mortgage Bankers Association of America ranked AMRESCO as the second
largest commercial mortgage servicing firm. Moody's and S&P have approved
AMRESCO as a master and special servicer for investment grade commercial and
multifamily mortgage-backed securities.
The information set forth in this Prospectus Supplement concerning the
Master Servicer and AMRESCO has been provided by it. Neither the Sponsor nor
the Underwriter makes any representation or warranty as to the accuracy or
completeness of such information.
The Special Servicer. The duties of Special Servicer will be performed by
Allied Capital Corporation, a Maryland corporation ("Allied"). As of September
30, 1998, Allied was responsible for performing certain servicing functions
with respect to commercial and multifamily loans with an aggregate principal
balance of approximately $719 million, the real property security for which is
located in 31 states and the District of Columbia. Allied has been approved as
a special servicer for investment grade-rated commercial and multifamily
mortgage-backed securities by S&P and Moody's.
The information set forth herein concerning Allied has been provided by
it, and neither the Sponsor nor the Underwriter make any representation or
warranty as to the accuracy or completeness of such information.
SUB-SERVICERS
The Master Servicer and Special Servicer may each delegate any of its
servicing obligations under the Pooling Agreement to any one or more
third-party servicers (each, a "Sub-Servicer"). Nevertheless, the Master
Servicer or Special Servicer, as the case may be, will remain obligated under
the Pooling Agreement for any such delegated duties. Some 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. One or more such Sub-Servicers may be affiliates of a Mortgage Loan
Seller. 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
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Servicer or Special Servicer, as the case may be, is no longer acting in such
capacity, the Trustee or any other successor to such Master Servicer or Special
Servicer, as applicable, may:
o assume such party's rights and obligations under such Sub-Servicing
Agreement;
o 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, as the case may be, and such Sub-Servicer shall mutually
agree; or
o terminate such Sub-Servicing Agreement without cause upon payment of a
termination fee to the Sub-Servicer.
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" in this Prospectus Supplement.
SERVICING AND OTHER COMPENSATION AND PAYMENT OF EXPENSES
The Master Servicing Fee. 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--
o accrue at the applicable Master Servicing Fee Rate in respect of each
and every Mortgage Loan (including each Specially Serviced Mortgage
Loan, if any, and each Mortgage Loan, if any, as to which the related
Mortgaged Property has become an REO Property),
o be computed 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, as the case may be, on each such Mortgage Loan is computed
under the terms of the related Mortgage Note and applicable law, and
o be payable monthly on a loan-by-loan basis from amounts received in
respect of interest on each such Mortgage Loan.
The "Master Servicing Fee Rate" will range from 0.11% to 0.185% per annum,
on a loan-by-loan basis. The weighted average Master Servicing Fee Rate for the
Mortgage Loans as of the Cut-off Date was 0.146% per annum.
Additional Master Servicing Compensation. As additional servicing
compensation, the Master Servicer will be entitled to receive--
o All Prepayment Interest Excesses, if any, collected in respect of the
entire Mortgage Pool (but only to the extent such Prepayment Interest
Excesses collected during any Collection Period are greater than all
Prepayment Interest Shortfalls (as defined below) incurred in respect of
the Mortgage Loans during such Collection Period). If a Borrower prepays
its Mortgage Loan, in whole or in part, after the related Due Date
during any Collection Period, the amount of interest (less the amount of
related Master Servicing Fees payable therefrom and any Additional
Interest included therein) will, to the extent actually collected,
constitute a "Prepayment Interest Excess".
o All modification fees and assumption fees and any similar fees
(excluding Prepayment Premiums), if any, collected in respect of
Mortgage Loans that are not Specially Serviced Mortgage Loans.
o All late payment charges and Default Interest, if any, collected in
respect of Mortgage Loans that are not Specially Serviced Mortgage Loans
(but only to the extent that such late payment charges
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and Default Interest have not otherwise been applied to pay the Master
Servicer, Special Servicer, Fiscal Agent or Trustee, as applicable,
interest on Advances made thereby with respect to the related Mortgage
Loan as described in this Prospectus Supplement). "Default Interest" is
any interest that (i) accrues on a defaulted Mortgage Loan solely by
reason of the subject default and (ii) is in excess of all interest at
the related Mortgage Rate and any Additional Interest accrued on such
Mortgage Loan.
o Charges for beneficiary statements or demands and amounts collected for
checks returned for insufficient funds, to the extent actually paid by a
Borrower with respect to any Mortgage Loan.
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 (as defined in the Prospectus), in certain government
securities and other investment grade obligations specified in the Pooling
Agreement ("Permitted Investments"). 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.
Prepayment Interest Shortfalls. If a Borrower prepays a Mortgage Loan, in
whole or in part, prior to the related Due Date during any Collection Period
and does not pay interest on such prepayment through such Due Date, then the
shortfall in a full month's interest (less the amount of related Master
Servicing Fees and any Additional Interest) on such prepayment will constitute
a "Prepayment Interest Shortfall".
The Pooling Agreement will provide that, if any Prepayment Interest
Shortfalls are incurred with respect to the Mortgage Pool during any Collection
Period, the Master Servicer must make a non-reimbursable payment (a
"Compensating Interest Payment") with respect to the related Distribution Date
in an amount equal to the lesser of:
(a) any excess of (i) the aggregate of all Prepayment Interest Shortfalls
incurred with respect to the Mortgage Pool during such Collection
Period, over (ii) the aggregate of all Prepayment Interest Excesses, if
any, collected with respect to the Mortgage Pool during such Collection
Period, and
(b) the aggregate of, with respect to each and every Mortgage Loan for
which the Master Servicer receives Master Servicing Fees during such
Collection Period, the portion of such fees calculated at an annual
rate of 0.06% per annum.
To the extent that the amount described in clause (b) of the preceding
sentence is less than the amount described in clause (a) of the preceding
sentence, such difference will constitute the "Net Aggregate Prepayment
Interest Shortfall" for the related Distribution Date.
Any Compensating Interest Payment made by the Master Servicer with respect
to any Distribution Date will be included among the amounts distributable as
principal and interest on the Certificates on such Distribution Date as
described under "Description of the Offered Certificates--Distributions" in
this Prospectus Supplement. Any Net Aggregate Prepayment Interest Shortfall for
any Distribution Date will be allocated among the respective Classes of
interest-bearing Certificates, in reduction of the interest distributable
thereon, in the amounts and priorities described under "Description of the
Offered Certificates--Allocation of Losses and Certain Other Shortfalls and
Expenses" in this Prospectus Supplement.
Principal Special Servicing Compensation. The principal compensation to be
paid to the Special Servicer in respect of its special servicing activities
will be--
o the Special Servicing Fee,
o the Workout Fee, and
o the Liquidation Fee.
The Special Servicing Fee. The "Special Servicing Fee" will--
o accrue at 0.25% per annum (the "Special Servicing Fee Rate") in respect
of each and every Specially Serviced Mortgage Loan, if any, and each and
every Mortgage Loan, if any, as to which the related Mortgaged Property
has become an REO Property,
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o be computed 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, as the case may be, on each such Mortgage Loan is computed
under the terms of the related Mortgage Note and applicable law, and
without giving effect to any Additional Interest that may accrue on an
ARD Loan after its Anticipated Repayment Date, and
o be payable monthly from general collections on all the Mortgage Loans
and any REO Properties on deposit in the Certificate Account from time
to time.
The Workout Fee. The Special Servicer will, in general, be entitled to
receive a Workout Fee 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 and Additional Interest) and principal
(including scheduled payments, prepayments and Balloon 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. Nevertheless, 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 remained Correct
Mortgage Loans at the time of such termination or resignation. The successor
Special Servicer shall not be entitled to any portion of such Workout Fees.
The Liquidation Fee. The Special Servicer will be entitled to receive a
Liquidation Fee with respect to each Specially Serviced Mortgage Loan as to
which the Special Servicer obtains a full or discounted payoff 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 defined in the Prospectus). 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 a recovery of Default Interest or
Additional 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:
o the repurchase of any Mortgage Loan by a Mortgage Loan Seller for a
breach of representation or warranty or for defective or deficient
Mortgage Loan documentation so long as such repurchase occurs within the
applicable cure period (see "Description of the Mortgage Pool--Cures and
Repurchases" in this Prospectus Supplement).
o 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
(see "--Sale of Defaulted Mortgage Loans" below); or
o 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 (see "Description of the Offered Certificates--
Termination" in this Prospectus Supplement).
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. 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.
Additional Special Servicing Compensation. As additional special servicing
compensation, the Special Servicer will be entitled to receive--
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o all modification fees and assumption fees, if any, collected in respect
of the Specially Serviced Mortgage Loans, and
o all late payment charges and Default Interest, if any, collected in
respect of the Specially Serviced Mortgage Loans (but only to the extent
that such late payment charges and Default Interest have not otherwise
been applied to pay the Master Servicer, Special Servicer, Fiscal Agent
or Trustee, as applicable, interest on Advances made thereby with
respect to the related Mortgage Loan as described in this Prospectus
Supplement).
Sub-Servicing Compensation. The Master Servicer and the Special Servicer
will each be responsible for all compensation payable to the Sub-Servicers
retained thereby. Such Sub-Servicers may, in some cases, be entitled to a
significant portion of the servicing compensation described above as being
payable to Master Servicer or Special Servicer, as applicable.
Payment of Expenses; Servicing Advances. Each of the Master Servicer and
the Special Servicer will 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. Neither the Master Servicer nor the
Special Servicer will be entitled to reimbursement for these expenses except as
expressly provided in the Pooling Agreement.
Any and all 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 will be
reimbursable from future payments and other collections, including in the form
of Insurance Proceeds (as defined in the Prospectus), Condemnation Proceeds
(also as defined in the Prospectus) and Liquidation Proceeds, on or in respect
of the related Mortgage Loan or REO Property ("Related Proceeds"). In addition,
the Special Servicer may from time to time require the Master Servicer to
reimburse the Special Servicer for any Servicing Advance made by it. Upon so
reimbursing the Special Servicer for any Servicing Advance, the Master Servicer
will thereafter be deemed to have been made such Advance.
In general, the Special Servicer may request (and, in certain
circumstances, must direct) the Master Servicer to make Servicing Advances in
respect of a Specially Serviced Mortgage Loan or REO Property (in lieu of the
Special Servicer making such Advances). Nevertheless, the Pooling Agreement
will obligate the Special Servicer to make Servicing Advances in an emergency
or in circumstances where (because of timing or otherwise) requesting the
Master Servicer to make such Advances would be inconsistent with the Servicing
Standard. In addition, the Pooling Agreement will require that the Special
Servicer 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 must 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. Except under the circumstances
described above in this paragraph, the Special Servicer will 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 ten (10) days
after such Servicing Advance is required to be made, then the Trustee will be
required: (a) if it has actual knowledge of such failure, to give the
defaulting party notice of its failure; and (b) if such failure continues for
three (3) more business days, to make such Servicing Advance. The Pooling
Agreement will obligate the Fiscal Agent to make any Servicing Advance that the
Trustee was obligated (but failed) to make.
NOTWITHSTANDING THE FOREGOING DISCUSSION OR ANYTHING ELSE TO THE CONTRARY
IN THIS PROSPECTUS SUPPLEMENT, THE MASTER SERVICER, THE SPECIAL SERVICER, THE
FISCAL AGENT AND THE TRUSTEE WILL NOT BE OBLIGATED TO MAKE SERVICING ADVANCES
THAT, IN THE REASONABLE AND GOOD FAITH JUDGMENT OF THE MASTER SERVICER, THE
SPECIAL SERVICER, THE FISCAL AGENT OR THE TRUSTEE, AS THE CASE MAY BE, WOULD
NOT BE ULTIMATELY RECOVERABLE FROM RELATED PROCEEDS (ANY SERVICING ADVANCE NOT
SO RECOVERABLE, A "NONRECOVERABLE SERVICING ADVANCE"). IF THE MASTER SERVICER,
THE SPECIAL SERVICER, THE FISCAL AGENT OR THE TRUSTEE MAKES
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ANY SERVICING ADVANCE THAT IT SUBSEQUENTLY DETERMINES, IN ITS REASONABLE AND
GOOD FAITH JUDGMENT, IS A NONRECOVERABLE SERVICING ADVANCE, IT MAY OBTAIN
REIMBURSEMENT FOR SUCH NONRECOVERABLE SERVICING ADVANCE OUT OF GENERAL
COLLECTIONS ON THE MORTGAGE LOANS AND ANY REO PROPERTIES ON DEPOSIT IN THE
CERTIFICATE ACCOUNT FROM TIME TO TIME.
The Master Servicer and the Special Servicer will each be permitted to
pay, or to direct the payment of, certain servicing expenses directly out of
the Certificate Account and at times without regard to the relationship between
the expense and the funds from which it is being paid (including in connection
with the remediation of any adverse environmental circumstance or condition at
a Mortgaged Property or an REO Property). In addition, the Pooling Agreement
will require the Master Servicer (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).
The Master Servicer, the Special Servicer, the Fiscal Agent and the
Trustee will each be entitled to receive interest on Servicing Advances made
thereby. Such interest will accrue on the amount of each Servicing Advance for
so long as it is outstanding 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. Interest so accrued with respect to
any Servicing Advance will be payable--
o at any time until such Servicing Advance either has been reimbursed or
has become a Nonrecoverable Servicing Advance, out of Default Interest
and late payment charges collected on the related Mortgage Loan, and
o if such Servicing Advance either has been reimbursed or has become a
Nonrecoverable Servicing Advance, out of any amounts then on deposit in
the Certificate Account.
EVIDENCE AS TO COMPLIANCE
On or before March 15 of each year, beginning March 15, 2000, each of the
Master Servicer and the Special Servicer must:
o at its expense, cause a firm of independent public accountants, that is
a member of the American 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 Master Servicer's or Special
Servicer's servicing of the Mortgage Loans under the Pooling Agreement
or servicing of mortgage loans similar to the Mortgage Loans under
substantially similar agreements for the preceding calendar year (or the
portion thereof during which the Certificates were outstanding) and that
the assertion of the management of the Master Servicer or Special
Servicer, as the case may be, 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; and
o deliver to the Trustee a statement signed by one or more officers
thereof to the effect that the Master Servicer or Special Servicer, as
the case may be, has fulfilled its obligations under the Pooling
Agreement in all material respects throughout the preceding calendar
year (or the portion thereof during which the Certificates were
outstanding).
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 any
Certificateholder, subject, however, to each of the following limitations,
conditions and restrictions:
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o With limited exception (including as described below with respect to
Additional 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. In addition, the Master Servicer may not agree to any
assumption without the Special Servicer's consent. The Special Servicer
will not be so restricted when acting with respect to a Specially
Serviced Mortgage Loan, provided that 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.
o The Special Servicer may not, in connection with any particular
extension, (a) extend the maturity date of a Mortgage Loan beyond a date
that is two years prior to the Rated Final Distribution Date, (b) in the
case of a Mortgage Loan secured solely by a Mortgage on the applicable
Borrower's leasehold interest in the related Mortgaged Property, beyond
a date that is ten years prior to the expiration of the related ground
lease or (c) in the case of a Mortgage Loan that is a Balloon Mortgage
Loan, extend the maturity date beyond the amortization term thereof (as
determined without regard to the Balloon Payment).
o 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 any of REMIC I, REMIC II or REMIC III 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
any of REMIC I, REMIC II or REMIC III 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 decisions in this regard
which were made in good faith; and, unless it would be contrary to the
Servicing Standard to do so, each of the Master Servicer and the Special
Servicer may rely on opinions of counsel in making such decisions.
o 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 and until (a)
each of Moody's and S&P has confirmed that such act will not result in a
qualification, downgrade or withdrawal of any rating assigned thereby to
the Certificates and (b) the Special Servicer has determined in
accordance with the Servicing Standard, based upon a Phase I
environmental assessment (and any additional environmental testing as
the Special Servicer deems necessary and appropriate), that such
additional or substitute collateral is in compliance with applicable
environmental laws and regulations and that there are no circumstances
or conditions present with respect to such new collateral relating to
the use, management or disposal of any hazardous materials for which
investigation, testing, monitoring, containment, clean-up or remediation
would be required under any then applicable environmental laws and/or
regulations.
o With limited exceptions, neither the Master Servicer nor the Special
Servicer may release any collateral securing an outstanding Mortgage
Loan.
Nevertheless, the limitations, conditions and restrictions set forth above will
not apply to any act or event described above that either occurs automatically,
or results from the exercise of a unilateral option by the related Borrower
within the meaning of Treasury Regulations Section 1.1001-3(c)(2)(ii), in any
event under the terms of such Mortgage Loan in effect on the Delivery Date.
Furthermore, 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 its reasonable and good faith judgment,
such opposition would not ultimately prevent the confirmation of such plan or
one substantially similar.
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With respect to any ARD Loan after its Anticipated Repayment Date, the
Master Servicer will be permitted, in its discretion, to waive all or any
accrued Additional 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 such accrued Additional Interest. However, the Master
Servicer's determination to waive the Trust's right to such accrued Additional
Interest must be reasonably likely to produce a greater payment to
Certificateholders on a present value basis than a refusal to waive the Trust's
right to such accrued Additional Interest. 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.
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 is in accordance with the Servicing Standard,
the Special Servicer will be required to give prompt written notice of such
determination to the Trustee and the Master Servicer. The Trustee will be
required, within 10 days after receipt of such notice, to provide a similar
notice to the Holder (or Holders) of the Controlling Class. Any single Holder
or particular group of Holders of Certificates evidencing a majority interest
in the Controlling Class may (but is not obligated to) purchase any such
defaulted Mortgage Loan from the Trust, at a price equal to the applicable
Purchase Price. If such Certificateholders have not purchased such defaulted
Mortgage Loan within fifteen (15) days of their having received notice in
respect thereof, either the Special Servicer or the Master Servicer, in that
order of priority, may (but is not obligated to) 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
has not otherwise been purchased as described in the prior paragraph, if 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.
In general, the Special Servicer will be required to accept the highest cash
offer (or such lower cash offer as may be in the best interests of the Trust)
that constitutes a fair price for such Mortgage Loan, notwithstanding that a
fair price may be less than the applicable Purchase Price. Nevertheless, none
of the Special Servicer, the Master Servicer, the Sponsor, either Mortgage Loan
Seller, any Certificateholder 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 both the Purchase Price and the price proposed by any Interested
Persons. Additionally, neither the Trustee nor any of its affiliates 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 Trust, the Special Servicer will be required to sell such
Mortgaged Property not later than the end of the third calendar year following
the year of acquisition, unless--
o the Internal Revenue Service grants an extension of time to sell such
property (an "REO Extension"), or
o the Special Servicer obtains an opinion of independent counsel generally
to the effect that the holding of such 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, REMIC II or REMIC III to fail to qualify as a REMIC under
the Code.
Subject to the foregoing, the Special Servicer will generally be required
to solicit cash offers for any REO Property in such a manner as will be
reasonably likely to realize a fair price for such property. The
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Special Servicer may retain an independent contractor to operate and manage any
REO Property. 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
each REO Property, if any, in a manner that would, to the extent commercially
reasonable, 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 reasonable 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 in
this Prospectus Supplement as an "REO Tax"). To the extent that income the
Trust receives from an REO Property is subject to (a) a tax on "net income from
foreclosure property", such income would be subject to federal tax at the
highest marginal corporate tax rate (currently 35%) or (b) a tax on "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 such 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 hospitality properties that become REO Property. However, unless
otherwise required by expressly applicable authority, it is anticipated that
the Trust will take the position that no income from foreclosure property will
be subject to the 100% "prohibited transactions" tax. 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 1999, the Master Servicer must 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, must perform a physical inspection of
each Mortgaged Property as soon as practicable after servicing of the related
Mortgage Loan is transferred thereto and annually thereafter for so long as the
related Mortgage Loan remains a Specially Serviced Mortgage Loan. 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.
With respect to each Mortgage Loan that requires the related Borrower to
deliver quarterly or annual operating statements with respect to the related
Mortgaged Property, the Pooling Agreement will require the Master Servicer or
the Special Servicer, depending on which is obligated to service such Mortgage
Loan, to make reasonable efforts to collect and review such statements. There
can be no assurance, however, that the related Borrower will deliver any such
operating statements in accordance with the terms of any such Mortgage Loan.
Neither the Master Servicer nor the Special Servicer is likely to have any
practical means of compelling such delivery in the case of an otherwise
performing Mortgage Loan.
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TERMINATION OF THE SPECIAL SERVICER
The Holder or Holders of Certificates evidencing a majority interest in
the Controlling Class may at any time replace the Special Servicer. In
addition, such Holder(s) may designate a replacement Special Servicer by the
delivery to the Trustee of a written notice stating such designation. If the
designated replacement is approved by the Trustee, which approval may not be
unreasonably withheld, the designated replacement will become the Special
Servicer as of the date the Trustee has received each of the following items:
o written confirmation from each of Moody's and S&P stating that if the
designated replacement were to serve as Special Servicer under the
Pooling Agreement, none of the then-current ratings of the Certificates
would be downgraded or withdrawn as a result thereof;
o a written acceptance of all obligations of the Special Servicer,
executed by the designated replacement; and
o an opinion of counsel to the effect that the designation of such
replacement to serve as Special Servicer is in compliance with the
applicable provisions of 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 the designated
replacement in accordance with its terms.
The existing Special Servicer will 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 Principal
Balance Certificates outstanding from time to time (the Class A-1 and Class A-2
Certificates being treated as a single Class for this purpose) that has a
then-current Certificate Balance at least equal to 25% of its initial
Certificate Balance (or, if no Class of Certificates has a then-current
Certificate Balance at least equal to 25% of its initial Certificate Balance,
then the "Controlling Class" will be the Class of Principal Balance
Certificates with the largest Certificate Balance then outstanding). The Class
L Certificates will be the initial Controlling Class. At no time will the Class
X, Class R-I, Class R-II or Class R-III Certificates constitute the Controlling
Class. It is anticipated that an affiliate of the initial Special Servicer will
acquire certain of the Private Certificates, including all the Class L
Certificates.
RESIGNATION OF MASTER SERVICER OR SPECIAL SERVICER UPON ADVERSE RATING EVENTS
The Master Servicer or the Special Servicer will be required to resign if:
o Any of the outstanding ratings on any Class of Certificates is
downgraded or withdrawn due to the acts, omissions or circumstances of
the Master Servicer or the Special Servicer, as the case may be;
o Either Rating Agency places its ratings of any Class of Certificates on
a "watch" status in contemplation of a rating downgrade or withdrawal
due to such acts, omissions or circumstances, and the Master Servicer or
Special Servicer, as applicable, shall not have resolved all such
matters to the satisfaction of such Rating Agency within ninety (90)
days, except that no such cure period will continue beyond the end of
the cure period described in the next paragraph; or
o Moody's shall provide written notice to the Trustee that, unless the
Master Servicer or the Special Servicer, as applicable, resigns, it will
place its ratings on one or more Classes of Certificates on a "watch"
status in contemplation of a rating downgrade or withdrawal due to such
acts, omissions or circumstances, and the Master Servicer or Special
Servicer, as applicable, shall not have resolved all such matters to
Moody's satisfaction within ninety (90) days.
The cure periods available to the Master Servicer and Special Servicer may
be extended if the Rating Agency in question provides written consent to the
Trustee.
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DESCRIPTION OF THE OFFERED CERTIFICATES
GENERAL
The Certificates will be issued, on or about the Delivery Date, pursuant
to the Pooling Agreement. They will represent in the aggregate the entire
beneficial ownership interest in the Trust Fund. The Trust Fund will include:
o the Mortgage Loans;
o any and all payments under and proceeds of the Mortgage Loans received
after the Cut-off Date (exclusive of payments of principal, interest and
other amounts due on or before the Cut-off Date);
o the Mortgage Files for the Mortgage Loans;
o any REO Properties; and
o 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) or the Interest
Reserve Account (see "--Distributions--Interest Reserve Account" below).
The Certificates will include sixteen (16) separate Classes, seven (7) of
which are Classes of Offered Certificates and nine of which are Classes of
Private Certificates. The tables below set forth the Class designation, the
approximate initial Certificate Balance or Notional Amount and the initial
Pass-Through Rate for each Class of Certificates.
THE OFFERED CERTIFICATES
<TABLE>
<CAPTION>
INITIAL
CERTIFICATE BALANCE OR % OF INITIAL
CLASS DESIGNATION NOTIONAL AMOUNT(1) INITIAL POOL BALANCE PASS-THROUGH RATE
- ------------------- ------------------------ ---------------------- ------------------
<S> <C> <C> <C>
Class A-1 ......... $ % %
Class A-2 ......... $ % %
Class X ........... $ (2) % %
Class B ........... $ % %
Class C ........... $ % %
Class D ........... $ % %
Class E ........... $ % %
</TABLE>
- ----------
(1) The Certificate Balance or Notional Amount of any Class of Offered
Certificates may be as much as 10% larger or smaller than the balance or
amount, as the case may be, shown above.
(2) Notional Amount. The Class X Certificates will not have a Certificate
Balance.
THE PRIVATE CERTIFICATES
<TABLE>
<CAPTION>
APPROXIMATE
INITIAL INITIAL INITIAL
CLASS DESIGNATION CERTIFICATE BALANCE(1) CREDIT SUPPORT PASS-THROUGH RATE
- --------------------- ------------------------ --------------------- -------------------
<S> <C> <C> <C>
Class F ............. $ % %
Class G ............. $ % %
Class H ............. $ % %
Class J ............. $ % %
Class K ............. $ % %
Class L ............. $ % %
Class R-I ........... N/A(2) N/A(2) N/A(2)
Class R-II .......... N/A(2) N/A(2) N/A(2)
Class R-III ......... N/A(2) N/A(2) N/A(2)
</TABLE>
- ----------
(1) The Certificate Balance of any Class of Private Certificates may be as
much as 10% larger or smaller than the balance shown above.
(2) The Class R-I, Class R-II and Class R-III Certificates do not have
Certificate Balances, Notional Amounts or Pass-Through Rates.
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<PAGE>
The "Certificate Balance" of any Class of Principal Balance Certificates
will represent the aggregate distributions of principal to which the Holders of
such Certificates are entitled over time out of payments (or Advances) and
other collections on the assets of the Trust. On each Distribution Date, the
Certificate Balance of a Class of Principal Balance Certificates will be
permanently reduced by any distributions of principal actually made with
respect to such Class of Certificates on such Distribution Date. On any
particular Distribution Date, the Certificate Balance of a Class of Principal
Balance Certificates may also be permanently reduced in connection with the
allocation of Realized Losses and Additional Trust Fund Expenses, as and to the
extent described under "--Allocations of Losses and Certain Other Shortfalls
and Expenses" below.
The "Notional Amount" of the Class X Certificates will represent the
principal amount on which interest will accrue on such Certificates from time
to time. It does not represent any entitlement to principal. The Notional
Amount of the Class X Certificates will equal the aggregate of the Certificate
Balances of all of the Classes of Principal Balance Certificates outstanding
from time to time.
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. Under very limited circumstances, however, the prior Holders thereof may
thereafter be entitled to certain payments in reimbursement of any reductions
made in the Certificate Balance, if any, of such Class of Certificates as a
result of the allocation of Realized Losses and Additional Trust Fund Expenses,
as described under "--Allocations of Losses and Certain Other Shortfalls and
Expenses" below.
As described under "Certain Federal Income Tax Consequences" in this
Prospectus Supplement, the Class R-I, Class R-II and Class R-III Certificates
will constitute REMIC residual interests and are referred to as the "REMIC
Residual Certificates". The remaining Certificates will constitute REMIC
regular interests and are referred to as the "REMIC Regular Certificates".
The Sponsor is only offering the Offered Certificates pursuant to this
Prospectus Supplement and the accompanying Prospectus. The Private Certificates
have not been registered under the Securities Act and are not being offered to
you. Accordingly, to the extent that this Prospectus Supplement contains
information regarding the terms of the Private Certificates, the Sponsor has
provided such information because of its potential relevance to you as a
prospective purchaser of Offered Certificates.
REGISTRATION AND DENOMINATIONS
The Offered Certificates will be issued in book-entry form only in
original denominations of:
o in the case of the Class X Certificates, $1,000,000 initial notional
amount and in any higher whole dollar amount; and
o in the case of the other Offered Certificates, $10,000 initial principal
amount and in any higher whole dollar amount.
Each Class of Offered Certificates will initially be represented by one or
more Certificates registered in the name of the Cede & Co., as nominee of DTC.
You will not be entitled to receive a fully registered physical
certificate (a "Definitive Certificate") representing your interest in the
Offered Certificates, 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, beneficial ownership interests in the Offered Certificates will be
maintained and transferred on the book-entry records of DTC and its
participating organizations (the "DTC Participants").
All references in this Prospectus Supplement to actions by Holders of the
Offered Certificates will refer to actions taken by DTC upon instructions
received from the related beneficial owners through their respective DTC
Participants in accordance with DTC procedures. In addition, all references in
this Prospectus Supplement to payments, notices, reports and statements to
Holders of the Offered Certificates will refer to payments, notices, reports
and statements to DTC or Cede & Co., as the registered holder thereof, for
distribution to the related beneficial owners through their respective DTC
Participants in accordance with DTC procedures.
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<PAGE>
As a result of the foregoing, you may experience certain delays in the
receipt of payments on your Certificates and may have difficulty in pledging
your Certificates. See "Description of the Certificates--Book-Entry
Registration and Definitive Certificates" and "Risk Factors--Book-Entry
Registration" in the Prospectus.
The Trustee will initially serve as registrar (in such capacity, the
"Certificate Registrar") for purposes of providing for the registration of the
Offered Certificates and, if Definitive Certificates are issued, the
registration of transfers and exchanges of Definitive Certificates.
SENIORITY
The following chart sets forth the relative seniority of the Classes of
Certificates for purposes of--
o making distributions of interest and, if applicable, distributions of
principal, and
o allocating Realized Losses, Additional Trust Fund Expenses and Net
Aggregate Prepayment Interest Shortfalls.
S-91
<PAGE>
Each Class of Certificates will, for the above purposes, be subordinate to
each other Class of Certificates, if any, listed above it in the following
chart.
EXPANDED SENIORITY CHART
--------------------------------------
Most Senior Class A-1, Class A-2 and Class X Most Senior
--------------------------------------
|
------------------------------
Class B
------------------------------
|
------------------------------
Class C
------------------------------
|
------------------------------
Class D
------------------------------
|
------------------------------
Class E
------------------------------
|
------------------------------
Class F
------------------------------
|
------------------------------
Class G
------------------------------
|
------------------------------
Class H
------------------------------
|
------------------------------
Class J
------------------------------
|
------------------------------
Class K
------------------------------
|
------------------------------
Class L
------------------------------
|
--------------------------------------
Most Subordinate Classes of REMIC Residual Certificates Most Subordinate
--------------------------------------
THE ONLY FORM OF CREDIT SUPPORT FOR ANY CLASS OF OFFERED CERTIFICATES WILL
BE THE SUBORDINATION OF THE OTHER CLASSES OF CERTIFICATES LISTED BELOW IT IN
THIS EXPANDED SENIORITY CHART.
S-92
<PAGE>
CERTAIN RELEVANT CHARACTERISTICS OF THE MORTGAGE LOANS
The following characteristics of the Mortgage Loans are, in addition to
those described elsewhere in this Prospectus Supplement, relevant to the
following discussions in this section:
Net Mortgage Rate. The "Net Mortgage Rate" for each Mortgage Loan will
equal the related Mortgage Rate less the sum of the related Master Servicing
Fee Rate and the annual rate at which Trustee Fees are calculated (such sum,
the "Administrative Fee Rate"). As of the Cut-off Date, the Net Mortgage Rates
for the Mortgage Loans ranged from 6.16% per annum to 9.86% per annum, with a
weighted average Net Mortgage Rate of 7.36% per annum.
Stated Principal Balance. The "Stated Principal Balance" of each Mortgage
Loan will initially equal its Cut-off Date Balance and will permanently be
reduced on each Distribution Date (to not less than zero) by--
o that portion, if any, of the Principal Distribution Amount for such
Distribution Date that is attributable to such Mortgage Loan (see
"--Distributions--Calculation of the Principal Distribution Amount"
below), and
o the principal portion of any Realized Loss incurred in respect of such
Mortgage Loan during the related Collection Period (see "--Allocation of
Losses and Certain Other Shortfalls and Expenses" below).
DISTRIBUTIONS
General. Subject to available funds, the Trustee will, in general, make
all distributions required to be made on the Certificates on each Distribution
Date to the Certificateholders of record as of the close of business on the
related Record Date. However, the final distribution of principal and/or
interest on any REMIC Regular Certificate will be made 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.
In order to receive its distributions by wire transfer, a
Certificateholder must provide the Trustee with written wiring instructions no
less than five business days prior to the related Record Date. Otherwise, such
Certificateholder will receive its distributions by check mailed to it.
Until Definitive Certificates are issued, Cede & Co. will be the
registered holder of your Certificates, and you will receive distributions on
your Certificates through DTC and your DTC Participant. See "--Registration and
Denominations" above.
The Available Distribution Amount. The aggregate amount available to make
distributions of interest and principal on the Certificates on each
Distribution Date is referred to as the "Available Distribution Amount". The
Available Distribution Amount for any Distribution Date will include--
o All payments and other collections on the Mortgage Loans and any REO
Properties that are 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:
(a) Scheduled P&I Payments due on a Due Date subsequent to the end of
the related Collection Period;
(b) Prepayment Premiums (which are separately distributable on the
Certificates as described below in this Prospectus Supplement);
(c) amounts that are payable or reimbursable to any person other than
the Certificateholders, including (i) amounts payable to the Master
Servicer, the Special Servicer, any Sub-Servicers or the Trustee as
compensation (including Trustee Fees, Master Servicing Fees, Special
Servicing Fees, Workout Fees, Liquidation Fees, assumption fees,
modification fees and, to the extent not otherwise applied to cover
interest on Advances, Default Interest and late payment charges),
(ii) amounts payable in reimbursement of outstanding Advances,
together with interest thereon, and (iii) amounts payable in respect
of other expenses of the Trust;
S-93
<PAGE>
(d) if such Distribution Date occurs during February of any year or
during January of any year that is not a leap year, the Interest
Reserve Amounts with respect to the Actual/360 Mortgage Loans that
are to be transferred from the Certificate Account to the Interest
Reserve Account during such month and held for future distribution;
and
(e) amounts deposited in the Certificate Account in error.
o Any P&I Advances and Compensating Interest Payments made with respect to
such Distribution Date.
o If such Distribution Date occurs during March of any year, the Interest
Reserve Amounts with respect to the Actual/360 Mortgage Loans that are
transferred from the Interest Reserve Account to the Certificate Account
during such month.
See "--Distributions--Interest Reserve Account" and "--Allocations of
Losses and Certain Other Shortfalls and Expenses" below and "Description of the
Pooling Agreements--Certificate Account" in the Prospectus.
Interest Reserve Account. The Master Servicer will establish and maintain
an "Interest Reserve Account" in its name for the benefit of the
Certificateholders. During January (except in a leap year) and February of each
calendar year, beginning in 1999, the Master Servicer will, on or before the
Distribution Date in such month, withdraw from the Certificate Account and
deposit in the Interest Reserve Account the Interest Reserve Amount with
respect to each Actual/360 Mortgage Loan as to which the Scheduled P&I Payment
due in such month was either received or advanced. The "Interest Reserve
Amount" for any such Mortgage Loan for either such month will, in general,
equal one day's interest accrued at the related Net Mortgage Rate on the Stated
Principal Balance of such Mortgage Loan immediately following the Distribution
Date in the preceding calendar month. During March of each calendar year,
beginning in 1999, the Master Servicer will, on or before the Distribution Date
in such month, withdraw from the Interest Reserve Account and deposit in the
Certificate Account any and all amounts then on deposit in the Interest Reserve
Account with respect to the Actual/360 Mortgage Loans. All such Interest
Reserve Amounts that are so transferred from the Interest Reserve Account to
the Certificate Account will be included in the Available Distribution Amount
for the Distribution Date during the month of transfer.
Calculations of Interest. Each Class of REMIC Regular Certificates will
bear interest, such interest to accrue during each Interest Accrual Period
based upon--
o The Pass-Through Rate for such Class for the related Distribution Date.
o The Certificate Balance or Notional Amount, as the case may be, of such
Class outstanding immediately prior to the related Distribution Date.
o The assumption that each year consists of twelve 30-day months.
The total amount of interest accrued from time to time with respect to
each Class of REMIC Regular Certificates is called "Accrued Certificate
Interest". However, less than the full amount of Accrued Certificate Interest
in respect of any Class of REMIC Regular Certificates for any Interest Accrual
Period may be distributable as a result of the allocation of any Net Aggregate
Prepayment Interest Shortfall for the related Distribution Date.
The portion of the Accrued Certificate Interest in respect of any Class of
REMIC Regular Certificates for any Interest Accrual Period that is actually
distributable thereon is called "Distributable Certificate Interest" for such
Class. The Distributable Certificate Interest for any Class of REMIC Regular
Certificates for any Interest Accrual Period will equal the Accrued Certificate
Interest for such Class for such Interest Accrual Period, reduced (to not less
than zero) by any portion of the Net Aggregate Prepayment Interest Shortfall
for the related Distribution Date that has been allocated to such Class as
described under "--Allocation of Losses and Certain Other Shortfalls and
Expenses" below.
Calculation of Pass-Through Rates. The Pass-Through Rate for each Class of
Principal Balance Certificates for each Distribution Date will equal the lesser
of (i) the initial Pass-Through Rate for such Class of Certificates and (ii)
the Weighted Average Mortgage Pass-Through Rate for such Distribution
S-94
<PAGE>
Date. The Pass-Through Rate in respect of the Class X Certificates for each
Distribution Date will equal the excess, if any, of (i) the Weighted Average
Mortgage Pass-Through Rate for such Distribution Date, over (ii) the weighted
average of the Pass-Through Rates of the various Classes of Principal Balance
Certificates for such Distribution Date (weighted on the basis of the related
Certificate Balances immediately prior to such Distribution Date).
The "Weighted Average Mortgage Pass-Through Rate" for each Distribution
Date will, in general, equal the weighted average of the Mortgage Pass-Through
Rates in effect for all the Mortgage Loans for such Distribution Date (weighted
on the basis of the Mortgage Loans' Stated Principal Balances immediately prior
to such Distribution Date).
The "Mortgage Pass-Through Rate" in respect of any Mortgage Loan for any
Distribution Date will, in general, equal--
o in the case of each 30/360 Mortgage Loan, the Net Mortgage Rate for such
Mortgage Loan as of the Cut-off Date, and
o in the case of each Actual/360 Mortgage Loan, an annual rate generally
equal to the product of (i) the related Net Mortgage Rate in effect as
of the Cut-off Date, multiplied by (ii) a fraction, the numerator of
which is the number of days in the calendar month immediately preceding
the month in which such Distribution Date occurs, and the denominator of
which is 30; however, if the Interest Reserve Amounts for any Actual/360
Mortgage Loan are being properly transferred to and from the Interest
Reserve Account, then the calendar months of December (except in a year
preceding a leap year), January and February will be treated as if they
consisted of 30 days each.
The REMIC Residual Certificates will not have Pass-Through Rates.
Calculation of the Principal Distribution Amount. The "Principal
Distribution Amount" for any Distribution Date represents the maximum amount of
principal distributable on the Principal Balance Certificates for such
Distribution Date and will, in general, equal the aggregate (without
duplication) of the following:
(a) all payments of principal (other than voluntary Principal
Prepayments) received on the Mortgage Loans during the related Collection
Period, in each case net of any portion of the particular payment that
represents a late collection of principal for which a P&I Advance was
previously made for a prior Distribution Date or that represents the
principal portion of a Scheduled P&I Payment due on or before the Cut-off
Date or on a Due Date subsequent to the end of the related Collection
Period;
(b) the principal portion of all Scheduled P&I Payments due on the
Mortgage Loans for the Due Date occurring during the related Collection
Period, that were received prior to the related Collection Period;
(c) all voluntary Principal Prepayments received on the Mortgage Loans
during the related Collection Period;
(d) all other collections (including Liquidation Proceeds, Condemnation
Proceeds and Insurance Proceeds) that were received on or in respect of the
Mortgage Loans during the related Collection Period and that were
identified and applied by the Master Servicer as recoveries of principal,
in each case net of any portion of the particular collection that
represents a late collection of principal due on or before the Cut-off Date
or for which a P&I Advance was previously made for a prior Distribution
Date; and
(e) the principal portion of all P&I Advances made for such Distribution
Date.
Priority of Payments.
General. Distributions of interest and principal are to be made to the
Holders of the various Classes of REMIC Regular Certificates, sequentially
based on their relative seniority as depicted in the Expanded
S-95
<PAGE>
Seniority Chart under "--Seniority" above. Accordingly, the Trustee will make
distributions of interest and principal on the Class A-1, Class A-2 and Class X
Certificates (collectively, the "Senior Certificates") prior to making such
distributions in respect of any other Class of REMIC Regular Certificates.
Distributions of Interest and Principal on the Senior Certificates. On
each Distribution Date, the Trustee will apply the Available Distribution
Amount for such date for the following purposes and in the following order of
priority:
(1) to pay interest to the Holders of the respective Classes of Senior
Certificates, up to an amount equal to, and proportionately as among such
Classes in accordance with, all unpaid Distributable Certificate Interest
accrued on each such Class of Certificates through the end of the related
Interest Accrual Period,
(2) to pay principal to the Holders of the Class A-1 and Class A-2
Certificates (allocable between such two Classes of Certificateholders as
described below), up to an amount equal to the lesser of (a) the aggregate
of the then outstanding Certificate Balances of such Classes of
Certificates and (b) the Principal Distribution Amount for such
Distribution Date, and
(3) if applicable, to reimburse the Holders of the Class A-1 and Class
A-2 Certificates, up to an amount equal to, and proportionately as between
such two Classes of Certificateholders in accordance with, the aggregate of
any unreimbursed reductions made to the Certificate Balance of each such
Class of Certificates as described under "--Allocation of Losses and
Certain Other Shortfalls and Expenses" below in connection with Realized
Losses and Additional Trust Fund Expenses.
In general, all distributions of principal on the Class A-1 and Class A-2
Certificates on any Distribution Date will be distributable, first, to the
Holders of the Class A-1 Certificates, until the Certificate Balance of the
Class A-1 Certificates is reduced to zero, and thereafter, to the Holders of
the Class A-2 Certificates. However, if (a) the aggregate Certificate Balance
of the Class A-1 and Class A-2 Certificates outstanding immediately prior to
any Distribution Date, reduced (to not less than zero) by the lesser of (i) the
Principal Distribution Amount for such Distribution Date and (ii) the portion
of the Available Distribution Amount for such Distribution Date that will
remain after all required distributions of interest on the Senior Certificates
have been made, exceeds (b) the aggregate Stated Principal Balance of the
Mortgage Pool expected to be outstanding immediately following such
Distribution Date, then (assuming the Class A-1 Certificates still remain
outstanding) all distributions of principal in respect of the Class A-1 and
Class A-2 Certificates on such Distribution Date will be made on a
proportionate basis in accordance with the respective Certificate Balances of
such Certificates. Similarly, all distributions of principal, if any, in
respect of the Class A-1 and Class A-2 Certificates on the final Distribution
Date upon a termination of the Trust (see "--Termination below) will be made on
the same proportionate basis, but (subject to available funds) up to an amount
equal to the entire Certificate Balance of each such Class of Certificates.
All Certificates, other than the Senior Certificates, collectively
constitute the "Subordinate Certificates". The portion, if any, of the
Available Distribution Amount for any Distribution Date that remains after the
foregoing distributions on the Senior Certificates is called the "Subordinate
Available Distribution Amount".
Distributions of Interest and Principal on the Subordinate
Certificates. On each Distribution Date, the Trustee will apply the Subordinate
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 unpaid Distributable Certificate Interest accrued on
such Class of Certificates through the end of the related Interest Accrual
Period;
(2) if the Certificate Balances of all more senior Classes of Principal
Balance 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;
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<PAGE>
(3) if applicable, to reimburse the Holders of the Class B Certificates,
up to an amount equal to the aggregate of any unreimbursed reductions made
to the Certificate Balance of such Class of Certificates as described under
"--Allocation of Losses and Certain Other Shortfalls and Expenses" below in
connection with Realized Losses and Additional Trust Fund Expenses;
(4) to pay interest to the Holders of the Class C Certificates, up to an
amount equal to all unpaid Distributable Certificate Interest accrued on
such Class of Certificates through the end of the related Interest Accrual
Period;
(5) if the Certificate Balances of all more senior Classes of Principal
Balance 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) if applicable, to reimburse the Holders of the Class C Certificates,
up to an amount equal to the aggregate of any unreimbursed reductions made
to the Certificate Balance of such Class of Certificates as described under
"--Allocation of Losses and Certain Other Shortfalls and Expenses" below in
connection with Realized Losses and Additional Trust Fund Expenses;
(7) to pay interest to the Holders of the Class D Certificates, up to an
amount equal to all unpaid Distributable Certificate Interest accrued on
such Class of Certificates through the end of the related Interest Accrual
Period;
(8) if the Certificate Balances of all more senior Classes of Principal
Balance 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) if applicable, to reimburse the Holders of the Class D Certificates,
up to an amount equal to the aggregate of any unreimbursed reductions made
to the Certificate Balance of such Class of Certificates as described under
"--Allocation of Losses and Certain Other Shortfalls and Expenses" below in
connection with Realized Losses and Additional Trust Fund Expenses;
(10) to pay interest to the Holders of the Class E Certificates, up to an
amount equal to all unpaid Distributable Certificate Interest accrued on
such Class of Certificates through the end of the related Interest Accrual
Period;
(11) if the Certificate Balances of all more senior Classes of Principal
Balance 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;
(12) if applicable, to reimburse the Holders of the Class E Certificates,
up to an amount equal to the aggregate of any unreimbursed reductions made
to the Certificate Balance of such Class of Certificates as described under
"--Allocation of Losses and Certain Other Shortfalls and Expenses" below in
connection with Realized Losses and Additional Trust Fund Expenses;
(13) to pay interest to the Holders of the Class F Certificates, up to an
amount equal to all unpaid Distributable Certificate Interest accrued on
such Class of Certificates through the end of the related Interest Accrual
Period;
(14) if the Certificate Balances of all more senior Classes of Principal
Balance 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) if applicable, to reimburse the Holders of the Class F Certificates,
up to an amount equal to the aggregate of any unreimbursed reductions made
to the Certificate Balance of such Class of Certificates as described under
"--Allocation of Losses and Certain Other Shortfalls and Expenses" below in
connection with Realized Losses and Additional Trust Fund Expenses;
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<PAGE>
(16) to pay interest to the Holders of the Class G Certificates, up to an
amount equal to all unpaid Distributable Certificate Interest accrued on
such Class of Certificates through the end of the related Interest Accrual
Period;
(17) if the Certificate Balances of all more senior Classes of Principal
Balance 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) if applicable, to reimburse the Holders of the Class G Certificates,
up to an amount equal to the aggregate of any unreimbursed reductions made
to the Certificate Balance of such Class of Certificates as described under
"--Allocation of Losses and Certain Other Shortfalls and Expenses" below in
connection with Realized Losses and Additional Trust Fund Expenses;
(19) to pay interest to the Holders of the Class H Certificates, up to an
amount equal to all unpaid Distributable Certificate Interest accrued on
such Class of Certificates through the end of the related Interest Accrual
Period;
(20) if the Certificate Balances of all more senior Classes of Principal
Balance 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) if applicable, to reimburse the Holders of the Class H Certificates,
up to an amount equal to the aggregate of any unreimbursed reductions made
to the Certificate Balance of such Class of Certificates as described under
"--Allocation of Losses and Certain Other Shortfalls and Expenses" below in
connection with Realized Losses and Additional Trust Fund Expenses;
(22) to pay interest to the Holders of the Class J Certificates, up to an
amount equal to all unpaid Distributable Certificate Interest accrued on
such Class of Certificates through the end of the related Interest Accrual
Period;
(23) if the Certificate Balances of all more senior Classes of Principal
Balance 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) if applicable to reimburse the Holders of the Class J Certificates,
up to an amount equal to the aggregate of any unreimbursed reductions made
to the Certificate Balance of such Class of Certificates as described under
"--Allocation of Losses and Certain Other Shortfalls and Expenses" below in
connection with Realized Losses and Additional Trust Fund Expenses;
(25) to pay interest to the Holders of the Class K Certificates, up to an
amount equal to all unpaid Distributable Certificate Interest accrued on
such Class of Certificates through the end of the related Interest Accrual
Period;
(26) if the Certificate Balances of all more senior Classes of Principal
Balance 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) if applicable, to reimburse the Holders of the Class K Certificates,
up to an amount equal to the aggregate of any unreimbursed reductions made
to the Certificate Balance of such Class of Certificates as described under
"--Allocation of Losses and Certain Other Shortfalls and Expenses" below in
connection with Realized Losses and Additional Trust Fund Expenses;
(28) to pay interest to the Holders of the Class L Certificates, up to an
amount equal to all unpaid Distributable Certificate Interest accrued on
such Class of Certificates through the end of the related Interest Accrual
Period;
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<PAGE>
(29) if the Certificate Balances of all more senior Classes of Principal
Balance Certificates have been reduced to zero, to pay principal to the
Holders of the Class L 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;
(30) if applicable, to reimburse the Holders of the Class L Certificates,
up to an amount equal to the aggregate of any unreimbursed reductions made
to the Certificate Balance of such Class of Certificates as described under
"--Allocation of Losses and Certain Other Shortfalls and Expenses" below in
connection with Realized Losses and Additional Trust Fund Expenses; and
(31) to pay to the Holders of the REMIC Residual Certificates, the
balance, if any, of the Subordinate Available Distribution Amount for such
Distribution Date;
provided that, on the final Distribution Date upon a termination of the Trust
(see "--Termination" below), the distributions of principal to be made pursuant
to clauses (2), (5), (8), (11), (14), (17), (20), (23), (26) and (29) above
shall, in each case, subject to the then remaining portion of the Subordinate
Available Distribution Amount for such date, be made to the Holders of the
relevant Class of Principal Balance Certificates entitled to distributions of
principal pursuant to such clause in an amount equal to the entire then
remaining Certificate Balance of such Class outstanding immediately prior to
such final Distribution Date (and without regard to the Principal Distribution
Amount for such Distribution Date).
Distributions of Prepayment Premiums. Any Prepayment Premium (whether
described in the related Mortgage Loan documents as a specified percentage of
the amount prepaid or a yield maintenance amount) actually collected with
respect to a Mortgage Loan during any particular Collection Period will be
distributed on the related Distribution Date to the Holders of each Class of
Offered Certificates (other than the Class X Certificates) in an amount up to
the product of:
(i) such Prepayment Premium;
(ii) the applicable Discount Rate Fraction for such Class with respect to
such Mortgage Loan; and
(iii) the applicable Principal Allocation Fraction for such Class with
respect to such Distribution Date.
The "Discount Rate Fraction" for any Class of Offered Certificates (other
than the Class X Certificates) with respect to any prepaid Mortgage Loan is
equal to a fraction (not greater than 1.0 or less than 0.0), (a) the numerator
of which is equal to any excess of the Pass-Through Rate for such Class over
the relevant Discount Rate (as defined below), and (b) the denominator of which
is equal to any excess of the Mortgage Rate of such Mortgage Loan over the
relevant Discount Rate. For each Class of Offered Certificates (other than the
Class X Certificates) for any Distribution Date, the "Principal Allocation
Fraction" is a fraction, the numerator of which is the portion of the Principal
Distribution Amount allocated to such Class of Certificates for such
Distribution Date, and the denominator of which is the entire Principal
Distribution Amount for such Distribution Date.
The "Discount Rate" means the yield for "This Week" as reported by the
Federal Reserve Board in Federal Reserve Statistical Release H.15(519) for the
constant maturity treasury having a maturity coterminous with the maturity date
or, in the case of an ARD Loan, the Anticipated Repayment Date of the prepaid
Mortgage Loan as of the related Determination Date. If there is no Discount
Rate, for instruments having a maturity coterminous with the remaining term to
maturity or the Anticipated Repayment Date, as applicable, of the prepaid
Mortgage Loan, then the Discount Rate will equal the interpolation of the
yields of the constant maturity treasuries with maturities next longer and
shorter than such remaining term to maturity or Anticipated Repayment Date, as
applicable.
The portion of any Prepayment Premium remaining after distribution of the
amounts calculated as described above to the Holders of the Offered
Certificates will be distributed to the Holders of the Class X Certificates.
After the Distribution Date on which the Certificate Balances of the other
Classes of Offered Certificates have been reduced to zero, any Prepayment
Premiums collected on the Mortgage Loans will be distributable entirely to the
Holders of the Class X Certificates.
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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--Risks Related to the Mortgage Loans--Prepayment
Premiums" in this Prospectus Supplement.
Treatment of REO Properties. Notwithstanding that any Mortgaged Property
may be acquired as part of the Trust Fund through foreclosure, deed in lieu of
foreclosure or otherwise, the related Mortgage Loan will be treated, for
purposes of, among other things, determining distributions on the Certificates
and the amount of all fees payable under the Pooling Agreement, as having
remained outstanding until such REO Property is liquidated. Such related
Mortgage Loan will be taken into account when determining the Weighted Average
Mortgage Pass-Through Rate and the Principal Distribution Amount for each
Distribution Date as if such Mortgage Loan had remained outstanding. Operating
revenues and other proceeds derived from such REO Property (after application
thereof to pay certain costs and taxes, including certain reimbursements
payable to the Master Servicer, the Special Servicer and/or the Trustee,
incurred in connection with the operation and disposition of such REO Property)
will be "applied" by the Master Servicer as principal, interest and other
amounts "due" on such Mortgage Loan. As and to the extent described under
"--P&I Advances" below, the Master Servicer, the Fiscal Agent and the Trustee
will be required to make P&I Advances on such Mortgage Loan, as if such
Mortgage Loan remained outstanding.
ALLOCATION OF LOSSES AND CERTAIN OTHER SHORTFALLS AND EXPENSES
If Realized Losses and Additional Trust Fund Expenses are incurred, the
aggregate Stated Principal Balance of the Mortgage Pool may decline below the
aggregate Certificate Balance of the Principal Balance Certificates, thereby
resulting in a Mortgage Pool Deficit equal to the difference between such
aggregate balances. In general, if a Mortgage Pool Deficit exists following the
distributions made to Certificateholders on any Distribution Date, then the
respective Certificate Balances of the various Classes of Principal Balance
Certificates will be successively reduced, in reverse order of seniority as
depicted on the Expanded Seniority Chart under "--Seniority" above, until such
Mortgage Pool Deficit is eliminated. The first such Certificate Balance to be
reduced would be that of the most subordinate Class of Principal Balance
Certificates then outstanding, and no such reduction would be made to the
Certificate Balance of any Class of Principal Balance Certificates until the
Certificate Balance of each more subordinate Class of Principal Balance
Certificates, if any, is reduced to zero. If a Mortgage Pool Deficit exists at
any time after the Certificate Balances of the Class B, Class C, Class D, Class
E, Class F, Class G, Class H, Class J, Class K and Class L Certificates have
all been reduced to zero, the Certificate Balances of the Class A-1 and Class
A-2 Certificates will be reduced on a proportionate basis in accordance with
the relative sizes of the Certificate Balances of such Classes of Certificates,
until such Mortgage Pool Deficit is eliminated.
The foregoing reductions in the Certificate Balances of the respective
Classes of the Principal Balance Certificates will effectively constitute an
allocation of the Realized Losses and/or Additional Trust Fund Expenses that
caused any Mortgage Pool Deficit. Any such reduction in the Certificate Balance
of a Class of Principal Balance Certificates will result in a corresponding
reduction in the Notional Amount of the Class X Certificates.
"Realized Losses" are losses on 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, to the extent not covered by insurance, a
casualty of any nature at a Mortgaged Property. The Realized Loss in respect of
a liquidated Mortgage Loan (or related REO Property) is an amount generally
equal to any excess 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 to but not including the Due Date in the Collection Period in
which the liquidation occurred (exclusive, however, of any accrued and unpaid
interest that constitutes Default Interest or Additional Interest) and (ii) all
related unreimbursed Servicing Advances and unpaid liquidation expenses, over
(b) the aggregate amount of Liquidation Proceeds, if any, recovered in
connection with such liquidation.
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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
(other than Default Interest and Additional Interest) also will be treated as a
Realized Loss.
An "Additional Trust Fund Expense" is, in general, an expense of the Trust
that arises out of a default on a Mortgage Loan or an otherwise unanticipated
event and that is not covered by a Servicing Advance or a corresponding
collection from the Borrower. Some examples of Additional Trust Fund Expenses
are:
o any Special Servicing Fees, Workout Fees and Liquidation Fees paid to
the Special Servicer;
o any interest paid to the Master Servicer, the Special Servicer and/or
the Trustee in respect of unreimbursed Advances;
o 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;
o 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 (the Fiscal
Agent having the same rights to indemnity and reimbursement as described
with respect to the Trustee), 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" in this Prospectus Supplement and "Material Federal Income
Tax Consequences--Taxation of Owners of REMIC Regular
Certificates--Prohibited Transactions Tax and Other Taxes" in the
Prospectus; and
o any amounts expended on behalf of the Trust to remedy 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).
The Net Aggregate Prepayment Interest Shortfall, if any, for each
Distribution Date will be allocated on such Distribution Date to the respective
Classes of REMIC Regular Certificates (other than the Senior Certificates)
sequentially in reverse order of their seniority as depicted on the Expanded
Seniority Chart under "--Seniority" above, 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 the particular Class of Certificates for the related Interest Accrual
Period. However, if and to the extent that the Net Aggregate Prepayment
Interest Shortfall for any Distribution Date exceeds the aggregate Accrued
Certificate Interest in respect of the Subordinate Certificates for the related
Interest Accrual Period, such portion will be allocated among the respective
Classes of Senior Certificates, up to, and proportionately in accordance with,
the respective amounts of Accrued Certificate Interest for each such Class for
the related Interest Accrual Period.
P&I ADVANCES
The Master Servicer will be required to make for each Distribution Date
(either 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) an aggregate amount of P&I Advances generally equal
to all Scheduled P&I Payments (other than Balloon Payments) and any Assumed P&I
Payments, in each case net of related Master Servicing Fees and Workout Fees,
that (a) were due or deemed due 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. However,
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if it is determined that an Appraisal Reduction Amount (as defined below)
exists for any Required Appraisal Mortgage Loan (also as defined below), then
the Master Servicer will reduce the interest portion (but not the principal
portion) of each P&I Advance that it must make on such Required Appraisal Loan
during the period that such Appraisal Reduction Amount exists. The interest
portion of any P&I Advance required to be made on a Required Appraisal Loan as
to which there exists an Appraisal Reduction Amount, will equal 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 and the prior sentence, multiplied by (ii) a fraction, the numerator
of which is equal to the Stated Principal Balance of such Mortgage Loan, net of
such Appraisal Reduction Amount, and the denominator of which is equal to the
Stated Principal Balance of such Mortgage Loan. See "--Appraisal Reductions"
below.
If the Master Servicer fails to make a required P&I Advance, the Trustee
will be obligated to make such Advance. If the Trustee fails to make a required
P&I Advance, the Fiscal Agent will be required to make such P&I Advance. See
"--The Trustee" and "--The Fiscal Agent" below.
The Master Servicer, the Fiscal Agent and the Trustee will each be
entitled to recover any P&I Advance made by it out of its own funds from
Related Proceeds. NONE OF THE MASTER SERVICER, THE FISCAL AGENT OR THE TRUSTEE
WILL BE OBLIGATED TO MAKE ANY P&I ADVANCE THAT, IN ITS REASONABLE AND GOOD
FAITH JUDGMENT, WOULD NOT BE ULTIMATELY RECOVERABLE OUT OF RELATED PROCEEDS
(ANY P&I ADVANCE NOT SO RECOVERABLE, A "NONRECOVERABLE P&I ADVANCE"). IF THE
MASTER SERVICER, THE FISCAL AGENT OR THE TRUSTEE MAKES ANY P&I ADVANCE THAT IT
SUBSEQUENTLY DETERMINES, IN ITS REASONABLE AND GOOD FAITH JUDGMENT, IS A
NONRECOVERABLE P&I ADVANCE, IT MAY OBTAIN REIMBURSEMENT FOR SUCH NONRECOVERABLE
P&I ADVANCE OUT OF GENERAL COLLECTIONS ON THE MORTGAGE LOANS AND ANY REO
PROPERTIES ON DEPOSIT IN THE CERTIFICATE ACCOUNT FROM TIME TO TIME. 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 Fiscal Agent and the Trustee will each be
entitled to receive interest on P&I Advances it makes. Interest will accrue on
the amount of each P&I Advance for so long as it is outstanding 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.
Interest so accrued on any P&I Advance will be payable--
o at any time until such P&I Advance either is reimbursed or becomes a
Nonrecoverable P&I Advance, out of Default Interest and late payment
charges collected on the related Mortgage Loan, and
o if such P&I Advance either has been reimbursed or becomes a
Nonrecoverable P&I 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
Scheduled P&I Payment for 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 or the Trustee, as the case
may be, on such P&I Advance. To the extent not offset by Default Interest
and/or late payment charges accrued and actually collected, interest accrued on
outstanding P&I Advances will result in a reduction in amounts payable on the
Certificates.
An "Assumed P&I Payment" is an amount deemed due in respect of:
o each Mortgage Loan that is delinquent on its Balloon Payment beyond the
first Determination Date that follows its most recent maturity date and
as to which no arrangements have been agreed to for collection of the
delinquent amounts, including an extension of maturity; and
o each Mortgage Loan as to which the related Mortgaged Property has become
an REO Property.
The Assumed P&I Payment deemed due on any such Mortgage Loan that is delinquent
as to its Balloon Payment, for its stated maturity date and for each successive
Due Date that it remains outstanding, will equal the Scheduled P&I Payment that
would have been due on the Mortgage Loan on such date if the related Balloon
Payment had not come due (but instead the Mortgage Loan had continued to
amortize
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and accrue interest in accordance with its terms in effect prior to such
maturity date). The Assumed P&I 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
Scheduled P&I Payment (or, in the case of a Mortgage Loan delinquent in respect
of its Balloon Payment, the Assumed P&I Payment) due on the last Due Date prior
to the acquisition of such REO Property. Assumed P&I Payments for ARD Loans do
not include Additional Interest or Accelerated Amortization Payments.
APPRAISAL REDUCTIONS
Within 60 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 the appraisal referred to below) after the date on which any of the
following events (each, an "Appraisal Trigger Event") has occurred with respect
to any Mortgage Loan (upon the occurrence of any such event, a "Required
Appraisal Loan"), the Master Servicer or the Special Servicer, as applicable,
must obtain an appraisal of the related Mortgaged Property from an independent
appraiser meeting certain specified qualifications (any such appraisal, a
"Required Appraisal"), unless such an appraisal had previously been obtained
within the prior twelve months--
o Such Mortgage Loan becomes a Modified Mortgage Loan (as defined below).
o The related Borrower fails to make any Scheduled P&I Payment with
respect to such Mortgage Loan and the failure continues for 90 days.
o A receiver is appointed and continues in such capacity in respect of the
Mortgaged Property securing such Mortgage Loan.
o The related Borrower becomes the subject of bankruptcy, insolvency or
similar proceedings.
o The Mortgaged Property securing such Mortgage Loan becomes an REO
Property.
As a result of any such appraisal, it may be determined that an Appraisal
Reduction Amount exists with respect to the related Required Appraisal Loan.
The "Appraisal Reduction Amount" for any Required Appraisal Loan will, in
general, be an amount (determined as of the Determination Date immediately
following the later of the date on which the relevant appraisal is obtained and
the first relevant Appraisal Trigger Event occurred) equal to the excess, if
any, of "x" over "y" where--
o "x" is equal to 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 Fiscal Agent or the Trustee, all accrued and
unpaid interest (excluding, in the case of an ARD Loan after its
Anticipated Repayment Date, Additional 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 Fiscal Agent or the
Trustee with respect to such Required Appraisal Loan, together
with interest thereon; 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); and
o "y" is equal to 90% of the resulting appraised value of the related
Mortgaged Property or REO Property (as such appraised value may be
reduced (to not less than zero) by the amount of any obligations secured
by liens on such property that are prior to the lien of the Required
Appraisal Loan).
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If, however, any Required Appraisal is not obtained within sixty (60) days
of an Appraisal Trigger Event (and no comparable appraisal had been obtained
during the 12-month period prior to such Appraisal Trigger Event), then until
such Required Appraisal is obtained the "Appraisal Reduction Amount" for the
Required Appraisal Loan will be deemed to equal 25% of the Stated Principal
Balance of such Required Appraisal Loan. After receipt of such Required
Appraisal, the Appraisal Reduction Amount, if any, for such Required Appraisal
Loan will be calculated as described above.
With respect to each Required Appraisal Loan (unless such Mortgage Loan
has become a Corrected Mortgage Loan and has remained current for twelve
consecutive Scheduled P&I Payments, and no other Servicing Transfer Event has
occurred during the preceding twelve months), the Special Servicer is required,
within 30 days of each anniversary of such loan's becoming a Required Appraisal
Loan, to order an update of the prior appraisal. Based upon such update, the
Special Servicer is to redetermine and report to the Trustee and the Master
Servicer the new Appraisal Reduction Amount, if any, with respect to such
Mortgage Loan.
The cost of each Required Appraisal (and any update thereof) will be
advanced by the Master Servicer and will be reimbursable thereto as a Servicing
Advance.
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 Scheduled P&I
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 good faith and reasonable 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 deliver (or, if not prepared by the
Trustee, to forward) on each Distribution Date to the Holders of each Class of
Offered Certificates, the following statements and reports (collectively, the
"Trustee Reports") substantially in the forms set forth in Annex B (although
such forms may change over time) and substantially containing the information
set forth below:
(1) A "Distribution Date Statement" setting forth, among other things:
o 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;
o the amount of distributions, if any, made on such Distribution Date to
the Holders of each Class of REMIC Regular Certificates allocable to
Distributable Certificate Interest and Prepayment Premiums;
o the Available Distribution Amount for such Distribution Date;
o the aggregate amount of P&I Advances made in respect of the immediately
preceding Distribution Date;
o the aggregate Stated Principal Balance of the Mortgage Pool outstanding
immediately before and immediately after such Distribution Date;
o 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 related Collection Period;
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o 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 (1) month,
(b) delinquent two (2) months,
(c) delinquent three (3) or more months, and
(d) as to which foreclosure proceedings have been commenced;
o the most recent appraised value, property type and address of any REO
Property included in the Trust Fund as of the end of the related
Collection Period and the unpaid principal balance and Assumed P&I
Payment of the related Mortgage Loan;
o the Accrued Certificate Interest and Distributable Certificate
Interest in respect of each Class of REMIC Regular Certificates for
the related Interest Accrual Period;
o 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;
o any unpaid Distributable Certificate Interest in respect of each
Class of REMIC Regular Certificates after giving effect to the
distributions made on such Distribution Date;
o the Pass-Through Rate for each Class of REMIC Regular Certificates
for such Distribution Date;
o the Principal Distribution Amount for such Distribution Date,
separately identifying the respective components of such amount;
o the Certificate Balance or Notional Amount, as the case may be, of
each Class of REMIC Regular Certificates outstanding immediately
before and immediately after such Distribution Date, separately
identifying any reduction therein on such Distribution Date in
connection with the allocation of Realized Losses and Additional Trust
Fund Expenses;
o the aggregate amount of servicing fees paid to the Master Servicer
and the Special Servicer, collectively and separately, during the
Collection Period for the prior Distribution Date;
o 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
o 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 Delivery Date.
(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). The 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. However, 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 cash flow for the respective Mortgaged
Properties and a debt service coverage ratio calculated on the basis
thereof.
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(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 (a) during the Collection Period ending on
such Determination Date and (b) since the Cut-off Date, showing the
original and the revised terms thereof.
(5) An "Historical Loss Report" setting forth, among other things, as of
the close of business on the immediately preceding Determination Date,
(a) the aggregate amount of Liquidation Proceeds received, and
liquidation expenses incurred, both during the Collection Period ending
on such Determination Date and historically, and (b) 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
(a) the acquisition date of such REO Property, (b) the amount of income
collected with respect to such 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 (c) 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, (a) the aggregate principal balance of all
Specially Serviced Mortgage Loans and (b) a loan-by-loan listing of all
Specially Serviced Mortgage Loans indicating their status and the date
and reason for transfer to the Special Servicer.
(8) A "Comparative Financial Status Report" setting forth, among other
things, the occupancy and DSCR for each Mortgage Loan or related
Mortgaged Property, as applicable, as of the date of the latest
financial information (covering no less than 12 months) available
immediately preceding the preparation of such report and the revenue
and Net Cash Flow for each of the following three periods (to the
extent such information is in the Master Servicer's or the Special
Servicer's possession): (i) the most current available year-to-date,
(ii) each of the previous two full fiscal years stated separately; and
(iii) the "base year" (representing the original analysis of
information used as of the Cut-off Date).
(9) A "Watchlist" setting forth, among other things, information on any
Mortgage Loan that, as of the Determination Date immediately preceding
the preparation of such report, had a DSCR of less than 1.0x or, in the
Master Servicer's good faith and reasonable judgment, was otherwise in
jeopardy of becoming a Specially Serviced Mortgage Loan.
(10) A "CSSA Report"
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 will 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.
Operating Statement Analyses. The Pooling Agreement requires the Master
Servicer to prepare and deliver to the Trustee, with respect to each Mortgaged
Property and REO Property for each calendar
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quarter (commencing with the calendar quarter ending March 31, 1999), a report
(an "Operating Statement Analysis") that contains revenue, expense and net cash
flow information in respect of such property for such period normalized using
the methodology described therein (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). The Master Servicer
must deliver each Operating Statement Analysis to the Trustee within 130 days
following the end of the calendar quarter covered thereby (or, if the Master
Servicer has not received the requisite underlying information to prepare such
Operating Statement Analysis within 100 days following the end of the calendar
quarter covered thereby, it must deliver such Operating Statement Analysis to
the Trustee within thirty (30) days after receiving such information). The
Trustee will make available, upon request, 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.
Book-Entry Certificates. Even if you hold your Certificates in book-entry
from through DTC, you may obtain direct access to Trustee Reports and Operating
Statement Analyses as if you were a Certificateholder, provided that you
deliver a written certification to the Trustee confirming your beneficial
ownership in the Offered Certificates. Otherwise, until such time as Definitive
Certificates are issued for your Certificates, the foregoing information will
be available to you only to the extent that it is made available through DTC
and the DTC Participants. Conveyance of notices and other communications by DTC
to the DTC Participants, and by the DTC Participants to beneficial owners of
the 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. The Master Servicer, the Special Servicer, the Trustee, the Fiscal Agent,
the Sponsor, the REMIC Administrator, either 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.
Information Available through Trustee's ASAP System. Investors and any
other interested party may obtain Trustee Reports via the Trustee's "ASAP"
facsimile system by dialing (312) 904-2200 and requesting Statement Number 378.
In addition, investors and other interested parties who have obtained approval
from the Depositor, which approval has been furnished to the Trustee, may
obtain certain Mortgage Loan information via the Trustee's restricted
electronic bulletin board by dialing (714) 282-3990.
Information Available Electronically. The Trustee will make the Trustee
Report available each month to Certificateholders, Certificate Owners and
prospective investors the via the Trustee's Internet Website with the use of a
password provided by the Trustee to such person upon receipt by the Trustee
from such person of a certification in the form attached to the Pooling
Agreement. The Trustee's Internet Website will be located at "www.lnbabs.com"
or at such other address as the Trustee shall notify the parties hereto from
time to time. In addition, the Trustee will also make certain other reports and
certain Mortgage Loan information as presented in the CSSA loan setup file and
CSSA loan periodic update file formats, available to Certificateholders,
Certificate Owners, prospective investors, the Rating Agency and to any of the
parties to the Pooling Agreement via the Trustee's Internet Website with the
use of a password provided by the Trustee to such person upon receipt by the
Trustee from such person of a certification in the form attached to the Pooling
Agreement; provided, however that the Rating Agency and the parties to the
Pooling Agreement will not be required to provide such certification. For
assistance with the Trustee's Internet Website, investors may call (714)
282-3980, extension 275.
In connection with providing access to the Trustee's Internet Website, the
Trustee may require registration and the acceptance of a disclaimer. The
Trustee shall not be liable for the dissemination of information in accordance
with the Pooling Agreement.
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 will obligate the Trustee to make
available at its Corporate Trust Office (as defined below), during normal
business hours, for review by any Holder or
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beneficial owner of an Offered Certificate or any person identified to the
Trustee as a prospective transferee of an Offered Certificate or any interest
therein, originals or copies of, among other things, the following items:
o the Pooling Agreement and the Sub-Servicing Agreements and any
amendments thereto;
o all Trustee Reports delivered to Holders of the relevant Class of
Offered Certificates since the Delivery Date;
o all officer's certificates delivered to the Trustee by the Master
Servicer and/or Special Servicer since the Delivery Date as described
under "Servicing of the Mortgage Loans--Evidence as to Compliance" in
this Prospectus Supplement;
o all accountant's reports delivered to the Trustee with respect to the
Master Servicer and/or Special Servicer since the Delivery Date as
described under "Servicing of the Mortgage Loans--Evidence as to
Compliance" in this Prospectus Supplement; and
o 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 Pooling Agreement will obligate the Master Servicer to
make available, during normal business hours, for review by any Holder or
beneficial 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. The Master Servicer
will be entitled to reimbursement from such Holder, beneficial owner or
prospective transferee for its reasonable out of pocket expenses incurred in
connection with such review.
If the Master Servicer in its reasonable and good faith determination
believes that any item of information contained in the servicing file for any
Mortgage Loan should be conveyed to all Certificateholders, 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. Until the Trustee has either disclosed such information to all
Certificateholders as part of the Trustee Reports or such information has been
filed with the Securities and Exchange Commission on behalf of the Trust under
the Securities Exchange Act of 1934, as amended, the Master Servicer may
withhold such item of information from any Holder, beneficial owner or
prospective transferee of a Certificate or any interest. Further 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
documents, statements, reports and other items of information referred to above
that are maintained thereby, to Holders, beneficial owners and prospective
transferees of Certificates and interests therein; provided that the Trustee
and Master Servicer may each require:
o in the case of a beneficial owner of a Certificate held in book-entry
form, 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
o in the case of a prospective purchaser of Certificates or interests
therein, 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 Certificates or an interest therein, is
requesting the information for use in evaluating a possible investment
in such Certificates and will otherwise keep such information
confidential.
