<PAGE>
Filed Pursuant to Rule 424(b)(3)
Registration File No.: 333-61783
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES, NOR WILL WE ACCEPT OFFERS TO BUY
THESE SECURITIES, PRIOR TO THE TIME A FINAL PROSPECTUS SUPPLEMENT IS 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 SEPTEMBER 20, 2000
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED SEPTEMBER 20, 2000)
APPROXIMATELY $793,450,000
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2000-WF2
CLASSES A-1, A-2, X, B, C, D, E AND F
BEAR STEARNS COMMERCIAL MORTGAGE SECURITIES INC., DEPOSITOR
SERIES 2000-WF2 TRUST FUND, ISSUER
WELLS FARGO BANK, NATIONAL ASSOCIATION, SERVICER AND SELLER
BEAR, STEARNS FUNDING, INC., SELLER
MORGAN STANLEY DEAN WITTER MORTGAGE CAPITAL INC., SELLER
YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS BEGINNING ON PAGE S-31 OF
THIS PROSPECTUS SUPPLEMENT AND ON PAGE 8 IN THE ACCOMPANYING PROSPECTUS
PRIOR TO INVESTING IN THE OFFERED CERTIFICATES.
Payments on the mortgage loans backing these securities represent the sole
source of payment on these securities. These securities do not represent an
interest in or an obligation of us or any of our affiliates.
Neither these securities nor the underlying mortgage loans are insured or
guaranteed by any governmental agency or any other person.
THE TRUST FUND:
o The trust fund will primarily consist of a pool of conventional commercial
mortgage loans.
o The mortgage loans are secured by first priority liens on fee simple and/or
leasehold interests in commercial, multifamily and manufactured housing
community properties.
o Office, retail, industrial, manufactured housing community and multifamily
properties will represent security for material concentrations of the
mortgage loans included in the trust fund.
THE OFFERED CERTIFICATES:
o The offered certificates consist of eight classes of pass-through
certificates described in the table below. The offered certificates are
the only securities offered pursuant to this prospectus supplement and the
accompanying prospectus.
<TABLE>
<CAPTION>
INITIAL CLASS
CERTIFICATE
BALANCE OR EXPECTED
NOTIONAL INITIAL DESCRIPTION OF FINAL RATED FINAL ANTICIPATED
AMOUNT PASS-THROUGH PASS-THROUGH DISTRIBUTION DISTRIBUTION RATINGS(3)
CLASS (+/--5%) RATE(1) RATE DATE(2) DATE(2) FITCH S&P
<S> <C> <C> <C> <C> <C> <C> <C>
Class A-1 .. $170,728,000 % Fixed September 15, 2009 October 15, 2032 AAA AAA
Class A-2 .. $529,432,000 % Fixed August 15, 2010 October 15, 2032 AAA AAA
Class X .... $838,510,239 % Variable June 15, 2020 October 15, 2032 AAA AAA
Class B .... $ 28,300,000 % Fixed September 15, 2010 October 15, 2032 AA AA
Class C .... $ 26,200,000 % Fixed September 15, 2010 October 15, 2032 A A
Class D .... $ 8,390,000 % Fixed September 15, 2010 October 15, 2032 A- A-
Class E .... $ 23,060,000 % Variable June 15, 2011 October 15, 2032 BBB BBB
Class F .... $ 7,340,000 % Variable October 15, 2012 October 15, 2032 BBB- BBB-
</TABLE>
(1) The pass-through rates for the offered certificates will be determined in
accordance with the method described under "Description of the
Certificates--Distributions--Pass-Through Rates" in this prospectus
supplement.
(2) For a description of the assumptions and methods used to determine these
dates, see "Description of the Certificates--Distributions--
Expected Final Distribution Date; Rated Final Distribution Date" in this
prospectus supplement.
(3) See "Ratings" in this prospectus supplement.
---------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE OFFERED CERTIFICATES OR
DETERMINED WHETHER THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IS
ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
We expect that Bear Stearns Commercial Mortgage Securities Inc. will sell
the offered certificates to the underwriters listed below on or about October
5, 2000 and that they will sell the offered certificates from time to time in
negotiated transactions or otherwise at varying prices to be determined at the
time of sale. Bear, Stearns & Co. Inc. and Morgan Stanley & Co. Incorporated
will act as co-lead and joint book-running managers.
BEAR, STEARNS & CO. INC. MORGAN STANLEY DEAN WITTER
WELLS FARGO BROKERAGE SERVICES, L.L.C.
September , 2000
<PAGE>
THE PHOTOGRAPHS OF THE MORTGAGED PROPERTIES INCLUDED IN THIS
PROSPECTUS SUPPLEMENT ARE NOT REPRESENTATIVE OF ALL OF THE MORTGAGED
PROPERTIES OR OF ANY PARTICULAR TYPE OF MORTGAGED PROPERTY.
---------------------
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
We tell you about the offered certificates in two separate documents that
progressively provide more detail. These documents are:
o the prospectus, which provides general information, some of which may
not apply to a particular series of certificates, including your series;
and
o this prospectus supplement, which describes the specific terms of your
series of certificates.
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 cross-referenced sections are located.
YOU MAY FIND THE DEFINITIONS OF CAPITALIZED TERMS THAT ARE USED IN THIS
PROSPECTUS SUPPLEMENT BEGINNING ON PAGE S-131 UNDER THE CAPTION "GLOSSARY" AND
UNDER THE CAPTION "GLOSSARY" BEGINNING ON PAGE 115 OF THE PROSPECTUS.
---------------------
The principal offices of Bear Stearns Commercial Mortgage Securities Inc.
(the "depositor," "we" or "us") are located at 245 Park Avenue, New York, New
York 10167 and its telephone number is (212) 272-2000.
S-3
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
CERTIFICATE SUMMARY ............................ S-5
SUMMARY OF
SUBORDINATION LEVELS ........................ S-6
SUMMARY OF PROSPECTUS
SUPPLEMENT .................................. S-7
General ..................................... S-7
The Mortgage Pool ........................... S-9
The Certificates .............................. S-17
RISK FACTORS ................................... S-31
Risk Factors Relating to the
Certificates ............................. S-31
Risk Factors Relating to the
Mortgage Loans ........................... S-37
FORWARD LOOKING
STATEMENTS .................................. S-55
DESCRIPTION OF THE
MORTGAGE POOL ............................... S-56
General ..................................... S-56
Additional Debt ............................. S-57
The ARD Loan ................................ S-57
The Pari Passu Loans ........................ S-57
Certain Payment Characteristics ............. S-58
Yield Maintenance, Prepayment
and Lockout Provisions ................... S-59
Defeasance .................................. S-61
Substitution ................................ S-61
Other Property Releases ..................... S-61
"Due-On-Sale" and
"Due-On-Encumbrance"
Provisions; Assumptions .................. S-62
Recent Payment History ...................... S-63
Environmental Insurance ..................... S-63
Additional Mortgage Loan
Information .............................. S-63
Ten Largest Mortgage Loans .................. S-76
Underwritten Cash Flow ...................... S-76
Assessments of Property
Condition ................................ S-77
The Mortgage Loan Sellers ................... S-78
Representations and Warranties;
Repurchases .............................. S-79
Mortgaged Property Accounts ................. S-82
Underwriting Standards ...................... S-83
Changes in Mortgage Pool
Characteristics .......................... S-83
DESCRIPTION OF THE
CERTIFICATES ................................ S-84
General ..................................... S-84
Book-Entry Registration and
Definitive Certificates .................. S-85
Distributions ............................... S-86
Subordination; Allocation of
Losses, Shortfalls and Expenses .......... S-95
Advances .................................... S-96
</TABLE>
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Appraisal Reductions ........................ S-98
Reports to Certificateholders;
Certain Available Information ............ S-99
Optional Termination; Retirement
of Certificates .......................... S-102
Treatment of REO Properties ................. S-102
The Trustee ................................. S-103
The Fiscal Agent ............................ S-103
The Paying Agent, Certificate
Registrar and Authenticating
Agent .................................... S-103
YIELD AND MATURITY
CONSIDERATIONS .............................. S-104
Yield Considerations ........................ S-104
Yield Sensitivity of the Class X
Certificates ............................. S-107
Weighted Average Life ....................... S-108
SERVICING OF THE
MORTGAGE LOANS .............................. S-113
General ..................................... S-113
The Servicer ................................ S-115
Servicer Events of Default .................. S-116
Rights Upon Servicer Event of
Default .................................. S-116
The Special Servicer ........................ S-117
Termination of the Special
Servicer ................................. S-118
The Operating Advisor ....................... S-118
Servicing and Other Compensation
and Payment of Expenses .................. S-119
Modifications, Waivers and
Amendments ............................... S-120
Realization Upon Defaulted
Mortgage Loans ........................... S-121
Foreclosures ................................ S-122
MATERIAL FEDERAL INCOME
TAX CONSEQUENCES ............................ S-123
METHOD OF DISTRIBUTION ......................... S-124
LEGAL MATTERS .................................. S-125
RATINGS ........................................ S-125
LEGAL INVESTMENT
CONSIDERATIONS .............................. S-126
ERISA CONSIDERATIONS ........................... S-126
GLOSSARY ....................................... S-131
Annex A -- Characteristics of the
Mortgage Loans and Mortgaged
Properties .................................. A-1
Annex B -- Summary of Ten Largest
Loans ....................................... B-1
Annex C -- Form of Distribution
Date Statement and Operating
Statement Analysis Report ................... C-1
</TABLE>
S-4
<PAGE>
CERTIFICATE SUMMARY
<TABLE>
<CAPTION>
INITIAL
AGGREGATE WEIGHTED
CERTIFICATE CLASS AVERAGE PRINCIPAL OR
RATINGS BALANCE OR SIZE AS PASS-THROUGH INITIAL LIFE NOTIONAL
-------------------- NOTIONAL % OF RATE PASS-THROUGH (APPROX. PRINCIPAL
CLASS FITCH(1) S&P(2) AMOUNT TOTAL DESCRIPTION RATE YEARS)(6) WINDOW(6)
(+/-5%)
-------- ---------- -------- --------------- ----------- -------------- -------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Senior Classes
--------------------------------------------------------------------------------------------------------------------------
A-1 AAA AAA $170,728,000 20.36% Fixed % 5.75 11/00-9/09
A-2 AAA AAA $529,432,000 63.14% Fixed % 9.61 9/09-8/10
X AAA AAA $838,510,239 N/A Variable(3) %(5) 9.17 11/00-6/20
Subordinate Classes
--------------------------------------------------------------------------------------------------------------------------
B AA AA $ 28,300,000 3.375% Fixed % 9.88 8/10-9/10
C A A $ 26,200,000 3.125% Fixed % 9.94 9/10-9/10
D A- A- $ 8,390,000 1.00% Fixed % 9.94 9/10-9/10
E BBB BBB $ 23,060,000 2.75% Variable % 10.22 9/10-6/11
F BBB- BBB- $ 7,340,000 0.875% Variable % 11.25 6/11-10/12
G Not Offered $ 1,050,000 0.125% Fixed % 12.11 10/12-12/12
H Not Offered $ 14,670,000 1.75% Fixed % 13.49 12/12-4/15
I Not Offered $ 6,290,000 0.75% Fixed % 14.74 4/15-7/15
J Not Offered $ 6,290,000 0.75% Fixed % 14.83 7/15-8/15
K Not Offered $ 2,100,000 0.25% Fixed % 14.87 8/15-9/15
L Not Offered $ 4,190,000 0.50% Fixed % 15.00 9/15-3/16
M Not Offered $ 2,100,000 0.25% Fixed % 15.97 3/16-4/17
N Not Offered $ 8,370,239 1.00% Fixed % 18.33 4/17-6/20
Residual Classes
--------------------------------------------------------------------------------------------------------------------------
R-I Not Offered N/A N/A N/A N/A N/A N/A
R-II Not Offered N/A N/A N/A N/A N/A N/A
R-III Not Offered N/A N/A N/A N/A N/A N/A
</TABLE>
(1) Fitch, Inc. ("Fitch").
(2) Standard & Poor's Ratings Services, a division of The McGraw-Hill
Companies, Inc. ("S&P").
(3) The Class X Certificates are interest-only certificates. Class X
Certificateholders will not receive any principal. However, they will be
entitled to receive interest that accrues on a notional amount that will
be equal to the aggregate of the Scheduled Principal Balances (as defined
in this prospectus supplement) of the mortgage loans outstanding from
time to time.
(4) The pass-through rates of the Class A-1, Class A-2, Class B, Class C and
Class D Certificates will be the indicated fixed rate per annum or, if a
lower rate, the weighted average of the respective non-default interest
rates (each net of the related Administrative Cost Rate) of the mortgage
loans in the mortgage pool, each of which interest rates will be
calculated (for this purpose) by making the adjustments described herein
and without taking into account any reduction in the interest rate
resulting from a modification of the mortgage loan or otherwise following
the date of initial issuance of the certificates (such weighted average
for any Distribution Date, the "NWAC Rate"). The pass-through rate of the
Class E and Class F Certificates set forth in the table above are the
initial pass-through rates for those classes. For interest accrual
periods relating to each Distribution Date (as defined in this prospectus
supplement) after November 15, 2000, the pass-through rate of the Class E
Certificates will be the NWAC Rate for that Distribution Date minus %
per annum, and the pass-through rate of the Class F Certificates will be
a per annum rate equal to the NWAC Rate for that Distribution Date. For
purposes of the NWAC Rate for any Distribution Date after November 15,
2000, the non-default interest rates described above will be weighted
according to the Scheduled Principal Balances of the mortgage loans in
effect as of the close of business on the immediately preceding
Distribution Date.
(5) Approximate initial pass-through rate. The Class X pass-through rate with
respect to any Distribution Date after November 15, 2000 will be equal to
the excess, if any, of:
o the weighted average of the respective non-default interest rates
(each net of the related Administrative Cost Rate), of the mortgage
loans in the trust fund, each of which interest rates will be
calculated (for this purpose) by making the adjustments described
herein and taking into account any reduction to the interest rate
resulting from a modification of the mortgage loan or otherwise
following the date of initial issuance of the certificates, over
o the weighted average of the pass-through rates of the classes of
certificates that have certificate principal balances.
For purposes of the pass-through rate of the Class X Certificates for any
Distribution Date after November 15, 2000, the non-default interest rates
described above will be weighted according to the Scheduled Principal
Balances of the mortgage loans in effect as of the close of business on the
immediately preceding Distribution Date.
S-5
<PAGE>
(6) The weighted average life and the period during which distributions of
principal (or, for the Class X Certificates, reductions in the notional
amount) are scheduled to occur have been calculated using assumptions set
forth under "Yield and Maturity Considerations--Weighted Average Life" in
this prospectus supplement and assuming that there are no delinquencies,
defaults, modifications (including extensions of maturity dates), losses
or prepayments on or in respect of the mortgage loans (other than the
prepayment in full of the ARD Loan on its Anticipated Repayment Dates,
each term as defined in this prospectus supplement) and further assuming
a number of other circumstances that we describe in this prospectus
supplement.
---------------------
SUMMARY OF SUBORDINATION LEVELS
Credit support for the certificates, other than the Class M Certificates,
is provided by the sequential payment of interest and principal to those
classes (including reimbursement of losses allocated to those classes) in order
of (other than with respect to the Class X Certificates) their alphabetical
designations, and by the subordination of other classes to those classes in
respect of the allocation of losses and shortfalls experienced on the assets of
the trust fund (generally in reverse sequential order), as described more fully
in this prospectus supplement. The following chart summarizes the protection
afforded to each class of certificates by the initial principal amount of other
classes, if any, that are subordinate to that class.
<TABLE>
<CAPTION>
CLASS SIZE AS A
PRINCIPAL AND INITIAL RATINGS PERCENTAGE
APPROXIMATE INITIAL INTEREST-ONLY INTEREST CERTIFICATE OF INITIAL POOL
CREDIT SUPPORT CERTIFICATES CERTIFICATES BALANCE(+/-5%) FITCH S&P BALANCE(1)
------------ ------------ -------------- ----- --- ----------
<S> <C> <C> <C> <C> <C> <C>
16.50% Class A-1 $170,728,000 AAA AAA 20.36%
16.50% Class A-2 $529,432,000 AAA AAA 63.14%
13.125% Class B $ 28,300,000 AA AA 3.375%
10.00% Class C $ 26,200,000 A A 3.125%
9.00% Class D $ 8,390,000 A- A- 1.00%
6.25% Class X Class E $ 23,060,000 BBB BBB 2.75%
5.375% (AAA/AAA) Class F $ 7,340,000 BBB- BBB- 0.875%
5.25% $838,510,239 Class G $ 1,050,000 Not Offered 0.125%
3.50% Initial Notional Class H $ 14,670,000 Not Offered 1.75%
2.75% Amount Class I $ 6,290,000 Not Offered 0.75%
2.00% (+/-5%) Class J $ 6,290,000 Not Offered 0.75%
1.75% Class K $ 2,100,000 Not Offered 0.25%
1.25% Class L $ 4,190,000 Not Offered 0.50%
1.00% Class M $ 2,100,000 Not Offered 0.25%
N/A Class N $ 8,370,329 Not Offered 1.00%
</TABLE>
----------
(1) Initial pool balance means the aggregate of the Scheduled Principal
Balances of the mortgage loans as of October 1, 2000.
S-6
<PAGE>
SUMMARY OF PROSPECTUS SUPPLEMENT
THIS SUMMARY PRESENTS SELECTED INFORMATION FROM THIS PROSPECTUS
SUPPLEMENT. IT DOES NOT CONTAIN ALL OF THE INFORMATION YOU NEET TO CONSIDER IN
MAKING YOUR INVESTMENT DECISION. TO UNDERSTAND ALL OF THE TERMS OF THE OFFERING
OF THE OFFERED CERTIFICATES, YOU SHOULD READ THIS ENTIRE PROSPECTUS SUPPLEMENT
AND THE ACCOMPANYING PROSPECTUS CAREFULLY.
GENERAL
Title of Certificates....... Bear Stearns Commercial Mortgage Securities
Inc., Commercial Mortgage Pass-Through
Certificates, Series 2000-WF2. The certificates
will be issued in nineteen classes, designated as
the Class A-1, Class A-2, Class X, Class B, Class
C, Class D, Class E, Class F, Class G, Class H,
Class I, Class J, Class K, Class L, Class M,
Class N, Class R-I, Class R-II and Class R-III
Certificates. Only the Class A-1, Class A-2,
Class X, Class B, Class C, Class D, Class E and
Class F Certificates are offered by this
prospectus supplement.
Cut-Off Date................ October 1, 2000.
Closing Date................ On or about October 5, 2000.
Distribution Date........... The 15th day of each month, or if the 15th day
is not a business day then the next succeeding
business day, beginning on November 15, 2000.
Collection Period........... For each distribution date, the period
beginning with the day after the determination
date in the month preceding the month of
distribution (or, in the case of the first
distribution date, the cut-off date) and ending
on the determination date occurring in the month
in which the distribution date occurs. For each
distribution date, the determination date is the
fifth business day prior to that distribution
date.
Registration of the Offered
Certificates............... Each class of offered certificates will be
represented by one or more global certificates
registered in the name of Cede & Co., as nominee
of DTC. You may hold your offered certificates
through (i) DTC in the United States or (ii)
Clearstream Banking, societe anonyme or The
Euroclear System in Europe. If you are acquiring
an interest in any class of offered certificates
you will not be entitled to receive your
certificate in fully registered, certificated
form, except under the limited circumstances
described under "Description of the
Certificates--Book-Entry Registration and
Definitive Certificates" in the prospectus.
Denominations............... You may hold and trade the Class A-1 and Class
A-2 Certificates only in minimum denominations of
$25,000. You may hold and trade the Class X
Certificates only in minimum denominations of
$1,000,000 (notional amount). The
S-7
<PAGE>
remaining offered certificates will be offered
in minimum denominations of $100,000.
Investments in excess of the minimum
denominations may be made in any whole dollar
denomination in excess thereof.
Relevant Parties............ Depositor. Our name is Bear Stearns Commercial
Mortgage Securities Inc. and we are a Delaware
corporation. We will purchase the mortgage loans
from the mortgage loan sellers and deposit the
mortgage loans into the trust fund.
Servicer. Wells Fargo Bank, National
Association, a national banking association, is
the servicer of the mortgage loans for the
certificateholders.
Special Servicer. GMAC Commercial Mortgage
Corporation, a California corporation, is the
special servicer of the mortgage loans for the
certificateholders.
Trustee. LaSalle Bank National Association, a
nationally chartered bank, is the trustee for
the certificateholders.
Fiscal Agent. ABN AMRO Bank N.V., a Netherlands
banking corporation, is the trustee's fiscal
agent.
Paying Agent. Wells Fargo Bank Minnesota, N.A.,
a national banking association, is the paying
agent and will also act as certificate registrar
and authenticating agent.
Operating Advisor. The holders of certificates
representing more than 50% of the certificate
balance of the most subordinate class of
certificates outstanding at any time of
determination (or if the certificate balance of
that class of certificates is less than 25% of
its initial certificate balance, the next most
subordinate class of certificates) may appoint a
representative who will have the rights
described under "Servicing of the Mortgage
Loans--The Operating Advisor" in this prospectus
supplement.
Mortgage Loan Sellers. The mortgage loan sellers
are identified under "--The Mortgage
Pool--Mortgage Loan Sellers" below and
"Description of the Mortgage Pool--The Mortgage
Loan Sellers" in this prospectus supplement.
Underwriters. Bear, Stearns & Co. Inc., Morgan
Stanley & Co. Incorporated and Wells Fargo
Brokerage Services, L.L.C. are the underwriters
with respect to this offering of certificates.
Bear, Stearns & Co. Inc. and Morgan Stanley &
Co. Incorporated will act as co-lead and joint
book-running managers.
S-8
<PAGE>
THE MORTGAGE POOL
Characteristics of the
Mortgage Pool.............. The mortgage pool will consist of conventional
commercial mortgage loans. Each mortgage loan in
the mortgage pool is secured by a first mortgage
lien on a fee simple estate and/or a leasehold
estate on one or more commercial, multifamily or
manufactured housing community properties. Except
as described below, each mortgage loan requires
scheduled payments of principal and/or interest
to be made monthly. One mortgage loan requires
scheduled payments of principal and interest to
be made semiannually and the servicer will be
required to make advances of interest on that
mortgage loan in each month in which a scheduled
payment is not due. Without regard to grace
periods, scheduled payments under the mortgage
loans are due on the first day of each month (in
the case of mortgage loans that require monthly
payments) or the first day of every February and
August (in the case of the mortgage loan that
requires semiannual payments). We refer to the
date when scheduled payments are due under a
mortgage loan (without regard to grace periods)
as the "due date" for that mortgage loan.
Most of the mortgage loans provide for payments
of principal based on amortization schedules
that are significantly longer than the remaining
terms of the mortgage loans in the mortgage
pool. Those mortgage loans will have a
substantial principal amount due and payable on
their respective maturity dates, unless they are
prepaid prior to those maturity dates.
The following tables set forth some of the
anticipated characteristics of the mortgage
loans as of the cut-off date. We prepared these
tables using the assumptions described in this
prospectus supplement under "Description of the
Mortgage Pool--Additional Mortgage Loan
Information." The sum in any column may not
equal the indicated total due to rounding.