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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:
o 94.0% of the voting rights for the Certificates (the "Voting Rights")
will be allocated among the Holders of the various Classes of Principal
Balance Certificates in proportion to the outstanding Certificate
Balances of such Classes; and
o 5.0% of the Voting Rights will be allocated to the Holders of the Class
X Certificates; and
o 1/3 of 1.0% of the Voting Rights will be allocated equally among the
various Classes of REMIC Residual Certificates.
Voting Rights allocated to a Class of Certificateholders will be allocated
among such Certificateholders in proportion to the percentage interests in such
Class evidenced by their respective Certificates. See "Description of the
Certificates--Voting Rights" in the Prospectus.
TERMINATION
The obligations created by the Pooling Agreement will terminate following
the earliest of :
o the final payment or other liquidation of the last Mortgage Loan or
related REO Property remaining in the Trust Fund;
o the exchange by any single Holder of all of the Certificates for all of
the Mortgage Loans and each REO Property remaining in the Trust Fund;
and
o the purchase of all of the Mortgage Loans and REO Properties remaining
in the Trust Fund by any Holder or Holders (other than the Sponsor or
either Mortgage Loan Seller) of Certificates representing a majority
interest in the Controlling Class or by the Master Servicer (in that
order of priority).
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 majority Holder(s) of the Controlling Class or
the Master Servicer of all the Mortgage Loans and REO Properties remaining in
the Trust Fund is required to be made at a price (the "Termination 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
outstanding Certificates, but the right of the majority Holder(s) of the
Controlling Class or the Master Servicer 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 Termination
Price (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.
Any exchange by any single Holder of all of the Certificates for all of
the Mortgage Loans and each REO Property remaining in the Trust Fund may be
made by giving written notice to each of the parties to the Pooling Agreement
no later than sixty (60) days prior to the anticipated date of exchange. In the
event that any single Holder of all of the Certificates elects to exchange all
of the Certificates for all of the Mortgage Loans and each REO Property
remaining in the Trust Fund, such Certificateholder, no later
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than the business day immediately preceding the Distribution Date on which the
final distribution on the Certificates is to occur, shall deposit in the
Certificate Account an amount in immediately available funds equal to all
amounts then due and owing to the Master Servicer, the Special Servicer, the
Trustee and/or the REMIC Administrator under the Pooling Agreement that may be
withdrawn from the Certificate Account. Upon confirmation that such final
deposit has been made and following the surrender of all the Certificates on
the final Distribution Date, the Trustee shall release or cause to be released
to such Certificateholder or its designee, the Mortgage Files for the remaining
Mortgage Loans and shall execute all assignments, endorsements and other
instruments furnished to it by the Certificateholder, as shall be necessary to
effectuate transfer of the Mortgage Loans and REO Properties remaining in the
Trust Estate.
THE TRUSTEE
LaSalle National Bank, a national banking association, will act as Trustee
of the Trust. The Pooling Agreement provides that:
o the Trustee must at all times be a corporation, trust company, bank or
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
o the Fiscal Agent or the Trustee must at all times have a long-term
senior unsecured debt rating of not less than "Aa3" by Moody's and "AA"
by S&P (or, in the case of either such rating agency, such lower rating
as would not, as confirmed in writing by such rating agency, result in a
qualification, downgrade or withdrawal of any of the ratings then
assigned by such rating agency to the Certificates).
As of the Delivery Date, 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, Suite 1625, Chicago, Illinois 60603,
attention: Asset Backed Securities Trust Services-MCFI 1998-MC3. 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 and calculated at a specified rate per annum on
the aggregate Stated Principal Balance of each Mortgage Loan outstanding from
time to time.
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.
THE FISCAL AGENT
ABN AMRO Bank N.V., a Netherlands banking corporation, will act as Fiscal
Agent pursuant to the Pooling Agreement. The Fiscal Agent's office is located
at 135 South LaSalle Street, Chicago, Illinois 60603. The duties and
obligations of the Fiscal Agent consist only of making P&I Advances as
described under "--P&I Advances" above and Servicing Advances as described
under "Servicing of the Mortgage Loans--Servicing and Other Compensation and
Payment of Expenses" in this Prospectus Supplement. The Fiscal Agent will not
be liable except for the performance of such duties and obligations. The Fiscal
Agent will be entitled to reimbursement for each Advance made by it (with
interest) in the same manner and to the same extent as the Trustee and the
Master Servicer. The Fiscal Agent will be entitled to various rights,
protections and indemnities similar to those afforded to the Trustee. The
Trustee will be responsible for payment of the compensation of the Fiscal
Agent.
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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:
o the Pass-Through Rate for such Certificate;
o 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 applied to or
otherwise reduce the Certificate Balance or Notional Amount of the Class
to which such Certificate belongs;
o the rate, timing and severity of Realized Losses, Additional Trust Fund
Expenses, Net Aggregate Prepayment Interest Shortfalls and Appraisal
Reductions and the extent to which such losses, expenses and reductions
result in the nonpayment or deferred payment of interest on, or
reduction of the Certificate Balance or Notional Amount of, the Class to
which such Certificate belongs; and
o the extent to which Prepayment Premiums are collected on the Mortgage
Loans and, in turn, distributed on the Class to which such Certificate
belongs.
Pass-Through Rates. The Pass-Through Rate applicable to the Class X
Certificates will be variable and will be calculated based in part on the
Weighted Average Mortgage Pass-Through Rate from time to time. In addition, the
Pass-Through Rate on each other Class of Offered Certificates may not exceed
the Weighted Average Mortgage Pass-Through Rate 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 Rates and yields to maturity of the Class X Certificates will, and
the Pass-Through Rates and yields to maturity of the other Classes of Offered
Certificates may, be adversely affected if Mortgage Loans with relatively
higher Mortgage Pass-Through Rates amortize and/or prepay faster than Mortgage
Loans with relatively lower Mortgage Pass-Through 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
Principal Balance Certificates.
See "Description of the Offered Certificates--Distributions--Calculations
of Pass-Through Rates" and "Description of the Mortgage Pool" in this
Prospectus Supplement and "--Rate and Timing of Principal Payments" below.
Rate and Timing of Principal Payments. The yield to maturity on the Class
X Certificates will be extremely sensitive to, and the yield to maturity on 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 Balance or
Notional Amount, as the case may be, of such Class of Certificates. The
Principal Distribution Amount for each Distribution Date will be distributable
entirely to the Holders of the Class A-1 and/or Class A-2 Certificates until
the Certificate Balances thereof are reduced to zero. Following retirement of
the Class A-1 and Class A-2 Certificates, the Principal Distribution Amount for
each Distribution Date will be distributable entirely to the Holders of the
other Classes of Principal Balance Certificates, sequentially based on their
relative seniority, in each such case until the related Certificate Balance is
reduced to zero. The Notional Amount of the Class X Certificates will equal the
aggregate of the Certificate Balances of all the Classes of Principal Balance
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 respective dates on
which any Balloon Payments are due, the respective Anticipated Repayment Dates
for the ARD Loans 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).
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Prepayments and, assuming the respective stated maturity dates therefor
have not occurred, liquidations of the Mortgage Loans will result in
distributions on the Principal Balance 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 in the case of Balloon Loans at or near
their stated maturity dates, may result in significant delays in payments of
principal on the Mortgage Loans (and, accordingly, on the Principal Balance
Certificates) while workouts are negotiated or foreclosures are completed, and
such delays will tend to lengthen the weighted average lives of those
Certificates. Failure of the Borrower under any ARD Loan to repay its Mortgage
Loan by or shortly after its Anticipated Repayment Date, for whatever reason,
will also tend to lengthen the weighted average lives of the Principal Balance
Certificates. Although each ARD Loan includes incentives for the Borrower to
repay the Mortgage Loan by its Anticipated Repayment Date (e.g., an increase in
the rate at which interest accrues and the application of all excess cash (net
of the minimum required debt service, approved property expenses and any
required reserves) from the related Mortgaged Property to pay down the Mortgage
Loan, in each case following the passage of such date), there can be no
assurance that the Borrower will want or be able to repay the Mortgage Loan in
full.
See "Servicing of the Mortgage Loans--Modifications, Waivers, Amendments
and Consents" in this Prospectus Supplement 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
applied to or otherwise reduce the Certificate Balance or Notional Amount of
such Certificates. If you purchase your Offered Certificates at a discount, you
should consider the risk that a slower than anticipated rate of principal
payments on the Mortgage Loans could result in an actual yield to you that is
lower than your anticipated yield. If you purchase a Class X Certificate or if
you purchase any other Offered Certificate at a premium, you should consider
the risk that a faster than anticipated rate of principal payments on the
Mortgage Loans could result in an actual yield to you that is lower than your
anticipated yield.
In general, assuming you purchased your Certificates at a discount or a
premium, the earlier a payment of principal on or in respect of the Mortgage
Loans is applied to reduce or otherwise reduces the principal balance or
notional amount of your Certificates, the greater will be the effect on your
yield to maturity. As a result, the effect on your yield of principal payments
occurring at a rate higher (or lower) than you anticipated during any
particular period may not be fully offset by a subsequent like reduction (or
increase) in the rate of principal payments.
If you are contemplating an investment in the Class X Certificates, you
should fully consider the risk that an extremely rapid rate of principal
payments on the Mortgage Loans could result in your failure to recoup fully
your initial investment.
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 on the historical prepayment
experience of a large group of mortgage loans comparable to the Mortgage Loans.
Even if Prepayment Premiums are available and distributable on your
Certificates, they may not be sufficient to offset fully any loss in yield on
your Certificates attributable to the related prepayments of the Mortgage
Loans.
Delinquencies and Defaults on the Mortgage Loans. The rate and timing of
delinquencies and defaults on the Mortgage Loans will affect the amount of
distributions on your Certificates, the yield to maturity of your Certificates,
the rate of principal payments on your Certificates and the weighted average
life of your Certificates. Delinquencies on the Mortgage Loans, unless covered
by P&I Advances, may
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result in shortfalls in payments of interest and/or principal on your
Certificates for the current month. Although any such shortfalls may be made up
on future Distribution Dates, no interest would accrue on such shortfalls.
Thus, any such shortfalls would adversely affect the yield to maturity of your
Certificates.
If you calculate the anticipated yield to maturity for your Certificates
based on an assumed rate of default and amount of losses on the Mortgage Loans
that is lower than the default rate and amount of losses actually experienced
and such additional losses result in a reduction of the distributions on or the
aggregate principal balance or notional amount of your Certificates, your
actual yield to maturity will be lower than you calculated and could, under
certain scenarios, be negative. The timing of any loss on a liquidated Mortgage
Loan that results in a reduction of the distributions on or the aggregate
principal balance or notional amount of your Certificates will also affect the
actual yield to maturity of your Certificates, even if the rate of defaults and
severity of losses are consistent with your expectations. In general, the
earlier a loss occurs, the greater the effect on your yield to maturity.
Even if losses on the Mortgage Loans do not result in a reduction of the
distributions on or the aggregate principal balance or notional amount of your
Certificates, such losses may still affect the timing of distributions on (and,
accordingly, the weighted average life and yield to maturity of) your
Certificates.
Certain Relevant Factors. The rate and timing of principal payments and
defaults and the severity of losses on the Mortgage Loans may be affected by a
number of factors, including:
o prevailing interest rates;
o the terms of the Mortgage Loans (for example, Prepayment Premiums,
Lock-out Periods and amortization terms that require Balloon Payments);
o the demographics and relative economic vitality of the areas in which
the Mortgaged Properties are located;
o the general supply and demand for retail shopping space, rental
apartments, office space, hotel and motel rooms, industrial space,
health care facility beds, senior living units or mobile home park pads,
as the case may be, in such areas;
o the quality of management of the Mortgaged Properties;
o the servicing of the Mortgage Loans;
o possible changes in tax laws; and
o other opportunities for investment.
See "Risk Factors--Risks Related to the Mortgage Loans", "Description of
the Mortgage Pool" and "Servicing of the Mortgage Loans" in this Prospectus
Supplement 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 an ARD 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
an ARD Loan after its 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 an ARD Loan, out of certain net cash flow from the related
Mortgaged Property). Assuming prevailing market interest rates exceed the
related Revised Rate, the primary incentive to prepay an ARD Loan on or before
its Anticipated Repayment Date is to give the Borrower access to excess cash
flow, all of which (net of the minimum required debt service, approved property
expenses and any required reserves) must be applied to pay down principal of
the Mortgage Loan. Accordingly, there can be no assurance that any ARD Loan
will be prepaid on or before its Anticipated Repayment Date or on any other
date prior to maturity.
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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 on
such Mortgage Loan may not be sufficient economic disincentive to prevent the
related Borrower from voluntarily prepaying the loan as part of a refinancing
or a sale of the related Mortgaged Property. See "Description of the Mortgage
Pool--Certain Terms and Conditions of the Mortgage Loans" in this Prospectus
Supplement.
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.
Unpaid Distributable Certificate Interest. If the portion of the Available
Distribution Amount distributable as interest on your Certificates on any
Distribution Date is less than the Distributable Certificate Interest then
payable to you, the shortfall will be distributable to you on subsequent
Distribution Dates, to the extent of available funds. Any such shortfall will
not bear interest, however, and will therefore negatively affect the yield to
maturity on your Certificates for so long as it is outstanding. See
"Description of the Offered Certificates--Distributions--Priority of Payments"
in this Prospectus Supplement.
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 as follows:
o multiply the amount of each principal distribution on such Certificate
by the number of years from the assumed Settlement Date (as defined
below) to the related Distribution Date;
o sum the results; and
o divide 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 to which such Offered
Certificate belongs.
The Principal Distribution Amount for each Distribution Date will be
distributable entirely to the Holders of the Class A-1 and/or Class A-2
Certificates until their Certificate Balances are reduced to zero, and will
thereafter be distributable entirely to the Holders of the other Classes of
Principal Balance Certificates, sequentially based on their relative seniority,
in each such case until the related Certificate Balance is reduced to zero. As
a consequence, the weighted average lives of the Class A-1 and/or Class A-2
Certificates may be shorter, and the weighted average lives of the other
Classes of Principal Balance Certificates may be longer, than would otherwise
be the case if the Principal Distribution Amount for each Distribution Date was
being distributed on a proportionate basis among the Classes of Principal
Balance 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 (except that each ARD Loan is paid in full on its Anticipated
Repayment Date).
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The columns headed "4%", "8%", "12%", "16%" and 20% assume that no
prepayments are made on any Mortgage Loan during such Mortgage Loan's Lock-out
Period, defeasance period or yield maintenance period, in each case if any, and
are otherwise made on each of the Mortgage Loans at the indicated CPRs (except
that each ARD Loan is paid in full on its Anticipated Repayment Date). There is
no assurance, however, that prepayments of the Mortgage Loans (whether or not
in a Lock-out Period, a defeasance 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 set forth in this
Prospectus Supplement 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 set forth in this Prospectus Supplement at the same rate or that
Mortgage Loans that are in a Lock-out Period, a defeasance 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 (collectively, the "Maturity
Assumptions"):
o the Mortgage Loans have the characteristics set forth on Annex A and the
Initial Pool Balance is $908,161,006;
o the initial Certificate Balance or Notional Amount, as the case may be,
of each Class of Certificates is as set forth on page S-7 of this
Prospectus Supplement;
o the Pass-Through Rate for each Class of Certificates is as set forth on
page S-7 of this Prospectus Supplement;
o 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;
o Scheduled P&I Payments on the Mortgage Loans are timely received on the
first day of each month;
o no voluntary or involuntary prepayments are received as to any Mortgage
Loan during such Mortgage Loan's Lock-out Period ("LOP"), defeasance
period or yield maintenance period ("YMP"), in each case if any, each
ARD Loan is paid in full on its 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);
o no person or entity entitled thereto exercises its right of optional
termination described in this Prospectus Supplement under "Description
of the Offered Certificates--Termination";
o no Mortgage Loan is required to be repurchased by a Mortgage Loan
Seller;
o no Prepayment Interest Shortfalls are incurred and no Prepayment
Premiums are collected;
o there are no Additional Trust Fund Expenses;
o distributions on the Offered Certificates are made on the 18th day of
each month, commencing in January 18, 1999; and
o the Offered Certificates are settled on December 29, 1998 (the
"Settlement Date").
To the extent that the Mortgage Loans have characteristics that differ
from those assumed in preparing the tables set forth below, any Class of
Offered 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
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<PAGE>
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. You are
urged to conduct your 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, DEFEASANCE AND YMP, THEN AT THE FOLLOWING
CPR)
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION (CPR)
-----------------------------------------------------------------
DATE 0% CPR 4% CPR 8% CPR 12% CPR 16% CPR 20% CPR
- ----------------------- -------- -------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Delivery Date ......... % % % % % %
% % % % % %
% % % % % %
% % % % % %
% % % % % %
% % % % % %
% % % % % %
% % % % % %
% % % % % %
% % % % % %
Weighted Average Life
(in years) ...........
</TABLE>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS A-2 CERTIFICATES AT THE SPECIFIED CPRS
(PREPAYMENTS LOCKED OUT THROUGH LOP, DEFEASANCE AND YMP, THEN AT THE FOLLOWING
CPR)
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION (CPR)
-----------------------------------------------------------------
DATE 0% CPR 4% CPR 8% CPR 12% CPR 16% CPR 20% CPR
- ----------------------- -------- -------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Delivery Date ......... % % % % % %
% % % % % %
% % % % % %
% % % % % %
% % % % % %
% % % % % %
% % % % % %
% % % % % %
% % % % % %
% % % % % %
Weighted Average Life
(in years) ...........
</TABLE>
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<PAGE>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS B CERTIFICATES AT THE SPECIFIED CPRS
(PREPAYMENTS LOCKED OUT THROUGH LOP, DEFEASANCE AND YMP, THEN AT THE FOLLOWING
CPR)
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION (CPR)
-----------------------------------------------------------------
DATE 0% CPR 4% CPR 8% CPR 12% CPR 16% CPR 20% CPR
- ----------------------- -------- -------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Delivery Date ......... % % % % % %
% % % % % %
% % % % % %
% % % % % %
% % % % % %
% % % % % %
% % % % % %
% % % % % %
% % % % % %
% % % % % %
Weighted Average Life
(in years) ...........
</TABLE>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS C CERTIFICATES AT THE SPECIFIED CPRS
(PREPAYMENTS LOCKED OUT THROUGH LOP, DEFEASANCE AND YMP, THEN AT THE FOLLOWING
CPR)
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION (CPR)
-----------------------------------------------------------------
DATE 0% CPR 4% CPR 8% CPR 12% CPR 16% CPR 20% CPR
- ----------------------- -------- -------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Delivery Date ......... % % % % % %
% % % % % %
% % % % % %
% % % % % %
% % % % % %
% % % % % %
% % % % % %
% % % % % %
% % % % % %
% % % % % %
Weighted Average Life
(in 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, DEFEASANCE AND YMP, THEN AT THE FOLLOWING
CPR)
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION (CPR)
-----------------------------------------------------------------
DATE 0% CPR 4% CPR 8% CPR 12% CPR 16% CPR 20% CPR
- ----------------------- -------- -------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Delivery Date ......... % % % % % %
% % % % % %
% % % % % %
% % % % % %
% % % % % %
% % % % % %
% % % % % %
% % % % % %
% % % % % %
% % % % % %
Weighted Average Life
(in years) ...........
</TABLE>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS E CERTIFICATES AT THE SPECIFIED CPRS
(PREPAYMENTS LOCKED OUT THROUGH LOP, DEFEASANCE AND YMP, THEN AT THE FOLLOWING
CPR)
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION (CPR)
-----------------------------------------------------------------
DATE 0% CPR 4% CPR 8% CPR 12% CPR 16% CPR 20% CPR
- ----------------------- -------- -------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Delivery Date ......... % % % % % %
% % % % % %
% % % % % %
% % % % % %
% % % % % %
% % % % % %
% % % % % %
% % % % % %
% % % % % %
% % % % % %
Weighted Average Life
(in years) ...........
</TABLE>
YIELD SENSITIVITY OF THE CLASS X CERTIFICATES
The yield to maturity on the Class X Certificates will be highly sensitive
to the rate and timing of principal payments (including by reason of or as
affected by prepayments, hyper-amortization, loan extensions, defaults and
liquidations) and losses on the Mortgage Loans. If you are contemplating an
investment in the Class X Certificates, you 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 your failure to recoup fully your initial investment.
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<PAGE>
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
that, when specifically indicated in a particular table, [ o 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. Furthermore, it was assumed that
the yield curve, for purposes of calculating the allocation of such Prepayment
Premiums, is and remains as follows:
(a) 3 mo. T-bill- % per annum;
(b) 6 mo. T-bill- % per annum;
(c) 1 yr treasury- % per annum;
(d) 2 yr treasury- % per annum;
(e) 3 yr treasury- % per annum;
(f) 5 yr treasury- % per annum;
(g) 10 yr treasury- % per annum; and
(h) 30 yr treasury- % per annum.
It was also 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, plus 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 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 the 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 in
this Prospectus Supplement 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. You are
urged to conduct your own analyses of the rates at which the Mortgage Loans may
be expected to prepay in deciding whether to purchase Class X Certificates.
PRE-TAX YIELD TO MATURITY (CBE)
OF THE CLASS X CERTIFICATES ASSUMING 100% OF RECOVERY OF DECL.% PREMIUMS
(PREPAYMENTS LOCKED OUT THROUGH LOP, DEFEASANCE AND YMP, THEN AT THE FOLLOWING
CPR)
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION (CPR)
-----------------------------------------------------------------
PRICE 0% CPR 4% CPR 8% CPR 12% CPR 16% CPR 20% CPR
- ------- -------- -------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
% % % % % %
% % % % % %
% % % % % %
</TABLE>
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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
Upon the issuance of the Certificates, Sidley & Austin, counsel to the
Sponsor, will deliver its opinion generally to the effect that, assuming
compliance with the Pooling Agreement, REMIC I, REMIC II, and REMIC III,
respectively, will each qualify as a REMIC under the Code. For federal income
tax purposes,
o the separate non-certificated regular interests in REMIC I will be
"regular interests" in REMIC I and will constitute the assets of REMIC
II;
o the Class R-I Certificates will evidence the sole class of "residual
interests" in REMIC I;
o the separate non-certificated regular interests in REMIC II will be
"regular interests" in REMIC II and will constitute the assets of REMIC
III;
o the Class R-II Certificates will evidence the sole class of "residual
interests" in REMIC II;
o the REMIC Regular Certificates will constitute the "regular interests"
in, and generally will be treated as debt obligations of, REMIC III; and
o the Class R-III Certificates will evidence the sole class of residual
interests in REMIC III.
DISCOUNT AND PREMIUM; PREPAYMENT PREMIUMS
For federal income tax reporting purposes, it is anticipated that the
Class , Class , Class , Class and Class Certificates will not, the
Class Certificates may, and the Class X Certificates will, 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
amortization of 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 ARD Loans will be
repaid in full on their respective Anticipated Repayment Dates. There can be no
assurance, however, 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. You should be aware, however, 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. It is recommended that you consult your own tax advisor
concerning the tax treatment of your Certificates.
If the method for computing original issue discount described in the
Prospectus results in a negative amount for any period, a possibility of
particular relevance to the Class X Certificates, 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. However, 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
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<PAGE>
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 Certificateholder.
If you acquire an interest in any such Class of Certificates, you should
consider consulting your own tax advisor 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 in this Prospectus Supplement. 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, a Prepayment Premium will be treated as income to the
Holders of a Class of Certificates entitled thereto only after the Master
Servicer's actual receipt of such Prepayment Premium. 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. The correct characterization of such income is not entirely
clear, however, and you should consider consulting your own tax advisor
concerning the treatment of Prepayment Premiums.
CONSTRUCTIVE SALES OF CLASS X CERTIFICATES
The Taxpayer Relief Act of 1997 added a provision to the Code that
requires the recognition of gain upon the "constructive sale of an appreciated
financial position". A constructive sale of a financial position occurs if a
taxpayer enters into certain transactions or series of such transactions that
have the effect of substantially eliminating the taxpayer's risk of loss and
opportunity for gain with respect to the financial instrument. Debt instruments
that (i) entitle the Holder to a specified principal amount, (ii) pay interest
at a fixed or variable rate and (iii) are not convertible into the stock of the
issuer or a related party, cannot be the subject of a constructive sale for
this purpose. Accordingly, only Class X Certificates, which do not have a
principal balance, could be subject to this provision and only if a Holder of a
Class X Certificate were to engage in a constructive sale transaction.
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)(B) 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)(B) of the Code.
Most of the Mortgage Loans are not secured by real estate used for
residential or certain other purposes prescribed in Section 7701(a)(19)(C) of
the Code, and consequently the REMIC Regular Certificates will be treated as
assets qualifying under that section to only a limited extent. Accordingly,
investment in the REMIC Regular Certificates may not be suitable for thrift
institutions seeking to be treated as a "domestic building and loan
association" under Section 7701(a)(19)(C) of the Code.
The Offered Certificates will be treated as "qualified mortgages" for
another REMIC under Section 860G(a)(3)(C) of the Code and "permitted assets"
for a "financial asset securitization investment trust" under Section 860L(c)
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)(B)
of the Code and the interest thereon may not constitute "interest on
obligations secured by mortgages on
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<PAGE>
real property" within the meaning of Section 856(c)(3)(B) of the Code. See
"Description of the Mortgage Pool" in this Prospectus Supplement 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 reasonable, 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 reasonable 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 in this Prospectus Supplement as an "REO Tax"). To the extent that
income the Trust receives from an REO Property is subject to (i) a tax on "net
income from foreclosure property", such income would be subject to federal tax
at the highest marginal corporate tax rate (currently 35%) and (ii) a tax on
"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". These
considerations will be of particular relevance with respect to any health care
related facilities or hotels that become REO Property. However, unless
otherwise required by expressly applicable authority, it is anticipated that
the Trust will take the position that no income from foreclosure property will
be subject to the 100% "prohibited transactions" tax. Any REO Tax imposed on
the Trust's income from an REO Property would reduce the amount available for
distribution to Certificateholders.
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 any of REMIC I, REMIC II or REMIC III will be borne by
the REMIC Administrator, the Trustee, the Master Servicer or the Special
Servicer, in any case out of its own funds, if (but only if)--
o such person has sufficient assets to do so, and
o such tax arises out of a breach of such person's obligations under
certain specified sections of the Pooling Agreement.
Any such tax not borne by the REMIC Administrator, the Trustee, 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 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
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<PAGE>
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
related 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 related 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 a particular 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.
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.
CERTAIN 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 constitute or 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 is 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 an individual prohibited transaction
exemption (a "PTE") to Smith Barney Inc., a predecessor in interest to the
Underwriter (PTE 91-23). Subject to the satisfaction of certain conditions set
forth therein, PTE 91-23 (the "Exemption") generally exempts 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 relating to, among other things, 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, that
are underwritten by one of the following parties (collectively, the "Exemption
Favored Parties")--
(a) the Underwriter,
(b) any person directly or indirectly, through one or more
intermediaries, controlling, controlled by or under common
control with the Underwriter, and
(c) any member of the underwriting syndicate or selling group of
which a person described in (a), or (b) is a manager or
co-manager with respect to the Senior Certificates.
The Exemption sets 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. The conditions are
as follows:
o 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;
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<PAGE>
o second, the rights and interests evidenced by such Senior Certificate
must not be subordinated to the rights and interests evidenced by the
other Certificates;
o third, at the time of its acquisition by the Plan, such Senior
Certificate must be rated in one of the three highest generic rating
categories by Moody's, Fitch IBCA, Inc. ("Fitch") Duff & Phelps Credit
Rating Co. ("DCR") or S&P.
o fourth, the Trustee cannot be an affiliate of any other member of the
"Restricted Group", which (in addition to the Trustee) consists of the
Exemption-Favored Parties, the Sponsor, the Master Servicer, the Special
Servicer, any sub-servicers, the Mortgage Loan Sellers, each Borrower,
if any, 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 and all affiliates
of any of the aforementioned persons;
o 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; and
o sixth, the investing Plan must be an accredited investor as defined in
Rule 501(a)(1) of Regulation D under the Securities Act.
Because the Senior Certificates are not subordinated to any other Class of
Certificates, the second general condition set forth above is satisfied with
respect to such Certificates. It is a condition of their issuance that the
Class A-1 and Class A-2 of Senior Certificates be rated not lower than "Aaa" by
Moody's and "AAA" by S&P and that the Class X Certificates be rated not lower
than "Aaa" by Moody's and "AAAr" by S&P. In addition, the initial Trustee is
not an affiliate of any other member of the Restricted Group. Accordingly, as
of the Delivery Date, the third and fourth general conditions 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 Exemption also requires that the Trust meet the following
requirements:
o the Trust Fund must consist solely of assets of the type that have been
included in other investment pools;
o certificates evidencing interests in such other investment pools must
have been rated in one of the three highest categories of Moody's,
Fitch, DCR or S&P for at least one year prior to the Plan's acquisition
of a Senior Certificate; and
o 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 of this Prospectus Supplement.
If the general conditions of the Exemption are satisfied, the Exemption
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--
S-124
<PAGE>
o 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, a Mortgage Loan Seller, 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;
o the direct or indirect acquisition or disposition in the secondary
market of Senior Certificates by a Plan; and
o 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 of this
Prospectus Supplement, an "Excluded Plan" is a Plan sponsored by any member of
the Restricted Group.
In addition, if the general conditions of the Exemption, as well as
certain other specific conditions set forth in the Exemption, are satisfied,
the Exemption 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 Exemption, as well as certain
other conditions set forth in the Exemption, are satisfied, the Exemption 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 Exemption are satisfied, the
Exemption also may provide an exemption from the restrictions imposed by
Sections 406(a) and 407(a) of ERISA, and 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, 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:
o the Senior Certificates constitute "certificates" for purposes of the
Exemption; and
o the specific and general conditions and the other requirements set forth
in the Exemption would be satisfied.
In addition to determining the availability of the exemptive relief
provided in the Exemption, a 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
S-125
<PAGE>
will apply with respect to any particular Plan investment in the Senior
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 EXEMPTION. ACCORDINGLY, THE
CERTIFICATES OF THOSE CLASSES MAY NOT BE ACQUIRED BY OR ON BEHALF OF A PLAN OR
WITH PLAN ASSETS, EXCEPT IN THE CASE OF AN INSURANCE COMPANY USING FUNDS IN ITS
GENERAL ACCOUNT, WHICH MAY BE ABLE TO RELY ON SECTION III OF PTCE 95-60
(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) that do not meet the requirements of the Exemption solely because
they (a) are subordinated to other Classes of Certificates in the Trust or (b)
have not received a rating at the time of the purchase in one of the three
highest rating categories from Moody's, Fitch, DCR and S&P. All other
conditions of the Exemption would have to be satisfied in order for PTCE 95-60
to be available. Before purchasing Class B, Class C, Class D and 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.
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 or warranty by the Sponsor or the Underwriter 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 the Secondary Mortgage Market Enhancement Act of 1984. As a
result, the appropriate characterization of the Offered Certificates under
various legal investment restrictions, and thus the ability of investors
subject to these restrictions to purchase Offered Certificates, is subject to
significant interpretive uncertainties. Neither the Sponsor nor the Underwriter
makes any representation or warranty as to the ability of particular investors
to purchase the Offered Certificates under applicable legal investment or other
restrictions. If your investment activities are subject to legal investment
laws and regulations, regulatory capital requirements or review by regulatory
authorities, you should consult with your own legal advisors in determining
whether and to what extent the Offered Certificates constitute legal
investments for you or are subject to investment, capital or other
restrictions. See "Legal Investment" in the Prospectus.
S-126
<PAGE>
METHOD OF DISTRIBUTION
Subject to the terms and conditions set forth in the Underwriting
Agreement, dated as of the date of this Prospectus Supplement, between the
Sponsor and the Underwriter (the "Underwriting Agreement"), the Underwriter
will purchase the Offered Certificates from the Sponsor upon issuance. 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 Offered Certificates, plus
accrued interest on all the Offered Certificates from the Cut-off Date.
Each of the Sponsor and the Underwriter are indirect, wholly owned
subsidiaries of Citigroup Inc.
Distribution of the Offered Certificates will be made by the Underwriter
from time to time in negotiated transactions or otherwise at varying prices to
be determined at the time of sale. The Underwriter 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 Underwriter. In connection with the purchase and sale of
the Offered Certificates, the Underwriter may be deemed to have received
compensation from the Sponsor in the form of underwriting discounts. Purchasers
of the Offered Certificates, including dealers, may, depending on the facts and
circumstances of such purchases, be deemed to be "underwriters" within the
meaning of the Securities Act in connection with reoffers and sales by them of
Offered Certificates. Accordingly, 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. Certificateholders should consult with
their legal advisors in this regard prior to any such reoffer or sale.
The Underwriter has advised the Sponsor that it presently intends to make
a market in the Offered Certificates, but it has no 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--Risks Related to the Certificates--Limited Liquidity" in this
Prospectus Supplement and "Risk Factors--Certain Factors Adversely Affecting
Resale of the Offered Certificates" in the Prospectus.
The Sponsor has agreed to indemnify the Underwriter and each person, if
any, who controls the Underwriter within the meaning of Section 15 of the
Securities Act against, or make contributions to the Underwriter and each such
controlling person with respect to, certain liabilities, including certain
liabilities under the Securities Act. Each of the Mortgage Loan Sellers has
agreed to indemnify the Sponsor, its officers and directors, the Underwriter,
and each person, if any, who controls the Sponsor or the 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 the particular Mortgage Loan Seller's Mortgage Loans.
The Underwriter may engage in transactions that maintain or otherwise
affect the price of the Offered Certificates, including short-covering
transactions in such Offered Certificates, and the imposition of a penalty bid,
in connection with the offering. These activities may cause the price of the
Offered Certificates to be higher than the price that would exist in the open
market absent such activities, and these activities may be discontinued at any
time.
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 Underwriter by Andrews & Kurth,
Washington, D.C. Mr. Dietz owns or has the right to acquire a number of shares
of common stock of Citigroup Inc. equal to less than .01% of the outstanding
common stock of Citigroup Inc.
S-127
<PAGE>
RATINGS
It is a condition to their issuance that the Classes of Offered
Certificates receive the credit ratings indicated below from Moody's and/or
S&P:
<TABLE>
<CAPTION>
CLASS MOODY'S S&P
- ----- ------- ---
<S> <C> <C>
Class A-1 .......... Aaa AAA
Class A-2 .......... Aaa AAA
Class X ............ Aaa AAAr
Class B ............ Aa2 AA
Class C ............ A2 A
Class D ............ Baa2 BBB
Class E ............ Baa3 NR*
</TABLE>
- ----------
* "NR" means not rated.
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 Rated Final Distribution Date. The
ratings take into consideration the credit quality of the Mortgage Pool,
structural and legal aspects associated with the Offered Certificates, and the
extent to which the payment stream from the Mortgage Pool is adequate to make
payments of principal and interest, required on the Offered Certificates. The
ratings of the Offered Certificates do not, however, represent any assessments
of:
o the tax attributes of the Offered Certificates or of the Trust;
o the likelihood or frequency of voluntary or involuntary principal
prepayments on the Mortgage Loans;
o the degree to which such prepayments might differ from those originally
anticipated;
o whether and to what extent Prepayment Premiums will be collected on the
Mortgage Loans or the corresponding effect on yield to investors; or
o whether and to what extent Additional Interest will be collected on the
ARD Loans.
Also, a security rating does not represent any assessment of the yield to
maturity that you may experience or, if you are purchasing Class X
Certificates, the possibility that you might not fully recover your investment
in the event of rapid prepayments and/or other liquidations of the Mortgage
Loans.
In general, the ratings on the Offered Certificates address credit risk
and not prepayment risk. The amounts payable on the Class X Certificates do not
include principal. Thus, if the Mortgage Pool were to prepay in the initial
month, the holders of the Class X Certificates would receive only a single
month's interest. Although such holders may have suffered a nearly complete
loss of their investment, such result is consistent with the ratings received
on the Class X Certificates because all amounts "due" to such
Certificateholders would have been paid. The Notional Amount upon which
interest is calculated on the Class X Certificates is subject to reduction in
connection with each reduction in the Certificate Balance of a Class of
Principal Balance Certificates, whether as a result of principal payments or in
connection with Realized Losses and Additional Trust Fund Expenses. The ratings
on the Class X Certificates do not address the timing or magnitude of any
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.
The "r" subscript on the rating assigned by S&P to the Class X
Certificates denotes that there are non-credit risks associated with the
securities and that the securities may experience increased volatility or
fluctuations in expected returns.
S-128
<PAGE>
There is no assurance that any rating assigned to the Offered Certificates
by a Rating Agency will not be downgraded, 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 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 Moody's and/or S&P.
The ratings on the Offered Certificates should be evaluated independently
from similar ratings on other types of securities. A security rating is not a
recommendation to buy, sell or hold securities and may be subject to revision
or withdrawal at any time by the assigning rating agency. See "Risk Factors--
Limited Nature of Credit Ratings" in the Prospectus.
S-129
<PAGE>
INDEX OF PRINCIPAL DEFINITIONS
PAGE
----
30/360 Basis ................................. S-48
30/360 Mortgage Loans ........................ S-48
Accelerated Amortization Payments ............ S-49
Accrued Certificate Interest ................. S-94
ACMs ......................................... S-38, S-53
Actual/360 Basis ............................. S-48
Actual/360 Mortgage Loans .................... S-48
Additional Interest Rate ..................... S-49
Administrative Fee Rate ...................... A-5
Administrative Fees .......................... S-110
Advances ..................................... S-19
Annual Debt Service .......................... A-4
Anticipated Loan Balance at Scheduled
Maturity Date/ARD ............................ A-5
Anticipated Repayment Date ................... S-23, S-62
Appraisal Date ............................... S-54
Appraisal Reduction Amount ................... S-20
Appraisal Trigger Event ...................... S-103
Appraisal Trigger Events ..................... S-19
Appraisal Value .............................. A-4
Appraisals ................................... S-54
Appraised Value .............................. A-4
Appraised Values ............................. S-54
ARD .......................................... S-23
ARD Loan ..................................... S-48
ARD Loans .................................... S-23
Available Distribution Amount ................ S-93
Balloon ...................................... A-5
Balloon Loan ................................. S-49
Balloon Payment .............................. S-23
Beds ......................................... A-5
Borrower ..................................... S-20
Borrowers .................................... S-58
CBE .......................................... S-119
CERCLA ....................................... S-39
Certificate Balance .......................... S-90
Certificates ................................. S-8
Code ......................................... S-120
Compensating Interest Payment ................ S-81
Controlling Class ............................ S-8, S-88
Corporate Trust Office ....................... S-110
Corrected Mortgage Loan ...................... S-78
CREI ......................................... S-9
CREI Mortgage Loans .......................... S-72
Cross-Collateralized Group ................... S-40
Cross-Collateralized Mortgage Loans .......... S-40
Cut-off Date Balance ......................... S-22, S-44
Cut-off Date Loan-to-Value Ratio ............. A-4
Cut-off Date Loan-to-Value Ratio is as
defined in Annex A to this Prospectus
Supplement. .................................. S-22
Cut-off Date LTV Ratio ....................... A-4
PAGE
----
DCR .......................................... S-124
Default Interest ............................. S-81
Defeasance Collateral ........................ S-51
Defeasance Loan .............................. S-51
Defeasance Loans ............................. S-24
Defeasance(y) ................................ A-5
Definitive Certificate ....................... S-90
Discount Rate ................................ A-6
Douglasville Property ........................ S-56
DSCR ......................................... A-4
DTC .......................................... S-12
DTC Participants ............................. S-90
Due Date ..................................... S-23
ERISA ........................................ S-123
Exemption .................................... S-123
Exemption Favored Parties .................... S-123
Expenses ..................................... A-4
Fitch ........................................ S-124
Form 8-K ..................................... S-8
Fully Amortizing ............................. A-5
Fully Amortizing Loan ........................ S-49
Fully Amortizing Loans ....................... S-24
Grtr x% UPB or YM(y) ......................... A-6
Hospitality Properties ....................... S-32
Hyperamortizing .............................. A-5
Initial Pool Balance ......................... S-22
Interest Differential ........................ A-6
Interest Shortfall Payment ................... S-62
Interested Person ............................ S-86
IRS .......................................... S-120
Kranzco ...................................... S-58
Leasable Square Footage ...................... A-5
Lender ....................................... S-58
Liquidation Fee .............................. S-82
Liquidation Fee Rate ......................... S-82
Lockbox Account .............................. S-49
Lock-out Period .............................. S-50
LOP .......................................... S-115
LO(y) ........................................ A-5
LUSTs ........................................ S-39
Major Tenant ................................. S-52
marked-up .................................... S-73
Master Servicing Fee ......................... S-80
Master Servicing Fee Rate .................... S-80
Material Breach .............................. S-75
Material Document Defect ..................... S-73
Maturity Assumptions ......................... S-115
Maturity Date/ARD Loan-to-Value
Ratio ........................................ S-22, A-4
Maturity Date/ARD LTV Ratio .................. A-4
Maturity/ARD ................................. A-5
Monthly Discount Rate ........................ A-6
S-130
<PAGE>
PAGE
----
Mortgage ................................ S-44
Mortgage File ........................... S-73
Mortgage Loan Schedule .................. S-73
Mortgage Loans .......................... S-8
Mortgage Note ........................... S-44
Mortgage Pass-Through Rate .............. S-95
Mortgage Pool ........................... S-20
Mortgage Rate ........................... S-23, S-48
Mortgaged Property ...................... S-20
Mortgages ............................... S-58
Multifamily Rental Properties ........... S-33
Multi-Property Loan ..................... S-40
Net Aggregate Prepayment Interest
Shortfall ............................... S-81
Net Mortgage Rate ....................... S-93
Net Operating Income .................... A-3
NOI ..................................... A-3
NOI Debt Service Coverage Ratio ......... A-4
Nonrecoverable P&I Advance .............. S-102
Nonrecoverable Servicing Advance ........ S-83
Note .................................... S-58
Notional Amount ......................... S-90
NR ...................................... S-3, S-14
NRSF .................................... A-5
NSF ..................................... A-5
Occupancy % ............................. A-5
Occupancy Percent ....................... A-5
Oceanside Caldor/Gold Coast Plaza
Property Borrower ....................... S-67
Oceanside/Swan Borrowers ................ S-67
Oceanside/Swan Guarantor ................ S-69
Oceanside/Swan Guaranty ................. S-69
Oceanside/Swan Interest Rate ............ S-69
Oceanside/Swan Manager .................. S-68
Oceanside/Swan Maturity Date ............ S-69
Oceanside/Swan Mortgage ................. S-67
Oceanside/Swan Note ..................... S-67
Oceanside/Swan Prepayment Premium ....... S-69
Oceanside/Swan Properties ............... S-67
Oceanside/Swan Yield Maintenance
Expiration Date ......................... S-69
Offered Certificates .................... S-11
Office Properties ....................... S-32
OID Regulations ......................... S-120
O&M ..................................... S-68
Open Period ............................. S-50
Operating Statement Analysis ............ S-107
Party in Interest ....................... S-125
Payment Date ............................ S-62
Permitted Encumbrances .................. S-73
Permitted Investments ................... S-81
P&I Advance ............................. S-19
Pickaway Property ....................... S-56
Plan .................................... S-123
PAGE
----
Plan Assets ............................. S-123
Pooling Agreement ....................... S-8
Prepayment Interest Excess .............. S-80
Prepayment Interest Shortfall ........... S-81
Prepayment Premium ...................... S-41
Prepayment Premium Period ............... S-50
Prepayment Provisions ................... A-5
Present Value ........................... A-6
Principal Balance Certificates .......... S-17
Principal Distribution Amount ........... S-95
Private Certificates .................... S-11
Properties .............................. S-58
Property Manager ........................ S-61
Prospectus .............................. S-3
Prospectus Supplement ................... S-3
PTCE .................................... S-27
PTCE 95-60 .............................. S-126
PTE ..................................... S-123
Purchase Price .......................... S-75
Rating Agencies ......................... S-3
Related Loans ........................... A-5
Related Proceeds ........................ S-83
Release Price ........................... S-71
Remaining Available Funds ............... S-62, S-63
REMIC ................................... S-13
REMIC Administrator ..................... S-9, S-110
REMIC I ................................. S-13
REMIC II ................................ S-13
REMIC III ............................... S-13
REMIC Regular Certificates .............. S-90
REMIC Residual Certificates ............. S-90
REO Extension ........................... S-86
REO Property ............................ S-77
REO Tax ................................. S-87, S-122
Required Appraisal ...................... S-103
Required Appraisal Loan ................. S-103
Retail Sales and Service Properties ..... S-30
Revenues ................................ A-3
Revised Rate ............................ S-49
Rooms ................................... A-5
SBRC .................................... S-9
SBRC Mortgage Loans ..................... S-72
Scheduled Maturity Date/ARD ............. A-5
Scheduled P&I Payments .................. S-23
SEC ..................................... S-4
Securities Act .......................... S-4
Servicing Advance ....................... S-19
Servicing Standard ...................... S-77
Servicing Transfer Event ................ S-78
Settlement Date ......................... S-115
SF ...................................... A-5
Similar Law ............................. S-126
Snellville Property ..................... S-56
S-131
<PAGE>
PAGE
----
S&P ...................................... S-3
Special Servicing Fee .................... S-81
Special Servicing Fee Rate ............... S-81
Specially Serviced Mortgage Loan ......... S-77
Stated Principal Balance ................. S-93
Statler Property ......................... S-56
Sub-Servicer ............................. S-79
Sub-Servicing Agreement .................. S-79
Sub-Servicing Fee Rate ................... A-5
Swan Nursery Commons Property
Borrower ................................. S-67
Termination Price ........................ S-109
Trust .................................... S-8
Trust Fund ............................... S-8
Trustee Fee .............................. S-110
Trustee Reports .......................... S-104
Underwriter .............................. S-1
Underwriting Agreement ................... S-127
Underwritten Expenses .................... A-2
Underwritten NCF ......................... A-3
Underwritten NCF Debt Service
Coverage Ratio ........................... S-22, A-3
Underwritten NCF DSCR .................... A-3
Underwritten Net Cash Flow ............... A-3
PAGE
----
Underwritten NOI ......................... A-1
Underwritten NOI Debt Service
Coverage Ratio ........................... A-3
Underwritten NOI DSCR .................... A-3
Underwritten Revenues .................... A-1
Units .................................... A-5
UPB ...................................... A-5
U/W Expenses ............................. A-2
U/W NCF .................................. A-3
U/W NCF DSCR ............................. A-3
U/W NOI .................................. A-1
U/W NOI DSCR ............................. A-3
U/W Reserves ............................. A-5
U/W Revenues ............................. A-1
Voting Rights ............................ S-109
Weighted Average Mortgage
Pass-Through Rate ........................ S-95
Workout Fee .............................. S-82
Workout Fee Rate ......................... S-82
x% ....................................... A-6
x%(y) .................................... A-6
YMP ...................................... S-115
YM(y) .................................... A-6
S-132
<PAGE>
ANNEX A
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
The schedule and tables appearing in this Annex A set forth certain
information on 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 Underwriter or any of their
respective affiliates or any other person.
For purposes of this Prospectus Supplement, including the schedule and
tables in this Annex A, the indicated terms shall have the following meanings:
1. "Underwritten NOI" or "U/W NOI" means, for any Mortgaged Property, an
estimate, made at or about the time of origination of the related Mortgage Loan
(or, in some cases, more recently based upon current financial information), of
the total cash flow anticipated to be available for annual debt service on such
Mortgage Loan, calculated as the excess of Underwritten Revenues over
Underwritten Expenses before considering any reserves or capital expenditures.
Actual conditions at the Mortgaged Properties will differ, and may differ
substantially, from the assumed conditions used in calculating Underwritten
NOI. In particular, the assumptions regarding tenant vacancies, tenant
improvements and leasing commissions, future rental rates, future expenses and
various other relevant factors, may differ substantially from actual conditions
and circumstances of any 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.
Underwritten NOI describes the cash flow available before deductions for
capital expenditures such as tenant improvements, leasing commissions and
structural reserves. In general, Underwritten NOI has been calculated without
including U/W Reserves or any other underwritten capital expenditures among
Underwritten Expenses. Had such reserves been so included, Underwritten NOI
would have been lower. Even in those cases where such U/W Reserves or any other
underwritten capital expenditures were so included, no cash may have been
actually escrowed. No representation is made as to the future operating income
of the properties, nor is the Underwritten NOI set forth in this Prospectus
Supplement with respect to any Mortgaged Property intended to represent such
future operating income.
Underwritten NOI and the Underwritten Revenues and Underwritten Expenses
used to determine Underwritten 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 Underwritten NOI for such Mortgaged Property set
forth in the following schedule or tables. In addition, Underwritten 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. "Underwritten Revenues" or "U/W Revenues" generally equals (subject to
the assumptions and adjustments specified below):
o in the case of the Multifamily Mortgaged Properties, the amount of gross
rents received during the latest full calendar year or rolling 12-month
period, or in some cases, the amount of gross rents expected to be
received during a twelve-month period, as estimated by annualizing a
current rent roll;
o in the case of the Commercial Mortgaged Properties (other than health
care related and hospitality Mortgaged Properties), annual contractual
base rents 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
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o in the case of health care and hospitality Mortgaged Properties, annual
revenues consistent with historical operating trends and market and
competitive conditions.
However, such Underwritten Revenues were generally modified to take into
account (x) the market occupancy rate, if such rate 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, (y) lender's minimum vacancy
underwriting criteria for the applicable property type, and (z) in the case of
retail, office and industrial Mortgaged Properties, an assumed level of
reimbursements from tenants consistent with the terms of the lease or
historical trends at the property. In addition, in the case of certain
Mortgaged Properties, such Underwritten Revenues were adjusted upward 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 hospitality
properties and are subject to an operating lease with a single operator,
Underwritten Revenues may have been 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).
Underwritten Revenues generally include:
o for the Multifamily Mortgaged Properties, rental and other revenues;
o for the Commercial Mortgaged Properties (other than the health care
related and hospitality Mortgaged Properties), base rent (less
mark-to-market adjustments in some cases) and, in a limited number of
cases, percentage rent, expense reimbursements and other revenues;
o for the health care related Mortgaged Properties, resident charges,
Medicaid and Medicare payments, and other revenues; and
o for the hospitality Mortgaged Properties, guest room rates, food and
beverage charges, telephone charges and other revenues.
3. "Underwritten Expenses" or "U/W Expenses" generally equal the
historical annual expenses reflected in the operating statements and other
information furnished by each Borrower, except that such expenses were often
modified as follows:
o if there was no management fee or a below market management fee,
assumed to have a management fee payable with respect to the Mortgaged
Property in an amount generally between 3% and 5% of Underwritten
Revenues; and
o adjusted so as to eliminate any capital expenditures, loan closing
costs, tenant improvements or leasing commissions.
Underwritten 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, tenant improvements or leasing
commissions, (except as described above). In the case of hospitality Mortgaged
Properties, Underwritten Expenses included such departmental expenses as guest
rooms, food and beverage, telephone bills, and rental and other expenses, and
various undistributed operating expenses such as general and administrative
expenses, costs of marketing and franchise fees. In the case of health care
related Mortgaged Properties, Underwritten 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--
o from operating statements relating to the latest reported operating
period,
o by analyzing and annualizing the amount of expenses for previous
operating periods, including any partial periods for which operating
statements were available (with certain adjustments for items deemed
inappropriate for annualization), and/or
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o by reviewing the amounts of expenses for periods prior to the latest
full calendar year where such information was available or, in the case
of a limited number of newly constructed properties, the Borrower's
projected operating budget.
4. "Underwritten Net Cash Flow", "Underwritten NCF" or "U/W NCF" means,
for any Mortgaged Property, the Underwritten NOI for such Mortgaged Property
reduced by the following items (if and to the extent that such items have not
already been netted out in calculating Underwritten NOI): U/W Reserves, FF&E,
capital expenditures, tenant improvements and leasing commissions. Underwritten
Net Cash Flow is subject to the same limitations and qualifications as
Underwritten NOI.
5. "Underwritten NOI Debt Service Coverage Ratio", "Underwritten NOI DSCR"
or "U/W NOI DSCR" means, for any Mortgage Loan, the ratio of (a) the
Underwritten NOI for the related Mortgaged Property or Properties, to (b) the
Annual Debt Service for such Mortgage Loan.
However, in the event that a Mortgage Loan is part of a
Cross-Collateralized Group for which there is no provision allowing for the
potential release of the cross-collateralization, then Underwritten NOI DSCR
means the ratio of (a) the aggregate Underwritten NOI for all of the Mortgaged
Properties related to such Cross-Collateralized Group, to (b) the aggregate
Annual Debt Service for all of the Mortgage Loans in such Cross-Collateralized
Group.
6. "Underwritten NCF Debt Service Coverage Ratio", "Underwritten NCF DSCR"
or "U/W NCF DSCR" means, with respect to any Mortgage Loan, the ratio of (a)
the Underwritten NCF for the related Mortgaged Property or Properties, to (b)
the Annual Debt Service for such Mortgage Loan.
However, in the event that a Mortgage Loan is part of a
Cross-Collateralized Group for which there is no provision allowing for the
potential release of the cross-collateralization, then Underwritten NCF DSCR
means the ratio of (a) the aggregate Underwritten NCF for all of the Mortgaged
Properties related to such Cross-Collateralized Group, to (b) the aggregate
Annual Debt Service for all of the Mortgage Loans in such Cross-Collateralized
Group.
7. "Recent Year" means, for any Mortgaged Property's historical financial
information, the period of time relating to the financial statements provided
by the Borrower for the most recently reported operating period. In most cases,
this reported operating period was calendar year 1997. In some cases, the
latest reported operating period was a rolling twelve-month period ending after
December 31, 1997 or an annualized partial year period that occurred during
1997 or 1998.
8. "Net Operating Income" or "NOI" means, for any Mortgaged Property, the
net property income derived therefrom (equal to Revenues less Expenses) for the
applicable time period that was available for debt service, as established by
information provided by the related Borrower, except that in certain cases such
net property income has been adjusted by removing certain non-recurring
expenses and revenues or by certain other normalizations. NOI does not
necessarily reflect accrual of certain costs such as reserves, 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
excluded from Expenses to reflect normalized 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 property income that may have occurred since the date
of the information provided by each Borrower for the related Mortgaged
Property. NOI was not necessarily determined in accordance with GAAP. Moreover,
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.
9. "Revenues" are the gross revenues received with respect to a Mortgaged
Property for the specified time period, as reflected in the operating
statements and other information furnished by the related Borrower. 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 related Mortgaged Properties, resident
charges, Medicaid and Medicare payments and other revenues; and (d) for the
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hospitality 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, 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.
10. "Expenses" are the operating expenses incurred for a Mortgaged
Property for the specified time period, 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, Expenses may
have included leasing commissions and tenant improvements. In the case of
hospitality Mortgaged Properties, Expenses included such departmental expenses
as guest room, food and beverage, telephone, and rental and other expenses, and
such undistributed operating expenses as costs of marketing and franchise fees.
In the case of health care Mortgaged Properties, Expenses included routine and
ancillary contractual expenses, nursing expenses, dietary expenses, laundry/
housekeeping, activities/social service expenses, equipment rental expenses and
other expenses.
11. "NOI Debt Service Coverage Ratio" or "NOI DSCR" means, for any
Mortgage Loan, the ratio of (a) the NOI for the related Mortgaged Property or
Properties for the specified 12-month time period, to (b) the Annual Debt
Service for such Mortgage Loan.
However, in the event that a Mortgage Loan is part of a
Cross-Collateralized Group, for which there is no provision allowing for the
potential release of the cross-collaterlization, then NOI DSCR means the ratio
of (a) the aggregate NOI for the specified twelve-month time period for all of
the Mortgaged Properties related to such Cross-Collateralized Group, to (b) the
aggregate Annual Debt Service for all of the Mortgage Loans in such
Cross-Collateralized Group.
12. "NCF Debt Service Coverage Ratio" or "NCF DSCR" means, for any
Mortgage Loan, the ratio of (a) the NCF for the related Mortaged Property or
Properties for the specified twelve-month time period, to (b) the Annual Debt
Service for such Mortgage Loan.
However, in the event that a Mortgage Loan is part of a
Cross-Collateralized Group for which there is no provision allowing for the
potential release of the cross-collateralization, then NCF DSCR means the ratio
of (a) the aggregate NCF for the specified twelve-month time period for all of
the Mortgaged Properties related to such Cross-Collateralized Group, to (b) the
aggregate Annual Debt Service for all of the Mortgage Loans in such
Cross-Collateralized Group.
13. "Annual Debt Service" means, for any Mortgage Loan, twelve times the
amount of the Scheduled P&I Payment due under such Mortgage Loan as of the
Cut-off Date.
14. "Appraisal Value" or "Appraised 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.
15. "Cut-off Date Loan-to-Value Ratio" or "Cut-off Date LTV Ratio" means,
for any Mortgage Loan, the ratio of (a) the Cut-off Date Balance of such
Mortgage Loan, to (b) the Appraised Value of the related Mortgaged Property.
However, in the event that a Mortgage Loan is part of a
Cross-Collateralized Group for which there is no provision allowing for the
potential release of the cross-collateralization, then Cut-off Date LTV Ratio
means the ratio of (a) the aggregate Cut-off Date Balance for all of the
Mortgage Loans in such Cross-Collateralized Group, to (b) the aggregate
Appraised Value for all of the Mortgaged Properties related to such
Cross-Collateralized Group.
16. "Maturity Date/ARD Loan-to-Value Ratio" or "Maturity Date/ARD LTV
Ratio" means, for any Balloon Loan or ARD Loan, the related Anticipated Loan
Balance at Scheduled Maturity Date/ARD, divided by the Appraisal Value of the
related Mortgaged Property.
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However, in the event that a Mortgage Loan is part of a
Cross-Collateralized Group for which there is no provision allowing for the
potential release of the cross-collateralization, then Maturity Date/ARD LTV
Ratio means the ratio of (a) the aggregate Anticipated Loan Balance at
Scheduled Maturity/ARD for all of the Mortgage Loans in such
Cross-Collateralized Group, to (b) the aggregate Appraised Value for all of the
Mortgaged Properties related to such Cross-Collateralized Group.
17. "Leasable Square Footage", "NSF" or "NRSF" 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.
18. "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 or motel, 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").
19. "SF" means, for any Commercial Mortgaged Property, square footage.
20. "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 leasable area basis; (ii) in the case of a
Multifamily Mortgaged Property, on-going reserves required to be maintained on
a per Unit basis; (iii) in the case of a Mortgaged Property operated as a hotel
or motel 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.
21. "Occupancy %" or "Occupancy Percent" means, for any Mortgaged
Property, the percentage of Leasable Square Footage or Total
Units/Rooms/Beds/Pads, as the case may be, at such property that was occupied
as of a specified date (as indicated by the related Borrower or as derived from
the rent rolls), based upon physical presence or, alternatively, collected
rents as a percentage of potential rental revenues.
22. "Administrative Fee Rate" means, for any Mortgage Loan, the sum of the
Master Servicing Fee Rate (including the per annum rate at which the monthly
sub-servicing fee is payable to any related Sub-Servicer (the "Sub-Servicing
Fee Rate")), plus the per annum rate applicable to the calculation of the
Trustee Fee.
23. "Related Loans" means two or more Mortgage Loans for 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.
24. "Anticipated Loan Balance at Scheduled Maturity Date/ARD" means, for
any Mortgage Loan, the balance that would be due at maturity or, in the case of
an ARD Loan, at the related Anticipated Repayment Date, pursuant to the payment
schedule for such Mortgage Loan, after taking into account the principal amount
expected to be received from the final Scheduled P&I Payment and assuming no
prepayments, defaults or extensions.
25. "UPB" means, with respect to any Mortgage Loan, its unpaid principal
balance.
26. "Hyperamortizing" means an ARD Loan.
27. "Fully Amortizing" means a Fully Amortizing Loan.
28. "Balloon" means a Balloon Loan.
29. "Scheduled Maturity Date/ARD" or "Maturity/ARD" means, for any
Mortgage Loan, the date specified in the related Mortgage Note as its stated
maturity date or, for any ARD Loan, its Anticipated Repayment Date.
30. The "Prepayment Provisions" for each Mortgage Loan are described as
follows: "LO(y)" means the original duration of the Lock-out Period is y months;
"Defeasance(y)" means the
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original duration of the defeasance period is y months; "Grtr x% UPB or YM(y)"
means, for an original period of y months, the relevant Prepayment Premium will
equal the greater of the applicable yield maintenance charge and x% of the
principal amount prepaid; "YM(y)" means, for an original period of y months,
the relevant Prepayment Premium will equal the yield maintenance charge
(calculated as described in either clause 31 or 32 below); "Free(y)" means the
Mortgage Loan is freely prepayable for a period of y months; and "x%(y)" means,
for an original period of y months, the relevant Prepayment Premium will equal
"x%" of the principal amount prepaid.
31. Prepayment Premiums for Mortgage Loans with yield maintenance of type
"Present Value" are generally equal to (A) the product obtained by multiplying
(i) the ratio of (a) the amount of principal being prepaid to (b) the principal
balance outstanding assuming no prepayments have been made), times (ii) the
present value as of the prepayment date of the remaining scheduled payments of
principal and interest from the prepayment date through the maturity date or
Anticipated Repayment Date (including any Balloon Payment) determined by
discounting such payments at the Monthly Discount Rate, less (B) the amount of
principal being prepaid. The term "Monthly Discount Rate" means the rate which,
when compounded monthly, is equivalent to the "Discount Rate" as defined in
this Prospectus Supplement.
32. Prepayment Premiums for Mortgage Loans with yield maintenance of type
"Interest Differential" are generally equal to the product obtained by
multiplying (a) the amount of principal being prepaid, times (b) the difference
obtained by subtracting from the Mortgage Rate the Discount Rate, times (c) the
present value factor calculated using the following formula:
(1 - (1+r)-n)
- -------------
r
where:
r = Discount Rate
n = the number of years, and any fraction thereof, remaining between the
prepayment date and the maturity date or Anticipated Repayment Date, as
applicable.
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<TABLE>
<CAPTION>
CONTROL LOAN PROPERTY MORTGAGE
NUMBER NUMBER NUMBER SELLER PROPERTY NAME
<S> <C> <C> <C> <C>
S001 101 SBRC 515 22nd Street NW
S002 103 SBRC Master Realty Portfolio
S003 103 103A SBRC Ramada Inn DFW/West
S004 103 103B SBRC Historic Suites of America Hotel
S005 103 103C SBRC Ramada Inn Downtown
S006 103 103D SBRC Soho VI
S007 103 103E SBRC River Market
S008 104 SBRC Ocean City Factory Outlets
S009 107 SBRC Waterford Wedgwood Facility
S010 108 SBRC Victorville Towne Center
S011 109 SBRC University Park Towers
S012 111 SBRC Woodland Apartments
S013 114 SBRC Meadows at Hickory Lake Apartments
S014 115 SBRC 200 Valley Road - Mt. Arlington Corporate Center
S015 116 SBRC Park Oaks Shopping Ctr.
S016 118 SBRC Gardens at Hickory Lake Apartments
S017 120 SBRC Edmonston Crossing
S018 122 SBRC Summer Place Apartments
S019 124 SBRC HTW Portfolio
S020 124 124A SBRC Waverly Plaza
S021 124 124B SBRC Walmart Center
S022 124 124C SBRC East Hills Mall
S023 125 SBRC Linens 'N Things Retail Building
S024 126 SBRC The Deer Cross Apartments
S025 127 SBRC Susse Chalet Hotel
S026 129 SBRC Woodhaven Apartments
S027 130 SBRC Fallfax Commercial Center
S028 131 SBRC Best Western Adams Inn
S029 132 SBRC Bethesda East Office Center
S030 133 SBRC Comfort Inn - Sea Tac
S031 134 SBRC Times Square Shopping Center
S032 135 SBRC Comfort Inn-Marietta
S033 136 SBRC Hacienda Del Sol
S034 138 SBRC Premier Cruise Lines
S035 139 SBRC 100 Valley Road - Mount Arlington Corporate Center
S036 141 SBRC Sierra Center Portfolio
S037 141 141A SBRC Woodland Court
S038 141 141B SBRC East Towne Plaza
S039 142 SBRC Sherwood Mesa Shopping Center
S040 143 SBRC Forest Hills Center
S041 144 SBRC Talbott Shopping Center
S042 145 SBRC Sunrise Plaza Shopping Center
S043 146 SBRC Park Central Apartments
S044 147 SBRC New Kent Crossing Shopping Center
S045 148 SBRC Evergreen Marketplace
S046 151 SBRC Shoppes of Killian
S047 152 SBRC Days Inn of Orlando
S048 153 SBRC 10 Victor Square
S049 154 SBRC The Cosmopolitan
S050 155 SBRC Arbors at Hickory Lake
S051 156 SBRC Cochran Avenue Apartments
S052 159 SBRC Garden Ridge Apartments
S053 160 SBRC Clermont Shopping Center
S054 161 SBRC Alamosa Plaza Commercial Retail & Office Center
S055 163 SBRC Hampton Inn-Aiken, SC
S056 165 SBRC Mount Vernon Centre
S057 166 SBRC Federal Express Facility
S058 172 SBRC Summit Bank Plaza
S059 174 SBRC Deerwood I Apartments
S060 175 SBRC Maple Springs Medical Center
S061 176 SBRC Winding Creek Apartment
S062 177 SBRC Shoney's Inn of Augusta
S063 178 SBRC Winona Quality Inn
S064 179 SBRC Camilla Marketplace
S065 181 SBRC 80 Evergreen Avenue
S066 182 SBRC Park Street Office Building
S067 183 SBRC The Mode Building
S068 184 SBRC Food Lion Grocery Store
S069 185 SBRC East Hill Carriage Square Shopping Center
S070 187 SBRC Colonial Specialties Building
S071 188 SBRC Education America Building
S072 189 SBRC Westwood Apartments
S073 190 SBRC Park Plaza Mall
S074 192 SBRC Bennett Apartments/Edgepark Apartments Portfolio
S075 192 192A SBRC Bennett Apartments
S076 192 192B SBRC Edgepark Apartments
S077 193 SBRC Town Square Shopping Center
S078 194 SBRC Roy West Shopping Center
S079 195 SBRC Eastgate Garden Apartments
S080 196 SBRC Willowgrove Apartments/Lin-Nor Apartments Portfolio
S081 196 196A SBRC Willowgrove Apartments
S082 196 196B SBRC Lin-Nor Apartments
S083 198 SBRC Powder Mill Station Shopping Center
S084 199 SBRC Paradise Plaza Shopping Center
S085 200 SBRC Tropicana Topaz Shopping Center
S086 201 SBRC Northchase Professional Park Building One
S087 202 SBRC 20 Crooke Avenue
S088 204 SBRC Nevada Bob's Plaza
S089 206 SBRC Watertower Office Building
S090 207 SBRC University of Phoenix
S091 209 SBRC Casa Linda Apartments
S092 210 SBRC Blockbuster Video Store
S093 211 SBRC 3804-3808 North Wilson Boulevard
S094 212 SBRC Fort Washington Office Center
S095 214 SBRC The Amigos Del Sol Apartments
S096 215 SBRC Lakeside Apartments
S097 216 SBRC Deerwood II Apartments
S098 218 SBRC 214 West 30th Street
S099 219 SBRC Art-Deco Supermarket
S100 222 SBRC Sandy Pointe Shopping Center
S101 224 SBRC Island Plaza Shopping Center
S102 225 SBRC 909 Park Avenue
S103 226 SBRC 647 9th Avenue
S104 227 SBRC 5775 Bridge Street
S105 229 SBRC Oak Shadows Mobile Home Park
S106 231 SBRC Shirley 395 Business Center
S107 232 SBRC Oyster Bay Plaza
S108 247 SBRC Kennedy Space Center Days Inn
S109 251 SBRC Best Western Gateway Inn
S110 252 SBRC El Paseo Village
S111 253 SBRC Lee Gardens Apartments
S112 254 SBRC Hollywood Bldgs. 1,2,3,4A&B, 5A&B
S113 255 SBRC Dixie Business Center
S114 256 SBRC I-95 Building
S115 257 SBRC Parkwood Tract
S116 258 SBRC Building V
S117 259 SBRC Buildings "S", "T", and "U"
S118 260 SBRC Buildings "E", "F", "G"
S119 262 SBRC Alvin Center
S120 268 SBRC Jamestown Square I and II Apartments
S121 271 SBRC Jackson/Sherwood Apts. & Thackery Ave. Apts.
S122 275 SBRC Highland Office Building
S123 277 SBRC Apple Villa Apartments
S124 278 SBRC Fountaingrove Medical Office Building (Cancer Center)
S125 279 SBRC College Square Apartments
S126 280 SBRC Racanelli Portfolio I
S127 280 280A SBRC 15 Rasons Court
S128 280 280B SBRC 33 Ranick Road
S129 280 280C SBRC 26 Ranick Road
S130 281 SBRC Racanelli Portfolio II
S131 281 281A SBRC 290 Spagnoli Road
S132 281 281B SBRC 90 Nicon Court
S133 281 281C SBRC 780 Park Avenue
S134 281 281D SBRC 300 Spagnoli Road
S135 282 SBRC Shrewsbury Commons Shopping Center
S136 283 SBRC American Foundation for Biological Research Bldg.
S137 290 SBRC 59th Avenue and Thunderbird Road
S138 291 SBRC Canton-Central Bank Shopping Center
S139 292 SBRC Oceanside Caldor/Gold Coast Plaza & Swan Nursery Commons Portfolio
S140 292 292A SBRC Oceanside Caldor/Gold Coast Plaza
S141 292 292B SBRC Swan Nursery Commons
S142 293 SBRC 558 Broadway
S143 294 SBRC 183-02 through 183-14 Horace Harding Expressway
S144 295 SBRC 90 Saint Andrews Place
S145 297 SBRC Hunter Office Building
S146 301 SBRC 385 Franklin Avenue
S147 303 SBRC Expressway Building
S148 499 SBRC Kranzco Portfolio
S149 499 499A SBRC Douglasville Crossing
S150 499 499B SBRC Snellville Oaks
S151 499 499C SBRC Tifton Corners
S152 499 499D SBRC Village Oaks
S153 499 499E SBRC Statler Crossing
S154 499 499F SBRC Pickaway Crossing
S155 499 499G SBRC Vidalia Walmart
S156 499 499H SBRC Meeting Square
S157 499 499I SBRC Summerville Center
C001 6000202 332 CREI Elwye Center
C002 6000239 380 CREI Flinthills Mall
C003 6000244 387 CREI 67 Mason Street
C004 6000245 388 CREI 116 Post Road
C005 6110108 874 CREI Bank One Office Building
C006 6110118 885 CREI 1601 N. 39th Street
C007 6110122 890 CREI Royal Manor Apts.
C008 6201397 3047 CREI Eastpointe Plaza
C009 6201572 3222 CREI Comfort Inn - Clinton
C010 6202047 3698 CREI Fairfield Inn - Layton
C011 6202220 4673 CREI Cineplex Odeon Theater
C012 6202465 4117 CREI Washington Heights Apartments
C013 6202480 4132 CREI Park Villa Apartments
C014 6202484 4136 CREI Chesapeake Yachting Center
C015 6202649 4300 CREI Tower Park Bldgs. 100 and 200
C016 6202658 4706 CREI Richman Gordman 1/2 Price Stores
C017 6202701 4709 CREI Savers Plaza
C018 6202747 4398 CREI 383 Route 46 West
C019 6202752 4403 CREI Brookside Mobile Home Park
C020 6202753 4404 CREI Menlo Park Office Center
C021 6202821 CREI University Plaza/Winding River Plaza Portfolio
C022 6202821 4472 CREI University Plaza
C023 6202821 4473 CREI Winding River Plaza
C024 6202836 4487 CREI Lakeover Offices
C025 6202837 4488 CREI Business Park Offices (200 Business Park)
C026 6600048 974 CREI Crown Professional Building
C027 6600056 987 CREI Southwind Village Center
C028 6600060 992 CREI Hampton Inn-Bossier,LA
C029 6600061 993 CREI Elmtree Townhouse Apartments
C030 6600066 998 CREI Eagleview Apartments
C031 6600131 1071 CREI Larchmont Village
C032 6600135 1078 CREI Health Net Building
C033 6600163 1116 CREI Holiday Inn-Murfreesboro
C034 6600164 1117 CREI Brookwood Apartments
C035 6600165 1119 CREI Arbor Park Apartments
C036 6600175 1129 CREI Sunharbor Manor Nursing Home
C037 6600180 1135 CREI River Ridge At Hulen
C038 6600184 1141 CREI Bardin Square Shopping Center
C039 6600186 1142 CREI Country Day Plaza Shopping Center
C040 6600210 1170 CREI Circle K Mobile Home Park
C041 6600220 1186 CREI Starlite Plaza
C042 6600224 1197 CREI Comfort Suites - Jacksonville
C043 6600225 1198 CREI Holiday Inn Express-Lexington
C044 6600232 1205 CREI Sands Harbor Hotel & Marina
C045 6600262 1242 CREI Amberley Suites Hotel
C046 6600264 1245 CREI Granada Suites Hotel
C047 6600266 1246 CREI Inn at the Peachtrees Hotel
C048 6600267 1247 CREI Canal Winchester Medical Center
C049 6600270 1250 CREI Westbourne Morrison Limited
C050 6600286 1269 CREI Marengo Village Apartments
C051 6600287 1268 CREI Harvard Square Apartments
C052 6600295 1280 CREI Wyndwood Apartments
C053 6600315 1305 CREI York & Parks Retail Building
C054 6600331 1323 CREI Marina Park Hotel
C055 6600332 1324 CREI Market Square Office Building
C056 6600337 1329 CREI The Reynolds Building
C057 6600350 1338 CREI Metro Mobile Home Park
C058 6600356 1346 CREI San Marcos Crossroads
C059 6600364 1358 CREI Executive Plaza
C060 6600374 1368 CREI Days Inn- Hollywood, FL
C061 6600397 4737 CREI Fountainbleau Storage & Apts
C062 6600413 4752 CREI Marvin D. Love Office Building
C063 6600416 4755 CREI Jackson Place Apartments
C064 6600422 4765 CREI Best Western Mirage
C065 6600423 4766 CREI Holiday Inn Hotel - Trinidad
C066 6600457 4820 CREI Days Inn - Richmond, IN
C067 6600471 4831 CREI Hampton Inn-Grand Rapids
C068 6600481 4841 CREI Hampton Inn-Saginaw
C069 6600507 4878 CREI Howard Johnson-Cincinnati
C070 6600529 5041 CREI Lakeside Plaza
C071 6600599 5117 CREI Greencrest Mobile Home Park
C072 6600610 5132 CREI Shannon Tower Office Building
C073 6600667 5207 CREI Blue Star Storage
C074 6600683 5234 CREI Westminster Executive Plaza-LAM Portfolio
C075 6600689 5240 CREI Harbor Gateway Garden
C076 6600690 5254 CREI Nexus Garden Plaza
C077 6600701 5269 CREI Ramada Inn-Plant City
C078 6600702 5076 CREI Thunderbird Plaza
C079 6600708 5070 CREI 2401 Research Building
C080 6600709 5082 CREI 2301 Research Building
C081 6600723 5286 CREI 10605 Concord Street
C082 6600725 5288 CREI Country View Apartments
C083 6600756 5328 CREI Skyline Village MHP
C084 6600787 5367 CREI Quadrant Multi-Use Center
C085 6600789 5368 CREI Prospect Pointe East
C086 6600796 CREI Distribution Portfolio
C087 6600796 5375 CREI Distribution II
C088 6600796 5377 CREI Transdistribution - WV
C089 6600817 5396 CREI Econolite
C090 6600853 5433 CREI Sun River Professional Plaza
C091 6600870 5452 CREI CS Hotels
C092 6600912 376 CREI 168 Canal
C093 6600914 385 CREI 300 Rosewood Drive
C094 6600915 386 CREI 35 Otis Street
C095 6600917 403 CREI 850 Boylston Street
C096 6600950 5530 CREI Best Western Metro Inn
C097 6601050 CREI Day Care Centers Portfolio
C098 6601050 5641 CREI Ashburn Farms II
C099 6601050 5642 CREI Fair Lakes II
C100 6601050 5646 CREI Centreville Green
C101 6601050 5647 CREI McNair Farms
C102 6601050 5648 CREI South Riding
C103 6601050 5649 CREI Sully Station I
C104 6601050 5650 CREI Centre Ridge
C105 6601050 5661 CREI Cascades
C106 6601050 5699 CREI Fair Lakes I
C107 6601060 5667 CREI Courtyard by Marriott-Jackson
C108 6601061 5666 CREI Courtyard by Marriott-Germantown
C109 6601062 5668 CREI Hampton Inn & Suites-Jackson
C110 6601063 5669 CREI Courtyard by Marriott-Tupelo
C111 6601064 5670 CREI Holiday Inn-Muscatine
C112 6601080 5691 CREI Levinson Plaza
C113 6601139 5757 CREI BV Hollywood Storage Facility
C114 6601152 5774 CREI Fairfax Village Shopping Center
C115 6601288 5919 CREI PK Products Industrial Building
C116 6601371 6013 CREI Sunny Hills Business Park
C117 6601372 6012 CREI Cerritos Professional Center
C118 6601641 5147 CREI Stoffel Seals-GA
C119 6601642 4065 CREI Stoffel Seals-NY
C120 6602318 7114 CREI Parcfront Apartments
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PROPERTY ADDRESS CITY STATE ZIP CODE PROPERTY TYPE
<S> <C> <C> <C> <C>
515 22nd Street NW Washington DC 20037 Office
2155 West Airport Freeway Euless TX 76040 Hotel
612 Central Avenue Kansas City MO 64105 Hotel
401 North 1st Street Phoenix AZ 85004 Hotel
700-712 Broadway Kansas City MO 64105 Mixed Use
302-314, 412-416, 309-313, 502, 509, 512 Kansas City MO 64105 Mixed Use
Delaware St. & 500-508 Walnut/15-23 East 5th St.
12741 Ocean Gateway / N/s of route 50 West Ocean City MD 21842 Anchored Retail
1330 Campus Parkway Wall Township NJ 07719 Industrial
12351-12353 Mariposa Road Victorville CA 92392 Anchored Retail
2261 Sherman Circle South Miramar FL 33025 Multi-family
1201 Centre Road Wilmington DE 19805 Multi-family
2400 Old Concord Road Smyrna GA 30082 Multi-family
200 Valley Road Mount Arlington NJ 07856 Office
2407 West Airport Freeway Irving TX 75062 Anchored Retail
2400 Old Concord Road Smyrna GA 30082 Multi-family
1010-1020 Rockville Pike Rockville MD 20852 Office/Retail
101 Summer Place Drive Merritt Island FL 32953 Multi-family
East Side Emmitt Avenue Waverly OH 45690 Anchored Retail
512-520 North Webster Street Taylorville IL 62568 Anchored Retail
5278 Irvin Road Huntington WV 25705 Anchored Retail
1475 - 11th Ave Northwest Issaquah WA 98027 Retail
3000 South First Street Lufkin TX 75901 Multi-family
371 George Washington Boulevard Smithfield RI 02917 Hotel
1903-145 Woodhaven Circle Rockledge FL 32955 Multi-family
7630-7648 Lee Highway & 2822-2830 Fallfax Drive Falls Church VA 22042 Mixed Use
29 Hancock Street Quincy MA 02171 Hotel
4405 East-West Highway Bethesda MD 20814 Office
19333 Pacific Hwy. South Seattle WA 98188 Hotel
4012, 4016 & 4020 S. Rainbow Blvd. & 6820 W. Flamingo Road Las Vegas NV 89103 Anchored Retail
700 Pike Street Marietta OH 45750 Hotel
644 Alvarado Avenue Davis CA 95616 Multi-family
400 Challenger Road Cape Canaveral FL 32920 Office
100 Valley Road Mount Arlington NJ 07856 Office
3921-3953 South 76th Street Milwaukee WI 53220 Retail
1414-1438 East Brady Street Milwaukee WI 53202 Anchored Retail
1107-1161 East Main Street Mesa AZ 85204 Retail
63-27/35 108th Street Forest Hills NY 11375 Anchored Retail
1043-1099 Rockville Pike Rockville MD 20852 Retail
31070-31188 Cortez Boulevard Brooksville FL 34602 Anchored Retail
5702 50th Street Lubbock TX 79414 Multi-family
2581 - 2597 New Kent Highway Bottoms Bridge VA 23141 Anchored Retail
30790,30810 & 30901 Stagecoach Boulevard Evergreen CO 80439 Retail
10834 S.W. 104th Street Miami FL 33176 Retail
2425 Frontage Road Davenport FL 33837 Hotel
10 Victor Square Scotts Valley CA 95066 Industrial
145 East 48th Street New York NY 10017 Multi-family
2400 Old Concord Road Smyrna GA 30082 Multi-family
342-346 South Cochran Avenue Los Angeles CA 90036 Multi-family
6517 Melody Lane Dallas TX 75231 Multi-family
721-791 East State Road 50 Clermont FL 34711 Anchored Retail
2929 & 2949 East Desert Inn Road Las Vegas NV 89121 Office/Retail
100 Tamil Drive Aiken SC 29803 Hotel
521-545 Saint Paul Place Baltimore MD 21202 Office
18115 South Main Street Carson CA 90746 Industrial
213 Summerhill Road East Brunswick NJ 08816 Office/Retail
100 Champions Drive Lufkin TX 75901 Multi-family
10810 Darnestown Road Gaithersburg MD 20878 Office
5071 Ooltewah-Ringgold Road Collegedale (Ooltewah) TN 37363 Multi-family
3023 Washington Road Augusta GA 30907 Hotel
956 Mankato Avenue Winona MN 55987 Hotel
129 U.S Highway 19 North Camilla GA 31730 Anchored Retail
80 Evergreen Avenue Brooklyn NY 11206 Industrial
115 Park Street, S.E. Vienna VA 22180 Office
802 West Idaho Street Boise ID 83707 Mixed Use
300 Henslee Drive (Highway 70 Bypass) Dickson TN 37055 Anchored Retail
10211 S.E. 256th Street Kent WA 98032 Retail
9390 South 300 West Sandy UT 84070 Industrial
300 East Loop 820 Fort Worth TX 76112 Office
2 East Regal Street Murray UT 84107 Multi-family
400 10th Street Southeast Jamestown ND 58401 Anchored Retail
20-30 East Morris Street Buffalo NY 14214 Multi-family
1016 Amherst Street Buffalo NY 14216 Multi-family
372-450 East 12300 South Draper UT 84020 Retail
3500 West 4800 South Roy UT 84067 Retail
474 Old State Route 74 Mt. Carmel OH 45244 Multi-family
223 Elmwood Avenue Buffalo NY 14222 Multi-family
1-19 Linwood Avenue Buffalo NY 14209 Multi-family
11101 Baltimore Avenue Beltsville MD 20705 Retail
4080 Paradise Road Las Vegas NV 89109 Retail
2554 East Tropicana Avenue Las Vegas NV 89121 Retail
400 Professional Park Drive Goodlettsville TN 37072 Office
20 Crooke Avenue Brooklyn NY 11226 Multi-family
7303 East Main Street Mesa AZ 85207 Retail
6198 Butler Pike Blue Bell PA 19422 Office
5340 McNutt Road Santa Teresa NM 88008 Office
5750 North Fresno Street Fresno CA 93711 Multi-family
870 West Williams Avenue Fallon NV 89406 Retail
3804-3808 North Wilson Boulevard Arlington VA 22203 Retail
260 New York Drive Upper Dublin PA 19034 Office
10009 Rushing Drive El Paso TX 79901 Multi-family
112 S. Little Flower Road El Paso TX 79915 Multi-family
100 Temple Blvd. Lufkin TX 75901 Multi-family
214 West 30th Street New York NY 10001 Mixed Use
1431-1435 Washington Ave. Miami Beach FL 33139 Retail
7800 South and 700 East Sandy UT 84070 Retail
848-862 Long Island Ave. Deer Park NY 11729 Retail
909 Park Avenue Plainfield NJ 07060 Multi-family
647 9th Avenue New York NY 10036 Retail
5775 Bridge Street Dewitt NY 13057 Industrial
1330 Calaveritas Road San Andreas CA 95249 Mobile Home Park
2575-2615 Shirlington Road Arlington VA 22206 Industrial
4201-4207 Kitsap Way Bremerton WA 98312 Anchored Retail
3755 Cheney Highway Titusville FL 32780 Hotel
2585 Seaboard Avenue San Jose CA 95131 Hotel
73405-73445 El Paseo Drive Palm Desert CA 92260 Retail
16, 18, and 20 Israel Zupnik Drive Monroe NY 10905 Multi-family
3835-4011 Pembroke Rd. Hollywood FL 33009 Industrial
2044, 2046-2048 McKinley Street Hollywood FL 33009 Industrial
2000 S.W.30th Avenue Pembroke Park FL 33009 Industrial
3101 S.W. 25th Street Pembroke Park FL 33009 Industrial
1899-1911 S.W. 31st Avenue Pembroke Park FL 33009 Industrial
1817-1855 S.W. 31st Avenue Pembroke Park FL 33009 Industrial
1975-1985 South Park Road & 1804 SW 31st Avenue Pembroke Park FL 33009 Industrial
2477-2491 Alvin Avenue San Jose CA 95121 Retail
1263-1380 Eldorado Street Boise ID 83704 Multi-family
2683-2760 Jackson Avenue N.W. & 2871-2883 Thackery Avenue Canton, Jackson Township OH 44750 Multi-family
5 Catamore Boulevard East Providence RI 02914 Office
1705 State Highway 37 Blountville TN 37620 Multi-family
3555 Round Barn Circle Santa Rosa CA 95403 Office
2829-2847 Combs Lane and 3001-3056 Clinchview Drive Morristown TN 37814 Multi-family
15 Rasons Court Hauppauge NY 11788 Industrial
33 Ranick Road Hauppauge NY 11788 Industrial
26 Ranick Road Hauppauge NY 11788 Industrial
290 Spagnoli Road Melville NY 11747 Industrial
90 Nicon Court Hauppauge NY 11788 Industrial
780 Park Avenue Huntington NY 11743 Industrial
300 Spagnoli Road Mellville NY 11747 Industrial
Forrest Avenue East and Mount Airy Road Shrewsbury Township PA 17361 Anchored Retail
12111 Parklawn Drive Rockville MD 20852 Office
5890 & 5894 West Thunderbird Road Glendale AZ 85306 Retail
16800 N.W. 67th Avenue Miami FL 33015 Retail
3544-3600 Long Beach Road Oceanside NY 11572 Anchored Retail
655 Montauk Highway East Patchogue NY 11712 Anchored Retail
558 Broadway New York NY 10012 Retail
183-02 through 183-14 Horace Harding Expressway Fresh Meadows NY 11365 Retail
90 Saint Andrews Place Yonkers NY 10705 Multi-family
11495 Sunset Hills Road Reston VA 22090 Office
385 Franklin Avenue Rockaway NJ 07866 Industrial
91-31 Queens Boulevard Elmhurst NY 11373 Office
5983 Stewart Parkway Douglasville GA 30135 Anchored Retail
2135 East Main Street Snellville GA 30278 Anchored Retail
121 S. Virginia Avenue Tifton GA 31794 Anchored Retail
6241-51 N. Davis Highway Pensacola FL 32504 Anchored Retail
851 Statler Boulevard Staunton VA 24401 Anchored Retail
23625 U.S. Route 23 Circleville OH 43113 Anchored Retail
2305 Lyons Highway Vidalia GA 30474 Anchored Retail
1200 S. Russell Street Jefferson City TN 32504 Anchored Retail
14 Trion Road Summerville GA 30747 Anchored Retail
234 Fraley Boulevard Dumfries VA 22026 Office
18th and Industrial Road Emporia KS 66801 Anchored Retail
67 Mason Street Greenwich CT 06830 Office
112-118 Boston Post Road Orange CT 06477 Anchored Retail
1001 E. Southmore Pasadena TX 77502 Office
1601 N. 39th Street Tampa FL 33629 Industrial
1519 50th Street Seattle WA 98105 Multi-family
I-79 & U.S. Route 50 Clarksburg WV 26301 Anchored Retail
NE side of I-26, NW of SC Highway 56 Clinton SC 29325 Hotel
1740 North 1200 West Layton UT 94041 Hotel
1620 75th Street Downer's Grove IL 60516 Retail
168 Washington Street Bloomfield NJ 07003 Multi-family
1800 E. 38th Street Savannah GA 31401 Multi-family
400 Wagner Lane and Frog Mortar Creek Essex MD 21220 Other
131 & 201 Tower Park Dr. Waterloo IA 50702 Office
2590 Hubbell Ave Des Moines IA 50317 Retail
3517-3553 West Bell Road Phoenix AZ 85023 Anchored Retail
383 Route 46 West Fairfield NJ 07004 Office
Porto Road Catskill NY 12414 Mobile Home Park
1000 El Camino Real Menlo Park CA 94025 Office
90-116 Flock Road Hamilton Township NJ 08619 Retail
309 Main Street Sayerville NJ 08872 Retail
101 Business Park Drive Jackson MS 39213 Office
101 Business Park Drive Jackson MS 39213 Office
3662 Katella Avenue Los Alamitos CA 90720 Office
3195 Players Club Parkway Memphis TN 38138 Office
1005 Gould Drive Bossier City LA 71111 Hotel
Route 11 & Elmtree Drive Martinsburg WV 25401 Multi-family
1803 Prairie Road Colorado Springs CO 80909 Multi-family
206-226 N. Larchmont Blvds. Los Angeles CA 90004 Anchored Retail
20151 Nordhoff Street Chatsworth CA 91311 Industrial
2227 Old Fort Parkway Murfreesboro TN 37129 Hotel
5310 26th Street West Bradenton FL 34207 Multi-family
309 Southwest 16th Avenue Gainesville FL 32601 Multi-family
255 Warner Avenue Roslyn Heights NY 11577 Health Care
4920 Overton Ridge Blvd. Fort Worth TX 76132 Retail
130 Bardin Road Arlington TX 76018 Retail
5512 Bellaire Drive South Fort Worth TX 76109 Retail
827 West Valley Highway Kent WA 98032 Mobile Home Park
1812 Pulaski Highway Edgewood MD 21040 Retail
130 Workshop Lane Jacksonville NC 28546 Hotel
131 Innkeeper Drive Lexington SC 29072 Hotel
125 Riverside Drive Pompano Beach FL 33062 Mixed Use
5885 Oakbrook Parkway Norcross GA 30093 Hotel
1302 West Peachtree Street Atlanta GA 30309 Hotel
330 W. Peachtree Street Atlanta GA 30308 Hotel
6441 Winchester Square Blvd Canal Winchester OH 43110 Office
5656-5676 Westbourne Ave Columbus OH 43213 Industrial
Briden Dr. and Johnson St. Marengo IL 60152 Multi-family
201-205 W. Harrison Avenue Harvard IL 60033 Multi-family
55 Regina Drive East Windsor CT 06088 Multi-family
9709 York Road Cockeysville MD 21030 Retail
340 Biscayne Boulevard Miami FL 33132 Hotel
305 Harrison St. Leesburg VA 20175 Office
788 Shrewsbury Avenue Tinton Falls NJ 07724 Office
103 Moonachie Avenue Moonachie NJ 07074 Mobile Home Park
204-218 San Marcos Boulevard San Marcos CA 92069 Retail
10001 Lake Forest Blvd. New Orleans LA 70127 Office
2601 North 29th Avenue Hollywood FL 33020 Hotel
4040 Tulane Avenue at South Carrollton Avenue New Orleans LA 70119 Mixed Use
725 Marvin D. Love Freeway Dallas TX 75237 Office
Hospital Road Commerce GA 30529 Multi-family
5005 34th Street North St. Petersburg FL 33714 Hotel
9995 County Road 69 Trinidad CO 81082 Hotel
540 West Eaton Pike Richmond IN 47374 Hotel
4981 28th Street Grand Rapids MI 49512 Hotel
2222 Tittabawassee Saginaw MI 48604 Hotel
5410 Ridge Avenue Cincinnati OH 45213 Hotel
23120 Alicia Parkway Mission Viejo CA 92692 Office
541 W. 15th Avenue Escondido CA 92025 Mobile Home Park
4405 Mall Boulevard Union City GA 30291 Office
17613 Coit Road Dallas TX 75252 Industrial
13950 Milton Ave Westminster CA 92683 Office
19401 South vermont Ave. Torrance CA 90502 Industrial
2112 E. 4th Street Santa Ana CA 92705 Office
2011 Wheeler Street Plant City FL 33566 Hotel
2701-2721 South Collage Avenue Fort Collins CO 80525 Anchored Retail
2401 Research Building Fort Collins CO 80526 Office
2301 Research Building Fort Collins CO 80536 Office
10605 Concord Street Kensington MD 20895 Office
4164 St. Elmo Avenue Memphis TN 38128 Multi-family
1700 Swanson Drive Rock Springs WY 82901 Mobile Home Park
1421 N. Lee Trevino Drive El Paso TX 79936 Office
401 Curtis Road Savoy IL 61874 Multi-family
711 Distribution Drive Columbus OH 43228 Industrial
5300 Rosemar Road Parkersburg WV 26101 Industrial
3360 La Palma Avenue Anaheim CA 92806 Industrial
720 South Riverside Drive St. George UT 84790 Office
1746 Ocean Avenue Santa Monica CA 90401 Mixed Use
168-180 Canal Street Boston MA 02114 Office
300 Rosewood Drive Danvers MA 02923 Office
35 Otis Street Westborough MA 01581 Industrial
850 Boylston Street Brookline MA 02167 Office
99 Spring St. Nashville TN 37207 Hotel
43323 Rail Stop Terrace Ashburn VA 20147 Retail
4750 Rippling Pond Drive Fairfax VA 22033 Retail
13501 Braddock Road Centreville VA 22024 Retail
2487 McNair Farm Drive Herndon VA 20171 Retail
25400 S. Riding Boulevard South Riding VA 20152 Retail
5801 Stone Creek Drive Centreville VA 20120 Retail
6210 Multiplex Drive Centreville VA 22020 Retail
20655 Fernbank Court Sterling VA 20165 Retail
4401 Roger Stover Drive Fairfax VA 22033 Retail
6280 Ridgewood Court Jackson MS 39211 Hotel
7750 Wolf River Blvd. Germantown TN 38139 Hotel
320 Greymont Avenue Jackson MS 39201 Hotel
1320 North Gloster Street Tupelo MS 38801 Hotel
2915 North Highway 61 Muscatine IA 52761 Hotel
2 Lincoln Highway (Rt.# 27) Edison NJ 08840 Office
6372 Santa Monica Blvd. Los Angeles (Hollywood) CA 90038 Industrial
3827-3850 Pennsylvania Avenue, SE Washington DC 20020 Retail
2000 Fox Lane Elgin IL 60123 Industrial
211-285 E. Imperial Hwy Fullerton CA 92835 Mixed Use
10900 E. 183rd Street Cerritos CA 90701 Office
One Stoffel Road/GA. 100 Tallapoosa GA 30176 Industrial
400 High Avenue Nyack NY 10960 Industrial
245-275 Union Blvd. St. Louis MO 63108 Multi-family
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NET
RENTABLE
SQUARE
PROPERTY UNIT FEET YEAR OCCUPANCY OCCUPANCY AS
PROPERTY SIZE TYPE (NRSF) YEAR BUILT RENOVATED PERCENTAGE OF DATE
<S> <C> <C> <C> <C> <C> <C>
125,000 Sq Ft 102,080 1941 1985 100% 04/01/98
147 Rooms 69,038 1973 1994 88% 04/30/98
100 Rooms 62,585 1889 1987 - 1989 64% 04/30/98
162 Rooms 94,200 1955 1992 & 1995 63% 04/30/98
47,174 Sq Ft 47,174 1900 - 1902 1989 91% 10/31/98
207,768 Sq Ft 207,768 1890 - 1900 1990 91% 12/31/97
191,248 Sq Ft 191,248 1995 1996 100% 08/28/98
292,806 Sq Ft 292,806 1988 1996 100% 09/29/97
202,747 Sq Ft 202,747 1991 89% 05/06/98
290 Units 305,016 1990 97% 04/14/98
261 Units 156,570 1950 95% 02/28/98
344 Units 329,400 1968 1994 89% 03/25/98
85,787 Sq Ft 85,787 1989 100% 02/12/98
107,819 Sq Ft 107,819 1981 94% 03/12/98
272 Units 262,025 1966 & 1967 1993 94% 03/25/98
53,759 Sq Ft 53,742 1964 & 1983 1983 100% 07/08/98
152 Units 153,969 1988 99% 03/31/98
55,102 Sq Ft 55,102 1979 100% 05/05/98
43,127 Sq Ft 43,127 1982 100% 05/05/98
149,505 Sq Ft 142,055 1974 96% 05/05/98
37,379 Sq Ft 32,779 1997 100% 05/29/98
168 Units 124,332 1986 1990 96% 12/25/97
117 Rooms 28,412 1988 65% 08/07/97
152 Units 146,680 1989 90% 03/31/98
34,901 Sq Ft 34,901 1950 1989 & 1994 - 1996 98% 12/11/98
100 Rooms 29,675 1963 1994 - 1996 79% 06/30/98
61,660 Sq Ft 56,724 1958 1971 & 1988 100% 06/01/98
120 Rooms 50,631 1987 1996 82% 07/01/97
57,550 Sq Ft 57,550 1977 - 1979 100% 05/01/98
121 Rooms 1975 1997 52% 12/31/97
100 Units 86,440 1975 1997 93% 06/01/98
68,470 Sq Ft 68,470 1989 1996 96% 12/31/97
43,522 Sq Ft 43,522 1989 100% 04/14/98
34,155 Sq Ft 33,899 1967 1994 100% 12/31/97
24,251 Sq Ft 24,251 1986 100% 12/31/97
79,975 Sq Ft 79,795 1955 1987 93% 03/17/98
16,000 Sq Ft 16,000 1950 1997 100% 06/04/98
35,720 Sq Ft 35,720 1964 1985 89% 04/01/98
86,753 Sq Ft 86,730 1991 93% 10/01/98
189 Units 141,812 1977 1995 80% 03/25/98
52,883 Sq Ft 49,000 1996 100% 12/31/97
29,645 Sq Ft 29,645 1996 100% 03/21/98
35,780 Sq Ft 35,780 1988 100% 06/01/98
122 Rooms 41,180 1987 67% 11/06/96
39,605 Sq Ft 39,605 1981 100% 04/09/98
16 Units 9,040 1987 100% 01/01/98
110 Units 102,900 1972 - 1973 1991 94% 03/25/98
39 Units 36,510 1991 100% 12/31/97
170 Units 136,306 1970 1996 - 1997 95% 03/31/98
44,120 Sq Ft 43,920 1973 & 1974 1997 100% 03/31/98
46,400 Sq Ft 46,400 1985 100% 06/01/98
66 Rooms 36,475 1995 72% 12/31/97
56,200 Sq Ft 47,216 1920 1997 100% 01/17/98
46,500 Sq Ft 41,235 1988 100% 01/12/98
18,016 Sq Ft 18,016 1992, 1994 & 1997 100% 12/31/97
120 Units 90,696 1981 1994 94% 08/28/98
17,000 Sq Ft 13,070 1991 - 1994 100% 03/31/98
50 Units 53,800 1997 96% 05/31/98
120 Rooms 54,751 1974 1994 66% 12/31/97
112 Rooms 71,568 1965 - 1967 1996 - 1997 64% 06/30/97
40,482 Sq Ft 40,482 1990 100% 06/01/98
91,000 Sq Ft 87,000 1964 100% 09/19/97
18,270 Sq Ft 18,270 1986 100% 01/31/98
45,695 Sq Ft 39,607 1909 1994 79% 07/03/98
29,000 Sq Ft 29,000 1992 100% 06/18/97
58,128 Sq Ft 55,668 1971 94% 01/01/98
37,331 Sq Ft 37,331 1997 100% 04/25/98
34,017 Sq Ft 34,017 1988 1998 100% 05/01/98
64 Units 60,800 1964 - 1967 1994 - 1997 95% 06/16/98
81,750 Sq Ft 74,554 1963 1986 - 1991 94% 05/28/98
49 Units 45,994 1940 98% 06/01/98
33 Units 31,960 1942 97% 06/01/98
21,164 Sq Ft 21,164 1994 & 1995 100% 02/10/98
17,670 Sq Ft 17,670 1996 100% 12/31/97
60 Units 55,368 1966 1995, 1996 & 1997 97% 04/29/98
30 Units 20,148 1910 97% 06/01/98
66 Units 45,340 1929 98% 06/01/98
12,000 Sq Ft 11,527 1989 100% 12/31/97
16,209 Sq Ft 16,209 1985 100% 05/01/98
26,582 Sq Ft 26,582 1977 & 1978 92% 05/01/98
15,000 Sq Ft 14,416 1997 100% 10/09/97
53 Units 55,500 1937 1995 100% 05/25/98
20,518 Sq Ft 20,518 1990 100% 03/31/98
24,000 Sq Ft 22,888 1968 1985 97% 06/17/98
13,200 Sq Ft 13,200 1998 100% 01/02/98
41 Units 34,718 1977 98% 05/12/98
7,500 Sq Ft 7,500 1996 100% 02/01/97
9,416 Sq Ft 9,416 1960 1988 - 1989 100% 01/15/98
23,947 Sq Ft 22,555 1968 & 1970 1996 93% 05/11/98
52 Units 43,520 1971 94% 12/31/97
64 Units 39,648 1964 91% 12/31/97
60 Units 52,900 1974 1992 85% 08/28/98
21,763 Sq Ft 19,319 1927 100% 06/10/97
12,350 Sq Ft 9,656 1928 100% 05/31/98
9,175 Sq Ft 9,175 1988 100% 02/17/98
7,440 Sq Ft 7,440 1996 100% 12/03/97
23 Units 22,700 1937 1995 & 1996 100% 03/31/98
3,920 Sq Ft 3,920 1907 100% 10/10/97
28,100 Sq Ft 26,300 1952 & 1962 100% 01/01/98
105 Pads 1977 97% 11/30/97
112,708 Sq Ft 112,352 1961 100% 10/01/98
56,104 Sq Ft 56,104 1972 1998 100% 02/02/98
150 Rooms 46,206 1973 1993 - 1995 & 1997 37% 03/31/98
146 Rooms 61,319 1975 1991 82% 10/31/97
35,604 Sq Ft 35,604 1980 91% 03/12/98
51 Units 51,600 1985 100% 03/03/98
161,075 Sq Ft 161,075 1988 - 1990 100% 10/01/98
59,361 Sq Ft 59,361 1990 100% 10/01/98
33,500 Sq Ft 33,500 1969 1979 100% 10/01/98
28,671 Sq Ft 28,671 1988 100% 10/01/98
47,790 Sq Ft 47,790 1971 - 1987 100% 10/01/98
56,846 Sq Ft 56,846 1986 96% 10/01/98
48,207 Sq Ft 48,207 1974 100% 10/01/98
10,650 Sq Ft 10,650 1989 100% 02/01/98
58 Units 48,683 1983 - 1985 98% 04/30/98
50 Units 50,042 1968 - 1969 96% 05/01/98
14,230 Sq Ft 14,230 1983 100% 05/20/98
109 Units 101,000 1997 95% 06/23/98
24,160 Sq Ft 24,160 1995 100% 06/06/98
62 Units 55,120 1987 - 1994 98% 07/13/98
60,000 Sq Ft 60,000 1969 100% 02/01/98
40,060 Sq Ft 40,060 1973 100% 12/31/97
30,000 Sq Ft 30,000 1969 100% 12/31/97
145,600 Sq Ft 145,600 1974 100% 12/31/97
82,835 Sq Ft 82,835 1973 100% 12/31/97
97,940 Sq Ft 97,940 1972 100% 12/31/97
47,015 Sq Ft 47,015 1974 100% 12/31/97
217,904 Sq Ft 217,792 1997 100% 05/14/98
30,000 Sq Ft 30,000 1969 100% 05/22/98
8,285 Sq Ft 8,285 1986 1997 100% 03/11/98
20,915 Sq Ft 20,447 1982 100% 05/27/98
415,102
293,308 Sq Ft 293,308 1974 & 1991 1992 99% 06/08/98
121,794 Sq Ft 121,794 1989 77% 06/08/98
20,360 Sq Ft 16,000 1900 1994 100% 02/06/98
10,080 Sq Ft 10,000 1950 100% 11/10/97
13 Units 10,450 1927 100% 06/10/98
38,605 Sq Ft 38,605 1979 1996 - 1997 100% 07/22/98
79,700 Sq Ft 79,550 1990 100% 07/15/98
85,815 Sq Ft 85,815 1963 96% 08/01/98
267,800 Sq Ft 267,800 1990 100% 08/01/98
220,885 Sq Ft 220,885 1991 97% 08/01/98
186,629 Sq Ft 186,629 1987 1995 100% 08/01/98
171,653 Sq Ft 171,653 1987 1993 100% 08/01/98
166,944 Sq Ft 166,944 1989 97% 08/01/98
127,130 Sq Ft 127,130 1990 96% 08/01/98
97,096 Sq Ft 97,096 1985 1993 100% 08/01/98
92,968 Sq Ft 92,968 1984 100% 08/01/98
67,809 Sq Ft 67,809 1984 1992 100% 08/01/98
38,146 Sq Ft 38,146 1987 100% 07/23/98
250,197 Sq Ft 250,197 1974 1983 95% 04/01/98
11,056 Sq Ft 11,056 1981 100% 01/01/98
31,867 Sq Ft 31,867 1985 1988 100% 02/27/98
88,930 Sq Ft 88,930 1963 1977 88% 04/27/98
449,334 Sq Ft 449,334 1950 100% 05/28/98
50 Units 8,088 1987 96% 05/28/98
311,667 Sq Ft 311,667 1985 99% 05/14/98
83 Units 30,035 1988 1994 58% 04/30/98
78 Units 1996 86% 04/30/98
38,022 Sq Ft 38,022 1986 100% 01/15/98
96 Units 1963 97% 05/20/98
148 Units 112,320 1950 1992 89% 06/01/98
8,802 Sq Ft 8,802 1991 1991 70% 02/03/98
104,920 Sq Ft 104,920 1995 100% 02/01/98
90,579 Sq Ft 90,579 1971 100% 03/11/98
93,234 Sq Ft 93,234 1980 95% 04/30/98
34,000 Sq Ft 34,000 1975 1985 87% 02/01/98
142 Units 1964 1992 99% 05/31/98
37,702 Sq Ft 37,702 1982 93% 02/01/98
23,378 Sq Ft 23,378 1978 1990 100% 06/01/98
7,714 Sq Ft 7,714 1996 100% 06/01/98
74,863 Sq Ft 74,863 1988 99% 03/19/98
87,343 Sq Ft 87,343 1988 94% 06/03/98
22,165 Sq Ft 22,165 1976 90% 06/15/98
61,251 Sq Ft 61,251 1988 1995 100% 07/08/98
124 Units 1995 77% 12/31/97
66 Units 72,786 1986 100% 02/28/98
65 Units 55,940 1968 97% 04/16/98
16,105 Sq Ft 16,105 1987 100% 06/05/98
73,702 Sq Ft 73,702 1966 1993 100% 04/09/98
179 Units 1973 1987 73% 12/31/97
173 Units 1972 1998 97% 04/10/98
202 Units 209,473 1968 1998 99% 06/01/98
266 Units 103,164 1974 100% 06/29/98
42,924 Sq Ft 42,924 1986 91% 05/20/98
18,311 Sq Ft 18,311 1985 95% 03/01/98
15,387 Sq Ft 15,387 1984 98% 05/01/98
95 Units 1962 100% 02/01/98
51,370 Sq Ft 51,370 1988 1991 99% 06/08/98
72 Units 37,620 1996 77% 12/31/97
74 Units 1996 63% 11/05/97
58 Units 15,745 1966 95% 06/01/98
177 Units 79,208 1985 1994 63% 01/27/98
103 Units 55,325 1924 1991 69% 12/31/97
110 Units 35,500 1953 1995 62% 12/31/97
10,884 Sq Ft 10,884 1997 100% 06/08/98
155,168 Sq Ft 155,168 1997 92% 08/31/98
56 Units 42,432 1983 95% 05/07/98
24 Units 18,048 1983 92% 04/13/98
180 Units 160,900 1987 96% 04/29/98
6,050 Sq Ft 6,050 1987 100% 04/16/98
200 Units 127,739 1952 1989 69% 12/31/97
19,788 Sq Ft 19,788 1988 100% 03/12/98
47,342 Sq Ft 47,342 1978 1980 100% 05/21/98
234 Units 1946 88% 04/13/98
22,801 Sq Ft 22,801 1989 100% 04/13/98
112,878 Sq Ft 112,878 1974 97% 06/05/98
114 Units 59,216 1988 1996 91% 12/31/97
177,000 Sq Ft 177,000 1956 1994 95% 05/01/98
28,916 Sq Ft 28,916 1983 87% 04/30/98
50 Units 48,925 1997 96% 05/15/98
176 Units 87,712 1967 1993 48% 04/17/98
113 Units 53,402 1980 1987 71% 12/31/97
95 Units 30,264 1973 1996 54% 12/31/97
120 Units 1987 75% 11/30/97
120 Units 50,103 1991 69% 12/30/97
120 Units 62,800 1980 68% 03/31/98
22,637 Sq Ft 22,637 1990 100% 04/24/98
130 Units 1948 96% 06/01/98
37,712 Sq Ft 37,712 1974 90% 04/16/98
63,045 Sq Ft 63,045 1996 93% 06/01/98
36,891 Sq Ft 36,891 1987 85% 03/01/98
85,745 Sq Ft 85,745 1979 82% 03/01/98
31,004 Sq Ft 31,004 1972 100% 04/10/98
261 Units 168,767 1968 1987 48% 12/31/97
98,097 Sq Ft 98,097 1979 98% 08/01/98
18,675 Sq Ft 18,675 1988 100% 03/31/98
22,729 Sq Ft 22,729 1987 80% 03/31/98
55,665 Sq Ft 55,665 1969 1997 91% 08/01/98
335 Units 279,044 1986 85% 06/05/98
305 Units 1972 69% 04/08/98
102,275 Sq Ft 102,275 1983 96% 06/04/98
92 Units 96,930 1997 88% 06/11/98
208,800 Sq Ft 208,800 1965 100% 10/13/98
385,000 Sq Ft 385,000 1992 1994 100% 10/13/98
144,000 Sq Ft 144,000 1962 100% 06/01/98
49,994 Sq Ft 49,994 1998 100% 08/04/98
65,833 Sq Ft 65,833 1998 100% 05/16/98
32,412 Sq Ft 32,412 1900 1985 95% 07/31/98
80,158 Sq Ft 80,158 1987 100% 07/31/98
121,700 Sq Ft 121,700 1987 100% 07/31/98
139,303 Sq Ft 139,303 1972 1995 100% 07/22/98
147 Units 1974 65% 12/31/97
6,323 Sq Ft 6,323 1996 100% 04/01/98
6,323 Sq Ft 6,323 1992 100% 04/01/98
6,323 Sq Ft 6,323 1991 100% 04/01/98
6,323 Sq Ft 6,323 1995 100% 04/01/98
6,323 Sq Ft 6,323 1997 100% 04/01/98
6,323 Sq Ft 6,323 1997 100% 04/01/98
6,323 Sq Ft 6,323 1993 100% 04/01/98
6,323 Sq Ft 6,323 1996 100% 04/01/98
6,323 Sq Ft 6,323 1990 100% 04/01/98
117 Units 66,375 1995 80% 05/21/98
93 Units 48,180 1997 68% 12/31/97
111 Units 1996 71% 06/30/98
93 Units 48,180 1997 62% 02/28/98
112 Units 62,354 1978 58% 12/28/97
54,831 Sq Ft 54,831 1985 96% 08/01/98
92,250 Sq Ft 92,250 1922 100% 09/22/98
21,070 Sq Ft 21,070 1941 1994 87% 06/01/98
141,284 Sq Ft 141,284 1991 100% 09/02/98
172,628 Sq Ft 172,628 1980 95% 09/25/98
67,017 Sq Ft 67,017 1982 98% 08/31/98
144,900 Sq Ft 144,900 1977 1985 100% 06/04/98
40,242 Sq Ft 40,242 1970 100% 06/04/98
319 Units 1924 97% 07/31/98
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NET INTEREST
ORIGINAL MORTGAGE ADMINISTRATIVE SUB-SERVICING MORTGAGE ACCRUAL
BALANCE RATE FEE RATE FEE RATE RATE RATE TYPE METHOD
<S> <C> <C> <C> <C> <C> <C>
21,530,000.00 6.8100% 0.0638% 0.0800% 6.6662% Fixed Actual/360
19,675,000.00 7.5000% 0.0638% 0.0800% 7.3562% Fixed Actual/360
16,106,693.00 7.1500% 0.0638% 0.0800% 7.0062% Fixed 30/360
11,000,000.00 7.5100% 0.0638% 0.0800% 7.3662% Fixed 30/360
10,400,000.00 7.2800% 0.0638% 0.0800% 7.1362% Fixed Actual/360
9,750,000.00 7.5600% 0.0638% 0.0800% 7.4162% Fixed Actual/360
7,550,000.00 7.2000% 0.0638% 0.0800% 7.0562% Fixed Actual/360
6,896,980.00 9.8500% 0.0638% 0.0800% 9.7062% Fixed 30/360
6,865,926.98 8.2900% 0.0638% 0.0800% 8.1462% Fixed 30/360
6,000,000.00 8.6250% 0.0638% 0.0800% 8.4812% Fixed 30/360
5,317,950.00 9.8500% 0.0638% 0.0800% 9.7062% Fixed 30/360
5,010,000.00 10.0000% 0.0638% 0.0800% 9.8562% Fixed 30/360
4,900,000.00 7.2500% 0.0638% 0.0800% 7.1062% Fixed Actual/360
4,765,000.00 9.1250% 0.0638% 0.0800% 8.9812% Fixed 30/360
4,750,000.00 7.5000% 0.0638% 0.0800% 7.3562% Fixed 30/360
4,725,000.00 7.7500% 0.0638% 0.0800% 7.6062% Fixed Actual/360
4,500,000.00 8.3400% 0.0638% 0.0800% 8.1962% Fixed 30/360
4,400,000.00 7.5000% 0.0638% 0.0800% 7.3562% Fixed Actual/360
4,300,000.00 7.3750% 0.0638% 0.0800% 7.2312% Fixed Actual/360
4,200,000.00 7.8750% 0.0638% 0.0800% 7.7312% Fixed Actual/360
4,100,000.00 7.7000% 0.0638% 0.0800% 7.5562% Fixed Actual/360
4,000,000.00 8.0500% 0.0638% 0.0800% 7.9062% Fixed 30/360
3,900,000.00 7.7500% 0.0638% 0.0800% 7.6062% Fixed 30/360
3,800,000.00 7.8000% 0.0638% 0.0800% 7.6562% Fixed Actual/360
3,700,000.00 7.8100% 0.0638% 0.0800% 7.6662% Fixed 30/360
3,500,000.00 8.0000% 0.0638% 0.0800% 7.8562% Fixed 30/360
3,450,000.00 8.0600% 0.0638% 0.0800% 7.9162% Fixed 30/360
3,300,000.00 8.0000% 0.0638% 0.0800% 7.8562% Fixed 30/360
3,200,000.00 9.1250% 0.0638% 0.0800% 8.9812% Fixed 30/360
3,200,000.00 7.0000% 0.0638% 0.0800% 6.8562% Fixed Actual/360
3,165,000.00 9.8750% 0.0638% 0.0800% 9.7312% Fixed 30/360
3,150,000.00 8.5000% 0.0638% 0.0800% 8.3562% Fixed 30/360
3,100,000.00 8.1250% 0.0638% 0.0800% 7.9812% Fixed 30/360
3,070,000.00 8.6250% 0.0638% 0.0800% 8.4812% Fixed 30/360
3,000,000.00 8.5500% 0.0638% 0.0800% 8.4062% Fixed 30/360
2,750,000.00 9.2500% 0.0638% 0.0800% 9.1062% Fixed 30/360
2,750,000.00 9.1250% 0.0638% 0.0800% 8.9812% Fixed 30/360
2,700,000.00 7.8800% 0.0638% 0.0800% 7.7362% Fixed Actual/360
2,670,000.00 7.2500% 0.0638% 0.0800% 7.1062% Fixed 30/360
2,545,600.00 9.8500% 0.0638% 0.0800% 9.7062% Fixed 30/360
2,504,000.00 7.6100% 0.0638% 0.0800% 7.4662% Fixed 30/360
2,500,000.00 7.1500% 0.0638% 0.0800% 7.0062% Fixed Actual/360
2,500,000.00 8.7500% 0.0638% 0.0800% 8.6062% Fixed 30/360
2,500,000.00 8.6250% 0.0638% 0.0800% 8.4812% Fixed 30/360
2,430,000.00 8.5000% 0.0638% 0.0800% 8.3562% Fixed 30/360
2,400,000.00 8.6300% 0.0638% 0.0800% 8.4862% Fixed Actual/360
2,260,000.00 7.2500% 0.0638% 0.0800% 7.1062% Fixed Actual/360
2,100,000.00 8.0000% 0.0638% 0.0800% 7.8562% Fixed 30/360
1,967,000.00 7.8100% 0.0638% 0.0800% 7.6662% Fixed 30/360
1,910,000.00 7.6250% 0.0638% 0.0800% 7.4812% Fixed 30/360
1,900,000.00 7.6250% 0.0638% 0.0800% 7.4812% Fixed 30/360
1,850,000.00 8.2800% 0.0638% 0.0800% 8.1362% Fixed 30/360
1,800,000.00 8.6250% 0.0638% 0.0800% 8.4812% Fixed 30/360
1,800,000.00 7.1250% 0.0638% 0.0800% 6.9812% Fixed 30/360
1,750,000.00 8.2100% 0.0638% 0.0800% 8.0662% Fixed 30/360
1,740,000.00 7.2500% 0.0638% 0.0800% 7.1062% Fixed Actual/360
1,650,000.00 8.8750% 0.0638% 0.0800% 8.7312% Fixed 30/360
1,650,000.00 7.8750% 0.0638% 0.0800% 7.7312% Fixed 30/360
1,650,000.00 9.0000% 0.0638% 0.0800% 8.8562% Fixed 30/360
1,600,000.00 7.6250% 0.0638% 0.0800% 7.4812% Fixed 30/360
2,567,136.25 8.0600% 0.0638% 0.0800% 7.9162% Fixed Actual/360
1,500,000.00 7.6250% 0.0638% 0.0800% 7.4812% Fixed Actual/360
1,500,000.00 7.8750% 0.0638% 0.0800% 7.7312% Fixed 30/360
1,485,000.00 8.7500% 0.0638% 0.0800% 8.6062% Fixed 30/360
1,450,000.00 8.8750% 0.0638% 0.0800% 8.7312% Fixed 30/360
1,411,000.00 9.0000% 0.0638% 0.0800% 8.8562% Fixed 30/360
1,400,000.00 7.6500% 0.0638% 0.0800% 7.5062% Fixed 30/360
1,385,000.00 8.8000% 0.0638% 0.0800% 8.6562% Fixed 30/360
1,325,000.00 8.1600% 0.0638% 0.0800% 8.0162% Fixed Actual/360
1,325,000.00 9.2500% 0.0638% 0.0800% 9.1062% Fixed 30/360
1,300,000.00 8.6500% 0.0638% 0.0800% 8.5062% Fixed 30/360
1,300,000.00 7.6250% 0.0638% 0.0800% 7.4812% Fixed 30/360
1,300,000.00 8.0200% 0.0638% 0.0800% 7.8762% Fixed 30/360
1,225,000.00 9.1500% 0.0638% 0.0800% 9.0062% Fixed 30/360
1,144,000.00 8.3600% 0.0638% 0.0800% 8.2162% Fixed 30/360
1,125,000.00 7.3750% 0.0638% 0.0800% 7.2312% Fixed Actual/360
1,100,000.00 7.2500% 0.0638% 0.0800% 7.1062% Fixed Actual/360
1,100,000.00 9.0000% 0.0638% 0.0800% 8.8562% Fixed 30/360
1,100,000.00 7.3750% 0.0638% 0.0800% 7.2312% Fixed Actual/360
1,100,000.00 8.3700% 0.0638% 0.0800% 8.2262% Fixed 30/360
1,027,500.00 8.7500% 0.0638% 0.0800% 8.6062% Fixed 30/360
1,000,000.00 9.0000% 0.0638% 0.0800% 8.8562% Fixed 30/360
983,000.00 7.8100% 0.0638% 0.0800% 7.6662% Fixed 30/360
970,000.00 8.6500% 0.0638% 0.0800% 8.5062% Fixed 30/360
825,000.00 9.2500% 0.0638% 0.0800% 9.1062% Fixed 30/360
790,000.00 8.8750% 0.0638% 0.0800% 8.7312% Fixed 30/360
630,000.00 8.8100% 0.0638% 0.0800% 8.6662% Fixed 30/360
582,000.00 8.5900% 0.0638% 0.0800% 8.4462% Fixed 30/360
365,000.00 8.5300% 0.0638% 0.0800% 8.3862% Fixed 30/360
285,000.00 8.7300% 0.0638% 0.0800% 8.5862% Fixed 30/360
2,500,000.00 6.9800% 0.0638% 0.0800% 6.8362% Fixed 30/360
6,407,939.00 7.2500% 0.0638% 0.0800% 7.1062% Fixed Actual/360
3,050,000.00 7.2500% 0.0638% 0.0800% 7.1062% Fixed Actual/360
1,700,000.00 8.2500% 0.0638% 0.0800% 8.1062% Fixed Actual/360
8,000,000.00 7.4700% 0.0638% 0.0800% 7.3262% Fixed Actual/360
4,000,000.00 7.2970% 0.0638% 0.0800% 7.1532% Fixed Actual/360
1,726,000.00 7.3100% 0.0638% 0.0800% 7.1662% Fixed Actual/360
5,545,200.00 8.1250% 0.0638% 0.0800% 7.9812% Fixed 30/360
2,206,400.00 8.1250% 0.0638% 0.0800% 7.9812% Fixed 30/360
902,400.00 8.1250% 0.0638% 0.0800% 7.9812% Fixed 30/360
917,600.00 8.1250% 0.0638% 0.0800% 7.9812% Fixed 30/360
1,230,400.00 8.1250% 0.0638% 0.0800% 7.9812% Fixed 30/360
1,600,400.00 8.1250% 0.0638% 0.0800% 7.9812% Fixed 30/360
1,548,800.00 8.1250% 0.0638% 0.0800% 7.9812% Fixed 30/360
1,410,000.00 7.6250% 0.0638% 0.0800% 7.4812% Fixed Actual/360
1,875,000.00 7.1250% 0.0638% 0.0800% 6.9812% Fixed Actual/360
1,240,000.00 7.3000% 0.0638% 0.0800% 7.1562% Fixed Actual/360
950,000.00 7.5000% 0.0638% 0.0800% 7.3562% Fixed Actual/360
3,700,000.00 7.2500% 0.0638% 0.0800% 7.1062% Fixed Actual/360
3,100,000.00 7.5000% 0.0638% 0.0800% 7.3562% Fixed Actual/360
1,750,000.00 7.2500% 0.0638% 0.0800% 7.1062% Fixed Actual/360
3,975,000.00 7.6250% 0.0638% 0.0800% 7.4812% Fixed 30/360
12,975,000.00 7.6250% 0.0638% 0.0800% 7.4812% Fixed 30/360
17,500,000.00 7.2000% 0.0638% 0.0800% 7.0562% Fixed Actual/360
1,420,000.00 7.3750% 0.0638% 0.0800% 7.2312% Fixed Actual/360
1,170,000.00 7.6250% 0.0638% 0.0800% 7.4812% Fixed Actual/360
1,750,000.00 7.6250% 0.0638% 0.0800% 7.4812% Fixed Actual/360
49,000,000.00 7.1200% 0.0638% 0.0800% 6.9762% Fixed Actual/360
2,100,000.00 7.4270% 0.0638% 0.0800% 7.2832% Fixed Actual/360
1,275,000.00 7.7770% 0.0638% 0.0800% 7.6332% Fixed Actual/360
430,000.00 8.5090% 0.0638% 0.0800% 8.3652% Fixed Actual/360
1,500,000.00 7.5000% 0.0638% 0.0800% 7.3562% Fixed Actual/360
3,365,000.00 7.0600% 0.0638% 0.0800% 6.9162% Fixed Actual/360
7,000,000.00 6.8530% 0.0638% 0.0800% 6.7092% Fixed Actual/360
65,900,000.00 7.0000% 0.0638% 0.0800% 6.8562% Fixed Actual/360
2,250,000.00 7.4400% 0.0638% 0.1250% 7.2512% Fixed Actual/360
4,350,000.00 7.4500% 0.0638% 0.1250% 7.2612% Fixed Actual/360
925,000.00 7.4700% 0.0638% 0.0800% 7.3262% Fixed Actual/360
4,000,000.00 7.4300% 0.0638% 0.0800% 7.2862% Fixed Actual/360
2,000,000.00 7.5500% 0.0638% 0.1250% 7.3612% Fixed Actual/360
3,500,000.00 7.0300% 0.0638% 0.0800% 6.8862% Fixed Actual/360
1,400,000.00 7.0000% 0.0638% 0.1250% 6.8112% Fixed Actual/360
6,200,000.00 7.5600% 0.0638% 0.1250% 7.3712% Fixed Actual/360
1,800,000.00 7.8800% 0.0638% 0.0800% 7.7362% Fixed Actual/360
2,800,000.00 7.6100% 0.0638% 0.0800% 7.4662% Fixed Actual/360
2,200,000.00 7.1800% 0.0638% 0.1250% 6.9912% Fixed Actual/360
2,800,000.00 7.2200% 0.0638% 0.1250% 7.0312% Fixed Actual/360
2,000,000.00 7.4600% 0.0638% 0.0800% 7.3162% Fixed Actual/360
2,015,000.00 7.7000% 0.0638% 0.1250% 7.5112% Fixed Actual/360
7,500,000.00 7.3800% 0.0638% 0.1250% 7.1912% Fixed Actual/360
1,225,000.00 7.6200% 0.0638% 0.0900% 7.4662% Fixed Actual/360
3,800,000.00 7.5000% 0.0638% 0.1250% 7.3112% Fixed Actual/360
1,700,000.00 7.5600% 0.0638% 0.0800% 7.4162% Fixed Actual/360
1,375,000.00 7.2100% 0.0638% 0.0800% 7.0662% Fixed Actual/360
8,140,000.00 7.1000% 0.0638% 0.0800% 6.9562% Fixed Actual/360
2,625,000.00 7.4600% 0.0638% 0.1250% 7.2712% Fixed Actual/360
4,300,000.00 7.4200% 0.0638% 0.0800% 7.2762% Fixed Actual/360
4,400,000.00 7.2300% 0.0638% 0.0800% 7.0862% Fixed Actual/360
1,200,000.00 7.3000% 0.0638% 0.1250% 7.1112% Fixed Actual/360
4,000,000.00 7.4700% 0.0638% 0.0800% 7.3262% Fixed Actual/360
5,700,000.00 7.5500% 0.0638% 0.0800% 7.4062% Fixed Actual/360
2,570,000.00 7.2100% 0.0638% 0.1250% 7.0212% Fixed Actual/360
1,900,000.00 7.1900% 0.0638% 0.1250% 7.0012% Fixed Actual/360
2,550,000.00 6.9300% 0.0638% 0.0800% 6.7862% Fixed Actual/360
2,400,000.00 6.9000% 0.0638% 0.0800% 6.7562% Fixed Actual/360
5,200,000.00 7.4600% 0.0638% 0.0800% 7.3162% Fixed Actual/360
3,920,000.00 7.3300% 0.0638% 0.0800% 7.1862% Fixed Actual/360
4,800,000.00 7.2200% 0.0638% 0.1000% 7.0562% Fixed Actual/360
2,800,000.00 7.6100% 0.0638% 0.1250% 7.4212% Fixed Actual/360
3,350,000.00 7.4000% 0.0638% 0.1250% 7.2112% Fixed 30/360
1,050,000.00 7.2000% 0.0638% 0.1250% 7.0112% Fixed 30/360
760,000.00 7.2000% 0.0638% 0.1250% 7.0112% Fixed 30/360
1,850,000.00 7.2700% 0.0638% 0.1250% 7.0812% Fixed Actual/360
2,000,000.00 7.6500% 0.0638% 0.1250% 7.4612% Fixed Actual/360
3,800,000.00 7.4200% 0.0638% 0.0800% 7.2762% Fixed Actual/360
3,000,000.00 7.4500% 0.0638% 0.0800% 7.3062% Fixed Actual/360
4,000,000.00 7.8900% 0.0638% 0.1250% 7.7012% Fixed Actual/360
4,800,000.00 7.3400% 0.0638% 0.0800% 7.1962% Fixed Actual/360
5,200,000.00 7.2900% 0.0638% 0.0800% 7.1462% Fixed Actual/360
3,700,000.00 7.3400% 0.0638% 0.0800% 7.1962% Fixed Actual/360
1,000,000.00 7.5100% 0.0638% 0.1250% 7.3212% Fixed Actual/360
4,150,000.00 7.0800% 0.0638% 0.0850% 6.9312% Fixed Actual/360
2,350,000.00 7.3900% 0.0638% 0.1250% 7.2012% Fixed Actual/360
945,000.00 7.3900% 0.0638% 0.1250% 7.2012% Fixed Actual/360
7,000,000.00 7.0100% 0.0638% 0.0800% 6.8662% Fixed Actual/360
1,100,000.00 7.2900% 0.0638% 0.1250% 7.1012% Fixed Actual/360
5,750,000.00 7.4000% 0.0638% 0.1250% 7.2112% Fixed Actual/360
1,450,000.00 7.5100% 0.0638% 0.1250% 7.3212% Fixed Actual/360
4,000,000.00 7.4800% 0.0638% 0.0800% 7.3362% Fixed Actual/360
4,635,000.00 7.3800% 0.0638% 0.1250% 7.1912% Fixed Actual/360
2,300,000.00 7.3700% 0.0638% 0.0900% 7.2162% Fixed Actual/360
2,943,750.00 7.4600% 0.0638% 0.1250% 7.2712% Fixed 30/360
6,225,000.00 7.3400% 0.0638% 0.0500% 7.2262% Fixed Actual/360
5,150,000.00 6.9000% 0.0638% 0.1250% 6.7112% Fixed Actual/360
1,100,000.00 7.4900% 0.0638% 0.1250% 7.3012% Fixed Actual/360
1,800,000.00 7.2900% 0.0638% 0.0800% 7.1462% Fixed Actual/360
2,250,000.00 7.5600% 0.0638% 0.1000% 7.3962% Fixed Actual/360
3,700,000.00 7.4400% 0.0638% 0.0800% 7.2962% Fixed Actual/360
1,488,000.00 7.7500% 0.0638% 0.1250% 7.5612% Fixed Actual/360
5,500,000.00 7.4500% 0.0638% 0.0800% 7.3062% Fixed Actual/360
4,500,000.00 7.5100% 0.0638% 0.0800% 7.3662% Fixed Actual/360
2,700,000.00 7.4100% 0.0638% 0.0800% 7.2662% Fixed Actual/360
2,300,000.00 7.3500% 0.0638% 0.1250% 7.1612% Fixed Actual/360
2,400,000.00 7.0700% 0.0638% 0.0800% 6.9262% Fixed Actual/360
1,150,000.00 7.5200% 0.0638% 0.0800% 7.3762% Fixed Actual/360
2,500,000.00 7.2700% 0.0638% 0.1250% 7.0812% Fixed Actual/360
2,890,000.00 7.5400% 0.0638% 0.1250% 7.3512% Fixed Actual/360
3,120,000.00 7.5900% 0.0638% 0.1250% 7.4012% Fixed Actual/360
1,912,500.00 7.5400% 0.0638% 0.1250% 7.3512% Fixed Actual/360
3,400,000.00 7.4500% 0.0638% 0.0800% 7.3062% Fixed Actual/360
2,475,000.00 7.0400% 0.0638% 0.0900% 6.8862% Fixed Actual/360
1,156,500.00 7.0400% 0.0638% 0.0900% 6.8862% Fixed Actual/360
1,133,000.00 7.0400% 0.0638% 0.0900% 6.8862% Fixed Actual/360
3,750,000.00 7.2400% 0.0638% 0.0800% 7.0962% Fixed Actual/360
5,000,000.00 6.9800% 0.0638% 0.0800% 6.8362% Fixed Actual/360
1,285,000.00 7.6500% 0.0638% 0.1250% 7.4612% Fixed Actual/360
2,850,000.00 7.4800% 0.0638% 0.0800% 7.3362% Fixed Actual/360
4,500,000.00 6.8400% 0.0638% 0.1250% 6.6512% Fixed Actual/360
7,575,000.00 7.9000% 0.0638% 0.0800% 7.7562% Fixed Actual/360
5,000,000.00 7.1800% 0.0638% 0.1250% 6.9912% Fixed Actual/360
4,100,000.00 7.1100% 0.0638% 0.1250% 6.9212% Fixed Actual/360
6,325,000.00 6.8700% 0.0638% 0.0800% 6.7262% Fixed Actual/360
4,000,000.00 7.2300% 0.0638% 0.0800% 7.0862% Fixed Actual/360
5,000,000.00 7.1800% 0.0638% 0.0800% 7.0362% Fixed Actual/360
3,700,000.00 7.1500% 0.0638% 0.0800% 7.0062% Fixed Actual/360
14,000,000.00 7.2300% 0.0638% 0.0800% 7.0862% Fixed Actual/360
2,000,000.00 7.9000% 0.0638% 0.0800% 7.7562% Fixed Actual/360
7,800,000.03 7.1500% 0.0638% 0.1250% 6.9612% Fixed Actual/360
6,850,000.00 7.3100% 0.0638% 0.0800% 7.1662% Fixed Actual/360
5,400,000.00 7.3100% 0.0638% 0.0800% 7.1662% Fixed Actual/360
6,100,000.00 7.3100% 0.0638% 0.0800% 7.1662% Fixed Actual/360
4,650,000.00 7.3100% 0.0638% 0.0800% 7.1662% Fixed Actual/360
3,000,000.00 7.5800% 0.0638% 0.0800% 7.4362% Fixed Actual/360
4,800,000.00 6.6300% 0.0638% 0.0750% 6.4912% Fixed Actual/360
5,200,000.00 6.3500% 0.0638% 0.1250% 6.1612% Fixed Actual/360
1,688,750.00 7.3600% 0.0638% 0.0800% 7.2162% Fixed Actual/360
4,000,000.00 7.2100% 0.0638% 0.0900% 7.0562% Fixed Actual/360
5,500,000.00 7.3500% 0.0638% 0.0900% 7.1962% Fixed Actual/360
5,850,000.00 7.3000% 0.0638% 0.0900% 7.1462% Fixed Actual/360
1,500,000.00 7.8000% 0.0638% 0.1250% 7.6112% Fixed Actual/360
1,800,000.00 7.8000% 0.0638% 0.1250% 7.6112% Fixed Actual/360
14,000,000.00 7.0000% 0.0638% 0.1250% 6.8112% Fixed Actual/360
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ORIGINAL
TERM TO
FIRST SCHEDULED MATURITY/ ORIGINAL
PAYMENT ANTICIPATED MATURITY SCHEDULED ARD AMORTIZATION
LOAN TYPE NOTE DATE DATE REPAYMENT DATE DATE P&I PAYMENT (MONTHS) TERM (MONTHS)
<S> <C> <C> <C> <C> <C> <C> <C>
Amortizing Balloon 12/24/97 02/01/98 01/01/08 164,475.28 120 240
Amortizing Balloon 12/19/97 02/01/98 01/01/08 145,396.51 120 300
Amortizing Balloon 08/12/98 10/01/98 09/01/08 115,385.00 120 300
Interest Only ARD 09/29/97 11/01/97 10/01/03 10/01/23 68,841.67 72 Interest Only
Amortizing Balloon 02/25/98 04/01/98 03/01/08 71,158.08 120 360
Amortizing Balloon 10/15/97 12/01/97 11/01/07 69,303.23 120 347
Amortizing Balloon 12/10/97 02/01/98 01/01/08 51,248.51 120 360
Amortizing Balloon 11/09/94 01/01/95 12/01/01 59,762.85 84 360
Amortizing Balloon 06/19/98 07/01/98 06/01/08 51,774.62 120 360
Amortizing Balloon 01/25/96 03/01/96 02/01/03 48,820.09 84 300
Amortizing Balloon 11/09/94 01/01/95 12/01/01 46,080.44 84 360
Amortizing Balloon 06/18/96 08/01/96 07/01/06 44,486.82 120 336
Amortizing Balloon 01/30/98 03/01/98 02/01/08 33,426.64 120 360
Amortizing Balloon 01/15/97 03/01/97 02/01/07 40,396.37 120 300
Amortizing Balloon 10/31/97 12/01/97 11/01/07 33,212.69 120 360
Amortizing Balloon 08/20/97 10/01/97 09/01/07 34,192.50 120 346
Amortizing Balloon 12/23/97 02/01/98 01/01/08 36,701.23 120 276
Amortizing Balloon 12/12/97 02/01/98 01/01/08 30,765.44 120 360
Amortizing Balloon 03/20/98 05/01/98 04/01/08 31,427.83 120 300
Amortizing Balloon 03/16/98 05/01/98 04/01/08 34,804.45 120 240
Amortizing Balloon 12/30/97 02/01/98 01/01/08 29,934.91 120 330
Amortizing Balloon 12/10/97 02/01/98 01/01/08 31,005.26 120 300
Amortizing Balloon 09/26/97 11/01/97 10/01/07 27,940.08 120 360
Amortizing Balloon 02/24/98 04/01/98 03/01/08 31,313.37 120 240
Amortizing Balloon 09/02/97 11/01/97 10/01/07 28,093.08 120 300
Amortizing Balloon 11/26/97 01/01/98 12/01/07 25,681.76 120 360
Amortizing Balloon 10/29/97 12/01/97 11/01/07 25,459.33 120 360
Amortizing Balloon 10/15/97 12/01/97 11/01/07 25,469.94 120 300
Amortizing Balloon 02/20/97 04/01/97 03/01/07 27,128.73 120 300
Amortizing Balloon 02/06/98 04/01/98 03/01/08 21,289.68 120 360
Amortizing Balloon 06/18/96 08/01/96 07/01/06 27,817.06 120 336
Amortizing Balloon 04/01/97 06/01/97 05/01/07 25,364.65 120 300
Amortizing Balloon 11/26/97 01/01/98 12/01/07 24,183.57 120 300
Amortizing Balloon 04/29/97 06/01/97 05/01/07 23,878.14 120 360
Amortizing Balloon 09/12/97 11/01/97 10/01/07 23,173.79 120 360
Amortizing Balloon 04/24/97 06/01/97 05/01/07 23,550.50 120 300
Amortizing Balloon 01/16/97 03/01/97 02/01/07 24,963.87 120 240
Amortizing Balloon 11/12/97 01/01/98 12/01/07 20,624.87 120 300
Amortizing Balloon 01/15/98 03/01/98 02/01/08 21,103.04 120 240
Amortizing Balloon 11/09/94 01/01/95 12/01/01 22,057.81 84 360
Amortizing Balloon 10/01/97 12/01/97 11/01/07 17,697.33 120 360
Amortizing Balloon 01/26/98 03/01/98 02/01/08 16,885.17 120 360
Amortizing Balloon 04/15/97 06/01/97 05/01/07 19,667.51 120 360
Amortizing Balloon 01/10/97 03/01/97 02/01/07 20,341.70 120 300
Amortizing Balloon 10/27/97 12/01/97 11/01/07 20,073.90 120 276
Amortizing Balloon 09/19/97 11/01/97 10/01/07 21,025.65 120 240
Amortizing Balloon 03/02/98 05/01/98 04/01/08 16,335.44 120 300
Amortizing Balloon 09/26/97 11/01/97 10/01/07 16,208.14 120 300
Amortizing Balloon 08/29/97 10/01/97 09/01/07 14,173.47 120 360
Amortizing Balloon 12/24/97 02/01/98 01/01/08 14,270.39 120 300
Amortizing Balloon 10/28/97 12/01/97 11/01/07 13,448.08 120 360
Amortizing Balloon 12/16/97 02/01/98 01/01/08 15,798.07 120 240
Amortizing Balloon 09/29/97 11/01/97 10/01/07 15,763.52 120 240
Amortizing Balloon 02/03/98 04/01/98 03/01/08 12,126.93 120 360
Amortizing Balloon 02/03/98 04/01/98 03/01/08 13,751.13 120 300
Amortizing Balloon 02/13/98 04/01/98 03/01/08 12,181.39 120 330
Amortizing Balloon 03/17/97 05/01/97 04/01/07 13,705.78 120 300
Amortizing Balloon 09/29/97 11/01/97 10/01/07 12,241.98 120 330
Amortizing Balloon 08/04/97 10/01/97 09/01/07 13,846.74 120 300
Amortizing Balloon 12/18/97 02/01/98 01/01/08 11,324.70 120 360
Amortizing Balloon 12/16/97 08/01/98 01/01/08 20,043.06 114 294
Amortizing Balloon 02/24/98 04/01/98 03/01/08 11,207.12 120 300
Amortizing Balloon 10/21/97 12/01/97 11/01/07 10,876.04 120 360
Amortizing Balloon 08/11/97 10/01/97 09/01/07 12,208.83 120 300
Amortizing Balloon 01/02/97 03/01/97 02/01/07 12,044.47 120 300
Amortizing Balloon 07/09/97 09/01/97 08/01/07 11,841.10 120 300
Amortizing Balloon 10/06/97 12/01/97 11/01/07 9,933.20 120 360
Amortizing Balloon 08/11/97 10/01/97 09/01/07 11,433.78 120 300
Amortizing Balloon 11/12/97 01/01/98 12/01/07 10,367.40 120 300
Amortizing Balloon 05/30/97 07/01/97 06/01/07 11,347.06 120 300
Amortizing Balloon 08/29/97 10/01/97 09/01/07 10,599.69 120 300
Amortizing Balloon 01/08/98 03/01/98 02/01/08 9,201.32 120 360
Amortizing Balloon 11/17/97 01/01/98 12/01/07 10,050.84 120 300
Amortizing Balloon 06/05/97 08/01/97 07/01/07 10,406.28 120 300
Amortizing Balloon 11/19/97 01/01/98 12/01/07 9,104.12 120 300
Amortizing Balloon 03/13/98 05/01/98 04/01/08 8,977.13 120 240
Amortizing Balloon 01/28/98 03/01/98 02/01/08 7,503.94 120 360
Amortizing Balloon 03/27/97 05/01/97 04/01/07 9,231.16 120 300
Amortizing Balloon 02/27/98 04/01/98 03/01/08 8,039.68 120 300
Amortizing Balloon 11/19/97 01/01/98 12/01/07 8,761.34 120 300
Amortizing Balloon 03/25/97 05/01/97 04/01/07 8,447.53 120 300
Amortizing Balloon 06/18/97 08/01/97 07/01/07 8,391.96 120 300
Amortizing Balloon 08/29/97 10/01/97 09/01/07 7,083.13 120 360
Amortizing Balloon 10/22/97 12/01/97 11/01/07 7,909.00 120 300
Amortizing Balloon 03/17/97 05/01/97 04/01/07 7,065.15 120 300
Amortizing Balloon 02/24/97 04/01/97 03/01/07 6,562.16 120 300
Amortizing Balloon 12/31/97 02/01/98 01/01/08 5,205.21 120 300
Amortizing Balloon 09/29/97 11/01/97 10/01/07 4,721.77 120 300
Amortizing Balloon 02/24/98 04/01/98 03/01/08 2,946.46 120 300
Amortizing Balloon 02/12/98 04/01/98 03/01/08 2,339.24 120 300
Amortizing Balloon 03/12/98 05/01/98 04/01/08 16,599.00 120 360
Amortizing Balloon 03/23/98 05/01/98 04/01/08 46,317.02 120 300
Amortizing Balloon 03/25/98 05/01/98 04/01/08 20,806.38 120 360
Amortizing Balloon 04/06/98 06/01/98 04/01/08 14,485.12 119 240
Amortizing Balloon 03/27/98 05/01/98 04/01/08 58,963.27 120 300
Amortizing Balloon 04/09/98 06/01/98 05/01/08 29,033.51 120 300
Amortizing Balloon 04/13/98 06/01/98 05/01/08 13,704.71 120 240
Amortizing Balloon 09/18/97 11/01/97 10/01/07 41,172.95 120 360
Amortizing Balloon 09/18/97 11/01/97 10/01/07 16,382.46 120 360
Amortizing Balloon 09/18/97 11/01/97 10/01/07 6,700.29 120 360
Amortizing Balloon 09/18/97 11/01/97 10/01/07 6,813.15 120 360
Amortizing Balloon 09/18/97 11/01/97 10/01/07 9,135.69 120 360
Amortizing Balloon 09/18/97 11/01/97 10/01/07 11,882.92 120 360
Amortizing Balloon 09/18/97 11/01/97 10/01/07 11,499.80 120 360
Amortizing Balloon 04/28/98 06/01/98 05/01/08 10,534.69 120 300
Amortizing Balloon 05/01/98 06/01/98 05/01/08 12,632.22 120 360
Amortizing Balloon 05/14/98 07/01/98 06/01/08 9,002.79 120 300
Amortizing Balloon 05/21/98 07/01/98 06/01/08 7,020.42 120 300
Amortizing Balloon 06/23/98 08/01/98 07/01/08 25,240.52 120 360
Amortizing Balloon 06/24/98 08/01/98 07/01/08 22,908.73 120 300
Amortizing Balloon 07/13/98 09/01/98 08/01/08 11,938.08 120 360
Amortizing Balloon 04/21/98 06/01/98 05/01/05 29,698.86 84 300
Amortizing Balloon 04/21/98 06/01/98 05/01/08 96,941.55 120 300
Amortizing ARD 04/30/98 06/01/98 05/01/08 05/01/28 118,787.94 120 360
Amortizing Balloon 06/01/98 07/01/98 06/01/08 10,790.52 120 270
Amortizing Balloon 05/19/98 07/01/98 06/01/08 8,741.55 120 300
Amortizing Balloon 05/27/98 07/01/98 06/01/08 13,074.97 120 300
Amortizing Balloon (*) 06/09/98 08/01/98 (*) 07/01/08 329,956.76 120 360
Amortizing Balloon 05/29/98 07/01/98 06/01/08 15,419.24 120 300
Amortizing Balloon 05/29/98 07/01/98 06/01/08 9,653.05 120 300
Amortizing Balloon 06/11/98 08/01/98 07/01/08 3,465.09 120 300
Amortizing Balloon 07/22/98 09/01/98 08/01/08 11,084.87 120 300
Amortizing Balloon 07/15/98 09/01/98 08/01/08 23,912.07 120 300
Amortizing Balloon 08/03/98 10/01/98 09/01/08 48,820.06 120 300
Amortizing ARD 09/29/98 11/01/98 10/01/08 10/01/28 438,434.34 120 360
Amortizing Balloon 07/27/98 09/01/98 08/01/08 16,539.59 120 300
Amortizing Balloon 08/04/98 10/01/98 09/01/08 30,267.04 120 360
Amortizing Balloon 06/29/98 08/01/98 07/01/08 6,817.63 120 300
Amortizing Balloon 05/12/98 07/01/98 06/01/08 27,777.10 120 360
Amortizing Balloon 05/30/98 08/01/98 07/01/08 14,844.93 120 300
Amortizing Balloon 06/23/98 08/01/98 07/01/08 24,804.29 120 300
Amortizing Balloon 05/28/98 07/01/98 06/01/08 9,314.23 120 360
Amortizing Balloon 05/21/98 07/01/98 06/01/08 43,606.31 120 360
Amortizing Balloon 05/04/98 07/01/98 06/01/08 13,749.91 120 300
Amortizing Balloon 06/09/98 08/01/98 07/01/08 20,892.51 120 300
Fully Amortizing 06/10/98 08/01/98 07/01/08 25,748.43 120 120
Amortizing Balloon 06/10/98 08/01/98 07/01/08 19,043.99 120 360
Amortizing Balloon 06/23/98 08/01/98 07/01/08 14,727.83 120 300