S-9
<PAGE>
SUMMARY OF THE MORTGAGE POOL
<TABLE>
<S> <C>
Initial Pool Balance ....................... $838,510,239
Number of Mortgage Loans ................... 145
Number of Mortgaged Properties ............. 184
Number of Balloon Loans/ARD Loans .......... 122(1)
Balloon Loans/ARD Loans as a Percentage
of the Initial Pool Balance ................ 89.5%(1)
Number of Fully-Amortizing Loans ........... 23(2)
Fully Amortizing Loans as a Percentage of
the Initial Pool Balance ................... 10.5%
Average Cut-Off Date Balance ............... $5,782,829
Weighted Average Net Mortgage Rate ......... 8.1957%
Weighted Average Original Term to
Maturity ................................... 27 months(3)
Weighted Average Remaining Term to
Maturity ................................... 22 months(3)
Weighted Average Original Amortization
Term ....................................... 320 months
Weighted Average DSCR as of the Cut-Off
Date ....................................... 1.52x(4)
Weighted Average LTV Ratio as of the
Cut-Off Date ............................... 60.7%(4)
Weighted Average LTV Ratio as of
Maturity ................................... 48.1%(4)
Weighted Average Current Occupancy Rate
for Commercial (excluding the Hotel
Property), Multifamily and Manufactured
Housing Community Properties ............... 96.8%
Current Occupancy Rate for the Hotel
Property ................................... 73.9%
</TABLE>
(1) The "Trolley Square" mortgage loan
described in Annex B is an "ARD Loan" (as
defined in the Glossary to this prospectus
supplement). For purposes of the tables
and descriptions in this prospectus
supplement, the ARD Loan is treated as a
Balloon Loan (as defined in the Glossary
to this prospectus supplement) with a
maturity date on the same date as its
Anticipated Repayment Date (as defined in
the Glossary to this prospectus
supplement).
(2) Substantially all of the mortgage loans
identified as "fully-amortizing" provide
for the accrual of interest on the basis
of the actual number of days in each
payment period and a year assumed to
consist of 360 days. As a result, the
scheduled payments due on the maturity
dates for those mortgage loans will be
greater than the other scheduled payments
for those mortgage loans.
(3) The "maturity" or "maturity date" of a
mortgage loan, as used in this prospectus
supplement with respect to any mortgage
loan other than the ARD Loan, refers to
S-10
<PAGE>
the stated maturity of the mortgage loan
and, in the case of the ARD Loan, refers to
its Anticipated Repayment Date.
(4) "DSCR" and "LTV Ratio" are calculated as
described in the Glossary to this
prospectus supplement.
See "Risk Factors" and "Description of the
Mortgage Pool--Additional Mortgage Loan
Information" in this prospectus supplement.
GEOGRAPHIC DISTRIBUTION OF MORTGAGED PROPERTIES
<TABLE>
<CAPTION>
AGGREGATE % OF
CUT-OFF INITIAL
NUMBER OF DATE POOL
STATE PROPERTIES BALANCE BALANCE
--------------------------------- ------------ --------------- -----------
<S> <C> <C> <C>
California (Northern) ......... 32 $150,206,730 17.91%
California (Southern) ......... 29 134,917,756 16.09
Florida ....................... 8 87,581,689 10.44
Texas ......................... 17 73,532,885 8.77
Illinois ...................... 3 55,409,499 6.61
New York ...................... 12 46,464,775 5.54
30 other states (including the
District of Columbia) ......... 83 290,396,905 34.63
-- ------------ ------
Totals ........................ 184 $838,510,239 100.00%
=== ============ ======
</TABLE>
PROPERTY TYPE
<TABLE>
<CAPTION>
AGGREGATE % OF
CUT-OFF INITIAL
NUMBER OF DATE POOL
PROPERTY TYPE PROPERTIES BALANCE BALANCE
-------------------------------- ------------ --------------- -----------
<S> <C> <C> <C>
Office ....................... 32 $204,686,175 24.41%
Retail ....................... 48 202,280,240 24.12
Industrial/Warehouse ......... 44 138,669,675 16.54
Manufactured Housing
Community .................. 8 113,645,742 13.55
Multifamily .................. 23 93,231,526 11.12
Self-Storage ................. 24 41,076,723 4.90
Hospitality .................. 1 17,797,958 2.12
Theater ...................... 1 17,770,862 2.12
Mixed Use .................... 1 4,343,178 0.52
Land Subject to Ground Lease . 1 2,019,898 0.24
Other ........................ 1 2,988,263 0.36
-- ------------ ------
Totals ....................... 184 $838,510,239 100.00%
=== ============ ======
</TABLE>
S-11
<PAGE>
RANGE OF CUT-OFF DATE BALANCES
<TABLE>
<CAPTION>
AGGREGATE % OF
CUT-OFF INITIAL
RANGE OF NUMBER NUMBER OF DATE POOL
CUT-OFF DATE BALANCES OF LOANS PROPERTIES BALANCE BALANCE
----------------------------- ---------- ------------ --------------- ----------
<S> <C> <C> <C> <C>
$ 0 to $ 999,999 11 11 $ 9,351,620 1.12%
$ 1,000,000 to $ 1,999,999 43 49 67,311,278 8.03
$ 2,000,000 to $ 3,999,999 35 36 103,296,065 12.32
$ 4,000,000 to $ 5,999,999 20 20 95,435,956 11.38
$ 6,000,000 to $ 7,999,999 7 10 48,920,383 5.83
$ 8,000,000 to $ 9,999,999 10 13 89,826,434 10.71
$10,000,000 to $11,999,999 2 3 22,226,388 2.65
$12,000,000 to $13,999,999 5 6 65,662,089 7.83
$14,000,000 to $15,999,999 2 3 30,871,858 3.68
$16,000,000 to $17,999,999 2 2 35,568,820 4.24
$18,000,000 to $19,999,999 2 2 36,294,057 4.33
$20,000,000 to $24,999,999 1 1 21,157,357 2.52
$25,000,000 to $26,999,999 1 1 25,406,203 3.03
$27,000,000 to $59,999,999 3 21 93,254,583 11.12
$93,927,147 ............... 1 6 93,927,147 11.20
-- -- ------------ ------
Totals .................... 145 184 $838,510,239 100.00%
=== === ============ ======
</TABLE>
The average cut-off date balance is $5,782,829.
RANGE OF DSCRS AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
AGGREGATE % OF
RANGE OF CUT-OFF INITIAL
DEBT SERVICE NUMBER NUMBER OF DATE POOL
COVERAGE RATIOS OF LOANS PROPERTIES BALANCE BALANCE
-------------------------- ---------- ------------ --------------- ----------
<S> <C> <C> <C> <C>
1.14x .................. 1 1 $ 2,374,447 0.28%
1.15x to 1.19x ......... 3 3 15,707,554 1.87
1.20x to 1.24x ......... 3 3 11,590,656 1.38
1.25x to 1.29x ......... 12 12 59,486,149 7.09
1.30x to 1.34x ......... 19 25 114,118,364 13.61
1.35x to 1.39x ......... 16 21 52,613,267 6.27
1.40x to 1.44x ......... 27 50 241,150,608 28.76
1.45x to 1.49x ......... 10 11 58,901,577 7.02
1.50x to 1.59x ......... 11 13 51,046,840 6.09
1.60x to 1.69x ......... 9 11 40,972,556 4.89
1.70x to 1.79x ......... 8 8 55,714,594 6.64
1.80x to 1.89x ......... 9 9 44,190,685 5.27
1.90x to 1.99x ......... 4 4 24,253,658 2.89
2.00x to 2.49x ......... 11 11 64,098,612 7.64
2.50x to 2.99x ......... 1 1 998,427 0.12
3.49x .................. 1 1 1,292,247 0.15
-- -- ------------ ------
Totals ................. 145 184 $838,510,239 100.00%
=== === ============ ======
</TABLE>
The weighted average DSCR as of the cut-off date is approximately 1.52x.
S-12
<PAGE>
RANGE OF LTV RATIOS AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
AGGREGATE % OF
RANGE OF CUT-OFF INITIAL
CUT-OFF DATE NUMBER NUMBER OF DATE POOL
LTV RATIOS OF LOANS PROPERTIES BALANCE BALANCE
---------------------------- ---------- ------------ --------------- ----------
<S> <C> <C> <C> <C>
25.84% ................... 1 1 $ 1,292,247 0.15%
30.01% to 40.00% ......... 12 13 32,378,523 3.86
40.01% to 45.00% ......... 8 10 40,001,697 4.77
45.01% to 50.00% ......... 12 12 69,790,416 8.32
50.01% to 55.00% ......... 15 18 81,640,308 9.74
55.01% to 60.00% ......... 19 20 101,547,572 12.11
60.01% to 65.00% ......... 19 30 188,432,532 22.47
65.01% to 70.00% ......... 27 45 187,560,785 22.37
70.01% to 75.00% ......... 25 25 105,355,009 12.56
75.01% to 80.00% ......... 7 10 30,511,151 3.64
-- -- ------------ ------
Totals ................... 145 184 $838,510,239 100.00%
=== === ============ ======
</TABLE>
The weighted average LTV Ratio as of the cut-off date is approximately 60.7%.
RANGE OF REMAINING TERMS TO MATURITY
AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
AGGREGATE % OF
CUT-OFF INITIAL
RANGE OF NUMBER NUMBER OF DATE POOL
REMAINING TERMS (MOS.) OF LOANS PROPERTIES BALANCE BALANCE
------------------------ ---------- ------------ -------------- ----------
<S> <C> <C> <C> <C>
81 ................... 1 2 $ 11,984,978 1.43%
101 to 120 ........... 116 149 735,961,490 87.77
121 to 140 ........... 1 1 8,000,000 0.95
161 to 180 ........... 19 24 55,929,261 6.67
181 to 237 ........... 8 8 26,634,511 3.18
--- --- ------------ ------
Totals ............... 145 184 $838,510,239 100.00%
=== === ============ ======
</TABLE>
The weighted average remaining term to
maturity as of the cut-off date is
approximately 122 months.
S-13
<PAGE>
RANGE OF MORTGAGE RATES AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
AGGREGATE % OF
CUT-OFF INITIAL
RANGE OF NUMBER NUMBER OF DATE POOL
MORTGAGE RATES OF LOANS PROPERTIES BALANCE BALANCE
------------------------------ ---------- ------------ -------------- ----------
<S> <C> <C> <C> <C>
7.2501% to 7.5000% ......... 2 2 $ 10,889,617 1.30%
7.5001% to 7.7500% ......... 8 8 37,411,790 4.46
7.7501% to 8.0000% ......... 24 31 250,533,278 29.88
8.0001% to 8.5000% ......... 69 74 293,371,964 34.99
8.5001% to 9.0000% ......... 38 60 210,518,300 25.11
9.0001% to 9.5000% ......... 4 9 35,785,291 4.27
-- -- ------------ ------
Totals ..................... 145 184 $838,510,239 100.00%
=== === ============ ======
</TABLE>
The weighted average mortgage rate as of the
cut-off date is approximately 8.2490%.
SUMMARY OF CALL PROTECTION
<TABLE>
<CAPTION>
AGGREGATE % OF
CUT-OFF INITIAL
NUMBER DATE POOL
CALL PROTECTION OF LOANS BALANCE BALANCE
--------------------------------------- ---------- --------------- -----------
<S> <C> <C> <C>
Lockout through maturity date 42 $301,410,676 35.95%
Lockout to six (6) months or
less prior to maturity date ......... 97 505,256,719 60.26
YM to six (6) months or less
prior to maturity date .............. 5 30,362,322 3.62
Other ............................... 1 1,480,523 0.18
-- ------------ ------
Totals .............................. 145 $838,510,239 100.00%
=== ============ ======
</TABLE>
As used above, "YM" means that prepayments are
permitted if they are accompanied by the
payment of a yield maintenance charge.
SUMMARY OF INTEREST ACCRUAL METHODS
<TABLE>
<CAPTION>
AGGREGATE % OF
CUT-OFF INITIAL
NUMBER DATE POOL
ACCRUAL METHOD OF LOANS BALANCE BALANCE
---------------------- ---------- --------------- -----------
<S> <C> <C> <C>
Actual/360 ......... 142 $779,820,812 93.00%
30/360 ............. 3 58,689,427 7.00
--- ------------ ------
Totals ............. 145 $838,510,239 100.00%
=== ============ ======
</TABLE>
The mortgage loans were originated between
August 1998 and August 2000, inclusive.
S-14
<PAGE>
FREQUENCY OF SCHEDULED PAYMENTS
<TABLE>
<CAPTION>
AGGREGATE % OF
CUT-OFF INITIAL
NUMBER DATE POOL
FREQUENCY OF LOANS BALANCE BALANCE
---------------------- ---------- --------------- -----------
<S> <C> <C> <C>
Monthly ............ 144 $806,707,538 96.21%
Semiannual ......... 1 31,802,702 3.79
--- ------------ ------
Totals ............. 145 $838,510,239 100.00%
=== ============ ======
</TABLE>
Releases of
Mortgaged Properties.. As of the cut-off date, the mortgage loans permit the
release of the mortgages on the related mortgaged
properties as follows:
o Defeasance: 139 of the mortgage loans, representing
approximately 96.2% of the initial pool balance,
generally permit the related borrower, at any time
commencing approximately three to five years after the
date of origination, but in no event before the second
anniversary of the issuance of the certificates, to
substitute non-callable U.S. Treasury obligations for
the mortgaged property and to obtain the release of
the related mortgage on the mortgaged property.
o Partial Release (Defeasance): Five of the mortgage
loans, representing approximately 5.6% of the initial
pool balance, are secured by two or more mortgaged
properties and generally permit the related borrower,
at any time commencing (in general) approximately
three to four years after the date of origination, but
in no event before the second anniversary of the
issuance of the certificates, to substitute
non-callable U.S. Treasury obligations for some of the
mortgaged properties and to obtain the release of the
related mortgage on those mortgaged properties,
subject to, among other requirements, the satisfaction
of a specified debt service coverage ratio test, and
in some cases a loan to value ratio test, with respect
to the remaining mortgaged property or properties.
These partial releases of mortgaged properties are
generally permitted if the substitute non-callable
U.S. Treasury obligations provide for a series of
payments that are equal to 125% of the scheduled cash
flow allocable to the mortgaged property or mortgaged
properties being released.
o Partial Release (Prepayment): Two of the mortgage
loans, representing approximately 0.5% of the initial
pool balance, are secured by two or more mortgaged
properties (or one mortgaged property composed of
multiple parcels) and generally permit the related
borrower, at any time commencing approximately two
years after the date of origination, to obtain the
release of the related mortgage on one or more of
those mortgaged properties (or parcels) upon the
payment of 125% of the portion of the principal amount
of the mortgage loan allocated to the mortgaged
property or mortgaged properties (or parcels) being
S-15
<PAGE>
released, subject to, among other requirements, the
satisfaction of a specified debt service coverage
ratio test, and in some cases a loan to value ratio
test, with respect to the remaining mortgaged property
or properties (or parcels); in the case of one such
mortgage loan representing approximately 0.2% of the
initial pool balance, the borrower may either obtain a
release by delivering a replacement property as
described below under "Property Substitutions," or
obtain a release of the mortgaged property as provided
herein; however, such release may occur at any time
during the term of the mortgage loan and must include
payment of a yield maintenance charge.
o Property Substitutions: Two of the mortgage loans,
representing approximately 11.4% of the initial pool
balance, are secured by two or more mortgaged
properties and generally permit the related borrower
at any time to obtain a release of one or more of
those mortgaged properties upon the delivery of a
mortgage on one or more replacement properties,
subject to, among other requirements, a specified debt
service coverage ratio test and loan to value ratio
test with respect to the replacement properties and
the remaining properties (taken together).
o Other Partial Releases: Nine of the mortgage loans,
representing approximately 4.3% of the initial pool
balance, generally permit the borrower to obtain the
release from the related mortgage of specified parcels
of real estate constituting a portion of the
applicable mortgaged property to which no material
value was assigned or which was not considered a
material source of cash flow in determining the
appraised value or underwritten cash flow for that
mortgaged property.
See "Description of the Mortgage Pool--Defeasance,"
"--Substitution" and "--Other Property Releases" in this
prospectus supplement.
Mortgage Loan Sellers.. We will purchase 87 of the mortgage loans,
representing 49.4% of the initial pool balance, from
Wells Fargo Bank, National Association, 51 of the
mortgage loans, representing 43.7% of the initial pool
balance, from Bear, Stearns Funding, Inc., and 7 of
the mortgage loans, representing 6.9% of the initial
pool balance, from Morgan Stanley Dean Witter Mortgage
Capital Inc. Each mortgage loan seller will make
representations and warranties to us regarding the
mortgage loans sold by it. We will assign those
representations and warranties, and our remedies with
respect to any breach thereof, to the trustee on
behalf of the holders of the certificates.
S-16
<PAGE>
THE CERTIFICATES
Description of
the Certificates............ The certificates will be issued pursuant to a
pooling and servicing agreement, to be dated as
of the cut-off date, between us, the servicer,
the special servicer, the trustee, the fiscal
agent and the paying agent. The certificates will
represent in the aggregate the entire beneficial
ownership interest in a trust fund consisting of
the mortgage pool and some other assets that are
related to the mortgage loans.
THE CERTIFICATES WILL REPRESENT INTERESTS IN THE
ASSETS OF THE TRUST FUND ONLY. ALL PAYMENTS TO
YOU WILL COME ONLY FROM AMOUNTS RECEIVED IN
CONNECTION WITH THOSE ASSETS. NO OTHER ASSETS
WILL BE AVAILABLE TO MAKE PAYMENTS TO YOU.
Certificate Balance......... The aggregate certificate balance of the
certificates (other than the Class X, Class R-I,
Class R-II and Class R-III Certificates) as of
the closing date will equal the aggregate of the
Cut-Off Date Balances, as defined in this
prospectus supplement, of the mortgage loans,
which is also referred to as the "initial pool
balance." Each class of offered certificates
(other than the Class X Certificates) will have
the initial certificate balance set forth on the
cover page, subject to a permitted variance of
plus or minus 5%.
The certificate balance of each class of
certificates (other than the Class X, Class R-I,
Class R-II and Class R-III Certificates)
outstanding at any time represents the maximum
amount that the certificateholders are entitled
to receive as distributions allocable to
principal from the cash flow on the mortgage
loans and other assets in the trust fund. The
certificate balance of each of those classes of
certificates will be adjusted from time to time
on each distribution date to reflect any
reductions resulting from the distribution of
principal to that class or any allocation of
losses and expenses to that class.
The Class X Certificates are "interest only
certificates," meaning that they do not have a
principal balance and are not entitled to
distributions of principal. For the purpose of
calculations of the amount of interest that
accrues on the Class X Certificates while they
are outstanding, the Class X Certificates will
have a notional amount on which interest accrues
during each calendar month. The notional amount
of the Class X Certificates will equal the
aggregate of the Scheduled Principal Balances of
the mortgage loans measured immediately after
the distribution date occurring in each month
during which interest accrues on the Class X
Certificates.
We refer to the Class R-I, Class R-II and Class
R-III Certificates as "residual certificates"
because they represent limited rights to
distributions of amounts remaining after
required distributions are made to all other
classes of
S-17
<PAGE>
certificates. The residual certificates do not
have principal balances. The residual
certificates are not offered hereby.
The Scheduled Principal Balance of each mortgage
loan outstanding at any time represents the
principal balance of that mortgage loan that is
ultimately due and payable to the
certificateholders. The Scheduled Principal
Balance of each mortgage loan initially will
equal the Cut-Off Date Balance of that mortgage
loan. On each distribution date the Scheduled
Principal Balance of each mortgage loan will be
reduced by any payments or other collections or
advances of principal of that mortgage loan that
are distributed on the certificates on that date
and may be reduced by realized losses on that
mortgage loan.
Pass-Through Rates.......... The pass-through rates of the Class A-1, Class
A-2, Class B, Class C and Class D Certificates
for the interest accrual period relating to any
distribution date will be the fixed rate per
annum set forth on the cover of this prospectus
supplement or, if a lower rate, the weighted
average of the respective non-default interest
rates (each net of the related Administrative
Cost Rate) of the mortgage loans in the mortgage
pool, each of which interest rates will be
calculated (for this purpose) by making the
adjustments described herein and without taking
into account any reduction in the interest rate
resulting from a modification of the mortgage
loan or otherwise following the date of initial
issuance of the certificates (such weighted
average for any distribution date, the "NWAC
Rate"). For the interest accrual period relating
to each Distribution Date, the pass-through rate
of the Class E Certificates will be a per annum
rate equal to the NWAC Rate for that distribution
date minus % per annum and the pass-through
rate of the Class F Certificates will be a per
annum rate equal to the NWAC Rate. For purposes
of the NWAC Rate for any distribution date, the
non-default interest rates described above will
be weighted according to the Scheduled Principal
Balances of the mortgage loans in effect as of
the close of business on the immediately
preceding distribution date.
The Class X pass-through rate with respect to
the interest accrual period relating to any
distribution date will be equal to the excess,
if any, of:
o the weighted average of the respective
non-default interest rates (each net of
the related Administrative Cost Rate),
of the mortgage loans in the trust
fund, each of which interest rates will
be calculated (for this purpose) by
making the adjustments described herein
and taking into account any reduction
to the interest rate resulting from a
modification of the mortgage loan or
otherwise following the date of initial
issuance of the certificates, over
S-18
<PAGE>
o the weighted average of the
pass-through rates of the classes of
certificates that have certificate
principal balances.
For purposes of the pass-through rate of the
Class X Certificates for any distribution date,
the non-default interest rates described above
will be weighted according to the Scheduled
Principal Balances of the mortgage loans in
effect as of the close of business on the
immediately preceding distribution date.
The interest accrual period for each distribution
date will be the calendar month preceding the
calendar month in which that distribution date
occurs. Interest on each class of offered
certificates will be calculated at its
pass-through rate on the basis of a 360-day year
consisting of twelve 30-day months, i.e. on a
30/360 basis.
Distributions............... Distributions of (1) interest accrued on the
certificates, (2) principal thereof, and (3)
reimbursements of previously allocated realized
losses will be made on each distribution date to
the holders of each class of certificates in
sequential order based on their alphabetical
designations, except that the holders of the
Class A-1, Class A-2 and Class X Certificates
will be paid interest on a pro rata basis before
any interest or principal is paid to any other
classes of certificates. You will receive your
share of any distributions on your class of
offered certificates ratably with all other
holders of certificates of the same class. We
expect that the final distribution on each class
of offered certificates will be made on the
"expected final distribution date" set forth on
the cover page of this prospectus supplement,
assuming that there are no delinquencies,
modifications (including extensions of maturity
dates) and other losses, repurchases and
prepayments on or in respect of the mortgage
loans after the date of initial issuance of the
certificates and further assuming a number of
other circumstances that we describe in this
prospectus supplement.
A. Interest Distributions. You generally will
receive interest distributions on each
distribution date from the available distribution
amount described in this prospectus supplement
under "Description of the Certificates--
Distributions--Available Distribution Amount,"
subject to the sequential payment and
subordination features described below, in amounts
up to the interest accrued on your class of
certificates during the preceding calendar month
at the applicable pass-through rate, together
with any previously accrued and unpaid interest
amounts, in each case subject to reduction in
connection with the allocation to your class of
certificates of realized losses with respect to
interest amounts and net aggregate prepayment
interest shortfalls and net aggregate balloon
interest shortfalls. In addition, although any
S-19
<PAGE>
appraisal reductions will not (in and of
themselves) reduce the amount of interest that
you are entitled to receive on your class of
certificates, they may reduce the amount
available to make interest payments on your
class of certificates and, therefore, result in
shortfalls in interest distributions on your
class of certificates.
In general, the holders of each class of
certificates entitled to receive an interest
distribution on any distribution date will
receive that distribution only after the holders
of each class with an earlier alphabetical
designation (and the Class X Certificates) have
received all amounts of interest and principal
(if any) distributable thereto on that
distribution date. The holders of the Class A-1,
Class A-2 and Class X Certificates will receive
interest distributions on a pro rata basis
before the holders of any other class receives
interest or principal.
B. Principal Distributions. In general, the
holders of each class of offered certificates,
other than the Class X Certificates, will
receive a principal distribution on any
distribution date only after the holders of each
class with an earlier alphabetical designation
have received all amounts distributable thereto
on that distribution date and the certificate
balance of each class with an earlier
alphabetical designation has been reduced to
zero. See "Description of the
Certificates--Distributions--Principal
Distribution Amount" and "--Application of
Available Distribution Amount" in this
prospectus supplement for a more detailed
description of the amount of principal available
for distribution on any distribution date and
the priority of distribution of that principal.