Amortizing Balloon 05/21/98 07/01/98 06/01/08 15,153.79 120 300
Amortizing Balloon 05/18/98 07/01/98 06/01/08 51,826.20 120 360
Amortizing Balloon 07/20/98 09/01/98 08/01/05 8,666.26 84 360
Amortizing Balloon 05/15/98 07/01/98 06/01/08 28,081.66 120 300
Amortizing Balloon 06/18/98 08/01/98 07/01/08 12,629.27 120 300
Amortizing Balloon 07/02/98 09/01/98 08/01/08 9,903.19 120 300
Amortizing Balloon 04/24/98 06/01/98 05/01/08 54,703.40 120 360
Amortizing Balloon 07/01/98 09/01/98 08/01/08 18,282.54 120 360
Amortizing Balloon 06/10/98 08/01/98 07/01/08 31,553.20 120 300
Amortizing Balloon 06/18/98 08/01/98 07/01/08 31,746.83 120 300
Amortizing Balloon 07/13/98 09/01/98 08/01/08 8,712.38 120 300
Amortizing Balloon 05/07/98 07/01/98 06/01/08 29,481.64 120 300
Amortizing Balloon 05/13/98 07/01/98 06/01/08 42,308.05 120 300
Amortizing Balloon 05/05/98 07/01/98 06/01/08 17,462.26 120 360
Amortizing Balloon 05/01/98 06/01/98 05/01/08 12,884.12 120 360
Amortizing Balloon 07/07/98 09/01/98 08/01/08 16,845.50 120 360
Amortizing Balloon 07/07/98 09/01/98 08/01/08 18,463.39 120 240
Amortizing Balloon 05/05/98 07/01/98 06/01/08 38,292.35 120 300
Amortizing Balloon 06/05/98 08/01/98 07/01/08 26,954.35 120 360
Amortizing Balloon 03/26/98 05/01/98 04/01/08 34,602.01 120 300
Amortizing Balloon 07/14/98 09/01/98 08/01/08 22,745.31 120 240
Amortizing Balloon 05/26/98 07/01/98 06/01/08 23,194.72 120 360
Amortizing Balloon 05/26/98 07/01/98 06/01/08 7,127.28 120 360
Amortizing Balloon 05/26/98 07/01/98 06/01/08 5,158.79 120 360
Amortizing Balloon 05/18/98 07/01/98 06/01/08 13,395.77 120 300
Amortizing Balloon 06/05/98 08/01/98 07/01/08 14,975.51 120 300
Amortizing Balloon 05/07/98 07/01/98 06/01/08 27,884.22 120 300
Amortizing Balloon 05/13/98 07/01/98 06/01/08 22,072.26 120 300
Amortizing Balloon 06/09/98 08/01/98 07/01/08 30,581.74 120 300
Amortizing Balloon 05/18/98 07/01/98 06/01/08 34,973.54 120 300
Amortizing Balloon 05/18/98 07/01/98 06/01/08 37,720.07 120 300
Amortizing Balloon 05/18/98 07/01/98 06/01/08 26,958.77 120 300
Amortizing Balloon 07/14/98 09/01/98 08/01/08 7,396.42 120 300
Amortizing Balloon 08/26/98 10/01/98 09/01/08 29,543.47 120 300
Amortizing Balloon 05/18/98 07/01/98 06/01/08 16,254.90 120 360
Amortizing Balloon 05/18/98 07/01/98 06/01/08 6,536.54 120 360
Amortizing Balloon 04/30/98 06/01/98 05/01/08 46,618.20 120 360
Amortizing Balloon 06/02/98 08/01/98 07/01/08 7,979.25 120 300
Amortizing Balloon 06/05/98 08/01/98 07/01/08 42,118.69 120 300
Amortizing Balloon 08/13/98 10/01/98 09/01/08 10,148.54 120 360
Amortizing Balloon 06/12/98 08/01/98 07/01/08 29,507.63 120 300
Amortizing Balloon 05/21/98 07/01/98 06/01/08 32,028.59 120 360
Amortizing Balloon 06/18/98 08/01/98 07/01/08 16,802.79 120 300
Amortizing Balloon 06/18/98 08/01/98 07/01/08 21,677.52 120 300
Amortizing Balloon 07/08/98 09/01/98 08/01/08 45,356.31 120 300
Amortizing Balloon 07/13/98 09/01/98 08/01/08 37,969.84 120 264
Amortizing Balloon 06/08/98 08/01/98 07/01/08 8,121.75 120 300
Amortizing Balloon 06/01/98 08/01/98 07/01/08 12,328.05 120 360
Amortizing Balloon 06/16/98 08/01/98 07/01/08 16,715.21 120 300
Amortizing Balloon 05/28/98 07/01/98 06/01/08 27,198.43 120 300
Amortizing Balloon 07/22/98 09/01/98 08/01/08 12,215.72 120 240
Amortizing Balloon 06/04/98 08/01/98 07/01/08 40,465.81 120 300
Amortizing Balloon 05/21/98 07/01/98 06/01/08 33,283.88 120 300
Amortizing Balloon 06/09/98 08/01/98 07/01/08 19,794.97 120 300
Amortizing Balloon 07/02/98 09/01/98 08/01/08 16,773.03 120 300
Amortizing Balloon 07/07/98 09/01/98 08/01/08 16,080.25 120 360
Amortizing Balloon 07/23/98 09/01/98 08/01/08 8,513.36 120 300
Amortizing Balloon 08/21/98 10/01/98 09/01/08 18,102.40 120 300
Amortizing Balloon 05/11/98 07/01/98 06/01/08 20,286.52 120 360
Amortizing Balloon 05/11/98 07/01/98 06/01/08 22,008.09 120 360
Amortizing Balloon 05/19/98 07/01/98 06/01/08 13,424.90 120 360
Amortizing Balloon 07/09/98 09/01/98 08/01/08 25,015.23 120 300
Amortizing Balloon 04/02/98 06/01/98 05/01/08 17,555.99 120 300
Amortizing Balloon 04/02/98 06/01/98 05/01/08 8,203.44 120 300
Amortizing Balloon 04/02/98 06/01/98 05/01/08 8,036.74 120 300
Amortizing Balloon 07/31/98 10/01/98 09/01/08 27,081.10 120 300
Amortizing Balloon 06/15/98 08/01/98 07/01/08 33,197.99 120 360
Amortizing Balloon 05/13/98 07/01/98 06/01/05 9,117.26 84 360
Amortizing Balloon 06/25/98 08/01/98 07/01/08 21,024.19 120 300
Amortizing Balloon 07/14/98 09/01/98 08/01/08 29,456.63 120 360
Amortizing Balloon 10/13/98 12/01/98 11/01/08 57,964.16 120 300
Amortizing Balloon 07/06/98 09/01/98 08/01/08 35,915.16 120 300
Amortizing Balloon 08/13/98 10/01/98 09/01/08 29,266.29 120 300
Amortizing Balloon 06/26/98 08/01/98 07/01/08 44,180.62 120 300
Amortizing Balloon 04/23/98 06/01/98 05/01/08 27,232.81 120 360
Amortizing Balloon 04/23/98 06/01/98 05/01/08 33,871.74 120 360
Amortizing Balloon 04/23/98 06/01/98 05/01/08 24,990.05 120 360
Amortizing Balloon 04/23/98 06/01/98 05/01/08 95,314.84 120 360
Amortizing Balloon 05/29/98 07/01/98 06/01/08 15,304.07 120 300
Amortizing Balloon 06/03/98 08/01/98 07/01/08 57,664.17 120 276
Amortizing Balloon 06/30/98 08/01/98 07/01/08 49,777.37 120 300
Amortizing Balloon 06/30/98 08/01/98 07/01/08 39,240.55 120 300
Amortizing Balloon 06/30/98 08/01/98 07/01/08 44,327.29 120 300
Amortizing Balloon 06/30/98 08/01/98 07/01/08 33,790.48 120 300
Amortizing Balloon 05/19/98 07/01/98 06/01/08 22,326.08 120 300
Amortizing Balloon 09/11/98 11/01/98 10/01/08 30,750.80 120 360
Amortizing Balloon 09/22/98 11/01/98 10/01/08 34,624.94 120 300
Amortizing Balloon 08/12/98 10/01/98 09/01/08 12,326.34 120 300
Amortizing Balloon 09/03/98 11/01/98 10/01/08 28,809.27 120 300
Amortizing Balloon 09/29/98 11/01/98 10/01/08 37,893.47 120 360
Amortizing Balloon 09/29/98 11/01/98 10/01/08 40,105.90 120 360
Amortizing Balloon 05/21/98 08/01/98 07/01/08 11,379.22 120 300
Amortizing Balloon 05/21/98 08/01/98 07/01/08 13,655.05 120 300
Amortizing Balloon 09/28/98 11/01/98 10/01/08 93,142.35 120 360
(*) Will convert to an ARD loan immediately after the Delivery Date, with Anticipated Repayment Date of 7/1/08.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
REMAINING % OF TOTAL
TERM TO REMAINING MORTGAGE CUT-OFF DATE LOAN BALANCE
SEASONING MATURITY/ AMORTIZATION CUT-OFF DATE POOL BALANCE PER AT MATURITY/
(MONTHS) ARD (MONTHS) TERM (MONTHS) BALANCE BALANCE NRSF/UNIT ARD
<S> <C> <C> <C> <C> <C> <C>
11 109 229 21,067,759.31 2.320% 206.38 14,547,051.44
11 109 289 19,437,073.69 2.140% 15,974,771.46
23,647
49,824
26,106
17.81
28.44
3 117 297 16,048,097.38 1.767% 83.91 12,718,201.62
14 58 Interest Only 11,000,000.00 1.211% 37.57 11,000,000.00
9 111 351 10,336,405.23 1.138% 50.98 9,140,167.47
13 107 334 9,643,620.79 1.062% 33,254 8,472,225.00
11 109 349 7,488,704.66 0.825% 28,692 6,616,985.96
48 36 312 6,712,570.18 0.739% 19,513 6,518,150.27
6 114 354 6,839,417.78 0.753% 79.73 6,058,499.84
34 50 266 5,781,540.28 0.637% 53.62 5,346,287.34
48 36 312 5,175,759.70 0.570% 19,029 5,025,851.10
29 91 307 4,920,638.94 0.542% 91.56 4,449,376.14
10 110 350 4,863,684.28 0.536% 31,998 4,299,333.85
22 98 278 4,665,728.58 0.514% 3,953,776.63
24.97
34.67
12.63
13 107 347 4,702,413.99 0.518% 143.46 4,122,761.74
15 105 331 4,673,606.23 0.515% 27,819 4,136,994.03
11 109 265 4,438,193.44 0.489% 37,933 3,488,240.28
11 109 349 4,366,666.33 0.481% 28,728 3,885,829.61
8 112 292 4,262,709.41 0.469% 122.14 3,480,432.76
8 112 232 4,144,454.87 0.456% 41,445 2,950,282.56
11 109 319 4,062,369.89 0.447% 71.62 3,511,506.75
11 109 289 3,952,538.15 0.435% 32,938 3,234,629.97
14 106 346 3,859,803.63 0.425% 67.07 3,403,389.11
9 111 231 3,743,119.89 0.412% 30,935 2,663,002.64
14 106 286 3,641,389.38 0.401% 36,414 2,973,704.84
12 108 348 3,470,762.26 0.382% 50.69 3,070,364.65
13 107 347 3,419,043.14 0.376% 78.56 3,030,230.26
13 107 287 3,253,041.56 0.358% 2,665,188.15
35.54
84.46
21 99 279 3,136,610.24 0.345% 39.31 2,655,211.47
9 111 351 3,179,018.36 0.350% 198.69 2,791,800.91
29 91 307 3,107,236.98 0.342% 86.99 2,804,653.19
19 101 281 3,088,159.55 0.340% 35.61 2,575,773.34
12 108 288 3,060,212.14 0.337% 16,192 2,511,580.53
19 101 341 3,033,241.12 0.334% 61.90 2,726,591.98
14 106 346 2,973,616.75 0.327% 100.31 2,660,626.52
19 101 281 2,702,060.19 0.298% 75.52 2,288,250.92
22 98 218 2,653,354.37 0.292% 21,749 1,960,234.61
12 108 288 2,667,014.34 0.294% 67.34 2,217,339.91
10 110 230 2,618,908.38 0.288% 163,682 1,797,516.87
48 36 312 2,477,536.78 0.273% 22,523 2,405,778.91
13 107 347 2,479,448.32 0.273% 63,576 2,178,579.88
10 110 350 2,481,056.32 0.273% 14,594 2,187,878.51
19 101 341 2,470,801.74 0.272% 56.26 2,225,559.79
22 98 278 2,443,659.86 0.269% 52.67 2,050,409.24
13 107 263 2,391,179.09 0.263% 36,230 1,891,660.75
14 106 226 2,348,321.79 0.259% 49.74 1,728,939.22
8 112 292 2,239,942.97 0.247% 54.32 1,822,297.47
14 106 286 2,067,710.04 0.228% 114.77 1,696,029.54
15 105 345 1,945,462.06 0.214% 16,212 1,718,717.42
11 109 289 1,885,766.59 0.208% 144.28 1,527,667.64
13 107 347 1,881,425.18 0.207% 37,629 1,653,614.59
11 109 229 1,815,461.02 0.200% 15,129 1,286,359.85
14 106 226 1,758,533.12 0.194% 15,701 1,264,568.42
9 111 351 1,786,733.15 0.197% 44.14 1,549,135.28
9 111 291 1,733,551.05 0.191% 19.93 1,420,843.93
9 111 321 1,726,405.67 0.190% 94.49 1,473,051.62
20 100 280 1,617,738.64 0.178% 40.84 1,361,260.72
14 106 316 1,629,339.12 0.179% 56.18 1,393,136.68
15 105 285 1,626,726.37 0.179% 29.22 1,365,197.25
11 109 349 1,586,849.11 0.175% 42.51 1,392,517.38
5 109 289 2,554,697.81 0.281% 75.10 2,131,022.12
9 111 291 1,486,155.81 0.164% 23,221 1,223,486.36
13 107 347 1,486,038.91 0.164% 19.93 1,312,457.90
15 105 285 1,463,198.19 0.161% 1,221,557.36
19,175
15,868
22 98 278 1,418,577.48 0.156% 67.03 1,196,260.09
16 104 284 1,389,689.04 0.153% 78.65 1,167,442.93
13 107 347 1,386,380.16 0.153% 23,106 1,219,111.90
15 105 285 1,364,827.99 0.150% 1,140,635.26
10,297
15,999
12 108 288 1,309,632.68 0.144% 113.61 1,096,924.78
18 102 282 1,303,203.25 0.143% 80.40 1,102,520.73
15 105 285 1,280,607.36 0.141% 48.18 1,066,847.07
10 110 350 1,290,317.32 0.142% 89.51 1,131,420.16
12 108 288 1,283,035.33 0.141% 24,208 1,050,456.52
17 103 283 1,205,735.51 0.133% 58.76 1,017,022.54
12 108 288 1,129,855.13 0.124% 49.36 932,273.11
8 112 232 1,109,072.17 0.122% 84.02 776,416.82
10 110 350 1,091,847.49 0.120% 26,630 965,156.48
20 100 280 1,078,913.67 0.119% 143.86 910,131.52
9 111 291 1,089,352.76 0.120% 115.69 890,504.86
12 108 288 1,086,420.83 0.120% 48.17 896,636.25
20 100 280 1,007,009.87 0.111% 19,366 845,217.84
17 103 283 983,891.85 0.108% 15,373 827,393.06
15 105 345 972,236.53 0.107% 16,204 858,922.21
13 107 287 957,550.69 0.105% 49.57 796,031.85
20 100 280 809,801.42 0.089% 83.87 686,475.34
21 99 279 773,719.99 0.085% 84.33 651,755.30
11 109 289 623,381.02 0.069% 83.79 518,966.98
14 106 286 573,848.81 0.063% 24,950 476,936.56
9 111 291 361,741.17 0.040% 92.28 298,678.97
9 111 291 282,536.38 0.031% 10.74 234,329.32
8 112 352 2,483,202.34 0.273% 23,650 2,144,298.54
8 112 292 6,351,070.00 0.699% 56.53 5,166,892.62
8 112 352 3,033,061.54 0.334% 54.06 2,678,041.14
7 112 233 1,681,598.35 0.185% 11,211 1,216,116.04
8 112 292 7,931,837.63 0.873% 54,328 6,493,830.92
7 113 293 3,969,725.26 0.437% 111.50 3,230,403.15
7 113 233 1,704,680.15 0.188% 33,425 1,188,639.41
14 106 346 5,492,120.82 0.605% 34.10 4,876,948.34
14 106 346 2,185,280.08 0.241% 36.81 1,940,506.60
14 106 346 893,762.43 0.098% 26.68 793,653.26
14 106 346 908,816.70 0.100% 31.70 807,020.77
14 106 346 1,218,622.41 0.134% 25.50 1,082,123.28
14 106 346 1,585,080.40 0.175% 27.88 1,407,535.38
14 106 346 1,533,974.68 0.169% 31.82 1,362,153.89
7 113 293 1,399,978.77 0.154% 131.45 1,150,033.20
7 113 353 1,865,828.29 0.205% 32,169 1,641,183.18
6 114 294 1,231,873.70 0.136% 24,637 1,001,337.45
6 114 294 944,002.27 0.104% 66.34 771,808.19
5 115 355 3,687,662.57 0.406% 33,832 3,249,069.34
5 115 295 3,084,076.56 0.340% 127.65 2,518,911.50
4 116 356 1,745,202.59 0.192% 28,148 1,536,487.07
7 77 293 3,943,313.76 0.434% 3,484,052.73
31.00
29.72
29.76
7 113 293 12,871,571.36 1.417% 10,377,737.30
37.81
36.83
29.63
30.07
7 113 353 17,416,002.82 1.918% 79.97 15,347,757.00
6 114 264 1,408,311.87 0.155% 46.94 1,076,066.40
6 114 294 1,162,785.61 0.128% 140.35 954,098.21
6 114 294 1,739,209.23 0.192% 85.06 1,427,069.58
5 115 355 48,831,052.57 5.377% 42,882,662.65
135.91
73.64
6 114 294 2,086,559.38 0.230% 130.41 1,702,358.92
6 114 294 1,267,362.50 0.140% 126.74 1,044,401.36
5 115 295 428,200.52 0.047% 32,939 359,729.92
4 116 296 1,493,728.33 0.164% 38.69 1,218,598.57
4 116 296 3,349,729.50 0.369% 42.11 2,697,250.30
3 117 297 6,974,653.95 0.768% 81.28 5,573,769.02
2 118 358 65,804,538.20 7.246% 57,480,322.19
56.55
55.93
46.56
46.46
38.04
49.19
44.38
26.11
33.94
4 116 296 2,240,485.51 0.247% 58.73 1,824,603.31
3 117 357 4,341,061.89 0.478% 17.35 3,838,225.58
5 115 295 920,220.78 0.101% 83.23 750,932.55
6 114 354 3,984,169.42 0.439% 125.02 3,528,304.74
5 115 295 1,989,826.77 0.219% 22.38 1,627,543.19
5 115 295 3,480,325.65 0.383% 7.75 2,803,313.90
6 114 354 1,393,841.45 0.153% 27,877 1,221,204.03
6 114 354 6,176,255.00 0.680% 19.82 5,486,813.67
6 114 294 1,789,428.87 0.197% 21,559 1,478,895.07
5 115 295 2,785,924.26 0.307% 35,717 2,282,645.58
5 115 115 2,137,644.56 0.235% 56.22 21,693.78
5 115 355 2,790,590.82 0.307% 29,069 2,456,843.96
5 115 295 1,989,646.41 0.219% 13,444 1,623,148.83
6 114 294 2,002,750.97 0.221% 227.53 1,646,824.22
6 114 354 7,469,943.83 0.823% 71.20 6,607,163.00
4 80 356 1,221,940.88 0.135% 13.49 1,139,193.24
6 114 294 3,776,009.48 0.416% 40.50 3,087,236.29
5 115 295 1,691,369.69 0.186% 49.75 1,383,825.77
4 116 296 1,368,930.46 0.151% 9,640 1,107,261.41
7 113 353 8,099,931.65 0.892% 214.84 7,120,244.03
4 116 356 2,618,172.09 0.288% 2,317,132.87
81.45
92.57
5 115 295 4,277,566.16 0.471% 57.14 3,485,560.14
5 115 295 4,376,188.58 0.482% 50.10 3,546,035.68
4 116 296 1,194,790.81 0.132% 53.90 969,000.56
6 114 294 3,974,604.15 0.438% 64.89 3,246,793.08
6 114 294 5,664,351.24 0.624% 45,680 4,637,793.39
6 114 354 2,559,257.83 0.282% 38,777 2,254,172.48
7 113 353 1,890,857.15 0.208% 29,090 1,665,893.46
4 116 356 2,542,441.70 0.280% 157.87 2,220,127.05
4 116 236 2,382,113.85 0.262% 32.32 1,627,929.04
6 114 294 5,166,923.46 0.569% 28,865 4,219,561.58
5 115 355 3,907,198.36 0.430% 22,585 3,449,361.88
8 112 292 4,757,165.56 0.524% 23,550 3,866,810.49
4 116 236 2,781,051.67 0.306% 10,455 1,948,447.93
6 114 354 3,334,545.11 0.367% 77.68 2,901,191.84
6 114 354 1,044,961.29 0.115% 57.07 905,223.55
6 114 354 756,352.93 0.083% 49.16 655,210.00
6 114 294 1,837,808.55 0.202% 19,345 1,492,564.78
5 115 295 1,990,024.85 0.219% 38.74 1,632,402.16
6 114 294 3,775,647.09 0.416% 52,440 3,079,810.06
6 114 294 2,980,881.60 0.328% 40,282 2,433,629.42
5 115 295 3,980,981.15 0.438% 68,638 3,287,933.80
6 114 294 4,768,776.17 0.525% 26,942 3,880,868.07
6 114 294 5,165,858.76 0.569% 50,154 4,197,877.62
6 114 294 3,675,931.63 0.405% 33,418 2,991,502.55
4 116 296 995,826.77 0.110% 91.49 812,642.57
3 117 297 4,135,554.86 0.455% 26.65 3,327,972.43
6 114 354 2,340,605.89 0.258% 41,797 2,070,771.83
6 114 354 941,222.40 0.104% 39,218 832,715.45
7 113 353 6,964,759.94 0.767% 38,693 6,108,511.72
5 115 295 1,094,115.21 0.120% 180.85 888,138.17
5 115 295 5,719,884.69 0.630% 28,599 4,658,102.63
3 117 357 1,447,062.08 0.159% 73.13 1,281,343.49
5 115 295 3,979,373.34 0.438% 84.06 3,248,255.02
6 114 354 4,616,425.30 0.508% 19,728 4,083,227.02
5 115 295 2,287,883.74 0.252% 100.34 1,861,546.97
5 115 295 2,926,652.71 0.322% 25.93 2,344,172.30
4 116 296 6,198,178.37 0.682% 54,370 5,032,815.90
4 116 260 5,118,275.13 0.564% 28.92 3,778,795.60
5 115 295 1,094,338.71 0.121% 37.85 893,538.74
5 115 355 1,794,060.02 0.198% 35,881 1,582,261.58
5 115 295 2,238,577.53 0.246% 12,719 1,831,534.11
6 114 294 3,676,376.50 0.405% 32,534 3,000,573.06
4 116 236 1,478,123.63 0.163% 15,559 1,040,575.35
5 115 295 5,471,472.23 0.602% 45,596 4,462,315.00
6 114 294 4,471,643.48 0.492% 37,264 3,657,033.38
5 115 295 2,685,886.28 0.296% 22,382 2,187,945.47
4 116 296 2,290,108.50 0.252% 101.17 1,860,078.59
4 116 356 2,393,123.29 0.264% 18,409 2,097,307.41
4 116 296 1,145,209.88 0.126% 30.37 934,820.41
3 117 297 2,491,583.77 0.274% 39.52 2,016,544.47
6 114 354 2,878,875.39 0.317% 78.04 2,556,281.32
6 114 354 3,108,141.80 0.342% 36.25 2,763,176.76
6 114 354 1,905,138.14 0.210% 61.45 1,691,657.31
4 116 296 3,385,649.57 0.373% 12,972 2,758,008.91
7 113 293 2,455,341.03 0.270% 25.03 1,983,028.07
7 113 293 1,147,313.87 0.126% 61.44 926,614.05
7 113 293 1,124,000.57 0.124% 49.45 907,786.48
3 117 297 3,737,308.70 0.412% 67.14 3,022,047.56
5 115 355 4,982,137.07 0.549% 14,872 4,359,617.97
6 78 354 1,280,190.43 0.141% 4,197 1,195,586.41
5 115 295 2,835,303.49 0.312% 27.72 2,314,381.05
4 116 356 4,486,371.08 0.494% 48,765 3,908,411.35
1 119 299 7,566,904.59 0.833% 6,225,464.09
12.83
12.70
4 116 296 4,977,806.03 0.548% 34.57 4,022,696.00
3 117 297 4,085,803.61 0.450% 81.73 3,290,928.44
5 115 295 6,288,362.36 0.692% 95.52 5,040,619.69
7 113 353 3,980,946.31 0.438% 122.82 3,510,795.08
7 113 353 4,975,878.99 0.548% 62.08 4,382,789.18
7 113 353 3,682,014.70 0.405% 30.25 3,240,722.77
7 113 353 13,933,312.04 1.534% 100.02 12,287,782.11
6 114 294 1,988,299.55 0.219% 13,526 1,644,173.69
5 115 271 7,748,097.29 0.853% 5,957,078.25
137.83
134.60
137.83
137.83
134.60
135.68
134.60
137.83
134.60
5 115 295 6,813,494.67 0.750% 58,235 5,534,061.76
5 115 295 5,371,222.10 0.591% 57,755 4,362,618.81
5 115 295 6,067,491.62 0.668% 54,662 4,928,143.16
5 115 295 4,625,218.99 0.509% 49,734 3,756,698.37
6 114 294 2,981,343.41 0.328% 26,619 2,443,130.98
2 118 358 4,792,403.91 0.528% 87.40 4,145,032.79
2 118 298 5,186,667.91 0.571% 56.22 4,074,507.68
3 117 297 1,683,154.65 0.185% 79.88 1,365,906.90
2 118 298 3,991,225.36 0.439% 28.25 3,221,003.65
2 118 358 5,492,692.09 0.605% 31.82 4,841,221.69
2 118 358 5,842,129.18 0.643% 87.17 5,142,704.89
5 115 295 1,492,738.12 0.164% 10.30 1,229,733.67
5 115 295 1,791,285.81 0.197% 44.51 1,475,683.04
2 118 358 13,979,719.79 1.539% 43,824 12,211,297.38
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
YIELD
LOCKOUT YIELD YIELD MAINTENANCE
PERIOD END MAINTENANCE MAINTENANCE DISCOUNT TERM
PREPAYMENT PROVISIONS (MONTHS) DATE PERIOD START DATE PERIOD END DATE END DATE
<S> <C> <C> <C> <C>
LO(48)/Grtr1%UPBorYM(66)/Free(6) 01/01/02 01/02/02 07/01/07 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 01/01/02 01/02/02 10/31/07 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 09/01/02 09/02/02 06/30/08 Maturity Date
LO(48)/Grtr1%UPBorYM(12)/Free(12) 10/01/01 10/02/01 10/05/02 ARD
LO(48)/Grtr1%UPBorYM(66)/Free(6) 03/01/02 03/02/02 09/01/07 Maturity Date
LO(48)/Grtr1%UPBorYM(66)/Free(6) 11/01/01 11/02/01 05/01/07 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 01/31/02 02/01/02 10/31/07 Maturity Date
Grtr1%UPBorYM(47)/3%(12)/2%(12)/1%(6)/Free(7) 11/09/94 11/10/94 11/08/98 Maturity Date
LO(49)/Grtr1%UPBorYM(65)/Free(6) 07/01/02 07/02/02 12/01/07 Maturity Date
LO(48)/Grtr1%UPBorYM(33)/Free(3) 02/01/00 02/02/00 11/30/02 Maturity Date
Grtr1%UPBorYM(47)/3%(12)/2%(12)/1%(6)/Free(7) 11/09/94 11/10/94 11/08/98 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 07/01/00 07/02/00 04/30/06 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 02/01/02 02/02/02 11/30/07 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 02/01/01 02/02/01 11/30/06 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 11/30/01 12/01/01 08/31/07 Maturity Date
LO(48)/Grtr1%UPBorYM(66)/Free(6) 09/01/01 09/02/01 03/01/07 Maturity Date
LO(48)/Grtr1%UPBorYM(66)/Free(6) 01/01/02 01/02/02 07/01/07 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 01/01/02 01/02/02 10/31/07 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 04/30/02 05/01/02 01/31/08 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 04/01/02 04/02/02 01/31/08 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 01/31/02 02/01/02 10/31/07 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 01/01/02 01/02/02 10/31/07 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 10/31/01 11/01/01 07/31/07 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 03/01/02 03/02/02 12/31/07 Maturity Date
LO(47)/Grtr1%UPBorYM(61)/Free(12) 09/02/01 09/03/01 10/01/06 Maturity Date
LO(24)/Grtr1%UPBorYM(90)/Free(6) 12/01/99 12/02/99 06/01/07 Maturity Date
LO(48)/Grtr1%UPBorYM(66)/Free(6) 11/01/01 11/02/01 05/01/07 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 11/01/01 11/02/01 08/31/07 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 03/31/01 04/01/01 12/31/06 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 03/01/02 03/02/02 12/31/07 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 07/01/00 07/02/00 04/30/06 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 05/31/01 06/01/01 02/28/07 Maturity Date
LO(60)/Grtr1%UPBorYM(57)/Free(3) 12/01/02 12/02/02 09/30/07 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 05/31/01 06/01/01 02/28/07 Maturity Date
LO(36)/Grtr1%UPBorYM(81)/Free(3) 10/01/00 10/02/00 07/31/07 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 05/31/01 06/01/01 02/28/07 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 02/28/01 03/01/01 11/30/06 Maturity Date
LO(35)/Grtr1%UPBorYM(79)/Free(6) 11/01/00 11/02/00 06/01/07 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 02/01/02 02/02/02 11/30/07 Maturity Date
Grtr1%UPBorYM(47)/3%(12)/2%(12)/1%(6)/Free(7) 11/09/94 11/10/94 11/08/98 Maturity Date
LO(47)/Grtr1%UPBorYM(67)/Free(6) 10/01/01 10/02/01 05/01/07 Maturity Date
LO(47)/Grtr1%UPBorYM(67)/Free(6) 01/31/02 02/01/02 08/01/07 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 05/31/01 06/01/01 02/28/07 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 02/28/01 03/01/01 11/30/06 Maturity Date
LO(48)/Grtr1%UPBorYM(66)/Free(6) 11/01/01 11/02/01 05/01/07 Maturity Date
Grtr1%UPBorYM(114)/Free(6) 09/19/97 09/20/97 04/01/07 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 04/30/02 05/01/02 01/31/08 Maturity Date
LO(48)/Grtr1%UPBorYM(66)/Free(6) 10/01/01 10/02/01 04/01/07 Maturity Date
LO(48)/Grtr1%UPBorYM(65)/Free(7) 09/01/01 09/02/01 02/28/07 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 01/31/02 02/01/02 10/31/07 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 11/30/01 12/01/01 08/31/07 Maturity Date
LO(36)/Grtr1%UPBorYM(78)/Free(6) 01/01/01 01/02/01 07/01/07 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 10/01/01 10/02/01 07/31/07 Maturity Date
LO(48)/Grtr1%UPBorYM(65)/Free(7) 03/01/02 03/02/02 08/31/07 Maturity Date
LO(48)/Grtr1%UPBorYM(66)/Free(6) 03/01/02 03/02/02 09/01/07 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 03/31/02 04/01/02 12/31/07 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 04/30/01 05/01/01 01/31/07 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 10/31/01 11/01/01 07/31/07 Maturity Date
LO(49)/Grtr1%UPBorYM(68)/Free(3) 10/01/01 10/02/01 06/30/07 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 01/31/02 02/01/02 10/31/07 Maturity Date
LO(42)/Grtr1%UPBorYM(66)/Free(6) 01/02/02 01/03/02 07/01/07 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 03/31/02 04/01/02 12/31/07 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 11/30/01 12/01/01 08/31/07 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 09/30/01 10/01/01 06/30/07 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 02/28/01 03/01/01 11/30/06 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 08/31/01 09/01/01 05/31/07 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 11/30/01 12/01/01 08/31/07 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 09/30/01 10/01/01 06/30/07 Maturity Date
Grtr1%UPBorYM(114)/Free(6) 11/12/97 11/13/97 06/01/07 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 06/30/01 07/01/01 03/31/07 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 09/30/01 10/01/01 06/30/07 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 02/28/02 03/01/02 11/30/07 Maturity Date
LO(48)/Grtr1%UPBorYM(66)/Free(6) 12/01/01 12/02/01 06/01/07 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 07/31/01 08/01/01 04/30/07 Maturity Date
LO(47)/Grtr1%UPBorYM(67)/Free(6) 11/30/01 12/01/01 06/01/07 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 04/30/02 05/01/02 01/31/08 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 02/28/02 03/01/02 11/30/07 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 04/30/01 05/01/01 01/31/07 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 03/31/02 04/01/02 12/31/07 Maturity Date
LO(47)/Grtr1%UPBorYM(67)/Free(6) 11/30/01 12/01/01 06/01/07 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 04/30/01 05/01/01 01/31/07 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 07/31/01 08/01/01 04/30/07 Maturity Date
LO(48)/Grtr1%UPBorYM(65)/Free(7) 09/01/01 09/02/01 02/28/07 Maturity Date
Grtr1%UPBorYM(114)/Free(6) 10/22/97 10/23/97 05/01/07 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 04/30/01 05/01/01 01/31/07 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 03/31/01 04/01/01 12/31/06 Maturity Date
LO(24)/5%(24)/4%(24)/3%(24)/2%(12)/1%(6)/Free(6) 01/01/00 NAP NAP NAP
LO(48)/Grtr1%UPBorYM(66)/Free(6) 10/01/01 10/02/01 04/01/07 Maturity Date
Grtr1%UPBorYM(114)/Free(6) 02/24/98 02/25/98 09/01/07 Maturity Date
LO(24)/5%(24)/4%(24)/3%(24)/2%(12)/1%(6)/Free(6) 03/01/00 NAP NAP NAP
LO(47)/Grtr1%UPBorYM(67)/Free(6) 03/12/02 03/13/02 10/01/07 Maturity Date
LO(49)/Grtr1%UPBorYM(69)/Free(2) 05/01/02 05/02/02 02/01/08 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 04/30/02 05/01/02 01/31/08 Maturity Date
LO(48)/Grtr1%UPBorYM(68)/Free(3) 05/01/02 05/02/02 01/31/08 Maturity Date
LO(49)/Grtr1%UPBorYM(65)/Free(6) 05/01/02 05/02/02 10/01/07 Maturity Date
LO(48)/Grtr1%UPBorYM(66)/Free(6) 05/01/02 05/02/02 11/01/07 Maturity Date
LO(48)/Grtr1%UPBorYM(70)/Free(2) 05/01/02 05/02/02 03/01/08 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 10/01/01 10/02/01 07/31/07 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 10/01/01 10/02/01 07/31/07 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 10/01/01 10/02/01 07/31/07 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 10/01/01 10/02/01 07/31/07 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 10/01/01 10/02/01 07/31/07 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 10/01/01 10/02/01 07/31/07 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 10/01/01 10/02/01 07/31/07 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 05/31/02 06/01/02 02/28/08 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 05/31/02 06/01/02 02/28/08 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 06/30/02 07/01/02 03/31/08 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 06/30/02 07/01/02 03/31/08 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 07/31/02 08/01/02 04/30/08 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 07/31/02 08/01/02 04/30/08 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 08/31/02 09/01/02 05/31/08 Maturity Date
LO(48)/Grtr1%UPBorYM(30)/Free(6) 05/01/02 05/02/02 11/01/04 Maturity Date
LO(48)/Grtr1%UPBorYM(66)/Free(6) 05/01/02 05/02/02 11/01/07 Maturity Date
LO(48)/Grtr1%UPBorYM(68)/Free(4) 05/01/02 05/02/02 01/31/08 ARD
LO(48)/Grtr1%UPBorYM(69)/Free(3) 06/30/02 07/01/02 03/31/08 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 06/30/02 07/01/02 03/31/08 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 06/30/02 07/01/02 03/31/08 Maturity Date
LO(48)/Grtr1%UPBorYM(65)/Free(7) 07/31/02 08/01/02 12/31/07 Maturity Date
LO(48)/Grtr1%UPBorYM(66)/Free(6) 06/01/02 06/02/02 12/01/07 Maturity Date
LO(48)/Grtr1%UPBorYM(66)/Free(6) 06/01/02 06/02/02 12/01/07 Maturity Date
LO(24)/5%(24)/4%(24)/3%(24)/2%(12)/1%(6)/Free(6) 07/01/00 NAP NAP NAP
LO(48)/Grtr1%UPBorYM(69)/Free(3) 08/31/02 09/01/02 05/31/08 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 08/01/02 08/02/02 05/31/08 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 09/30/02 10/01/02 06/30/08 Maturity Date
LO(48)/Grtr1%UPBorYM(69)/Free(3) 10/31/02 11/01/02 07/31/08 ARD
LO(48)/YM(65)/FREE(7) 08/31/02 09/01/02 01/31/08 Maturity Date
LO(35)/Defeasance(81)/FREE(4) 08/31/01 NAP NAP NAP
LO(47)/YM(66)/FREE(7) 06/30/02 07/01/02 12/31/07 Maturity Date
LO(47)/YM(66)/FREE(7) 05/31/02 06/01/02 11/30/07 Maturity Date
LO(48)/YM(65)/FREE(7) 07/31/02 08/01/02 12/31/07 Maturity Date
LO(47)/YM(66)/FREE(7) 06/30/02 07/01/02 12/31/07 Maturity Date
LO(29)/Defeasance(88)/FREE(3) 11/30/00 NAP NAP NAP
LO(47)/YM(66)/FREE(7) 05/31/02 06/01/02 11/30/07 Maturity Date
LO(47)/YM(66)/FREE(7) 05/31/02 06/01/02 11/30/07 Maturity Date
LO(48)/YM(66)/FREE(6) 07/31/02 08/01/02 01/31/08 Maturity Date
LO(47)/YM(66)/FREE(7) 06/30/02 07/01/02 12/31/07 Maturity Date
LO(47)/YM(66)/FREE(7) 06/30/02 07/01/02 12/31/07 Maturity Date
LO(35)/Defeasance(81)/FREE(4) 06/30/01 NAP NAP NAP
LO(47)/YM(66)/FREE(7) 05/31/02 06/01/02 11/30/07 Maturity Date
LO(48)/YM(66)/FREE(6) 06/30/02 07/01/02 12/31/07 Maturity Date
LO(27)/Defeasance(50)/FREE(7) 11/30/00 NAP NAP NAP
LO(48)/YM(65)/FREE(7) 06/30/02 07/01/02 11/30/07 Maturity Date
LO(47)/YM(66)/FREE(7) 06/30/02 07/01/02 12/31/07 Maturity Date
LO(47)/YM(66)/FREE(7) 07/31/02 08/01/02 01/31/08 Maturity Date
LO(47)/YM(66)/FREE(7) 04/30/02 05/01/02 10/31/07 Maturity Date
LO(34)/YM(81)/FREE(5) 06/30/01 07/01/01 03/31/08 Maturity Date
LO(35)/Defeasance(81)/FREE(4) 06/30/01 NAP NAP NAP
LO(35)/Defeasance(81)/FREE(4) 06/30/01 NAP NAP NAP
LO(36)/YM(80)/FREE(4) 08/31/01 09/01/01 04/30/08 Maturity Date
LO(47)/YM(66)/FREE(7) 05/31/02 06/01/02 11/30/07 Maturity Date
LO(47)/YM(66)/FREE(7) 05/31/02 06/01/02 11/30/07 Maturity Date
LO(35)/YM(81)/FREE(4) 05/31/01 06/01/01 02/29/08 Maturity Date
LO(48)/YM(66)/FREE(6) 05/31/02 06/01/02 11/30/07 Maturity Date
LO(59)/5%(12)/4%(12)/3%(12)/2%(12)/1%(6)/FREE(7) 07/31/03 NAP NAP NAP
LO(59)/5%(12)/4%(12)/3%(12)/2%(12)/1%(6)/FREE(7) 07/31/03 NAP NAP NAP
LO(48)/YM(66)/FREE(6) 06/30/02 07/01/02 12/01/07 Maturity Date
LO(35)/Defeasance(81)/FREE(4) 06/30/01 NAP NAP NAP
LO(47)/YM(66)/FREE(7) 03/31/02 04/01/02 09/30/07 Maturity Date
LO(47)/YM(66)/FREE(7) 07/31/02 08/01/02 01/31/08 Maturity Date
LO(47)/YM(66)/FREE(7) 05/31/02 06/01/02 11/30/07 Maturity Date
LO(47)/YM(66)/FREE(7) 05/31/02 06/01/02 11/30/07 Maturity Date
LO(47)/YM(66)/FREE(7) 05/31/02 06/01/02 11/30/07 Maturity Date
LO(48)/YM(66)/FREE(6) 06/30/02 07/01/02 12/31/07 Maturity Date
LO(47)/YM(66)/FREE(7) 06/30/02 07/01/02 12/31/07 Maturity Date
LO(47)/YM(66)/FREE(7) 05/31/02 06/01/02 11/30/07 Maturity Date
LO(47)/YM(66)/FREE(7) 05/31/02 06/01/02 11/30/07 Maturity Date
LO(47)/YM(66)/FREE(7) 06/30/02 07/01/02 12/31/07 Maturity Date
LO(35)/Defeasance(81)/FREE(4) 05/17/01 NAP NAP NAP
LO(35)/Defeasance(82)/FREE(3) 05/17/01 NAP NAP NAP
LO(35)/Defeasance(82)/FREE(3) 05/17/01 NAP NAP NAP
LO(47)/YM(66)/FREE(7) 07/31/02 08/01/02 01/31/08 Maturity Date
LO(35)/Defeasance(81)/FREE(4) 08/25/01 NAP NAP NAP
LO(47)/YM(66)/FREE(7) 05/31/02 06/01/02 11/30/07 Maturity Date
LO(47)/YM(66)/FREE(7) 05/31/02 06/01/02 11/30/07 Maturity Date
LO(30)/Defeasance(86)/FREE(4) 11/30/00 NAP NAP NAP
LO(47)/YM(66)/FREE(7) 06/30/02 07/01/02 12/31/07 Maturity Date
LO(47)/YM(66)/FREE(7) 06/30/02 07/01/02 12/31/07 Maturity Date
LO(35)/Defeasance(81)/FREE(4) 08/31/01 NAP NAP NAP
LO(47)/YM(66)/FREE(7) 06/30/02 07/01/02 12/31/07 Maturity Date
LO(46)/YM(67)/FREE(7) 04/30/02 05/01/02 11/30/07 Maturity Date
LO(47)/YM(67)/FREE(6) 06/30/02 07/01/02 01/01/08 Maturity Date
LO(35)/Defeasance(82)/FREE(3) 06/30/01 NAP NAP NAP
LO(35)/Defeasance(81)/FREE(4) 07/31/01 NAP NAP NAP
LO(35)/Defeasance(81)/FREE(4) 07/12/01 NAP NAP NAP
LO(47)/YM(66)/FREE(7) 06/30/02 07/01/02 12/31/07 Maturity Date
LO(47)/YM(66)/FREE(7) 06/30/02 07/01/02 12/31/07 Maturity Date
LO(47)/YM(66)/FREE(7) 06/30/02 07/01/02 12/31/07 Maturity Date
LO(48)/YM(66)/FREE(6) 06/30/02 07/01/02 12/01/07 Maturity Date
LO(35)/Defeasance(82)/FREE(3) 07/21/01 NAP NAP NAP
LO(47)/YM(66)/FREE(7) 06/30/02 07/01/02 12/31/07 Maturity Date
LO(47)/YM(66)/FREE(7) 05/31/02 06/01/02 11/30/07 Maturity Date
LO(47)/YM(66)/FREE(7) 06/30/02 07/01/02 12/31/07 Maturity Date
LO(35)/YM(81)/FREE(4) 07/31/01 08/01/01 04/30/08 Maturity Date
LO(27)/Defeasance(89)/FREE(4) 11/30/00 NAP NAP NAP
LO(47)/YM(69)/FREE(4) 07/31/02 08/01/02 04/30/08 Maturity Date
LO(35)/Defeasance(81)/FREE(4) 08/31/01 NAP NAP NAP
LO(47)/YM(66)/FREE(7) 05/31/02 06/01/02 11/30/07 Maturity Date
LO(47)/YM(66)/FREE(7) 05/31/02 06/01/02 11/30/07 Maturity Date
LO(47)/YM(66)/FREE(7) 05/31/02 06/01/02 11/30/07 Maturity Date
LO(35)/Defeasance(81)/FREE(4) 07/31/01 NAP NAP NAP
LO(47)/YM(69)/FREE(4) 04/30/02 05/01/02 01/31/08 Maturity Date
LO(47)/YM(69)/FREE(4) 04/30/02 05/01/02 01/31/08 Maturity Date
LO(47)/YM(69)/FREE(4) 04/30/02 05/01/02 01/31/08 Maturity Date
LO(47)/YM(66)/FREE(7) 08/31/02 09/01/02 02/29/08 Maturity Date
LO(47)/YM(66)/FREE(7) 06/30/02 07/01/02 12/31/07 Maturity Date
LO(23)/4%(12)/3%(12)/2%(12)/1%(18)/FREE(7) 05/31/00 NAP NAP NAP
LO(47)/YM(66)/FREE(7) 06/30/02 07/01/02 12/31/07 Maturity Date
LO(35)/Defeasance(81)/FREE(4) 07/31/01 NAP NAP NAP
LO(35)/Defeasance(81)/FREE(4) 10/12/01 NAP NAP NAP
LO(27)/Defeasance(86)/FREE(7) 11/30/00 NAP NAP NAP
LO(26)/Defeasance(91)/FREE(3) 11/30/00 NAP NAP NAP
LO(28)/Defeasance(89)/FREE(3) 11/30/00 NAP NAP NAP
LO(23)/YM(90)/FREE(7) 04/30/00 05/01/00 10/31/07 Maturity Date
LO(23)/YM(90)/FREE(7) 04/30/00 05/01/00 10/31/07 Maturity Date
LO(23)/YM(90)/FREE(7) 04/30/00 05/01/00 10/31/07 Maturity Date
LO(23)/YM(90)/FREE(7) 04/30/00 05/01/00 10/31/07 Maturity Date
LO(29)/Defeasance(88)/FREE(3) 11/30/00 NAP NAP NAP
LO(46)/Defeasance(67)/FREE(7) 05/31/02 NAP NAP NAP
LO(35)/Defeasance(81)/FREE(4) 06/30/01 NAP NAP NAP
LO(35)/Defeasance(81)/FREE(4) 06/30/01 NAP NAP NAP
LO(35)/Defeasance(81)/FREE(4) 06/30/01 NAP NAP NAP
LO(35)/Defeasance(81)/FREE(4) 06/30/01 NAP NAP NAP
LO(47)/YM(69)/FREE(4) 05/31/02 06/01/02 02/28/08 Maturity Date
LO(35)/Defeasance(81)/FREE(4) 09/30/01 NAP NAP NAP
LO(25)/Defeasance(91)/FREE(4) 11/30/00 NAP NAP NAP
LO(26)/Defeasance(90)/FREE(4) 11/30/00 NAP NAP NAP
LO(35)/Defeasance(81)/FREE(4) 09/02/01 NAP NAP NAP
LO(25)/Defeasance(91)/FREE(4) 11/30/00 NAP NAP NAP
LO(25)/Defeasance(91)/FREE(4) 11/30/00 NAP NAP NAP
LO(47)/YM(66)/FREE(7) 06/30/02 07/01/02 12/31/07 Maturity Date
LO(47)/YM(66)/FREE(7) 06/30/02 07/01/02 12/31/07 Maturity Date
LO(35)/Defeasance(81)/FREE(4) 09/30/01 NAP NAP NAP
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CROSS RELATED
YIELD COLLATERALIZED MORTGAGE OWNERSHIP APPRAISED APPRAISAL CUT-OFF DATE
MAINTENANCE TYPE MORTGAGE LOANS LOANS INTEREST VALUE DATE LTV RATIO
<S> <C> <C> <C> <C> <C> <C>
Treasury Flat Fee Simple 27,200,000 10/17/97 77.46%
Treasury Flat 33,550,000 57.93%
Fee Simple 6,000,000 01/01/98
Fee Simple 8,600,000 01/01/98
Leasehold 7,300,000 01/01/98
Fee Simple 1,450,000 12/10/97
Fee Simple 10,200,000 12/10/97
Treasury Flat Leasehold 25,000,000 08/01/98 64.19%
Treasury Flat Fee Simple 15,200,000 06/25/97 72.37%
Treasury Flat Fee Simple 14,000,000 11/26/97 73.83%
Treasury Flat Fee Simple 12,600,000 08/25/97 76.54%
Treasury Flat Fee Simple 10,150,000 10/31/97 73.78%
Treasury Flat Yes (a) Fee Simple 10,000,000 04/01/95 67.13%
Treasury Flat Yes (a) Yes (b) Fee Simple 9,500,000 08/11/97 72.24%
Treasury Flat Fee Simple 8,000,000 12/04/95 72.27%
Treasury Flat Yes (a) Fee Simple 8,000,000 04/01/95 64.70%
Treasury Flat Yes (c) Fee Simple 8,010,000 03/14/96 61.43%
Treasury Flat Fee Simple 6,150,000 11/12/97 79.08%
Treasury Flat 7,800,000 59.82%
Fee Simple 2,300,000 07/01/96
Fee Simple 2,500,000 06/13/96
Fee Simple 3,000,000 06/10/96
Treasury Flat Fee Simple 6,400,000 09/19/97 73.48%
Treasury Flat Yes (d) Fee Simple 5,950,000 07/22/97 78.55%
Treasury Flat Fee Simple 6,000,000 06/20/97 73.97%
Treasury Flat Fee Simple 5,500,000 08/29/97 79.39%
Treasury Flat Yes (e) Fee Simple 5,750,000 02/16/98 74.13%
Treasury Flat Fee Simple 7,700,000 02/01/98 53.82%
Treasury Flat Yes (f) Fee Simple 5,750,000 11/23/97 70.65%
Treasury Flat Fee Simple 7,600,000 07/01/97 52.01%
Treasury Flat Fee Simple 5,300,000 09/02/97 72.83%
Treasury Flat Both Fee Simple 5,400,000 10/01/97 69.32%
and Leasehold
Treasury Flat Fee Simple 5,430,000 07/07/97 67.06%
Treasury Flat Leasehold 5,000,000 09/19/97 69.42%
Treasury Flat Yes (a) Yes (b) Fee Simple 4,700,000 08/11/97 72.24%
Treasury Flat 5,400,000 60.24%
Fee Simple 2,000,000 09/22/97
Fee Simple 3,400,000 09/22/97
Treasury Flat Fee Simple 4,700,000 01/23/97 66.74%
Treasury Flat Fee Simple 4,300,000 12/03/97 73.93%
Treasury Flat Yes (c) Fee Simple 4,800,000 03/14/96 64.73%
Treasury Flat Fee Simple 4,200,000 12/06/96 73.53%
Treasury Flat Fee Simple 4,700,000 07/07/97 65.11%
Treasury Flat Fee Simple 4,100,000 02/11/97 73.98%
Treasury Flat Yes (v) Fee Simple 4,350,000 07/10/97 68.36%
Treasury Flat Fee Simple 4,300,000 02/28/97 62.84%
Treasury Flat Fee Simple 4,200,000 11/06/96 63.18%
Treasury Flat Fee Simple 3,930,000 07/08/97 67.86%
Treasury Flat Fee Simple 3,650,000 12/12/97 71.75%
Treasury Flat Yes (a) Fee Simple 4,100,000 04/01/95 60.43%
Treasury Flat Fee Simple 3,130,000 07/24/97 79.22%
Treasury Flat Fee Simple 3,350,000 10/30/97 74.06%
Treasury Flat Fee Simple 3,650,000 12/20/96 67.69%
Treasury Flat Yes (g) Fee Simple 4,290,000 10/02/96 56.96%
Treasury Flat Fee Simple 3,300,000 07/11/97 72.46%
Treasury Flat Fee Simple 3,150,000 07/28/97 74.55%
Treasury Flat Fee Simple 3,133,175 01/29/98 71.49%
Treasury Flat Fee Simple 2,825,000 07/01/97 73.19%
Treasury Flat Yes (b) Yes (d) Fee Simple 2,500,000 07/22/97 75.59%
Treasury Flat Fee Simple 2,700,000 10/07/97 69.84%
Treasury Flat Fee Simple 2,550,000 07/10/97 73.78%
Treasury Flat Fee Simple 3,000,000 09/23/97 60.52%
Treasury Flat Fee Simple 2,800,000 07/21/97 62.80%
Treasury Flat Fee Simple 2,430,000 09/11/97 73.53%
Treasury Flat Fee Simple 2,870,000 07/01/97 60.40%
Treasury Flat Yes (e) Fee Simple 2,400,000 01/16/98 71.93%
Treasury Flat Fee Simple 3,500,000 12/02/96 46.22%
Treasury Flat Fee Simple 2,200,000 08/05/97 74.06%
Treasury Flat Fee Simple 3,460,000 06/19/97 47.02%
Treasury Flat Fee Simple 2,145,000 11/03/97 73.98%
Treasury Flat Fee Simple 3,500,000 04/22/98 72.99%
Treasury Flat Fee Simple 2,275,000 12/24/97 65.33%
Treasury Flat Fee Simple 2,200,000 07/24/97 67.55%
Treasury Flat Yes (h) 1,970,000 74.27%
Fee Simple 1,265,000 05/01/97
Fee Simple 705,000 05/01/97
Treasury Flat Fee Simple 2,250,000 11/18/96 63.05%
Treasury Flat Fee Simple 2,150,000 06/12/97 64.64%
Treasury Flat Fee Simple 1,765,000 09/12/97 78.55%
Treasury Flat Yes (h) 2,165,000 63.04%
Fee Simple 490,000 05/01/97
Fee Simple 1,675,000 05/01/97
Treasury Flat Fee Simple 1,770,000 05/05/97 73.99%
Treasury Flat Yes (g) Fee Simple 2,045,000 02/21/97 63.73%
Treasury Flat Yes (g) Fee Simple 2,340,000 07/03/97 54.73%
Treasury Flat Fee Simple 1,750,000 11/24/97 73.73%
Treasury Flat Fee Simple 1,900,000 08/14/97 67.53%
Treasury Flat Fee Simple 1,860,000 03/12/97 64.82%
Treasury Flat Yes (i) Fee Simple 1,625,000 07/21/97 69.53%
Treasury Flat Fee Simple 2,175,000 01/13/98 50.99%
Treasury Flat Fee Simple 1,525,000 12/11/97 71.60%
Treasury Flat Fee Simple 1,650,000 02/19/97 65.39%
Treasury Flat Yes (e) Fee Simple 1,575,000 02/09/98 69.17%
Treasury Flat Yes (i) Fee Simple 1,700,000 07/21/97 63.91%
Treasury Flat Fee Simple 1,380,000 02/18/97 72.97%
Treasury Flat Fee Simple 1,400,000 05/15/97 70.28%
Treasury Flat Yes (b) Yes (d) Fee Simple 1,360,000 07/22/97 75.59%
Treasury Flat Fee Simple 1,270,000 08/07/97 75.40%
Treasury Flat Fee Simple 1,150,000 01/30/97 70.42%
Treasury Flat Fee Simple 1,060,000 01/07/97 72.99%
NAP Fee Simple 1,000,000 11/05/97 62.34%
Treasury Flat Fee Simple 800,000 08/13/97 71.73%
Treasury Flat Fee Simple 660,000 09/17/97 54.81%
NAP Fee Simple 490,000 12/09/97 57.66%
Treasury Flat Fee Simple 3,260,000 12/02/97 76.17%
Treasury Flat Fee Simple 9,400,000 01/13/98 67.56%
Treasury Flat Fee Simple 3,900,000 03/15/98 77.77%
Treasury Flat Fee Simple 3,300,000 06/13/97 50.96%
Treasury Flat Fee Simple 12,000,000 12/15/97 66.10%
Treasury Flat Fee Simple 5,440,000 10/23/97 72.97%
Treasury Flat Fee Simple 2,550,000 02/05/98 66.85%
Treasury Flat Yes (c) Yes (j) Fee Simple 6,909,000 06/27/97 79.23%
Treasury Flat Yes (c) Yes (j) Fee Simple 2,758,000 06/27/97 79.23%
Treasury Flat Yes (c) Yes (j) Fee Simple 1,128,000 06/27/97 79.23%
Treasury Flat Yes (c) Yes (j) Fee Simple 1,147,000 06/27/97 79.23%
Treasury Flat Yes (c) Yes (j) Fee Simple 1,538,000 06/27/97 79.23%
Treasury Flat Yes (c) Yes (j) Leasehold 2,023,000 06/27/97 79.23%
Treasury Flat Yes (c) Yes (j) Fee Simple 1,936,000 06/27/97 79.23%
Treasury Flat Fee Simple 1,980,000 02/12/98 70.71%
Treasury Flat Fee Simple 2,400,000 03/11/98 77.74%
Treasury Flat Fee Simple 1,650,000 04/01/98 74.66%
Treasury Flat Fee Simple 1,360,000 05/06/98 69.41%
Treasury Flat Fee Simple 5,000,000 05/01/98 73.75%
Treasury Flat Fee Simple 4,800,000 03/02/98 64.25%
Treasury Flat Fee Simple 2,350,000 05/12/98 74.26%
Treasury Flat Yes (k) 5,300,000 74.40%
Fee Simple 2,500,000 08/07/97
Fee Simple 1,600,000 08/07/97
Fee Simple 1,200,000 08/07/97
Treasury Flat Yes (k) 17,300,000 74.40%
Fee Simple 7,400,000 08/01/97
Fee Simple 4,100,000 08/07/97
Fee Simple 3,900,000 10/31/97
Fee Simple 1,900,000 08/01/97
Treasury Flat Fee Simple 22,200,000 02/09/98 78.45%
Treasury Flat Yes (f) Fee Simple 2,100,000 04/02/98 67.06%
Treasury Flat Fee Simple 1,885,000 03/09/98 61.69%
Treasury Flat Fee Simple 2,550,000 02/06/98 68.20%
Treasury Flat 62,900,000 77.63%
Fee Simple 50,000,000 04/21/98
Fee Simple 12,900,000 04/21/98
Treasury Flat Yes (l) Fee Simple 3,200,000 01/13/98 65.21%
Treasury Flat Yes (l) Fee Simple 1,950,000 01/13/98 64.99%
NAP Fee Simple 700,000 12/18/97 61.17%
Treasury Flat Fee Simple 3,000,000 06/15/98 49.79%
Treasury Flat Leasehold 4,520,000 11/19/97 74.11%
Treasury Flat Fee Simple 17,200,000 07/13/98 40.55%
Treasury Flat 91,870,000 71.63%
Fee Simple 21,640,000 08/03/98
Fee Simple 16,700,000 08/03/98
Fee Simple 12,400,000 08/03/98
Fee Simple 11,700,000 08/03/98
Fee Simple 8,700,000 08/03/98
Fee Simple 8,400,000 08/03/98
Fee Simple 5,400,000 08/03/98
Fee Simple 3,600,000 08/03/98
Fee Simple 3,330,000 08/03/98
Interest Differential Fee Simple 3,100,000 02/10/98 72.27%
NAP Fee Simple 5,800,000 05/27/98 74.85%
Interest Differential Leasehold 1,275,000 03/03/98 72.17%
Interest Differential Fee Simple 5,000,000 02/27/98 79.68%
Interest Differential Fee Simple 3,600,000 04/01/98 55.27%
Interest Differential Fee Simple 7,000,000 04/10/98 49.72%
NAP Fee Simple 1,950,000 03/17/98 71.48%
Interest Differential Fee Simple 7,900,000 12/08/97 78.18%
Interest Differential Fee Simple 2,900,000 08/18/97 61.70%
Interest Differential Fee Simple 4,070,000 03/10/98 68.45%
Interest Differential Fee Simple 4,600,000 02/01/98 46.47%
Interest Differential Fee Simple 3,900,000 02/26/98 71.55%
NAP Fee Simple 2,420,000 02/04/98 82.22%
Interest Differential Fee Simple 3,000,000 02/03/98 66.76%
Interest Differential Fee Simple 10,300,000 03/25/98 72.52%
NAP Fee Simple 1,860,000 03/13/98 65.70%
Interest Differential Fee Simple 5,250,000 03/31/98 71.92%
Interest Differential Fee Simple 2,500,000 02/01/98 67.65%
Interest Differential Fee Simple 1,950,000 06/10/98 70.20%
Interest Differential Leasehold 12,800,000 03/18/98 63.28%
Interest Differential 3,575,000 73.24%
Fee Simple 2,600,000 04/09/98
Fee Simple 975,000 04/01/98
NAP Yes (m) Fee Simple 6,025,000 03/30/98 71.00%
NAP Yes (m) Fee Simple 5,930,000 03/30/98 73.80%
Interest Differential Fee Simple 1,600,000 05/27/98 74.67%
Interest Differential Fee Simple 5,300,000 03/16/98 74.99%
Interest Differential Fee Simple 7,600,000 02/25/98 74.53%
Interest Differential Fee Simple 3,300,000 03/11/98 77.55%
Interest Differential Yes (v) Fee Simple 2,500,000 03/12/98 75.63%
NAP Fee Simple 4,400,000 04/09/98 57.78%
NAP Fee Simple 4,750,000 04/10/98 50.15%
Interest Differential Yes (n) Fee Simple 7,500,000 03/16/98 68.89%
NAP Fee Simple 4,900,000 07/01/98 79.74%
Interest Differential Fee Simple 6,130,000 01/21/98 77.60%
Interest Differential Fee Simple 13,100,000 03/30/98 21.23%
Interest Differential Yes (o) Fee Simple 4,300,000 03/30/98 77.55%
Interest Differential Yes (d) Yes (o) Fee Simple 1,400,000 04/06/98 74.64%
Interest Differential Yes (d) Yes (o) Fee Simple 1,125,000 03/30/98 67.23%
Interest Differential Fee Simple 2,525,000 03/26/98 72.78%
Interest Differential Fee Simple 2,750,000 03/16/98 72.36%
Interest Differential Fee Simple 5,200,000 03/20/98 72.61%
Interest Differential Fee Simple 4,150,000 03/24/98 71.83%
Interest Differential Fee Simple 6,650,000 04/13/98 59.86%
NAP Fee Simple 6,750,000 03/26/98 70.65%
NAP Fee Simple 7,175,000 03/26/98 72.00%
NAP Fee Simple 5,460,000 03/26/98 67.32%
Interest Differential Fee Simple 1,400,000 12/19/97 71.13%
NAP Fee Simple 5,600,000 06/01/98 73.85%
Interest Differential Yes (p) Fee Simple 2,950,000 04/03/98 79.34%
Interest Differential Yes (p) Fee Simple 1,175,000 11/07/97 80.10%
NAP Fee Simple 8,800,000 03/11/98 79.15%
Interest Differential Fee Simple 1,580,000 04/16/98 69.25%
Interest Differential Fee Simple 11,100,000 03/15/98 51.53%
NAP Fee Simple 1,940,000 03/10/98 74.59%
Interest Differential Fee Simple 5,800,000 04/20/98 68.61%
Interest Differential Fee Simple 6,600,000 01/02/98 69.95%
Interest Differential Fee Simple 3,080,000 04/16/98 74.28%
NAP Fee Simple 3,750,000 04/17/98 78.04%
NAP Fee Simple 8,430,000 02/25/98 73.53%
NAP Fee Simple 9,500,000 05/01/98 53.88%
Interest Differential Fee Simple 1,550,000 04/13/98 70.60%
Interest Differential Fee Simple 2,550,000 03/18/98 70.36%
Interest Differential Fee Simple 3,150,000 04/17/98 71.07%
Interest Differential Yes (n) Fee Simple 5,800,000 03/25/98 63.39%
NAP Fee Simple 2,300,000 04/17/98 64.27%
Interest Differential Yes (q) Fee Simple 7,500,000 04/02/98 72.95%
Interest Differential Yes (q) Fee Simple 6,085,000 04/02/98 73.49%
Interest Differential Yes (q) Fee Simple 3,875,000 04/15/98 69.31%
Interest Differential Fee Simple 3,150,000 04/24/98 72.70%
NAP Fee Simple 3,250,000 05/04/98 73.63%
Interest Differential Fee Simple 1,600,000 04/16/98 71.58%
NAP Fee Simple 3,500,000 07/06/98 71.19%
Interest Differential Fee Simple 3,850,000 02/20/98 74.78%
Interest Differential Fee Simple 4,200,000 02/25/98 74.00%
Interest Differential Fee Simple 2,550,000 02/19/98 74.71%
NAP Fee Simple 5,000,000 04/23/98 67.71%
Interest Differential Yes (r) Fee Simple 4,100,000 02/27/98 59.89%
Interest Differential Yes (r) Fee Simple 1,650,000 02/27/98 69.53%
Interest Differential Yes (r) Fee Simple 1,700,000 02/27/98 66.12%
Interest Differential Fee Simple 4,750,000 05/05/98 78.68%
Interest Differential Fee Simple 7,900,000 04/14/98 63.07%
NAP Fee Simple 2,175,000 01/26/98 58.86%
Interest Differential Fee Simple 3,775,000 01/28/98 75.11%
NAP Fee Simple 5,650,000 10/20/97 79.40%
NAP 11,300,000 66.96%
Fee Simple 4,000,000 12/15/97
Fee Simple 7,300,000 12/30/97
NAP Fee Simple 7,050,000 05/08/98 70.61%
NAP Fee Simple 5,440,000 05/15/98 75.11%
NAP Fee Simple 16,400,000 05/16/98 38.34%
Interest Differential Yes (s) Fee Simple 5,500,000 04/01/98 72.38%
Interest Differential Yes (s) Fee Simple 7,700,000 03/01/98 64.62%
Interest Differential Yes (s) Fee Simple 5,350,000 02/27/98 68.82%
Interest Differential Yes (s) Fee Simple 23,800,000 03/03/98 58.54%
NAP Fee Simple 3,000,000 02/26/98 66.28%
NAP 11,380,000 68.09%
Fee Simple 1,280,000 03/12/98
Fee Simple 1,250,000 03/12/98
Fee Simple 1,280,000 03/12/98
Fee Simple 1,280,000 03/12/98
Fee Simple 1,250,000 03/12/98
Fee Simple 1,260,000 03/12/98
Fee Simple 1,250,000 03/12/98
Fee Simple 1,280,000 03/12/98
Fee Simple 1,250,000 03/12/98
NAP Yes (t) Fee Simple 9,235,000 05/12/98 73.78%
NAP Yes (t) Fee Simple 6,800,000 05/20/98 78.99%
NAP Yes (e) Yes (t) Fee Simple 8,215,000 05/12/98 73.86%
NAP Yes (e) Yes (t) Fee Simple 6,370,000 05/12/98 72.61%
Interest Differential Fee Simple 4,200,000 04/29/98 70.98%
NAP Fee Simple 6,350,000 07/10/98 75.47%
NAP Fee Simple 7,000,000 07/02/98 74.10%
NAP Fee Simple 2,325,000 06/30/98 72.39%
NAP Fee Simple 6,400,000 06/22/98 62.36%
NAP Fee Simple 7,450,000 07/15/98 73.73%
NAP Fee Simple 7,800,000 07/21/98 74.90%
Interest Differential Yes (f) Yes (u) Fee Simple 2,175,000 09/09/97 71.78%
Interest Differential Yes (f) Yes (u) Fee Simple 2,400,000 11/12/97 71.78%
NAP Fee Simple 17,650,000 08/01/98 79.21%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MATURITY
MORTGAGE DATE / ARD
SELLER PROPERTY NAME LTV RATIO LARGEST TENANT
<S> <C> <C> <C>
SBRC 515 22nd Street NW 53.48% General Services Administration
SBRC Master Realty Portfolio 47.61%
SBRC Ramada Inn DFW/West NAP
SBRC Historic Suites of America Hotel NAP
SBRC Ramada Inn Downtown NAP
SBRC Soho VI Multi-Family Units
SBRC River Market Multi-Family Units
SBRC Ocean City Factory Outlets 50.87% Fleming Corporation
SBRC Waterford Wedgwood Facility 72.37% Waterford Wedgwood USA, Inc.
SBRC Victorville Towne Center 65.29% Vons
SBRC University Park Towers 67.24% NAP
SBRC Woodland Apartments 65.19% NAP
SBRC Meadows at Hickory Lake Apartments 65.18% NAP
SBRC 200 Valley Road - Mt. Arlington Corporate Center 64.01% Logos Corporation
SBRC Park Oaks Shopping Ctr. 66.83% Service Merchandise
SBRC Gardens at Hickory Lake Apartments 62.82% NAP
SBRC Edmonston Crossing 55.55% Eyelab, Inc.
SBRC Summer Place Apartments 69.91% NAP
SBRC HTW Portfolio 50.69%
SBRC Waverly Plaza Kroger
SBRC Walmart Center Kroger
SBRC East Hills Mall Hill's
SBRC Linens 'N Things Retail Building 64.42% Linens 'n Things
SBRC The Deer Cross Apartments 69.53% NAP
SBRC Susse Chalet Hotel 58.14% NAP
SBRC Woodhaven Apartments 70.65% NAP
SBRC Fallfax Commercial Center 60.53% Golden Dragon Buffet Restaurant
SBRC Best Western Adams Inn 38.32% NAP
SBRC Bethesda East Office Center 61.07% Growth Stock Outloook
SBRC Comfort Inn - Sea Tac 42.56% NAP
SBRC Times Square Shopping Center 64.21% Von's
SBRC Comfort Inn-Marietta 49.31% NAP
SBRC Hacienda Del Sol 54.76% NAP
SBRC Premier Cruise Lines 61.41% Greyhound Leisure
SBRC 100 Valley Road - Mount Arlington Corporate Center 64.01% Software Associates Int'l
SBRC Sierra Center Portfolio 49.36%
SBRC Woodland Court Wisconsin Craft Market
SBRC East Towne Plaza Walgreen Company
SBRC Sherwood Mesa Shopping Center 56.49% Disabled American Veterans
SBRC Forest Hills Center 64.93% Rite Aid of New York
SBRC Talbott Shopping Center 58.43% Upscale Resale
SBRC Sunrise Plaza Shopping Center 61.33% Winn Dixie Stores, Inc.
SBRC Park Central Apartments 53.44% NAP
SBRC New Kent Crossing Shopping Center 66.50% Food Lion
SBRC Evergreen Marketplace 61.16% Porter Care
SBRC Shoppes of Killian 53.22% W. Kendall Tire & Service Ctr.
SBRC Days Inn of Orlando 46.67% NAP
SBRC 10 Victor Square 56.42% ACS Communications, Inc.
SBRC The Cosmopolitan 49.25% NAP
SBRC Arbors at Hickory Lake 58.68% NAP
SBRC Cochran Avenue Apartments 69.60% NAP
SBRC Garden Ridge Apartments 65.31% NAP
SBRC Clermont Shopping Center 60.97% South Lake Wellness Center
SBRC Alamosa Plaza Commercial Retail & Office Center 47.80% Hurst Dental
SBRC Hampton Inn-Aiken, SC 57.32% NAP
SBRC Mount Vernon Centre 54.89% State of Maryland
SBRC Federal Express Facility 58.16% Federal Express (Single Ten.)
SBRC Summit Bank Plaza 60.04% Radiology Grp.of New Brunswick
SBRC Deerwood I Apartments 66.78% NAP
SBRC Maple Springs Medical Center 56.58% Raman R. Tuli, M.D.
SBRC Winding Creek Apartment 64.85% NAP
SBRC Shoney's Inn of Augusta 42.88% NAP
SBRC Winona Quality Inn 45.16% NAP
SBRC Camilla Marketplace 63.75% Winn-Dixie Stores, Inc.
SBRC 80 Evergreen Avenue 49.51% Tereza Merchandising
SBRC Park Street Office Building 61.38% Fairfax Family Practice Center
SBRC The Mode Building 38.89% Noodles (2nd Floor/Retail)
SBRC Food Lion Grocery Store 63.32% Food Lion (Single Tenant)
SBRC East Hill Carriage Square Shopping Center 39.46% Diaz Fitness Center
SBRC Colonial Specialties Building 64.92% Colonial Specialty Company Inc
SBRC Education America Building 60.89% Education America
SBRC Westwood Apartments 53.78% NAP
SBRC Park Plaza Mall 59.66% Country Market
SBRC Bennett Apartments/Edgepark Apartments Portfolio 62.01%
SBRC Bennett Apartments NAP
SBRC Edgepark Apartments NAP
SBRC Town Square Shopping Center 53.17% Kwal Howell's Paint
SBRC Roy West Shopping Center 54.30% Video Express
SBRC Eastgate Garden Apartments 69.07% NAP
SBRC Willowgrove Apartments/Lin-Nor Apartments Portfolio 52.69%
SBRC Willowgrove Apartments NAP
SBRC Lin-Nor Apartments NAP
SBRC Powder Mill Station Shopping Center 61.97% Oren Music
SBRC Paradise Plaza Shopping Center 53.91% Gandhi Restaurant
SBRC Tropicana Topaz Shopping Center 45.59% Office 6 Lounge
SBRC Northchase Professional Park Building One 64.65% R.W. Beck, Inc. Single Tenant
SBRC 20 Crooke Avenue 55.29% NAP
SBRC Nevada Bob's Plaza 54.68% Weather Vane Restaurant
SBRC Watertower Office Building 57.37% Uniglobe Wings Travel
SBRC University of Phoenix 35.70% The University of Phoenix, Inc.
SBRC Casa Linda Apartments 63.29% NAP
SBRC Blockbuster Video Store 55.16% Silver State Entertainment Inc
SBRC 3804-3808 North Wilson Boulevard 56.54% Arlington Center for Dance
SBRC Fort Washington Office Center 52.74% Harvest Book
SBRC The Amigos Del Sol Apartments 61.25% NAP
SBRC Lakeside Apartments 59.10% NAP
SBRC Deerwood II Apartments 66.78% NAP
SBRC 214 West 30th Street 62.68% Residential Apartments
SBRC Art-Deco Supermarket 59.69% Art-Deco Supermarket
SBRC Sandy Pointe Shopping Center 61.49% 7-11/Southland Corp.
SBRC Island Plaza Shopping Center 51.90% Stacey's Boutique
SBRC 909 Park Avenue 59.62% NAP
SBRC 647 9th Avenue 45.25% OK Cleaners
SBRC 5775 Bridge Street 47.82% Triangle Pacific
SBRC Oak Shadows Mobile Home Park 65.78% NAP
SBRC Shirley 395 Business Center 54.97% Washington Golf Center
SBRC Oyster Bay Plaza 68.67% Quality Food Centers, Inc.
SBRC Kennedy Space Center Days Inn 36.85% NAP
SBRC Best Western Gateway Inn 54.12% NAP
SBRC El Paseo Village 59.38% Cedar Creek Inn
SBRC Lee Gardens Apartments 46.61% NAP
SBRC Hollywood Bldgs. 1,2,3,4A&B, 5A&B 70.36% Baron Mfg.
SBRC Dixie Business Center 70.36% Holiday Foods
SBRC I-95 Building 70.36% Multi-Entertainment
SBRC Parkwood Tract 70.36% All American Van Lines
SBRC Building V 70.36% ECO Waste & Recycling
SBRC Buildings "S", "T", and "U" 70.36% Hospitality Purchase
SBRC Buildings "E", "F", "G" 70.36% Myton Industries
SBRC Alvin Center 58.08% Chinese Restaurant
SBRC Jamestown Square I and II Apartments 68.38% NAP
SBRC Jackson/Sherwood Apts. & Thackery Ave. Apts. 60.69% NAP
SBRC Highland Office Building 56.75% Option One Mortgage Corp.
SBRC Apple Villa Apartments 64.98% NAP
SBRC Fountaingrove Medical Office Building (Cancer Center) 52.48% Redwood Regional Medical Group
SBRC College Square Apartments 65.38% NAP
SBRC Racanelli Portfolio I 65.74%
SBRC 15 Rasons Court Maharam Fabric
SBRC 33 Ranick Road Mason Industries
SBRC 26 Ranick Road W.A. Book Services
SBRC Racanelli Portfolio II 59.99%
SBRC 290 Spagnoli Road Estee Lauder Realty Corp.
SBRC 90 Nicon Court Estee Lauder Realty Corp.
SBRC 780 Park Avenue U.S. Web, Inc.
SBRC 300 Spagnoli Road TruGreen LP
SBRC Shrewsbury Commons Shopping Center 69.13% Walmart
SBRC American Foundation for Biological Research Bldg. 51.24% American Foundation for Bio.
SBRC 59th Avenue and Thunderbird Road 50.62% Blockerbuster Videos
SBRC Canton-Central Bank Shopping Center 55.96% Canton Six Chinese Restaurant
SBRC Oceanside Caldor/Gold Coast Plaza & Swan Nursery Commons Portfolio 68.18%
SBRC Oceanside Caldor/Gold Coast Plaza Caldor
SBRC Swan Nursery Commons Waldbaums
SBRC 558 Broadway 53.20% HDMI Inc.
SBRC 183-02 through 183-14 Horace Harding Expressway 53.56% Hongie Cho - Grocery
SBRC 90 Saint Andrews Place 51.39% NAP
SBRC Hunter Office Building 40.62% NetStart, Inc.
SBRC 385 Franklin Avenue 59.67% Cardio Medical Products
SBRC Expressway Building 32.41% Emigrant Savings Bank
SBRC Kranzco Portfolio 62.57%
SBRC Douglasville Crossing Wal-Mart
SBRC Snellville Oaks Wal-Mart
SBRC Tifton Corners Wal-Mart
SBRC Village Oaks Wal-Mart
SBRC Statler Crossing Wal-Mart
SBRC Pickaway Crossing Wal-Mart
SBRC Vidalia Walmart Wal-Mart
SBRC Meeting Square Wal-Mart
SBRC Summerville Center Wal-Mart
CREI Elwye Center 58.86% CSC
CREI Flinthills Mall 66.18% Sutherlands Lumber
CREI 67 Mason Street 58.90% The Fitness Image
CREI 116 Post Road 70.57% David's Bridal
CREI Bank One Office Building 45.21% Bank One of Pasadena
CREI 1601 N. 39th Street 40.05% Nutmeg Mills, Inc.
CREI Royal Manor Apts. 62.63% NAP
CREI Eastpointe Plaza 69.45% K-Mart Corp.
CREI Comfort Inn - Clinton 51.00% NAP
CREI Fairfield Inn - Layton 56.08% NAP
CREI Cineplex Odeon Theater 0.47% Cineplex
CREI Washington Heights Apartments 63.00% NAP
CREI Park Villa Apartments 67.07% NAP
CREI Chesapeake Yachting Center 54.89% NAP
CREI Tower Park Bldgs. 100 and 200 64.15% Principal Mutual
CREI Richman Gordman 1/2 Price Stores 61.25% Richman Gordman 1/2 Price Store
CREI Savers Plaza 58.80% Savers
CREI 383 Route 46 West 55.35% Bradley Pharmaceuticals
CREI Brookside Mobile Home Park 56.78%
CREI Menlo Park Office Center 55.63% Cornerstone Research
CREI University Plaza/Winding River Plaza Portfolio 64.81%
CREI University Plaza Welsh Farms
CREI Winding River Plaza Kruzers
CREI Lakeover Offices 57.85% Mississippi Hospital Assoc.
CREI Business Park Offices (200 Business Park) 59.80% Companion Technologies
CREI Crown Professional Building 60.56% StaffPro Security
CREI Southwind Village Center 61.26% Fisher & Arnold Inc.
CREI Hampton Inn-Bossier,LA 61.02% NAP
CREI Elmtree Townhouse Apartments 68.31% NAP
CREI Eagleview Apartments 66.64% NAP
CREI Larchmont Village 50.46% Rite Aid Corporation
CREI Health Net Building 34.27% Health Net, Inc.
CREI Holiday Inn-Murfreesboro 56.26% NAP
CREI Brookwood Apartments 70.40% NAP
CREI Arbor Park Apartments 63.08% NAP
CREI Sunharbor Manor Nursing Home 14.87% NAP
CREI River Ridge At Hulen 67.47% Joshua's Christian Store
CREI Bardin Square Shopping Center 64.66% Angel Heaven
CREI Country Day Plaza Shopping Center 58.24% Fort Worth Dialysis
CREI Circle K Mobile Home Park 59.11% NAP
CREI Starlite Plaza 59.36% Shanks Martial
CREI Comfort Suites - Jacksonville 59.23% NAP
CREI Holiday Inn Express-Lexington 58.64% NAP
CREI Sands Harbor Hotel & Marina 49.44% Jeremiah's Grille
CREI Amberley Suites Hotel 57.49% NAP
CREI Granada Suites Hotel 58.51% NAP
CREI Inn at the Peachtrees Hotel 54.79% NAP
CREI Canal Winchester Medical Center 58.05% Mount Carmel
CREI Westbourne Morrison Limited 59.43% Marble by Design
CREI Marengo Village Apartments 70.20% NAP
CREI Harvard Square Apartments 70.87% NAP
CREI Wyndwood Apartments 69.41% NAP
CREI York & Parks Retail Building 56.21% Mattress Discounters
CREI Marina Park Hotel 41.96% NAP
CREI Market Square Office Building 66.05% Price & Zimmerman
CREI The Reynolds Building 56.00% Nations, Inc.
CREI Metro Mobile Home Park 61.87% NAP
CREI San Marcos Crossroads 60.44% Dedicated 2 Kids Day Care
CREI Executive Plaza 62.51% Luther Speight
CREI Days Inn- Hollywood, FL 59.70% NAP
CREI Fountainbleau Storage & Apts 39.78% NAP
CREI Marvin D. Love Office Building 57.65% Wol-Med
CREI Jackson Place Apartments 62.05% NAP
CREI Best Western Mirage 58.14% NAP
CREI Holiday Inn Hotel - Trinidad 51.73% NAP
CREI Days Inn - Richmond, IN 45.24% NAP
CREI Hampton Inn-Grand Rapids 59.50% NAP
CREI Hampton Inn-Saginaw 60.10% NAP
CREI Howard Johnson-Cincinnati 56.46% NAP
CREI Lakeside Plaza 59.05% Terry Halverson
CREI Greencrest Mobile Home Park 64.53% NAP
CREI Shannon Tower Office Building 58.43% Acme Alabama, Inc.
CREI Blue Star Storage 57.62% NAP
CREI Westminster Executive Plaza-LAM Portfolio 66.40% Medpartners
CREI Harbor Gateway Garden 65.79% Desk Talk
CREI Nexus Garden Plaza 66.34% 20th Century Insurance
CREI Ramada Inn-Plant City 55.16% NAP
CREI Thunderbird Plaza 48.37% Sutherlands
CREI 2401 Research Building 56.16% Gerard's Photo Lab, Inc.
CREI 2301 Research Building 53.40% TGS Technology Geo
CREI 10605 Concord Street 63.62% Hodge Hart & Associates
CREI Country View Apartments 55.19% NAP
CREI Skyline Village MHP 54.97% NAP
CREI Quadrant Multi-Use Center 61.31% Entertainment Plus, Inc.
CREI Prospect Pointe East 69.18% NAP
CREI Distribution Portfolio 55.09%
CREI Distribution II Owner/occupant
CREI Transdistribution - WV Owner occupant
CREI Econolite 57.06% Econolite Control Products Inc.
CREI Sun River Professional Plaza 60.50% Dixie Dialysis Center
CREI CS Hotels 30.74% CW Hotel
CREI 168 Canal 63.83% Hygenetics, Inc.
CREI 300 Rosewood Drive 56.92% Datacube Inc.
CREI 35 Otis Street 60.57% Coughlin Electric
CREI 850 Boylston Street 51.63% Brigham & Women's Hospital, Inc.
CREI Best Western Metro Inn 54.81% NAP
CREI Day Care Centers Portfolio 52.35%
CREI Ashburn Farms II Unicity Day Care Center
CREI Fair Lakes II Learning Tree
CREI Centreville Green Rocking Horse Child Care Centers
of America
CREI McNair Farms Learning Tree
CREI South Riding South Riding Children's Center
CREI Sully Station I Sully Station Children Center
CREI Centre Ridge Rocking Horse Child Care Centers
of America
CREI Cascades Unicity Day Care Center
CREI Fair Lakes I Rocking Horse Child Day Care
Centers
CREI Courtyard by Marriott-Jackson 59.92% NAP
CREI Courtyard by Marriott-Germantown 64.16% NAP
CREI Hampton Inn & Suites-Jackson 59.99% NAP
CREI Courtyard by Marriott-Tupelo 58.97% NAP
CREI Holiday Inn-Muscatine 58.17% NAP
CREI Levinson Plaza 65.28% Levinson, Axelrod
CREI BV Hollywood Storage Facility 58.21% LA Security Storage
CREI Fairfax Village Shopping Center 58.75% REN
CREI PK Products Industrial Building 50.33% P&K Products
CREI Sunny Hills Business Park 64.98% St. Jude Billing
CREI Cerritos Professional Center 65.93% Platt College
CREI Stoffel Seals-GA 59.13% Stoffel Seals Corp.
CREI Stoffel Seals-NY 59.13% Stoffel Seals Corp.
CREI Parcfront Apartments 69.19% NAP
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SECOND
LARGEST LARGEST
TENANT SECOND SECOND TENANT
LARGEST LARGEST LEASE LARGEST LARGEST LEASE
TENANT TENANT MATURITY TENANT TENANT MATURITY
NRSF NRSF% DATE SECOND LARGEST TENANT NRSF NRSF% DATE
<S> <C> <C> <C> <C> <C> <C>
102,080 100% 11/30/07 NAP
NAP
NAP
NAP
34,240 73% American Reprographics Inc 5,366 11% 12/31/99
122,171 59% Faultless Starch/Bon Ami 20,729 10% 03/01/96
35,000 18% 09/30/08 The Dress Barn, Inc. 8,500 4% 01/31/03
292,806 100% 05/31/08 NAP
71,040 35% 07/31/06 Cinemark 29,397 15% 06/30/16
NAP
NAP
NAP
8,473 10% 11/30/98 Quality Systems & Software Inc. 7,080 8% 02/28/03
50,000 46% 01/31/03 Mattress Giant 8,248 8% 08/14/07
NAP
9,449 18% 08/31/04 Reliable/La-Z-Boy 5,267 10% 05/31/98
NAP
28,199 51% 11/30/99 CVS 10,069 18% 11/30/99
27,958 65% 03/31/07 CVS 10,069 23% 03/31/07
85,817 60% 07/31/03 Office Depot 25,900 18% 02/28/05
32,779 100% 01/31/13 NAP
NAP
NAP
NAP
7,096 20% 04/30/04 Exclusive Interim (Office) 6,500 19% 07/31/04
NAP
4,736 8% 02/28/99 Cauldron Company 3,581 6% 09/30/99
NAP
30,000 52% 10/30/07 Norwest Bank 5,000 9% 03/31/01
NAP
NAP
46,560 68% 04/30/01 Heritage Facilities, Inc. 10,800 16% 01/31/99
14,935 34% 10/30/02 Hilltown Consulting Inc. 9,465 22% 10/30/02
11,750 35% 04/30/02 Gift Baskets and More 6,000 18% 12/31/99
11,060 46% 12/31/25 Video Adventures 4,229 17% 11/30/00
20,600 26% 03/31/06 Paddock Pool Construction Co. 14,160 18% 11/30/03
9,600 60% 11/30/11 Francisco Jin 2,560 16% 03/31/09
4,636 13% 11/14/99 Rickshaw 3,840 11% 11/30/02
43,750 50% 04/10/11 Dollar General Store 8,000 9% 10/31/05
NAP
29,000 59% 12/17/16 Revco 8,450 17% 01/14/12
7,212 24% 11/23/07 Blockbuster Video 6,420 22% 02/07/07
6,441 18% 09/30/07 Video Trax Inc. 4,420 12% 10/31/00
NAP
39,605 100% 11/30/08 NAP
NAP
NAP
NAP
NAP
15,900 36% 08/31/01 Walgreen Company 14,700 33% 02/28/57
6,000 13% 08/31/99 ARGO Corporation 4,800 10% 03/31/01
NAP
47,216 100% 06/30/07 NAP
41,235 100% 10/31/03 NAP
8,000 44% 04/30/07 Pulse Savings Bank 4,016 22% 11/01/07
NAP
3,100 24% 08/01/09 Maple Spring Ambulatory Surgical Center 2,835 22% 08/01/09
NAP
NAP
NAP
26,482 65% 06/30/10 Crown Fashions 3,000 7% 02/28/00
50,000 57% 07/31/01 Vanguard Corrugated 19,000 22% 09/30/98
9,051 50% 12/31/12 Robert C. Koch, Inc. 3,367 18% 09/30/02
9,113 23% 10/31/09 Comstock (3rd Floor/Office) 4,147 10% 01/31/02
29,000 100% 02/29/12 NAP
33,930 61% 08/31/08 The Sports Pub 4,750 9% 05/31/99
16,554 44% 07/31/12 Body Alive International, Inc. 11,300 30% 05/31/02
34,017 100% 04/30/08 NAP
NAP
43,000 58% 01/31/02 White Drug 10,000 13% 12/31/06
NAP
NAP
4,880 23% 09/30/00 Stefano's Restaurant 4,284 20% 07/01/06
5,716 32% 11/30/01 Burger King 2,800 16% 09/30/16
NAP
NAP
NAP
3,726 32% 06/30/00 Video Liquidators 2,951 26% 05/31/06
4,000 25% 07/14/03 Capri Pizza 2,400 15% 11/30/02
4,000 15% 09/30/09 Arby's - PAD 3,618 14% 02/01/02
14,416 100% 06/30/07 NAP
NAP
4,450 22% 01/18/01 Century 21 Adobe Realty 3,600 18% 12/31/99
3,495 15% 03/31/02 Vincent Insurance 2,415 11% 04/30/03
13,200 100% 12/31/04 NAP
NAP
7,500 100% 01/30/12 NAP
6,451 69% 06/30/02 Food for Health 1,975 21% 02/28/01
8,303 37% 10/31/02 Bartolomeo Pio 6,454 29% 10/31/01
NAP
NAP
NAP
13,148 68% Tony Papas & Sons, Inc. 4,784 25% 12/31/99
6,660 69% 02/01/12 Liquid, Inc. 813 8% 05/25/00
3,145 34% 12/31/08 The Water Store 1,200 13% 02/07/01
1,260 17% 04/30/02 Liza Le Nails 1,200 16% 10/31/02
NAP
1,520 39% Owner Occupied Elizabeth Flemin - Residential 1,200 31% 10/31/98
12,000 46% 12/31/01 Lauriats 11,300 43% 03/31/01
NAP
30,000 27% 04/30/02 D.C. Rentals 26,117 23% 03/31/08
26,004 46% 02/28/18 Thrifty Payless (Rite Aid) 21,080 38% 09/30/02
NAP
NAP
4,078 11% 10/31/03 My Mother's Garden 3,321 9% 08/31/00
NAP
20,370 13% 12/31/98 Miami Herald 18,898 12% 12/31/98
40,279 68% 04/30/07 Jackeline Body Shop 5,650 10% 12/31/00
21,400 64% 08/31/00 Party Design 12,100 36% 09/30/00
9,705 34% 07/31/99 International Dock Products 6,486 23% 05/31/99
20,000 42% 08/31/02 Jen Homes International 12,000 25% 08/31/99
8,778 15% 04/30/03 Supreme Hotel 5,005 9% 10/31/99
10,402 22% 12/31/99 Sea Gate Auto 10,153 21% 01/31/03
2,130 20% 12/24/02 Newspaper Office 1,990 19% 09/30/02
NAP
NAP
8,040 57% 12/30/03 DialAmerica Marketing, Inc. 6,190 44% 09/30/01
NAP
9,045 37% 12/31/02 Santa Rosa Memorial Hospital 8,056 33% 07/31/05
NAP
60,000 100% 04/30/03 NAP
40,060 100% 12/31/99 NAP
30,000 100% 12/31/01 NAP
145,600 100% 07/31/00 NAP
82,835 100% 06/30/02 NAP
97,940 100% 12/31/01 NAP
24,000 51% 02/28/99 Miss Chocolate 23,015 49% 07/31/01
149,704 69% 01/31/18 Laser Force 10,000 5% 12/31/02
30,000 100% 10/31/09 NAP
5,460 66% 09/01/07 Einstein Bagels/Starbucks 2,825 34% 08/01/07
5,691 28% 07/31/05 Central Bank 3,085 15% 04/30/01
94,421 32% 01/31/12 Pergament Home Center 82,471 28% 06/30/11
50,000 41% 06/30/10 Walgreens Eastern Co., Inc. 11,466 9% 07/31/20
7,700 48% 02/28/09 Spa Ace 4,300 27% 09/30/04
3,500 35% 01/31/08 Tri Boro Bagel 2,800 28% 04/30/09
NAP
16,882 44% 09/30/01 Gannon Technologies, Inc. 10,055 26% 10/31/99
12,700 16% 08/31/99 Ultraflex Systems, Inc. 12,450 16% 12/31/01
8,029 9% 06/30/03 Payless ShoeSource, Inc. 3,959 5% 06/30/04
114,760 43% 01/26/10 Cub Foods 63,070 24% 08/31/10
114,513 52% 12/29/11 Snellville Oaks 34,500 16% 03/31/15
101,047 54% 01/31/11 Bruno's 47,982 26% 07/31/10
108,217 63% 05/31/08 Haverty Furniture 45,000 26% 09/09/03
86,944 52% 12/29/09 Fresh Farm 60,000 36% 07/14/13
91,990 72% 10/27/09 Stage 17,990 14% 03/31/00
97,096 100% 10/31/05 NAP
47,638 51% 12/06/08 Food Lion 29,123 31% 11/17/09
50,059 74% 04/09/04 Big B 8,450 12% 06/30/01
19,397 51% 04/30/01 MKI 9,910 26% 08/31/03
78,405 31% 04/05/00 Food 4 Less 48,412 19% 01/31/03
4,700 43% 12/31/01 HB Nitkin Group 2,930 27% 12/31/07
8,600 27% 05/31/07 Metro Mobile CTS 6,500 20% 07/31/99
23,771 27% 09/30/01 The Bridge Over Troubled Waters 11,168 13% 02/28/02
449,334 100% 09/30/01
NAP
83,076 27% 09/30/10 Bonanza 63,597 20% 04/01/03
NAP
NAP
38,022 100% 10/31/11
NAP
NAP
NAP
81,130 77% 04/30/02 W.W. Grainger 8,801 8% 04/28/01
90,579 100% 10/31/01
33,200 36% 01/07/06 Phoenix Fitness 15,874 17% 05/15/05
15,120 44% 01/31/03 Banyan Communications 9,850 29% 01/31/08
21,816 58% 11/11/08 Coldwell Banker 8,166 22% 12/31/02
3,300 14% 01/31/03 Roman Restaurant 2,778 12% 05/31/99
2,400 31% 03/31/98 Pizzarama 1,500 19% 04/01/08
23,868 32% 05/31/00 United States Postal Service 20,953 28% 09/30/02
10,661 12% 11/30/00 Family Savers Of Mississippi 9,413 11% 03/31/01
5,044 23% 10/31/99 Alamitos Back Pain Center 1,524 7% 08/31/02
27,469 45% 03/31/04 Treadwell & Harry Insurance 10,263 17% 04/30/01
NAP
NAP
NAP
9,930 62% 01/31/09 Larchmont Beauty Ctr 2,120 13% 06/14/04
73,702 100% 09/30/04
NAP
NAP
NAP
NAP
9,228 21% 05/31/08 Abacus Restaurant 3,600 8% 07/31/99
4,904 27% 12/31/98 Dominos Pizza 2,042 11% 06/30/00
5,174 34% 04/30/00 Better Health Market 2,983 19% 08/31/02
NAP
5,280 10% 06/01/99 Country Cross 4,000 8% 12/31/00
NAP
NAP
4,000 25% 12/31/99 Southeast Corporate Mgmt. 1,600 10% 09/30/99
NAP
NAP
NAP
7,454 68% 05/31/07 S. Malik, DDS 1,491 14% 05/31/07
9,992 6% 12/31/99 Scioto Kitchen 9,992 6% 10/31/99
NAP
NAP
NAP
4,000 66% 05/30/05 Fitness Resource 2,050 34% 02/28/99
NAP
4,996 25% 05/31/00 The Mad Hatters d/b/a Remax 4,996 25%
25,000 53% 08/31/08 ARC Slides 7,209 15% 11/30/01
NAP
7,428 33% 09/01/05 Rodeo's Meat Market 3,012 13% 06/01/02
7,848 7% 03/31/01 Internal Medicine Group 7,778 7% 04/30/01
NAP
NAP
8,598 30% 12/31/09 Reliable Life 3,532 12% 03/14/01
NAP
NAP
NAP
NAP
NAP
NAP
NAP
12,262 54% 10/07/00 Gary Thomas (ReMax) 8,363 37% 04/30/06
NAP
6,370 17% 03/31/00 Unite Inc. 6,100 16% 12/31/99
NAP
17,006 46% 12/31/01 Regional Center of Orange Cty 10,027 27% 04/12/03
8,539 10% 04/30/00 US Healthworks 7,595 9% 08/31/04
14,256 46% 06/30/01 Transpacific 9,211 30% 06/30/03
NAP
51,870 53% 10/31/10 Cloth World 12,365 13% 11/30/01
5,780 31% 08/31/02 Directed Energy 4,611 25% 05/31/02
5,192 23% 10/31/02 HESKA Corporation 3,260 14% 03/31/99
7,590 14% 04/30/99 Bell BCI Company 4,318 8% 02/28/03
NAP
NAP
13,600 13% 08/01/00 Lightning Showcase 9,900 10% 12/01/99
NAP
208,800 100% 10/31/18
385,000 100% 10/31/18
92,800 64% 06/30/18 California Chassis, Inc. 51,200 36% 06/30/18
6,200 12% 02/28/07 RE/Max First Realty 5,000 10% 08/31/00
65,833 100% 10/15/86
20,027 62% 10/31/98 Fleet Bank 3,730 12% 12/31/02
46,380 58% 06/30/99 Riso Inc. 19,078 24% 12/31/02
60,850 50% 06/30/04 Supermarket Info Systems 60,850 50% 02/28/02
82,460 59% 01/31/03 John Hancock Mutual Life 7,909 6% 02/28/01
NAP
6,323 100% 10/14/11
6,323 100% 10/20/06
6,323 100% 09/29/05
6,323 100% 08/31/10
6,323 100% 08/31/12
6,323 100% 04/15/12
6,323 100% 10/31/07
6,323 100% 08/23/10
6,323 100% 12/01/04
NAP
NAP
NAP
NAP
NAP
17,352 32% 03/31/00 Amserv Healthcare 4,215 8% 12/31/98
80,000 87% 08/31/08 Bulbtronics 4,500 5% 12/31/99
5,600 27% 09/30/05 Papa Johns 2,400 11% 09/02/07
141,284 100% 11/30/08
15,175 9% 08/31/01 Alliance of Abilities 8,590 5% 08/14/00
19,034 28% 05/31/00 Private Industry Council 16,190 24% 07/31/99
144,900 100% 01/31/13
40,242 100% 01/31/13
NAP
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MANAGEMENT COMPANY MORTGAGE LOAN ORIGINATOR U/W REVENUES U/W EXPENSES
<S> <C> <C> <C>
RDP Management Corporation Salomon Brothers Realty Corporation 3,443,376 1,083,682
Salomon Brothers Realty Corporation
Embassy Hotel Management Co., Inc. 1,926,477 1,490,719
Embassy Hotel Management Co., Inc. 2,349,342 1,776,743
Embassy Hotel Management Co., Inc. 3,038,447 2,262,648
Embassy Properties, Inc. 415,938 223,760
Embassy Properties, Inc. 1,775,590 667,932
Owner Managed Salomon Brothers Realty Corporation 2,874,612 1,013,334
Waterford Investors, LLC M. Robert Goldman & Company of New Jersey Inc. 1,639,692 380,183
J.L. Management Co. Pacific Equity Advisors 1,748,169 446,360
Trammell Crow Residential Serv M. Robert Goldman & Company of New Jersey Inc. 2,453,216 1,224,061
Timothy O. Fanning John Alden Asset Management Company 1,434,671 521,409
Pinnacle Brokerage & Mgt. Co. Huntoon Hastings Capital Corp. 1,972,133 956,255
Atkins Management, L.L.C. Salomon Brothers Realty Corporation 1,520,971 575,768
Transwestern Property Company RFG Financial 1,260,467 326,185
Pinnacle Brokerage & Mgt. Co. Huntoon Hastings Capital Corp. 1,527,035 725,850
Investment Properties, Inc. Suburban Capital Markets, Inc. 1,156,807 352,614
Reebco Management Barnett Bank, N.A. 967,417 352,278
Suburban Capital Markets, Inc.
EBL&S Property Management, Inc. 303,477 90,434
EBL&S Property Management, Inc. 402,269 93,731
EBL&S Property Management, Inc. 449,941 155,278
10970 Ashton Corporation John Alden Asset Management Company 601,357 82,940
JMA Properties, Inc Aries Capital Incorporated 986,159 429,541
Chalet Susse International Inc Mercantile Bank and Trust Company 1,711,035 980,745
Sunset Enterprises Barnett Bank, N.A. 887,531 381,037
Schupp Development Corporation John Alden Asset Management Company 653,379 154,224
Adams Inn Motel, Inc. Greyfield Mortgage Corporation 2,227,071 1,483,469
Klinedinst Management, Inc. John Alden Asset Management Company 877,809 270,539
Condor Hotel Development Suburban Capital Markets, Inc. 2,080,013 1,335,166
D.T.J., Inc. John Alden Asset Management Company 681,980 174,781
Motel Management of Roanoke Suburban Capital Markets, Inc. 1,438,776 828,486
Davisville Properties, Inc. Home Savings of America, FSB 815,383 361,868
May and McLaud Aries Capital Incorporated 935,663 378,148
Atkins Management, L.L.C. M. Robert Goldman & Company of New Jersey Inc. 761,721 333,191
Greyfield Mortgage Corporation
Phoenix Investors, LLC 360,906 133,485
Phoenix Investors, LLC 490,890 178,773
English & Continental Prop Inc John Alden Asset Management Company 662,267 163,312
Stonecrest Management, Inc. Salomon Brothers Realty Corporation 470,073 103,775
Whalen Properties, Inc. Suburban Capital Markets, Inc. 707,948 181,988
Owner managed John Alden Asset Management Company 544,803 135,705
McDougal Properties, L.C. Salomon Brothers Realty Corporation 928,706 511,847
Morton G. Thalhemer, Inc. John Alden Asset Management Company 470,516 78,181
Inverness Properties, LLC Belford Partners, Inc. d/b/a United Mortgage Company 555,122 182,603
Breder Management Corporation John Alden Asset Management Company 550,008 172,688
Owner Operated John Alden Asset Management Company 1,421,068 850,970
Toeniskoetter & Breeding, Inc. Huntoon Hastings Capital Corp. 441,328 97,688
Rose Associates Salomon Brothers Realty Corporation 546,700 152,959
Pinnacle Brokerage & Mgmt Co Huntoon Hastings Capital Corp. 673,659 312,289
Trans-Asia Real Estate Service Home Savings of America, FSB 450,271 170,332
Texcan Properties, Inc. Sparks Financial Group Inc. 862,213 502,830
Robert Wade John Alden Asset Management Company 517,569 86,415
Commercial West Realty Advisor John Alden Asset Management Company 548,828 144,075
North Point Hospitality Group Suntrust Mortgage, Inc. 1,014,948 671,520
Steven L. Rosenstein Smith Barney Mortgage Capital Group, Inc. 565,414 217,199
Delson/Norris Investment John Alden Asset Management Company 357,432 65,301
The Thomas Organization Smith Barney Mortgage Capital Group, Inc. 372,302 103,398
JMA Properties, Inc. Aries Capital Incorporated 606,513 352,659
Owner managed John Alden Asset Management Company 278,628 59,104
Owner Managed John Alden Asset Management Company 317,018 100,333
B.B.K, Inc. Suntrust Mortgage, Inc. 1,040,707 755,515
Winona Hospitality Corp. Greyfield Mortgage Corporation 1,472,259 1,117,416
Southeast Leasing & Management Barnett Bank, N.A. 273,302 64,431
Ari Jacobowitz Parmann Mortgage Associates, LP 403,075 123,273
Raymond C Schupp John Alden Asset Management Company 321,549 105,188
Paragon Commercial Group John Alden Asset Management Company 507,294 188,429
Owner Managed John Alden Asset Management Company 224,193 35,627
Ford Real Estate Management Co John Alden Asset Management Company 379,654 124,798
Owner Managed John Alden Asset Management Company 221,878 8,875
R.J. Pipes Huntoon Hastings Capital Corp. 430,179 84,177
Owner managed John Alden Asset Management Company 376,996 133,684
Owner managed John Alden Asset Management Company 331,435 122,840
John Alden Asset Management Company
JVL Management Company 303,178 166,367
JVL Management Company 192,020 114,794
TriCo Realty & Investment Co. John Alden Asset Management Company 293,378 65,171
The Boyer Company, LC John Alden Asset Management Company 260,199 65,266
Diamond Realty Management, LLC John Alden Asset Management Company 282,998 117,275
John Alden Asset Management Company
JVL Management Company 157,176 86,524
JVL Management Company 391,581 233,182
Community Realty Company, Inc. Smith Barney Mortgage Capital Group, Inc. 251,111 63,570
Commercial West Realty Advisor John Alden Asset Management Company 295,228 91,458
Commercial West Realty Advisor John Alden Asset Management Company 333,246 98,926
The Mathews Company John Alden Asset Management Company 195,956 37,168
Owner managed Parmann Mortgage Associates, LP 389,242 190,784
A+ Management & Investment,Inc. John Alden Asset Management Company 256,092 69,224
Keystone Real Estate Mgmt. Secore Financial Corporation 345,585 154,284
L & M Asset Management, Inc. John Alden Asset Management Company 156,396 6,256
Casa MJC, LLC John Alden Asset Management Company 221,531 68,470
C&M Sallon, LLC (Owner) John Alden Asset Management Company 153,282 4,598
Schupp Development Company John Alden Asset Management Company 175,404 27,339
Keystone Real Estate Mgmt. Secore Financial Corporation 300,120 142,450
1st Valley Realty, Inc. John Alden Asset Management Company 263,928 120,941
Gatekeeper Property Management John Alden Asset Management Company 281,889 133,408
JMA Properties, Inc. Aries Capital Incorporated 326,039 192,348
Yunus Khyvat Parmann Mortgage Associates, LP 219,851 90,969
Owner-managed John Alden Asset Management Company 204,817 61,585
Barlow-Nielsen Associates Inc. John Alden Asset Management Company 142,898 33,945
Giordano and Giordano Parmann Mortgage Associates, LP 126,430 26,490
Barry Williams Parmann Mortgage Associates, LP 172,282 101,049
Owner-managed Parmann Mortgage Associates, LP 72,171 22,719
Gerald B. Meyer Parmann Mortgage Associates, LP 85,288 33,372
Helga L. Herla Home Savings of America, FSB 500,677 230,189
M.J. Greaney, LLC Salomon Brothers Realty Corporation 1,071,603 232,894
Inovest John Alden Asset Management Company 482,874 123,264
Satish Saraswat Greyfield Mortgage Corporation 997,907 690,952
Vista Hotel Management, Inc. Smith Barney Mortgage Capital Group, Inc. 3,275,505 2,038,714
EPV Management, Inc. Smith Barney Mortgage Capital Group, Inc. 765,037 198,855
Jacob Deutsch Parmann Mortgage Associates, LP 380,966 144,916
The Kelsey Group, Inc. Barnett Bank, N.A. 964,063 209,072
The Kelsey Group, Inc. Barnett Bank, N.A. 369,089 78,930
The Kelsey Group, Inc. Barnett Bank, N.A. 165,520 45,815
The Kelsey Group, Inc. Barnett Bank, N.A. 145,712 33,776
The Kelsey Group, Inc. Barnett Bank, N.A. 256,738 57,146
The Kelsey Group, Inc. Barnett Bank, N.A. 325,177 109,488
The Kelsey Group, Inc. Barnett Bank, N.A. 265,015 62,633
Owner managed John Alden Asset Management Company 240,036 65,575
Hammack Management, Inc. Skymar Capital Corporation 345,149 146,874
T.K. Harris Commercial RE Svcs Skymar Capital Corporation 258,152 104,323
Highland Associates Skymar Capital Corporation 180,414 48,859
Apple Realty & Auction Co. Skymar Capital Corporation 602,612 212,531
Owner Managed Skymar Capital Corporation 585,064 199,803
owner managed Skymar Capital Corporation 284,180 87,967
Salomon Brothers Realty Corporation
Racanelli Realty Services, Inc. 367,667 108,193
Racanelli Realty Services, Inc. 202,239 64,721
Racanelli Realty Services, Inc. 166,027 44,664
Salomon Brothers Realty Corporation
Racanelli Realty Services, Inc. 1,141,037 268,548
Racanelli Realty Services, Inc. 540,075 121,166
Racanelli Realty Services, Inc. 450,328 128,303
Racanelli Realty Services, Inc. 276,124 95,669
Chesapeake Commercial Property Salomon Brothers Realty Corporation 2,306,346 555,955
Klinedinst Management, Inc. Skymar Capital Corporation 343,956 151,204
Jerome S. Stumphauzer Skymar Capital Corporation 197,454 42,841
Elliott Associates Realty Salomon Brothers Realty Corporation 316,878 88,155
Salomon Brothers Realty Corporation
NLS Company 6,568,291 1,900,090
NLS Company 1,400,842 392,036
Broadway 558 Realty, LLC Parmann Mortgage Associates, LP 447,957 150,004
Horace 183 Realty LLC Parmann Mortgage Associates, LP 247,275 70,171
Jose Gutierrez Parmann Mortgage Associates, LP 113,624 45,730
Jefferson/LBG, LLC Skymar Capital Corporation 427,617 196,334
Saddleback Managment Salomon Brothers Realty Corporation 609,188 193,455
Menowitz Management Corp. Salomon Brothers Realty Corporation 2,948,289 1,297,105
Salomon Brothers Realty Corporation 8,790,781 1,539,232
Kranzco Realty Trust 1,979,659 349,430
Kranzco Realty Trust 1,614,832 280,652
Kranzco Realty Trust 1,214,196 237,713
Kranzco Realty Trust 1,034,542 156,344
Kranzco Realty Trust 904,673 151,606
Kranzco Realty Trust 815,739 143,099
Kranzco Realty Trust 508,080 63,438
Kranzco Realty Trust 387,981 82,269
Kranzco Realty Trust 331,079 74,681
The Jason Corporation GMAC Commercial Mortgage Corp. 504,822 204,327
Weigand - Omega Management, Inc. GMAC Commercial Mortgage Corp. 1,178,118 560,802
The Innovest Group, dba HBNitkin Group Citibank PBG East 229,738 112,774
The Innovest Group, Inc. d/b/a The HB Nitkin GroupCitibank PBG East 615,283 142,295
TCPA, Inc. Mitchell Mortgage Company, LLC 772,108 467,801
Quadrelle Group, Inc. Citibank PBG East 1,016,639 234,569
Lindgren/Felgar GMAC Commercial Mortgage Corp. 243,884 76,875
Petroplus & Associates Huntington Capital Corp. 1,061,462 340,153
Viram Enterprises, Inc. Branch Banking & Trust 578,627 304,505
Western States Lodging and Management L.C. KeyCorp Real Estate Capital Markets, Inc. 756,927 357,309
Ordower Real Estate GMAC Commercial Mortgage Corp. 510,852 25,543
Winding Brook Corporation Legg Mason Real Estate Services, Inc. 768,134 420,462
A.B. Verdery, Jr. Financial Federal Savings Bank 528,566 260,519
Chesapeake Yachting Center, Inc. GMAC Commercial Mortgage Corp. 508,500 256,056
Lockard Development, Inc. GMAC Commercial Mortgage Corp. 1,605,975 635,825
Goodrich Management Corp. LJ Melody & Company, Inc. 175,750 10,888
Diversified Management L.L.C. LJ Melody & Company, Inc. 829,497 258,904
Iris Glassman Citibank PBG East 341,173 94,838
Carmen Romano Manufacturers and Traders Trust Company 351,434 191,887
Matteson Realty Services, Inc. Citibank PBG West 1,808,694 587,837
GMAC Commercial Mortgage Corp.
D&A Investment Corp. 350,290 92,593
D&A Investment Corp. 122,386 30,887
Underwood Investment Co. Financial Federal Savings Bank 857,561 315,839
Underwood Commercial R.E. Financial Federal Savings Bank 743,100 176,724
Vonda L. Pelto dba Pelto Management LJ Melody & Company, Inc. 302,557 146,117
Weston Retail Management Company, Inc. Financial Federal Savings Bank 648,923 124,595
Vista Host Inc. Financial Federal Savings Bank 1,682,668 800,500
John E. and Rhonda Meyers and family GMAC Commercial Mortgage Corp. 420,967 107,305
Evans Real Estate Group GMAC Commercial Mortgage Corp. 436,926 204,146
Ronald A. Simms Commercial Development George Smith Partners 506,857 113,519
Ronald A. Simms Commercial Development George Smith Partners 598,940 108,247
Landcom Hospitality, Inc. Financial Federal Savings Bank 2,311,000 1,512,200
Owners Property Management Corporation, Inc. Financial Federal Savings Bank 924,433 466,396
Paradigm Properties Management Team, Inc. LJ Melody & Company, Inc. 1,111,899 515,813
Sunharbor Manor Real Estate Company KeyCorp Real Estate Capital Markets, Inc. 17,504,390 16,131,110
William C. Jennings Management Co. LJ Melody & Company, Inc. 603,132 167,935
William C. Jennings Management Co. LJ Melody & Company, Inc. 221,990 65,916
William C. Jennings Management Co. LJ Melody & Company, Inc. 162,253 49,059
Patrick L. Davis LJ Melody & Company, Inc. 377,074 140,132
Northcross Development, Inc. GMAC Commercial Mortgage Corp. 405,342 112,438
East Coast Hospitality, LLC Branch Banking & Trust 1,082,899 510,260
Lexington Lodging, Inc. Branch Banking & Trust 872,976 421,606
Sands Harbor, Inc. GMAC Commercial Mortgage Corp. 1,584,610 1,040,823
Creative Hotel Concepts, Inc. Citicorp Real Estate, Inc. 2,581,197 1,812,800
Creative Hotel Concepts, Inc. Branch Banking & Trust 2,196,163 1,350,543
Creative Hotel Concepts, Inc. Branch Banking & Trust 1,934,108 1,362,521
Calgary Management Ltd. Huntington Capital Corp. 129,252 2,000
Rudolph Management Company Huntington Capital Corp. 728,460 203,899
Rooftree Management Company, Inc. GMAC Commercial Mortgage Corp. 425,109 174,052
Rooftree Management Company, Inc. GMAC Commercial Mortgage Corp. 180,887 78,494
J&S Development & Management Corp. Citibank PBG East 1,389,662 619,302
Constellation Realty Management, LLC GMAC Commercial Mortgage Corp. 201,745 42,739
Sound Hospitality Management, Inc. GMAC Commercial Mortgage Corp. 2,511,766 1,645,346
Commercial Condominium Management Company GMAC Commercial Mortgage Corp. 235,911 69,789
Owner Managed (Chris Reynolds) Huntington Capital Corp. 712,937 196,485
Park Operations, Inc. GMAC Commercial Mortgage Corp. 1,318,172 790,677
The O'Rielly Company LJ Melody & Company, Inc. 409,963 129,147
Executive Property Management Co. LJ Melody & Company, Inc. 1,163,531 690,369
Prince-Bush Management Co. Legg Mason Real Estate Services, Inc. 1,848,976 983,746
Heaven Company GMAC Commercial Mortgage Corp. 1,330,175 499,996
S/T Real Estate Services, Inc. LJ Melody & Company, Inc. 312,949 167,372
Kelly Realty Financial Federal Savings Bank 276,393 71,720
Harvey Carmichael Collateral Mortgage, Inc 875,040 535,432
Landcom Hospitality Management, Inc. Financial Federal Savings Bank 1,539,172 966,109
Jai Guru Inc. Huntington Capital Corp. 557,265 262,447
Brilyn, Inc. Financial Federal Savings Bank 1,495,255 752,920
Bri Lyn, Inc. Financial Federal Savings Bank 1,316,713 709,893
Brilyn, Inc. Financial Federal Savings Bank 996,106 621,032
Mission Equity New South Federal Savings Bank 491,613 166,020
GCMHP, Inc. Capital Advisors Real Estate Group 459,384 211,937
Southeast Properties, Inc. Financial Federal Savings Bank 375,204 193,860
Blue Star Investments, Inc. a Texas Corporation GMAC Commercial Mortgage Corp. 591,383 256,188
Sunny Hills - Palladium LJ Melody & Company, Inc. 568,827 209,814
Sunny Hills - Palladium LJ Melody & Company, Inc. 935,963 513,569
Sunny Hills - Palladium LJ Melody & Company, Inc. 380,790 149,637
Midtown Properties, Inc. Financial Federal Savings Bank 1,972,928 1,443,405
Everitt Enterprises Inc. LJ Melody & Company, Inc. 740,425 304,259
Everitt Enterprises Inc. LJ Melody & Company, Inc. 240,100 73,684
Everitt Enterprises Inc. LJ Melody & Company, Inc. 236,807 89,418
Mark Winkler Company Citicorp Real Estate, Inc. 778,115 297,651
Sunshine Corporation Financial Federal Savings Bank 1,573,699 834,891
Colorado Real Estate & Investment Company GMAC Commercial Mortgage Corp. 504,920 352,639
Fiesta Realty Financial Federal Savings Bank 523,460 175,023
Royse & Brinkmeyer Apartments LJ Melody & Company, Inc. 747,587 259,791
Huntington Capital Corp.
Transmanagement 413,624 20,461
Transmanagement 866,250 43,313
Aurora Holdings, Inc. GMAC Commercial Mortgage Corp. 731,378 39,569
Sun River Development II, LC GMAC Commercial Mortgage Corp. 669,628 174,907
CW Hotel Limited Partnership City National Bank 987,000 29,740
Glen Management Corp Citibank PBG East 732,445 195,189
Glen Management Corp Citibank PBG East 914,441 376,526
Glen Management Corp Citibank PBG East 604,363 160,217
Glen Management Corp Citibank PBG East 2,885,978 1,269,711
Owner Managed (Best Western Metro Inn) H & A Capital Real Estate Investment Bankers 1,087,653 744,526
GMAC Commercial Mortgage Corp.
Next Generation - Ashburn Farm II, LLC GMAC Commercial Mortgage Corp. 143,005 8,450
Next Generation - Fair Lakes II, LLC GMAC Commercial Mortgage Corp. 141,270 8,663
Next Generation - Centerville Greene, LLC GMAC Commercial Mortgage Corp. 147,622 8,981
McNair Farms Day Care Center LLC GMAC Commercial Mortgage Corp. 141,630 9,182
Next Generation - South Riding, LLC GMAC Commercial Mortgage Corp. 138,840 7,942
Next Generation - Sully Station II, LLC GMAC Commercial Mortgage Corp. 143,005 10,150
Next Generation Investments, LLC GMAC Commercial Mortgage Corp. 142,135 8,507
Next Generation - Cascades, LLC GMAC Commercial Mortgage Corp. 143,005 9,950
Next Generation - Fair Lakes I, LLC GMAC Commercial Mortgage Corp. 142,215 8,711
Master Hospitality Services, Inc. Financial Federal Savings Bank 1,976,000 1,028,181
Master Hospitality Services, Inc. Financial Federal Savings Bank 1,557,115 738,049
Master Hospitality Services, Inc. Financial Federal Savings Bank 1,544,769 784,188
Master Hospitality Services, Inc. Financial Federal Savings Bank 1,256,914 624,850
Shaner Hotel Group Limited Partnership Financial Federal Savings Bank 1,448,792 980,787
Weingarten Development Corporation GMAC Commercial Mortgage Corp. 1,109,313 539,091
Leon Vahn (BV Hollywood Storage) GMAC Commercial Mortgage Corp. 742,276 94,644
Jackson Prentice Management, Inc. Dwight A. Bowler 356,043 101,238
P&K PROPERTIES LJ Melody & Company, Inc. 513,000 15,390
Sunny Hills Management Company LJ Melody & Company, Inc. 1,224,353 471,393
Sunny Hills Management Company LJ Melody & Company, Inc. 1,098,244 381,631
Stoffel Properties Corporation LJ Melody & Company, Inc. 240,896 7,227
Stoffel Properties Corporation LJ Melody & Company, Inc. 245,879 7,376
CMS GMAC Commercial Mortgage Corp. 2,881,866 1,432,662
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
U/W RECENT RECENT
U/W NOI NCF YEAR END YEAR
U/W NOI DSCR U/W NCF DSCR RECENT YEAR TYPE DATE REVENUES
<S> <C> <C> <C> <C> <C> <C>
2,359,694 1.20 2,339,278 1.19 Calendar Year 12/31/97 3,948,196
3,083,992 1.77 2,520,072 1.44 Trailing 12 months 04/30/98
435,758 339,434 Trailing 12 months 04/30/98 2,215,549
572,599 455,132 Trailing 12 months 04/30/98 2,349,342
775,799 623,876 Trailing 12 months 04/30/98 3,071,708
192,178 157,190 Trailing 12 months 04/30/98 491,937
1,107,658 944,440 Trailing 12 months 04/30/98 1,819,755
1,861,278 1.34 1,731,037 1.25 Calendar Year 12/31/97 2,996,776
1,259,509 1.52 1,177,523 1.43 Calendar Year 12/31/97 1,406,040
1,301,809 1.52 1,128,820 1.32 Calendar Year 12/31/97 1,744,100
1,229,155 1.48 1,161,005 1.40 Annualized 7 months 07/31/97 2,498,732
913,262 1.49 848,012 1.38 Calendar Year 12/31/97 1,434,671
1,015,878 1.42 955,674 1.33 Calendar Year 12/31/97 2,002,011
945,203 1.48 822,365 1.28 Calendar Year 12/31/97 1,446,459
934,282 1.59 808,429 1.38 Calendar Year 12/31/97 1,356,885
801,185 1.45 753,585 1.36 Calendar Year 12/31/97 1,550,931
804,193 1.51 734,046 1.38 Calendar Year 12/31/97 1,228,064
615,139 1.53 577,139 1.44 Calendar Year 12/31/97 964,961
816,244 1.68 663,726 1.37 Calendar Year 12/31/97
213,043 174,989 Calendar Year 12/31/97 338,212
308,538 265,574 Calendar Year 12/31/97 431,805
294,663 223,163 Calendar Year 12/31/97 472,856
518,417 1.30 505,305 1.27 Annualized 7 months 05/29/97 633,006
556,618 1.36 518,818 1.26 Calendar Year 12/31/97 966,284
730,290 1.66 647,201 1.47 Trailing 12 months 07/09/98 1,713,850
506,494 1.37 468,494 1.27 Calendar Year 12/31/97 898,838
499,155 1.32 452,039 1.20 Calendar Year 12/31/97 639,806
743,602 1.78 632,248 1.51 Trailing 12 months 06/30/98 2,432,841
607,270 1.69 524,275 1.46 Calendar Year 12/31/97 873,753
744,847 2.00 640,846 1.72 Calendar Year 12/31/97 2,107,375
507,199 1.51 472,394 1.41 Calendar Year 12/31/97 701,258
610,290 1.62 538,351 1.43 Calendar Year 12/31/97 1,433,336
453,515 1.35 420,898 1.25 Annualized 4 months 04/30/98 835,265
557,515 1.81 457,926 1.49 Calendar Year 12/31/97 861,129
428,530 1.48 367,327 1.28 Calendar Year 12/31/97 844,065
539,538 1.77 478,941 1.57 Calendar Year 12/31/97
227,421 192,288 Calendar Year 12/31/97 387,576
312,117 286,653 Calendar Year 12/31/97 531,552
498,955 1.53 424,698 1.30 Trailing 12 months 02/28/98 676,591
366,298 1.43 354,898 1.39 Calendar Year 12/31/97 498,562
525,960 1.58 486,200 1.46 Calendar Year 12/31/97 722,556
409,098 1.34 354,772 1.17 Trailing 12 months 03/31/98 488,753
416,859 1.44 364,884 1.26 Calendar Year 12/31/97 928,439
392,335 1.37 372,140 1.30 Calendar Year 12/31/97 440,414
372,519 1.34 340,467 1.22 Calendar Year 12/31/97 562,577
377,320 1.34 335,995 1.19 Calendar Year 12/31/97 568,832
570,098 1.90 499,045 1.67 Calendar Year 12/31/97 1,421,068
343,640 1.39 322,435 1.30 Calendar Year 12/31/97 482,200
393,741 1.55 339,071 1.34
361,370 1.37 342,120 1.29 Calendar Year 12/31/97 673,659
279,939 1.32 269,919 1.27 Calendar Year 12/31/97 446,413
359,383 1.77 316,883 1.56 Annualized 10 months 10/31/97 883,160
431,154 1.83 385,826 1.63 Trailing 12 months 03/31/98 468,851
404,753 1.66 353,713 1.45 Calendar Year 12/31/97 495,620
343,428 1.43 302,830 1.26 Calendar Year 12/31/97 1,015,193
348,215 1.38 313,083 1.24 Calendar Year 12/31/97 373,401
292,131 1.49 266,476 1.36 Annualized 8 months 08/31/97 367,703
268,904 1.38 252,442 1.30 Annualized 6 months 03/31/98 407,585
253,854 1.52 223,854 1.34 Trailing 12 months 07/31/98 546,020
219,524 1.28 201,226 1.18 Calendar Year 12/31/97 261,244
216,685 1.34 204,185 1.27 Annualized 3 months 12/31/97 309,530
285,192 1.50 226,363 1.19 Calendar Year 12/31/97 1,040,707
354,843 1.88 281,230 1.49 Calendar Year 12/31/97 1,485,252
208,871 1.44 190,760 1.31 Calendar Year 12/31/97 271,860
279,802 1.70 229,515 1.39
216,361 1.48 198,878 1.36 Annualized 10 months 10/31/97 227,184
318,865 1.94 269,005 1.64 Calendar Year 12/31/97 497,463
188,566 1.28 184,216 1.25 Calendar Year 12/31/97 224,193
254,856 1.53 211,832 1.27 Calendar Year 12/31/97 433,470
213,003 1.57 194,338 1.43
346,002 1.44 307,607 1.28 Calendar Year 12/31/97 292,081
243,312 1.81 227,312 1.69 Calendar Year 12/31/97 353,609
208,595 1.60 170,233 1.30 Annualized 3 months 03/31/98 302,764
214,037 1.46 193,537 1.32 Calendar Year 12/31/97
136,811 124,561 Calendar Year 12/31/97 283,564
77,226 68,976 Calendar Year 12/31/97 188,279
228,207 1.58 204,926 1.42 Calendar Year 12/31/97 303,488
194,933 1.37 181,055 1.27 Calendar Year 12/31/97 256,017
165,723 1.39 150,723 1.26 Calendar Year 12/31/97 260,885
229,051 1.67 202,649 1.48 Calendar Year 12/31/97
70,652 63,152 Calendar Year 12/31/97 134,626
158,399 139,497 Calendar Year 12/31/97 372,685
187,541 1.51 173,091 1.39 Calendar Year 12/31/97 291,077
203,770 1.50 185,940 1.37 Calendar Year 12/31/97 310,962
234,320 1.84 204,549 1.61 Calendar Year 12/31/97 324,806
158,788 1.44 143,033 1.30
198,458 1.65 181,920 1.51 Annualized 11 months 03/31/98 396,000
186,868 1.50 161,764 1.30 Trailing 12 months 03/31/98 274,114
191,301 1.75 157,826 1.44 Calendar Year 12/31/97 327,242
150,140 1.39 135,156 1.25
153,061 1.70 142,811 1.59 Calendar Year 12/31/97 199,038
148,684 1.34 145,309 1.31 Calendar Year 12/31/97 156,750
148,065 1.53 138,179 1.43 Calendar Year 12/31/97 220,776
157,670 1.50 125,215 1.19 Calendar Year 12/31/97 350,852
142,987 1.41 129,987 1.28 Trailing 12 months 03/31/98 268,080
148,481 1.47 128,641 1.28 Calendar Year 12/31/97 268,774
133,691 1.52 118,691 1.34 Trailing 12 months 07/31/98 290,554
128,882 1.36 121,175 1.28 Trailing 12 months 02/28/97
143,232 1.69 128,489 1.52 Trailing 12 months 03/31/98 146,323
108,953 1.38 101,691 1.29 Calendar Year 12/31/97 127,873
99,940 1.60 90,500 1.45 Annualized 10 months 10/31/97 142,800
71,593 1.26 65,843 1.16
49,452 1.40 46,707 1.32
51,916 1.85 36,898 1.31 Calendar Year 12/31/97 90,387
270,488 1.36 262,613 1.32 Calendar Year 12/31/97 501,838
838,709 1.51 719,632 1.29 Calendar Year 12/31/97 1,032,279
359,610 1.44 322,599 1.29 Calendar Year 12/31/97
306,955 1.77 257,060 1.48 Trailing 12 months 08/31/97 966,530
1,236,791 1.75 1,073,016 1.52 Calendar Year 12/31/97 3,569,882
566,182 1.63 499,276 1.43 Calendar Year 12/31/97 803,806
236,050 1.44 223,300 1.36 Calendar Year 12/31/97 403,158
754,991 1.52 674,463 1.34 Calendar Year 12/31/97 926,233
290,159 1.52 260,567 1.34 Calendar Year 12/31/97 359,172
119,705 1.52 102,956 1.34 Calendar Year 12/31/97 167,435
103,776 1.52 89,441 1.34 Calendar Year 12/31/97 123,882
199,592 1.52 175,696 1.34 Calendar Year 12/31/97 228,966
215,689 1.52 187,263 1.34 Calendar Year 12/31/97 342,587
202,382 1.52 178,279 1.34 Calendar Year 12/31/97 236,204
174,461 1.38 162,746 1.29 Calendar Year 12/31/97 225,780
198,275 1.31 183,021 1.21 Calendar Year 12/31/97 332,678
153,829 1.42 134,979 1.25 Calendar Year 12/31/97 246,851
131,555 1.56 109,498 1.30 Calendar Year 12/31/97 233,323
390,081 1.29 362,831 1.20
385,261 1.40 343,071 1.25 Calendar Year 12/31/97 657,095
196,213 1.37 180,713 1.26 Calendar Year 12/31/97 295,140
518,355 1.45 446,852 1.25 Calendar Year 12/31/97
259,474 226,474 Calendar Year 12/31/97 389,427
137,518 115,485 Calendar Year 12/31/97 212,877
121,363 104,893 Calendar Year 12/31/97 174,728
1,794,774 1.54 1,589,410 1.37 Calendar Year 12/31/97
872,489 792,409 Calendar Year 12/31/97 1,104,671
418,909 373,350 Calendar Year 12/31/97 454,453
322,921 269,054 Calendar Year 12/31/97 474,562
180,455 154,597 Calendar Year 12/31/97 277,159
1,750,391 1.23 1,656,427 1.16
192,752 1.49 168,652 1.30 Calendar Year 12/31/97 335,562
154,613 1.47 145,499 1.39 Calendar Year 12/31/97
228,723 1.46 207,254 1.32 Calendar Year 12/31/97 334,670
5,677,007 1.43 5,511,909 1.39 Calendar Year 12/31/97
4,668,201 4,559,793 Calendar Year 12/31/97 6,827,809
1,008,806 952,116 Calendar Year 12/31/97 1,505,155
297,953 1.61 276,893 1.50 Calendar Year 12/31/97 501,276
177,104 1.53 164,404 1.42 Calendar Year 12/31/97 289,824
67,894 1.63 64,644 1.55 Calendar Year 12/31/97 110,160
231,283 1.74 173,332 1.30 Calendar Year 12/31/97 421,946
415,733 1.45 379,935 1.32 Calendar Year 12/31/97 640,143
1,651,184 2.82 1,352,851 2.31 Calendar Year 12/31/97 3,186,352
7,251,008 1.38 6,522,778 1.24
1,630,229 1,501,052 Calendar Year 12/31/97 2,121,537
1,334,181 1,224,786 Calendar Year 12/31/97 1,675,665
976,482 861,067 Calendar Year 12/31/97 1,236,580
878,198 790,208 Calendar Year 12/31/97 1,161,159
753,067 629,567 Calendar Year 12/31/97 993,430
672,639 620,006 Calendar Year 12/31/97 855,755
444,642 427,165 Calendar Year 12/31/97 492,951
305,172 240,710 Calendar Year 12/31/97 458,492
256,398 228,217 Calendar Year 12/31/97 355,597
300,495 1.51 254,079 1.28 Calendar Year 12/31/97 544,268
617,316 1.70 477,395 1.31 Calendar Year 12/31/97 1,175,485
116,965 1.43 104,194 1.27
472,988 1.42 442,695 1.33 Calendar Year 12/31/97 533,246
304,307 1.71 230,138 1.29 Calendar Year 12/31/97 728,668
782,070 2.63 663,484 2.23 Calendar Year 12/31/97 1,060,538
167,009 1.49 163,109 1.46 Calendar Year 12/31/97 232,561
721,309 1.38 684,570 1.31 Calendar Year 12/31/97 1,019,074
274,122 1.66 242,141 1.47 Calendar Year 12/31/97 578,627
399,618 1.59 354,727 1.41 Calendar Year 12/31/97 751,882
485,309 1.57 477,705 1.55 Calendar Year 12/31/97 422,709
347,672 1.52 323,672 1.42 Calendar Year 12/31/97 758,625
268,047 1.52 223,499 1.26 Calendar Year 12/31/97 523,605
252,444 1.39 238,164 1.31 Calendar Year 12/31/97 508,031
970,150 1.56 870,244 1.40 Calendar Year 12/31/97 1,386,762
164,863 1.59 134,224 1.29 Calendar Year 12/31/97 187,000
570,594 1.69 507,356 1.51 Calendar Year 12/31/97 750,718
246,335 1.63 212,853 1.40 Calendar Year 12/31/97 376,668
159,547 1.34 152,447 1.28 Calendar Year 12/31/97 351,434
1,220,857 1.86 1,149,291 1.75 Calendar Year 12/31/97 1,371,744
1.59 1.47
257,697 238,342 Calendar Year 12/31/97 342,356
91,499 85,173
541,722 1.43 478,697 1.26 Calendar Year 12/31/97 921,852
566,376 1.49 492,194 1.29 Calendar Year 12/31/97 754,147
156,440 1.50 140,349 1.34 Calendar Year 12/31/97 269,580
524,328 1.48 465,968 1.32 Calendar Year 12/31/97 634,743
882,168 1.74 797,168 1.57 Calendar Year 12/31/97 1,828,199
313,662 1.50 294,852 1.41 Calendar Year 12/31/97 442,935
232,779 1.51 216,529 1.40 Calendar Year 12/31/97 424,378
393,338 1.95 376,524 1.86 Calendar Year 12/31/97 520,451
490,693 2.21 456,654 2.06 Calendar Year 12/31/97 588,589
798,800 1.74 666,483 1.45 Calendar Year 12/31/97 2,336,512
458,037 1.42 405,837 1.25 Calendar Year 12/31/97 903,023
596,086 1.44 535,486 1.29 Calendar Year 12/31/97 836,598
1,373,280 5.03 1,289,756 4.73 Calendar Year 12/31/91 8,255,471
435,197 1.56 407,564 1.46 Calendar Year 12/31/97 483,969
156,073 1.82 145,763 1.70 Calendar Year 12/31/97 173,224
113,194 1.83 101,804 1.64 Calendar Year 12/31/97 177,415
236,942 1.47 230,913 1.44 Calendar Year 12/31/97 373,134
292,904 1.63 257,664 1.43 Calendar Year 12/31/97 436,707
572,639 1.71 513,524 1.53 Calendar Year 12/31/97 1,199,003
451,370 1.70 406,885 1.54 Calendar Year 12/31/97 826,133
543,786 1.48 454,638 1.24 Calendar Year 12/31/97 1,633,592
768,396 1.83 649,173 1.55 Calendar Year 12/31/97 2,542,268
845,620 1.87 745,281 1.65 Calendar Year 12/31/97 2,196,163
571,588 1.77 483,002 1.49 Calendar Year 12/31/97 1,965,011
127,252 1.43 116,368 1.31
524,561 1.48 469,384 1.32 Calendar Year 12/31/97 720,638
251,057 1.29 234,257 1.20 Calendar Year 12/31/97 434,717
102,393 1.31 95,193 1.21 Calendar Year 12/31/97 185,297
770,360 1.38 725,360 1.30 Calendar Year 12/31/97 1,370,734
159,006 1.66 153,013 1.60 Calendar Year 12/31/97 203,369
866,419 1.71 713,400 1.41 Calendar Year 12/31/97 2,667,156
166,122 1.36 147,632 1.21 Calendar Year 12/31/97 234,427
516,452 1.46 464,053 1.31 Calendar Year 12/31/97 759,159
527,495 1.37 515,645 1.34 Calendar Year 12/31/97 1,343,778
280,816 1.39 262,825 1.30 Calendar Year 12/31/97 391,831
473,162 1.82 379,383 1.46 Calendar Year 12/31/97 1,034,597
865,230 1.59 772,481 1.42 Calendar Year 12/31/97 2,119,850
830,179 1.82 759,937 1.67 Calendar Year 12/31/97 1,467,509
145,577 1.49 122,613 1.26 Calendar Year 12/31/97 205,948
204,673 1.38 194,673 1.32
339,608 1.69 271,108 1.35 Calendar Year 12/31/97 835,850
573,064 1.76 497,338 1.52 Calendar Year 12/31/97 1,612,061
294,818 2.01 255,572 1.74 Calendar Year 12/31/97 569,270
742,335 1.53 663,723 1.37 Calendar Year 12/31/97 1,474,427
606,820 1.52 538,283 1.35 Calendar Year 12/31/97 1,231,713
375,074 1.58 322,508 1.36 Calendar Year 12/31/97 913,702
325,593 1.62 297,310 1.48 Calendar Year 12/31/97 518,821
247,447 1.28 240,947 1.25 Calendar Year 12/31/97 392,177
181,344 1.78 150,150 1.47 Calendar Year 12/31/97 329,697
335,195 1.54 325,738 1.50 Calendar Year 12/31/97 422,709
359,013 1.47 328,712 1.35 Calendar Year 12/31/97 429,400
422,394 1.60 333,434 1.26 Calendar Year 12/31/97 929,474
231,152 1.43 207,279 1.29 Calendar Year 12/31/97 343,868
529,523 1.76 411,411 1.37 Calendar Year 12/31/97 1,995,396
436,166 2.07 359,345 1.71 Calendar Year 12/31/97 721,459
166,417 1.69 148,512 1.51 Calendar Year 12/31/97 213,772
147,389 1.53 123,673 1.28 Calendar Year 12/31/97 252,319
480,464 1.48 430,155 1.32 Calendar Year 12/31/97 463,845
738,809 1.85 648,359 1.63 Calendar Year 12/31/97 1,554,033
152,281 1.39 137,031 1.25 Calendar Year 12/31/97 478,476
348,437 1.38 320,241 1.27 Calendar Year 12/31/97 488,069
487,796 1.38 464,796 1.31 Calendar Year 12/31/97 270,063
1,216,101 1.75 967,027 1.39
393,163 306,511
822,938 660,516
691,809 1.61 610,719 1.42
494,721 1.41 441,328 1.26 Calendar Year 12/31/97 519,346
957,260 1.81 957,260 1.81
537,256 1.64 508,167 1.56 Calendar Year 12/31/97 739,793
537,915 1.32 474,667 1.17 Calendar Year 12/31/97 944,198
444,146 1.48 398,508 1.33 Calendar Year 12/31/97 598,659
1,616,267 1.41 1,485,197 1.30 Calendar Year 12/31/97 2,791,889
343,127 1.87 292,127 1.59 Calendar Year 12/31/97 1,104,334
1,202,191 1.74 1,168,318 1.69
134,555 133,606 Calendar Year 12/31/97 140,004
132,606 125,392 Calendar Year 12/31/97 144,374
138,641 131,175 Calendar Year 12/31/97 146,837
132,449 131,500 Calendar Year 12/31/97 138,880
130,898 129,950 Calendar Year 12/31/97 46,280
132,855 131,906 Calendar Year 12/31/97 91,435
133,628 126,411 Calendar Year 12/31/97 142,135
133,055 132,106 Calendar Year 12/31/97 140,228
133,504 126,271 Calendar Year 12/31/97 149,700
947,819 1.59 867,509 1.45 Calendar Year 12/31/97 1,998,705
819,066 1.74 756,250 1.61
760,581 1.43 702,995 1.32 Calendar Year 12/31/97 1,544,769
632,064 1.56 579,682 1.43 Calendar Year 12/31/97 704,418
468,006 1.75 371,021 1.38 Calendar Year 12/31/97 1,520,468
570,222 1.55 503,832 1.37 Calendar Year 12/31/97 1,137,410
647,632 1.56 636,541 1.53 Calendar Year 12/31/97 751,503
254,804 1.72 239,436 1.62 Calendar Year 12/31/97 308,282
497,610 1.44 441,080 1.28
752,960 1.66 604,367 1.33 Calendar Year 12/31/97 1,062,719
716,613 1.49 636,233 1.32 Calendar Year 12/31/97 1,013,045
233,669 1.57 181,414 1.34
238,503 1.57 220,646 1.34
1,449,204 1.30 1,357,851 1.21 Calendar Year 12/31/97 2,804,347
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RECENT RECENT 1996
YEAR RECENT YEAR NOI 1996 1996 NOI
EXPENSES YEAR NOI DSCR REVENUES EXPENSES 1996 NOI DSCR
<S> <C> <C> <C> <C> <C> <C>
1,087,319 2,860,877 1.45 3,824,596 1,151,731 2,672,865 1.35
3,433,580 1.97 2,412,559 1.38
1,648,912 566,637 1,828,749 1,466,850 361,899
1,730,437 618,905 599,084 413,744 185,340
2,260,959 810,749 2,912,473 2,159,050 753,423
216,129 275,808 394,382 254,678 139,704
658,274 1,161,481 1,671,959 699,766 972,193
1,019,603 1,977,173 1.43 2,703,742 912,262 1,791,480 1.29
14,060 1,391,980 1.69 1,230,121 252,769 977,352 1.18
414,332 1,329,768 1.56 1,249,735 381,630 868,105 1.02
1,232,343 1,266,389 1.52 2,483,139 1,180,202 1,302,937 1.57
520,030 914,641 1.49 1,290,626 493,627 796,999 1.30
969,232 1,032,779 1.44 1,885,633 927,460 958,173 1.34
514,999 931,460 1.55 1,397,045 502,189 894,856 1.57
320,895 1,035,990 1.77 995,976 324,454 671,522 1.15
735,914 815,017 1.47 1,446,414 736,478 709,936 1.28
329,457 898,607 1.68 1,155,101 249,557 905,544 1.70
349,631 615,330 1.53 929,380 353,457 575,923 1.44
925,440 1.91 813,127 1.68
78,214 259,998 317,659 86,775 230,884
95,188 336,617 405,254 94,429 310,825
144,031 328,825 425,562 154,144 271,418
66,042 566,964 1.42
416,357 549,927 1.34 913,782 386,254 527,528 1.29
859,556 854,294 1.94 1,500,448 777,550 722,898 1.64
381,038 517,800 1.40 883,546 360,705 522,841 1.42
155,205 484,601 1.28 770,506 154,609 615,897 1.63
1,366,492 1,066,349 2.55 1,648,051 1,284,631 363,420 0.87
270,377 603,376 1.68 889,918 276,775 613,143 1.71
1,446,419 660,956 1.78 2,246,241 1,434,149 812,092 2.18
168,736 532,522 1.59 706,990 151,077 555,913 1.66
739,099 694,237 1.85 1,418,066 790,973 627,093 1.67
281,904 553,361 1.64 755,836 323,717 432,119 1.28
166,181 694,948 2.25 863,092 153,983 709,109 2.30
336,567 507,498 1.55 870,406 307,117 563,289 1.57
599,451 1.96 518,299 1.70
136,254 251,322 300,937 156,832 144,105
183,423 348,129 545,627 171,433 374,194
158,398 518,193 1.59 510,423 119,709 390,714 1.20
75,935 422,627 1.65
174,072 548,484 1.64 712,662 161,940 550,722 1.65
161,241 327,512 1.08 527,611 154,238 373,373 1.23
559,559 368,880 1.27 906,888 464,180 442,708 1.53
60,565 379,849 1.33
187,749 374,828 1.35
168,129 400,703 1.42 567,038 201,293 365,745 1.29
850,970 570,098 1.90 1,309,289 759,601 549,688 1.83
90,978 391,222 1.58 483,690 92,723 390,967 1.58
315,909 357,750 1.35 633,925 298,091 335,834 1.27
169,414 276,999 1.30 431,918 150,850 281,068 1.32
493,105 390,055 1.93 845,426 453,044 392,382 1.94
58,449 410,402 1.74
150,287 345,333 1.41 494,367 134,827 359,540 1.47
617,980 397,213 1.65 1,089,112 612,602 476,510 1.98
207,026 166,375 0.66
46,075 321,628 1.64 375,767 44,965 330,802 1.69
90,916 316,669 1.63 316,781 95,499 221,282 1.14
298,905 247,115 1.53 550,230 318,201 232,029 1.25
47,480 213,764 1.25 250,686 48,397 202,289 1.18
100,054 209,476 1.30
721,220 319,487 1.69 1,033,616 726,051 307,565 1.62
1,227,887 257,365 1.36 1,552,385 1,212,172 340,213 1.80
65,713 206,147 1.42 271,133 51,428 219,705 1.51
66,832 160,352 1.10
187,144 310,319 1.89 386,645 178,009 208,636 1.27
25,893 198,300 1.35 221,835 29,654 192,181 1.31
125,577 307,893 1.85 400,646 115,562 285,084 1.72
34,896 257,185 1.07 291,275 41,190 250,085 1.04
118,604 235,005 1.75 305,705 107,002 198,703 1.48
112,059 190,705 1.46 293,766 99,708 194,058 1.49
190,998 1.30 199,000 1.36
166,051 117,513 272,888 141,047 131,841
114,794 73,485 177,456 110,297 67,159
49,727 253,761 1.76 220,879 (1,803) 222,682 1.54
63,839 192,178 1.35
104,705 156,180 1.31 260,577 103,641 156,936 1.32
159,840 1.16 181,559 1.32
93,587 41,039 133,862 92,365 41,497
253,884 118,801 381,588 241,526 140,062
59,258 231,819 1.86 241,810 63,494 178,316 1.43
91,458 219,504 1.61 311,017 77,565 233,452 1.71
98,612 226,194 1.78 256,089 74,557 181,532 1.43
192,582 203,418 1.69 391,285 169,162 222,123 1.84
69,224 204,890 1.64 268,928 70,337 198,591 1.59
158,035 169,207 1.55 277,682 131,939 145,743 1.33
58,587 140,451 1.56 222,375 80,645 141,730 1.57
156,750 1.42
32,343 188,433 1.95 180,303 40,947 139,356 1.44
254,442 96,410 0.92
121,438 146,642 1.45 268,152 106,544 161,608 1.59
132,865 135,909 1.35 294,310 126,489 167,821 1.67
146,418 144,136 1.53 284,168 196,632 87,536 1.25
250,179 75,589 174,590 1.84
28,619 117,704 1.39
33,001 94,872 1.20 135,149 31,229 103,920 1.32
15,344 127,456 2.04
185,572 86,635 98,937 1.75
63,203 13,180 50,023 1.41
33,765 56,622 2.02 77,450 29,615 47,835 1.70
200,439 301,399 1.51 491,084 196,834 294,250 1.48
204,831 827,448 1.49 1,227,884 197,624 1,030,260 1.85
675,203 291,327 1.68 925,743 626,355 299,388 1.72
1,898,768 1,671,114 2.36 3,162,023 1,777,120 1,384,903 1.96
200,113 603,693 1.73 746,236 191,864 554,372 1.59
139,212 263,946 1.60 305,282 141,463 163,819 1.00
206,794 719,439 1.44 939,134 188,532 750,602 1.42
76,739 282,433 1.44 356,106 68,447 287,659 1.42
53,235 114,200 1.44 166,973 39,226 127,747 1.42
32,284 91,598 1.44 93,540 26,359 67,181 1.42
54,890 174,076 1.44 154,167 44,509 109,658 1.42
108,472 234,115 1.44 340,774 95,280 245,494 1.42
60,299 175,905 1.44 223,124 51,622 171,502 1.42
61,092 164,688 1.30 229,892 63,467 166,425 1.32
140,456 192,222 1.27 331,224 132,716 198,508 1.31
99,953 146,898 1.36 238,959 97,007 141,952 1.31
43,070 190,253 2.26 203,396 47,215 156,181 1.85
184,445 472,650 1.72 604,698 192,487 412,209 1.50
75,977 219,163 1.53 276,062 70,569 205,493 1.43
566,418 1.59 544,403 1.53
104,712 284,715 366,197 99,692 266,505
64,693 148,184 219,010 75,765 143,245
41,209 133,519 176,469 41,816 134,653
1,844,060 1.59 1,661,943 1.43
241,547 863,124 1,103,065 243,955 859,110
21,026 433,427 432,812 21,219 411,593
122,601 351,961 445,986 127,115 318,871
81,611 195,548 187,730 115,361 72,369
103,925 231,637 1.79 324,063 107,546 216,517 1.67
87,176 247,494 1.58 322,361 91,566 230,795 1.47
6,388,061 1.61 5,800,571 1.46
1,610,164 5,217,645 6,295,337 1,534,028 4,761,309
334,739 1,170,416 1,392,144 352,882 1,039,262
105,405 395,871 2.14 417,972 111,258 306,714 1.66
38,150 251,674 2.17 210,162 50,478 159,684 1.38
65,480 44,680 1.07 124,712 61,602 63,110 1.52
196,389 225,557 1.70
218,186 421,957 1.47 614,832 178,442 436,390 1.52
1,305,850 1,880,502 3.21 2,958,108 1,319,674 1,638,434 2.80
7,956,526 1.51 7,832,898 1.49
312,203 1,809,334 2,018,656 309,882 1,708,774
254,204 1,421,461 1,792,929 298,232 1,494,697
237,888 998,692 1,214,572 192,464 1,022,108
144,431 1,016,728 1,058,843 140,111 918,732
126,069 867,361 992,280 143,004 849,276
135,281 720,474 845,470 115,303 730,167
41,130 451,821 482,652 23,833 458,819
72,817 385,675 461,880 96,517 365,363
70,617 284,980 339,800 54,838 284,962
199,574 344,694 1.74 520,715 199,743 320,972 1.62
590,588 584,897 1.61 1,154,121 531,602 622,519 1.71
117,470 415,776 1.25 645,379 117,310 528,069 1.58
434,665 294,003 1.65 637,516 412,920 224,596 1.26
300,271 760,267 2.55 1,049,099 348,203 700,896 2.35
52,677 179,884 1.61 171,380 29,488 141,892 1.27
299,500 719,574 1.38 1,176,890 380,197 796,693 1.52
256,824 321,803 1.95 603,844 277,325 326,519 1.98
343,397 408,485 1.63 210,367 123,436 86,931 0.35
166,455 256,254 0.83
371,876 386,749 1.69 768,063 390,668 377,395 1.65
238,251 285,354 1.61 461,292 237,898 223,394 1.26
245,527 262,504 1.44 544,433 209,626 334,807 1.84
511,329 875,433 1.41 1,345,895 483,104 862,791 1.39
23,811 163,189 1.57 185,000 2,006 182,994 1.76
247,571 503,147 1.49 761,321 197,210 564,111 1.67
68,417 308,251 2.03 513,424 63,050 450,374 2.97
230,077 121,357 1.02 358,477 212,491 145,986 1.23
529,399 842,345 1.28 1,281,425 518,608 762,817 1.16
70,088 272,268 335,956 66,314 269,642
303,292 618,560 1.63 884,411 292,964 591,447 1.56
161,485 592,662 1.56 544,534 108,021 436,513 1.15
156,926 112,654 1.08 296,400 129,627 166,773 1.60
132,464 502,279 1.42 616,237 105,475 510,762 1.44
866,511 961,688 1.89 1,577,613 776,391 801,222 1.58
84,530 358,405 1.71 441,998 106,767 335,231 1.60
179,735 244,643 1.58 397,389 188,376 209,013 1.35
86,556 433,895 2.15 505,635 58,755 446,880 2.21
76,004 512,585 2.31 546,942 34,190 512,752 2.31
1,525,606 810,906 1.76 2,422,571 1,551,952 870,619 1.89
462,321 440,702 1.36 852,569 619,803 232,766 0.72
536,612 299,986 0.72
15,252,127 3,003,344 11.00 18,206,947 15,120,936 3,086,011 11.31
154,764 329,205 1.18 468,524 159,622 308,902 1.11
49,798 123,426 1.44 157,436 46,602 110,834 1.30
32,344 145,071 2.34
151,755 221,379 1.38 349,226 149,898 199,328 1.24
55,650 381,057 2.12 385,842 120,060 265,782 1.48
491,663 707,340 2.11
373,330 452,803 1.71
944,265 689,327 1.88 1,614,973 961,442 653,531 1.78
1,528,498 1,013,770 2.42 4,022,988 1,629,571 2,393,417 5.70
1,212,838 983,325 2.17 2,906,966 1,169,102 1,737,864 3.84
1,219,588 745,423 2.30 1,916,271 1,068,390 847,881 2.62
163,252 557,386 1.57 370,951 132,955 237,996 0.67
187,440 247,277 1.27 445,970 204,266 241,704 1.24
74,237 111,060 1.42 184,970 87,408 97,562 1.24
583,748 786,986 1.41 1,378,319 586,980 791,339 1.41
39,000 164,369 1.72 219,583 39,779 179,804 1.88
1,472,084 1,195,072 2.36 2,514,749 1,432,864 1,081,885 2.14
62,154 172,273 1.41 235,880 65,998 169,882 1.39
127,604 631,555 1.78 697,340 101,949 595,391 1.68
786,349 557,429 1.45 1,336,801 760,512 576,289 1.50
122,944 268,887 1.33 409,186 125,322 283,864 1.41
690,104 344,493 1.32 920,941 631,145 289,796 1.11
1,025,566 1,094,284 2.01 1,871,428 966,873 904,555 1.66
475,077 992,432 2.18 1,288,660 399,699 888,961 1.95
166,668 39,280 0.40 160,630 103,006 57,624 0.59
536,633 299,217 1.49 830,833 510,762 320,071 1.60
950,114 661,947 2.03 1,393,654 906,634 487,020 1.49
208,378 360,892 2.46 631,249 235,291 395,958 2.70
630,554 843,873 1.74 1,397,005 602,616 794,389 1.64
606,578 625,135 1.57 1,390,236 516,386 873,850 2.19
550,639 363,063 1.53 930,416 527,068 403,348 1.70
161,545 357,276 1.78 494,543 176,651 317,892 1.58
204,266 187,911 0.97 357,501 203,495 154,006 0.80
186,988 142,709 1.40 272,201 189,702 82,499 0.81
167,451 255,258 1.18
182,875 246,525 1.01
490,646 438,828 1.66
154,430 189,438 1.18
1,373,848 621,548 2.07 1,969,040 1,338,015 631,025 2.10
260,051 461,408 2.19 732,176 282,471 449,705 2.13
69,667 144,105 1.46 206,065 64,794 141,271 1.44
84,191 168,128 1.74 262,846 88,339 174,507 1.81
237,052 226,793 0.70 72,660 (72,660) -0.22
803,210 750,823 1.88 1,594,225 778,039 816,186 2.05
319,327 159,149 1.45 442,747 290,037 152,710 1.40