Certain Investment
Considerations; Mortgage
Loan Prepayments............ General. The yield on the offered certificates
of any class will depend on, among other things,
the pass-through rate for that class of
certificates, which rate may be limited by the
weighted average of the respective non-default
interest rates of the mortgage loans, calculated
and adjusted as described herein for such
purpose. That weighted average will vary as
principal is received on the mortgage loans,
losses of principal are experienced on the
mortgage loans or the mortgage loans are
repurchased, sold or otherwise liquidated.
The yield on any class of offered certificates
will also be affected by the rate and timing of
reductions in the certificate balance or
notional amount of that class of certificates,
which in turn will be affected by the following:
1. the rate and timing of principal
payments, including voluntary and
involuntary principal prepayments, on
the mortgage loans;
S-20
<PAGE>
2. the rate, timing and severity of losses
on the mortgage loans;
3. the rate and timing at which the
mortgage loans are sold or mortgaged
properties are liquidated following
default; and
4. the extent to which the items described
in clauses 1 and 2 and proceeds
received from the events described in
clause 3 are applied on any
distribution date in reduction of the
certificate balance or notional amount
of that class of offered certificates,
which in the case of losses depends on,
in part, the nature of those amounts.
See "Description of the
Certificates--Distributions--Application
of Available Distribution Amount" and
"--Distributions--Principal
Distribution Amount" in this prospectus
supplement.
The rate and timing of voluntary principal
prepayments on the mortgage loans will be
affected by, among other things, the restrictions
on prepayments set forth under the terms of the
mortgage loans. Many of the mortgage loans
prohibit voluntary prepayments for a specified
period of time following origination. In general,
the prohibition remains in effect substantially
until maturity or until a specified date after
which the mortgage loan permits (i) voluntary
prepayments but requires payment of a yield
maintenance charge in connection with prepayments
that are made before a specified number of months
before maturity or (ii) in the case of one
mortgage loan, a voluntary partial prepayment
without payment of any yield maintenance charge
or prepayment premium. Other mortgage loans
permit voluntary prepayments at any time but
require payment of a yield maintenance charge or
prepayment premium in connection with prepayments
that are made before a specified number of months
before maturity. We describe the restrictions on
prepayments under the mortgage loans more fully
under "Description of the Mortgage Pool--Yield
Maintenance, Prepayment and Lockout Provisions."
We describe the manner in which yield maintenance
charges and prepayment premiums are allocated
among the various classes of certificates under
"Description of the Certificates--
Distributions--Allocation of Yield Maintenance
Charges and Prepayment Premiums" in this
prospectus supplement. You should be aware that a
yield maintenance charge or prepayment premium
may not be collected in all circumstances and,
even if it is collected, may not (giving effect
to the manner of allocation thereof to
certificateholders or otherwise) be sufficient to
offset any loss in yield on your certificates
that may result from the applicable prepayment.
In deciding whether to purchase any offered
certificates, you should make an independent
decision as to the appropriate prepayment
assumptions to be used.
S-21
<PAGE>
Yield. If you purchase an offered certificate at
an amount equal to its unpaid certificate
balance (that is, at "par"), the effective yield
to you (assuming that there are no interest
shortfalls and assuming the full return of your
investment principal) will approximate the
pass-through rate in effect from time to time on
that certificate. If you pay less or more than
the unpaid principal balance of the certificate,
then, assuming the accuracy of the assumptions
set forth in the preceding sentence, the
effective yield to you will be higher or lower,
respectively, than the pass-through rate in
effect from time to time on that certificate,
because the related discount or premium will be
amortized over the life of the certificate (that
is, because the aggregate amount received on
your investment, relative to the amount of that
investment, will be greater (in the case of a
purchase at a discount) or less (in the case of
a purchase at a premium) than would be received
in the case of a purchase at par).
If you purchase your certificate at a discount
or premium from par, any deviation in the actual
rate of prepayments or other early collections
in respect of principal on the mortgage loans
from the rate assumed by you may affect the
period of time over which, or the rate at which,
the discount or premium will be amortized and,
consequently, may change your actual yield from
the yield that you anticipated. In general, in
the case of the purchase of a certificate at a
discount, if prepayments or other early
collections in respect of principal on the
mortgage loans result in reductions of the
principal balance of your certificate at a rate
slower than you anticipated, your anticipated
yield will be lower; in the case of a purchase
at a premium, your anticipated yield will be
lower if prepayments or other early collections
in respect of principal on the mortgage loans
result in reductions of the principal balance of
your certificate at a rate faster than you
anticipated.
Reinvestment Risk. As stated above, if an
offered certificate is purchased at par,
fluctuations in the rate of distributions of
principal will generally not affect the yield to
maturity of that certificate. However, the total
return on any purchaser's investment, including
that of an investor who purchases at par, will
be reduced to the extent that principal
distributions received on its certificate cannot
be reinvested at a rate as high as the
pass-through rate of the certificate. You should
consider the risk that rapid rates of
prepayments on the mortgage loans may coincide
with periods of low prevailing market interest
rates, when mortgagors may be expected to prepay
or refinance mortgage loans that carry interest
rates significantly higher than then-current
interest rates for mortgage loans. Consequently,
the amount of principal distributions that you
will be required to reinvest at lower prevailing
interest rates may be relatively large.
Conversely, slower rates of prepayments on the
mortgage loans are likely
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to coincide with periods of high prevailing
market interest rates, when it is less likely
that mortgagors will elect to prepay or
refinance mortgage loans and, therefore, the
amount of principal distributions available to
you for reinvestment at higher prevailing
interest rates may be relatively small.
Weighted Average Life Volatility. One indication
of the effect of varying prepayment rates on a
security is the change in its weighted average
life. The "weighted average life" of an offered
certificate is the weighted average amount of
time that will elapse between the date of
issuance of the certificate and the date on
which each dollar in reduction of the principal
balance of the certificate is distributed to you
or, in the case of the Class X Certificates, the
notional amount thereof is reduced. Slower rates
of prepayment may result in an increase in the
weighted average life of a certificate; faster
rates may result in a decrease in the weighted
average life of a certificate. In general, if
the weighted average life of a certificate
purchased by you at par is extended beyond that
which you initially anticipate, your
certificate's market value may be adversely
affected, particularly, if prevailing interest
rates have risen since you purchased your
certificate, even though the yield to maturity
on your certificate may be unaffected. The
weighted average lives of the offered
certificates (other than the Class X
Certificates), under various prepayment
scenarios, are displayed in the table appearing
under the heading "Yield and Maturity
Considerations--Weighted Average Life" in this
prospectus supplement.
The Class X Certificates. The Class X
Certificates are interest-only certificates and
are not entitled to any distributions of
principal. The yield to maturity of the Class X
Certificates will be especially sensitive to the
prepayment, repurchase and default experience on
the mortgage loans, which may fluctuate
significantly from time to time. A rate of
principal payments that is more rapid than you
expect will have a material adverse effect on
the yield to maturity of your Class X
Certificates. See "Risk Factors--Risk Factors
Relating to the Certificates--The Rates of
Prepayment and Repurchases of the Mortgage Loans
in the Mortgage Pool may Adversely Affect the
Yield on Your Investment" and "Yield and
Maturity Considerations--Yield Sensitivity of
the Class X Certificates" in this prospectus
supplement.
P&I Advances................ Subject to a determination of recoverability
from collections on the related mortgage loans,
the servicer is required to make advances with
respect to each distribution date in an amount
that is generally equal to the sum of the
following amounts to the extent they are not
received from the respective borrowers or net
income from the respective REO properties:
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o for all mortgage loans that require scheduled
payments to be made monthly, the aggregate of the
following amounts:
1. all delinquent monthly payments of principal
and interest (or interest only) scheduled to
be due during the related collection period,
net of related servicing fees, on the
mortgage loans, other than delinquent
balloon payments, default interest or excess
interest accruing after an anticipated
repayment date;
2. in the case of each mortgage loan delinquent
in respect of its balloon payment, an amount
equal to the scheduled monthly payment of
principal and interest (or interest only)
that would have been due during the related
collection period if that mortgage loan had
continued to amortize in accordance with the
amortization schedule in effect immediately
prior to the due date for its balloon
payment, net of related servicing fees; and
3. in the case of each REO property, the
scheduled monthly payment of principal and
interest (or interest only) that would have
been due on the related mortgage loan on the
due date during the related collection
period if the mortgage loan had remained
outstanding and had continued to amortize in
accordance with the amortization schedule in
effect on the due date immediately prior to
its conversion to an REO Property, net of
related servicing fees; and
o for the mortgage loan that requires scheduled
payments to be made semiannually (which mortgage
loan is a fully-amortizing loan), either:
1. if a scheduled payment was not due during
the related collection period, or if the
mortgaged property has become an REO
property and a scheduled payment would not
have been due during the related collection
period had the mortgage loan remained
outstanding, one-sixth of the interest
portion (net of servicing fees) of the
scheduled payment that is due or would have
been due on the immediately succeeding due
date for that mortgage loan; or
2. if a scheduled payment was due during the
related collection period and is delinquent,
or if the mortgaged property has become an
REO Property and a scheduled payment would
have been due during the related collection
period had the mortgage loan remained
outstanding, one-sixth of the interest
portion (net of servicing fees) and the
entire principal portion of the scheduled
payment that is due or would have been due
on the due date in the related collection
period.
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In addition, if certain adverse events or
circumstances, which we describe under "Description
of the Certificates--Appraisal Reductions," occur
or exist with respect to a mortgage loan or the
related mortgaged property, the special servicer
will be required to obtain a new appraisal or, in
cases involving relatively small principal
balances, conduct an internal valuation of that
property. If, based on that appraisal or other
valuation, it is determined that--
o the principal balance of, and other
delinquent amounts due under, the mortgage
loan, exceed
o the sum of 90% of the new estimated value of
that property and the amount of certain
escrow funds,
then the amount otherwise required to be advanced
on that mortgage loan will be reduced. The
reduction will be in the same proportion that the
excess bears to the principal balance of the
mortgage loan, net of related advances of
principal. Any reduction in advances will generally
reduce the funds available to pay interest on the
most subordinate class of certificates that has a
certificate balance then outstanding.
The servicer generally will be entitled to interest
on any advances made and specified servicing
expenses incurred. Such interest will be at a rate
equal to the "Prime Rate" as reported in The Wall
Street Journal from time to time, and will be paid
contemporaneously with the reimbursement of the
advance or the servicing expense, out of general
collections on the mortgage pool then on deposit in
the certificate account. However, in the case of
the mortgage loan that pays semiannually, that
interest will not accrue on any advance of the
interest portion of a scheduled payment due in a
month subsequent to the advance date unless and
until the borrower fails to make the scheduled
payment when it subsequently becomes due and
payable. See "Description of the
Certificates--Advances--P&I Advances" in this
prospectus supplement and "Description of the
Certificates--Advances in Respect of Delinquencies"
and "Description of the Pooling and Servicing
Agreements--Certificate Account" in the prospectus.
Credit Enhancement........ The rights of holders of certificates of classes
with later alphabetical designations to receive
distributions of amounts collected or advanced on
the mortgage loans generally will be subordinated
to the rights of holders of certificates of classes
with earlier alphabetical class designations.
Therefore, we describe classes with earlier
alphabetical designations generally as "senior" to
classes with later alphabetical designations, and
classes with later alphabetical designations as
"subordinated" to classes with earlier alphabetical
designations. Holders of the Class A-1, Class A-2
and Class X Certificates will receive interest
distributions on a pro rata basis before the
holders of certificates of any other class
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receive interest or principal distributions.
Principal will generally be paid in respect of the
Class A-1 and Class A-2 Certificates in sequential
order (that is, first to the holders of the Class
A-1 Certificates until those certificates are
retired, and then to the holders of the Class A-2
Certificates). However, the Class A-1 and Class A-2
Certificates are pari passu in right of payment of
principal.
More senior classes of certificates are intended to
be protected from losses by the application of the
amount available for distribution to the
certificateholders on each distribution date in the
order described in this prospectus supplement under
"Description of the Certificates--Distributions--
Application of Available Distribution Amount." This
is referred to as "sequential payment." If the
aggregate certificate balance of the certificates
exceeds the aggregate principal balance of the
mortgage loans, the certificate balances of the
certificates that have certificate balances will be
reduced in the order described in this prospectus
supplement under "Description of the Certificates--
Subordination; Allocation of Losses, Shortfalls and
Expenses," without a related distribution of
principal, until the aggregate certificate balance
of the certificates equals the aggregate principal
balance of the mortgage loans. More senior classes
of certificates are similarly intended to be
protected by the application of those reductions of
certificate balances or shortfalls in respect of
the mortgage loans to the most subordinated class
of outstanding certificates, as further described
in this prospectus supplement under "Description of
the Certificates--Subordination; Allocation of
Losses; Shortfalls and Expenses." This is referred
to as "subordination."
As a result of sequential payment, the certificate
balances of the most senior class of outstanding
certificates with a principal balance will amortize
prior to the classes of certificates subordinate to
that class. This is expected to result in the
subordinate certificates evidencing an increasing
percentage interest in the trust fund over time,
and a corresponding increase in the protection
afforded to each class of outstanding certificates
by the certificates subordinate to that class.
Sequential payment and subordination are intended
to enhance the likelihood of timely receipt by the
holders of the more senior certificates of the full
amount of their interest entitlement on each
distribution date and the ultimate receipt by them
of principal equal to the entire certificate
balance of their certificates. No other form of
credit support will be available for the benefit of
the holders of the offered certificates.
Optional Termination.... On any distribution date on which the aggregate
certificate balance of all classes of
certificates is less than 1% of the initial pool
balance, the depositor, the servicer, the special
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<PAGE>
servicer, the majority holders of the
controlling class, the operating advisor and any
holder of a majority interest in the Class R-I
Certificates, each in turn, will have the option
to purchase all of the remaining mortgage loans
(and all property acquired through exercise of
remedies in respect of any mortgage loan), at a
price that we describe in this prospectus
supplement. Exercise of this option will
terminate the trust fund and retire the then
outstanding certificates at par plus accrued
interest. See "Description of the
Certificates--Optional Termination; Retirement
of the Certificates" in this prospectus
supplement and "Description of the
Certificates--Termination" in the prospectus.
Information Available to
Certificateholders.......... On each distribution date, commencing in
November 2000, the paying agent will provide to
you a report concerning the certificates and the
mortgage loans, a form of which is included in
Annex C to this prospectus supplement. These
reports will be based solely on information
prepared by the servicer and the special servicer
and delivered to the paying agent. Each report
will contain the items described in this
prospectus supplement under "Description of the
Certificates--Reports to Certificateholders;
Certain Available Information--Distribution Date
Statements."
Material Federal Income Tax
Consequences................ The trustee or its agent will make elections to
treat designated portions of the assets of the
trust as three separate real estate mortgage
investment conduits, or REMICs, under Section
860A through 860G of the Internal Revenue Code.
Those REMICs are as follows:
o REMIC I, the lowest tier REMIC, will hold
the pooled mortgage loans. REMIC I will also
hold various other related assets. It will
not hold, however, the collections of excess
interest with respect to the ARD Loan.
o REMIC II will hold the regular interests in
REMIC I.
o REMIC III will hold 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 be required to report income derived
from the offered certificates in accordance with
the accrual method of accounting. We anticipate
that the Class and Class Certificates will
be issued with original issue discount in an
amount equal to the excess of the initial class
certificate balance thereof (including accrued
interest) over its issue price (including
accrued interest). We also anticipate that the
Class , Class , Class and Class
Certificates will be issued at a premium and
that the Class and Class Certificates will
be issued with de minimis original issue
discount for federal income tax purposes.
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<PAGE>
Although not free from doubt, it is anticipated
that the Class X Certificates will be treated as
issued with original issue discount in an amount
equal to the excess of all distributions of
interest expected to be received thereon over
their issue price, including accrued interest,
and we intend to report income in respect of the
Class X Certificates in this manner. The
prepayment assumption that will be used in
determining the rate of accrual of original
issue discount and that may be used to amortize
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 prepay at a rate equal to a CPR of
0%, provided however, that it is further assumed
that the ARD Loan prepays on its Anticipated
Repayment Date. If you own an offered
certificate issued with original issue discount,
you may have to report original issue discount
income and be subject to a tax on this income
before you receive a corresponding payment. See
"Material Federal Income Tax Consequences" in
this prospectus supplement and the prospectus.
ERISA Considerations........ If you are a fiduciary of any employee benefit
plan or other retirement arrangement subject to
ERISA or Section 4975 of the Internal Revenue
Code, you should review carefully with your legal
advisors whether the purchase or holding of
offered certificates could give rise to a
transaction that is prohibited or is not
otherwise permitted under either ERISA or Section
4975 of the Internal Revenue Code or whether
there exists any statutory or administrative
prohibited transaction exemption applicable to an
investment in the offered certificates.
We anticipate that, subject to the satisfaction
of the conditions that we describe under "ERISA
Considerations" in this prospectus supplement,
retirement plans and other employee benefit
plans and arrangements that are subject to ERISA
or Section 4975 of the Internal Revenue 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 under ERISA or the
Code. This is based on individual prohibited
transaction exemptions granted to the
underwriters by the U.S. Department of Labor.
THE CHARACTERISTICS OF THE CLASS B, CLASS C,
CLASS D, CLASS E AND CLASS F CERTIFICATES DO NOT
SATISFY THE CONDITIONS OF THE INDIVIDUAL
PROHIBITED TRANSACTION EXEMPTIONS GRANTED TO THE
UNDERWRITERS. None of the Class B, Class C,
Class D, Class E and Class F Certificates may be
acquired by, on behalf of or with assets of a
retirement plan or employee benefit plan or
arrangement described above, unless either:
1. the transferee is an insurance company using
funds in its general account and the
acquisition and holding of those
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<PAGE>
Certificates is exempt under prohibited
transaction class exemption 95-60; or
2. the transferee delivers or causes to be
delivered to the paying agent and the
depositor any opinions of counsel, officer's
certificates or agreements that may be
required by the paying agent or the
depositor to the effect that the acquisition
and holding of those Certificates will not
(a) result in the assets of the trust being
deemed to be "plan assets" under or subject
to the prohibited transaction provisions of
ERISA, the Code or other similar law or (b)
subject the parties to the pooling and
servicing agreement to any obligation in
addition to those set forth in the pooling
and servicing agreement.
For further information about considerations
that are relevant to an investment in the
offered certificates by employee benefit plans
or other retirement arrangements subject to
ERISA or Section 4975 of the Internal Revenue
Code, see "ERISA Considerations" in this
prospectus supplement and in the prospectus.
Ratings..................... It is a condition of their issuance that the
offered certificates receive the initial ratings
from Fitch, Inc. and Standard & Poor's Ratings
Services set forth in the table on the cover page
of this prospectus supplement. A security rating
on any class of offered certificates addresses
the likelihood of the timely payment of interest
on that class of certificates and the ultimate
payment of principal thereof not later than the
"rated final distribution date" indicated on the
cover page of this prospectus supplement. 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. A security rating
does not address the frequency or likelihood of
voluntary or involuntary prepayments of mortgage
loans, the corresponding effect on yield to
investors or the possibility that, as a result of
prepayments, investors in the Class X
Certificates may realize a lower than anticipated
yield or may fail to recover fully their initial
investment. See "Ratings" in this prospectus
supplement and "Risk Factors--Risks Relating to
the Certificates--Ratings on Your Certificates Do
Not Guarantee that You Will Receive Payment under
the Pooling and Servicing Agreement" in the
prospectus for a further explanation of the
ratings, the limitations and restrictions on the
ratings and the conclusions that may not be drawn
from a rating.
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<PAGE>
Legal Investment............ The offered certificates will not be "mortgage
related securities" within the meaning of the
Secondary Mortgage Market Enhancement Act of
1984. As a result, the appropriate
characterization of the offered certificates
under various legal investment restrictions, and
thus the ability of investors subject to these
restrictions to purchase the offered
certificates, may be subject to significant
interpretative uncertainties.
You should consult your own legal advisors to
determine whether and to what extent the offered
certificates may constitute legal investments
for you. See "Legal Investment Considerations"
in this prospectus supplement and "Legal
Investment" in the prospectus.
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<PAGE>
RISK FACTORS
In deciding whether to purchase any offered certificates, you should
consider the following risk factors as well as the risk factors that begin on
page 8 of the prospectus.
RISK FACTORS RELATING TO THE CERTIFICATES
LACK OF A SECONDARY MARKET FOR THE CERTIFICATES MAY MAKE IT DIFFICULT FOR
YOU TO RESELL YOUR CERTIFICATES AT ALL OR AT AN ATTRACTIVE PRICE. Your
certificates will not be listed on any securities exchange, and there is
currently no secondary market for the offered certificates. While each
underwriter currently intends to make a secondary market in the offered
certificates, none of them is obligated to do so. Accordingly, you may not have
an active or liquid secondary market for your certificates. Lack of liquidity
could result in a substantial decrease in the market value of your
certificates. The market value of your certificates also may be affected by
many other factors, including the then-prevailing interest rates. Furthermore,
you should be aware that the market for securities of the same type as the
certificates has been volatile at times and offered very limited liquidity. See
"Risk Factors--Risks Relating to the Certificates--Lack of a Secondary Market
for the Certificates May Make it Difficult for You to Resell Your Certificates
at All or at an Attractive Price" in the prospectus.
THE CERTIFICATES ARE SUPPORTED BY LIMITED ASSETS. If the amount available
for payments on the certificates is insufficient to make payments on your
certificates in accordance with the priority of payments and the subordination
arrangements described in this prospectus supplement, no other assets will be
available to you for payment of the deficiency.
The amount available for payments on the certificates will come primarily
from collections on the mortgage loans. In general, the only source of payment
for any mortgage loan is the mortgaged property and other assets (if any) that
have been pledged to secure the mortgage loan. Accordingly, distributions on
the certificates will depend upon the borrowers' abilities to repay the
mortgage loans. Factors that affect a borrower's ability to repay a mortgage
loan include:
o the net cash flow of the related mortgaged property; and
o the market value of the related mortgaged property or the ability of the
related borrower to refinance the mortgaged property at maturity of the
mortgage loan or upon the acceleration of maturity of the mortgage loan
following an event of default.
Delinquencies and defaults on the mortgage loans may significantly delay
the receipt of distributions by you on your certificates, unless advances of
scheduled payments of interest and/or principal are made by the servicer, the
trustee or the fiscal agent to cover delinquent payments or the subordination
of another class of certificates fully offsets the effects of any delinquency
or default. For a more detailed description of factors that may affect the
borrowers' abilities to repay the mortgage loans, see "--Risk Factors Relating
to the Mortgage Loans" below and "Risk Factors--Risks Relating to the Mortgage
Loans" and "Description of the Trust Funds--Mortgage Loans" in the prospectus.
The rate and timing of delinquencies or defaults on the mortgage loans
will affect the following yield and payment characteristics of the
certificates:
o the aggregate amount of distributions on the certificates;
o the yields to maturity of the certificates;
o the rates of principal payments on the certificates; and
o the weighted average lives of the certificates.
Even if losses on the mortgage loans are not borne by your certificates,
the events resulting in those losses may affect the weighted average life and
yield to maturity of your certificates. This may be so because, for example, a
default and early liquidation of a mortgage loan may result in payments on the
certificates that would otherwise be made over the remaining term of that loan.
Such events may affect the timing of distributions on your certificates.
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<PAGE>
THE YIELD ON YOUR CERTIFICATE WILL DEPEND UPON ITS PASS-THROUGH RATE, THE
PRICE YOU PAY FOR YOUR CERTIFICATE, THE RATE AND TIMING OF COLLECTIONS AND
LOSSES ON THE MORTGAGE LOANS AND THE PAYMENT PRIORITY OF YOUR CERTIFICATE. The
yield on your certificate will be affected by:
o the pass-through rate in effect from time to time for your certificate;
o the price paid for your certificate and, if the price was other than
par, the rate and timing of principal payments (including voluntary and
involuntary principal prepayments and repurchases as a result of breaches
of a mortgage loan seller's representations and warranties), as such rate
and timing is affected by (among other things) the rate and timing of
delinquencies of principal to the extent the servicer is not required to
make an advance of such principal;
o losses and shortfalls on the mortgage loans and some types of expense
losses of the trust fund; and
o the extent to which principal payments are made or losses are allocated
on any distribution date in reduction of the certificate balance or
notional amount of the class to which your certificate belongs or in
reduction of amounts distributable thereon.
WE CANNOT PREDICT THE YIELD ON ANY CLASS OF CERTIFICATES AND DO NOT MAKE
ANY REPRESENTATIONS OR WARRANTIES REGARDING THE YIELD ON ANY CLASS OF
CERTIFICATES.
See "Description of the Certificates-- Distributions--Application of
Available Distribution Amount" and "--Distributions--Principal Distribution
Amount" and "Yield and Maturity Considerations" in this prospectus supplement.
THE RATES OF PREPAYMENT AND REPURCHASES OF THE MORTGAGE LOANS IN THE
MORTGAGE POOL MAY ADVERSELY AFFECT THE YIELD ON YOUR INVESTMENT. The yield to
maturity on your certificate will depend, in significant part, upon the rate
and timing of principal payments on the mortgage loans. For this purpose,
principal payments include both voluntary prepayments, if permitted, and
involuntary prepayments, including prepayments resulting from casualty or
condemnation of mortgaged properties, liquidations as a result of defaults by
borrowers or repurchases as a result of a seller's breaches of representations
and warranties.
If you purchase your certificates at a discount, you should consider the
risk that a slower than anticipated rate of principal payments on the mortgage
loans in the pool will result in an actual yield that is lower than your
expected yield. Conversely, if you purchase your certificates at a premium, you
should consider the risk that a faster than anticipated rate of principal
payments on the mortgage loans in the pool will result in an actual yield that
is lower than your expected yield. Insofar as your initial investment in any
certificate is repaid, you may not be able to reinvest your initial investment
in an alternative investment with a yield comparable to the yield on your
certificates.
The investment performance of your certificates may vary materially and
adversely from your investment expectations due to voluntary or involuntary
prepayments on the mortgage loans being higher or lower than you anticipated.
Even if the actual yield is equal to your anticipated yield, you may not
realize your expected total return on your investment, and the weighted average
life of your certificates may be shorter or longer than you expected.
The rate at which voluntary prepayments occur on the mortgage loans will
be affected by a variety of factors, including:
o the terms of the mortgage loans;
o the length of any prepayment lockout period;
o the level of prevailing interest rates;
o the availability of mortgage credit;
o any applicable obligations of the borrowers to pay yield maintenance
charges or prepayment premiums in connection with any voluntary
prepayments;
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<PAGE>
o the occurrence of casualties or natural disasters; and
o economic, demographic, tax or legal factors.
Voluntary prepayments under some of the mortgage loans require payment of
a yield maintenance charge or prepayment premium. See "--Enforcement of
Prepayment Restrictions Will Generally Result in a Slower Rate of Prepayment
But May Not Be Effective in All Circumstances to Protect the Lender's Yield"
below and "Description of the Mortgage Pool--Yield Maintenance, Prepayment and
Lockout Provisions" in this prospectus supplement. Nevertheless, we cannot
assure you that the related borrowers will refrain from prepaying their
mortgage loans due to the existence of a yield maintenance charge.
In addition, if a seller repurchases any mortgage loan from the trust fund
due to the breach of a representation or warranty, the repurchase price paid
will be passed through to the holders of the certificates with the same effect
as if the mortgage loan had been prepaid in full, except that no yield
maintenance charge or prepayment premium will be payable. A repurchase by a
seller may, therefore, adversely affect the yield to maturity on your
certificates.
Also, if the related borrower does not repay an ARD Loan by its
Anticipated Repayment Date, the effect will be to increase the weighted average
life of your certificates and may reduce your yield to maturity.
WE CANNOT PREDICT THE ACTUAL RATE OF PREPAYMENT OF PRINCIPAL OF THE
MORTGAGE LOANS IN THE POOL AND MAKE NO REPRESENTATION OR WARRANTY WITH RESPECT
TO THAT RATE OF PREPAYMENT. IN DECIDING WHETHER TO PURCHASE ANY OFFERED
CERTIFICATE, YOU SHOULD MAKE AN INDEPENDENT DECISION AS TO THE APPROPRIATE
PREPAYMENT ASSUMPTION TO BE USED.
IF YOU PURCHASE CLASS X CERTIFICATES, YOUR YIELD TO MATURITY WILL BE
EXTREMELY SENSITIVE TO THE RATE AND TIMING OF PRINCIPAL PAYMENTS, INCLUDING
PREPAYMENTS, LIQUIDATIONS AND PRINCIPAL LOSSES WITH RESPECT TO THE MORTGAGE
LOANS. YOU SHOULD FULLY CONSIDER THE ASSOCIATED RISKS, INCLUDING THE RISK THAT
A RAPID RATE OF PRINCIPAL PAYMENTS, LIQUIDATIONS AND/OR PRINCIPAL LOSSES
EXPERIENCED BY THE MORTGAGE POOL COULD RESULT IN THE FAILURE TO FULLY RECOUP
YOUR INITIAL INVESTMENT IN THE CLASS X CERTIFICATES. IN ADDITION, THE YIELD ON
THE CLASS X CERTIFICATES WILL BE ADVERSELY AFFECTED BY ANY REDUCTIONS TO THE
NET MORTGAGE RATES ON THE MORTGAGE LOANS RESULTING FROM MODIFICATIONS AFTER
DEFAULT, ALTHOUGH THE SPECIAL SERVICER WILL BE SUBJECT TO LIMITATIONS ON ITS
ABILITY TO ENTER INTO SUCH MODIFICATIONS. FOR ADDITIONAL INFORMATION REGARDING
THE YIELD ON CLASS X CERTIFICATES, YOU SHOULD ALSO REVIEW THE SECTIONS IN THIS
PROSPECTUS SUPPLEMENT TITLED "DESCRIPTION OF THE MORTGAGE POOL," "DESCRIPTION
OF THE CERTIFICATES--DISTRIBUTIONS" AND "--SUBORDINATION; ALLOCATION OF LOSSES,
SHORTFALLS AND EXPENSES" AND "YIELD AND MATURITY CONSIDERATIONS."
ENFORCEMENT OF PREPAYMENT RESTRICTIONS WILL GENERALLY RESULT IN A SLOWER
RATE OF PREPAYMENT BUT MAY NOT BE EFFECTIVE IN ALL CIRCUMSTANCES TO PROTECT THE
LENDER'S YIELD. Each mortgage loan restricts voluntary prepayments in one or
more of the following ways:
o by prohibiting any prepayments for a specified period of time, which we
refer to as a lockout period, that generally does not expire until not
less than three to five years after the date of origination of that
mortgage loan and in some cases extends throughout the term of that
mortgage loan until a date that is six months or less prior to its
maturity; or
o by requiring that any principal prepayment made during a specified
period of time, known as a "yield maintenance period" or "prepayment
premium period," after the date of origination of that mortgage loan or,
in the case of a mortgage loan also subject to a lockout period, after
the date of expiration of that lockout period, generally be accompanied
by a yield maintenance charge or prepayment premium.
The existence of requirements for the payment of yield maintenance charges
or prepayment premiums generally will result in prepayments of the mortgage
loans in the pool occurring at a slower rate than would have been the case if
the borrowers were not required to pay that additional amount. However, yield
maintenance charges or prepayment premiums may not be effective in all
circumstances to protect the lender's yield. For example:
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<PAGE>
o in some circumstances, including without limitation especially low
interest rate environments, the terms of refinancing or sale may be so
attractive that borrowers will prepay their mortgage loans
notwithstanding the obligation to pay a yield maintenance charge or
prepayment premium;
o yield maintenance charges or prepayment premiums may be unenforceable
under state or federal law, including federal bankruptcy law, in some
cases, particularly if they are sought to be enforced following a
default; and
o state or federal laws, including federal bankruptcy law, may limit the
amount that may be collected from a borrower.
Even if the requirement to pay a yield maintenance charge or prepayment
premium following default is enforceable, the foreclosure proceeds received
with respect to a defaulted mortgage loan may be insufficient to make the
required payment. In addition, a yield maintenance charge or prepayment premium
generally will not be required for prepayments in connection with a casualty or
condemnation. For a description of yield maintenance charges and prepayment
premiums, see "Description of the Mortgage Pool--Yield Maintenance, Prepayment
and Lockout Provisions" in this prospectus supplement.
CHANGES IN CONCENTRATIONS IN THE TYPES AND LOCATIONS OF PROPERTIES
SECURING THE MORTGAGE LOANS IN THE POOL MAY OCCUR AS A RESULT OF PREPAYMENTS,
WHICH MAY AFFECT THE RISKS ASSOCIATED WITH YOUR INVESTMENT. As borrowers pay
down the principal of the mortgage loans (particularly in the case of
prepayments and payments made at maturity) or the mortgage loans are liquidated
following any defaults, the mortgage pool may exhibit increased concentration
with respect to the type of properties, property characteristics, number of
borrowers and affiliated borrowers or geographic location. In general, because
distributions of principal payments are made sequentially, the exposure to
risks associated with increased concentration will be greater for classes with
lower payment priorities.
THE TRUST MAY BECOME LIABLE FOR THE COSTS OF ENVIRONMENTAL CLEAN-UP. Except
as described below, "Phase I" environmental site assessments were performed at
the mortgaged properties during the 12-month period prior to the respective
dates of origination of the mortgage loans. In some cases, the environmental
consultant identified a condition or circumstance:
o that was remediated or for which an escrow for remediation costs has
been established;
o for which an entity other than the related borrower is responsible
either for remediation or for paying the cost of remediation; and/or
o for which the consultant recommended an operations and maintenance plan
or periodic monitoring of the subject properties and/or nearby
properties, which recommendations were required to be implemented in a
manner consistent with industry-wide practices.
50 mortgage loans, representing 9.2% of the initial pool balance, are
together the subject of a group secured creditor impaired property policy
providing coverage for certain losses that may arise from adverse environmental
conditions that may exist at the related mortgaged properties. We describe that
policy under "Description of the Mortgage Pool--Environmental Insurance" in
this prospectus supplement. Environmental site assessments were not performed
with respect to those mortgaged properties.
Federal law requires owners of multifamily housing constructed prior to
1978 to disclose to potential residents or purchasers any condition on the
property that could lead to exposure to lead-based paint and the related
hazards to pregnant women and young children. Property owners may be liable for
tenant injuries from exposure to lead-based paint under federal and state laws
that impose affirmative discovery and remediation obligations on owners of
multifamily housing containing lead-based paint. In those cases where the
environmental assessments revealed the existence of lead-based paint at
multifamily properties and recommended an operations and maintenance program,
the borrowers are obligated to implement operations and maintenance programs.
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The pooling and servicing agreement requires the special servicer to
obtain an environmental site assessment of a mortgaged property securing a
defaulted mortgage loan prior to acquiring title to the mortgaged property or
assuming its operation. This restriction may delay enforcement of the security
for the related mortgage note and will interfere with the ability of the
servicer or special servicer to foreclose on a mortgaged property if a
satisfactory environmental site assessment is not obtained or if required
remedial action is not taken. This prohibition is meant to decrease the
likelihood that the trust will become liable for an environmental condition at
any mortgaged property. However, we cannot assure you that the requirements of
the pooling and servicing agreement will completely protect the assets of the
trust from liability for an environmental condition.
For additional information regarding environmental risks associated with
mortgaged properties, you should also review the section in this prospectus
supplement titled "Servicing of the Mortgage Loans--Realization Upon Defaulted
Mortgage Loans" and the sections in the prospectus titled "Risk Factors--Risks
Relating to the Mortgage Loans--Owners and Operators of Mortgaged Property and
Mortgage Lenders May Become Liable for the Costs of Environmental Cleanup" and
"Legal Aspects of Mortgage Loans--Environmental Risks."
A TAX MAY BE IMPOSED ON THE TRUST IF THE TRUST ACQUIRES A MORTGAGED
PROPERTY SUBSEQUENT TO A DEFAULT, WHICH WILL REDUCE THE NET PROCEEDS AVAILABLE
TO MAKE PAYMENTS TO YOU. If the trust were to acquire a mortgaged property
subsequent to a default on the related mortgage loan pursuant to a foreclosure
or deed in lieu of foreclosure, the special servicer may be required to retain
an independent contractor to operate and manage the REO property. Any "net
income from foreclosure property" arising from that manner of operation and
management, other than qualifying "rents from real property," as defined in
Section 856(d) of the Internal Revenue Code, will subject the trust to federal,
and possibly state or local, tax on income derived from that source at the
highest marginal corporate tax rate, currently 35%, and in some cases might
subject the trust to a "prohibited transaction" tax under Section 860F of the
Internal Revenue Code on any net income from foreclosure property at a rate of
100%. This tax will reduce net proceeds available for distribution to you and
to other certificateholders. The trust generally will be permitted to receive
taxable "net income from foreclosure property" within the meaning of Section
857(b)(4)(B) of the Internal Revenue Code if (a) the special servicer
determines that the net after-tax recovery to the trust from operating the
property would be greater than it would be if the related REO property were
leased to a third party at a fixed rental so as to produce qualifying "rents
from real property," or (b) the property could not reasonably be so leased. The
risk of such a tax being imposed is particularly present with respect to the
mortgaged property operated as a hotel.
YOU HAVE VERY LIMITED RIGHTS TO PARTICIPATE IN DECISIONS REGARDING THE
TRUST. Your certificates generally do not entitle you to vote, except with
respect to required consents to some types of amendments to the pooling and
servicing agreement and, if the conditions specified in the pooling and
servicing agreement are met, with respect to votes to replace parties to the
pooling and servicing agreement. Generally, you have only very limited rights
to participate in decisions with respect to the administration of the trust
because the pooling and servicing agreement provides that decisions are
generally made by the servicer, the trustee or the special servicer, as
applicable. However, the controlling class will have the right to select the
operating advisor, who in turn will have the right to replace the special
servicer under the circumstances described under "Servicing of the Mortgage
Loans--Termination of the Special Servicer" in this prospectus supplement.
Any decision made by one of those parties in respect of the trust, even
if, as determined by that party in its good faith and reasonable judgment to be
in your best interest, may be contrary to the decision that would have been
made by you and may adversely affect your interests.
IF THE SERVICER AND/OR SPECIAL SERVICER PURCHASES ALL OR A PORTION OF THE
CERTIFICATES, THE SERVICER AND/OR SPECIAL SERVICER MAY BE SUBJECT TO A CONFLICT
OF INTEREST. The servicer, the special servicer or one or more of their
respective affiliates may purchase the certificates. If the servicer and/or
special servicer purchases certificates, the servicer and/or special servicer
may be subject to a conflict of interest because it would have an economic
interest in the trust that is different from that of holders of other
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classes of certificates. However, the pooling and servicing agreement requires
the servicer and the special servicer to service the mortgage loans in
accordance with specified objective standards and without regard to ownership
of any certificate by the servicer, the special servicer or any affiliate of
either of them.
The special servicer is given considerable latitude in determining whether
and in what manner to liquidate or modify defaulted mortgage loans. The
operating advisor will have the right to replace the special servicer under the
circumstances described under "Servicing of the Mortgage Loans--
Termination of the Special Servicer" in this prospectus supplement. At any
given time, the operating advisor will be controlled generally by the holders
of the controlling class, and those holders may have interests in conflict with
those of the holders of the certificates of one or more other classes. For
instance, the holders of certificates of the controlling class might desire to
mitigate the potential for loss to that class from a troubled mortgage loan by
deferring enforcement in the hope of maximizing future proceeds. However, the
interests of the trust may be better served by prompt action, since delay
followed by a market downturn could result in less proceeds to the trust fund
than would have been realized if earlier action had been taken. The special
servicer or an affiliate may acquire some of the most subordinated certificates
(including those of the initial controlling class). Under those circumstances,
the special servicer itself may have interests that conflict with the interests
of the other holders of the certificates. It is anticipated that the special
servicer will be the initial operating advisor.
For additional information regarding the obligations of the servicer and
special servicer, you should also review the section in this prospectus
supplement titled "Servicing of the Mortgage Loans."
THE UNDERWRITERS MAY BE SUBJECT TO A CONFLICT OF INTEREST. Each
underwriter is an affiliate of a mortgage loan seller and may be subject to
conflicts of interest arising from the related mortgage loan seller's desire to
consummate a sale of its mortgage loans to the trust.
THE PROPERTY MANAGERS MAY BE SUBJECT TO A CONFLICT OF INTEREST. Some of
the property managers for the mortgaged properties (or their affiliates) manage
additional properties, including properties that may compete with the mortgaged
properties. Affiliates of the managers, and some of the managers themselves,
also may own other properties, including competing properties. The managers of
the mortgaged properties may accordingly experience conflicts of interest in
the management of those mortgaged properties.
IF YOU HOLD SUBORDINATE CERTIFICATES, THE SEQUENTIAL PAY AND SUBORDINATION
FEATURES OF THESE CERTIFICATES MAY RESULT IN DELAYS AND REDUCTIONS IN PAYMENTS
TO YOU. The rights of holders of each class of subordinate certificates to
receive payments of principal and interest otherwise payable on their
certificates will be subordinated to the rights of the holders of the more
senior certificates. Losses on the mortgage loans will be generally allocated
to the Class N, Class M, Class L, Class K, Class J, Class I, Class H, Class G,
Class F, Class E, Class D, Class C and Class B Certificates, in that order,
reducing amounts otherwise payable to the class to which a loss is allocated.
Any remaining losses would then be allocated to the Class A-1 and Class A-2
Certificates, and solely with respect to interest losses, the Class X
Certificates, pro rata, in each case reducing principal and/or interest
otherwise payable thereon. If losses on the mortgage loans exceed the aggregate
certificate balance of the classes of certificates subordinated to a particular
class, that class will suffer a loss equal to the full amount of that excess
(up to the outstanding certificate balance of that class). If you calculate
your anticipated yield based on assumed rates of default and losses that are
lower than the default rate and losses actually experienced, and those losses
are allocable to your certificates, your actual yield to maturity will be lower
than your assumed yield. Under some extreme scenarios, your yield could be
negative. In general, the earlier a loss borne by your certificates occurs, the
greater the effect on your yield to maturity.
The sequential pay and subordination features governing the priority of
distributions to certificateholders may result in delays in the payment of
interest and/or principal to any subordinated class of certificates or to the
reduction of the related certificate balance in connection with the allocation
of losses, shortfalls or expenses, which reduction may remain unreimbursed. Any
such delay
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or reduction will adversely affect the yield to maturity of one or more classes
of certificates. See "Description of the
Certificates--Distributions--Application of Available Distribution Amount" and
"Description of the Certificates--Subordination; Allocation of Losses,
Shortfalls and Expenses" in this prospectus supplement for more information.
INTEREST ON ADVANCES AND COMPENSATION FOR SPECIAL SERVICING ACTIVITIES MAY
LEAD TO SHORTFALLS OR LOSSES BEING ALLOCATED TO ONE OR MORE CLASSES OF
CERTIFICATES. To the extent described under "Servicing of the Mortgage
Loans--Servicing and Other Compensation and Payment of Expenses" in this
prospectus supplement, the servicer, the trustee or the fiscal agent, as
applicable, will be entitled to receive interest on unreimbursed advances of
scheduled interest and/or principal and servicing advances on the mortgage
loans. This interest will generally accrue from the date on which the related
advance is made or incurred through the date of reimbursement. In addition,
under some circumstances, including delinquencies in the payment of principal
and interest, a mortgage loan will be serviced by the special servicer, and the
special servicer is entitled to compensation for special servicing activities.
The rights of those parties to receive interest on advances and special
servicing compensation is senior to the rights of certificateholders to receive
distributions and may lead to shortfalls or losses being allocated to one or
more classes of certificates on one or more distribution dates.
RISK FACTORS RELATING TO THE MORTGAGE LOANS
SUBSTANTIALLY ALL OF THE MORTGAGE LOANS IN THE POOL ARE NON-RECOURSE
LOANS. The mortgage loans in the pool are not an obligation of, or insured or
guaranteed by, any governmental entity or private mortgage insurer.
You should consider all of the mortgage loans in the pool to be
non-recourse loans, which generally means that, in the event of a default under
a mortgage loan, other than a default resulting from fraud or other willful
misconduct, recourse may be had only against the specific properties and other
assets that have been pledged to secure the mortgage loan. Consequently,
payment on each mortgage loan prior to maturity is dependent primarily on the
income from, and the value of, the related mortgaged property. Moreover, even
if a mortgage loan provides for recourse to a borrower or its affiliates, there
can be no assurance that the trust ultimately could collect sums due under the
mortgage loan.
OFFICE PROPERTIES HAVE PARTICULAR RISKS. 32 of the mortgaged properties,
which constitute security for mortgage loans (or allocated principal portion
thereof) representing approximately 24.4% of the initial pool balance, are
office properties. These types of properties are exposed to certain unique
risks. See "Risk Factors--Risks Relating to the Mortgage Loans--Office
properties have particular risks" in the prospectus.
In addition to risks generally associated with real estate, office
properties are also affected significantly by:
o adverse changes in population and employment growth;
o the quality of the office property's tenants;
o the physical attributes of the building;
o local competitive conditions, including the supply of office space or
the existence or construction of new competitive office buildings;
o the quality and management philosophy of management;
o the attractiveness of the properties to tenants and their customers or
clients;
o the attractiveness of the surrounding neighborhood; and
o the need to make major repairs or improvements to the property to
satisfy the needs of major tenants.
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Office properties that are not equipped to accommodate the needs of modern
business may become functionally obsolete, and thus non-competitive. In
addition, office properties may be adversely affected by an economic decline in
the businesses operated by their tenants. A decline of this sort may result in
one or more significant tenants ceasing operations at the related locations,
which may occur on account of:
o a tenant's voluntary decision not to renew a lease;
o bankruptcy or insolvency of a tenant; or
o a tenant's general cessation of business activities.
The risk to the performance of a mortgaged property of an economic decline
as described above is greater if the property's revenue is dependent on a
single tenant or if there is a significant concentration at the property of
tenants in a particular business or industry.
RETAIL PROPERTIES HAVE PARTICULAR RISKS. 48 of the mortgaged properties,
which constitutes security for mortgage loans (or allocated principal portion
thereof) representing approximately 24.1% of the initial pool balance, are
retail properties. These types of properties are exposed to certain unique
risks. See "Risk Factors--Risks Relating to the Mortgage Loans--Mortgage loans
secured by retail properties may be adversely affected by changes in consumer
spending patterns, alternative forms of retailing and changes in tenants
occupying the retail properties" in the prospectus.
In addition to risks generally associated with real estate, retail
properties are also affected significantly by:
o adverse changes in consumer spending patterns;
o local competitive conditions, including the supply of retail space or
the existence or construction of new competitive shopping centers or
shopping malls;
o alternative forms of retailing, which reduce the need for retail space
by retail companies, including
-- direct mail,
-- television shopping networks, and
-- Internet based sales;
o the quality and management philosophy of management;
o the attractiveness of the properties to tenants and their customers;
o the attractiveness of the surrounding neighborhood;
o the public perception of the safety of customers, at shopping malls and
shopping centers, for example; and
o the need to make major repairs or improvements to satisfy the needs of
tenants.
In some cases, rents on retail properties are linked to a percentage of
gross sales generated by the tenant's business. These arrangements cause the
value of the retail properties to correlate to the performance of tenant
businesses and increase the risk that the borrower will be unable to make
payments on the related mortgage loan if the tenants' businesses perform
poorly. Therefore, the value of these retail properties are significantly
impacted by the quality of the tenants as well as fundamental aspects of real
estate such as location and market demographics.
Anchor or significant tenants at a retail property operated as a shopping
center play an important part in generating customer traffic and making the
property a desirable location for other tenants at the related property. Retail
properties operated as shopping centers may be adversely affected if an anchor
or other significant tenant ceases operations at relevant locations, which may
occur on account of:
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o a tenant's decision not to renew a lease;
o bankruptcy or insolvency of the tenant; or
o a tenant's general cessation of business activities.