165,261 322,808 1.28 510,711 181,364 329,347 1.31
131,927 138,136 0.39
129,730 389,616 1.11
0.00
192,081 547,712 1.68 696,448 180,994 515,454 1.58
371,787 572,411 1.41 947,690 359,470 588,220 1.45
170,206 428,453 1.43
1,235,824 1,556,065 1.36 2,603,814 1,212,985 1,390,829 1.22
796,141 308,193 1.68 1,090,330 749,329 341,001 1.86
1,056,908 1.53
17,105 122,899
8,036 136,338 141,089 8,057 133,032
8,652 138,185 142,644 9,676 132,968
8,575 130,305 134,926 18,683 116,243
2,296 43,984
5,047 86,388
7,952 134,183 132,856 7,655 125,201
16,952 123,276
8,350 141,350 140,493 7,920 132,573
1,000,819 997,886 1.67 2,077,024 1,045,426 1,031,598 1.73
769,530 775,239 1.46
388,824 315,594 0.78
957,615 562,853 2.10 1,332,789 895,600 437,189 1.63
498,850 638,560 1.73 1,114,301 581,266 533,035 1.44
122,368 629,135 1.51 720,919 131,680 589,239 1.42
92,268 216,014 1.46 319,414 116,319 203,095 1.37
527,862 534,857 1.18 924,024 442,357 481,667 1.06
349,579 663,466 1.38 1,060,206 369,651 690,555 1.43
1,406,674 1,397,673 1.25 892,632 439,516 453,116 0.41
</TABLE>
<PAGE>
CUT-OFF DATE BALANCES
<TABLE>
<CAPTION>
% OF
AGGREGATE INITIAL
NUMBER OF CUT-OFF DATE POOL
CUT-OFF DATE BALANCE MORTGAGE LOANS BALANCE BALANCE
- ----------------------------- ---------------- -------------- -----------
<S> <C> <C> <C>
$0 to $999,999.... 17 $ 13,127,113 1.45%
1,000,000 to 2,499,999 ... 95 160,575,474 17.68
2,500,000 to 4,999,999 ... 79 291,748,695 32.13
5,000,000 to 7,499,999 ... 25 150,993,800 16.63
7,500,000 to 9,999,999 ... 5 40,990,392 4.51
10,000,000 to 14,999,999 ... 5 62,121,008 6.84
15,000,000 to 74,999,999 ... 6 188,604,524 20.77
-- ------------ ------
Totals ..................... 232 $908,161,006 100.00%
=== ============ ======
<CAPTION>
WEIGHTED AVERAGES
------------------------------------------------
CUMULATIVE
% OF STATED U/W CUT-OFF DATE
INITIAL POOL MORTGAGE REMAINING NCF LOAN-TO-
CUT-OFF DATE BALANCE BALANCE RATE TERM (MO.) DSCR VALUE RATIO
- ----------------------------- -------------- ---------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C>
$0 to $999,999.... 1.45% 8.165% 109 1.34x 71.80%
1,000,000 to 2,499,999 ... 19.13 7.772 109 1.39 68.56
2,500,000 to 4,999,999 ... 51.25 7.619 111 1.41 70.06
5,000,000 to 7,499,999 ... 67.88 7.564 106 1.46 68.82
7,500,000 to 9,999,999 ... 72.39 7.437 113 1.55 68.53
10,000,000 to 14,999,999 ... 79.23 7.318 104 1.32 71.47
15,000,000 to 74,999,999 ... 100.00% 7.093 115 1.29 72.42
------ ----- --- ---- -----
Totals ..................... 7.507% 110 1.39x 70.13%
===== === ==== =====
</TABLE>
MORTGAGE RATES
<TABLE>
<CAPTION>
% OF
AGGREGATE INITIAL
NUMBER OF CUT-OFF DATE POOL
MORTGAGE RATE MORTGAGE LOANS BALANCE BALANCE
- -------------------------- ---------------- -------------- -----------
<S> <C> <C> <C>
0.00% to 6.99% ......... 11 $ 66,304,389 7.30%
7.00% to 7.49% ......... 101 508,056,084 55.94
7.50% to 7.99% ......... 59 194,496,256 21.42
8.00% to 8.49% ......... 23 56,912,828 6.27
8.50% to 8.99% ......... 22 38,441,991 4.23
9.00% to 9.49% ......... 11 21,555,714 2.37
9.50% to 9.99% ......... 4 17,473,104 1.92
10.00% to 10.49% ......... 1 4,920,639 0.54
--- ------------ ------
Totals .................. 232 $908,161,006 100.00%
=== ============ ======
<CAPTION>
WEIGHTED AVERAGES
------------------------------------------------
CUMULATIVE
% OF STATED U/W CUT-OFF DATE
INITIAL POOL MORTGAGE REMAINING NCF LOAN-TO-
MORTGAGE RATE BALANCE RATE TERM (MO.) DSCR VALUE RATIO
- -------------------------- -------------- ---------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C>
0.00% to 6.99% ......... 7.30% 6.807% 114 1.55x 64.90%
7.00% to 7.49% ......... 63.24 7.217 115 1.36 72.00
7.50% to 7.99% ......... 84.66 7.633 107 1.42 69.07
8.00% to 8.49% ......... 90.93 8.149 108 1.38 69.85
8.50% to 8.99% ......... 95.16 8.651 95 1.37 67.93
9.00% to 9.49% ......... 97.53 9.125 100 1.35 62.63
9.50% to 9.99% ......... 99.46 9.854 46 1.36 65.03
10.00% to 10.49% ......... 100.00% 10.000 91 1.38 61.43
------ ------ --- ---- -----
Totals .................. 7.507% 110 1.39x 70.13%
====== === ==== =====
</TABLE>
ORIGINAL TERM TO SCHEDULED MATURITY DATE/ARD
<TABLE>
<CAPTION>
% OF
AGGREGATE INITIAL
NUMBER OF CUT-OFF DATE POOL
ORIGINAL TERM (MONTHS) MORTGAGE LOANS BALANCE BALANCE
- ------------------------ ---------------- -------------- -----------
<S> <C> <C> <C>
72 to 83 ............. 1 $ 11,000,000 1.21%
84 to 95 ............. 7 26,592,852 2.93
108 to 119 ............. 2 4,236,296 0.47
120 .................. 222 866,331,858 95.39
--- ------------ ------
Totals ................ 232 $908,161,006 100.00%
=== ============ ======
<CAPTION>
WEIGHTED AVERAGES
----------------------------------------------------------
CUMULATIVE
% OF U/W CUT-OFF DATE
INITIAL POOL MORTGAGE STATED NCF LOAN-TO-
ORIGINAL TERM (MONTHS) BALANCE RATE REMAINING TERM (MO.) DSCR VALUE RATIO
- ------------------------ -------------- ---------- ---------------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
72 to 83 ............. 1.21% 7.510% 58 1.43x 72.37%
84 to 95 ............. 4.14 9.045 49 1.33 67.76
108 to 119 ............. 4.61 8.135 110 1.36 64.25
120 .................. 100.00% 7.456 113 1.39 70.21
------ ----- --- ---- -----
Totals ................ 7.507% 110 1.39x 70.13%
===== === ==== =====
</TABLE>
A-11
<PAGE>
REMAINING TERM TO SCHEDULED MATURITY DATE/ARD
<TABLE>
<CAPTION>
% OF
AGGREGATE INITIAL
NUMBER OF CUT-OFF DATE POOL
REMAINING TERM (MONTHS) MORTGAGE LOANS BALANCE BALANCE
- ---------------------------- ---------------- -------------- -----------
<S> <C> <C> <C>
36 to 47 ................. 3 $ 14,365,867 1.58%
48 to 59 ................. 2 16,781,540 1.85
72 to 83 ................. 3 6,445,445 0.71
84 to 95 ................. 2 8,027,876 0.88
96 to 107 ................. 50 113,378,923 12.48
108 to 119 ................. 172 749,161,355 82.49
--- ------------ ------
Totals .................... 232 $908,161,006 100.00%
=== ============ ======
<CAPTION>
WEIGHTED AVERAGES
-----------------------------------------------
CUMULATIVE CUT-OFF
% OF STATED U/W DATE
INITIAL POOL MORTGAGE REMAINING NCF LOAN-TO-
REMAINING TERM (MONTHS) BALANCE RATE TERM (MO.) DSCR VALUE RATIO
- ---------------------------- -------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C>
36 to 47 ................. 1.58% 9.850% 36 1.33x 65.10%
48 to 59 ................. 3.43 7.894 55 1.41 72.33
72 to 83 ................. 4.14 7.629 78 1.26 69.66
84 to 95 ................. 5.02 9.952 91 1.41 62.71
96 to 107 ................. 17.51 8.300 104 1.35 70.50
108 to 119 ................. 100.00% 7.306 114 1.40 70.21
------ ----- --- ---- -----
Totals .................... 7.507% 110 1.39x 70.13%
===== === ==== =====
</TABLE>
UNDERWRITTEN NET CASH FLOW DEBT SERVICE COVERAGE RATIO
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
------------------------------------------------
% OF CUMULATIVE
AGGREGATE INITIAL % OF STATED U/W CUT-OFF DATE
NUMBER OF CUT-OFF DATE POOL INITIAL POOL MORTGAGE REMAINING NCF LOAN-TO-
U/W NCF DSCR MORTGAGE LOANS BALANCE BALANCE BALANCE RATE TERM (MO.) DSCR VALUE RATIO
- --------------------- ---------------- -------------- ----------- -------------- ---------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1.10x to 1.19x ...... 9 $ 54,611,358 6.01% 6.01% 7.311% 110 1.18x 74.50%
1.20x to 1.29x ...... 59 242,685,793 26.72 32.74 7.422 112 1.25 71.65
1.30x to 1.39x ...... 76 301,221,045 33.17 65.90 7.628 108 1.35 72.46
1.40x to 1.49x ...... 43 161,650,761 17.80 83.70 7.603 108 1.44 69.18
1.50x to 1.59x ...... 21 65,084,333 7.17 90.87 7.423 113 1.54 67.97
1.60x to 1.69x ...... 13 41,427,871 4.56 95.43 7.503 112 1.65 66.11
1.70x to 1.79x ...... 5 17,030,896 1.88 97.31 7.374 112 1.73 60.96
1.80x to 1.89x ...... 2 8,830,804 0.97 98.28 6.887 115 1.82 43.94
2.00x to 2.99x ...... 3 12,837,093 1.41 99.69 6.910 116 2.24 44.82
3.00x to 4.79x ...... 1 2,781,052 0.31 100.00% 7.610 116 4.73 21.23
-- ------------ ------ ------ ----- --- ---- -----
Totals ............. 232 $908,161,006 100.00% 7.507% 110 1.39x 70.13%
=== ============ ====== ===== === ==== =====
</TABLE>
CUT-OFF DATE LOAN-TO-VALUE RATIO
<TABLE>
<CAPTION>
AGGREGATE % OF
CUT-OFF INITIAL
NUMBER OF DATE POOL
CUT-OFF DATE LTV RATIO MORTGAGE LOANS BALANCE BALANCE
- ------------------------ ---------------- --------------- -----------
<S> <C> <C> <C>
0.00% to 24.99% ....... 1 $ 2,781,052 0.31%
25.00% to 49.99% ....... 7 23,619,180 2.60
50.00% to 59.99% ....... 19 78,761,377 8.67
60.00% to 64.99% ....... 29 88,972,633 9.80
65.00% to 69.99% ....... 41 119,800,160 13.19
70.00% to 74.99% ....... 94 373,362,915 41.11
75.00% to 79.99% ....... 39 217,932,819 24.00
80.00% to 84.99% ....... 2 2,930,869 0.32
-- ------------ ------
Totals ................ 232 $908,161,006 100.00%
=== ============ ======
<CAPTION>
WEIGHTED AVERAGES
-----------------------------------------------
CUMULATIVE CUT-OFF
% OF STATED U/W DATE
INITIAL POOL MORTGAGE REMAINING NCF LOAN-TO-
CUT-OFF DATE LTV RATIO BALANCE RATE TERM (MO.) DSCR VALUE RATIO
- ------------------------ -------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C>
0.00% to 24.99% ....... 0.31% 7.610% 116 4.73x 21.23%
25.00% to 49.99% ....... 2.91 7.240 114 1.91 43.27
50.00% to 59.99% ....... 11.58 7.599 110 1.47 56.43
60.00% to 64.99% ....... 21.38 8.088 103 1.40 63.23
65.00% to 69.99% ....... 34.57 7.778 107 1.40 67.71
70.00% to 74.99% ....... 75.68 7.428 111 1.35 72.83
75.00% to 79.99% ....... 99.68 7.250 113 1.31 78.00
80.00% to 84.99% ....... 100.00% 7.438 115 1.24 81.54
------ ----- --- ---- -----
Totals ................ 7.507% 110 1.39x 70.13%
===== === ==== =====
</TABLE>
A-12
<PAGE>
SCHEDULED MATURITY DATE/ARD LOAN-TO-VALUE RATIO
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
------------------------------------------------
% OF CUMULATIVE
SCHEDULED MATURITY AGGREGATE INITIAL % OF STATED U/W CUT-OFF DATE
DATE/ARD NUMBER OF CUT-OFF DATE POOL INITIAL POOL MORTGAGE REMAINING NCF LOAN-TO-
LOAN-TO-VALUE RATIO MORTGAGE LOANS BALANCE BALANCE BALANCE RATE TERM (MO.) DSCR VALUE RATIO
- --------------------- ---------------- -------------- ----------- -------------- ---------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0.00% to 24.99% 2 $ 4,918,696 0.54% 0.54% 7.423% 116 3.35x 32.20%
25.00% to 49.99% 30 98,580,013 10.85 11.40 7.610 111 1.59 54.73
50.00% to 59.99% 100 338,333,103 37.25 48.65 7.562 112 1.39 68.74
60.00% to 64.99% 52 219,159,829 24.13 72.78 7.460 112 1.32 72.62
65.00% to 69.99% 35 206,811,845 22.77 95.56 7.384 108 1.33 76.59
70.00% to 74.99% 13 40,357,520 4.44 100.00% 7.684 96 1.34 77.50
--- ------------ ------ ------ ----- --- ---- -----
Totals ............. 232 $908,161,006 100.00% 7.507% 110 1.39x 70.13%
=== ============ ====== ===== === ==== =====
</TABLE>
PREPAYMENT PREMIUM
<TABLE>
<CAPTION>
AGGREGATE % OF
CUT-OFF INITIAL
NUMBER OF DATE POOL
PREPAYMENT PREMIUM MORTGAGE LOANS BALANCE BALANCE
- ------------------------------------------ ---------------- --------------- -----------
<S> <C> <C> <C>
(greater than) of YM or 1% ......... .... 4 $ 4,977,246 0.55%
Lockout/ (greater than) of YM or 1% ..... 115 501,768,716 55.25
Lockout/Declining Fee .................... 6 7,538,864 0.83
Lockout/Defeasance ....................... 38 172,644,038 19.01
Lockout/YM ............................... 66 206,866,274 22.78
(greater than) of YM or 1%/Declining
Fee ..................................... 3 14,365,867 1.58
--- ------------ ------
Totals .................................. 232 $908,161,006 100.00%
=== ============ ======
<CAPTION>
WEIGHTED AVERAGES
-----------------------------------------------
MAXIMUM CUT-OFF
CUT-OFF STATED U/W DATE
DATE MORTGAGE REMAINING NCF LOAN-TO-
PREPAYMENT PREMIUM BALANCE RATE TERM (MO.) DSCR VALUE RATIO
- ------------------------------------------ ------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C>
(greater than) of YM or 1% ......... .... $ 2,348,322 8.503% 107 1.29x 73.13%
Lockout/ (greater than) of YM or 1% ..... 65,804,538 7.584 109 1.35 70.63
Lockout/Declining Fee .................... 2,542,442 7.355 109 1.75 56.12
Lockout/Defeasance ....................... 13,979,720 7.210 116 1.42 71.62
Lockout/YM ............................... 13,933,312 7.384 114 1.46 68.46
(greater than) of YM or 1%/Declining
Fee ..................................... $ 6,712,570 9.850 36 1.33 65.10
----------- ----- --- ---- -----
Totals .................................. 7.507% 110 1.39x 70.13%
===== === ==== =====
</TABLE>
A-13
<PAGE>
PREPAYMENT PREMIUM BY MORTGAGE RATE
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
-----------------------
% OF
AGGREGATE INITIAL STATED
NUMBER OF CUT-OFF POOL MORTGAGE REMAINING
MORTGAGE RATE MORTGAGE LOANS DATE BALANCE BALANCE RATE TERM (MO.)
- ----------------------- ---------------- -------------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
0.00% to 6.99% 11 $ 66,304,389 7.30% 6.807% 114
7.00% to 7.49% 101 508,056,084 55.94 7.217 115
7.50% to 7.99% 59 194,496,256 21.42 7.633 107
8.00% to 8.49% 23 56,912,828 6.27 8.149 108
8.50% to 8.99% 22 38,441,991 4.23 8.651 95
9.00% to 9.49% 11 21,555,714 2.37 9.125 100
9.50% to 9.99% 4 17,473,104 1.92 9.854 46
10.00% to 10.49% 1 4,920,639 0.54 10.000 91
--- ------------ ------ ------ ---
Totals ............... 232 $908,161,006 100.00% 7.507% 110
=== ============ ====== ====== ===
<CAPTION>
% OF INITIAL POOL BALANCE
--------------------------------------------------------------------------------------
LOCKOUT GREATER OF
GREATER THEN GREATER LOCKOUT LOCKOUT LOCKOUT 1%/YLD.
OF 1%/YLD. OF 1%/YLD. THEN THEN THEN YLD. MAINTENANCE THEN
MORTGAGE RATE MAINT. MAINT. DECLINING FEE DEFEASANCE MAINT. DECLINING FEE
- ----------------------- ------------ -------------- --------------- ------------ ----------- -----------------
<S> <C> <C> <C> <C> <C> <C>
0.00% to 6.99% 0.00% 3.36% 0.54% 2.85% 0.55% 0.00%
7.00% to 7.49% 0.00 25.41 0.00 14.65 15.88 0.00
7.50% to 7.99% 0.00 13.42 0.14 1.51 6.35 0.00
8.00% to 8.49% 0.14 6.12 0.00 0.00 0.00 0.00
8.50% to 8.99% 0.40 3.68 0.15 0.00 0.00 0.00
9.00% to 9.49% 0.00 2.37 0.00 0.00 0.00 0.00
9.50% to 9.99% 0.00 0.34 0.00 0.00 0.00 1.58
10.00% to 10.49% 0.00 0.54 0.00 0.00 0.00 0.00
---- ----- ---- ----- ----- ----
Totals ............... 0.55% 55.25% 0.83% 19.01% 22.78% 1.58%
==== ===== ==== ===== ===== ====
</TABLE>
INITIAL LOAN POOL PREPAYMENT RESTRICTION COMPOSITION OVER TIME (1)
<TABLE>
<CAPTION>
MONTHS FOLLOWING CUT-OFF DATE
------------------------------------------------
PREPAYMENT RESTRICTION 0 12 24 36
- ----------------------------------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Remaining Pool Balance (2) ........ 100.00% 98.77% 97.46% 94.49%
Locked/Defeasance ................. 97.87 97.87 92.10 78.88
Yield Maintenance ................. 0.55 0.55 6.02 20.83
5% Premium ........................ 0.00 0.00 0.15 0.15
4% Premium ........................ 0.00 0.00 0.14 0.00
3% Premium ........................ 1.58 0.00 0.00 0.15
2% Premium ........................ 0.00 1.59 0.00 0.00
1% Premium ........................ 0.00 0.00 1.59 0.00
Open .............................. 0.00 0.00 0.00 0.00
------ ------ ------ ------
Total ........................... 100.00% 100.00% 100.00% 100.00%
====== ====== ====== ======
<CAPTION>
MONTHS FOLLOWING CUT-OFF DATE
-----------------------------------------------------------------------
PREPAYMENT RESTRICTION 48 60 72 84 96 108
- ----------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Remaining Pool Balance (2) ........ 92.96% 89.53% 87.79% 85.26% 82.44% 68.40%
Locked/Defeasance ................. 20.16 19.65 19.65 19.64 19.82 23.25
Yield Maintenance ................. 77.61 79.50 79.06 79.66 77.84 45.19
5% Premium ........................ 0.00 0.55 0.00 0.00 0.00 0.00
4% Premium ........................ 0.15 0.15 0.54 0.00 0.00 0.00
3% Premium ........................ 0.00 0.00 0.15 0.70 0.00 0.00
2% Premium ........................ 0.15 0.00 0.00 0.00 0.70 0.00
1% Premium ........................ 0.00 0.15 0.00 0.00 0.00 0.69
Open .............................. 1.94 0.00 0.59 0.00 1.64 30.86
------ ------ ------ ------ ------ ------
Total ........................... 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
====== ====== ====== ====== ====== ======
</TABLE>
- -------
(1) All numbers, unless otherwise noted, are as a percentage of the aggregate
pool balance at the specified point in time.
(2) Remaining aggregate mortgage loan pool balance as a percentage of the
Initial Pool Balance at the specified point in time.
A-14
<PAGE>
MORTGAGE LOAN SEASONING
<TABLE>
<CAPTION>
AGGREGATE % OF
CUT-OFF INITIAL
MORTGAGE LOAN NUMBER OF DATE POOL
SEASONING (MONTHS) MORTGAGE LOANS BALANCE BALANCE
- ----------------------- ---------------- --------------- -----------
<S> <C> <C> <C>
0 to 5 .............. 76 $385,218,616 42.42%
6 to 10 .............. 81 285,656,488 31.45
11 to 15 .............. 51 173,328,723 19.09
16 to 20 .............. 12 20,690,246 2.28
21 to 25 .............. 6 15,091,651 1.66
26 to 30 .............. 2 8,027,876 0.88
31 to 35 .............. 1 5,781,540 0.64
36 to 48 .............. 3 14,365,867 1.58
-- ------------ ------
Totals ............... 232 $908,161,006 100.00%
=== ============ ======
<CAPTION>
WEIGHTED AVERAGES
-----------------------------------------------
CUMULATIVE CUT-OFF
% OF STATED U/W DATE
MORTGAGE LOAN INITIAL POOL MORTGAGE REMAINING NCF LOAN-TO-
SEASONING (MONTHS) BALANCE RATE TERM (MO.) DSCR VALUE RATIO
- ----------------------- -------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C>
0 to 5 .............. 42.42% 7.199% 116 1.41x 69.87%
6 to 10 .............. 73.87 7.397 112 1.39 71.07
11 to 15 .............. 92.96 7.731 104 1.35 70.92
16 to 20 .............. 95.24 8.886 101 1.34 66.92
21 to 25 .............. 96.90 9.008 98 1.42 62.36
26 to 30 .............. 97.78 9.952 91 1.41 62.71
31 to 35 .............. 98.42 8.625 50 1.38 72.27
36 to 48 .............. 100.00% 9.850 36 1.33 65.10
------ ----- --- ---- -----
Totals ............... 7.507% 110 1.39x 70.13%
===== === ==== =====
</TABLE>
A-15
<PAGE>
STATES
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
------------------------------------------------
% OF CUMULATIVE
NUMBER OF AGGREGATE INITIAL % OF STATED U/W CUT-OFF DATE
MORTGAGED CUT-OFF DATE POOL INITIAL POOL MORTGAGE REMAINING NCF LOAN-TO-
STATES PROPERTIES BALANCE BALANCE BALANCE RATE TERM (MO.) DSCR VALUE RATIO
- ----------------- ------------ -------------- ----------- -------------- ---------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CA .............. 26 $ 98,195,075 10.81% 10.81% 7.256% 114 1.45x 68.35%
NY .............. 29 97,916,411 10.78 21.59 7.354 112 1.54 70.71
FL .............. 27 92,949,769 10.23 31.83 7.717 110 1.39 71.01
GA .............. 17 80,799,194 8.90 40.73 7.632 102 1.32 70.26
NJ .............. 13 47,738,084 5.26 45.98 7.542 101 1.36 72.09
MD .............. 12 43,914,576 4.84 50.82 7.909 110 1.33 67.55
TX .............. 17 40,482,704 4.46 55.28 7.806 101 1.37 71.24
VA .............. 18 35,741,941 3.94 59.21 7.352 113 1.36 69.82
TN .............. 11 34,144,612 3.76 62.97 7.362 114 1.42 71.88
MA .............. 5 30,716,607 3.38 66.35 7.299 113 1.34 61.92
MS .............. 5 26,159,960 2.88 69.23 7.315 115 1.36 73.14
MO .............. 4 25,711,486 2.83 72.07 7.228 114 1.31 69.50
OH .............. 9 24,486,911 2.70 74.76 7.471 115 1.32 70.75
DC .............. 2 22,750,914 2.51 77.27 6.851 110 1.22 77.08
PA .............. 3 19,632,279 2.16 79.43 7.332 112 1.18 77.13
WA .............. 6 16,546,390 1.82 81.25 7.665 110 1.42 66.29
WV .............. 4 15,418,378 1.70 82.95 7.792 114 1.36 72.38
IL .............. 6 15,392,495 1.69 84.64 7.322 114 1.32 68.54
LA .............. 3 13,709,279 1.51 86.15 7.288 115 1.58 67.57
UT .............. 7 13,526,719 1.49 87.64 7.810 111 1.38 70.07
AZ .............. 5 13,510,370 1.49 89.13 8.035 108 1.41 64.83
CO .............. 6 13,267,506 1.46 90.59 7.511 112 1.45 66.36
CT .............. 3 11,869,150 1.31 91.90 7.187 113 1.31 78.79
IA .............. 3 11,673,228 1.29 93.18 7.456 110 1.38 71.42
NV .............. 5 9,966,188 1.10 94.28 8.412 103 1.43 64.62
MI .............. 2 9,943,116 1.09 95.38 7.477 115 1.36 73.19
DE .............. 1 7,488,705 0.82 96.20 7.200 109 1.38 73.78
SC .............. 3 7,161,490 0.79 96.99 7.908 112 1.43 69.51
RI .............. 2 5,382,196 0.59 97.58 8.193 110 1.44 73.17
KS .............. 1 4,341,062 0.48 98.06 7.450 117 1.31 74.85
NC .............. 1 3,775,647 0.42 98.48 7.420 114 1.53 72.61
ID .............. 2 3,483,567 0.38 98.86 7.938 107 1.41 63.10
WI .............. 2 3,253,042 0.36 99.22 8.000 107 1.57 60.24
MN .............. 1 1,758,533 0.19 99.41 8.625 106 1.49 62.80
ND .............. 1 1,486,039 0.16 99.57 7.875 107 1.30 67.55
IN .............. 1 1,478,124 0.16 99.74 7.750 116 1.74 64.27
WY .............. 1 1,280,190 0.14 99.88 7.650 78 1.25 58.86
NM .............. 1 1,109,072 0.12 100.00% 7.375 112 1.25 50.99
-- ------------ ------ ------ ----- --- ---- -----
Totals ......... 265 $908,161,006 100.00% 7.507% 110 1.39x 70.13%
=== ============ ====== ===== === ==== =====
</TABLE>
A-16
<PAGE>
<TABLE>
<S> <C> <C>
ABN AMRO MORTGAGE CAPITAL FUNDING, INC. Statement Date: 01/19/99
LaSalle National Bank SALOMON BROTHERS REALTY CORP. AND Payment Date: 01/19/99
CITICORP REAL ESTATE, INC., AS MORTGAGE LOAN SELLERS Prior Payment: NA
Administrator: AMRESCO SERVICES, L.P., AS MASTER SERVICER Record Date: 12/31/98
Brian Ames (800) 246-5761 SERIES 1998-MC3
135 S. LaSalle Street Suite 1625 ABN AMRO ACCT: 99-9999-99-9 WAC:
Chicago, IL 60603 WAMM:
====================================================================================================================
Number Of Pages
---------------
Table of Contents
REMIC Certificate Report
Other Related Information
Asset Backed Facts Sheets
Delinquency Loan Detail
Mortgage Loan Characteristics
Loan Level Listing
TOTAL PAGES INCLUDED IN THIS PACKAGE
Specially Serviced Loan Detail Appendix A
Modified Loan Detail Appendix B
Realized Loan Detail Appendix C
==================================================================
INFORMATION IS AVAILABLE FOR THIS ISSUE FROM THE FOLLOWING SOURCES
La Salle Web Site www.lnbabs.com
LaSalle Bulletin Board (714) 282-3990
LaSalle ASAP Fax System (312) 904-2200
ASAP #:
Monthly Data File Name:
==================================================================
====================================================================================================================
</TABLE>
B-1
<PAGE>
<TABLE>
<S> <C> <C>
ABN AMRO MORTGAGE CAPITAL FUNDING, INC. Statement Date: 01/19/99
LaSalle National Bank SALOMON BROTHERS REALTY CORP. AND Payment Date: 01/19/99
CITICORP REAL ESTATE, INC., AS MORTGAGE LOAN SELLERS Prior Payment: NA
Administrator: AMRESCO SERVICES, L.P., AS MASTER SERVICER Record Date: 12/31/98
Brian Ames (800) 246-5761 SERIES 1998-MC3
135 S. LaSalle Street Suite 1625 ABN AMRO ACCT: 99-9999-99-9 WAC:
Chicago, IL 60603 WAMM:
<CAPTION>
===================================================================================================================================
ORIGINAL OPENING PRINCIPAL PRINCIPAL NEGATIVE CLOSING INTEREST INTEREST PASS-THROUGH
CLASS FACE VALUE (1) BALANCE PAYMENT ADJ. OR LOSS AMORTIZATION BALANCE PAYMENT ADJUSTMENT RATE (2)
CUSIP PER $1,000 PER $1,000 PER $1,000 PER $1,000 PER $1,000 PER $1,000 PER $1,000 PER $1,000 NEXT RATE (3)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
===================================================================================================================================
TOTAL P&I PAYMENT 0.00
===================================================================================================================================
</TABLE>
Notes: (1) N denotes notional balance not included in total
(2) Interest Paid minus Interest Adjustment minus Deferred Interest
equals Accrual
(3) Estimated
B-2
<PAGE>
<TABLE>
<S> <C> <C>
ABN AMRO MORTGAGE CAPITAL FUNDING, INC. Statement Date: 01/19/99
LaSalle National Bank SALOMON BROTHERS REALTY CORP. AND Payment Date: 01/19/99
CITICORP REAL ESTATE, INC., AS MORTGAGE LOAN SELLERS Prior Payment: NA
Administrator: AMRESCO SERVICES, L.P., AS MASTER SERVICER Record Date: 12/31/98
Brian Ames (800) 246-5761 SERIES 1998-MC3
135 S. LaSalle Street Suite 1625 ABN AMRO ACCT: 99-9999-99-9
Chicago, IL 60603
OTHER RELATED INFORMATION
===================================================================================================================================
===================================================================================================================================
</TABLE>
B-3
<PAGE>
<TABLE>
<S> <C> <C>
ABN AMRO MORTGAGE CAPITAL FUNDING, INC. Statement Date: 01/19/99
LaSalle National Bank SALOMON BROTHERS REALTY CORP. AND Payment Date: 01/19/99
CITICORP REAL ESTATE, INC., AS MORTGAGE LOAN SELLERS Prior Payment: NA
Administrator: AMRESCO SERVICES, L.P., AS MASTER SERVICER Record Date: 12/31/98
Brian Ames (800) 246-5761 SERIES 1998-MC3
135 S. LaSalle Street Suite 1625 ABN AMRO ACCT: 99-9999-99-9
Chicago, IL 60603
<CAPTION>
====================================================================================================
Distribution Delinq. 1 Month Delinq. 2 Months Delinq. 3 Months Foreclosure/Bankruptcy
Date # Balance # Balance # Balance # Balance
- ------------- ----------------- ------------------ ------------------ ----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
01/19/99 0 0 0 0 0 0 0 0
0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
====================================================================================================
</TABLE>
<TABLE>
<CAPTION>
============================================================================================
REO Modifications Prepayments Curr Weighted Avg.
# Balance # Balance # Balance Coupon Remit
- ------------------------ ----------------- -------------------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
0 0 0 0 0 0
0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
============================================================================================
</TABLE>
Note: Foreclosure and REO Totals are Included in the Appropriate Delinquency
Aging Category
B-4
<PAGE>
<TABLE>
<S> <C> <C>
ABN AMRO MORTGAGE CAPITAL FUNDING, INC. Statement Date: 01/19/99
LaSalle National Bank SALOMON BROTHERS REALTY CORP. AND Payment Date: 01/19/99
CITICORP REAL ESTATE, INC., AS MORTGAGE LOAN SELLERS Prior Payment: NA
Administrator: AMRESCO SERVICES, L.P., AS MASTER SERVICER Record Date: 12/31/98
Brian Ames (800) 246-5761 SERIES 1998-MC3
135 S. LaSalle Street Suite 1625 ABN AMRO ACCT: 99-9999-99-9
Chicago, IL 60603
</TABLE>
DELINQUENT LOAN DETAIL
<TABLE>
<CAPTION>
===================================================================================================================================
Paid Outstanding Out. Property Special
Disclosure Date Thru Current P&I P&I Protection Advance Servicer Foreclosure Bankruptcy REO
Control # Date Advance Advances** Advances Description (1) Transfer Date Date Date Date
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
===================================================================================================================================
A. P&I Advance - Loan in Grace Period
B. P&I Advance - Late Payment but less than 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
===================================================================================================================================
</TABLE>
** Outstanding P&I Advances include the current period P&I Advance
B-5
<PAGE>
<TABLE>
<S> <C> <C>
ABN AMRO MORTGAGE CAPITAL FUNDING, INC. Statement Date: 01/19/99
LaSalle National Bank SALOMON BROTHERS REALTY CORP. AND Payment Date: 01/19/99
CITICORP REAL ESTATE, INC., AS MORTGAGE LOAN SELLERS Prior Payment: NA
Administrator: AMRESCO SERVICES, L.P., AS MASTER SERVICER Record Date: 12/31/98
Brian Ames (800) 246-5761 SERIES 1998-MC3
135 S. LaSalle Street Suite 1625 ABN AMRO ACCT: 99-9999-99-9
Chicago, IL 60603
POOL TOTAL
</TABLE>
DISTRIBUTION OF PRINCIPAL BALANCES
<TABLE>
<CAPTION>
(2) Current Scheduled Number (2) Scheduled Based on
Balances of Loans Balance Balance
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
$0 to $500,000
$500,000 to $1,000,000
$1,000,000 to $1,000,000
$1,500,000 to $2,000,000
$2,000,000 to $2,500,000
$2,500,000 to $3,000,000
$3,000,000 to $3,500,000
$3,500,000 to $4,000,000
$4,000,000 to $5,000,000
$5,000,000 to $6,000,000
$6,000,000 to $7,000,000
$7,000,000 to $8,000,000
$8,000,000 to $9,000,000
$9,000,000 to $10,000,000
$10,000,000 to $11,000,000
$11,000,000 to $12,000,000
$12,000,000 to $13,000,000
$13,000,000 to $14,000,000
$14,000,000 to $15,000,000
$15,000,000 & Above
- --------------------------------------------------------------------------------------
Total 0 0 0.00%
</TABLE>
DISTRIBUTION OF PROPERTY TYPES
<TABLE>
<CAPTION>
Number (2) Scheduled Based on
Property Types of Loans Balance Balance
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
- ------------------------------------------------------------------------------
Total 0 0 0.00%
</TABLE>
DISTRIBUTION OF MORTGAGE INTEREST RATES
<TABLE>
<CAPTION>
Current Mortgage Number (2) Scheduled Based on
Interest Rate of Loans Balance Balance
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
7.000% or less
7.000% to 7.125%
7.125% to 7.375%
7.375% to 7.625%
7.625% to 7.875%
7.875% to 8.125%
8.125% to 8.375%
8.375% to 8.625%
8.625% to 8.875%
8.875% to 9.125%
9.125% to 9.375%
9.375% to 9.625%
9.625% to 9.875%
9.875% to 10.125%
10.125% & Above
- -------------------------------------------------------------------------------
Total 0 0 0.00%
</TABLE>
W/Avg Mortgage Interest Rate is 0.0000%
Minimum Mortgage Interest Rate is 0.0000%
Maximum Mortgage Interest Rate is 0.0000%
GEOGRAPHIC DISTRIBUTION
<TABLE>
<CAPTION>
Number (2) Scheduled Based on
Geographic Location of Loans Balance Balance
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
- -------------------------------------------------------------------------------
Total 0 0 0.00%
</TABLE>
B-6
<PAGE>
<TABLE>
<S> <C> <C>
ABN AMRO Mortgage Capital Funding, Inc. Statement Date: 01/19/99
LaSalle National Bank Salomon Brothers Realty Corp. and Payment Date: 01/19/99
Citicorp Real Estate, Inc., as Mortgage Loan Sellers Prior Payment: NA
Administrator: AMRESCO Services, L.P., as Master Servicer Record Date: 12/31/98
Brian Ames (800) 246-5761 Series 1998-MC3
135 S. LaSalle Street Suite 1625 ABN AMRO Acct: 99-9999-99-9
Chicago, IL 60603 Pool Total
</TABLE>
LOAN SEASONING
<TABLE>
- ---------------------------------------------------------------------------------------------------
Number (2) Scheduled Based on
Number of Years of Loans Balance Balance
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
Weighted Average Seasoning is 0.0
</TABLE>
DISTRIBUTION OF AMORTIZATION TYPE
<TABLE>
- ---------------------------------------------------------------------------------------------------
Number (2) Scheduled Based on
Amortization Type of Loans Balance Balance
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
Total 0 0 0.00%
- ---------------------------------------------------------------------------------------------------
</TABLE>
DISTRIBUTION OF REMAINING TERM
FULLY AMORTIZING
<TABLE>
- ---------------------------------------------------------------------------------------------------
Fully Amortizing Number (2) Scheduled Based on
Mortgage Loans of Loans Balanced Balence
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
60 months or less
61 to 120 months
121 to 180 months
181 to 240 months
241 to 360 months
- ---------------------------------------------------------------------------------------------------
Total 0 0 0.00%
- ---------------------------------------------------------------------------------------------------
Weighted Average Months to Maturity is 0
</TABLE>
DISTRIBUTION OF REMAINING TERM
BALLOON LOANS
<TABLE>
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balloon Number (2) Scheduled Based on
Mortgage Loans of Loans Balanced Balence
- ---------------------------------------------------------------------------------------------------
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%
- ---------------------------------------------------------------------------------------------------
Weighted Average Months to Maturity is 0
</TABLE>
DISTRIBUTION OF DSCR
<TABLE>
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Debt Service Number (2) Scheduled Based on
Coverage Ratio (1) of Loans Balance Balance
- ---------------------------------------------------------------------------------------------------
0.500 or less
0.500 to 0.675
0.625 to 0.750
0.750 to 0.875
0.875 to 1.000
1.000 to 1.125
1.125 to 1.250
1.250 to 1.375
1.375 to 1.500
1.500 to 1.625
1.625 to 1.750
1.750 to 1.875
1.875 to 2.000
2.000 to 2.125
2.125 & above
Unknown
- ---------------------------------------------------------------------------------------------------
Total 0 0 0.00%
- ---------------------------------------------------------------------------------------------------
Weighted Average Debt Service Coverage Ratio is 0.000
</TABLE>
NOI AGING
<TABLE>
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Number (2) Scheduled Based on
NOI Date of Loans Balanced Balence
- ---------------------------------------------------------------------------------------------------
1 year or less
1 to 2 years
2 Years or More
Unknown
- ---------------------------------------------------------------------------------------------------
Total 0 0 0.00%
- ---------------------------------------------------------------------------------------------------
</TABLE>
(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.
B-7
<PAGE>
<TABLE>
<S> <C> <C>
ABN AMRO Mortgage Capital Funding, Inc. Statement Date: 01/19/99
LaSalle National Bank Salomon Brothers Realty Corp. and Payment Date: 01/19/99
Citicorp Real Estate, Inc., as Mortgage Loan Sellers Prior Payment: NA
Administrator: AMRESCO Services, L.P., as Master Servicer Record Date: 12/31/98
Brian Ames (800) 246-5761 Series 1998-MC3
135 S. LaSalle Street Suite 1625 ABN AMRO Acct: 99-9999-99-9
Chicago, IL 60603
</TABLE>
LOAN LEVEL DETAIL
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Appraisal Property Operating Ending Loan
Disclosure Reduction Type Maturity Statement Principal Note Scheduled Prepayment Status
Control # Amounts Code Date DSCR NOI Date Balance Rate P&I 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 Period
B. P&I Adv - (less than) one month delinq
1. P&I Adv - delinquent 1 month
2. P&I Adv - delinquent 2 months
3. P&I Adv - delinquent 3+ months
4. Mat. Balloon/Assumd P&I
5. Prepaid in Full
6. Specially Serviced
7. Foreclosure
8. Bankruptcy
9. REO
10. DPO
11. Modification
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
B-8
<PAGE>
<TABLE>
<S> <C> <C>
ABN AMRO Mortgage Capital Funding, Inc. Statement Date: 01/19/99
LaSalle National Bank Salomon Brothers Realty Corp. and Payment Date: 01/19/99
Citicorp Real Estate, Inc., as Mortgage Loan Sellers Prior Payment: NA
Administrator: AMRESCO Services, L.P., as Master Servicer Record Date: 12/31/98
Brian Ames (800) 246-5761 Series 1998-MC3
135 S. LaSalle Street Suite 1625 ABN AMRO Acct: 99-9999-99-9
Chicago, IL 60603
</TABLE>
<TABLE>
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(1) Comments
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Legend:
1) Request for waiver of Prepayment Penalty
2) Payment default
3) Request for Loan Modification or Workout
4) Loan with Borrower Bankruptcy
5) Loan in Process of Foreclosure
6) Loan now REO Property
7) Loans Paid Off
8) Loans Returned to Master Servicer
APPENDIX A
B-9
<PAGE>
<TABLE>
<S> <C> <C>
ABN AMRO Mortgage Capital Funding, Inc. Statement Date: 01/19/99
LaSalle National Bank Salomon Brothers Realty Corp. and Payment Date: 01/19/99
Citicorp Real Estate, Inc., as Mortgage Loan Sellers Prior Payment: NA
Administrator: AMRESCO Services, L.P., as Master Servicer Record Date: 12/31/98
Brian Ames (800) 246-5761 Series 1998-MC3
135 S. LaSalle Street Suite 1625 ABN AMRO Acct: 99-9999-99-9
Chicago, IL 60603
</TABLE>
<TABLE>
MODIFIED LOAN DETAIL
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Disclosure Modification Modification
Control # Date Description
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
APPENDIX B
B-10
<PAGE>
<TABLE>
<S> <C> <C>
ABN AMRO Mortgage Capital Funding, Inc. Statement Date: 01/19/99
LaSalle National Bank Salomon Brothers Realty Corp. and Payment Date: 01/19/99
Citicorp Real Estate, Inc., as Mortgage Loan Sellers Prior Payment: NA
Administrator: AMRESCO Services, L.P., as Master Servicer Record Date: 12/31/98
Brian Ames (800) 246-5761 Series 1998-MC3
135 S. LaSalle Street Suite 1625 ABN AMRO Acct: 99-9999-99-9
Chicago, IL 60603
</TABLE>
REALIZED LOSS DETAIL
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning Gross Proceeds Aggregate Net Net Proceeds
Dist. Disclosure Appraisal Appraisal Scheduled Gross as a % of Liquidation Liquidation as a % of Realized
Date Control# Date Value Balance Proceeds Sched Principal Expenses* Proceeds Sched. Balance Loss
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
CURRENT TOTAL 0.00 0.00 0.00 0.00 0.00
CUMULATIVE 0.00 0.00 0.00 0.00 0.00
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
APPENDIX C
* Aggregate liquidation expenses also include outstanding P&I advances and
unpaid servicing fees, unpaid trustee fees, etc.
B-11
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
ANNEX C
INFORMATION IN THIS MATERIAL REGARDING ANY ASSETS BACKING ANY SECURITIES
DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION REGARDING SUCH ASSETS. ALL
INFORMATION IN THIS TERM SHEET, WHETHER REGARDING THE ASSETS BACKING ANY
SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED BY THE INFORMATION
CONTAINED IN ANY FINAL PROSPECTUS FOR ANY SECURITIES ACTUALLY SOLD TO YOU.
- --------------------------------------------------------------------------------
MORTGAGE CAPITAL FUNDING, INC.
MULTIFAMILY / COMMERCIAL MORTGAGE PASS-THROUGH
CERTIFICATES, SERIES 1998-MC3
CLASSES A-1, A-2, B, C, D, E & X
$805,992,000 (APPROXIMATE)
-------------
CMBS NEW ISSUE TERM SHEET
-------------
DECEMBER 14, 1998
SALOMON SMITH BARNEY INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Contacts:
Salomon Citicorp
TRADING TRADING
<S> <C> <C> <C> <C> <C>
Paul Vanderslice (212) 783-3659 (212) 783-4109 Jeff Sturdevant (212) 291-3320 (212) 291-3687
Jeff Lewis (212) 783-3659 (212) 783-4109
FINANCE FINANCE
David Tibbals (212) 783-7171 (212) 783-2096 Richard Jarocki (212) 559-0217 (212) 793-5602
Angela Hutzel (212) 783-5664 (212) 783-2096 Mark Horinbein (212) 559-0216 (212) 793-5602
Joseph Siragusa (212) 783-8542 (212) 783-2096
ANALYTICS ANALYTICS
Tony Lupo (212) 783-5838 (212) 783-2096 Nancy Wilt (212) 291-3320 (212) 291-3687
Bruce Bernard (212) 783-1873 (212) 783-2096
</TABLE>
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do not represent that it is
accurate or complete and it should not be relied upon as such. By accepting this
material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
therein. We make no representations regarding the reasonableness of such
assumptions or the likelihood that any of such assumptions will coincide with
actual market conditions or events, and this material should not be relied upon
for such purposes. We and our affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned therein or derivatives thereof (including
options). This material may be filed with the Securities and Exchange Commission
(the "SEC") and incorporated by reference into an effective registration
statement previously filed with the SEC under Rule 415 of the Securities Act of
1933, including in cases where the material does not pertain to securities that
are ultimately offered for sale pursuant to such registration statement.
Information contained in this material is current as of the date appearing on
this material only. Information in this material regarding any assets backing
any securities discussed herein supersedes all prior information regarding such
assets. All information in this Term Sheet, whether regarding the assets backing
any securities discussed herein or otherwise, will be superseded by the
information contained in any final prospectus for any securities actually sold
to you.
This material is furnished to you by Salomon Smith Barney Inc. and not by the
issuer of the securities. Salomon Smith Barney Inc. is not acting as agent for
the issuer or its affiliates in connection with the proposed transaction. The
issuer has not prepared or taken part in the preparation of these materials.
C-1
<PAGE>
INFORMATION IN THIS MATERIAL REGARDING ANY ASSETS BACKING ANY SECURITIES
DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION REGARDING SUCH ASSETS. ALL
FORMATION IN THIS TERM SHEET, WHETHER REGARDING THE ASSETS BACKING ANY
SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED BY THE INFORMATION
CONTAINED IN ANY FINAL PROSPECTUS FOR ANY SECURITIES ACTUALLY SOLD TO YOU.
- --------------------------------------------------------------------------------
MORTGAGE CAPITAL FUNDING, INC.
MULTIFAMILY/COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1998-MC3
CLASSES A-1, A-2, B, C, D, E & X
$805,992,000 (APPROXIMATE)
- --------------------------------------------------------------------------------
COLLATERAL FACTS
- --------------------------------------------------------------------------------
INITIAL POOL BALANCE: $908,161,006
NUMBER OF MORTGAGE LOANS: 232
NUMBER OF PROPERTIES 265
AVERAGE LOAN CUT-OFF DATE BALANCE: $3,914,487
AVERAGE PROPERTY CUT-OFF DATE BALANCE: $3,427,023
WEIGHTED AVERAGE CURRENT MORTGAGE RATE(A): 7.507% (6.35% - 10.00%)
WEIGHTED AVERAGE REMAINING AMORTIZATION TERM: 316 mos.
WEIGHTED AVERAGE U/W NCF DSCR (B): 1.39x (1.16x - 4.73x)
WEIGHTED AVERAGE CUT-OFF DATE LTV RATIO: 70.13% (21.23 %- 82.22%)
WEIGHTED AVERAGE REMAINING TERM TO SCHEDULED 110 mos. (36 mos. - 119 mos.)
MATURITY/ARD(C):
WEIGHTED AVERAGE SEASONING: 8 mos.
WEIGHTED AVERAGE PREPAYMENT RESTRICTION 105 mos.
- --------------------------------------------------------------------------------
(a) Gross Coupon.
(b) U/W NCF DSCR is the ratio of Underwritten Net Cash Flow over the annualized
debt service payments.
(c) Anticipated Repayment Date for loans that provide for such a date. All
information presented herein with respect to ARD Loans assumes that they
mature on their respective Anticipated Repayment Dates.
KEY FEATURES
- --------------------------------------------------------------------------------
Issuer: Mortgage Capital Funding, Inc.
Sole Manager: Salomon Smith Barney Inc.
Mortgage Loan Sellers: Citicorp Real Estate, Inc. (42.47% of Initial
Pool Balance) and Salomon Brothers Realty
Corp.(57.53% of Initial Pool Balance)
Master Servicer: Amresco Services, L.P.
Special Servicer: Allied Capital Corp.
Purchaser of Classes H, J, K, L Allied Capital Corp.
Trustee/Fiscal Agent: LaSalle National Bank/ABN AMRO Bank N.V.
Pricing: On or about December 21,1998
Closing: On or about December 29, 1998
Settlement: On or about December 30, 1998
Cut-off Date: December 1,1998
Distribution Date: 18th of each month, or following business day
(commencing in January 1999)
ERISA Eligible: Classes A1, A2 and X are ERISA eligible under
the individual underwriters' prohibited
transaction exemptions, subject to certain
conditions for eligibility
Representations & Warranties: Provided by applicable Mortgage Loan Sellers
Structure: Sequential pay
Interest Accrual Period: With respect to any Distribution Date, the
calendar month preceding the month in which
such Distribution Date occurs.
Day Count: 30/360
Tax Treatment: REMIC
Rated Final Distribution Date: November 18, 2031
Clean up Call: 1.0%
Minimum Denominations: Publicly Offered Classes except Class X:
$10,000 & $1 Class X: $1,000,000 Notional
Amount & $1
Deal Information/Analytics It is anticipated that certain Mortgage Loan
and Certificate information will be available
from the following services: Bloomberg, Intex,
Charter Research, and The Trepp Group.
- --------------------------------------------------------------------------------
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do not represent that it is
accurate or complete and it should not be relied upon as such. By accepting this
material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
therein. We make no representations regarding the reasonableness of such
assumptions or the likelihood that any of such assumptions will coincide with
actual market conditions or events, and this material should not be relied upon
for such purposes. We and our affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned therein or derivatives thereof (including
options). This material may be filed with the Securities and Exchange Commission
(the "SEC") and incorporated by reference into an effective registration
statement previously filed with the SEC under Rule 415 of the Securities Act of
1933, including in cases where the material does not pertain to securities that
are ultimately offered for sale pursuant to such registration statement.
Information contained in this material is current as of the date appearing on
this material only. Information in this material regarding any assets backing
any securities discussed herein supersedes all prior information regarding such
assets. All information in this Term Sheet, whether regarding the assets backing
any securities discussed herein or otherwise, will be superseded by the
information contained in any final prospectus for any securities actually sold
to you.
This material is furnished to you by Salomon Smith Barney Inc. and not by the
issuer of the securities. Salomon Smith Barney Inc. is not acting as agent for
the issuer or its affiliates in connection with the proposed transaction. The
issuer has not prepared or taken part in the preparation of these materials.
C-2
<PAGE>
INFORMATION IN THIS MATERIAL REGARDING ANY ASSETS BACKING ANY SECURITIES
DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION REGARDING SUCH ASSETS. ALL
FORMATION IN THIS TERM SHEET, WHETHER REGARDING THE ASSETS BACKING ANY
SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED BY THE INFORMATION
CONTAINED IN ANY FINAL PROSPECTUS FOR ANY SECURITIES ACTUALLY SOLD TO YOU.
- --------------------------------------------------------------------------------
MORTGAGE CAPITAL FUNDING, INC.
MULTIFAMILY/COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1998-MC3
CLASSES A-1, A-2, B, C, D, E & X
$805,992,000 (APPROXIMATE)
- --------------------------------------------------------------------------------
APPROXIMATE SECURITIES STRUCTURE
- ---------------------------------------------------------------------------
RATING
(MOODY'S/
S&P) CREDIT CLASS APPROX. COUPON
CLASS (A) SUPPORT % SIZE DESCRIPTION COUPON
- ---------------------------------------------------------------------------
Publicly Offered
Classes:
X Aaa/AAAr $908,161,005(c) Variable Rate
A1 Aaa/AAA 30.50% 23.62% $214,494,000 Fixed Rate
A2 Aaa/AAA 30.50% 45.88% $416,677,000 Fixed Rate
B Aa2/AA 26.00% 4.50% $40,867,000 Fixed Rate
C A2/A 21.25% 4.75% $43,138,000 Fixed Rate
D Baa2/BBB 14.50% 6.75% $61,301,000 WAC
E Baa3/NR 11.25% 3.25% $29,515,000 WAC
Privately Placed Classes
(144A eligible):
- ---------------------------------------------------------------------------
F NOT OFFERED HEREBY
G NOT OFFERED HEREBY
H NOT OFFERED HEREBY
J NOT OFFERED HEREBY
K NOT OFFERED HEREBY
L NOT OFFERED HEREBY
Total $908,161,005
Securities
- ---------------------------------------------------------------------------
APPROXIMATE SECURITIES STRUCTURE
- -----------------------------------------------------------------
WTD
AVERAGE PRINCIPAL
LIFE SMMEA ERISA PAYMENT
SPREAD PRICE (YRS.) DELIVERY ELIGIBLE ELIGIBLE WINDOW (B)
- -----------------------------------------------------------------
7.11 DTC N/A Yes
100.50 5.50 DTC N/A Yes 01/99-09/07
101.50 9.26 DTC N/A Yes 09/07-07/08
101.50 9.55 DTC N/A N/A 07/08-07/08
101.50 9.55 DTC N/A N/A 07/08-07/08
100.50 9.62 DTC N/A N/A 07/08-09/08
92.22 9.72 DTC N/A N/A 09/08-09/08
- -----------------------------------------------------------------
- -----------------------------------------------------------------
(a) Ratings shown are those of Moody's and S&P, respectively. Classes marked
"NR" will not be rated by the applicable Rating Agency.
(b) Calculated at 0% CPR, no balloon extension and ARD Loans pay in full on
Anticipated Repayment Dates.
(c) Notional amount.
STRUCTURAL OVERVIEW
[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.]
[BAR GRAPH]
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do not represent that it is
accurate or complete and it should not be relied upon as such. By accepting this
material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
therein. We make no representations regarding the reasonableness of such
assumptions or the likelihood that any of such assumptions will coincide with
actual market conditions or events, and this material should not be relied upon
for such purposes. We and our affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned therein or derivatives thereof (including
options). This material may be filed with the Securities and Exchange Commission
(the "SEC") and incorporated by reference into an effective registration
statement previously filed with the SEC under Rule 415 of the Securities Act of
1933, including in cases where the material does not pertain to securities that
are ultimately offered for sale pursuant to such registration statement.
Information contained in this material is current as of the date appearing on
this material only. Information in this material regarding any assets backing
any securities discussed herein supersedes all prior information regarding such
assets. All information in this Term Sheet, whether regarding the assets backing
any securities discussed herein or otherwise, will be superseded by the
information contained in any final prospectus for any securities actually sold
to you.
This material is furnished to you by Salomon Smith Barney Inc. and not by the
issuer of the securities. Salomon Smith Barney Inc. is not acting as agent for
the issuer or its affiliates in connection with the proposed transaction. The
issuer has not prepared or taken part in the preparation of these materials.
C-3
<PAGE>
INFORMATION IN THIS MATERIAL REGARDING ANY ASSETS BACKING ANY SECURITIES
DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION REGARDING SUCH ASSETS. ALL
FORMATION IN THIS TERM SHEET, WHETHER REGARDING THE ASSETS BACKING ANY
SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED BY THE INFORMATION
CONTAINED IN ANY FINAL PROSPECTUS FOR ANY SECURITIES ACTUALLY SOLD TO YOU.
- --------------------------------------------------------------------------------
MORTGAGE CAPITAL FUNDING, INC.
MULTIFAMILY/COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1998-MC3
CLASSES A-1, A-2, B, C, D, E & X
$805,992,000 (APPROXIMATE)
- --------------------------------------------------------------------------------
STRUCTURAL OVERVIEW - CONT.
- --------------------------------------------------------------------------------
o The Mortgage Pool will be comprised of one Loan Group
o Principal will be paid sequentially to Class A1, A2, B, C, D, E, F, G,
H, J, K and L Certificates (If principal balances of all such Classes
other than Classes A1 and A2 have reduced to zero, principal will be
allocated to Class A1 and A2 pro-rata)
o Class X will receive interest payments pro-rata (based on interest
entitlements) with the Class A1 and Class A2 Certificates each month
o Each of the Classes (except Class X) will be subordinate to earlier
alphabetically lettered classes (Losses will be allocated in reverse
alphabetical order to Classes with certificate balances and pro-rata to
Classes A1 and A2)
o The Master Servicer will cover net prepayment interest shortfalls, up to the
portion of the Master Servicing Fee equal to 0.06% per annum. Net shortfalls
(after application of prepayment interest excesses and other Servicer
coverage from the Master Servicing Fee) will be allocated in reverse
alphabetical order to the interest-bearing Certificates (other than the
Class A1, Class A2 and Class X) and then pro-rata (based on interest
entitlements) to the Class A1, Class A2 and Class X Certificates
o All Classes will pay interest on a 30/360 basis
o Shortfalls resulting from Master Servicer and Special Servicer
modifications, Special Servicer compensation or other extraordinary trust
fund expenses will be allocated in reverse alphabetical order to Classes
with certificate balances (in the case of the Class A1 and Class A2
Certificates, pro rata based on certificate balances)
o IO protected with regard to loan modifications and waivers that reduce
Mortgage Rate
MORTGAGE POOL OVERVIEW
- --------------------------------------------------------------------------------
o The Mortgage Pool is comprised of 232 multifamily and commercial loans with
an aggregate Cut-off Date Balance of approximately $908,161,006
o All of the Mortgage Loans are secured by first mortgage liens on multifamily
and commercial properties
o The Mortgage Pool's average Cut-off Date Balance is approximately $3,914,487
o The Mortgage Pool's weighted average current Underwritten NCF Debt Service
Coverage Ratio is 1.39x (a)
o The Mortgage Pool's Cut-off Date LTV is 70.13%
o The Mortgage Pool's weighted average Mortgage Rate is approximately 7.507%
per annum
(a) Underwritten NCF Debt Service Coverage Ratio is the ratio of
Underwritten NCF over the annualized debt service payments.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do not represent that it is
accurate or complete and it should not be relied upon as such. By accepting this
material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
therein. We make no representations regarding the reasonableness of such
assumptions or the likelihood that any of such assumptions will coincide with
actual market conditions or events, and this material should not be relied upon
for such purposes. We and our affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned therein or derivatives thereof (including
options). This material may be filed with the Securities and Exchange Commission
(the "SEC") and incorporated by reference into an effective registration
statement previously filed with the SEC under Rule 415 of the Securities Act of
1933, including in cases where the material does not pertain to securities that
are ultimately offered for sale pursuant to such registration statement.
Information contained in this material is current as of the date appearing on
this material only. Information in this material regarding any assets backing
any securities discussed herein supersedes all prior information regarding such
assets. All information in this Term Sheet, whether regarding the assets backing
any securities discussed herein or otherwise, will be superseded by the
information contained in any final prospectus for any securities actually sold
to you.
This material is furnished to you by Salomon Smith Barney Inc. and not by the
issuer of the securities. Salomon Smith Barney Inc. is not acting as agent for
the issuer or its affiliates in connection with the proposed transaction. The
issuer has not prepared or taken part in the preparation of these materials.
C-4
<PAGE>
INFORMATION IN THIS MATERIAL REGARDING ANY ASSETS BACKING ANY SECURITIES
DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION REGARDING SUCH ASSETS. ALL
FORMATION IN THIS TERM SHEET, WHETHER REGARDING THE ASSETS BACKING ANY
SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED BY THE INFORMATION
CONTAINED IN ANY FINAL PROSPECTUS FOR ANY SECURITIES ACTUALLY SOLD TO YOU.
- --------------------------------------------------------------------------------
MORTGAGE CAPITAL FUNDING, INC.
MULTIFAMILY/COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1998-MC3
CLASSES A-1, A-2, B, C, D, E & X
$805,992,000 (APPROXIMATE)
- --------------------------------------------------------------------------------
PREPAYMENT RESTRICTIONS
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
---------------------------------------------
% OF CUT-OFF
NUMBER OF AGGREGATE INITIAL MAXIMUM STATED U/W DATE
MORTGAGE CUT-OFF DATE POOL CUT-OFF DATE MORTGAGE REMAIN. NCF LOAN-TO-VALUE
PREPAYMENT RESTRICTIONS LOANS BALANCE BALANCE BALANCE RATE TERM (MO.) DSCR RATIO
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
> of YM or 1% 4 $4,977,246 0.55% $2,348,322 8.503% 107 1.29x 73.13%
Lockout/> of YM or 1% 115 $501,768,716 55.25% $65,804,538 7.584% 109 1.35x 70.63%
Lockout/Declining Fee 6 $7,538,864 0.83% $2,542,442 7.355% 109 1.75x 56.12%
Lockout/Defeasance 38 $172,644,038 19.01% $13,979,720 7.210% 116 1.42x 71.62%
Lockout/YM 66 $206,866,274 22.78% $13,933,312 7.384% 114 1.46x 68.46%
> of YM or 3 $14,365,867 1.58% $6,712,570 9.850% 36 1.33x 65.10%
1%/Declining Fee
- -----------------------------------------------------------------------------------------------------------------------------
TOTALS 232 $908,161,006 100.00% 7.507% 110 1.39x 70.13%
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
PREPAYMENT RESTRICTIONS BY MORTGAGE RATE
<TABLE>
<CAPTION>
WEIGHTED AVERAGES % BY CUT-OFF DATE BALANCE OF MORTGAGE LOANS
----------------------------------------------------------------------------------
LOCKOUT
% BY THEN GREATER OF
NUMBER AGGREGATE STATED GREATER GREATER LOCKOUT 1%/YLD.
OF AGGREGATE CUT-OFF REMAIN. OF OF LOCKOUT LOCKOUT THEN MAINT.
MORTGAGE CUT-OFF DATE DATE MORTGAGE TERM 1%/YLD. 1%/YLD. THEN THEN YLD. THEN
MORTGAGE RATE LOANS BALANCE BALANCE RATE (MO.) MAINT. MAINT. DECLINING DEFEASANCE MAINT. DECLINING
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0.00% to 6.99% 11 $66,304,389 7.30% 6.807% 114 0.00 3.36 0.54 2.85 0.55 0.00
7.00% to 7.49% 101 $508,056,084 55.94% 7.217% 115 0.00 25.41 0.00 14.65 15.88 0.00
7.50% to 7.99% 59 $194,496,256 21.42% 7.633% 107 0.00 13.42 0.14 1.51 6.35 0.00
8.00% to 8.49% 23 $56,912,828 6.27% 8.149% 108 0.14 6.12 0.00 0.00 0.00 0.00
8.50% to 8.99% 22 $38,441,991 4.23% 8.651% 95 0.40 3.68 0.15 0.00 0.00 0.00
9.00% to 9.49% 11 $21,555,714 2.37% 9.125% 100 0.00 2.37 0.00 0.00 0.00 0.00
9.50% to 9.99% 4 $17,473,104 1.92% 9.854% 46 0.00 0.34 0.00 0.00 0.00 1.58
10.00% to 10.49% 1 $4,920,639 0.54% 10.000% 91 0.00 0.54 0.00 0.00 0.00 0.00
- ----------------------------------------------------------------------------------------------------------------------------------
TOTALS 232 $908,161,006 100.00% 7.507% 110 0.55 55.25 0.83 19.01 22.78 1.58
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
PREPAYMENT RESTRICTION ANALYSIS (A) (B) (C)
<TABLE>
<CAPTION>
PREPAYMENT RESTRICTIONS
(MONTHS SINCE CUT-OFF DATE) 0 12 24 36 48 60 72 84 96 108
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
REMAINING BALANCE (1) 100.00% 98.77% 97.46% 94.49% 92.96% 89.53% 87.79% 85.26% 82.44% 68.40%
LOCKED/DEFEASANCE 97.87% 97.87% 92.10% 78.88% 20.16% 19.65% 19.65% 19.64% 19.82% 23.25%
YIELD MAINTENANCE 0.55% 0.55% 6.02% 20.83% 77.61% 79.50% 79.06% 79.66% 77.84% 45.19%
5% PREMIUM 0.00% 0.00% 0.15% 0.15% 0.00% 0.55% 0.00% 0.00% 0.00% 0.00%
4% PREMIUM 0.00% 0.00% 0.14% 0.00% 0.15% 0.15% 0.54% 0.00% 0.00% 0.00%
3% PREMIUM 1.58% 0.00% 0.00% 0.15% 0.00% 0.00% 0.15% 0.70% 0.00% 0.00%
2% PREMIUM 0.00% 1.59% 0.00% 0.00% 0.15% 0.00% 0.00% 0.00% 0.70% 0.00%
1% PREMIUM 0.00% 0.00% 1.59% 0.00% 0.00% 0.15% 0.00% 0.00% 0.00% 0.69%
OPEN 0.00% 0.00% 0.00% 0.00% 1.94% 0.00% 0.59% 0.00% 1.64% 30.86%
BALANCE $908.2 $896.97 $885.05 $858.10 $844.25 $813.07 $797.24 $774.29 $748.68 $621.21
% OF INITIAL BALANCE 100.00% 98.77% 97.46% 94.49% 92.96% 89.53% 87.79% 85.26% 82.44% 68.40%
</TABLE>
(a) Table calculated using modeling assumptions and assuming 0% CPR and all ARD
Loans are paid in full on their respective Anticipated Repayment Dates.
(b) Totals may not equal 100% due to rounding.
(c) All numbers, unless otherwise noted, are as a percentage of the aggregate
mortgage loan pool balance at the specified point in time.
(1) Remaining aggregate mortgage loan pool balance as a percentage of Initial
Pool Balance at the specified point in time.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do not represent that it is
accurate or complete and it should not be relied upon as such. By accepting this
material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
therein. We make no representations regarding the reasonableness of such
assumptions or the likelihood that any of such assumptions will coincide with
actual market conditions or events, and this material should not be relied upon
for such purposes. We and our affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned therein or derivatives thereof (including
options). This material may be filed with the Securities and Exchange Commission
(the "SEC") and incorporated by reference into an effective registration
statement previously filed with the SEC under Rule 415 of the Securities Act of
1933, including in cases where the material does not pertain to securities that
are ultimately offered for sale pursuant to such registration statement.