In addition, some tenants at retail properties may be entitled to
terminate their leases or reduce their rent payments if an anchor tenant ceases
operations at the related property.
In some cases, a shopping center has a "shadow" anchor tenant, meaning
that an anchor store is located in close proximity to but is not part of the
mortgaged property and therefore is not under the control of the borrower or
property manager.
INDUSTRIAL PROPERTIES HAVE PARTICULAR RISKS. 44 of the mortgaged
properties, which constitute security for mortgage loans (or allocated
principal portion thereof) representing approximately 16.5% of the initial pool
balance, are industrial properties. These types of properties are exposed to
certain unique risks. See "Description of the Trust Funds--Mortgage
Loans--Mortgage Loans Secured by Industrial Properties" in the prospectus.
Significant factors that affect the value of industrial properties are:
o the quality of tenants;
o building design and adaptability; and
o the location of the property.
Industrial properties may be adversely affected by reduced demand for
industrial space occasioned by a decline in a particular industry segment
and/or by a general slow-down in the economy, and an industrial property that
suited the particular needs of its original tenant may be difficult to relet to
another tenant or may become functionally obsolete relative to newer
properties. Furthermore, industrial properties may be adversely affected by the
availability of labor sources or a change in the proximity of supply sources.
Industrial properties frequently have a single tenant, and are therefore
heavily dependent on the success of the tenant's business.
Aspects of building site, design and adaptability affect the value of an
industrial property. Site characteristics that are valuable to an industrial
property include ceiling heights, column spacing, number of bays and bay
depths, divisibility, floor loading capacities, truck turning radius and
overall functionality and accessibility. Nevertheless, site characteristics of
an industrial property suitable for one tenant may not be appropriate for other
potential tenants, which may make it difficult to relet the property.
Location is also important to the success of an industrial property
because an industrial property requires the availability of labor sources,
proximity to supply sources and customers and accessibility to rail lines,
major roadways and other distribution channels. Further, industrial properties
may be adversely affected by economic declines in the industry segment of their
tenants.
MANUFACTURED HOUSING COMMUNITY PROPERTIES HAVE PARTICULAR RISKS. Eight of
the mortgaged properties, which constitute security for mortgage loans (or
allocated principal portion thereof) representing approximately 13.6% of the
initial pool balance, are parcels of land underlying manufactured housing
community properties, together with certain improvements thereon, in which the
tenants rent space for their individually-owned manufactured homes. These types
of properties are exposed to certain unique risks. See "Risk Factors--Risks
Relating to the Mortgage Loans--Risks Particular to Manufactured Housing
Community Properties and Recreational Vehicle Parks" in the prospectus.
The successful operation of a manufactured housing community will
generally depend upon the number of competing manufactured housing communities
in the local market, as well as upon other factors, including its age,
appearance, reputation, management and the types of facilities and services it
provides.
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Manufactured housing communities also compete against alternative forms of
residential housing, including multifamily rental properties,
cooperatively-owned apartment buildings, condominium complexes and
single-family residential developments.
Manufactured housing community properties are "special purpose" properties
that cannot be readily converted to general residential, retail or office use.
Thus, if the operation of a manufactured housing community becomes unprofitable
due to competition, age of the improvements or other factors such that the
borrower becomes unable to meet its obligations on the related mortgage loan,
the liquidation value of the mortgaged property may be substantially less,
relative to the amount owing on the related mortgage loan, than would be the
case if the mortgaged property were readily adaptable to other uses.
MULTIFAMILY PROPERTIES HAVE PARTICULAR RISKS. 23 of the mortgaged
properties, which constitute security for mortgage loans (or allocated
principal portion thereof) representing approximately 11.1% of the initial pool
balance, are multifamily properties. These types of properties are exposed to
certain unique risks. See "Risk Factors--Risks Relating to the Mortgage
Loans--Some Risks That Affect Occupancy and Rent Levels of Multifamily Rental
Properties Such as Adverse Economic Conditions, Construction of Additional
Housing, Military Base Closings, Company Relocations and Rent Control Laws May
Affect the Ability of the Borrower to Meet its Obligations Under the Mortgage
Loan" in the prospectus.
Adverse economic conditions, either local, regional or national, may limit
the amount of rent that can be charged for rental units, may adversely affect
tenants' ability to pay rent and may result in a reduction in timely rent
payments or a reduction in occupancy levels without a corresponding decrease in
expenses. Occupancy and rent levels may also be affected by:
o the capability of the property manager;
o construction of additional housing units in the surrounding area;
o the reputation of the rental property;
o the services provided at the rental property;
o the deterioration of the surrounding neighborhood;
o local military base closings;
o interest rate levels and favorable income and economic conditions which
may encourage home ownership instead of renting;
o company relocations and closings; or
o national and local politics, including current or future rent
stabilization and rent control laws and agreements.
Multifamily apartment units are typically leased on a short-term basis,
and consequently, the occupancy rate of a multifamily rental property may be
subject to rapid decline, for reasons including the foregoing. In addition,
favorable mortgage interest rates may encourage tenants in multifamily rental
properties to purchase single-family housing rather than continue to lease
housing, or the characteristics of a neighborhood may change over time or in
relation to newer developments. Further, some costs of operating a multifamily
rental property may increase, including the cost of utilities and the costs of
required capital expenditures. Also, multifamily rental properties may be
subject to rent control laws, which could impact the future cash flows of the
related properties.
Some states strictly regulate the relationship between landlords and
tenants. Commonly, these laws require a written lease, good cause for eviction
and disclosure of fees, and prohibit unreasonable rules and retaliatory
evictions. Apartment building owners also have been the subject of suits under
state "Unfair and Deceptive Practices Acts" and other general consumer
protection statutes for coercive, abusive or unconscionable leasing and sales
practices. In those jurisdictions and potentially others, landlords are facing
new and more complicated challenges to their rights to set rents and
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enforce lease terms, which may reduce the value of multifamily properties or
increase the volatility of the related net cash flows. A few states offer
especially significant protection to tenants. For example, some states limit
the basis on which a landlord may terminate a tenancy or increase its rent or
prohibit a landlord from terminating a tenancy solely by reason of the sale of
the building.
In addition to state regulation of the landlord-tenant relationship,
numerous counties and municipalities impose rent control or rent stabilization
regulations on apartment buildings. These ordinances may limit rent increases
to fixed percentages, which in turn may be linked to increases in the consumer
price index, schedules approved by a governmental agency, or to increases
determined through mediation or binding arbitration. In many cases, rent
control or rent stabilization laws do not permit vacancy decontrol or
destabilization, and therefore limit the projected future net cash flows and
market value of the affected multifamily properties. Any limitations on a
borrower's ability to raise property rents may impair that borrower's ability
to repay its mortgage loan from the property's net cash flow or from the
proceeds of a sale or refinancing of the property.
Some multifamily rental properties are eligible to receive low-income
housing tax credits pursuant to Section 42 of the Internal Revenue Code.
However, rent limitations associated therewith may adversely affect the ability
of the applicable borrowers to increase rents to maintain the related mortgaged
properties in proper condition during periods of rapid inflation or declining
market value of the properties. In addition, the income restrictions on tenants
imposed by Section 42 of the Internal Revenue Code may reduce the number of
eligible tenants in the related mortgaged properties and result in a reduction
in occupancy rates applicable thereto. Furthermore, some eligible tenants may
not find any differences in rents between the multifamily rental properties
eligible to receive low-income housing tax credits and other multifamily rental
properties in the same area to be a sufficient economic incentive to reside at
property eligible to receive those tax credits, which may have fewer amenities
or otherwise be less attractive as a residence. All of these conditions and
events may increase the possibility that a borrower owning such a property may
be unable to meet its obligations under its mortgage loan.
Some multifamily rental properties are believed to have tenants eligible
for rental subsidy payments under federal housing assistance payment programs,
including Section 8 of United States Housing Act, as amended. Under that
program, administered by the Department of Housing and Urban Development, a
property must satisfy requirements to qualify for inclusion in the program.
These requirements relate to, among other things, income limitations on
tenants. A borrower that owns such a mortgaged property may be adversely
affected if the mortgaged property fails to qualify for inclusion in the
program, if subsidies thereunder are reduced, or if the programs are otherwise
terminated.
SELF-STORAGE FACILITIES HAVE PARTICULAR RISKS. 24 of the mortgaged
properties, which constitute security for mortgage loans (or allocated
principal portion thereof) representing approximately 4.9% of the initial pool
balance, are self-storage facilities. These types of properties are exposed to
certain unique risks. See "Risk Factors--Risks Relating to the Mortgage
Loans--Self-Storage Properties Have Particular Risks" in the prospectus.
Self-storage properties are vulnerable to competition because they are
relatively quick and inexpensive to construct, and because break-even occupancy
rates are relatively low. In addition to competition, factors that affect the
success of a self-storage facility include:
o location and visibility;
o building design;
o proximity to apartment complexes or commercial users;
o trends of apartment tenants in the area moving to single family homes;
o services provided, including security, privacy and accessibility;
o dependence upon business activities ancillary to renting units as a
source of income;
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o age and appearance of the improvements; and
o quality of management.
Conversion of a self-storage facility to an alternate use generally would
require substantial capital expenditures because of their particular building
characteristics. If the operations of any of the self-storage mortgaged
properties becomes unprofitable as a result of decreased demand or competition,
or other factors, so that the borrower is unable to meet its obligations on the
related mortgage loan, the liquidation value of that mortgaged property may be
substantially reduced because of its limited adaptability to other uses.
User privacy and ease of access to individual storage space may increase
environmental risks, although lease agreements generally prohibit users from
storing hazardous materials in their leased units. The environmental
assessments performed in connection with self-storage mortgaged properties did
not include inspections of the contents of the self-storage units. Accordingly,
there can be no assurance that all of the units included in the self-storage
mortgaged properties are free from hazardous materials or will remain so in the
future.
HOTEL PROPERTIES HAVE PARTICULAR RISKS. One mortgaged property, which
constitutes security for a mortgage loan representing approximately 2.1% of the
initial pool balance, is a limited service hotel. Hotel properties are exposed
to certain unique risks. See "Risk Factors--Risks Relating to the Mortgage
Loans--Hotel and Motel Properties Have Particular Risks" in the prospectus.
Hotel properties are subject to operating risks common to the lodging
industry. These risks include, among other things:
o a high level of continuing capital expenditures to keep necessary
furniture, fixtures and equipment updated;
o competition from other hotels and hospitality properties;
o increases in operating costs, which increases may not necessarily in the
future be offset by increased room rates; and
o dependence on business and commercial travelers and tourism, increases
in energy costs and other expenses of travel and adverse effects of
general and local economic conditions.
These factors could adversely affect the related borrowers' ability to
make payments on the related mortgage loans. Since limited service hotels and
motels are relatively quick and inexpensive to construct, an over-building of
hotels and motels could occur in any given region, which would likely adversely
affect occupancy and daily room rates of the mortgaged properties that compete
with them. Further, because hotel rooms are generally rented for short periods
of time, hotel properties tend to be more sensitive to adverse economic
conditions and competition than many other commercial properties. Furthermore,
the financial strength and capabilities of the owner and operator of a hotel
may have a substantial impact on that hotel's quality of service and economic
performance. Additionally, the revenues of some hotels may be highly seasonal
in nature.
A hotel property may present additional risks as compared to other
commercial property types in that:
o hotels may be operated pursuant to franchise, management and operating
agreements that may be terminable by the franchisor, the manager or the
operator;
o the transferability of any operating, liquor and other licenses to the
entity acquiring the related hotel, either through purchase or
foreclosure, is subject to local law requirements that typically restrict
the transfer of those licenses;
o it may be difficult to terminate an ineffective operator of a hotel
property subsequent to a foreclosure of the related property; and
o future occupancy rates may be adversely affected by, among other
factors, any negative perception of a hotel based upon its historical
reputation.
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HOTEL PROPERTIES AFFILIATED WITH A FRANCHISE OR HOTEL MANAGEMENT COMPANY
HAVE PARTICULAR RISKS. The mortgaged property operated as a hotel is operated
as a franchise of a national hotel chain and managed by a hotel management
company. The performance of a hotel property operated in this manner depends in
part on:
o the continued existence and financial strength of the franchisor and of
the hotel management company;
o the public perception of the franchise; and
o the duration of the franchise license and of the management agreement.
Where a hotel property is operated pursuant to a franchise agreement, the
continuation of the franchise license is typically subject to specified
operating standards and other terms and conditions. The franchisor periodically
inspects its licensed properties to confirm adherence to its operating
standards. The failure of the hotel property to maintain these standards or
adhere to other terms and conditions could result in the loss or cancellation
of the franchise license. It is possible that the franchisor could condition
the continuation of a franchise license on the completion of capital
improvements or the making of capital expenditures that the related borrower
determines are too expensive or are otherwise unwarranted in light of general
economic conditions or the operating results or prospects of the affected
hotels or motels. In that event, the related borrower may elect to allow the
franchise license to lapse. In any case, if the franchise is terminated, the
related borrower may seek to obtain a suitable replacement franchise or to
operate the related hotel property independently of a franchise license. The
loss of a franchise license could have a material adverse effect upon the
operations or the value of the hotel covered by the franchise because of the
loss of associated name recognition, marketing support and centralized
reservation systems provided by the franchisor.
The transferability of franchise license agreements may be restricted. In
the event of a foreclosure, the trustee (or servicer or special servicer) may
not have the right to use the franchise license without the franchisor's
consent. Conversely, the trustee (or servicer or special servicer) may be
unable to remove a franchisor or a hotel management company that it desires to
replace following a foreclosure.
THEATER PROPERTIES HAVE PARTICULAR RISKS. One mortgaged property, which
constitutes security for a mortgage loan representing approximately 2.1% of the
initial pool balance, is a theater property. These types of properties are
exposed to certain unique risks.
Significant factors determining the value of a theater property include:
o the strength and experience of the operator;
o its ability to secure film license agreements for first-run movies; and
o its ability to maintain high attendance levels.
Theater operators are also highly reliant on sales of food and beverages
to attendees. Physical attributes of the building will also impact property
value. These physical attributes include:
o number of screens;
o the size of individual auditoriums within the theater;
o quality and modernity of sound and projection systems; and
o quality and comfort of individual theaters and common areas (including
box office, lobby and concessions area).
The performance of a theater property can also be impacted by the quality,
size and proximity of competitive theater properties and the relative appeal of
films being screened at other theater properties within the market. In recent
years, the theater industry has experienced a high level of construction of new
theaters and an increase in competition among theater operators. This has
caused
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some operators to experience financial difficulties, resulting in downgrades in
their credit ratings and, in certain cases, bankruptcy filings. The theater
industry is highly dependent on the quality and popularity of films being
produced by film production companies both in the United States and overseas; a
slowdown in movie production or decrease in the appeal of films being produced
can negatively impact the value of a theater property. The theater industry is
also subject to competitive distribution channels. These competitive
distribution channels include:
o cable and satellite television;
o videotape and videodisk sales and rentals; and
o electronic distribution via the Internet.
REPAYMENT OF THE MORTGAGE LOANS IN THE POOL WILL DEPEND ON THE SUCCESSFUL
OPERATION OF THE MORTGAGED PROPERTIES. The mortgaged properties consist
entirely of income-producing real estate. Lending on the security of
commercial, multifamily and manufactured housing community properties is
generally viewed as riskier than lending on the security of single-family
residential real estate. This is because commercial, multifamily and
manufactured housing community real estate lending typically involves larger
loans than single-family lending and because repayment is dependent on the
successful operation of the related real estate project, the tenants'
businesses and their creditworthiness.
The ability of a mortgaged property to generate sufficient net operating
income to pay debt service on the related mortgage loan 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 ability to convert an unsuccessful property to an alternative use;
o the proximity and attractiveness of competing properties;
o new construction of competing properties in the same real estate market
as the property;
o the adequacy of the property's management and maintenance;
o an increase in operating expenses for the property;
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;
o rent control laws;
o a decline in rental rates as leases are renewed or replaced;
o number and diversity of tenants; and
o dependence on a single tenant or a concentration of tenants in a
particular business or industry.
Other factors that may adversely affect the ability of a mortgaged
property to generate net cash flow are more general in nature, including
without limitation:
o national, regional or local economic conditions, including plant
closings, industry slowdowns, unemployment rates and weaknesses in
industries;
o local real estate conditions, including without limitation, an
oversupply of similar space;
o demographic factors;
o customer tastes and preferences; and
o retroactive changes in building codes.
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Lenders typically look to the debt service coverage ratio (i.e., the ratio
of net cash flow to debt service described more fully under "Description of the
Mortgage Pool--Underwritten Cash Flow" in this prospectus supplement) and loan
to value ratio (i.e., the ratio of the unpaid principal balance of a mortgage
loan to the appraised value of the related mortgaged property) as measures of
the risk and severity of default on a loan secured by income-producing
property. Commercial, multifamily and manufactured housing community property
values and cash flows are subject to volatility and may be insufficient to
cover debt service on the related mortgage loans at any given time. 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 revenues;
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.
Mortgaged properties with short-term or less creditworthy sources of
revenue and/or relatively high operating costs, including without limitation
hotel or motel 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 lease or occupancy
rates will tend to have a more immediate effect on the net cash flow of those
mortgaged properties with short-term revenue sources than on mortgaged
properties with longer-term sources of revenue, and may lead to higher rates of
delinquency or defaults than would be experienced by those properties with
medium to long-term leases from creditworthy tenants.
THE PROPERTY VALUES OF THE MORTGAGED PROPERTIES MAY BE ADVERSELY AFFECTED
EVEN IF CURRENT OPERATING INCOME IS NOT. While the property values of the
mortgaged properties generally will depend upon the operating income they
generate, various factors may adversely affect the value of the mortgaged
properties without affecting the mortgaged properties' current net operating
income. These factors include, among others:
o changes in governmental regulations;
o fiscal policy;
o zoning or tax laws;
o potential environmental legislation or liabilities or other legal
liabilities;
o the availability of capital for refinancing;
o changes in interest rate levels;
o convertability of any property to an alternative use;
o the proximity and attractiveness of competing properties; and
o new construction of the same or similar type of property in the same
real estate market.
A decrease in the value of a mortgaged property could adversely affect the
liquidation value of that mortgaged property and reduce the amount that can be
realized if an event of default occurs on the related mortgage loan.
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MORTGAGE LOANS WITH BALLOON PAYMENTS INVOLVE A GREATER RISK TO THE LENDER
BECAUSE THE ABILITY OF THE BORROWER TO MAKE THE BALLOON PAYMENT DEPENDS UPON
ITS ABILITY TO REFINANCE THE LOAN OR SELL THE RELATED MORTGAGED PROPERTY. 122
of the mortgage loans in the pool, representing approximately 89.5% of the
initial pool balance, do not fully amortize over their stated term to maturity
and will have substantial payments of principal due at maturity, or in the case
of the ARD Loan on its Anticipated Repayment Date, each as defined in the
Glossary to this prospectus supplement, unless previously prepaid. Two of the
mortgage loans described above, which represent approximately 2.0% of the
initial pool balance, have an initial interest only period during which time
they do not require the payment of principal and thereafter require partial
amortization of principal prior to maturity. Two of the mortgage loans
described above, representing approximately 1.8% of the initial pool balance,
require payments of interest only for their entire respective terms.
Loans that require balloon payments involve a greater risk to the lender
than fully amortizing loans because the ability of a borrower to make a balloon
payment will depend on its ability either:
o to refinance the mortgage loan; or
o to sell the related mortgaged property.
The ability of a borrower to accomplish either of these goals will be
affected by all of the factors described in this prospectus supplement
affecting property value and cash flow, as well as a number of other factors at
the time of attempted sale or refinancing, including:
o prevailing economic conditions;
o the level of available mortgage rates;
o the availability of financing for properties of the type being financed
at the time of sale or refinancing; and
o changes in governmental regulations, zoning and tax laws.
In order to maximize recoveries on defaulted mortgage loans, the pooling
and servicing agreement authorizes the servicer or the special servicer to
extend and modify mortgage loans that are in material default or as to which a
payment default, including the failure to make a balloon payment, is imminent,
subject to the limitations described under "Servicing of the Mortgage
Loans--Modifications, Waivers and Amendments" in this prospectus supplement. We
cannot assure you that any extension or modification will increase the present
value of recoveries in a given case. Any delay in collection of a balloon
payment that would otherwise be distributable in respect of a class of offered
certificates, whether the delay is due to borrower default or to modification
of the related mortgage loan by the servicer or the special servicer, will
likely extend the weighted average life of that class of offered certificates.
For more information, you should also review "Yield and Maturity
Considerations" in this prospectus supplement and in the prospectus.
THE SUCCESS OF EACH MORTGAGED PROPERTY DEPENDS ON THE PERFORMANCE AND
VIABILITY OF THE PROPERTY MANAGER. Each mortgaged property is managed by a
property manager or by the borrower itself. In many cases the property manager
is an affiliate of the borrower. The successful operation of real estate is
largely dependent on the performance and viability of the property manager. The
property manager is responsible for responding to changes in the local market,
planning and implementing the rental structure, including establishing rental
rates, and advising the borrowers so that maintenance and capital improvements
can be carried out in a timely fashion. Properties deriving revenues primarily
from short-term sources are generally more management-intensive than properties
leased to creditworthy tenants under long-term leases. A good property manager,
by controlling costs, providing appropriate service to tenants and overseeing
the maintenance of improvements, can improve cash flow, reduce vacancy, leasing
and repair costs and preserve building value. On the other hand, management
errors can, in some cases, impair short-term cash flow and the long-term
viability of an income-producing property.
We cannot give you any assurance regarding the performance of any property
manager or operator that is currently in place or that may be put in place upon
the expiration or termination of
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current management agreements or following any default or foreclosure under a
mortgage loan. In addition, the non-borrower property managers generally are
operating companies and, unlike limited purpose entities, may not be restricted
from incurring debt and other liabilities in the ordinary course of business or
otherwise. We cannot assure you that the property managers will always be in a
financial condition to continue to fulfill their management responsibilities
under the related management agreements throughout their respective terms or
that the property managers will not be subject to conflicts of interest arising
from their management of other properties that compete with those securing the
mortgage loans.
THE FILING OF BANKRUPTCY PETITIONS BY OR AGAINST BORROWERS MAY REDUCE OR
DELAY COLLECTIONS ON THE RELATED MORTGAGE LOANS. Under the federal bankruptcy
code, the filing of a bankruptcy petition by or against a borrower may stay the
commencement or continuation of a foreclosure action. In addition, if a court
determines that the value of the mortgaged property is less than the principal
balance of the mortgage loan it secures, the court may reduce the amount of
secured indebtedness to the then-current value of the mortgaged property. Such
an action would make the lender a general unsecured creditor for the difference
between the then-current value and the amount of its outstanding mortgage
indebtedness. A bankruptcy court also may:
o grant a debtor time to cure a payment default on a mortgage loan;
o reduce monthly payments due under a mortgage loan;
o change the rate of interest due on a mortgage loan;
o otherwise alter the mortgage loan's repayment schedule; or
o change other terms of the mortgage loan.
Additionally, the borrower's trustee or the borrower, as debtor in
possession, has special powers to avoid, subordinate or disallow debts. In some
circumstances, the claims of the mortgage lender may be subordinated to
financing obtained by a debtor-in-possession subsequent to its bankruptcy.
The filing of a bankruptcy petition may also stay the lender from
enforcing a borrower's assignment of rents and leases. The federal bankruptcy
code also may interfere with the trustee's ability to enforce any lockbox
requirements. The legal proceedings necessary to resolve these issues can be
time consuming and expensive and may significantly delay the trust fund's
receipt of rents. Rents also may escape an assignment to the extent they are
used by the borrower to maintain the mortgaged property or for other court
authorized expenses.
As a result of the foregoing, the trustee's recovery with respect to
borrowers in bankruptcy proceedings may be significantly delayed, and the
aggregate amount ultimately collected may be substantially less than the amount
owed.
In addition, a number of the borrowers under the mortgage loans are
limited or general partnerships. Under some circumstances, the bankruptcy of a
general partner in a partnership may result in the dissolution of that
partnership. The dissolution of a borrower partnership, the winding up of its
affairs and the distribution of its assets could result in an acceleration of
its payment obligations under the related mortgage loan. See "Legal Aspects of
Mortgage Loans--Bankruptcy Laws," "--Due-on-Sale and Due-on-Encumbrance
Provisions" and "--Subordinate Financing" in the prospectus.
TENANT CONCENTRATION ENTAILS RISK BECAUSE A DECLINE IN THE FINANCIAL
CONDITION OF A SINGLE TENANT OR A FEW TENANTS MAY ADVERSELY AFFECT THE NET CASH
FLOW GENERATED BY A MORTGAGED PROPERTY. In those cases where a mortgaged
property is leased to a single tenant, or is primarily leased to a small number
of major tenants, a deterioration in the financial condition or a change in the
plan of operations of that single or major tenant can have a particularly
significant effect on the net cash flow generated by the mortgaged property. If
any such single or major tenant defaults under or fails to renew its lease, the
resulting adverse financial effect on the operation of the mortgaged property
will be substantially greater than would otherwise be the case with respect to
a property occupied by a large number of less significant tenants.
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46 of the mortgaged properties, which constitutes security for mortgage
loans (or allocated principal portion thereof) representing approximately 23.6%
of the initial pool balance, are each leased to a single tenant.
In some cases where a mortgaged property is leased to a single tenant, the
property has been constructed, configured or equipped in a manner that is
generally suited for the unique requirements of the business conducted by the
tenant. If the tenant were to vacate, adapting the property to an alternative
use would be difficult and involve a much greater expense than would otherwise
be the case. Examples of these properties generally include theaters and the
retail properties operated as restaurants, parking garages or other specialty
facilities.
In addition, retail, office or industrial properties also may be adversely
affected if there is a concentration of tenants in a particular business or
industry 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 the borrower to make required payments on its
mortgage loan, pay for maintenance and other operating expenses, fund capital
improvements and pay other obligations it may have. Thus, where a mortgaged
property is leased to a single tenant, or a small number of major tenants, the
performance of the related mortgaged property will depend on the success of the
business conducted by the tenant and the nature of the industry or industries
in which that business is conducted to a greater extent than would otherwise be
the case.
TENANT BANKRUPTCY ENTAILS SPECIAL RISK. 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 the particular mortgaged
property.
Under the federal bankruptcy code, a tenant has the option of assuming an
unexpired lease (and either retaining it or assigning it to a third party) or
rejecting the lease. In general, the tenant must assume or reject the lease
within 60 days after the bankruptcy filing, although the period can be
extended. Tenants that file bankruptcy must pay rent until the lease is assumed
or rejected, except that the tenant may be granted up to 60 days (not subject
to extension) during which time rent may not be payable. If the lease is
assumed, the tenant must cure any defaults under the lease, compensate the
landlord for its losses and provide the landlord with "adequate assurance" of
future performance. If the tenant rejects the lease, the landlord's claim for
breach of the lease would be a general unsecured claim against the tenant,
unless the tenant has pledged collateral to secure the landlord's 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, plus the greater of (i) one year's rent and (ii) 15% of the remaining
reserved rent, not to exceed three years' rent. A tenant may file for
bankruptcy protection for a variety of reasons and on account of various
circumstances that may include a desire to obtain relief from lease obligations
that it considers to be at above market rates or otherwise undesirable.
The 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.
THERE ARE 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. Moreover, if
a tenant at any mortgaged property defaults in its lease obligations, the
borrower (or foreclosing lender) may incur substantial costs and experience
significant delays associated with enforcing its rights and protecting its
investment, potentially including costs incurred in renovating and reletting
the mortgaged property. For example, this may occur if a tenant attempts to
avoid paying above-market rental payments by vacating and withholding rent
following a foreclosure notwithstanding its obligation to attorn to the lender.
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We cannot give you any assurance that tenants will renew leases upon
expiration or, in the case of renewal, whether the renewal rent will be equal
to the rent previously paid or, in the case of a commercial tenant, that it
will continue to operate throughout the term of its lease. A borrower would be
adversely affected if its tenants were unable to pay rent or if the borrower
could not rent space on favorable terms or rent any space. In addition, upon
reletting or renewing existing leases, the borrower under a mortgage loan
secured by a commercial property will likely be required to pay leasing
commissions and tenant improvement costs, which, in the absence of sufficient
reserves, may adversely affect cash flow from the mortgaged property. We cannot
give you any assurances as to whether, or to what extent, economic, legal or
social factors will affect future rental or repayment patterns.
PROPERTIES LEASED TO MULTIPLE TENANTS HAVE PARTICULAR RISKS. 81 mortgaged
properties, which constitutes security for mortgage loans (or allocated
principal portion thereof) representing approximately 44.4% of the initial pool
balance, are leased to multiple tenants. If a mortgaged property has multiple
tenants, re-leasing expenditures may be more frequent than in the case of
mortgaged properties with fewer tenants, thereby reducing the cash flow
available for debt service payments.
GROUND LEASES HAVE PARTICULAR RISKS. The interest of the respective
borrowers in nine mortgaged properties, which constitutes security for mortgage
loans (or allocated principal portion thereof) representing approximately 9.1%
of the initial pool balance, consists primarily of a leasehold interest under a
ground lease where the related fee interest is not pledged as security for the
mortgage loan.
Mortgage loans secured by leasehold interests under ground leases are
subject to some 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 is terminated upon a lease default, the lender will
lose its security. Generally, the related ground lease requires the lessor to
give the lender notice of lessee defaults and an opportunity to cure them,
permits the leasehold estate to be assigned to the lender or the purchaser at a
foreclosure sale, and contains other protective provisions typically included
in a "mortgageable" ground lease.
Upon the bankruptcy of a landlord or a tenant under a ground lease,
federal bankruptcy law allows the debtor entity to elect to continue or
terminate the ground lease. A tenant under a ground lease that has been
rejected by the debtor ground lessor has the right to remain in possession of
its leased premises under the rent reserved in the lease for the term,
including renewals, of the ground lease, but is not entitled to enforce the
obligation of the ground lessor to provide any services required under the
ground lease. If a debtor tenant under a ground lease rejects the related
ground lease, the holder of a mortgage secured by the leasehold interest would
have the right to succeed to the ground lessee's position under the ground
lease only if the ground lessor had specifically granted that right to the
ground lessee. In the event of concurrent bankruptcy proceedings involving the
ground lessor and the ground lessee, the trust fund may be unable to enforce
the debtor ground lessee's obligation to refuse to treat a ground lease
rejected by a ground lessor as having been terminated. In those circumstances,
the ground lease could be terminated notwithstanding lender protection
provisions contained in the ground lease or in the mortgage. Some of the ground
leases securing the mortgaged properties provide that the ground rent payable
thereunder increases during the term of the lease. These increases may
adversely affect the cash flow and net income of the borrower from the
mortgaged property.
A mortgage loan that is secured by the borrower's leasehold interest in
the mortgaged property and by the related fee interest is presented in this
prospectus supplement as if the mortgage loan were secured by a fee mortgage.
In the case of one of the mortgage loans that is secured primarily by a
leasehold interest in a mortgaged property, which loan represents approximately
0.6% of the initial pool balance, the borrower's interest consists of a ground
sublease estate in that property. In this case, the risks described above are
associated with both the subleasehold estate of the borrower and the leasehold
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estate of the ground sublessor. In particular, the security for the mortgage
loan may be adversely affected by a borrower bankruptcy or default under the
ground sublease, a ground sublessor's default under the ground lease, a
bankruptcy of the ground sublessor/ground lessee or a bankruptcy of the owner
of the fee interest.
GEOGRAPHIC CONCENTRATION OF MORTGAGED PROPERTIES IN A PARTICULAR AREA
INCREASES THE EXPOSURE OF THE MORTGAGE POOL AS A WHOLE TO ADVERSE CONDITIONS IN
THAT AREA. A concentration of mortgaged properties in a particular state,
region or locale increases the exposure of the mortgage pool to adverse
conditions in that state, region or locale that may reduce the mortgaged
property's income and its liquidation value. Adverse conditions may include:
o general economic or demographic conditions in the state, region or
locale or adverse developments affecting an industry that is concentrated
in the state or region;
o real estate market conditions in the state or region;
o state or local government regulations;
o natural disasters, including earthquakes, floods, tornadoes and
hurricanes, which may not be fully covered by insurance; and
o other factors that are beyond the control of the related borrower.
Some states or geographic regions may be more severely affected by the
above factors than other states or regions, and to the extent that there is a
concentration of mortgaged properties or borrowers in the state or region, the
impact on the trust may be more significant than would be the case if the
properties were more geographically diversified.
Mortgaged properties located in California, Florida, Texas, Illinois and
New York, respectively, represent security for 61, 8, 17, 3 and 12 mortgaged
properties, respectively, constituting approximately 34.0%, 10.4%, 8.8%, 6.6%
and 5.5%, respectively, of the initial pool balance.
ABSENCE OR INADEQUACY OF INSURANCE COVERAGE AND THE GEOGRAPHIC
CONCENTRATION OF MORTGAGED PROPERTIES IN AREAS WITH A GREATER RISK OF NATURAL
DISASTERS MAY ADVERSELY AFFECT THE YIELD ON YOUR INVESTMENT. The mortgaged
properties may suffer casualty losses due to risks that are not covered by
insurance or for which insurance coverage is not available at commercially
reasonable rates. In addition, a substantial number of mortgage loans are
secured by mortgaged properties located in areas, including California and
Texas and in coastal areas of Florida, that have historically been at greater
risk of acts of nature for which adequate insurance may not be generally
available (including earthquakes, hurricanes and floods). Some of these
mortgage loans generally do not require borrowers to maintain earthquake or
hurricane insurance, or flood insurance in excess of the federal limit, and we
cannot assure you that borrowers will attempt or be able to obtain adequate
insurance against those risks. Moreover, if reconstruction or major repairs are
required following a casualty, changes in laws that have occurred since the
time of original construction may materially affect the borrower's ability to
effect reconstruction or major repairs or may materially increase their cost.
THE TRUST FUND'S ABILITY TO REALIZE UPON THE MORTGAGE LOANS MAY BE LIMITED
BY THE APPLICATION OF STATE LAWS. Some states (including California) have laws
prohibiting more than one "judicial action" to enforce a mortgage obligation.
Some courts have construed the term "judicial action" broadly. In the case of a
mortgage loan secured by mortgaged properties located in multiple states, the
servicer or special servicer may be required to foreclose first on mortgaged
properties located in states where those "one action" rules apply (and where
non-judicial foreclosure is permitted) before foreclosing on properties located
in states where judicial foreclosure is the only permitted method of
foreclosure. As a result, the ability to realize upon the mortgage loans may be
limited by the application of state laws. Violations of these statutes may
result in the loss of some or all of the security under the loan. Other
statutory provisions (including provisions of California law) limit any
deficiency judgment (if recourse beyond the mortgaged property is otherwise
permitted) against the borrower following a judicial sale to the excess of the
outstanding debt over the greater of (i) the fair market value of the property
at the time of the public sale and (ii) the amount of the winning bid in the
foreclosure. Further, under
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the laws of some states, including California, once a property has been sold
pursuant to a power-of-sale clause contained in a deed of trust, the lender is
precluded from seeking a deficiency judgment (if otherwise permitted) against
the borrower or, under some circumstances, guarantors.
CONCENTRATIONS IN A MORTGAGE POOL OF LOANS WITH LARGER-THAN-AVERAGE
BALANCES CAN RESULT IN LOSSES THAT ARE MORE SEVERE, RELATIVE TO THE SIZE OF THE
POOL, THAN IF THE MORTGAGE LOAN BALANCES WERE MORE EVENLY DISTRIBUTED. Several
of the mortgage loans in the pool have cut-off date balances that are
substantially higher than the average cut-off date balance of the mortgage
loans, which is approximately $5,782,829.
The largest mortgage loan has a cut-off date balance of approximately
$93,927,147 and represents approximately 11.2% of the initial pool balance.
The ten largest mortgage loans have an aggregate cut-off date balance of
approximately $305,608,167 and represent, in the aggregate, approximately 36.4%
of the initial pool balance. See the table entitled "Ten Largest Mortgage
Loans" under "Description of the Mortgage Pool--Additional Mortgage Loan
Information" in this prospectus supplement and Annex B to this prospectus
supplement.
IF THERE IS A HIGH CONCENTRATION OF LOANS TO RELATED BORROWERS, THE
FINANCIAL CONDITION OF THESE BORROWERS MAY HAVE A SIGNIFICANT IMPACT ON THE
MORTGAGE POOL. Some groups of mortgage loans in the pool consist of
non-cross-collateralized and non-cross-defaulted mortgage loans that have been
made to the same borrower or to separate borrowers with common principals. One
of those groups consists of the mortgage loan secured by the "Manufactured Home
Communities" properties that we identify as loan number 310900140 on Annex A
and describe in Annex B to this prospectus supplement and the mortgage loan
that we identify by loan number 3109000195 on Annex A, which together represent
13.1% of the initial pool balance.
If a mortgage pool has a high concentration of loans to related borrowers,
the financial difficulties of a borrower could have a greater impact on the
mortgage pool than would be the case if the borrower and its affiliates
represented a smaller proportion of the mortgage pool.
Mortgaged properties that are owned by a group of related borrowers are
likely to have common management. To the extent that mortgaged properties owned
by a group of related borrowers have common property management, any financial
or other difficulties experienced by the property manager would have a greater
impact on the mortgaged properties than would be the case if the properties did
not have common management. In addition, if a person that owns or controls
several mortgaged properties experiences financial difficulty at one of those
properties, it could defer maintenance at one or more other mortgaged
properties in order to satisfy current expenses with respect to the mortgaged
property experiencing financial difficulty, or it could attempt to avert
foreclosure by filing a bankruptcy petition that might have the effect of
interrupting monthly payments for an indefinite period on all the related
mortgage loans.
In addition, a financial failure or bankruptcy filing involving an
affiliate of a group of affiliated borrowers, including a common general
partner or the owner of a common general partner, would have a greater impact
on the mortgage pool than a financial failure or bankruptcy filing involving a
single borrower representing a smaller portion of the mortgage pool.
Nonetheless, the filing of a bankruptcy petition should not invalidate the
first lien position held by the trustee on the related mortgaged property, and
the servicer is required to make advances of scheduled payments of principal
and interest and servicing advances through liquidation unless the servicer
determines that those advances will not be recoverable.
CHANGES IN MORTGAGE POOL CONCENTRATION CAN CHANGE THE NATURE OF YOUR
INVESTMENT. As mortgage loans are prepaid, repurchased or liquidated following
default, the remaining mortgage loans as a group may exhibit increased
concentration with respect to the type of properties, property characteristics,
number of borrowers and affiliated borrowers or geographic location, and your
pass-through rate may be affected if it is equal to or calculated based upon a
weighted average of the Net Mortgage Rates on the mortgage loans.
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MORTGAGE LOANS WITH CROSS-COLLATERALIZATION ARRANGEMENTS MAY BE
SUSCEPTIBLE TO "FRAUDULENT CONVEYANCE" RISK. One mortgage loan, representing
11.2% of the mortgage pool, is secured by several mortgaged properties and
represents the indebtedness of two affiliated borrowers. This arrangement
results in cross-collateralization in that each of those borrowers has pledged
its interest in the properties as security for the repayment of its and the
other borrower's respective shares of the loan proceeds.
The purpose of cross-collateralization arrangements is to reduce the risk
of default or ultimate loss as a result of the inability of a mortgaged
property to generate sufficient net cash flow to pay debt service on the
related mortgage loan. However, if a borrower under a loan that we describe
above were to become a debtor in a bankruptcy case, the creditors of that
borrower or the representatives of the borrower's estate could challenge as a
fraudulent conveyance the pledge of the borrower's interests in one or more of
the mortgaged properties as security for the repayment of the other related
borrower's shares of the loan proceeds.
In general, such a pledge may be set aside as a "fraudulent conveyance" if
a court finds that the following circumstances exist:
o Insufficient Consideration. The pledgor did not receive fair
consideration or reasonably equivalent value in exchange for its
agreement to pledge its interest in a mortgaged property for the benefit
of the other borrower; and
o Insolvency. The pledgor either was insolvent at the time of granting the
lien on its interest in the mortgaged property, or was rendered insolvent
as a result of granting the lien on its interest in the mortgaged
property, or intended to or believed that it would incur debts that would
be beyond its ability to pay as they matured.
A BORROWER MAY BE MAINTAINING OTHER FINANCING THAT COULD REDUCE CASH FLOW
FROM THE RELATED PROPERTY AND INCREASE THE RISK OF BORROWER DEFAULT AND
BANKRUPTCY. Except as described below, the mortgage loans generally do not
permit borrowers to incur additional indebtedness that is secured by the
mortgaged properties. All of the mortgage loans, however, permit the related
borrower to incur unsecured indebtedness in the ordinary course of business.
With respect to one mortgage loan, representing approximately 0.2% of the
initial pool balance, the related borrower has incurred additional debt to an
affiliate, which debt is secured by the mortgaged property and which debt is
subject to a subordination agreement in favor of the lender. The mortgage loan
identified by loan number 310900040 permits the borrower to incur fixed-rate,
fully-amortizing subordinated indebtedness secured by the mortgaged property if
the combined loan-to-value ratio of the subordinated loan and the mortgage loan
is not more than 56.5%, the pro forma debt service coverage ratio of those
loans is greater than 1.5x, and the lender is provided with adequate
protections as it may reasonably require. The mortgage loan identified by loan
number 310900070 on Annex A permits subordinate indebtedness that is secured by
the mortgaged property for the limited purpose of financing re-tenanting costs
if the subordinated loan does not exceed $300,000, the combined loan-to- value
ratio of the subordinate loan and the mortgage loan is not more than 50%, and
the debt service coverage ratio for those loans is not less than 2.0x. Those
two mortgage loans represent 1.0% and 0.2%, respectively, of the initial pool
balance, respectively. With respect to three mortgage loans, representing
approximately 1.3% of the initial pool balance, the borrower is permitted to
incur additional debt that is not secured by the mortgaged property without the
consent of the lender.
In the case of the mortgage loan secured by the "FM Global Headquarters"
property, which we identify by loan number 28983 on Annex A and describe in
Annex B to this prospectus supplement, the borrower has incurred additional
indebtedness to a third party that is secured by the related mortgaged property
and which additional indebtedness is subject to a subordination agreement in
favor of the lender. See "Annex B--Summary of Ten Largest Loans--FM
Global--Additional Debt/Transfers."
With respect to two mortgage loans, which we refer to as the "pari passu
loans" (the mortgage loan secured by "Long Beach Marketplace," which we
identify by loan number 28750 on Annex A
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and describe in Annex B to this prospectus supplement, and the mortgage loan
that we identify by loan number 29476 on Annex A), the related mortgaged
property also secures a separate loan having identical terms (including
Mortgage Rate) other than principal balance, which we refer to as the
"companion loan," that will not be an asset of the trust or contained in the
mortgage pool. Each pari passu loan and its companion loan are together secured
by a first mortgage lien on the related mortgaged property. Each companion loan
has the benefit of a letter of credit that is required to be released if the
related borrower satisfies certain conditions that include a loan-to-value
ratio test, debt service coverage ratio test and requirements for increases in
effective gross income. Under the terms of an intercreditor agreement between
the holder of each pari passu loan and the holder of the related companion
loan, each companion loan will be subordinated in right of payment to the
related pari passu loan until the date when specified income or occupancy
criteria are satisfied and the letter of credit is released or drawn upon and
thereafter will be pari passu with the related pari passu loan in right of
payment. The right to exercise remedies with respect to each companion loan is
generally exercisable only by the holder of the related pari passu loan. The
servicer and special servicer will be required and entitled to service and
administer, and the servicer will be required to make advances with respect to,
both the pari passu loan and the companion loan. See "Description of the
Mortgage Pool--Pari Passu Loans" in this prospectus supplement.
The existence of additional debt, even if subordinated, may increase the
risk of default on a mortgage loan for several reasons, including the
following:
o Reduced Cash Flow. Additional debt service requirements may reduce cash
available for property maintenance, thereby reducing the value of the
mortgaged property.
o Refinancing. A borrower with additional debt outstanding when a mortgage
loan matures may have more difficulty refinancing the mortgage loan,
especially if the mortgage loan requires a relatively large balloon
payment at maturity.
o Bankruptcy Risks. Additional debt increases the risk that the borrower
could become insolvent or subject to bankruptcy or similar proceedings,
or might complicate bankruptcy proceedings and further delay foreclosure
on the mortgaged property. In addition, if the holder of additional debt
becomes insolvent, the trustee's ability to foreclose on the related
mortgage loan could be delayed. See "Legal Aspects of the Mortgage
Loans--Due-on-Sale and Due-on-Encumbrance Provisions" and "--Subordinate
Financing" in the prospectus.
o Default Under Other Indebtedness. If another loan secured by the
mortgaged property is in default, the other lender may foreclose on the
mortgaged property, absent an agreement to the contrary, thereby causing
a delay in payments and/or an involuntary repayment of the mortgage loan
prior to maturity. The trust fund may also be subject to the costs and
administrative burdens of involvement in foreclosure proceedings or
related litigation.
RECENTLY CONSTRUCTED PROPERTIES DO NOT HAVE OPERATING HISTORIES. 23 of the
mortgaged properties, which constitute security for mortgage loans (or
allocated principal portion thereof) representing approximately 10.7% of the
initial pool balance, were constructed after 1998, and consequently do not have
significant operating histories. There can be no assurance that these
properties will be commercially successful. There can be no assurance that
current occupancy levels of these properties will be maintained or that full
occupancy will be achieved or maintained. There also can be no assurance that
any as yet undiscovered physical or design problems with these properties will
not adversely affect occupancy levels.
THE APPRAISALS OBTAINED IN CONNECTION WITH THE ORIGINATION OR ACQUISITION
OF THE MORTGAGE LOANS MAY NOT ACCURATELY REFLECT THE PRESENT OR FUTURE VALUES
OF THE MORTGAGED PROPERTIES. An appraisal was conducted in respect of each
mortgaged property in connection with the origination or acquisition of the
related mortgage loan. The resulting estimates of value are the basis of the
loan to value ratios referred to in this prospectus supplement. Those estimates
represent the analysis and opinion of the person performing the appraisal or
market analysis and are not guarantees of present or future values. Moreover,
the values of the mortgaged properties may have changed significantly since the
appraisals
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or market studies were performed. In addition, appraisals seek to establish the
amount a typically motivated buyer would pay a typically motivated seller. That
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 values of mortgaged properties available to us as of the cut-off
date is presented for illustrative purposes only in Annex A and Annex B to this
prospectus supplement. See "Description of the Mortgage Pool--Assessments of
Property Condition" in this prospectus supplement.
INSPECTIONS OF THE MORTGAGED PROPERTIES MAY NOT IDENTIFY ALL CONDITIONS
REQUIRING REPAIR OR REPLACEMENT. Except as described below, licensed engineers
or consultants inspected each mortgaged property in connection with the
origination of the related mortgage loan to assess items such as structure,
exterior walls, roofing, interior construction, mechanical and electrical
systems and general condition of the site, buildings and other improvements.
However, we cannot assure you that all conditions requiring repair or
replacement were identified. One mortgaged property, representing security for
approximately 0.6% of the initial pool balance, had been recently constructed
as of the origination of the mortgage loan and therefore were not the subject
of a property condition assessment. In addition, the mortgaged property that is
ground leased to a third party, which mortgaged property represents security
for 0.2% of the initial pool balance, was not the subject of a property
condition assessment.