Information contained in this material is current as of the date appearing on
this material only. Information in this material regarding any assets backing
any securities discussed herein supersedes all prior information regarding such
assets. All information in this Term Sheet, whether regarding the assets backing
any securities discussed herein or otherwise, will be superseded by the
information contained in any final prospectus for any securities actually sold
to you.
This material is furnished to you by Salomon Smith Barney Inc. and not by the
issuer of the securities. Salomon Smith Barney Inc. is not acting as agent for
the issuer or its affiliates in connection with the proposed transaction. The
issuer has not prepared or taken part in the preparation of these materials.
C-5
<PAGE>
INFORMATION IN THIS MATERIAL REGARDING ANY ASSETS BACKING ANY SECURITIES
DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION REGARDING SUCH ASSETS. ALL
FORMATION IN THIS TERM SHEET, WHETHER REGARDING THE ASSETS BACKING ANY
SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED BY THE INFORMATION
CONTAINED IN ANY FINAL PROSPECTUS FOR ANY SECURITIES ACTUALLY SOLD TO YOU.
- --------------------------------------------------------------------------------
MORTGAGE CAPITAL FUNDING, INC.
MULTIFAMILY/COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1998-MC3
CLASSES A-1, A-2, B, C, D, E & X
$805,992,000 (APPROXIMATE)
- --------------------------------------------------------------------------------
ALLOCATION OF PREPAYMENT PENALTIES
- --------------------------------------------------------------------------------
ALLOCATION OF PREPAYMENT PREMIUMS
Prepayment premiums will be allocated between the Publicly Offered Certificates
then entitled to principal distributions and the Class X Certificates as
follows:
o A percentage of all prepayment premiums (either fixed prepayment premiums or
yield maintenance amount) will be allocated to each class of the Publicly
Offered Certificates then entitled to principal distributions, which
percentage will be equal to the product of (a) the percentage of the total
principal distribution that such Class receives, and (b) a fraction
(expressed as a percentage which can be no greater than 100%), the numerator
of which is the excess of the Pass-Through Rate of such Class of the
Publicly Offered Certificates currently receiving principal over the
relevant Discount Rate, and the denominator of which is the excess of the
Mortgage Rate of the related Mortgage Loan over the Discount Rate.
--------------------------- ---- ---------------------------------
| Prepayment (Pass-Through Rate - Discount Rate) |
| Premium Allocation = --------------------------------------- |
| Percentage (Mortgage Rate - Discount Rate) |
--------------------------- ---- ---------------------------------
o The remaining percentage of the Prepayment Premiums will be allocated to the
Class X Certificates
o In general, this formula provides for an increase in the allocation of
Prepayment Premiums to the Publicly Offered Certificates then entitled to
principal distributions relative to the Class X Certificates as Discount
Rates decrease and a decrease in the allocation to such Classes as Discount
Rates rise
Allocation of Prepayment Premiums Example
Discount Rate Fraction Methodology:
Mortgage Rate = 9%
Bond Class Rate = 7%
Treasury Rate = 6%
BOND CLASS ALLOCATION | CLASS X ALLOCATION
-------------------------|----------------------------------------------
7% - 6% |
------- = 33 1/3% | Receives excess premiums = 66 2/3% thereof
9% - 6% |
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do not represent that it is
accurate or complete and it should not be relied upon as such. By accepting this
material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
therein. We make no representations regarding the reasonableness of such
assumptions or the likelihood that any of such assumptions will coincide with
actual market conditions or events, and this material should not be relied upon
for such purposes. We and our affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned therein or derivatives thereof (including
options). This material may be filed with the Securities and Exchange Commission
(the "SEC") and incorporated by reference into an effective registration
statement previously filed with the SEC under Rule 415 of the Securities Act of
1933, including in cases where the material does not pertain to securities that
are ultimately offered for sale pursuant to such registration statement.
Information contained in this material is current as of the date appearing on
this material only. Information in this material regarding any assets backing
any securities discussed herein supersedes all prior information regarding such
assets. All information in this Term Sheet, whether regarding the assets backing
any securities discussed herein or otherwise, will be superseded by the
information contained in any final prospectus for any securities actually sold
to you.
This material is furnished to you by Salomon Smith Barney Inc. and not by the
issuer of the securities. Salomon Smith Barney Inc. is not acting as agent for
the issuer or its affiliates in connection with the proposed transaction. The
issuer has not prepared or taken part in the preparation of these materials.
C-6
<PAGE>
INFORMATION IN THIS MATERIAL REGARDING ANY ASSETS BACKING ANY SECURITIES
DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION REGARDING SUCH ASSETS. ALL
FORMATION IN THIS TERM SHEET, WHETHER REGARDING THE ASSETS BACKING ANY
SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED BY THE INFORMATION
CONTAINED IN ANY FINAL PROSPECTUS FOR ANY SECURITIES ACTUALLY SOLD TO YOU.
- --------------------------------------------------------------------------------
MORTGAGE CAPITAL FUNDING, INC.
MULTIFAMILY/COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1998-MC3
CLASSES A-1, A-2, B, C, D, E & X
$805,992,000 (APPROXIMATE)
- --------------------------------------------------------------------------------
DISTRIBUTION OF CUT-OFF DATE BALANCES
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
------------------------------------------------
% OF CUM. % CUT-OFF
NUMBER OF AGGREGATE INITIAL OF INITIAL STATED U/W DATE
MORTGAGE CUT-OFF POOL POOL MORTGAGE REMAIN. NCF LOAN-TO-VALUE
CUT-OFF DATE BALANCE LOANS DATE BALANCE BALANCE BALANCE RATE TERM (MO.) DSCR RATIO
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$0 to $999,999 17 $13,127,113 1.45% 1.45% 8.165% 109 1.34x 71.80%
$1,000,000 to $2,499,999 95 $160,575,474 17.68% 19.13% 7.772% 109 1.39x 68.56%
$2,500,000 to $4,999,999 79 $291,748,695 32.13% 51.25% 7.619% 111 1.41x 70.06%
$5,000,000 to $7,499,999 25 $150,993,800 16.63% 67.88% 7.564% 106 1.46x 68.82%
$7,500,000 to $9,999,999 5 $40,990,392 4.51% 72.39% 7.437% 113 1.55x 68.53%
$10,000,000 to $14,999,999 5 $62,121,008 6.84% 79.23% 7.318% 104 1.32x 71.47%
$15,000,000 to $74,999,999 6 $188,604,524 20.77% 100.00% 7.093% 115 1.29x 72.42%
- --------------------------------------------------------------------------------------------------------------------------
TOTALS 232 $908,161,006 100.00% 7.507% 110 1.39x 70.13%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do not represent that it is
accurate or complete and it should not be relied upon as such. By accepting this
material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
therein. We make no representations regarding the reasonableness of such
assumptions or the likelihood that any of such assumptions will coincide with
actual market conditions or events, and this material should not be relied upon
for such purposes. We and our affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned therein or derivatives thereof (including
options). This material may be filed with the Securities and Exchange Commission
(the "SEC") and incorporated by reference into an effective registration
statement previously filed with the SEC under Rule 415 of the Securities Act of
1933, including in cases where the material does not pertain to securities that
are ultimately offered for sale pursuant to such registration statement.
Information contained in this material is current as of the date appearing on
this material only. Information in this material regarding any assets backing
any securities discussed herein supersedes all prior information regarding such
assets. All information in this Term Sheet, whether regarding the assets backing
any securities discussed herein or otherwise, will be superseded by the
information contained in any final prospectus for any securities actually sold
to you.
This material is furnished to you by Salomon Smith Barney Inc. and not by the
issuer of the securities. Salomon Smith Barney Inc. is not acting as agent for
the issuer or its affiliates in connection with the proposed transaction. The
issuer has not prepared or taken part in the preparation of these materials.
C-7
<PAGE>
INFORMATION IN THIS MATERIAL REGARDING ANY ASSETS BACKING ANY SECURITIES
DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION REGARDING SUCH ASSETS. ALL
FORMATION IN THIS TERM SHEET, WHETHER REGARDING THE ASSETS BACKING ANY
SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED BY THE INFORMATION
CONTAINED IN ANY FINAL PROSPECTUS FOR ANY SECURITIES ACTUALLY SOLD TO YOU.
- --------------------------------------------------------------------------------
MORTGAGE CAPITAL FUNDING, INC.
MULTIFAMILY/COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1998-MC3
CLASSES A-1, A-2, B, C, D, E & X
$805,992,000 (APPROXIMATE)
- --------------------------------------------------------------------------------
GEOGRAPHIC DISTRIBUTION BY CUT-OFF DATE BALANCE
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
--------------------------------------------
LOAN TO
% OF CUM. % CUT-OFF
NUMBER OF AGGREGATE INITIAL OF INITIAL STATED U/W DATE
MORTGAGED CUT-OFF DATE POOL POOL MORTGAGE REMAIN. TERM NCF VALUE
STATES PROPERTIES BALANCE BALANCE BALANCE RATE (MO.) DSCR RATIO
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CA 26 $98,195,075 10.81% 10.81% 7.256% 114 1.45x 68.35%
NY 29 $97,916,411 10.78% 21.59% 7.354% 112 1.54x 70.71%
FL 27 $92,949,769 10.23% 31.83% 7.717% 110 1.39x 71.01%
GA 17 $80,799,194 8.90% 40.73% 7.632% 102 1.32x 70.26%
NJ 13 $47,738,084 5.26% 45.98% 7.542% 101 1.36x 72.09%
MD 12 $43,914,576 4.84% 50.82% 7.909% 110 1.33x 67.55%
TX 17 $40,482,704 4.46% 55.28% 7.806% 101 1.37x 71.24%
VA 18 $35,741,941 3.94% 59.21% 7.352% 113 1.36x 69.82%
TN 11 $34,144,612 3.76% 62.97% 7.362% 114 1.42x 71.88%
MA 5 $30,716,607 3.38% 66.35% 7.299% 113 1.34x 61.92%
MS 5 $26,159,960 2.88% 69.23% 7.315% 115 1.36x 73.14%
MO 4 $25,711,486 2.83% 72.07% 7.228% 114 1.31x 69.50%
OH 9 $24,486,911 2.70% 74.76% 7.471% 115 1.32x 70.75%
DC 2 $22,750,914 2.51% 77.27% 6.851% 110 1.22x 77.08%
PA 3 $19,632,279 2.16% 79.43% 7.332% 112 1.18x 77.13%
WA 6 $16,546,390 1.82% 81.25% 7.665% 110 1.42x 66.29%
WV 4 $15,418,378 1.70% 82.95% 7.792% 114 1.36x 72.38%
IL 6 $15,392,495 1.69% 84.64% 7.322% 114 1.32x 68.54%
LA 3 $13,709,279 1.51% 86.15% 7.288% 115 1.58x 67.57%
UT 7 $13,526,719 1.49% 87.64% 7.810% 111 1.38x 70.07%
AZ 5 $13,510,370 1.49% 89.13% 8.035% 108 1.41x 64.83%
CO 6 $13,267,506 1.46% 90.59% 7.511% 112 1.45x 66.36%
CT 3 $11,869,150 1.31% 91.90% 7.187% 113 1.31x 78.79%
IA 3 $11,673,228 1.29% 93.18% 7.456% 110 1.38x 71.42%
NV 5 $9,966,188 1.10% 94.28% 8.412% 103 1.43x 64.62%
MI 2 $9,943,116 1.09% 95.38% 7.477% 115 1.36x 73.19%
DE 1 $7,488,705 0.82% 96.20% 7.200% 109 1.38x 73.78%
SC 3 $7,161,490 0.79% 96.99% 7.908% 112 1.43x 69.51%
RI 2 $5,382,196 0.59% 97.58% 8.193% 110 1.44x 73.17%
KS 1 $4,341,062 0.48% 98.06% 7.450% 117 1.31x 74.85%
NC 1 $3,775,647 0.42% 98.48% 7.420% 114 1.53x 72.61%
ID 2 $3,483,567 0.38% 98.86% 7.938% 107 1.41x 63.10%
WI 2 $3,253,042 0.36% 99.22% 8.000% 107 1.57x 60.24%
MN 1 $1,758,533 0.19% 99.41% 8.625% 106 1.49x 62.80%
ND 1 $1,486,039 0.16% 99.57% 7.875% 107 1.30x 67.55%
IN 1 $1,478,124 0.16% 99.74% 7.750% 116 1.74x 64.27%
WY 1 $1,280,190 0.14% 99.88% 7.650% 78 1.25x 58.86%
NM 1 $1,109,072 0.12% 100.00% 7.375% 112 1.25x 50.99%
- --------------------------------------------------------------------------------------------------------
TOTALS 265 $908,161,006 100.00% 7.507% 110 1.39x 70.13%
- --------------------------------------------------------------------------------------------------------
</TABLE>
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do not represent that it is
accurate or complete and it should not be relied upon as such. By accepting this
material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
therein. We make no representations regarding the reasonableness of such
assumptions or the likelihood that any of such assumptions will coincide with
actual market conditions or events, and this material should not be relied upon
for such purposes. We and our affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned therein or derivatives thereof (including
options). This material may be filed with the Securities and Exchange Commission
(the "SEC") and incorporated by reference into an effective registration
statement previously filed with the SEC under Rule 415 of the Securities Act of
1933, including in cases where the material does not pertain to securities that
are ultimately offered for sale pursuant to such registration statement.
Information contained in this material is current as of the date appearing on
this material only. Information in this material regarding any assets backing
any securities discussed herein supersedes all prior information regarding such
assets. All information in this Term Sheet, whether regarding the assets backing
any securities discussed herein or otherwise, will be superseded by the
information contained in any final prospectus for any securities actually sold
to you.
This material is furnished to you by Salomon Smith Barney Inc. and not by the
issuer of the securities. Salomon Smith Barney Inc. is not acting as agent for
the issuer or its affiliates in connection with the proposed transaction. The
issuer has not prepared or taken part in the preparation of these materials.
C-8
<PAGE>
INFORMATION IN THIS MATERIAL REGARDING ANY ASSETS BACKING ANY SECURITIES
DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION REGARDING SUCH ASSETS. ALL
FORMATION IN THIS TERM SHEET, WHETHER REGARDING THE ASSETS BACKING ANY
SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED BY THE INFORMATION
CONTAINED IN ANY FINAL PROSPECTUS FOR ANY SECURITIES ACTUALLY SOLD TO YOU.
- --------------------------------------------------------------------------------
MORTGAGE CAPITAL FUNDING, INC.
MULTIFAMILY/COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1998-MC3
CLASSES A-1, A-2, B, C, D, E & X
$805,992,000 (APPROXIMATE)
- --------------------------------------------------------------------------------
GEOGRAPHIC DISTRIBUTION BY CUT-OFF DATE BALANCE
[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 AMERICA]
WA 1.8% ND 0.2% WI 0.4% PA 2.2% RI 0.6% AZ 1.5%
ID 0.4% KS 0.5% IL 1.7% VA 3.9% CT 1.3% MI 1.1%
NV 1.1% TX 4.5% TN 3.8% NC 0.4% NJ 5.3% IN 0.2%
CA 10.8% MN 0.2% MS 2.9% SC 0.8% DE 0.8%
WY 0.1% IA 1.3% OH 2.7% GA 8.9% MD 4.8%
CO 1.5% MO 2.8% WVA 1.7% FL 10.2% DC 2.5%
NM 0.1% LA 1.5% NY 10.8% MA 3.4% UT 1.5%
[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.]
[PIE CHART]
California 10.8%
New York 10.8%
Florida 10.2%
Georgia 8.9%
New Jersey 5.3%
Maryland 4.8%
Texas 4.5%
Virginia 3.9%
Tennessee 3.8%
Massachusetts 3.4%
Other 33.6%
PERCENTAGES MAY NOT SUM TO 100% DUE TO ROUNDING
- --------------------------------------------------------------------------------
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do not represent that it is
accurate or complete and it should not be relied upon as such. By accepting this
material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
therein. We make no representations regarding the reasonableness of such
assumptions or the likelihood that any of such assumptions will coincide with
actual market conditions or events, and this material should not be relied upon
for such purposes. We and our affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned therein or derivatives thereof (including
options). This material may be filed with the Securities and Exchange Commission
(the "SEC") and incorporated by reference into an effective registration
statement previously filed with the SEC under Rule 415 of the Securities Act of
1933, including in cases where the material does not pertain to securities that
are ultimately offered for sale pursuant to such registration statement.
Information contained in this material is current as of the date appearing on
this material only. Information in this material regarding any assets backing
any securities discussed herein supersedes all prior information regarding such
assets. All information in this Term Sheet, whether regarding the assets backing
any securities discussed herein or otherwise, will be superseded by the
information contained in any final prospectus for any securities actually sold
to you.
This material is furnished to you by Salomon Smith Barney Inc. and not by the
issuer of the securities. Salomon Smith Barney Inc. is not acting as agent for
the issuer or its affiliates in connection with the proposed transaction. The
issuer has not prepared or taken part in the preparation of these materials.
C-9
<PAGE>
INFORMATION IN THIS MATERIAL REGARDING ANY ASSETS BACKING ANY SECURITIES
DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION REGARDING SUCH ASSETS. ALL
FORMATION IN THIS TERM SHEET, WHETHER REGARDING THE ASSETS BACKING ANY
SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED BY THE INFORMATION
CONTAINED IN ANY FINAL PROSPECTUS FOR ANY SECURITIES ACTUALLY SOLD TO YOU.
- --------------------------------------------------------------------------------
MORTGAGE CAPITAL FUNDING, INC.
MULTIFAMILY/COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1998-MC3
CLASSES A-1, A-2, B, C, D, E & X
$805,992,000 (APPROXIMATE)
- --------------------------------------------------------------------------------
PROPERTY TYPE DISTRIBUTION BY CUT-OFF DATE BALANCE
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
------------------------------------------
% OF CUT-OFF
NUMBER OF AGGREGATE INITIAL MAXIMUM STATED U/W DATE
MORTGAGED CUT-OFF DATE POOL CUT-OFF DATE MORTGAGE REMAIN. NCF LOAN-TO-VALUE
PROPERTY TYPES PROPERTIES BALANCE BALANCE BALANCE RATE TERM (MO.) DSCR RATIO
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Anchored Retail 34 $217,773,052 23.98% $39,862,084 7.300% 113 1.31x 73.00%
Office 47 $167,246,897 18.42% 21,067,759 7.349% 113 1.37x 69.42%
Hotel 37 $146,144,543 16.09% 7,931,838 7.587% 113 1.47x 67.61%
Multi-family 47 $140,563,364 15.48% 13,979,720 7.635% 104 1.33x 74.16%
Industrial 35 $104,129,598 11.47% 11,000,000 7.490% 106 1.41x 70.92%
Retail 45 $69,640,363 7.67% 4,702,414 7.994% 108 1.43x 67.47%
Mixed Use 9 $34,467,696 3.80% 6,288,362 7.398% 113 1.48x 58.44%
Mobile Home Park 6 $13,979,680 1.54% 4,616,425 7.249% 111 1.32x 71.07%
Office/Retail 3 $9,432,009 1.04% 4,920,639 9.205% 96 1.38x 62.85%
Health Care 1 $2,781,052 0.31% 2,781,052 7.610% 116 4.73x 21.23%
Other 1 $2,002,751 0.22% 2,002,751 7.700% 114 1.31x 66.76%
- ---------------------------------------------------------------------------------------------------------------------------
TOTALS 265 $908,161,006 100.00% 7.507% 110 1.39x 70.13%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) May not add up due to rounding
(b) May not sum to 100 % due to rounding
[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.]
[PIE CHART]
Office/Retail 1.0%
Health Care 0.3%
Other 0.2%
Anchored Retail 24.0%
Office 18.4%
Hotel 16.1%
Multi-family 15.5%
Industrial 11.5%
Retail 7.7%
Mixed Use 3.8%
Mobile Home Park 1.5%
- --------------------------------------------------------------------------------
Percentages may not sum to 100% due to rounding
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do not represent that it is
accurate or complete and it should not be relied upon as such. By accepting this
material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
therein. We make no representations regarding the reasonableness of such
assumptions or the likelihood that any of such assumptions will coincide with
actual market conditions or events, and this material should not be relied upon
for such purposes. We and our affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned therein or derivatives thereof (including
options). This material may be filed with the Securities and Exchange Commission
(the "SEC") and incorporated by reference into an effective registration
statement previously filed with the SEC under Rule 415 of the Securities Act of
1933, including in cases where the material does not pertain to securities that
are ultimately offered for sale pursuant to such registration statement.
Information contained in this material is current as of the date appearing on
this material only. Information in this material regarding any assets backing
any securities discussed herein supersedes all prior information regarding such
assets. All information in this Term Sheet, whether regarding the assets backing
any securities discussed herein or otherwise, will be superseded by the
information contained in any final prospectus for any securities actually sold
to you.
<PAGE>
This material is furnished to you by Salomon Smith Barney Inc. and not by the
issuer of the securities. Salomon Smith Barney Inc. is not acting as agent for
the issuer or its affiliates in connection with the proposed transaction. The
issuer has not prepared or taken part in the preparation of these materials.
C-10
<PAGE>
INFORMATION IN THIS MATERIAL REGARDING ANY ASSETS BACKING ANY SECURITIES
DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION REGARDING SUCH ASSETS. ALL
FORMATION IN THIS TERM SHEET, WHETHER REGARDING THE ASSETS BACKING ANY
SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED BY THE INFORMATION
CONTAINED IN ANY FINAL PROSPECTUS FOR ANY SECURITIES ACTUALLY SOLD TO YOU.
- --------------------------------------------------------------------------------
MORTGAGE CAPITAL FUNDING, INC.
MULTIFAMILY/COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1998-MC3
CLASSES A-1, A-2, B, C, D, E & X
$805,992,000 (APPROXIMATE)
- --------------------------------------------------------------------------------
UNDERWRITTEN NCF DSCR
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
-------------------------------------------
AGGREGATE % OF CUM. % OF
NUMBER OF CUT-OFF INITIAL INITIAL STATED LOAN TO
MORTGAGE DATE POOL (B) POOL MORTGAGE REMAIN. U/W NCF CUT-OFF
U/W NCF DSCR LOANS BALANCE (A) BALANCE BALANCE RATE TERM (MO.) DSCR DATE VALUE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1.10 - 1.19 9 $54,611,358 6.01% 6.01 7.311% 110 1.18x 74.50%
1.20 - 1.29 59 $242,685,793 26.72% 32.74 7.422% 112 1.25x 71.65%
1.30 - 1.39 76 $301,221,045 33.17% 65.90 7.628% 108 1.35x 72.46%
1.40 - 1.49 43 $161,650,761 17.80% 83.70 7.603% 108 1.44x 69.18%
1.50 - 1.59 21 $65,084,333 7.17% 90.87 7.423% 113 1.54x 67.97%
1.60 - 1.69 13 $41,427,871 4.56% 95.43 7.503% 112 1.65x 66.11%
1.70 - 1.79 5 $17,030,896 1.88% 97.31 7.374% 112 1.73x 60.96%
1.80 - 1.99 2 $8,830,804 0.97% 98.28 6.887% 115 1.82x 43.94%
2.00 - 2.99 3 $12,837,093 1.41% 99.69 6.910% 116 2.24x 44.82%
3.00 - 4.79 1 $2,781,052 0.31% 100.00 7.610% 116 4.73x 21.23%
- ------------------------------------------------------------------------------------------------------------
232 $908,161,006 100.00% 7.507% 110 1.39x 70.13%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(a) May not add up due to rounding
(b) May not sum to 100% due to rounding
o Weighted Average Current U/W NCF Debt Service Coverage Ratio: 1.39x
CUT-OFF DATE LOAN TO VALUE
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
----------------------------------------------
CUT-OFF
AGGREGATE % OF CUM. % OF DATE
NUMBER OF CUT-OFF INITIAL INITIAL STATED LOAN-TO-
MORTGAGE DATE POOL POOL MORTGAGE REMAIN. U/W NCF VALUE
LTV LOANS BALANCE BALANCE(B) BALANCE RATE TERM (MO.) DSCR RATIO(A)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0.00% to 24.99% 1 $2,781,052 0.31% 0.31% 7.610% 116 4.73x 21.23%
25.00% to 49.99% 7 $23,619,180 2.60% 2.91% 7.240% 114 1.91x 43.27%
50.00% to 59.99% 19 $78,761,377 8.67% 11.58% 7.599% 110 1.47x 56.43%
60.00% to 64.99% 29 $88,972,633 9.80% 21.38% 8.088% 103 1.40x 63.23%
65.00% to 69.99% 41 $119,800,160 13.19% 34.57% 7.778% 107 1.40x 67.71%
70.00% to 74.99% 94 $373,362,915 41.11% 75.68% 7.428% 111 1.35x 72.83%
75.00% to 79.99% 39 $217,932,819 24.00% 99.68% 7.250% 113 1.31x 78.00%
80.00% to 89.99% 2 $2,930,869 0.32% 100.00% 7.438% 115 1.24x 81.54%
- ---------------------------------------------------------------------------------------------------------------
TOTALS 232 $908,161,006 100.00% 7.507% 110 1.39x 70.13%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Ratio of Cut-off Date Principal Balance to most recent Appraised Value
(b) May not add up due to rounding
(c) May not sum to 100% due to rounding.
o Weighted Average Cut-off Date Loan-to-Value Ratio: 70.13%
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do not represent that it is
accurate or complete and it should not be relied upon as such. By accepting this
material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
therein. We make no representations regarding the reasonableness of such
assumptions or the likelihood that any of such assumptions will coincide with
actual market conditions or events, and this material should not be relied upon
for such purposes. We and our affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned therein or derivatives thereof (including
options). This material may be filed with the Securities and Exchange Commission
(the "SEC") and incorporated by reference into an effective registration
statement previously filed with the SEC under Rule 415 of the Securities Act of
1933, including in cases where the material does not pertain to securities that
are ultimately offered for sale pursuant to such registration statement.
Information contained in this material is current as of the date appearing on
this material only. Information in this material regarding any assets backing
any securities discussed herein supersedes all prior information regarding such
assets. All information in this Term Sheet, whether regarding the assets backing
any securities discussed herein or otherwise, will be superseded by the
information contained in any final prospectus for any securities actually sold
to you.
This material is furnished to you by Salomon Smith Barney Inc. and not by the
issuer of the securities. Salomon Smith Barney Inc. is not acting as agent for
the issuer or its affiliates in connection with the proposed transaction. The
issuer has not prepared or taken part in the preparation of these materials.
C-11
<PAGE>
INFORMATION IN THIS MATERIAL REGARDING ANY ASSETS BACKING ANY SECURITIES
DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION REGARDING SUCH ASSETS. ALL
FORMATION IN THIS TERM SHEET, WHETHER REGARDING THE ASSETS BACKING ANY
SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED BY THE INFORMATION
CONTAINED IN ANY FINAL PROSPECTUS FOR ANY SECURITIES ACTUALLY SOLD TO YOU.
- --------------------------------------------------------------------------------
MORTGAGE CAPITAL FUNDING, INC.
MULTIFAMILY/COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1998-MC3
CLASSES A-1, A-2, B, C, D, E & X
$805,992,000 (APPROXIMATE)
- --------------------------------------------------------------------------------
MORTGAGE RATES
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
----------------------------------------------
CUT-OFF
AGGREGATE % OF CUM. % OF DATE
NUMBER OF CUT-OFF INITIAL INITIAL STATED LOAN-TO-
MORTGAGE DATE POOL POOL MORTGAGE REMAIN. U/W NCF VALUE
MORTGAGE RATES LOANS BALANCE BALANCE BALANCE RATE TERM (MO.) DSCR RATIO(A)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0.00% to 6.99% 11 $66,304,389 7.30% 7.30% 6.807% 114 1.55x 64.90%
7.00% to 7.49% 101 $508,056,084 55.94% 63.24% 7.217% 115 1.36x 72.00%
7.50% to 7.99% 59 $194,496,256 21.42% 84.66% 7.633% 107 1.42x 69.07%
8.00% to 8.49% 23 $56,912,828 6.27% 90.93% 8.149% 108 1.38x 69.85%
8.50% to 8.99% 22 $38,441,991 4.23% 95.16% 8.651% 95 1.37x 67.93%
9.00% to 9.49% 11 $21,555,714 2.37% 97.53% 9.125% 100 1.35x 62.63%
9.50% to 9.99% 4 $17,473,104 1.92% 99.46% 9.854% 46 1.36x 65.03%
10.00% to 10.49% 1 $4,920,639 0.54% 100.00% 10.000% 91 1.38x 61.43%
- ---------------------------------------------------------------------------------------------------------------
TOTALS 232 $908,161,006 100.00% 7.507% 110 1.39x 70.13%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(a) May not add up due to rounding
(b) May not sum to 100% due to rounding.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do not represent that it is
accurate or complete and it should not be relied upon as such. By accepting this
material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
therein. We make no representations regarding the reasonableness of such
assumptions or the likelihood that any of such assumptions will coincide with
actual market conditions or events, and this material should not be relied upon
for such purposes. We and our affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned therein or derivatives thereof (including
options). This material may be filed with the Securities and Exchange Commission
(the "SEC") and incorporated by reference into an effective registration
statement previously filed with the SEC under Rule 415 of the Securities Act of
1933, including in cases where the material does not pertain to securities that
are ultimately offered for sale pursuant to such registration statement.
Information contained in this material is current as of the date appearing on
this material only. Information in this material regarding any assets backing
any securities discussed herein supersedes all prior information regarding such
assets. All information in this Term Sheet, whether regarding the assets backing
any securities discussed herein or otherwise, will be superseded by the
information contained in any final prospectus for any securities actually sold
to you.
This material is furnished to you by Salomon Smith Barney Inc. and not by the
issuer of the securities. Salomon Smith Barney Inc. is not acting as agent for
the issuer or its affiliates in connection with the proposed transaction. The
issuer has not prepared or taken part in the preparation of these materials.
C-12
<PAGE>
INFORMATION IN THIS MATERIAL REGARDING ANY ASSETS BACKING ANY SECURITIES
DISCUSSED HEREIN SUPERSEDES ALL PRIOR INFORMATION REGARDING SUCH ASSETS. ALL
FORMATION IN THIS TERM SHEET, WHETHER REGARDING THE ASSETS BACKING ANY
SECURITIES DISCUSSED HEREIN OR OTHERWISE, WILL BE SUPERSEDED BY THE INFORMATION
CONTAINED IN ANY FINAL PROSPECTUS FOR ANY SECURITIES ACTUALLY SOLD TO YOU.
- --------------------------------------------------------------------------------
MORTGAGE CAPITAL FUNDING, INC.
MULTIFAMILY/COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1998-MC3
CLASSES A-1, A-2, B, C, D, E & X
$805,992,000 (APPROXIMATE)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMORTIZATION CHARACTERISTICS
WEIGHTED AVERAGES
--------------------------------------------
% OF CUT-OFF
NUMBER OF AGGREGATE INITIAL MAXIMUM STATED U/W DATE
MORTGAGE CUT-OFF DATE POOL CUT-OFF DATE MORTGAGE REMAIN. NCF LOAN-TO-VALUE
LOAN TYPE LOANS BALANCE BALANCE BALANCE RATE TERM (MO.) DSCR RATIO
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Amortizing Balloon 228 $811,802,820 89.39% $48,831,053 7.555% 110 1.41x 69.86%
Amortizing ARD 2 $83,220,541 9.16% $65,804,538 7.042% 117 1.22x 73.06%
Interest Only ARD 1 $11,000,000 1.21% $11,000,000 7.510% 58 1.43x 72.37%
Fully Amortizing 1 $2,137,645 0.24% $2,137,645 7.180% 115 1.55x 46.47%
- -------------------------------------------------------------------------------------------------------------------------
TOTALS 232 $908,161,006 100.00% 7.507% 110 1.39x 70.13%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Column total may not add up due to rounding.
(b) May not sum to 100% due to rounding
<TABLE>
<CAPTION>
REMAINING TERM TO MATURITY (IN MONTHS) (A)
WEIGHTED AVERAGES
----------------------------------------------------
% OF CUM. %
NUMBER OF AGGREGATE INITIAL OF INITIAL STATED U/W CUTOFF DATE
MORTGAGE CUT-OFF DATE POOL POOL MORTGAGE REMAIN. TERM NCF LOAN-TO-VALUE
REMAINING TERM LOANS BALANCE BALANCE BALANCE RATE (MO.) DSCR RATIO
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
36 to 47 3 $14,365,867 1.58% 1.58% 9.850% 36 1.33x 65.10%
48 to 59 2 $16,781,540 1.85% 3.43% 7.894% 55 1.41x 72.33%
72 to 83 3 $6,445,445 0.71% 4.14% 7.629% 78 1.26x 69.66%
84 to 95 2 $8,027,876 0.88% 5.02% 9.952% 91 1.41x 62.71%
96 to 107 50 $113,378,923 12.48% 17.51% 8.300% 104 1.35x 70.50%
108 to 119 172 $749,161,355 82.49% 100.00% 7.306% 114 1.40x 70.21%
- -----------------------------------------------------------------------------------------------------------------------------------
TOTALS 232 $908,161,006 100.00% 7.507% 110 1.39x 70.13%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) "Maturity" means the stated maturity date or, with respect to any
ARD Loan, its Anticipated Repayment Date.
(b) Column total may not add up due to rounding.
(c) May not sum to 100% due to rounding
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do not represent that it is
accurate or complete and it should not be relied upon as such. By accepting this
material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
therein. We make no representations regarding the reasonableness of such
assumptions or the likelihood that any of such assumptions will coincide with
actual market conditions or events, and this material should not be relied upon
for such purposes. We and our affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned therein or derivatives thereof (including
options). This material may be filed with the Securities and Exchange Commission
(the "SEC") and incorporated by reference into an effective registration
statement previously filed with the SEC under Rule 415 of the Securities Act of
1933, including in cases where the material does not pertain to securities that
are ultimately offered for sale pursuant to such registration statement.
Information contained in this material is current as of the date appearing on
this material only. Information in this material regarding any assets backing
any securities discussed herein supersedes all prior information regarding such
assets. All information in this Term Sheet, whether regarding the assets backing
any securities discussed herein or otherwise, will be superseded by the
information contained in any final prospectus for any securities actually sold
to you.
This material is furnished to you by Salomon Smith Barney Inc. and not by the
issuer of the securities. Salomon Smith Barney Inc. is not acting as agent for
the issuer or its affiliates in connection with the proposed transaction. The
issuer has not prepared or taken part in the preparation of these materials.
C-13
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
PROSPECTUS
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 15 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.
--------------
DECEMBER 16, 1998
<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.
2
<PAGE>
PROSPECTUS SUPPLEMENT
As more particularly described herein, the Prospectus Supplement relating
to each series of Offered Certificates will, among other things, set forth, as
and to the extent appropriate: (i) a description of the class or classes of
such Offered Certificates, including the payment provisions with respect to
each such class, the aggregate principal amount of each such class (the
"Certificate Balance"), the rate at which interest accrues from time to time,
if at all, with respect to each such class (the "Pass-Through Rate") or the
method of determining such rate, and whether interest with respect to each such
class will accrue from time to time on its aggregate principal amount or a
specified notional amount, if at all; (ii) information with respect to any
other classes of Certificates of the same series; (iii) the respective dates on
which distributions are to be made; (iv) information as to the assets
constituting the related Trust Fund, including the general characteristics of
the assets included therein, including the Mortgage Assets and any Credit
Support and Cash Flow Agreements (with respect to the Certificates of any
series, the "Trust Assets"); (v) the circumstances, if any, under which the
related Trust Fund may be subject to early termination; (vi) additional
information with respect to the method of distribution of such Offered
Certificates; (vii) the initial percentage ownership interest in the related
Trust Fund to be evidenced by each class of Certificates of such series; (viii)
information concerning the trustee (as to any series, the "Trustee") of the
related Trust Fund; (ix) if the related Trust Fund includes Mortgage Loans,
information concerning the master servicer (as to any series, the "Master
Servicer") and, if different than the Master Servicer, the special servicer (as
to any series, the "Special Servicer") of such Mortgage Loans and the
circumstances under which all or a portion, as specified, of the servicing of a
Mortgage Loan would transfer from the Master Servicer to the Special Servicer;
(x) whether one or more REMIC elections will be made, the designation of the
"regular interests" and "residual interests" in each REMIC to be created and
the identity of the person (the "REMIC Administrator") responsible for the
various tax-related administrative duties in respect of each REMIC to be
created; (xi) information as to the nature and extent of subordination of any
class of Certificates of such series, including a class of Offered
Certificates; and (xii) whether such Offered Certificates will be initially
issued in definitive or book-entry form.
AVAILABLE INFORMATION
The Sponsor has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (of which this Prospectus forms a part)
under the Securities Act of 1933, as amended, with respect to the Offered
Certificates. This Prospectus and the Prospectus Supplement relating to each
series of Offered Certificates contain summaries of the material terms of the
documents referred to herein and therein, but do not contain all of the
information set forth in the Registration Statement pursuant to the rules and
regulations of the Commission. For further information, reference is made to
such Registration Statement and the exhibits thereto. Such Registration
Statement and exhibits can be inspected and copied at prescribed rates at the
public reference facilities maintained by the Commission at its Public
Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549, and at its
Regional Offices located as follows: 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.
3
<PAGE>
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.
4
<PAGE>
TABLE OF CONTENTS
PAGE
----
PROSPECTUS SUPPLEMENT .................................... 3
AVAILABLE INFORMATION .................................... 3
INCORPORATION OF CERTAIN
INFORMATION BY REFERENCE ............................... 4
SUMMARY OF PROSPECTUS .................................... 7
Title of Certificates .................................. 7
Sponsor ................................................ 7
Master Servicer ........................................ 7
Special Servicer ....................................... 7
Trustee ................................................ 7
REMIC Administrator .................................... 7
The Trust Assets ....................................... 7
Description of Certificates ............................ 9
Distributions of Interest on the Certificates .......... 10
Distributions of Principal of the Certificates ......... 10
Advances ............................................... 11
Termination ............................................ 11
Registration of Book-Entry Certificates ................ 12
Tax Status of the Certificates ......................... 12
ERISA Considerations ................................... 13
Legal Investment ....................................... 13
Rating ................................................. 14
RISK FACTORS ............................................. 15
Certain Factors Adversely Affecting Resale of the
Offered Certificates ................................ 15
Limited Assets for Payment of Certificates ............. 15
Prepayments; Average Life of Certificates; Yields ...... 16
Limited Nature of Credit Ratings ....................... 17
Certain Risks Associated with Mortgage Loans
Secured by Commercial and Multifamily
Properties .......................................... 17
Balloon Payments; Borrower Default ..................... 18
Credit Support Limitations ............................. 19
Enforceability ......................................... 19
Leases and Rents as Security for a Mortgage Loan 19
Environmental Risks .................................... 20
Special Hazard Losses .................................. 20
ERISA Considerations ................................... 20
Certain Federal Tax Considerations Regarding
REMIC Residual Certificates ......................... 20
Book-Entry Registration ................................ 21
Potential Conflicts of Interest ........................ 21
Delinquent and Non-Performing Mortgage Loans ........... 21
DESCRIPTION OF THE TRUST FUNDS ........................... 22
General ................................................ 22
Mortgage Loans ......................................... 22
MBS .................................................... 24
Certificate Accounts ................................... 25
Credit Support ......................................... 25
Cash Flow Agreements ................................... 25
YIELD AND MATURITY CONSIDERATIONS ........................ 26
General ................................................ 26
Pass-Through Rate ...................................... 26
Payment Delays ......................................... 26
Certain Shortfalls in Collections of Interest .......... 26
Yield and Prepayment Considerations .................... 27
Weighted Average Life and Maturity ..................... 28
PAGE
----
Controlled Amortization Classes and Companion
Classes ............................................. 29
Other Factors Affecting Yield, Weighted Average
Life and Maturity ................................... 29
MORTGAGE CAPITAL FUNDING, INC ............................ 31
USE OF PROCEEDS .......................................... 31
DESCRIPTION OF THE CERTIFICATES .......................... 32
General ................................................ 32
Distributions .......................................... 32
Distributions of Interest on the Certificates .......... 33
Distributions of Principal of the Certificates ......... 33
Distributions on the Certificates in Respect of
Prepayment Premiums or in Respect of Equity
Participations ...................................... 34
Allocation of Losses and Shortfalls .................... 34
Advances in Respect of Delinquencies ................... 34
Reports to Certificateholders .......................... 35
Voting Rights .......................................... 36
Termination ............................................ 36
Book-Entry Registration and Definitive
Certificates ........................................ 37
DESCRIPTION OF THE POOLING
AGREEMENTS ............................................. 38
General ................................................ 38
Assignment of Mortgage Loans; Repurchases .............. 38
Representations and Warranties; Repurchases ............ 39
Collection and Other Servicing Procedures .............. 40
Sub-Servicers .......................................... 41
Certificate Account .................................... 41
Escrow Accounts ........................................ 44
Modifications, Waivers and Amendments of
Mortgage Loans ...................................... 44
Realization Upon Defaulted Mortgage Loans .............. 44
Hazard Insurance Policies .............................. 46
Due-on-Sale and Due-on-Encumbrance Provisions .......... 47
Servicing Compensation and Payment of Expenses 47
Evidence as to Compliance .............................. 48
Certain Matters Regarding the Master Servicer, the
Special Servicer, the REMIC Administrator and
the Sponsor ......................................... 48
Events of Default ...................................... 49
Rights Upon Event of Default ........................... 50
Amendment .............................................. 50
List of Certificateholders ............................. 51
The Trustee ............................................ 51
Duties of the Trustee .................................. 51
Certain Matters Regarding the Trustee .................. 51
Resignation and Removal of the Trustee ................. 52
DESCRIPTION OF CREDIT SUPPORT ............................ 53
General ................................................ 53
Subordinate Certificates ............................... 53
Cross-Support Provisions ............................... 53
Insurance or Guarantees with Respect to Mortgage
Loans ............................................... 53
Letter of Credit ....................................... 54
Certificate Insurance and Surety Bonds ................. 54
Reserve Funds .......................................... 54
Credit Support with Respect to MBS ..................... 54
5
<PAGE>
PAGE
----
CERTAIN LEGAL ASPECTS OF MORTGAGE
LOANS ................................................... 55
General ................................................. 55
Types of Mortgage Instruments ........................... 55
Leases and Rents ........................................ 55
Personalty .............................................. 56
Foreclosure on Mortgages ................................ 56
Bankruptcy Laws ......................................... 58
Environmental Risks ..................................... 59
Due-on-Sale and Due-on-Encumbrance ...................... 61
Subordinate Financing ................................... 61
Default Interest and Limitations on Prepayments ......... 61
Applicability of Usury Laws ............................. 61
Soldiers' and Sailors' Civil Relief Act of 1940 ......... 62
Americans with Disabilities Act ......................... 62
Forfeitures in Drug and RICO Proceedings ................ 62
MATERIAL FEDERAL INCOME TAX
CONSEQUENCES ............................................ 62
General ................................................. 62
REMICs .................................................. 63
PAGE
----
Taxation of Owners of REMIC Regular Certificates 64
Taxation of Owners of REMIC Residual
Certificates ......................................... 68
Grantor Trust Funds ..................................... 77
Characterization of Investments in Grantor Trust
Certificates ......................................... 77
Taxation of Owners of Grantor Trust Fractional
Interest Certificates ................................ 78
Taxation of Owners of Stripped Interest
Certificates ......................................... 83
STATE AND OTHER TAX CONSEQUENCES .......................... 85
ERISA CONSIDERATIONS ...................................... 85
General ................................................. 85
Plan Asset Regulations .................................. 85
LEGAL INVESTMENT .......................................... 86
METHOD OF DISTRIBUTION .................................... 87
FINANCIAL INFORMATION ..................................... 89
RATING .................................................... 89
INDEX OF PRINCIPAL TERMS .................................. 90
6
<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 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.
7
<PAGE>
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.
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 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".
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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".
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 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
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be made, subject to available funds, based on a
specified principal payment schedule or other
method.
Each class of Certificates, other than certain
classes of Stripped Interest Certificates and
certain classes of REMIC Residual Certificates (as
defined below), will have a stated principal amount
(a "Certificate Balance"); and each class of
Certificates, other than certain classes of Stripped
Principal Certificates and certain REMIC Residual
Certificates, will accrue interest at a fixed,
variable or adjustable interest rate (a
"Pass-Through Rate") on its Certificate Balance or,
in the case of certain classes of Stripped Interest
Certificates, on a hypothetical or notional amount
(a "Notional Amount") used solely for such purpose
and not evidencing a right to receive distributions
of principal. The related Prospectus Supplement will
specify the Certificate Balance, Notional Amount
and/or Pass-Through Rate (or, in the case of a
variable or adjustable Pass-Through Rate, the method
for determining such), as applicable, for each class
of Offered Certificates.
The Certificates will not be guaranteed or insured
by the Sponsor or any of its affiliates, by any
governmental agency or instrumentality or by any
other person, unless otherwise provided in the
related Prospectus Supplement. See "Risk
Factors--Limited Assets for Payment of Certificates"
and "Description of the Certificates".
DISTRIBUTIONS OF INTEREST
ON THE CERTIFICATES.... Interest on each class of Offered Certificates
(other than certain classes of Stripped Principal
Certificates and certain classes of REMIC Residual
Certificates) of each series will accrue at the
applicable Pass-Through Rate on the Certificate
Balance or, in the case of certain classes of
Stripped Interest Certificates, the Notional Amount
thereof outstanding from time to time and will be
distributed to Certificateholders as provided in the
related Prospectus Supplement (each of the specified
dates on which distributions are to be made, a
"Distribution Date"). Distributions of interest with
respect to one or more classes of Certificates
(collectively, "Accrual Certificates") may not
commence until the occurrence of certain events, such
as the retirement of one or more other classes of
Certificates, and interest accrued with respect to a
class of Accrual Certificates prior to the occurrence
of such an event will either be added to the
Certificate Balance thereof or otherwise deferred.
Distributions of interest with respect to one or more
classes of Certificates may be reduced to the extent
of certain delinquencies, losses and other
contingencies described herein and in the related
Prospectus Supplement. See "Risk
Factors--Prepayments; Average Life of Certificates;
Yields", "Yield and Maturity Considerations", and
"Description of the Certificates--Distributions of
Interest on the Certificates".
DISTRIBUTIONS OF PRINCIPAL
OF THE CERTIFICATES.... Each class of Certificates of each series (other
than certain classes of Stripped Interest
Certificates and certain classes of REMIC Residual
Certificates) will have a Certificate Balance. The
Certificate Balance of a class of Certificates
outstanding from time to time will represent the
maximum amount that the holders thereof are then
entitled to receive in respect of principal from
future cash flow on the assets in the related Trust
Fund. Unless otherwise specified in the related
Prospectus Supplement, the initial aggregate
Certificate Balance of all classes of a series of
Certificates will not be greater than the outstanding
principal balance of the related Mortgage Assets as
of a specified date (the "Cut-off Date"), after
application of scheduled payments due on or before
such date, whether or not received. As and to the
extent described in the related
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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".
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 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."
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<PAGE>
REGISTRATION OF BOOK-ENTRY
CERTIFICATES........... If so provided in the related Prospectus
Supplement, one or more classes of the Offered
Certificates of any series will be offered in
book-entry format (collectively, "Book-Entry
Certificates") through the facilities of The
Depository Trust Company ("DTC"). Each class of
Book-Entry Certificates will be initially represented
by one or more Certificates registered in the name of
a nominee of DTC. No person acquiring an interest in
a class of Book-Entry Certificates (a "Certificate
Owner") will be entitled to receive a Certificate of
such class in fully registered, definitive form (a
"Definitive Certificate"), except under the limited
circumstances described herein. See "Risk
Factors--Book-Entry Registration" and "Description of
the Certificates--Book-Entry Registration and
Definitive Certificates".
TAX STATUS OF
THE CERTIFICATES........ The Certificates of each series will constitute
either (i) "regular interests" ("REMIC Regular
Certificates") and "residual interests" ("REMIC
Residual Certificates") in a Trust Fund, or a
designated portion thereof, treated as a real estate
mortgage investment conduit (a "REMIC") under
Sections 860A through 860G of the Internal Revenue
Code of 1986 (the "Code"), or (ii) interests
("Grantor Trust Certificates") in a Trust Fund
treated as a grantor trust under applicable
provisions of the Code.
A. REMIC.............. REMIC Regular Certificates generally will be
treated as debt obligations of the applicable REMIC
for federal income tax purposes. In general, to the
extent the assets and income of the REMIC are treated
as qualifying assets and income under the following
sections of the Code, REMIC Regular Certificates
owned by a real estate investment trust will be
treated as "real estate assets" for purposes of
Section 856(c)(5)(B) 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 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)(B)
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
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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)(B), 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)(B) 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 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
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authority is subject to legal restrictions should
consult their own legal advisors to determine
whether and to what extent the Offered Certificates
constitute legal investments for them. See "Legal
Investment" herein and in the related Prospectus
Supplement.
RATING.................. At their respective dates of issuance, each class
of Offered Certificates will be rated not lower than
investment grade by one or more nationally recognized
statistical rating agencies (each, a "Rating
Agency"). See "Rating" herein and in the related
Prospectus Supplement.
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<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 (i.e., 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 be treated as
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"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). See "Material Federal Income Tax
Consequences--REMICs--Taxation of Owners of REMIC Residual Certificates."
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
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Support provided with respect to a particular series of Certificates may not
cover all losses related to such delinquent or non-performing Mortgage Loans,
and investors should consider the risk that the inclusion of such Mortgage
Loans in the Trust Fund may adversely affect the rate of defaults and
prepayments on the Mortgage Assets in such Trust Fund and the yield on the
Offered Certificates of such series. See "Description of the Trust
Funds--Mortgage Loans--General".
DESCRIPTION OF THE TRUST FUNDS
GENERAL
The primary assets of each Trust Fund will consist of (i) one or more
various types of multifamily or commercial mortgage loans 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.
On April 5, 1998, Citicorp, of which the Sponsor and Citibank, N.A. are
wholly owned subsidiaries, and Travelers Group Inc. ("Travelers"), of which
Salomon Smith Barney Inc. is a wholly owned subsidiary, agreed to merge (the
"Merger"). The combined company is known as Citigroup Inc. The Merger was
consummated on October 8, 1998.
USE OF PROCEEDS
The net proceeds to be received from the sale of the Certificates of any
series will be applied by the Sponsor to the purchase of Trust Assets or will
be used by the Sponsor for general corporate purposes. The Sponsor expects to
sell the Certificates from time to time, but the timing and amount of offerings
of Certificates will depend on a number of factors, including the volume of
Mortgage Assets acquired by the Sponsor, prevailing interest rates,
availability of funds and general market conditions.
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DESCRIPTION OF THE CERTIFICATES
GENERAL
Each series of Certificates will represent the entire beneficial ownership
interest in the Trust Fund created pursuant to the related Pooling Agreement.
As described in the related Prospectus Supplement, the Certificates of each
series, including the Offered Certificates of such series, may consist of one
or more classes of Certificates that: (i) provide for the accrual of interest
thereon at a fixed, variable or adjustable rate; (ii) are senior (collectively,
"Senior Certificates") or subordinate (collectively, "Subordinate
Certificates") to one or more other classes of Certificates in entitlement to
certain distributions on the Certificates; (iii) are entitled to distributions
of principal, with disproportionately small, nominal or no distributions of
interest (collectively, "Stripped Principal Certificates"); (iv) are entitled
to distributions of interest, with disproportionately small, nominal or no
distributions of principal (collectively, "Stripped Interest Certificates");
(v) provide for distributions of interest thereon or principal thereof that
commence only after the occurrence of certain events, such as the retirement of
one or more other classes of Certificates of such series; (vi) provide for
distributions of principal thereof to be made, from time to time or for
designated periods, at a rate that is faster (and, in some cases, substantially
faster) or slower (and, in some cases, substantially slower) than the rate at
which payments or other collections of principal are received on the Mortgage
Assets in the related Trust Fund; or (vii) provide for distributions of
principal thereof to be made, subject to available funds, based on a specified
principal payment schedule or other methodology.
Each class of Offered Certificates of a series will be issued in minimum
denominations corresponding to the principal balances or, in case of Stripped
Interest Certificates or 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.
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DISTRIBUTIONS OF INTEREST ON THE CERTIFICATES
Each class of Certificates of each series (other than certain classes of
Stripped Principal Certificates and certain classes of REMIC Residual
Certificates that have no Pass-Through Rate) may have a different Pass-Through
Rate, which in each case may be fixed, variable or adjustable. The related
Prospectus Supplement will specify the Pass-Through Rate or, in the case of a
variable or adjustable Pass-Through Rate, the method for determining the
Pass-Through Rate, for each class. Unless otherwise specified in the related
Prospectus Supplement, interest on the Certificates of each series will be
calculated on the basis of a 360-day year consisting of twelve 30-day months.
Distributions of interest in respect of any class of Certificates (other
than certain classes of Certificates that will be entitled to distributions of
accrued interest commencing only on the Distribution Date, or under the
circumstances, specified in the related Prospectus Supplement ("Accrual
Certificates"), and other than any class of Stripped Principal Certificates or
REMIC Residual Certificates that is not entitled to any distributions of
interest) will be made on each Distribution Date based on the Accrued
Certificate Interest for such class and such Distribution Date, subject to the
sufficiency of the portion of the Available Distribution Amount allocable to
such class on such Distribution Date. Prior to the time interest is
distributable on any class of Accrual Certificates, the amount of Accrued
Certificate Interest otherwise distributable on such class will be added to the
Certificate Balance thereof on each Distribution Date. With respect to each
class of Certificates (other than certain classes of Stripped Interest
Certificates and certain classes of REMIC Residual Certificates), the "Accrued
Certificate Interest" for each Distribution Date will be equal to interest at
the applicable Pass-Through Rate accrued for a specified period (generally
equal to the time period between Distribution Dates) on the outstanding
Certificate Balance of such class of Certificates immediately prior to such
Distribution Date. Unless otherwise provided in the related Prospectus
Supplement, the Accrued Certificate Interest for each Distribution Date on a
class of Stripped Interest Certificates will be similarly calculated except
that it will accrue on a hypothetical or notional amount (a "Notional Amount")
that is either (i) based on the principal balances of some or all of the
Mortgage Assets in the related Trust Fund or (ii) equal to the Certificate
Balances of one or more other classes of Certificates of the same series.
Reference to a Notional Amount with respect to a class of Stripped Interest
Certificates is solely for convenience in making certain calculations and does
not represent the right to receive any distributions of principal. If so
specified in the related Prospectus Supplement, the amount of Accrued
Certificate Interest that is otherwise distributable on (or, in the case of
Accrual Certificates, that may otherwise be added to the Certificate Balance
of) one or more classes of the Certificates of a series will be reduced to the
extent that any Prepayment Interest Shortfalls, as described under "Yield and
Maturity Considerations--Certain Shortfalls in Collections of Interest", exceed
the amount of any sums (including, if and to the extent specified in the
related Prospectus Supplement, the Master Servicer's servicing compensation)
that are applied to offset such shortfalls. The particular manner in which such
shortfalls will be allocated among some or all of the classes of Certificates
of that series will be specified in the related Prospectus Supplement. The
related Prospectus Supplement will also describe the extent to which the amount
of Accrued Certificate Interest that is otherwise distributable on (or, in the
case of Accrual Certificates, that may otherwise be added to the Certificate
Balance of) a class of Offered Certificates may be reduced as a result of any
other contingencies, including delinquencies, losses and deferred interest on
or in respect of the Mortgage Assets in the related Trust Fund. Unless
otherwise provided in the related Prospectus Supplement, any reduction in the
amount of Accrued Certificate Interest otherwise distributable on a class of
Certificates by reason of the allocation to such class of a portion of any
deferred interest on or in respect of the Mortgage Assets in the related Trust
Fund will result in a corresponding increase in the Certificate Balance of such
class. See "Risk Factors--Prepayments; Average Life of Certificates; Yields"
and "Yield and Maturity Considerations".
DISTRIBUTIONS OF PRINCIPAL OF THE CERTIFICATES
Each class of Certificates of each series (other than certain classes of
Stripped Interest Certificates and certain classes of REMIC Residual
Certificates) will have a "Certificate Balance" which, at any time, will equal
the then maximum amount that the holders of Certificates of such class will be
entitled to receive in respect of principal out of the future cash flow on the
Mortgage Assets and other assets included in the related Trust Fund. The
outstanding Certificate Balance of a class of Certificates will be reduced by
distributions of principal made thereon from time to time and, if so provided
in the related Prospectus Supplement, further by any losses incurred in respect
of the related 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
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Balance of all classes of a series of Certificates will not be greater than the
aggregate outstanding principal balance of the related Mortgage Assets as of
the applicable Cut-off Date, after application of scheduled payments due on or
before such date, whether or not received. The initial Certificate Balance of
each class of a series of Certificates will be specified in the related
Prospectus Supplement. As and to the extent described in the related Prospectus
Supplement, distributions of principal with respect to a series of Certificates
will be made on each Distribution Date to the holders of the class or classes
of Certificates of such series entitled thereto until the Certificate Balances
of such Certificates have been reduced to zero. Distributions of principal with
respect to one or more classes of Certificates may be made at a rate that is
faster (and, in some cases, substantially faster) than the rate at which
payments or other collections of principal are received on the Mortgage Assets
in the related Trust Fund. Distributions of principal with respect to one or
more classes of Certificates may not commence until the occurrence of certain
events, such as the retirement of one or more other classes of Certificates of
the same series, or may be made at a rate that is slower (and, in some cases,
substantially slower) than the rate at which payments or other collections of
principal are received on the Mortgage Assets in the related Trust Fund.
Distributions of principal with respect to one or more classes of Certificates
(each such class, a "Controlled Amortization Class") may be made, subject to
available funds, based on a specified principal payment schedule. Distributions
of principal with respect to one or more classes of Certificates (each such
class, a "Companion Class") may be contingent on the specified principal
payment schedule for a Controlled Amortization Class of the same series and the
rate at which payments and other collections of principal on the Mortgage
Assets in the related Trust Fund are received. Unless otherwise specified in
the related Prospectus Supplement, distributions of principal of any class of
Certificates will be made on a pro rata basis among all of the Certificates of
such class.
DISTRIBUTIONS ON THE CERTIFICATES IN RESPECT OF PREPAYMENT PREMIUMS OR IN
RESPECT OF EQUITY PARTICIPATIONS
If so provided in the related Prospectus Supplement, Prepayment Premiums
or payments in respect of Equity Participations received on or in connection
with the Mortgage Assets in any Trust Fund will be distributed on each
Distribution Date to the holders of the class of Certificates of the related
series entitled thereto in accordance with the provisions described in such
Prospectus Supplement. 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
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if, in the judgment of the Master Servicer, Special Servicer or Trustee, as the
case may be, such advance would not be recoverable from Related Proceeds or
another specifically identified source (any such advance, a "Nonrecoverable
Advance"); and, if previously made by a Master Servicer, Special Servicer or
Trustee, a Nonrecoverable Advance will be reimbursable thereto from any amounts
in the related Certificate Account prior to any distributions being made to the
related series of Certificateholders.
If advances have been made by a Master Servicer, Special Servicer, Trustee
or other entity from excess funds in a Certificate Account, such Master
Servicer, Special Servicer, Trustee or other entity, as the case may be, will
be required to replace such funds in such Certificate Account on any future
Distribution Date to the extent that funds in such Certificate Account on such
Distribution Date are less than payments required to be made to the related
series of Certificateholders on such date. If so specified in the related
Prospectus Supplement, the obligation of a Master Servicer, Special Servicer,
Trustee or other entity to make advances may be secured by a cash advance
reserve fund or a surety bond. If applicable, information regarding the
characteristics of, and the identity of any obligor on, any such surety bond,
will be set forth in the related Prospectus Supplement.
If and to the extent so provided in the related Prospectus Supplement, any
entity making advances may be entitled to receive interest thereon for the
period that such advances are outstanding at the rate specified in such
Prospectus Supplement, and such entity will be entitled to payment of such
interest periodically from general collections on the Mortgage Loans in the
related Trust Fund prior to any payment to the related series of
Certificateholders or as otherwise provided in the related Pooling Agreement
and described in such Prospectus Supplement.
The Prospectus Supplement for any series of Certificates evidencing an
interest in a Trust Fund that includes MBS will describe any comparable
advancing obligation of a party to the related Pooling Agreement or of a party
to the related MBS Agreement.
REPORTS TO CERTIFICATEHOLDERS
On each Distribution Date, together with the distribution to the holders
of each class of the Offered Certificates of a series, a Master Servicer or
Trustee, as provided in the related Prospectus Supplement, will forward to each
such holder, a statement (a "Distribution Date Statement") that, unless
otherwise provided in the related Prospectus Supplement, will set forth, among
other things, in each case to the extent applicable:
(i) the amount of such distribution to holders of such class of Offered
Certificates that was applied to reduce the Certificate Balance thereof;
(ii) the amount of such distribution to holders of such class of Offered
Certificates that is allocable to Accrued Certificate Interest;
(iii) the amount, if any, of such distribution to holders of such class
of Offered Certificates that is allocable to (A) Prepayment Premiums and
(B) payments on account of Equity Participations;
(iv) the amount, if any, by which such distribution is less than the
amounts to which holders of such class of Offered Certificates are
entitled;
(v) the Certificate Balance or Notional Amount, as the case may be, of
each class of Certificates (including any class of Certificates not offered
hereby) at the close of business on such Distribution Date, separately
identifying any reduction in such Certificate Balance or Notional Amount
due to the allocation of any losses in respect of the related Mortgage
Assets, any increase in such Certificate Balance or Notional Amount due to
the allocation of any negative amortization in respect of the related
Mortgage Assets and any increase in the Certificate Balance of a class of
Accrual Certificates, if any, in the event that Accrued Certificate
Interest has been added to such balance;
(vi) information regarding the aggregate principal balance of the related
Mortgage Assets on or shortly before such Distribution Date;
(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;
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(ix) if the related Trust Fund includes one or more instruments of Credit
Support, such as a letter of credit, an insurance policy and/or a surety
bond, the amount of coverage under each such instrument as of the close of
business on such Distribution Date; and
(x) to the extent not otherwise reflected through the information
furnished pursuant to subclauses (v) and (vi) above, the amount of Credit
Support being afforded by any classes of Subordinate Certificates.
In the case of information furnished pursuant to subclauses (i)-(iii)
above, the amounts will be expressed as a dollar amount per minimum
denomination of the relevant class of Offered Certificates or per a specified
portion of such minimum denomination. The Prospectus Supplement for each series
of Offered Certificates will describe any additional information to be included
in reports to the holders of such Certificates. Upon request, a
Certificateholder may receive with respect to the Mortgage Loans, if any, in
the related Trust Fund, a monthly report regarding the delinquencies thereon,
indicating the number and aggregate principal amount of such Mortgage Loans
delinquent one month and two or more months, as well as the book value of any
related Mortgaged Property acquired through foreclosure, deed in lieu of
foreclosure or other exercise of rights respecting the Trustee's interest in
such Mortgage Loans.
Within a reasonable period of time after the end of each calendar year,
the related Master Servicer or Trustee, as the case may be, will be required to
furnish to each person who at any time during the calendar year was a holder of
an Offered Certificate a statement containing the information set forth in
subclauses (i)-(iii) above, aggregated for such calendar year or the applicable
portion thereof during which such person was a Certificateholder, together with
such other customary information as the Sponsor or the reporting party
determines to be necessary to enable Certificateholders to prepare their tax
returns for such calendar year. See, however, "Description of the
Certificates--Book-Entry Registration and Definitive Certificates". If the
Trust Fund for a series of Certificates includes MBS, the ability of the
related Master Servicer or Trustee, as the case may be, to include in any
Distribution Date Statement information regarding the mortgage loans underlying
such MBS will depend on the reports received with respect to such MBS. In such
cases, the related Prospectus Supplement will describe the loan-specific
information to be included in the Distribution Date Statements that will be
forwarded to the holders of the Offered Certificates of that series in
connection with distributions made to them.
VOTING RIGHTS
The voting rights evidenced by each series of Certificates (as to such
series, the "Voting Rights") will be allocated among the respective classes of
such series in the manner described in the related Prospectus Supplement.
Certificateholders will generally not have a right to vote, except with
respect to required consents to certain amendments to the related Pooling
Agreement and as otherwise specified in the related Prospectus Supplement. See
"Description of the Pooling Agreements--Amendment". The holders of specified
amounts of Certificates of a particular series will have the right to act as a
group to remove the related Trustee and also upon the occurrence of certain
events which if continuing would constitute an Event of Default on the part of
the related Master Servicer, Special Servicer or REMIC Administrator. See
"Description of the Pooling Agreements--Events of Default", "--Rights Upon
Event of Default" and "--Resignation and Removal of the Trustee".
TERMINATION
The obligations created by the Pooling Agreement for each series of
Certificates will terminate following (i) the final payment or other
liquidation of the last Mortgage Asset subject thereto or the disposition of
all property acquired upon foreclosure of any Mortgage Loan subject thereto and
(ii) the payment to Certificateholders of that series of all amounts required
to be paid to them pursuant to such Pooling Agreement. Written notice of
termination of a Pooling Agreement will be given to each Certificateholder of
the related series, and the final distribution will be made only upon
presentation and surrender of the Certificates of such series at the location
to be specified in the notice of termination.
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.
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BOOK-ENTRY REGISTRATION AND DEFINITIVE CERTIFICATES
If so provided in the related Prospectus Supplement, one or more classes
of the Offered Certificates of any series will be offered in book-entry format
through the facilities of The Depository Trust Company ("DTC"), and each such
class will be represented by one or more global Certificates registered in the
name of DTC or its nominee.
DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking corporation" within the meaning of the New York Banking
Law, a member of the Federal Reserve System, a "clearing corporation" within
the meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
was created to hold securities for its participating organizations
("Participants") and facilitate the clearance and settlement of securities
transactions between Participants through electronic computerized book-entry
changes in their accounts, thereby eliminating the need for physical movement
of securities certificates. "Direct Participants", which maintain accounts with
DTC, include securities brokers and dealers, banks, trust companies and
clearing corporations and may include certain other organizations. DTC is owned
by a number of its Direct Participants and by the New York Stock Exchange,
Inc., the American Stock Exchange, Inc., and the National Association of
Securities Dealers, Inc. Access to the DTC system also is available to others
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a Direct Participant, either directly or
indirectly ("Indirect Participants"). The Rules applicable to DTC and its
Participants are on file with the Commission.
Purchases of Book-Entry Certificates under the DTC system must be made by
or through Direct Participants, which will receive a credit for the Book-Entry
Certificates on DTC's records. The ownership interest of each actual purchaser
of a Book-Entry Certificate (a "Certificate Owner") is in turn to be recorded
on the Direct and Indirect Participants' records. Certificate Owners will not
receive written confirmation from DTC of their purchases, but Certificate
Owners are expected to receive written confirmations providing details of such
transactions, as well as periodic statements of their holdings, from the Direct
or Indirect Participant through which each Certificate Owner entered into the
transaction. Transfers of ownership interest in the Book-Entry Certificates are
to be accomplished by entries made on the books of Participants acting on
behalf of Certificate Owners. Certificate Owners will not receive certificates
representing their ownership interests in the Book-Entry Certificates, except
in the event that use of the book-entry system for the Book-Entry Certificates
of any series is discontinued as described below.
DTC has no knowledge of the actual Certificate Owners of the Book-Entry
Certificates; DTC's records reflect only the identity of the Direct
Participants to whose accounts such Certificates are credited, which may or may
not be the Certificate Owners. The Participants will remain responsible for
keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Certificate Owners will be governed
by arrangements among them, subject to any statutory or regulatory requirements
as may be in effect from time to time.
Distributions on the Book-Entry Certificates will be made to DTC. DTC's
practice is to credit Direct Participants' accounts on the related Distribution
Date in accordance with their respective holdings shown on DTC's records unless
DTC has reason to believe that it will not receive payment on such date.
Disbursement of such distributions by Participants to Certificate Owners will
be governed by standing instructions and customary practices, as is the case
with securities held for the accounts of customers in bearer form or registered
in "street name", and will be the responsibility of each such Participant (and
not of DTC, the Sponsor or any Trustee, Master Servicer or Special Servicer),
subject to any statutory or regulatory requirements as may be in effect from
time to time. Under a book-entry system, Certificate Owners may receive
payments after the related Distribution Date.
Unless otherwise provided in the related Prospectus Supplement, the only
"Certificateholder" (as such term is used in the related Pooling Agreement)
will be the nominee of DTC, and the Certificate Owners will not be recognized
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.
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Unless otherwise specified in the related Prospectus Supplement,
Certificates initially issued in book-entry form will be issued in fully
registered, certificated form (as so issued, "Definitive Certificates") to
Certificate Owners or their nominees, rather than to DTC or its nominee, only
if (i) the Sponsor advises the Trustee in writing that DTC is no longer willing
or able to properly discharge its responsibilities as depository with respect
to such Certificates and the Sponsor is unable to locate a qualified successor
or (ii) the Sponsor, at its option, elects to terminate the book-entry system
through DTC with respect to such Certificates. Upon the occurrence of either of
the events described in the preceding sentence, DTC will be required to notify
all Participants of the availability through DTC of Definitive Certificates.
Upon surrender by DTC of the certificate or certificates representing a class
of Book-Entry Certificates, together with instructions for registration, the
Trustee or other designated party will be required to issue to the Certificate
Owners identified in such instructions the Definitive Certificates to which
they are entitled, and thereafter the holders of such Definitive Certificates
will be recognized as Certificateholders under the related Pooling Agreement.
DESCRIPTION OF THE POOLING AGREEMENTS
GENERAL
The Certificates of each series will be issued pursuant to a pooling and
servicing agreement or other agreement specified in the related Prospectus
Supplement (in either case, a "Pooling Agreement"). In general, the parties to
a Pooling Agreement will include the Sponsor, the Trustee, the Master Servicer,
the Special Servicer and, if one or more REMIC elections have been made with
respect to the related Trust Fund, the REMIC Administrator. However, a Pooling
Agreement may 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
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each Mortgage Loan included in the related Trust Fund, which information will
typically include: the address of the related Mortgaged Property and type of
such property; the Mortgage Rate and, if applicable, the applicable index,
gross margin, adjustment date and any rate cap information; the original and
remaining term to maturity; the original amortization term; and the original
and outstanding principal balance.
With respect to each Mortgage Loan to be included in a Trust Fund, the
Sponsor will deliver (or cause to be delivered) to the related Trustee (or to a
custodian appointed by the Trustee) certain loan documents which, unless
otherwise specified in the related Prospectus Supplement, will include the
original Mortgage Note endorsed, without recourse, to the order of the Trustee,
the original Mortgage or a certified copy thereof, with evidence of recording
or filing indicated thereon, and an assignment of the Mortgage to the Trustee
in recordable form. In certain cases where documents respecting a Mortgage Loan
may not be available prior to execution of the related Pooling Agreement, the
Sponsor may be permitted to deliver (or cause to be delivered) copies thereof
(if applicable, without evidence of recording or filing thereon) to the related
Trustee (or to a custodian appointed by the Trustee), provided that such
documents or certified copies thereof are delivered (if applicable, with
evidence of recording or filing thereon) promptly upon receipt.
Assignments of Mortgage to a Trustee will be recorded or filed in the
appropriate jurisdictions except in states where, in the written opinion of
local counsel acceptable to the Sponsor, such filing or recording is not
required to protect the Trustee's interests in the related Mortgage Loans
against sale, further assignment, satisfaction or discharge by the related
Mortgage Asset Seller, the related Master Servicer, the related Special
Servicer, any Sub-Servicers or the Sponsor.
The related Trustee (or a custodian appointed by the Trustee) will be
required to review the Mortgage Loan documents delivered to it within a
specified period of days after receipt thereof, and the Trustee (or such
custodian) will hold such documents in trust for the benefit of the
Certificateholders of the related series. Unless otherwise specified in the
related Prospectus Supplement, if any such document is found to be missing or
defective, and such omission or defect, as the case may be, materially and
adversely affects the interests of the related series of Certificateholders,
the Trustee (or such custodian) will be required to notify the Master Servicer,
the Special Servicer and the Sponsor, and one of such persons will be required
to notify the relevant Mortgage Asset Seller. In that case, and if the Mortgage
Asset Seller cannot deliver the document or cure the defect within a specified
number of days after receipt of such notice, then, except as otherwise
specified below or in the related Prospectus Supplement, the Mortgage Asset
Seller will be obligated to repurchase the related Mortgage Loan from the
Trustee at a price that will be specified in the related Prospectus Supplement.
If so provided in the Prospectus Supplement for a series of Certificates, a
Mortgage Asset Seller, in lieu of repurchasing a Mortgage Loan as to which
there is missing or defective loan documentation, will have the option,
exercisable upon certain conditions and/or within a specified period after
initial issuance of such series of Certificates, to replace such Mortgage Loan
with one or more other mortgage loans, in accordance with standards that will
be described in the Prospectus Supplement. Unless otherwise specified in the
related Prospectus Supplement, this repurchase or substitution obligation will
constitute the sole remedy to holders of the Certificates of any series or to
the related Trustee on their behalf for missing or defective loan
documentation, and none of the Sponsor, the Master Servicer or the Special
Servicer, in the last two cases unless it is the Mortgage Asset Seller, will be
obligated to purchase or replace a Mortgage Loan if a Mortgage Asset Seller
defaults on its obligation to do so. Notwithstanding the foregoing, if a
document has not been delivered to the related Trustee (or to a custodian
appointed by the Trustee) because such document has been submitted for
recording, and neither such document nor a certified copy thereof, in either
case with evidence of recording thereon, can be obtained because of delays on
the part of the applicable recording office, then the Mortgage Asset Seller
will not be required to 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
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expected that in most cases the Warranting Party will be the Mortgage Asset
Seller; however, the Warranting Party may also be an affiliate of the Mortgage
Asset Seller, the Sponsor or an affiliate of the Sponsor, the Master Servicer,
the Special Servicer or another person acceptable to the Sponsor. The
Warranting Party, if other than the Mortgage Asset Seller, will be identified
in the related Prospectus Supplement.
Unless otherwise provided in the related Prospectus Supplement, each
Pooling Agreement will provide that the Master Servicer, Special Servicer
and/or Trustee will be required to notify promptly any Warranting Party of any
breach of any representation or warranty made by it in respect of a Mortgage
Loan that materially and adversely affects the interests of the related series
of Certificateholders. If such Warranting Party cannot cure such breach within
a specified period following the date on which it was notified of such breach,
then, unless otherwise provided in the related Prospectus Supplement, it will
be obligated to repurchase such Mortgage Loan from the Trustee at a price that
will be specified in the related Prospectus Supplement. If so provided in the
Prospectus Supplement for a series of Certificates, a Warranting Party, in lieu
of repurchasing a Mortgage Loan as to which a breach has occurred, will have
the option, exercisable upon certain conditions and/or within a specified
period after initial issuance of such series of Certificates, to replace such
Mortgage Loan with one or more other mortgage loans, in accordance with
standards that will be described in the Prospectus Supplement. Unless otherwise
specified in the related Prospectus Supplement, this repurchase or substitution
obligation will constitute the sole remedy available to holders of the
Certificates of any series or to the related Trustee on their behalf for a
breach of representation and warranty by a Warranting Party, and none of the
Sponsor, the Master Servicer or the Special Servicer, in each case unless it is
the Warranting Party, will be obligated to purchase or replace a Mortgage Loan
if a Warranting Party defaults on its obligation to do so.
In some cases, representations and warranties will have been made in
respect of a Mortgage Loan as of a date prior to the date upon which the
related series of Certificates is issued, and thus may not address events that
may occur following the date as of which they were made. However, the Sponsor
will not include any Mortgage Loan in the Trust Fund for any series of
Certificates if anything has come to the Sponsor's attention that would cause
it to believe that the representations and warranties made in respect of such
Mortgage Loan will not be accurate in all material respects as of the date of
issuance. The date as of which the representations and warranties regarding the
Mortgage Loans in any Trust Fund were made, will be specified in the related
Prospectus Supplement.
COLLECTION AND OTHER SERVICING PROCEDURES
The Master Servicer and Special Servicer for any Trust Fund, directly or
through Sub-Servicers, will each be required to make reasonable efforts to
collect all scheduled payments under the Mortgage Loans in such Trust Fund
serviced thereby, and will each be required to follow such collection
procedures as it would follow with respect to mortgage loans that are
comparable to the Mortgage Loans in such Trust Fund serviced thereby and held
for its own account, provided such procedures are consistent with (i) the terms
of the related Pooling Agreement and any related instrument of Credit Support
included in such Trust Fund, (ii) applicable law and (iii) the servicing
standard specified in the related Pooling Agreement and Prospectus Supplement
(the "Servicing Standard").
The Master Servicer and Special Servicer for any Trust Fund, either
jointly or separately, directly or through Sub-Servicers, also will be required
to perform as to the Mortgage Loans in such Trust Fund various other customary
functions of a servicer of comparable loans, including maintaining escrow or
impound accounts for payment of taxes, insurance premiums, ground rents and
similar items, or otherwise monitoring the timely payment of those items;
attempting to collect delinquent payments; supervising foreclosures; conducting
property inspections on a periodic or other basis; managing Mortgaged
Properties acquired on behalf of such Trust Fund through foreclosure,
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
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related Prospectus Supplement, when the circumstances no longer warrant a
Special Servicer's continuing to service a particular Mortgage Loan (e.g., the
related borrower is paying in accordance with the forbearance arrangement
entered into between the Special Servicer and such borrower), the Master
Servicer will resume the servicing duties with respect thereto. If and to the
extent provided in the related Pooling Agreement and described in the related
Prospectus Supplement, a Special Servicer may perform certain limited duties in
respect of Mortgage Loans for which the Master Servicer is primarily
responsible (including, if so specified, performing property inspections and
evaluating financial statements); and a Master Servicer may perform certain
limited duties in respect of any Mortgage Loan for which the Special Servicer
is primarily responsible (including, if so specified, continuing to receive
payments on such Mortgage Loan (including amounts collected by the Special
Servicer), making certain calculations with respect to such Mortgage Loan and
making remittances and preparing certain reports to the Trustee and/or
Certificateholders with respect to such Mortgage Loan). Unless otherwise
specified in the related Prospectus Supplement, the Master Servicer will be
responsible for filing and settling claims in respect of particular Mortgage
Loans under any applicable instrument of Credit Support. See "Description of
Credit Support".
SUB-SERVICERS
A Master Servicer or Special Servicer may delegate its servicing
obligations in respect of the Mortgage Loans serviced thereby to one or more
third-party servicers (each, a "Sub-Servicer"); provided that, unless otherwise
specified in the related Prospectus Supplement, such Master Servicer or Special
Servicer will remain obligated under the related Pooling Agreement. Unless
otherwise provided in the related Prospectus Supplement, each sub-servicing
agreement between a Master Servicer or Special Servicer, as the case may be,
and a Sub-Servicer (a "Sub-Servicing Agreement") must provide that, if for any
reason such Master Servicer or Special Servicer is no longer acting in such
capacity, the Trustee or any successor to such Master Servicer or Special
Servicer may assume such party's rights and obligations under such
Sub-Servicing Agreement. The Master Servicer and Special Servicer for any Trust
Fund will each be required to monitor the performance of Sub-Servicers retained
by it, and will each have the right to remove a Sub-Servicer retained by it at
any time it considers such removal to be in the best interests of
Certificateholders.
Unless otherwise provided in the related Prospectus Supplement, a Master
Servicer or Special Servicer will be solely liable for all fees owed by it to
any Sub-Servicer, irrespective of whether its compensation pursuant to the
related Pooling Agreement is sufficient to pay such fees. Each Sub-Servicer
will be reimbursed by the Master Servicer or Special Servicer, as the case may
be, that retained it for certain expenditures which it makes, generally to the
same extent such Master Servicer or Special Servicer would be reimbursed under
a Pooling Agreement. See "--Certificate Account" and "--Servicing Compensation
and Payment of Expenses".
CERTIFICATE ACCOUNT
General. The Master Servicer, the Special Servicer and/or the Trustee
will, as to each Trust Fund that includes Mortgage Loans, establish and
maintain or cause to be established and maintained one or more separate
accounts for the collection of payments on or in respect of such Mortgage Loans
(collectively, the "Certificate Account"), which will be established so as to
comply with the standards of each Rating Agency that has rated any one or more
classes of Certificates of the related series. A Certificate Account may be
maintained as an interest-bearing or a non-interest-bearing account and the
funds held therein may be invested pending each succeeding Distribution Date in
United States government securities and other obligations (including guaranteed
investment contracts) that are acceptable to each Rating Agency that has rated
any one or more classes of Certificates of the related series ("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
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case of collections on or in respect of the Mortgage Loans) or otherwise as
provided in the related Pooling Agreement, the following payments and
collections received or made by the Master Servicer, the Special Servicer or
the Trustee subsequent to the Cut-off Date (other than payments due on or
before the Cut-off Date):
(i) all payments on account of principal, including principal
prepayments, on the Mortgage Loans;
(ii) all payments on account of interest on the Mortgage Loans, including
any default interest collected, in each case net of any portion thereof
retained by the Master Servicer, the Special Servicer or any Sub-Servicer
as its servicing compensation or as compensation to the Trustee;
(iii) all proceeds received under any hazard, title or other insurance
policy that provides coverage with respect to a Mortgaged Property or the
related Mortgage Loan (other than proceeds applied to the restoration of
the property or released to the related borrower in accordance with the
customary servicing practices of the Master Servicer (or the Special
Servicer, with respect to Mortgage Loans serviced by it) and/or the terms
and conditions of the related Mortgage) (collectively, "Insurance
Proceeds"), all proceeds received in connection with the condemnation or
other governmental taking of all or any Mortgaged Property (other than
proceeds applied to the restoration of the property or released to the
related borrower in accordance with the customary servicing practices of
the Master Servicer (or the Special Servicer, with respect to Mortgage
Loans serviced by it) and/or the terms and conditions of the related
Mortgage) (collectively, "Condemnation Proceeds") and all other amounts
received and retained in connection with the liquidation of defaulted
Mortgage Loans or property acquired in respect thereof, by foreclosure or
otherwise ("Liquidation Proceeds"), together with the net operating income
(less reasonable reserves for future expenses) derived from the operation
of any Mortgaged Properties acquired by the Trust Fund through foreclosure
or otherwise;
(iv) any amounts paid under any instrument or drawn from any fund that
constitutes Credit Support for the related series of Certificates as
described under "Description of Credit Support";
(v) any advances made as described under "Description of the
Certificates--Advances in Respect of Delinquencies";
(vi) any amounts paid under any Cash Flow Agreement, as described under
"Description of the Trust Funds--Cash Flow Agreements";
(vii) all proceeds of the purchase of any Mortgage Loan, or property
acquired in respect thereof, by the Sponsor, any Mortgage Asset Seller or
any other specified person as described under "--Assignment of Mortgage
Loans; Repurchases" and "--Representations and Warranties; Repurchases",
all proceeds of the purchase of any defaulted Mortgage Loan as described
under "--Realization Upon Defaulted Mortgage Loans", and all proceeds of
any Mortgage Asset purchased as described under "Description of the
Certificates--Termination" (all of the foregoing, also "Liquidation
Proceeds");
(viii) any amounts paid by the Master Servicer to cover Prepayment
Interest Shortfalls arising out of the prepayment of Mortgage Loans as
described under "--Servicing Compensation and Payment of Expenses";
(ix) to the extent that any such item does not constitute additional
servicing compensation to the Master Servicer or Special Servicer, any
payments on account of modification or assumption fees, late payment
charges, Prepayment Premiums or Equity Participations on the Mortgage
Loans;
(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;
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(ii) to pay the Master Servicer, the Special Servicer or any Sub-Servicer
any servicing fees not previously retained thereby, such payment to be
made, unless otherwise provided in the related Prospectus Supplement, out
of payments on the particular Mortgage Loans as to which such fees were
earned;
(iii) to reimburse the Master Servicer, the Special Servicer, the Trustee
or any other specified person for any unreimbursed amounts advanced by it
as described under "Description of the Certificates--Advances in Respect of
Delinquencies", such reimbursement to be made out of amounts received which
were identified and applied by the Master Servicer or Special Servicer, as
applicable, as late collections of interest on and principal of the
particular Mortgage Loans with respect to which the advances were made or
out of amounts drawn under any form of Credit Support with respect to such
Mortgage Loans;
(iv) to reimburse the Master Servicer or the Special Servicer for unpaid
servicing fees earned by it and certain unreimbursed servicing expenses
incurred by it with respect to Mortgage Loans in the Trust Fund and
properties acquired in respect thereof, such reimbursement to be made out
of amounts that represent Liquidation Proceeds, Condemnation Proceeds and
Insurance Proceeds collected on the particular Mortgage Loans and
properties, and net income collected on the particular properties, with
respect to which such fees were earned or such expenses were incurred or
out of amounts drawn under any form of Credit Support with respect to such
Mortgage Loans and properties;
(v) to reimburse the Master Servicer, the Special Servicer or the Trustee
for any advances described in clause (iii) above made by it and/or any
servicing expenses referred to in clause (iv) above incurred by it which,
in the good faith judgment of the Master Servicer, the Special Servicer or
the Trustee, as applicable, will not be recoverable from the amounts
described in clauses (iii) and (iv), respectively, such reimbursement to be
made from amounts collected on other Mortgage Loans in the same Trust Fund
or, if and to the extent so provided by the related Pooling Agreement and
described in the related Prospectus Supplement, only from that portion of
amounts collected on such other Mortgage Loans that is otherwise
distributable on one or more classes of Subordinate Certificates of the
related series;
(vi) if and to the extent described in the related Prospectus Supplement,
to pay the Master Servicer, the Special Servicer, the Trustee or any other
specified person interest accrued on the advances described in clause (iii)
above made by it and/or the servicing expenses described in clause (iv)
above incurred by it while such remain outstanding and unreimbursed;
(vii) to pay for costs and expenses incurred by the Trust Fund for
environmental site assessments performed with respect to Mortgaged
Properties that constitute security for defaulted Mortgage Loans, and for
any containment, clean-up or remediation of hazardous wastes and materials
present on such Mortgaged Properties, as described under "--Realization
Upon Defaulted Mortgage Loans";
(viii) to reimburse the Master Servicer, the Special Servicer, the REMIC
Administrator (if any), the Sponsor, or any of their respective directors,
officers, employees and agents, as the case may be, for certain expenses,
costs and liabilities incurred thereby, as and to the extent described
under "--Certain Matters Regarding the Master Servicer, the Special
Servicer, the REMIC Administrator and the Sponsor";
(ix) if and to the extent described in the related Prospectus Supplement,
to pay the fees of the Trustee and/or the REMIC Administrator (if any);
(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;
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(xv) if one or more elections have been made to treat the Trust Fund or
designated portions thereof as a REMIC, to pay any federal, state or local
taxes imposed on the Trust Fund or its assets or transactions, as and to
the extent described under "Material Federal Income Tax
Consequences--REMICS--Prohibited Transactions Tax and Other Taxes";
(xvi) to pay for the cost of an independent appraiser or other expert in
real estate matters retained to determine a fair sale price for a defaulted
Mortgage Loan or a property acquired in respect thereof in connection with
the liquidation of such Mortgage Loan or property;
(xvii) to pay for the cost of various opinions of counsel obtained
pursuant to the related Pooling Agreement for the benefit of
Certificateholders;
(xviii) to make any other withdrawals permitted by the related Pooling
Agreement and described in the related Prospectus Supplement ; and
(xix) to clear and terminate the Certificate Account upon the
termination of the Trust Fund.
ESCROW ACCOUNTS
A Pooling Agreement may require the Master Servicer or Special Servicer
thereunder to establish and maintain, as and to the extent permitted by the
terms of the related Mortgage Loans, one or more escrow accounts into which
mortgagors deposit amounts sufficient to pay taxes, assessments, hazard
insurance premiums or comparable items. Withdrawals from the escrow accounts
maintained in respect of the Mortgage Loans in any Trust Fund may be made to
effect timely payment of taxes, assessments and hazard insurance premiums or
comparable items, to reimburse the related Master Servicer or Special Servicer
out of related collections for prior advances in respect of taxes, assessments
and hazard insurance premiums or comparable items, to refund to mortgagors
amounts determined to be overages, to remit to mortgagors, if required,
interest earned, if any, on balances in any of the escrow accounts, to repair
or otherwise protect the related Mortgaged Property and to clear and terminate
any of the escrow accounts. The Master Servicer and Special Servicer each will
be solely responsible for administration of the escrow accounts maintained by
it.
MODIFICATIONS, WAIVERS AND AMENDMENTS OF MORTGAGE LOANS
Unless otherwise provided in the related Prospectus Supplement, a Master
Servicer or Special Servicer may agree to modify, waive or amend any term of
any Mortgage Loan serviced by it in a manner consistent with the applicable
Servicing Standard; provided that the modification, waiver or amendment (i)
will not affect the amount or timing of any scheduled payments of principal or
interest on the Mortgage Loan, (ii) will not, in the judgment of the Master
Servicer or Special Servicer, as the case may be, materially impair the
security for the Mortgage Loan or reduce the likelihood of timely payment of
amounts due thereon, (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,
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a borrower that is unable to make Mortgage Loan payments may also be unable to
make timely payment of taxes and insurance premiums and to otherwise maintain
the related Mortgaged Property. In general, and subject to the discussion in
the related Prospectus Supplement, the related Special Servicer will be
required to monitor any Mortgage Loan that is in default more than a specified
number of scheduled payments, evaluate whether the causes of the default can be
corrected over a reasonable period without significant impairment of the value
of the related Mortgaged Property, initiate corrective action in cooperation
with the borrower if cure is likely, inspect the related Mortgaged Property and
take such other actions as are consistent with the Servicing Standard. A
significant period of time may elapse before the Special Servicer is able to
assess the success of any such corrective action or the need for additional
initiatives.
The time within which the Special Servicer can make the initial
determination of appropriate action, evaluate the success of corrective action,
develop additional initiatives, institute foreclosure proceedings and actually
foreclose (or accept a deed to a Mortgaged Property in lieu of foreclosure) on
behalf of the Certificateholders may vary considerably depending on the
particular Mortgage Loan, the Mortgaged Property, the borrower, the presence of
an acceptable party to assume the Mortgage Loan and the laws of the
jurisdiction in which the Mortgaged Property is located. If a borrower files a
bankruptcy petition, the Special Servicer may not be permitted to accelerate
the maturity of the related Mortgage Loan or to foreclose on the related
Mortgaged Property for a considerable period of time, and such Mortgage Loan
may be restructured in the resulting bankruptcy proceedings. See "Certain Legal
Aspects of Mortgage Loans".
A Pooling Agreement may grant to the Master Servicer, the Special
Servicer, a provider of Credit Support and/or the holder or holders of certain
classes of the related series of Certificates a right of first refusal to
purchase from the Trust Fund, at a predetermined purchase price (which, if
insufficient to fully fund the entitlements of Certificateholders to principal
and interest thereon, will be specified in the related Prospectus Supplement),
any Mortgage Loan as to which a specified number of scheduled payments are
delinquent. In addition, unless otherwise specified in the related Prospectus
Supplement, the Special Servicer may offer to sell any defaulted Mortgage Loan
if and when the Special Servicer determines, consistent with the applicable
Servicing Standard, that such a sale would produce a greater recovery on a
present value basis than would liquidation of the related Mortgaged Property.
Unless otherwise provided in the related Prospectus Supplement, the related
Pooling Agreement will require that the Special Servicer accept the highest
cash bid received from any person (including itself, the Master Servicer, the
Sponsor or any affiliate of any of them or any Certificateholder) that
constitutes a fair price for such defaulted Mortgage Loan. In the absence of
any bid determined in accordance with the related Pooling Agreement to be fair,
the Special Servicer will generally be required to proceed against the related
Mortgaged Property, subject to the discussion below.
If a default on a Mortgage Loan has occurred or, in the Special Servicer's
judgment, a payment default is imminent, the Special Servicer, on behalf of the
Trustee, may at any time institute foreclosure proceedings, exercise any power
of sale contained in the related Mortgage, obtain a deed in lieu of
foreclosure, or otherwise acquire title to the related Mortgaged Property
and/or other collateral, 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
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required to sell the Mortgaged Property by the end of the third taxable year
following the taxable year in which such acquisition occurred, 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 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 (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
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contains a deductible clause, the Master Servicer (or Special Servicer) will be
required, in the event of a casualty covered by such blanket policy, to deposit
or cause to be deposited in the related Certificate Account all sums that would
have been deposited therein but for such deductible clause.
In general, the standard form of fire and extended coverage policy covers
physical damage to or destruction of the improvements of the property by fire,
lightning, explosion, smoke, windstorm and hail, and riot, strike and civil
commotion, subject to the conditions and exclusions specified in each policy.
Although the policies covering the Mortgaged Properties will be underwritten by
different insurers under different state laws in accordance with different
applicable state forms, and therefore will not contain identical terms and
conditions, most such policies typically do not cover any physical damage
resulting from war, revolution, governmental actions, floods and other
water-related causes, earth movement (including earthquakes, landslides and
mudflows), wet or dry rot, vermin, domestic animals and other kinds of risks
not specified in the preceding sentence. Accordingly, a Mortgaged Property may
not be insured for losses arising from any such cause unless the related
Mortgage specifically requires, or permits the holder thereof to require, such
coverage.
The hazard insurance policies covering the Mortgaged Properties will
typically contain co-insurance clauses that in effect require an insured at all
times to carry insurance of a specified percentage (generally 80% to 90%) of
the full replacement value of the improvements on the property in order to
recover the full amount of any partial loss. If the insured's coverage falls
below this specified percentage, such clauses generally provide that the
insurer's liability in the event of partial loss does not exceed the lesser of
(i) the replacement cost of the improvements less physical depreciation and
(ii) such proportion of the loss as the amount of insurance carried bears to
the specified percentage of the full replacement cost of such improvements.
DUE-ON-SALE AND DUE-ON-ENCUMBRANCE PROVISIONS
Certain of the Mortgage Loans may contain a due-on-sale clause that
entitles the lender to accelerate payment of the Mortgage Loan upon any sale or
other transfer of the related Mortgaged Property made without the lender's
consent. Certain of the Mortgage Loans may also contain a due-on-encumbrance
clause that entitles the lender to accelerate the maturity of the Mortgage Loan
upon the creation of any other lien or encumbrance upon the Mortgaged Property.
Unless otherwise provided in the related Prospectus Supplement, the Master
Servicer or the Special Servicer will determine whether to exercise any right
the Trustee may have under any such provision in a manner consistent with the
Servicing Standard. Unless otherwise specified in the related Prospectus
Supplement, the Master Servicer or Special Servicer, as applicable, will be
entitled to retain as additional servicing compensation any fee collected in
connection with the permitted transfer of a Mortgaged Property. See "Certain
Legal Aspects of Mortgage Loans--Due-on-Sale and Due-on-Encumbrance".
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
Unless otherwise specified in the related Prospectus Supplement, a Master
Servicer's primary servicing compensation with respect to a series of
Certificates will come from the periodic payment to it of a specified portion
of the interest payments on each Mortgage Loan in the related Trust Fund,
including Mortgage Loans serviced by the related Special Servicer. If and to
the extent described in the related Prospectus Supplement, a Special Servicer's
primary compensation with respect to a series of Certificates may consist of
any or all of the following components: (i) a specified portion of the interest
payments on each Mortgage Loan in the related Trust Fund, whether or not
serviced by it; (ii) an additional specified portion of the interest payments
on each Mortgage Loan then currently serviced by it; and (iii) subject 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,
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without limitation, payment of the fees and disbursements of independent
accountants and payment of expenses incurred in connection with distributions
and reports to Certificateholders. Certain other expenses, including certain
expenses related to Mortgage Loan defaults and liquidations and, to the extent
so provided in the related Prospectus Supplement, interest on such expenses at
the rate specified therein, may be required to be borne by the Trust Fund.
If and to the extent provided in the related Prospectus Supplement, a
Master Servicer may be required to apply a portion of the servicing
compensation otherwise payable to it in respect of any period to Prepayment
Interest Shortfalls. See "Yield and Maturity Considerations--Certain Shortfalls
in Collections of Interest".
EVIDENCE AS TO COMPLIANCE
Unless otherwise provided in the related Prospectus Supplement, each
Pooling Agreement will require that, on or before a specified date in each
year, the Master Servicer and, if and to the extent appropriate, the Special
Servicer each cause a firm of independent public accountants to furnish to the
Trustee a statement to the effect that (i) such firm has obtained a letter of
representations regarding certain matters relating to the management of the
Master Servicer or the Special Servicer, as the case may be, which includes an
assertion that the Master Servicer or the Special Servicer, as the case may be,
has complied with certain minimum mortgage loan servicing standards (to the
extent applicable to commercial and multifamily mortgage loans), identified in
the Uniform Single Attestation Program for Mortgage Bankers established by the
Mortgage Bankers Association of America, with respect to the servicing of
commercial and multifamily mortgage loans during the most recently completed
calendar year and (ii) on the basis of an examination conducted by such firm in
accordance with standards established by the American Institute of Certified
Public Accountants, such representation is fairly stated in all material
respects, subject to such exceptions and other qualifications that may be
appropriate. In rendering its report, such firm may rely, as to matters
relating to the direct servicing of commercial and multifamily mortgage loans
by sub-servicers, upon comparable reports of firms of independent public
accountants rendered on the basis of examinations conducted in accordance with
the same standards (rendered within one year of such report) with respect to
those sub-servicers. A Prospectus Supplement may provide that additional or
alternative reports of independent certified public accountants relating to the
servicing of mortgage loans may be required to be delivered to the Trustee.
Each Pooling Agreement will also require that, on or before a specified
date in each year, the Master Servicer and Special Servicer each deliver to the
Trustee a statement signed by one or more officers thereof to the effect that
the Master Servicer or the Special Servicer, as the case may be, has fulfilled
its material obligations under the Pooling Agreement throughout the preceding
calendar year or other specified twelve month period.
CERTAIN MATTERS REGARDING THE MASTER SERVICER, THE SPECIAL SERVICER, THE REMIC
ADMINISTRATOR AND THE SPONSOR
Any entity serving as Master Servicer, Special Servicer or REMIC
Administrator under a Pooling Agreement may be an affiliate of the Sponsor and
may have other normal business relationships with the Sponsor or the Sponsor's
affiliates. Unless otherwise specified in the Prospectus Supplement for a
series of Certificates, the related Pooling Agreement will permit the Master
Servicer, the Special Servicer and any REMIC Administrator to resign from its
obligations thereunder only upon (a) the appointment of, and the acceptance of
such appointment by, a successor thereto and receipt by the Trustee of written
confirmation from each applicable Rating Agency that such resignation and
appointment will not have an adverse effect on the rating assigned by such
Rating Agency to any class of Certificates of such series or (b) a
determination that such obligations are no longer permissible under applicable
law or are in material conflict by reason of applicable law with any other
activities carried on by it. No such resignation 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
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none of the Master Servicer, the Special Servicer, the REMIC Administrator (if
any), the Sponsor or any such person will be protected against any liability
that would otherwise be imposed by reason of willful misfeasance, bad faith or
gross negligence in the performance of obligations or duties thereunder or by
reason of reckless disregard of such obligations and duties. Unless otherwise
specified in the related Prospectus Supplement, each Pooling Agreement will
further provide that the Master Servicer, the Special Servicer, the REMIC
Administrator (if any), the Sponsor and any director, officer, employee or
agent of any of them will be entitled to indemnification by the related Trust
Fund against any loss, liability or expense incurred in connection with any
legal action that relates to such Pooling Agreement or the related series of
Certificates; provided, however, that such indemnification will not extend to
any loss, liability or expense incurred by reason of 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
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Agreement, by Certificateholders entitled to not less than 25% (or such other
percentage specified in the related Prospectus Supplement) of the Voting Rights
for such series; and (v) certain events of insolvency, readjustment of debt,
marshalling of assets and liabilities, or similar proceedings in respect of or
relating to the Master Servicer, the Special Servicer, or a REMIC Administrator
(if any), and certain actions by or on behalf of the Master Servicer, the
Special Servicer or a REMIC Administrator (if any) indicating its insolvency or
inability to pay its obligations. Material variations to the foregoing Events
of Default (other than to add thereto or shorten cure periods or eliminate
notice requirements) will be specified in the related Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, when a single
entity acts as Master Servicer, Special Servicer and REMIC Administrator, or in
any two of the foregoing capacities, for any Trust Fund, an Event of Default
described above 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 qualified and established 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
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(other than an amendment for one of the specific purposes referred to in
clauses (i) through (iv) above) must be acceptable to each applicable Rating
Agency. Unless otherwise specified in the related Prospectus Supplement, each
Pooling Agreement may also be amended by the respective parties thereto, with
the consent of the holders of the related series of Certificates entitled to
not less than 51% (or such other percentage specified in the related Prospectus
Supplement) of the Voting Rights for such series allocated to the affected
classes, for any purpose; provided that, unless otherwise specified in the
related Prospectus Supplement, no such amendment may (i) reduce in any manner
the amount of, or delay the timing of, payments received or advanced on
Mortgage Loans that are required to be distributed in respect of any
Certificate without the consent of the holder of such Certificate, (ii)
adversely affect in any material respect the interests of the holders of any
class of Certificates, in a manner other than as described in clause (i),
without the consent of the holders of all Certificates of such class or (iii)
modify the 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 as 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
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Agreement; provided, however, that such indemnification will not extend to any
loss, liability or expense incurred by reason of willful misfeasance, bad faith
or gross negligence on the part of the Trustee in the performance of its
obligations and duties thereunder, or by reason of its reckless disregard of
such obligations or duties.
Unless otherwise specified in the related Prospectus Supplement, the
Trustee for each series of Certificates will be entitled to execute any of its
trusts or powers under the related Pooling Agreement or perform any of its
duties thereunder either directly or by or through agents or attorneys, and the
Trustee will not be responsible for any willful misconduct or gross negligence
on the part of any such agent or attorney appointed by it with due care.
RESIGNATION AND REMOVAL OF THE TRUSTEE
A Trustee will be permitted at any time to resign from its obligations and
duties under the related Pooling Agreement by giving written notice thereof to
the Sponsor. Upon receiving such notice of resignation, the Sponsor (or such
other person as may be specified in the related Prospectus Supplement) will be
required to use its best efforts to promptly appoint a successor trustee. If no
successor trustee shall have accepted an appointment within a specified period
after the giving of such notice of resignation, the resigning Trustee may
petition any court of competent jurisdiction to appoint a successor trustee.
If at any time a Trustee ceases to be eligible to continue as such under
the related Pooling Agreement, or if at any time the Trustee becomes incapable
of acting, or if certain events of (or proceedings in respect of) bankruptcy or
insolvency occur with respect to the Trustee, the Sponsor will be authorized to
remove the Trustee and appoint a successor trustee. In addition, holders of the
Certificates of any series entitled to at least 33 1/3% (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.
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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 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.
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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.
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.
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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
located in the United States. 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, 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
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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 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
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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 in light of State law
fraudulent conveyance concerns. 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
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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 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 its consequences caused by the
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
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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.
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
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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 "Lender Liability Act") amended, among other things, the provisions of
CERCLA with respect to lender liability and the secured creditor exemption. The
Lender Liability 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 Lender Liability 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 Lender Liability 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.
Certain Other Federal and State Laws. Many states have statutes similar to
CERCLA, and not all those statutes provide for a secured creditor exemption. In
addition, under federal law, there is potential liability relating to
underground storage tanks pursuant to Subtitle I of the federal Resource
Conservation and Recovery Act ("RCRA").
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
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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 without the lender's consent. In recent years, court
decisions and legislative actions placed substantial restrictions on the right
of lenders to enforce such clauses in many states. By virtue, however, of the
Garn-St Germain Depository Institutions Act of 1982 (the "Garn Act"), effective
October 15, 1982 (which purports to preempt state laws that prohibit the
enforcement of due-on-sale clauses by providing among other matters, that
"due-on-sale" clauses in certain loans made after the effective date of the
Garn Act are enforceable, within certain limitations as set forth in the Garn
Act and the regulations promulgated thereunder), a Master Servicer or Special
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 or Special
Servicer's, as the case may be, 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, and 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
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for inclusion in a Trust Fund unless (i) such Mortgage Loan provides for such
interest rate, discount points and charges as are permitted in such state or
(ii) such Mortgage Loan provides that the terms thereof are to be construed in
accordance with the laws of another state under which such interest rate,
discount points and charges would not be usurious and the borrower's counsel
has rendered an opinion that such choice of law provision would be given
effect.
SOLDIERS' AND SAILORS' CIVIL RELIEF ACT OF 1940
Under the terms of the Soldiers' and Sailors' Civil Relief Act of 1940, as
amended (the "Relief Act"), a borrower who enters military service after the
origination of such borrower's mortgage loan (including a borrower who was in
reserve status and is called to active duty after origination of the Mortgage
Loan), may not be charged interest (including fees and charges) above an annual
rate of 6% during the period of such borrower's active duty status, unless a
court orders otherwise upon application of the lender. The Relief Act applies
to individuals who are members of the Army, Navy, Air Force, Marines, National
Guard, Reserves, Coast Guard and officers of the U.S. Public Health Service
assigned to duty with the military. Because the Relief Act applies to
individuals who enter military service (including reservists who are called to
active duty) after origination of the related mortgage loan, no information can
be provided as to the number of loans with individuals as borrowers that may be
affected by the Relief Act. Application of the Relief Act would adversely
affect, for an indeterminate period of time, the ability of a Master Servicer
or Special Servicer to collect full amounts of interest on certain of the
Mortgage Loans. Any shortfalls in interest collections resulting from the
application of the Relief Act would result in a reduction of the amounts
distributable to the holders of the related series of Certificates, and would
not be covered by advances or, unless otherwise specified in the related
Prospectus Supplement, any form of Credit Support provided in connection with
such Certificates. In addition, the Relief Act imposes limitations that would
impair the ability of a Master Servicer or Special Servicer to foreclose on an
affected Mortgage Loan during the borrower's period of active duty status, and,
under certain circumstances, during an additional three month period
thereafter.
AMERICANS WITH DISABILITIES ACT
Under Title III of the Americans with Disabilities Act of 1990 and rules
promulgated thereunder (collectively, the "ADA"), in order to protect
individuals with disabilities, public accommodations (such as hotels,
restaurants, shopping centers, hospitals, schools and social service center
establishments) must remove architectural and communication barriers that are
structural in nature from existing places of public accommodation to the extent
"readily achievable". In addition, under the ADA, alterations to a place of
public accommodation or a commercial facility are to be made so that, to the
maximum extent feasible, such altered portions are readily accessible to and
usable by disabled individuals. The "readily achievable" standard takes into
account, among other factors, the financial resources of the affected site,
owner, landlord or other applicable person. The requirements of the ADA may
also be imposed on a foreclosing lender who succeeds to the interest of the
borrower as owner or landlord. Since the "readily achievable" standard may vary
depending on the financial condition of the owner or landlord, a foreclosing
lender who is financially more capable than the borrower of complying with the
requirements of the ADA may be subject to more stringent requirements than
those to which the borrower is subject.
FORFEITURES IN DRUG AND RICO PROCEEDINGS
Federal law provides that property owned by persons convicted of
drug-related crimes or of criminal violations of the Racketeer Influenced and
Corrupt Organizations ("RICO") statute can be seized by the government if the
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
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within the meaning of Section 1221 of the Internal Revenue Code of 1986 (the
"Code"), and is based on the advice of the 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. Prospective investors should note that no rulings have been or
will be sought from the IRS with respect to any of the federal income tax
consequences discussed below, and no assurances can be given that the IRS will
not take contrary positions. 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, 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. Accordingly, each investor is
advised to consult its own tax advisors with regard to the tax consequences to
it of investing in REMIC Certificates.
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
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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)(B) of the
Code and assets described in Section 7701(a)(19)(C) of the Code in the same
proportion that the assets of the REMIC underlying such Certificates would be
so treated. However, to the extent that the REMIC assets constitute mortgages
on property not used for residential or certain other prescribed purposes, the
REMIC Certificates will not be treated as assets qualifying under Section
7701(a)(19)(C)(v). Moreover, if 95% or more of the assets of the REMIC qualify
for any of the foregoing treatments at all times during a calendar year, the
REMIC Certificates will qualify for the corresponding status in their entirety
for that calendar year. Interest (including original issue discount) on the
REMIC Regular Certificates and income allocated to the class of REMIC Residual
Certificates will be interest described in Section 856(c)(3)(B) of the Code to
the extent that such Certificates are treated as "real estate assets" within
the meaning of Section 856(c)(5)(B) 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)(4)(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)(B) 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
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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.
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 during the entire term of the instrument 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.
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Notwithstanding the general definition of original issue discount,
original issue discount on a REMIC Regular Certificate will be considered to be
de minimis if it is less than 0.25% of the stated redemption price of the REMIC
Regular Certificate multiplied by its weighted average life. For this purpose,
the weighted average life of the REMIC Regular Certificate is computed as the
sum of the amounts determined, as to each payment included in the stated
redemption price of such REMIC Regular Certificate, by multiplying (i) the
number of complete years (rounding down for partial years) from the issue date
until such payment is expected to be made (presumably taking into account the
Prepayment Assumption) by (ii) a fraction, the numerator of which is the amount
of the payment and the denominator of which is the stated redemption price at
maturity of such REMIC Regular Certificate. Under the OID Regulations, original
issue discount of only a de minimis amount (other than de minimis original
issue discount attributable to a so-called "teaser" interest rate or an initial
interest holiday) will be included in income as each payment of stated
principal is made, based on the product of the total amount of such de minimis
original issue discount and a fraction, the numerator of which is the amount of
such principal payment and the denominator of which is the outstanding stated
principal amount of the REMIC Regular Certificate. The OID Regulations also
would permit a Certificateholder to elect to accrue de minimis original issue
discount into income currently based on a constant yield method. See
"--Taxation of Owners of REMIC Regular Certificates--Market Discount" for a
description of such election under the OID Regulations.
If original issue discount on a REMIC Regular Certificate is in excess of
a de minimis amount, the holder of such Certificate must include in ordinary
gross income the sum of the "daily portions" of original issue discount for
each day during its taxable year on which it held such REMIC Regular
Certificate, including the purchase date but excluding the disposition date. In
the case of an original holder of a REMIC Regular Certificate, the daily
portions of original issue discount will be determined as follows.
As to each "accrual period", that is, unless otherwise stated in the
related Prospectus Supplement, each period that ends on a date that corresponds
to a Distribution Date and begins on the first day following the immediately
preceding accrual period (or in the case of the first such period, begins on
the Closing Date), a calculation will be made of the portion of the original
issue discount that accrued during such accrual period. The portion of original
issue discount that accrues in any accrual period will equal the excess, if
any, of (i) the sum of (a) the present value, as of the end of the accrual
period, of all of the distributions remaining to be made on the REMIC Regular
Certificate, if any, in future periods and (b) the distributions made on such
REMIC Regular Certificate during the accrual period of amounts included in the
stated redemption price, over (ii) the adjusted issue price of such REMIC
Regular Certificate at the beginning of the accrual period. The present value
of the remaining distributions referred to in the preceding sentence will be
calculated (i) assuming that distributions on the REMIC Regular Certificate
will be received in future periods based on the Mortgage Loans being prepaid at
a rate equal to the Prepayment Assumption, (ii) using a discount rate equal to
the original yield to maturity of the Certificate, and (iii) taking into
account events (including actual prepayments) that have occurred before the
close of the accrual period. 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
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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 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.
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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.
Premium. A REMIC Regular Certificate purchased at a cost (excluding any
portion of such cost attributable to accrued qualified stated interest) greater
than its remaining stated redemption price will be considered to be purchased
at a premium. The holder of such a REMIC Regular Certificate may elect under
Section 171 of the Code to amortize such premium under the constant yield
method over the life of the Certificate. If a holder elects to amortize bond
premium, bond premium would be amortized on a constant yield method and would
be applied as an offset against qualified stated interest. If made, such an
election will apply to all debt instruments having amortizable bond premium
that the holder owns or subsequently acquires. The IRS recently finalized new
regulations on the amortization of bond premium. However, the regulations
expressly do not apply to holders of REMIC Regular Certificates. 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" above. 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. Accordingly, holders of
REMIC Regular Certificates are urged to consult with their own tax advisors
regarding the appropriate timing, amount and character of any loss sustained
with respect to such Certificate.
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.
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A holder of a REMIC Residual Certificate generally will be required to
report its daily portion of the taxable income or, subject to the limitations
noted in this discussion, the net loss of the REMIC for each day during a
calendar quarter that such holder owned such REMIC Residual Certificate. For
this purpose, the taxable income or net loss of the REMIC will be allocated to
each day in the calendar quarter ratably using a "30 days per month/90 days per
quarter/360 days per year" convention unless otherwise disclosed in the related
Prospectus Supplement. The daily amounts so allocated will then be allocated
among the Residual Certificateholders in proportion to their respective
ownership interests on such day. Any amount included in the gross income or
allowed as a loss of any Residual Certificateholder by virtue of this paragraph
will be treated as ordinary income or loss. The taxable income of the REMIC
will be determined under the rules described below in "--Taxable Income of the
REMIC" and will be taxable to the Residual Certificateholders without regard to
the timing or amount of cash distributions by the REMIC. Ordinary income
derived from REMIC Residual Certificates will be "portfolio income" for
purposes of the taxation of taxpayers subject to limitations under Section 469
of the Code on the deductibility of "passive losses".
A holder of a Residual Certificate that purchased such Certificate from a
prior holder of such Certificate also will be required to report on its federal
income tax return amounts representing its daily share of the taxable income
(or net loss) of the REMIC for each day that it holds such REMIC Residual
Certificate. Those daily amounts generally will equal the amounts of taxable
income or net loss determined as described above. The Committee Report
indicates that certain modifications of the general rules may be made, by
regulations, legislation or otherwise to reduce (or increase) the income of a
Residual Certificateholder that purchased such REMIC Residual Certificate from
a prior holder of such Certificate at a price greater than (or less than) the
adjusted basis (as defined below) such REMIC Residual Certificate would have
had in the hands of an original holder of such Certificate. The REMIC
Regulations, however, do not provide for any such modifications.
Any payments received by a holder of a REMIC Residual Certificate in
connection with the acquisition of such REMIC Residual Certificate will be
taken into account in determining the income of such holder for federal income
tax purposes. Although it appears likely that any such payment would be
includible in income immediately upon its receipt, the IRS might assert that
such payment should be included in income over time according to an
amortization schedule or according to some other method. Because of the
uncertainty concerning the treatment of such payments, holders of REMIC
Residual Certificates should consult their tax advisors concerning the
treatment of such payments for income tax purposes.
The amount of income Residual Certificateholders will be required to
report (or the tax liability associated with such income) may exceed the amount
of cash distributions received from the REMIC for the corresponding period.
Consequently, Residual Certificateholders should have other sources of funds
sufficient to pay any federal income taxes due as a result of their ownership
of REMIC Residual Certificates or unrelated deductions against which income may
be offset, subject to the rules relating to "excess inclusions", residual
interests without "significant value" and "noneconomic" residual interests
discussed below. The fact that the tax liability associated with the income
allocated to Residual Certificateholders may exceed the cash distributions
received by such Residual Certificateholders for the corresponding period may
significantly adversely affect such Residual Certificateholders' after-tax rate
of return. 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
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property will equal the fair market value of such interests in the Mortgage
Loans or other property. Accordingly, if one or more classes of REMIC
Certificates are retained initially rather than sold, the REMIC Administrator
may be required to estimate the fair market value of such interests in order to
determine the basis of the REMIC in the Mortgage Loans and other property held
by the REMIC.
Subject to possible application of the de minimis rules, the method of
accrual by the REMIC of original issue discount income and market discount
income with respect to Mortgage Loans that it holds will be equivalent to the
method for accruing original issue discount income for holders of REMIC Regular
Certificates (that is, under the constant yield method taking into account the
Prepayment Assumption). However, a REMIC that acquires loans at a market
discount must include such market discount in income currently, as it accrues,
on a constant yield basis. See "--Taxation of Owners of REMIC Regular
Certificates" above, which describes a method for accruing such discount income
that is analogous to that required to be used by a REMIC as to Mortgage Loans
with market discount that it holds.
A Mortgage Loan will be deemed to have been acquired with discount (or
premium) to the extent that the REMIC's basis therein, determined as described
in the preceding paragraph, is less than (or greater than) its stated
redemption price. Any such discount will be includible in the income of the
REMIC as it accrues, in advance of receipt of the cash attributable to such
income, under a method similar to the method described above for accruing
original issue discount on the REMIC Regular Certificates. It is anticipated
that each REMIC will elect under Section 171 of the Code to amortize any
premium on the Mortgage Loans. Premium on any Mortgage Loan to which such
election applies may be amortized under a constant yield method, presumably
taking into account a Prepayment Assumption.
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
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such calendar quarter (determined without regard to such net loss). Any loss
that is not currently deductible by reason of this limitation may be carried
forward indefinitely to future calendar quarters and, subject to the same
limitation, may be used only to offset income from the REMIC Residual
Certificate. The ability of Residual Certificateholders to deduct net losses
may be subject to additional limitations under the Code, as to which Residual
Certificateholders should consult their tax advisors.
Any distribution on a REMIC Residual Certificate will be treated as a
non-taxable return of capital to the extent it does not exceed the holder's
adjusted basis in such REMIC Residual Certificate. To the extent a distribution
on a REMIC Residual Certificate exceeds such adjusted basis, it will be treated
as gain from the sale of such REMIC Residual Certificate. Holders of certain
REMIC Residual Certificates may be entitled to distributions early in the term
of the related REMIC under circumstances in which their bases in such REMIC
Residual Certificates will not be sufficiently large that such distributions
will be treated as nontaxable returns of capital. Their bases in such REMIC
Residual Certificates will initially equal the amount paid for such REMIC
Residual Certificates and will be increased by their allocable shares of
taxable income of the Trust Fund. However, such bases increases may not occur
until the end of the calendar quarter, or perhaps the end of the calendar year,
with respect to which such REMIC taxable income is allocated to the REMIC
Residual Certificateholders. To the extent such REMIC Residual
Certificateholders' initial bases are less than the distributions to such
Residual Certificateholders, and increases in such initial bases either occur
after such distributions or (together with their initial bases) are less than
the amount of such distributions, gain will be recognized to such Residual
Certificateholders on such distributions and will be treated as gain from the
sale of their REMIC Certificates.
The effect of these rules is that a Residual Certificateholder may not
amortize its basis in a REMIC Residual Certificate, but may only recover its
basis through distributions, through the deduction of any net losses of the
REMIC or upon the sale of its REMIC Residual Certificate. See "--Sales of REMIC
Certificates". For a discussion of possible modifications of these rules that
may require adjustments to income of a holder of a REMIC Residual Certificate
other than an original holder in order to reflect any difference between the
cost of such REMIC Residual Certificate to such Residual Certificateholder and
the adjusted basis such REMIC Residual Certificate would have in the hands of
an original holder. See "--Taxation of Owners of REMIC Residual
Certificates--General".
Excess Inclusions. Any "excess inclusions" with respect to a REMIC
Residual Certificate will 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.
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In the case of any REMIC Residual Certificates held by a real estate
investment trust, the aggregate excess inclusions with respect to such REMIC
Residual Certificates, reduced (but not below zero) by the real estate
investment trust taxable income (within the meaning of Section 857(b)(2) of the
Code, excluding any net capital gain), will be allocated among the shareholders
of such trust in proportion to the dividends received by such shareholders from
such trust, and any amount so allocated will be treated as an excess inclusion
with respect to a REMIC Residual Certificate as if held directly by such
shareholder. Treasury regulations yet to be issued could apply a similar rule
to regulated investment companies, common trust funds and certain cooperatives;
the REMIC Regulations currently do not address this subject.
Noneconomic REMIC Residual Certificates. Under the REMIC Regulations,
transfers of "noneconomic" REMIC Residual Certificates will be disregarded for
all federal income tax purposes if "a significant purpose of the transfer was
to enable the transferor to impede the assessment or collection of tax". If
such transfer is disregarded, the purported transferor will continue to remain
liable for any taxes due with respect to the income on such "noneconomic" REMIC
Residual Certificate. The REMIC Regulations provide that a REMIC Residual
Certificate is noneconomic unless, based on the Prepayment Assumption and on
any required or permitted clean up calls, or required liquidation provided for
in the REMIC's organizational documents, (1) the present value of the expected
future distributions (discounted using the "applicable Federal rate" for
obligations whose term ends on the close of the last quarter in which excess
inclusions are expected to accrue with respect to the REMIC Residual
Certificate, which rate is computed and published monthly by the IRS) on the
REMIC Residual Certificate equals at least the present value of the expected
tax on the anticipated excess inclusions, and (2) the transferor reasonably
expects that the transferee will receive distributions with respect to the
REMIC Residual Certificate at or after the time the taxes accrue on the
anticipated excess inclusions in an amount sufficient to satisfy the accrued
taxes. Accordingly, all transfers of REMIC Residual Certificates that may
constitute noneconomic residual interests will be subject to certain
restrictions under the terms of the related Pooling Agreement that are intended
to reduce the possibility of any such transfer being disregarded. Such
restrictions will require each party to a transfer to provide an affidavit that
no purpose of such transfer is to impede the assessment or collection of tax,
including certain representations as to the financial condition of the
prospective transferee, as to which the transferor is also required to make a
reasonable investigation to determine such transferee's historic payment of its
debts and ability to continue to pay its debts as they come due in the future.
Prior to purchasing a REMIC Residual Certificate, prospective purchasers should
consider the possibility that a purported transfer of such REMIC Residual
Certificate by such a purchaser to another purchaser at some future date may be
disregarded in accordance with the above-described rules which would result in
the retention of tax liability by such purchaser.
The related Prospectus Supplement will disclose whether offered REMIC
Residual Certificates may be considered "noneconomic" residual interests under
the REMIC Regulations; provided, however, that any disclosure that a REMIC
Residual Certificate will not be considered "noneconomic" will be based upon
certain assumptions, 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.
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With respect to REMIC Residual Certificates or REMIC Regular Certificates
the holders of which receive an allocation of fees and expenses in accordance
with the preceding discussion, if any holder thereof is an individual, estate
or trust, or a "pass-through entity" beneficially owned by one or more
individuals, estates or trusts, (i) an amount equal to such individual's,
estate's or trust's share of such fees and expenses will be added to the gross
income of such holder and (ii) such individual's, estate's or trust's share of
such fees and expenses will be treated as a miscellaneous itemized deduction
allowable subject to the limitation of Section 67 of the Code, which permits
such deductions only to the extent they exceed in the aggregate two percent of
a taxpayer's adjusted gross income. In addition, Section 68 of the Code
provides that the amount of itemized deductions otherwise allowable for an
individual whose adjusted gross income exceeds a specified amount will be
reduced by the lesser of (i) 3% of the excess of the individual's adjusted
gross income over such amount or (ii) 80% of the amount of itemized deductions
otherwise allowable for the taxable year. The amount of additional taxable
income reportable by REMIC Certificateholders that are subject to the
limitations of either Section 67 or Section 68 of the Code may be substantial.
Furthermore, in determining the alternative minimum taxable income of such a
holder of a REMIC Certificate that is an individual, estate or trust, or a
"pass-through entity" beneficially owned by one or more individuals, estates or
trusts, no deduction will be allowed for such holder's allocable portion of
servicing fees and other miscellaneous itemized deductions of the REMIC, even
though an amount equal to the amount of such fees and other deductions will be
included in such holder's gross income. Accordingly, REMIC Residual
Certificates will generally 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 lower rates as to mid-term capital gains,
and still lower rates as to long-term capital gains, than those applicable to
the short-term capital gains and ordinary income realized or received by
individuals. 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
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in a conversion transaction that is recharacterized as ordinary income
generally will not exceed the amount of interest that would have accrued on the
taxpayer's net investment at 120% of the appropriate "applicable Federal rate"
(which rate is computed and published monthly by the IRS) at the time the
taxpayer enters into the conversion transaction, subject to appropriate
reduction for prior inclusion of interest and other ordinary income items from
the transaction.
Finally, a taxpayer may elect to have net capital gains taxed at ordinary
income rates rather than capital gain rates in order to include such net
capital gain in total net investment income for the taxable year, for purposes
of the rule that limits the deduction of interest on indebtedness incurred to
purchase or carry property held for investment to a taxpayer's net investment
income.
Except as may be provided in Treasury regulations yet to be issued, if the
seller of a REMIC Residual Certificate reacquires a REMIC Residual Certificate,
or acquires any other residual interest in a REMIC or any similar interest in a
"taxable mortgage pool" (as defined in Section 7701(i) of the Code) during the
period beginning six months before, and ending six months after, the date of
such sale, such sale will be subject to the "wash sale" rules of Section 1091
of the Code. In that event, any loss realized by the REMIC Residual
Certificateholder on the sale will not be deductible, but instead will be added
to such REMIC Residual Certificateholder's adjusted basis in the newly-acquired
asset.
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
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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. 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.
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 "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.
For taxable years beginning on or after January 1, 1998, if an "electing
large partnership" holds a REMIC Residual Certificate, all interests in the
electing large partnership are treated as held by disqualified organizations
for purposes of the tax imposed upon a pass-through entity by Section 860E(c)
of the Code. An exception to this tax, otherwise available to a pass-through
entity that is furnished certain affidavits by record holders of interests in
the entity and that does not know such affidavits are false, is not available
to an electing large partnership. For these purposes, an "electing large
partnership" means any partnership having more than 100 members during the
preceding tax years (other than certain service partnerships and commodity
pools), which elect to apply simplified reporting provisions under the Code.
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 REMIC 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. REMIC Residual Certificateholders generally will be required to
report
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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 REMIC
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 REMIC Residual Certificateholder's return.
No REMIC will be registered as a tax shelter pursuant to Section 6111 of the
Code because it is not anticipated that any REMIC will have a net loss for any
of the first five taxable years of its existence. Any person that holds a REMIC
Residual Certificate as a nominee for another person may be required to furnish
the related REMIC, in a manner to be provided in Treasury regulations, with the
name and address of such person and other information.
Reporting of interest income, including any original issue discount, with
respect to REMIC Regular Certificates is required annually, and may be required
more frequently under Treasury regulations. These information reports generally
are required to be sent to individual holders of REMIC Regular Interests and
the IRS; holders of REMIC Regular Certificates that are corporations, trusts,
securities dealers and certain other non-individuals will be provided interest
and original issue discount income information and the information set forth in
the following paragraph upon request in accordance with the requirements of the
applicable regulations. The information must be provided by the later of 30
days after the end of the quarter for which the information was requested, or
two weeks after the receipt of the request. The REMIC must also comply with
rules requiring a REMIC Regular Certificate issued with original issue discount
to disclose on its face the amount of original issue discount and the issue
date, and requiring such information to be reported to the IRS. Reporting with
respect to the REMIC Residual Certificates, including income, excess
inclusions, investment expenses and relevant information regarding
qualification of the REMIC's assets will be made as required under the Treasury
regulations, generally on a quarterly basis.
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 persons 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
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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.
It is possible, under regulations promulgated under Section 881 of the
Code concerning conduit financing transactions, that the exemption from
withholding taxes described above may not be available to a holder who is not a
United States person and owns 10% of more of one or more underlying Mortgagors
or, if the holder is a controlled foreign corporation, who is related to one or
more Mortgagors.
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.
New Withholding Regulations. On October 6, 1997, the Treasury Department
issued new regulations (the "New Regulations") which make certain modifications
to the withholding, backup withholding and information reporting rules
described above. The New Regulations attempt to unify certification
requirements and modify reliance standards. The New Regulations will generally
be effective for payments made after December 31, 1999, subject to certain
transition rules. Prospective investors are urged to consult their own tax
advisors regarding the New Regulations.
GRANTOR TRUST FUNDS
Classification of Grantor Trust Funds. With respect to each series of
Grantor Trust Certificates, counsel to the Sponsor will deliver its opinion to
the effect that, assuming compliance with all provisions of the related Pooling
Agreement, the related Grantor Trust Fund will be classified as a grantor trust
under subpart E, part I of subchapter J of the Code and not as a partnership or
an association taxable as a corporation. Accordingly, each holder of a Grantor
Trust Certificate generally will be treated as the owner of an interest in the
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; (iii)
permitted assets within the meaning of Section 860L(a)(1)(C) of the Code; and
(iv) "real estate assets" within the meaning of Section 856(c)(5)(B) 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)(B) of the Code, and the
interest on which is "interest on obligations secured by mortgages on real
property" within the meaning of Section
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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 and, in general, "permitted assets" within
the meaning of Section 860L(a)(1)(C) of the Code.
Taxation of Owners of Grantor Trust Fractional Interest Certificates.
General. Holders of a particular series of Grantor Trust Fractional
Interest Certificates generally will be required to report on their federal
income tax returns their shares of the entire income from the Mortgage Loans
(including amounts used to pay reasonable servicing fees and other expenses)
and will be entitled to deduct their shares of any such reasonable servicing
fees and other expenses. Because of stripped interests, market or original
issue discount, or premium, the amount includible in income on account of a
Grantor Trust Fractional Interest Certificate may differ significantly from the
amount distributable thereon representing interest on the Mortgage Loans.
Under Section 67 of the Code, an individual, estate or trust holding a
Grantor Trust Fractional Interest Certificate directly or through certain
pass-through entities will be allowed a deduction for such reasonable servicing
fees and expenses only to the extent that the aggregate of such holder's
miscellaneous itemized deductions exceeds two percent of such holder's adjusted
gross income. In addition, Section 68 of the Code provides that the amount of
itemized deductions otherwise allowable for an individual whose adjusted gross
income exceeds a specified amount will be reduced by the lesser of (i) 3% of
the excess of the individual's adjusted gross income over such amount or (ii)
80% of the amount of itemized deductions otherwise allowable for the taxable
year. The amount of additional taxable income reportable by holders of Grantor
Trust Fractional Interest Certificates who are subject to the limitations of
either Section 67 or Section 68 of the Code may be substantial. Further,
Certificateholders (other than corporations) subject to the alternative minimum
tax may not deduct miscellaneous itemized deductions in determining such
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
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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. Recent legislation extends the scope of the section to any pool of
debt instruments, the yield on which may be affected by reason of prepayments.
The precise application of the new legislation is unclear in certain respects.
For example, it is uncertain whether a prepayment assumption will be applied
collectively to all a taxpayer's investments in pools of debt instruments or
will be applied on an investment-by-investment basis. Similarly, as to
investments in Grantor Trust Fractional Interest Certificates, it is not clear
whether the assumed prepayment rate is to 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.
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.
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. See "--Grantor Trust Reporting", below.
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
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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 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. See "--Taxation of Owners of REMIC Regular
Interests--Original Issue Discount", above.
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 each month, based on a constant yield. Under
recent legislation, Section 1272(a)(6) of the Code requires that a prepayment
assumption be used in computing original issue discount with respect to any
pool of debt instruments, the yield on which may be affected by prepayments.
The precise application of the new legislation is unclear in certain respects.
For example, it is uncertain whether a prepayment assumption will be applied
collectively to all a taxpayer's investments in pools of debt instruments or
will be applied on an investment-by-investment basis. Similarly, as to
investments in Grantor Trust Fractional Interest Certificates, it is not clear
whether the assumed prepayment rate is to be determined at the time of the
first sale of the Grantor Trust Fractional Interest Certificate or, with
respect to any holder, at the time of that holder's purchase of the Grantor
Trust Fractional Interest Certificate. Certificateholders should consult their
own tax advisors concerning reporting of original issue discount with respect
to Grantor Trust Fractional Interest Certificates and 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.
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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.
In the absence of statutory or administrative clarification, it is
currently intended that information reports or returns to the IRS and
Certificateholders will be based on a prepayment assumption (the "Prepayment
Assumption") that is determined when Certificates are offered and sold
hereunder and that is disclosed in the related Prospectus Supplement. However,
neither the Depositor 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. See "--Grantor Trust Reporting", below.
Market Discount. If the stripped bond rules do not apply to the Grantor
Trust Fractional Interest Certificate, a Certificateholder may be subject to
the market discount rules of Sections 1276 through 1278 of the Code to the
extent an interest in a Mortgage Loan is considered to have been purchased at a
"market discount", that is, in the case of a Mortgage Loan issued without
original issue discount, at a purchase price less than its remaining stated
redemption price (as defined above), or in the case of a Mortgage Loan issued
with original issue discount, at a purchase price less than its adjusted issue
price (as defined above). If market discount is in excess of a de minimis
amount (as described below), the holder generally will be required to include
in income in each month the amount of such discount that has accrued (under the
rules described in the next paragraph) through such month that has not
previously been included in income, but limited, in the case of the portion of
such discount that is allocable to any Mortgage Loan, to the payment of stated
redemption price on such Mortgage Loan that is received by (or, in the case of
accrual basis Certificateholders, due to) the Trust Fund in that month. A
Certificateholder may elect to include market discount in income currently as
it accrues (under a constant yield method based on the yield of the Certificate
to such holder) rather than including it on a deferred basis in accordance with
the foregoing. If made, such election will apply to all market discount bonds
acquired by such Certificateholder during or after the first taxable year to
which such election applies. In addition, the OID Regulations would permit a
Certificateholder to elect to accrue all interest, discount (including de
minimis market or original issue discount) and premium in income as interest,
based on a constant yield method. If such an election were made with respect to
a Mortgage Loan with market discount, the Certificateholder would be deemed to
have made an election to include currently market discount in income with
respect to all other debt instruments having market discount that such
Certificateholder acquires during the taxable year of the election and
thereafter, and possibly previously acquired instruments. Similarly, a
Certificateholder that made this election for a Certificate acquired at a
premium would be deemed to have made an election to amortize bond premium with
respect to all debt instruments having amortizable bond premium that such
Certificateholder owns or acquires. See "--REMICs--Taxation of Owners of REMIC
Regular Certificates--Premium". Each of these elections to accrue interest,
discount and premium with respect to a Certificate on a constant yield method
or as interest is irrevocable.
Section 1276(b)(3) of the Code 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 such time as regulations are issued by the Treasury Department, certain
rules described in the Committee Report apply. Under
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those rules, in each accrual period market discount on the Mortgage Loans
should accrue, at the holder'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.
Under recent legislation, 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 any pool of debt instruments, the yield on which may
be affected by prepayments. Because the Mortgage Loans will be such a pool,
under the Committee Report, it appears that the prepayment assumption used (or
that would be used) in calculating the accrual of original issue discount, if
any, is also to be used in calculating the accrual of market discount. However,
the precise application of the new legislation is unclear in certain respects.
For example, it is uncertain whether a prepayment assumption will be applied
collectively to all of a taxpayer's investments in pools of debt instruments or
will be applied on an investment-by-investment basis. Similarly, it is not
clear whether the assumed prepayment rate is to be determined at the time of
the first sale of the Grantor Trust Fractional Interest Certificate or, with
respect to any holder, at the time of that holder's purchase of the Grantor
Trust Fractional Interest Certificate. Moreover, because the regulations under
1276(b)(3) referred to in the preceding 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.
Certificateholders should consult their own tax advisors concerning accrual of
market discount with respect to Grantor Trust Fractional Interest Certificates
and should refer to the related Prospectus Supplement with respect to each
Series to determine whether and in what manner the market discount will apply
to Mortgage Loans purchased at a market discount in such Series.
To the extent that the Mortgage Loans provide for periodic payments of
stated redemption price, market 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. 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", below.
Further, under the rules described in "--REMICs--Taxation of Owners of
REMIC Regular Certificates--Market Discount", any discount that is not original
issue discount and exceeds a de minimis amount may require the deferral of
interest expense deductions attributable to accrued market discount not yet
includible in income, unless an election has been made to report market
discount currently as it accrues. This rule applies without regard to the
origination dates of the Mortgage Loans.
In the absence of statutory or administrative clarification, it is
currently intended that information reports or returns to the IRS and
Certificateholders will be based on a prepayment assumption (the "Prepayment
Assumption") that is determined when Certificates are offered and sold
hereunder and that is disclosed in the related Prospectus Supplement. However,
neither the Depositor 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. See "--Grantor Trust Reporting", below.
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).
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It appears that a prepayment assumption should be used in computing
amortization of premium allowable under Section 171 of the Code, based on the
recent amendments to Section 1272(a)(6) of the Code that require the use of a
prepayment assumption with respect to original issue discount for debt
instruments, the yield on which may be affected by prepayments, and on the
Committee Report's extension of those rules to the accrual of market discount
and amortization of premium.
In the absence of statutory or administrative clarification, it is
currently intended that information reports or returns to the IRS and
Certificateholders will be based on a prepayment assumption (the "Prepayment
Assumption") that is determined when Certificates are offered and sold
hereunder and that is disclosed in the related Prospectus Supplement. However,
neither the Depositor 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. See "--Grantor Trust Reporting", below.
Taxation of Owners of Stripped Interest Certificates. The "stripped
coupon" rules of Section 1286 of the Code will apply to the Stripped Interest
Certificates. Except as described above in "--Taxation of Owners of Grantor
Trust Fractional Interest Certificates--If Stripped Bond Rules Apply", no
regulations or published rulings under Section 1286 of the Code have been
issued and some uncertainty exists as to how 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.
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. Under recent legislation extending
Section 1272(a)(6) to pools of debt instruments the yield on which may be
affected by prepayments, that method of prepayment would apply to Stripped
Interest Certificates. The precise application of the new legislation is
unclear in certain respects. For example, it is uncertain whether a prepayment
assumption will be applied collectively to all a taxpayer's investments in
pools of debt instruments or will be applied on an investment-by-investment
basis. Similarly, as to investments in Stripped Interest Certificates, it is
not clear whether the assumed prepayment rate is to be determined based on
conditions at the time of the first sale of the Stripped Interest Certificates
or, with respect to any holder, at the time of purchase of the Stripped
Interest Certificates 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 Stripped Interest Certificates.
The accrual of income on the Stripped Interest Certificates will be
significantly slower using a prepayment assumption 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. See "--Taxation of Owners of Grantor
Fractional Interest Certificates--If Stripped Bond Rules Apply", above.
Prospective purchasers of the Stripped Interest Certificates should consult
their own tax advisors regarding the use of the Prepayment Assumption.
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Sales of Grantor Trust Certificates. Any gain or loss, equal to the
difference between the amount realized on the sale or exchange of a Grantor
Trust Certificate and its adjusted basis, recognized on such sale or exchange
of a Grantor Trust Certificate by an investor who holds such Grantor Trust
Certificate as a capital asset, will be capital gain or loss, except to the
extent of accrued and unrecognized market discount, which will be treated as
ordinary income, and (in the case of banks and other financial institutions)
except as provided under Section 582(c) of the Code. The adjusted basis of a
Grantor Trust Certificate generally will equal its cost, increased by any
income reported by the seller (including original issue discount and market
discount income) and reduced (but not below zero) by any previously reported
losses, any amortized premium and by any distributions with respect to such
Grantor Trust Certificate. The Code as of the date of this Prospectus provides
for lower rates as to long-term capital gains, than those applicable to the
short-term capital gains and ordinary income realized or received by
individuals. 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.
On August 13, 1998, the Service published proposed regulations that would,
when effective, establish a reporting method for "widely held fixed investment
trusts" holding pools of debt instruments subject to Section 1272(a)(6), that
would be similar to the reporting method currently used for regular interests
in REMICs. A fixed investment trust, defined to include any entity classified
as a "trust" under Treasury Regulation 301.7701-4(c), is a "widely held" fixed
investment trust if any ownership interest in the trust is held by a middleman
(which includes, but is not limited to, a custodian holding of a person's
account, a nominee, and a broker holding an interest for a customer in street
name). These regulations are proposed to be effective for calendar years
beginning on or after the date that final regulations are published in the
Federal Register.
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.
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To the extent that interest on a Grantor Trust Certificate would be exempt
under Sections 871(h)(1) and 881(c) of the Code from United States withholding
tax, and the Grantor Trust Certificate is not held in connection with a
Certificateholder's trade or business in the United States, such Grantor Trust
Certificate will not be subject to U.S. estate taxes in the estate of
non-resident alien individual.
STATE AND OTHER TAX CONSEQUENCES
In addition to the federal income tax consequences described in "Material
Federal Income Tax Consequences", potential investors should consider the state
and local tax consequences of the acquisition, ownership, and disposition of
the Offered Certificates. State tax law may differ substantially from the
corresponding federal law, and the discussion above does not purport to
describe any aspect of the tax laws of any state or other jurisdiction.
Therefore, prospective investors should consult their own tax advisors with
respect to the various tax consequences of investments in the Offered
Certificates.
ERISA CONSIDERATIONS
GENERAL
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and the Code impose certain requirements on employee benefit plans, and on
certain other retirement plans and arrangements, including 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
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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
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
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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 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.
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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.
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 Salomon
Smith Barney Inc. and Citibank, N.A., each of which is an affiliate of the
Sponsor. Either 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 either 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 Salomon Smith Barney 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 Salomon Smith Barney 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. Salomon Smith
Barney Inc. or Citibank, N.A. may also purchase Offered Certificates acting as
principal.
On April 5, 1998, Citicorp, of which the Sponsor and Citibank N.A. are
wholly owned subsidiaries, and Travelers Group Inc., of which Salomon Smith
Barney Inc. is a wholly owned subsidiary, agreed to merge (the "Merger"). The
combined company is known as Citigroup Inc. The Merger was consummated on
October 8, 1998.
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
88
<PAGE>
enter into repurchase arrangements or secured lending arrangements with
institutions that may include Salomon Smith Barney 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.
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.
89
<PAGE>
INDEX OF PRINCIPAL TERMS
PAGE
----
Accrual Certificates .................................... 10, 33
ADA ..................................................... 62
ARM Loans ............................................... 24
Book-Entry Certificates ................................. 12, 32
Cash Flow Agreement ..................................... 9, 26
Cash Flow Agreements .................................... 1
CERCLA .................................................. 20, 59
Certificate Account ..................................... 8, 25, 41
Certificate Balance ..................................... 3, 10
Certificate Owner ....................................... 12, 37
Certificateholders ...................................... 2
Certificates ............................................ 7
Closing Date ............................................ 65
Code .................................................... 12, 63
Commercial Properties ................................... 7, 22
Commission .............................................. 3
Committee Report ........................................ 65
Companion Class ......................................... 11, 34
Condemnation Proceeds ................................... 42
Contributions Tax ....................................... 74
Controlled Amortization Class ........................... 11, 34
Cooperatives ............................................ 22
CPR ..................................................... 28
Credit Support .......................................... 1, 9, 25
Cut-off Date ............................................ 10
Definitive Certificate .................................. 12
Definitive Certificates ................................. 32, 38
Determination Date ...................................... 26, 32
Distribution Date ....................................... 10
Distribution Date Statement ............................. 35
DOL ..................................................... 85
DTC ..................................................... 3, 12, 32, 37
Due Dates ............................................... 24
Equity Participation .................................... 24
ERISA ................................................... 13, 85
Exchange Act ............................................ 4
FAMC .................................................... 8
FHLMC ................................................... 8
FNMA .................................................... 8
Garn Act ................................................ 61
GNMA .................................................... 8
Grantor Trust Certificates .............................. 12, 63
Grantor Trust Fractional Interest Certificates .......... 13
Grantor Trust Fund ...................................... 63
Indirect Participants ................................... 37
Insurance Proceeds ...................................... 42
IRS ..................................................... 65
Issue Premium ........................................... 70
90
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PAGE
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L/C Bank .............................. 54
Lender Liability Act .................. 60
Liquidation Proceeds .................. 42
Lock-out Date ......................... 24
Lock-out Period ....................... 24
Mark-to-Market Regulations ............ 72
Master Servicer ....................... 3, 7
MBS ................................... 1, 22
MBS Agreement ......................... 25
MBS Issuer ............................ 25
MBS Servicer .......................... 25
MBS Trustee ........................... 25
Mortgage Asset Pool ................... 1
Mortgage Asset Seller ................. 8, 22
Mortgage Assets ....................... 1, 22
Mortgage Loans ........................ 1, 7, 22
Mortgage Notes ........................ 22
Mortgage Rate ......................... 8, 24
Mortgaged Properties .................. 22
Mortgages ............................. 22
Multifamily Properties ................ 7, 22
Net Leases ............................ 23
New Regulations ....................... 77
Nonrecoverable Advance ................ 35
Notional Amount ....................... 10, 33
OCC ................................... 87
Offered Certificates .................. 1
OID Regulations ....................... 63
Originator ............................ 22
OTS ................................... 87
PAC ................................... 29
Participants .......................... 21, 32, 37
Parties in Interest ................... 85
Pass-Through Rate ..................... 3, 10
Permitted Investments ................. 41
Plans ................................. 85
Policy Statement ...................... 87
Pooling Agreement ..................... 9, 38
Prepayment Assumption ................. 65, 79, 81,
82, 83
Prepayment Interest Shortfall ......... 26
Prepayment Premium .................... 24
Prohibited Transactions Tax ........... 74
Prospectus Supplement ................. 1
Rating Agency ......................... 14
RCRA .................................. 60
Record Date ........................... 32
Related Proceeds ...................... 34
Relief Act ............................ 62
REMIC ................................. 2, 12, 63
91
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PAGE
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REMIC Administrator ..................... 3, 7
REMIC Certificates ...................... 63
REMIC Provisions ........................ 63
REMIC Regular Certificates .............. 12, 63
REMIC Regulations ....................... 63
REMIC Residual Certificates ............. 12, 63
REO Property ............................ 40
RICO .................................... 62
Securities Act .......................... 88
Senior Certificates ..................... 9, 32
Servicing Standard ...................... 40
SMMEA ................................... 86
SPA ..................................... 28
Special Servicer ........................ 3, 7
Sponsor ................................. 22
Stripped Interest Certificates .......... 9, 32
Stripped Principal Certificates ......... 9, 32
Subordinate Certificates ................ 9, 32
Sub-Servicer ............................ 41
Sub-Servicing Agreement ................. 41
TAC ..................................... 29
Tiered REMICs ........................... 64
Title V ................................. 61
Trust Assets ............................ 3
Trust Fund .............................. 1
Trustee ................................. 3, 7
UCC ..................................... 55
Voting Rights ........................... 36
Warranting Party ........................ 39
92
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This diskette contains a spreadsheet file that can be put on a
user-specified hard drive or network drive. The file is "MCF98s3.xls". The file
"MCF98s3.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>
================================================================================
TABLE OF CONTENTS
PAGE
----
PROSPECTUS SUPPLEMENT
Important Notice about the Information Contained in
this Prospectus Supplement and the Accompanying
Prospectus .............................................. S-3
Executive Summary ......................................... S-7
Summary of Prospectus Supplement .......................... S-8
Risk Factors .............................................. S-25
Description of the Mortgage Pool .......................... S-44
Servicing of the Mortgage Loans ........................... S-77
Description of the Offered Certificates ................... S-89
Yield and Maturity Considerations ......................... S-111
Use of Proceeds ........................................... S-120
Certain Federal Income Tax Consequences ................... S-120
Certain ERISA Considerations .............................. S-123
Legal Investment .......................................... S-126
Method of Distribution .................................... S-127
Legal Matters ............................................. S-127
Ratings ................................................... S-128
Index of Principal Definitions ............................ S-130
ANNEX A -- Certain Characteristics of the
Mortgage Loans .......................................... A-1
ANNEX B -- Trustee Report ................................. B-1
ANNEX C -- Term Sheet ..................................... C-1
PROSPECTUS
Prospectus Supplement ..................................... 3
Available Information ..................................... 3
Incorporation of Certain Information by Reference ......... 4
Summary of Prospectus ..................................... 7
Risk Factors .............................................. 15
Description of the Trust Funds ............................ 22
Yield and Maturity Considerations ......................... 26
Mortgage Capital Funding, Inc. ............................ 31
Use of Proceeds ........................................... 31
Description of the Certificates ........................... 32
Description of the Pooling Agreements ..................... 38
Description of Credit Support ............................. 53
Certain Legal Aspects of Mortgage Loans ................... 55
Material Federal Income Tax Consequences .................. 62
State and Other Tax Consequences .......................... 85
ERISA Considerations ...................................... 85
Legal Investment .......................................... 86
Method of Distribution .................................... 87
Financial Information ..................................... 89
Rating .................................................... 89
Index of Principal Definitions ............................ 90
UNTIL MARCH, 1999, ALL DEALERS THAT EFFECT TRANSACTIONS IN THE OFFERED
CERTIFICATES, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO
DELIVER A PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH
RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
================================================================================
================================================================================
$805,992,000
(APPROXIMATE)
MORTGAGE CAPITAL
FUNDING, INC.
(SPONSOR)
SALOMON BROTHERS REALTY CORP.
AND
CITICORP REAL ESTATE, INC.
(MORTGAGE LOAN SELLERS)
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 1998-MC3
-------------------------------
PROSPECTUS SUPPLEMENT
DECEMBER , 1998
-------------------------------
SALOMON SMITH BARNEY
================================================================================