CHANGES IN ZONING LAWS MAY ADVERSELY AFFECT THE BORROWER'S PROPERTY AND AS
A RESULT ADVERSELY AFFECT THAT BORROWER'S ABILITY TO MEET ITS MORTGAGE LOAN
OBLIGATIONS. Changes in building and zoning ordinances and codes affecting some
of the mortgaged properties may have come into effect after the construction of
improvements on the mortgaged properties. As a result, some of these
improvements may not comply fully with current zoning laws, including density,
use, parking and setback requirements, but in certain cases may qualify as
permitted non-conforming uses. Changes in the applicable zoning laws may limit
the ability of a borrower to rebuild its premises "as is" in the event of a
substantial casualty loss and, to the extent law and ordinance insurance is not
in place providing coverage against the resulting diminution in value, may
adversely affect the ability of the borrower to meet its mortgage loan
obligations.
ABSENCE OF ATTORNMENT PROVISIONS IN SOME TENANT LEASES MAY REDUCE THE
VALUE OF SOME OF THE MORTGAGED PROPERTIES OR THE CASH FLOW GENERATED BY THOSE
MORTGAGED PROPERTIES. In some jurisdictions, if tenant leases are subordinate
to the liens created by the mortgage and do not contain attornment provisions
(i.e., provisions requiring the tenant to recognize a successor owner following
foreclosure as landlord under the lease), the leases may terminate upon the
transfer of the property to a foreclosing lender or purchaser at foreclosure.
Not all leases were reviewed to ascertain the existence of attornment or
subordination provisions. Accordingly, if a mortgaged property is located in
such a jurisdiction and is leased to one or more desirable tenants under leases
that are subordinate to the mortgage and do not contain attornment provisions,
that mortgaged property could experience a further decline in value if those
tenants' leases were terminated. This is particularly likely if those tenants
were paying above-market rents or could not be replaced.
If a lease is not subordinate to a mortgage, the trust fund will not
possess the right to dispossess the tenant upon foreclosure of the mortgaged
property (unless it has otherwise agreed with the tenant). If the lease
contains provisions inconsistent with the mortgage (e.g., provisions relating
to application of insurance proceeds or condemnation awards) or that could
affect the enforcement of the lender's rights (e.g., a right of first refusal
to purchase the property), the provisions of the lease will take precedence
over the provisions of the mortgage. Some of the leases of some mortgaged
properties may not be subordinate to the related mortgage.
BORROWERS THAT ARE NOT SPECIAL PURPOSE ENTITIES MAY BE MORE LIKELY TO FILE
BANKRUPTCY PETITIONS AND THIS MAY ADVERSELY AFFECT YOUR CERTIFICATES. In most
cases, the purposes of the borrowers are limited to owning and operating the
respective mortgaged properties. In some cases, however, the respective
borrower is not subject to such a limitation or is not subject to other
covenants that are customarily used to cause a borrower to be a special purpose
entity (such as requirements for the appointment of
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an independent director and the consent of that director to any voluntary
bankruptcy or similar proceedings by the borrower). One purpose of such
limitations and covenants is to avoid a bankruptcy or similar proceeding that
is intended solely to benefit a borrower's affiliate or is not justified by the
borrower's own economic circumstances (although the presence of those
limitations and covenants does not assure that a bankruptcy would be avoided).
COMPLIANCE WITH THE AMERICANS WITH DISABILITIES ACT MAY IMPOSE ADDITIONAL
COSTS ON A BORROWER AND ADVERSELY AFFECT ITS ABILITY TO MEET ITS MORTGAGE LOAN
OBLIGATIONS. Under the Americans with Disabilities Act of 1990, public
accommodations are required to meet applicable federal requirements related to
access and use by disabled persons. If a mortgaged property does not currently
comply with the Americans with Disabilities Act, 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 of damages to private litigants. These
costs could have an adverse effect on a borrower's ability to pay debt service
on the related mortgage loan.
LITIGATION INVOLVING A BORROWER MAY HAVE AN ADVERSE EFFECT ON ITS ABILITY
TO MEET ITS MORTGAGE LOAN OBLIGATIONS. There may be legal proceedings pending,
from time to time, against the borrowers and their affiliates relating to the
business of, or arising out of the ordinary course of business of, the
borrowers and their affiliates. We cannot assure you that litigation will not
have a material adverse effect on the performance of the borrower or the
related mortgaged properties and, thus, the distributions to
certificateholders.
FORWARD LOOKING STATEMENTS
Whenever we use words like "intends," "anticipates" or "expects" or
similar words in this prospectus supplement, we are making a forward-looking
statement, or a projection of what we think will happen in the future.
Forward-looking statements are inherently subject to a variety of
circumstances, many of which are beyond our control, that could cause actual
results to differ materially from what we think they will be. Any
forward-looking statements in this prospectus supplement speak only as of the
date of this prospectus supplement. We do not assume any responsibility to
update or review any forward-looking statement contained in this prospectus
supplement to reflect any change in our expectation with respect to the subject
of the forward-looking statement or to reflect any change in events, conditions
or circumstances on which any forward-looking statement is based.
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DESCRIPTION OF THE MORTGAGE POOL
GENERAL
The trust fund will consist primarily of 145 mortgage loans collectively
secured by liens on 153 commercial, 23 multifamily and 8 manufactured housing
community mortgaged properties. The initial pool balance is approximately
$838,510,239. Each mortgage loan is evidenced by one or more promissory notes
and secured by one or more mortgages, deeds of trust or other similar security
instruments that collectively create a first mortgage lien on one or more of
the following properties:
o with respect to 174 mortgaged properties, which represent security for
mortgage loans (or allocated principal portions thereof) representing
approximately 87.1% of the initial pool balance, the property consists of
a fee simple estate (i.e., the borrower owns the land and any
improvements that constitute the mortgaged property or, in the case of
one mortgaged property, for which the related mortgage loans (or
allocated principal portions thereof) constitute 0.2% of the initial pool
balance, the property is the land but not the improvements that
constitute the mortgaged property);
o with respect to nine mortgaged properties, which represent security for
mortgage loans (or allocated principal portions thereof) representing
approximately 9.1% of the initial pool balance, the property consists of
a leasehold interest (i.e., the borrower has the interest of a tenant or
subtenant in the land and improvements that constitute the related
mortgaged property); or
o with respect to one mortgaged property, which represents security for a
mortgage loan representing approximately 3.8% of the initial pool
balance, the property consists of (a) a leasehold interest in land or
land and improvements and (b) a fee interest (i.e., the mortgage loan is
secured by a leasehold interest and a fee interest in the land and
improvements).
Unless the related mortgage loan is also secured by the lessor's fee
interest in a property, each ground lease that is security for a mortgage loan,
in whole or in part, that is not also secured by the related fee interest,
extends at least 10 years (including any extension options) beyond the maturity
date of that mortgage loan. Generally, when we refer to a borrower's "leasehold
interest" in a mortgaged property, we mean the borrower's interest under a
ground lease or ground sublease unless the context makes clear otherwise.
Generally, whenever we refer to "mortgage loans," "mortgaged properties"
and "mortgages," we are only referring to those that relate to the mortgage
loans that are in the mortgage pool unless the context makes clear otherwise.
All percentages of the mortgage loans, or of any specified group of mortgage
loans, referred to in this prospectus supplement without further description
are approximate percentages of the initial pool balance.
The mortgage loans will be acquired by us, on the date the certificates
are issued to the underwriters, from Wells Fargo Bank, National Association,
Bear, Stearns Funding, Inc. and Morgan Stanley Dean Witter Mortgage Capital
Inc., the mortgage loan sellers, which either originated the mortgage loans or
acquired them from their respective originators. We will assign our interests
in the mortgage loans, without recourse, to the trust fund on the date on which
we acquire the mortgage loans from the mortgage loan sellers. See "--The
Mortgage Loan Sellers" and "--Representations and Warranties; Repurchases"
below and "Description of the Pooling and Servicing Agreements--
Assignment of Mortgage Loans; Repurchases" in the prospectus.
The mortgage loans are not insured or guaranteed by the mortgage loan
sellers or any of their affiliates, the servicer, the special servicer, any
governmental entity or any private mortgage insurer. We have not undertaken any
evaluation of the significance of the provisions of any of the mortgage loans
that provide for recourse against the related borrower or another person in the
event of a default. Accordingly, you should consider all of the mortgage loans
to be non-recourse loans as to which recourse in the case of default will be
limited to the specific property and such other assets, if any, pledged to
secure a mortgage loan.
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The mortgage loans in the pool were originated between August 1998 and
August 2000, inclusive.
ADDITIONAL DEBT
Except as described in the immediately succeeding paragraph or "--The Pari
Passu Loans" below, the mortgage loans generally do not permit borrowers to
incur additional indebtedness that is secured by the mortgaged properties. All
of the mortgage loans, however, permit the related borrower to incur unsecured
indebtedness in the ordinary course of business. With respect to one mortgage
loan, representing approximately 0.2% of the initial pool balance, the related
borrower has incurred additional debt to an affiliate, which debt is secured by
the mortgaged property and which debt is subject to a subordination agreement
in favor of the lender under the mortgage loan. The mortgage loan identified by
loan number 310900040 permits the borrower to incur fixed-rate,
fully-amortizing subordinated indebtedness secured by the mortgaged property if
the combined loan-to-value ratio of the subordinated loan and the mortgage loan
is not more than 56.5%, the pro forma debt service coverage ratio of those
loans is greater than 1.5x, and the lender is provided with adequate
protections as it may reasonably require. The mortgage loan identified by loan
number 310900070 on Annex A permits subordinate indebtedness that is secured by
the mortgaged property for the limited purpose of financing re-tenanting costs
if the subordinated loan does not exceed $300,000, the combined loan to value
ratio of the subordinate loan and the mortgage loan is not more than 50%, and
the debt service coverage ratio for those loans is not less than 2.0x. Those
two mortgage loans represent 1.0% and 0.2%, respectively, of the initial pool
balance. With respect to three mortgage loans, representing approximately 1.3%
of the initial pool balance, the borrower is permitted to incur additional debt
that is not secured by the mortgaged property without the consent of the
lender.
In the case of the mortgage loan secured by the "FM Global Headquarters"
property, which we identify by loan number 28983 on Annex A and describe in
Annex B to this prospectus supplement, the borrower has incurred additional
indebtedness to a third party that is secured by the related mortgaged property
and which additional debt is subject to a subordination agreement in favor of
the lender. See "Annex B--Summary of Ten Largest Loans--FM Global--Additional
Debt/Transfers."
See "Legal Aspects of Mortgage Loans--Subordinate Financing" in the
prospectus.
THE ARD LOAN
The mortgage loan secured by the "Trolley Square" mortgaged property,
which we identify by loan number 10006891 on Annex A and describe in Annex B,
representing approximately 3.5% of the initial pool balance, provides that if
the related borrower has not prepaid the mortgage loan in full on or before its
Anticipated Repayment Date, any principal outstanding on that date thereafter
will accrue interest at the Revised Rate for the mortgage loan rather than the
Initial Rate. As described below under "--Mortgaged Property Accounts--Lock Box
Accounts," funds on deposit in the Lock Box Account relating to the ARD Loan in
excess of amounts required for the payment of property operating expenses and
reserves will be applied to amortize the principal of the mortgage loan. The
Anticipated Repayment Date of the ARD Loan is 120 months after the first due
date. The Revised Rate for the ARD Loan will be equal to the sum of 5% and the
greater of (i) the Initial Rate and (ii) the yield on United States Treasury
obligations having a maturity set forth in the related mortgage loan documents.
THE PARI PASSU LOANS
With respect to two mortgage loans, which we refer to as the "pari passu
loans" (the mortgage loan secured by "Long Beach Marketplace," which we
identify by loan number 28750 on Annex A and describe in Annex B to this
prospectus supplement and the mortgage loan secured by "De Anza Plaza," which
we identify by loan number 29476 on Annex A), the related mortgaged property
also secures a separate mortgage loan having identical terms (including
mortgage rate) other than principal balance, which we refer to as the
"companion loan," that will not be an asset of the trust or contained in the
mortgage pool. Each pari passu loan and its companion loan are together secured
by a first mortgage lien on the related mortgaged property.
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Each companion loan (but not the related pari passu loan) has the benefit
of a letter of credit that is required to be released if the related borrower
satisfies certain conditions that include satisfaction of a loan-to-value ratio
test, a debt service coverage ratio test and requirements for increases in
effective gross income. If these criteria are satisfied, the holder of the
companion loan is required to reduce the amount of the letter of credit. If the
criteria are not fully satisfied on or before a specified date, the holder of
the companion loan is entitled to draw on the remaining amount of the letter of
credit and apply the proceeds thereof to a repayment of the companion loan.
Under the terms of an intercreditor agreement between the holder of each
pari passu loan and the holder of the related companion loan:
o the servicer and special servicer will service and administer both the
pari passu loan and the companion loan (other than the exercise of rights
to draw on the letter of credit held by the holder of the companion loan)
for as long as the pari passu loan is part of the trust; and
o the pari passu loan will be senior to the companion loan in right of
payment until the letter of credit has been fully released and/or drawn
upon and thereafter the pari passu loan will be pari passu with the
companion loan in right of payment.
Accordingly, prior to the date on which the letter of credit for the
companion loan is fully released and/or drawn upon, payments and proceeds
received on or in respect of either or both of the loans (other than the
proceeds of any draw on the letter of credit) on any date will generally be
applied, first, to the reimbursement of the servicer (or the trustee or the
fiscal agent) for any P&I Advances made in respect of the pari passu loan and
any servicing advances relating to the mortgaged property or otherwise; second,
to the payment of accrued and unpaid interest, principal and other amounts then
due and payable under the pari passu loan; and, third, to the payment of
accrued and unpaid interest, principal and other amounts then due and payable
under the companion loan. After the date on which the letter of credit is fully
released and/or drawn upon, payments and proceeds received on or in respect of
the loans will be applied, first, to the reimbursement of any P&I Advances made
in respect of the pari passu loan or advances of debt service on the companion
loan, any servicing advances made in respect of the related mortgaged property;
and, second, pro rata, to accrued and unpaid interest, principal and other
amounts then due and payable under the pari passu loan and such amounts due and
payable under the companion loan. The occurrence of a draw under a letter of
credit by the holder of a companion loan will not, in and of itself, constitute
a default under the related pari passu loan.
For purposes of the information presented in this prospectus supplement,
the Debt Service Coverage Ratio for each pari passu loan is presented for the
aggregate indebtedness represented by the pari passu loan and the companion
loan as if the related borrower has satisfied, among other things, the debt
service coverage criteria that is a condition to the release of the letter of
credit held by the holder of the related companion loan. In each case, however,
that criteria is not less than the Debt Service Coverage Ratio that we present
for the related pari passu loan.
CERTAIN PAYMENT CHARACTERISTICS
Except as described below, each mortgage loan requires scheduled payments
of principal and/or interest to be made monthly. One mortgage loan requires
scheduled payments of principal and interest to be made semiannually and the
servicer will be required to make advances of interest on that mortgage loan in
each month in which a scheduled payment is not due. Without regard to grace
periods, those scheduled payments are due on the first day of each month (in
the case of mortgage loans that require monthly payments) or the first day of
every February and August (in the case of the mortgage loan that requires
semiannual payments). No mortgage loan has a grace period for scheduled
payments that exceeds 10 days.
All of the mortgage loans bear interest at a fixed rate per annum.
122 mortgage loans, representing approximately 89.5% of the initial pool
balance, provide for payments of principal and interest based on amortization
schedules significantly longer than the
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remaining terms of those mortgage loans. In addition, the ARD Loan,
representing approximately 3.5% of the initial pool balance, amortizes
principal (prior to its Anticipated Repayment Date) at a rate that will result
in a substantial principal payment being required to be paid on or after its
Anticipated Repayment Date and prior to its stated maturity date. Two of the
mortgage loans, representing approximately 1.8% of the initial pool balance,
require payments of interest only for their entire respective terms. Two of the
mortgage loans, representing approximately 2.0% of the initial pool balance,
have an initial interest only period during which time they do not require the
payment of principal and thereafter require partial amortization of principal
prior to maturity.
142 mortgage loans, representing approximately 93.0% of the initial pool
balance, accrue interest on the basis of the actual number of days in a month,
assuming a 360-day year. Three mortgage loans, representing approximately 7.0%
of the initial pool balance, accrue interest on the basis of a 30-day month,
assuming a 360-day year.
YIELD MAINTENANCE, PREPAYMENT AND LOCKOUT PROVISIONS
Each mortgage loan restricts voluntary prepayments in one or more of the
following ways: (i) by prohibiting any prepayments during a Lockout Period,
(ii) by requiring that any principal prepayment made during a Yield Maintenance
Period be accompanied by a yield maintenance charge, or (iii) by requiring that
any principal prepayment made during any Prepayment Premium Period be
accompanied by a prepayment premium.
42 mortgage loans, representing approximately 35.9% of the initial pool
balance, prohibit voluntary prepayments at any time prior to the maturity date
of those mortgage loans. Generally, in lieu of permitting voluntary
prepayments, these mortgage loans provide for a defeasance feature described
below under "--Defeasance."
97 mortgage loans, representing approximately 60.3% of the initial pool
balance, prohibit voluntary prepayments until a specified date (generally
between one and six months prior to the maturity date of those mortgage loans)
and thereafter permit voluntary prepayments without payment of a yield
maintenance charge or prepayment premium. Generally, in lieu of permitting
voluntary prepayments these mortgage loans provide for a defeasance feature
described below under "--Defeasance."
Three mortgage loans, representing approximately 1.2% of the initial pool
balance, contain provisions that prohibit voluntary prepayment for a specified
period of time (generally between two and four years) after origination, and
permit voluntary prepayments thereafter with the payment of the greater of (a)
1.0% of the outstanding principal balance of the mortgage loan at the time of
the prepayment and (b) a yield maintenance charge (except that in the case of
two of these mortgage loans, representing 1.1% of the initial pool balance,
prepayments are permitted without the payment of a yield maintenance charge
during the three months prior to maturity).
One mortgage loan, representing approximately 0.2% of the initial pool
balance, permits the related borrower to either obtain a release of the
mortgaged property by delivering a mortgage on one or more replacement
properties, subject to certain other conditions, or obtain a release of the
mortgaged property, at any time during the term of the mortgage loan, upon
payment of 125% of the portion of the principal amount of the mortgage loan (or
mortgage loan group) allocated to the mortgaged property or mortgaged
properties being released and a yield maintenance charge. See "Description of
the Mortgage Pool--Other Property Releases."
One mortgage loan, representing 0.2% of the initial pool balance, contains
a provision that prohibits voluntary prepayments during a Lockout Period (of
approximately 5 years), then permits voluntary prepayments only if they are
accompanied by a yield maintenance charge until a specified date, then permits
voluntary principal prepayments only if they are accompanied by a prepayment
premium until a specified date (generally six months prior to maturity), after
which specified date voluntary prepayments are permitted without payment of a
yield maintenance charge or a prepayment premium.
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Two mortgage loans, representing approximately 2.4% of the initial pool
balance, do not provide for a Lockout Period but permit voluntary prepayment at
any time with the payment of a yield maintenance charge.
In the case of one mortgage loan representing approximately 0.3% of the
initial pool balance, which generally prohibits prepayment in full prior to
three months before maturity, partial prepayment is generally permitted in
conjunction with the release of one parcel comprising a portion of the
mortgaged property upon either (a) prepayment in an amount not less than 125%
of the portion of the reappraised value of the mortgaged property that is
allocable to that parcel (without payment of a yield maintenance charge or
prepayment premium) or (b) the satisfaction of certain loan-to-value ratio and
debt service coverage ratio tests.
Substantially all of the mortgage loans that permit voluntary prepayments
either require that any prepayment be made on a due date or provide that
payments made on a date other than a due date will be deemed to be paid on the
next due date, so that those prepayments are required to include one month's
interest on the amount prepaid. However, five mortgage loans described in the
preceding sentence, representing 2.9% of the initial pool balance, provide that
any prepayments made during the final three months of their respective terms
may be made other than on a due date and with payment of interest accrued only
to the date of prepayment.
Some state laws limit the amounts that a lender may collect from a
borrower as an additional charge in connection with the prepayment of a
mortgage loan. In addition, the enforceability of provisions that provide for
prepayment fees or penalties is unclear under the laws of many states. As a
result, those charges may not be recoverable in some states in the event of
prepayment or foreclosure. See "Legal Aspects of Mortgage Loans--Default
Interest and Limitations on Prepayments" in the prospectus.
The yield maintenance charge contained in those mortgage loans that
provide for the payment of a yield maintenance charge in connection with a
principal prepayment is calculated so as to result in a payment to the lender
of an amount that is generally equal to the present value of the remaining
payments that would have become due had the prepayment not occurred to the
extent those payments would have accrued at a rate in excess of the yield to
maturity, as of the date of the prepayment, on United States Treasury
securities with a maturity generally corresponding to the maturity date of the
related mortgage loan (and in some cases, not less than 1% of the amount of the
principal prepayment). A yield maintenance charge is determined utilizing a
discount rate generally equal to the rate that, when compounded monthly, is
equal to the semi-annual yield of the corresponding Treasury securities
described in the preceding sentence (the "Yield Rate").
Yield maintenance charges are distributable as described in this prospectus
supplement under "Description of the Certificates--Distributions--Allocation of
Yield Maintenance Charges."
Unless a mortgage loan is relatively close to its stated maturity date or
unless the sale price or the amount of the refinancing of the related mortgaged
property is considerably higher than the current outstanding principal balance
of the mortgage loan (due to an increase in the value of the mortgaged property
and/or amortization of the mortgage loan), the yield maintenance charge may,
even in a relatively low interest rate environment, offset entirely or render
insignificant any economic benefit to be received by the borrower upon a
refinancing or sale of the mortgaged property. The yield maintenance charge
provision of a mortgage loan creates an economic disincentive for the borrower
to prepay that mortgage loan voluntarily and, accordingly, the related borrower
may elect not to prepay that mortgage loan. However, there can be no assurance
that the imposition of a yield maintenance charge will provide a sufficient
disincentive to prevent a voluntary principal prepayment. All of the mortgage
loans prohibit voluntary partial prepayments other than in connection with the
release of one or more but less than all of the mortgaged properties securing
the mortgage loan. Notwithstanding the foregoing, as described under
"General--The ARD Loan" above, the ARD Loan will be prepayable in whole or in
part on and after its Anticipated Repayment Date without payment of a yield
maintenance charge or a prepayment premium. You should note that the
enforceability of provisions concerning yield maintenance charges has been
challenged in several states.
S-60
<PAGE>
Involuntary prepayments due to casualty or condemnation may occur at any
time without the payment of a yield maintenance charge or prepayment premium.
All of the mortgage loans require payment of a yield maintenance charge in the
event of a default under the mortgage loan.
DEFEASANCE
139 mortgage loans, representing approximately 96.2% of the initial pool
balance, grant the related borrower the right at any time, commencing generally
three to five years after the date of origination, but in all cases not less
than two years after the date of issuance of the certificates, to obtain the
release of the lien of the mortgage on the mortgaged property or mortgaged
properties, as applicable, by substituting for the mortgaged property or
mortgaged properties, as applicable, as collateral for the related mortgage
note, direct non-callable obligations of the United States of America that
provide for payments on or prior to each due date and the maturity date of
amounts at least equal to the amounts that would have been payable on each of
those dates under the terms of the related mortgage loan. In the case of 42 of
these mortgage loans, representing approximately 35.9% of the initial pool
balance, this collateral substitution is the only method of obtaining a release
of the lien on the mortgaged property prior to the maturity date and all
voluntary prepayments are prohibited during the defeasance period. In the case
of the remaining 97 of these mortgage loans representing 60.3% of the initial
mortgage pool balance, this collateral substitution is the only method of
obtaining a release of the lien on the mortgaged property prior to a specified
date (generally three months but in no case more than six months) prior to the
maturity date and all voluntary prepayments are prohibited prior to such
period.
Five mortgage loans, representing 5.6% of the initial pool balance, are
cross-collateralized and/or secured by two or more mortgaged properties and
grant the related borrower the right, at any time commencing generally three to
four years after the date of origination, but in all cases not less than two
years after the date of issuance of the certificates, (i) to obtain the release
of all of those mortgaged properties from the lien of the mortgage on terms
substantially similar to those described in the immediately preceding paragraph
and (ii) to obtain the release of one or more (but fewer than all) of those
mortgaged properties by substituting direct, non-callable obligations of the
United States of America that provide for payments on or prior to each due date
in an amount generally equal to 125% of the amounts payable on each due date
under the terms of the related mortgage loan; provided, however, that, in the
case of all of these mortgage loans, a partial release will be permitted only
if other criteria, such as debt service coverage ratio and loan to value ratio
tests, are satisfied by the remaining mortgaged property or properties.
SUBSTITUTION
Two mortgage loans, representing 11.4% of the initial pool balance,
entitle the related borrower to obtain the release of the related mortgage on
one or more of the related mortgaged properties upon the delivery of a
replacement mortgage on another similar property and the satisfaction of other
conditions. These other conditions generally include the satisfaction of a debt
service coverage ratio test and loan to value ratio test with respect to the
replacement property and the remaining properties (taken together). One of
those mortgage loans is the mortgage loan secured by "Manufactured Home
Communities" properties, which we identify by loan number 310900140 on Annex A
and describe in Annex B to this prospectus supplement. See Annex B--Summary of
Ten Largest Loans-- Manufactured Home Communities, Inc.--Additional
Debt/Transfers--Replacement Properties".
OTHER PROPERTY RELEASES
As we describe above under "--Yield Maintenance, Prepayment and Lockout
Provisions," some of the mortgage loans that are secured by two or more
mortgaged properties entitle the related borrower to obtain the release of the
related mortgage on one or more of those mortgaged properties upon a partial
prepayment of the mortgage loan provided that, among other things, such partial
prepayment is accompanied by a yield maintenance charge.
S-61
<PAGE>
In the case of nine mortgage loans, representing approximately 4.3% of the
initial pool balance, the related mortgage loan documents provide for the
release of specified parcels of real estate that secure these mortgage loans
but were not assigned any material value or considered a source of any material
cash flow for purposes of determining the related Appraised Value or
Underwritten Cash Flow. This real estate is generally subject to release
without reduction of the principal balance of the related mortgage note or
substitution of additional collateral if zoning and other specified
requirements are satisfied.
"DUE-ON-SALE" AND "DUE-ON-ENCUMBRANCE" PROVISIONS; ASSUMPTIONS
The mortgage loans generally contain "due-on-sale" and
"due-on-encumbrance" provisions that in each case, with limited exceptions,
permit the holder of the mortgage to accelerate the maturity of the related
mortgage loan if the borrower sells or otherwise transfers or encumbers the
related mortgaged property without the consent of the holder of the mortgage;
provided, however that, under the terms of some of the mortgage loans this
consent must be granted if specified conditions are met. With respect to a
mortgage loan containing a "due-on-sale" clause, the special servicer will be
required either (i) to enforce the due-on-sale clause, or (ii) to waive the
effect of the due-on-sale clause if it believes that the waiver would be in the
best economic interest of the trust fund. However, the special servicer will
not be permitted to waive enforcement of a due-on-sale clause under a mortgage
loan with a principal balance greater than $2.5 million if that mortgage loan
(together with all other mortgage loans that were made to the same or
affiliated borrowers) represents 5% or more of the aggregate certificate
principal balance without first confirming that the waiver will not result in a
withdrawal, downgrade or qualification (if applicable) of the then current
rating on any class of certificates. With respect to a mortgage loan with a
"due-on-encumbrance" clause, the servicer (with respect to mortgage loans that
are not Specially Serviced Mortgage Loans) and the special servicer (with
respect to any Specially Serviced Mortgage Loan) may exercise (or waive its
right to exercise) any right it may have (i) to accelerate the payments
thereon, or (ii) to withhold its consent to the creation of any additional lien
or other encumbrance, consistent with the Servicing Standard and the terms of
the related mortgage loan; provided that the servicer will not be permitted to
waive a "due-on-encumbrance" clause in connection with the creation of
additional debt secured by the related mortgaged property without (i) the
consent of the special servicer (except that the special servicer will be
deemed to have consented if it does not respond to a written request for
consent within five business days) and (ii) delivery of confirmation by each of
S&P and Fitch that waiver of the "due-on-encumbrance" clause will not result in
a downgrade, withdrawal or qualification (if applicable) of the then current
rating on any class of certificates.
Some of the mortgage loans expressly permit the assignment of the related
mortgaged property to, and assumption of the mortgage loan by, another entity.
If the servicer receives a request from a borrower to approve an assignment
pursuant to these provisions for any of these mortgage loans (other than a
Specially Serviced Mortgage Loan), the servicer must obtain relevant
information for purposes of evaluating the request. If the servicer recommends
approval of the assignment, the servicer must provide to the special servicer a
copy of the recommendation and the materials upon which the recommendation is
based. The special servicer will have the right to grant or withhold consent to
any request for assignment and assumption in accordance with the terms of the
mortgage loan and the pooling and servicing agreement, provided that the
special servicer may not unreasonably withhold consent, and any decision of the
special servicer to consent to an assignment and assumption is subject to the
Servicing Standard. Failure of the special servicer to notify the servicer in
writing of its determination to grant or withhold consent to an assignment and
assumption within five business days of the servicer's delivery of the
recommendation described above and the relevant loan information will be deemed
to constitute a grant of that consent.
S-62
<PAGE>
RECENT PAYMENT HISTORY
No mortgage loan was 30 days or more delinquent in respect of any
scheduled payment as of the Cut-Off Date or during the twelve-month period
preceding the Cut-Off Date.
ENVIRONMENTAL INSURANCE
In the case of 50 mortgaged properties, representing security for 9.2% of
the initial mortgage pool balance, the related mortgage loan seller has
obtained, or has the benefit of, and there will be assigned to the trust, a
secured creditor impaired property policy covering selected environmental
matters with respect to all those mortgaged properties as a group. None of the
mortgage loans covered by the policy has a Cut-Off Date Balance in excess of
$2,500,000, except that one of those mortgage loans has a Cut-Off Date Balance
equal to $4,736,283. The premium for the group environmental policy has been
or, as of the date of initial issuance of the certificates, will be, paid in
full.
In general, the secured creditor impaired property policy referred to
above provides coverage for the following losses, subject to the coverage
limits discussed below, and further subject to the policy's conditions and
exclusions:
o if during the term of the policy, a borrower defaults under its mortgage
loan and adverse environmental conditions exist at levels above legal
limits on the related underlying real property, the insurer will
indemnify the insured for the outstanding principal balance of the
related mortgage loan on the date of the default, together with accrued
interest from the date of default until the date that the outstanding
principal balance is paid;
o if the insured becomes legally obligated to pay as a result of a claim
first made against the insured and reported to the insurer during the
term of the policy, for bodily injury, property damage or clean-up costs
resulting from adverse environmental conditions on, under or emanating
from an underlying real property, the insurer will pay that claim; and
o if the insured enforces the related mortgage, the insurer will
thereafter pay legally required clean-up costs for adverse environmental
conditions at levels above legal limits which exist on or under the
acquired underlying real property, provided that the appropriate party
reported those conditions to the government in accordance with applicable
law.
The secured creditor impaired property policy does not cover adverse
environmental conditions that the insured first became aware of before the term
of the policy unless those conditions were disclosed to the insurer before the
policy was issued. The policy also does not insure against any liability
arising from the presence of asbestos containing materials, radon gas or lead
paint. However, property condition assessments or engineering surveys were
conducted for all of the mortgaged properties covered by the policy. If the
report disclosed the existence of material amounts of lead based paint,
asbestos containing materials or radon gas affecting such a mortgaged property,
the related borrower was required to remediate the condition before the closing
of the loan, establish a reserve from loan proceeds in an amount considered
sufficient by the mortgage loan seller or agree to establish an operations and
maintenance plan. No individual claim under the policy may exceed $6,000,000,
and the total claims under the group policy may not exceed $28,000,000. There
is no deductible under the policy.
The secured creditor impaired property policy requires that the
appropriate party associated with the trust report a claim during the term of
the policy, which extends eight years beyond the terms of the respective
mortgage loans.
The secured creditor impaired property policy will be issued by American
International Specialty Lines Insurance Company.
ADDITIONAL MORTGAGE LOAN INFORMATION
The following tables set forth the specified characteristics of the
mortgage loans. The sum in any column may not equal the indicated total due to
rounding.
S-63
<PAGE>
The descriptions in this prospectus supplement of the mortgage loans and
the mortgaged properties are based upon the mortgage pool as it is expected to
be constituted as of the close of business on the Cut-Off Date, assuming that
(i) all scheduled principal and interest payments due on or before the Cut-Off
Date have been or will be made, and (ii) there will be no principal prepayments
on or before the Cut-Off Date. Mortgage loans may be removed from the mortgage
pool (i.e., not sold by the related mortgage loan seller to us), as a result of
prepayments, delinquencies, incomplete documentation or otherwise, if we deem
or the related mortgage loan seller deems that removal necessary, appropriate
or desirable. A limited number of other mortgage loans may be included in the
mortgage pool prior to the issuance of the certificates, unless including those
other mortgage loans would materially alter the characteristics of the mortgage
pool as described in this prospectus supplement.
S-64
<PAGE>
The following table sets forth information as of the Cut-Off Date with respect
to the types of mortgaged properties.
TYPES OF MORTGAGED PROPERTIES
<TABLE>
<CAPTION>
AGGREGATE % OF
CUT-OFF INITIAL
NUMBER OF DATE POOL
PROPERTY TYPE PROPERTIES BALANCE BALANCE
----------------------------------- ------------ --------------- -----------
<S> <C> <C> <C>
Office
Suburban ......................... 21 $134,318,235 16.02%
Urban ............................ 8 47,027,675 5.61
Medical .......................... 3 23,340,266 2.78
-- ------------ ------
Subtotal ........................ 32 $204,686,175 24.41%
Retail
Anchored ......................... 13 $121,373,923 14.47%
Shadow/Weak Anchored ............. 10 33,721,910 4.02
Unanchored ....................... 7 19,357,030 2.31
Big Box .......................... 8 18,340,676 2.19
Specialty ........................ 10 9,486,701 1.13
-- ------------ ------
Subtotal ........................ 48 $202,280,240 24.12%
Industrial/Warehouse
Warehouse/Distribution ........... 22 $ 78,792,445 9.40%
Flex Industrial .................. 13 41,814,078 4.99
Light Industrial ................. 9 18,063,153 2.15
-- ------------ ------
Subtotal ........................ 44 $138,669,675 16.54%
Manufactured Housing Community..... 8 $113,645,742 13.55%
-- ------------ ------
Subtotal: ....................... 8 $113,645,742 13.55%
Multifamily
Garden ........................... 16 $ 68,692,190 8.19%
Mid-Rise ......................... 4 20,426,394 2.44
Low-Rise ......................... 3 4,112,941 0.49
-- ------------ ------
Subtotal: ....................... 23 $ 93,231,526 11.12%
Self-Storage ...................... 24 $ 41,076,723 4.90%
-- ------------ ------
Subtotal: ....................... 24 $ 41,076,723 4.90%
Hospitality
Limited Service .................. 1 $ 17,797,958 2.12%
-- ------------ ------
Subtotal: ....................... 1 $ 17,797,958 2.12%
Theater ........................... 1 $ 17,770,862 2.12%
-- ------------ ------
Subtotal: ....................... 1 $ 17,770,862 2.12%
Mixed Use ......................... 1 $ 4,343,178 0.52%
-- ------------ ------
Subtotal: ....................... 1 $ 4,343,178 0.52%
Other
Parking Garage ................... 1 $ 2,988,263 0.36%
-- ------------ ------
Subtotal: ....................... 1 $ 2,988,263 0.36%
Ground Leased Land ................ 1 $ 2,019,898 0.24%
-- ------------ ------
Subtotal: ....................... 1 $ 2,019,898 0.24%
-- ------------ ------
Totals/Weighted Avg. .............. 184 $838,510,239 100.00%
=== ============ ======
<CAPTION>
WEIGHTED AVERAGES
---------------------------------------------------------------------------------------
STATED REMAINING CUT-OFF
MORTGAGE REMAINING AMORT. DATE MATURITY
PROPERTY TYPE RATE TERM (MO.) TERM (MO.) DSCR LTV LTV OCCUPANCY(1)
----------------------------------- ------------ ------------ ------------ ---------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Office
Suburban ......................... 8.3333% 117 263 1.70x 51.13% 32.72% 99.54%
Urban ............................ 8.0329% 115 337 1.69x 56.33% 48.26% 95.67%
Medical .......................... 8.3042% 123 345 1.29x 67.72% 58.35% 99.37%
------ --- --- ---- ----- ----- ------
Subtotal ........................ 8.2610% 118 292 1.66x 54.21% 39.22% 98.63%
Retail
Anchored ......................... 8.4724% 133 327 1.39x 65.57% 50.42% 95.66%
Shadow/Weak Anchored ............. 8.4962% 125 337 1.45x 65.65% 57.04% 97.91%
Unanchored ....................... 8.4777% 139 301 1.57x 56.05% 38.55% 87.62%
Big Box .......................... 7.9674% 155 254 1.48x 56.71% 25.42% 100.00%
Specialty ........................ 8.8601% 166 252 1.35x 55.78% 30.94% 100.00%
------ --- --- ---- ----- ----- ------
Subtotal ........................ 8.4493% 136 316 1.42x 63.41% 47.21% 95.86%
Industrial/Warehouse
Warehouse/Distribution ........... 8.3662% 124 319 1.34x 66.81% 53.16% 99.78%
Flex Industrial .................. 8.4676% 116 310 1.55x 51.68% 44.18% 100.00%
Light Industrial ................. 8.0869% 128 306 1.57x 59.67% 46.72% 99.12%
------ --- --- ---- ----- ----- ------
Subtotal ........................ 8.3604% 122 314 1.43x 61.31% 49.61% 99.76%
Manufactured Housing Community..... 7.8304% 117 353 1.46x 62.17% 55.30% 96.26%
------ --- --- ---- ----- ----- ------
Subtotal: ....................... 7.8304% 117 353 1.46x 62.17% 55.30% 96.26%
Multifamily
Garden ........................... 8.0469% 115 351 1.43x 68.36% 60.46% 94.01%
Mid-Rise ......................... 7.8777% 133 328 1.54x 58.80% 44.55% 97.68%
Low-Rise ......................... 8.1703% 117 357 1.37x 75.38% 67.79% 96.08%
------ --- --- ---- ----- ----- ------
Subtotal: ....................... 8.0153% 119 346 1.45x 66.57% 57.29% 94.90%
Self-Storage ...................... 8.5626% 112 284 1.43x 67.68% 55.13% 85.12%
------ --- --- ---- ----- ----- ------
Subtotal: ....................... 8.5626% 112 284 1.43x 67.68% 55.13% 85.12%
Hospitality
Limited Service .................. 8.1900% 108 288 2.04x 56.14% 47.02% 69.83%
------ --- --- ---- ----- ----- ------
Subtotal: ....................... 8.1900% 108 288 2.04x 56.14% 47.02% 69.83%
Theater ........................... 8.2350% 115 295 1.99x 49.88% 41.58% 100.00%
------ --- --- ---- ----- ----- ------
Subtotal: ....................... 8.2350% 115 295 1.99x 49.88% 41.58% 100.00%
Mixed Use ......................... 8.3650% 114 198 1.58x 57.15% 34.72% 100.00%
------ --- --- ---- ----- ----- ------
Subtotal: ....................... 8.3650% 114 198 1.58x 57.15% 34.72% 100.00%
Other
Parking Garage ................... 7.8500% 116 296 2.03x 46.69% 38.46% 100.00%
------ --- --- ---- ----- ----- ------
Subtotal: ....................... 7.8500% 116 296 2.03x 46.69% 38.46% 100.00%
Ground Leased Land ................ 8.2700% 115 355 1.20x 78.44% 70.78% 100.00%
------ --- --- ---- ----- ----- ------
Subtotal: ....................... 8.2700% 115 355 1.20x 78.44% 70.78% 100.00%
------ --- --- ---- ----- ----- ------
Totals/Weighted Avg. .............. 8.2490% 122 315 1.52x 60.71% 48.10% 96.76%
</TABLE>
-------
(1) Weighted average occupancy excludes hospitality.
S-65
<PAGE>
.
The following table sets forth the range of Mortgage Rates as of the
Cut-Off Date.
RANGE OF MORTGAGE RATES AS OF CUT-OFF DATE
<TABLE>
<CAPTION>
AGGREGATE % OF CUM. % OF
CUT-OFF INITIAL CUT-OFF
NUMBER NUMBER OF DATE POOL DATE
RANGE OF MORTGAGE RATES OF LOANS PROPERTIES BALANCE BALANCE BALANCE
------------------------- ---------- ------------ -------------- ----------- ----------
<S> <C> <C> <C> <C> <C>
7.2501% to 7.5000% ...... 2 2 $ 10,889,617 1.30% 1.30%
7.5001% to 7.7500% ...... 8 8 37,411,790 4.46 5.76
7.7501% to 8.0000% ...... 24 31 250,533,278 29.88 35.64
8.0001% to 8.5000% ...... 69 74 293,371,964 34.99 70.63
8.5001% to 9.0000% ...... 38 60 210,518,300 25.11 95.73
9.0001% to 9.5000% ...... 4 9 35,785,291 4.27 100.00
-- -- ------------ ------ ------
Totals/Weighted Avg. 145 184 $838,510,239 100.00% 100.00%
=== === ============ ====== ======
<CAPTION>
WEIGHTED AVERAGES
-------------------------------------------------------------------------
STATED REMAINING CUT-OFF
MORTGAGE REMAINING AMORT. DATE MATURITY
RANGE OF MORTGAGE RATES RATE TERM (MO.) TERM (MO.) DSCR LTV LTV
------------------------- ------------ ------------ ------------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
7.2501% to 7.5000% ...... 7.3903% 169 291 1.62x 60.37% 30.96%
7.5001% to 7.7500% ...... 7.6545% 126 252 1.83x 47.70% 35.99%
7.7501% to 8.0000% ...... 7.8688% 120 333 1.53x 59.25% 49.58%
8.0001% to 8.5000% ...... 8.2715% 122 326 1.56x 61.17% 50.89%
8.5001% to 9.0000% ...... 8.6814% 122 284 1.41x 63.69% 44.27%
9.0001% to 9.5000% ...... 9.0647% 124 341 1.37x 63.40% 55.27%
------ --- --- ---- ----- -----
Totals/Weighted Avg. 8.2490% 122 315 1.52x 60.71% 48.10%
</TABLE>
S-66
<PAGE>
The following table sets forth the mortgaged properties by state.
MORTGAGED PROPERTIES BY STATE
<TABLE>
<CAPTION>
AGGREGATE % OF
CUT-OFF INITIAL
NUMBER OF DATE POOL
STATE PROPERTIES BALANCE BALANCE
------------------------------ ------------ --------------- -----------
<S> <C> <C> <C>
California (Northern) ........ 32 $150,206,730 17.91%
California (Southern) ........ 29 134,917,756 16.09
Florida ...................... 8 87,581,689 10.44
Texas ........................ 17 73,532,885 8.77
Illinois ..................... 3 55,409,499 6.61
New York ..................... 12 46,464,775 5.54
Utah ......................... 2 33,421,607 3.99
Rhode Island ................. 1 31,802,702 3.79
Pennsylvania ................. 8 28,516,207 3.40
Massachusetts ................ 5 22,692,974 2.71
Maryland ..................... 4 21,423,227 2.55
Virginia ..................... 8 17,812,356 2.12
Colorado ..................... 4 16,056,668 1.91
Arizona ...................... 8 15,142,542 1.81
New Jersey ................... 1 13,350,000 1.59
Connecticut .................. 3 11,042,294 1.32
Indiana ...................... 3 10,697,407 1.28
Ohio ......................... 3 8,873,591 1.06
Minnesota .................... 3 8,029,060 0.96
District of Columbia ......... 1 6,918,402 0.83
South Carolina ............... 4 5,655,142 0.67
Michigan ..................... 2 5,584,047 0.67
North Dakota ................. 2 5,375,594 0.64
Delaware ..................... 1 5,352,712 0.64
Oklahoma ..................... 1 4,670,429 0.56
Louisiana .................... 4 4,300,065 0.51
Nevada ....................... 2 2,486,370 0.30
Georgia ...................... 2 2,369,926 0.28
New Mexico ................... 1 1,692,530 0.20
Arkansas ..................... 1 1,554,332 0.19
Washington ................... 1 1,321,226 0.16
North Carolina ............... 2 1,213,966 0.14
New Hampshire ................ 2 1,145,614 0.14
Idaho ........................ 1 994,664 0.12
Tennessee .................... 2 669,934 0.08
Mississippi .................. 1 231,315 0.03
-- ------------ ------
Totals/Weighted Avg. ......... 184 $838,510,239 100.00%
=== ============ ======
<CAPTION>
WEIGHTED AVERAGES
-------------------------------------------------------------------------
STATED REMAINING CUT-OFF
MORTGAGE REMAINING AMORT. DATE MATURITY
STATE RATE TERM (MO.) TERM (MO.) DSCR LTV LTV
------------------------------ ------------ ------------ ------------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
California (Northern) ........ 8.2379% 117 319 1.67x 53.92% 45.14%
California (Southern) ........ 8.3052% 137 305 1.43x 64.59% 45.43%
Florida ...................... 7.9029% 118 354 1.46x 62.42% 56.11%
Texas ........................ 8.2019% 122 334 1.40x 66.23% 55.26%
Illinois ..................... 8.2225% 116 337 1.55x 59.48% 52.51%
New York ..................... 8.1471% 128 315 1.56x 55.07% 44.58%
Utah ......................... 8.9852% 118 358 1.34x 65.49% 59.92%
Rhode Island ................. 8.7350% 106 106 1.73x 50.07% 0.00%
Pennsylvania ................. 8.4000% 114 349 1.36x 74.13% 66.72%
Massachusetts ................ 8.2300% 128 312 1.43x 61.86% 45.01%
Maryland ..................... 8.2995% 116 329 1.41x 64.57% 55.37%
Virginia ..................... 8.4533% 111 320 1.37x 68.73% 60.11%
Colorado ..................... 7.9927% 115 347 1.40x 74.42% 66.07%
Arizona ...................... 8.3531% 132 287 1.51x 58.08% 37.64%
New Jersey ................... 8.0800% 113 360 1.80x 47.17% 41.54%
Connecticut .................. 7.9036% 115 328 1.93x 52.19% 49.41%
Indiana ...................... 7.6848% 177 256 1.70x 58.03% 24.93%
Ohio ......................... 7.9586% 116 325 1.57x 52.83% 46.08%
Minnesota .................... 8.4649% 115 355 1.33x 73.75% 66.83%
District of Columbia ......... 7.6000% 109 289 1.85x 42.44% 34.99%
South Carolina ............... 8.4514% 110 311 1.36x 70.25% 60.91%
Michigan ..................... 7.7295% 118 272 2.03x 46.57% 37.06%
North Dakota ................. 8.1044% 115 317 1.54x 64.23% 55.03%
Delaware ..................... 8.4850% 117 357 1.41x 70.43% 63.79%
Oklahoma ..................... 8.2400% 113 293 1.66x 59.31% 49.54%
Louisiana .................... 8.5843% 108 288 1.41x 68.52% 58.04%
Nevada ....................... 9.1330% 236 236 1.77x 43.85% 2.61%
Georgia ...................... 8.6432% 132 246 1.34x 69.24% 37.68%
New Mexico ................... 8.4900% 173 173 1.27x 57.37% 1.58%
Arkansas ..................... 8.5230% 107 287 1.41x 68.99% 58.39%
Washington ................... 7.8400% 115 355 1.41x 68.10% 60.85%
North Carolina ............... 8.7566% 111 291 1.40x 67.19% 57.03%
New Hampshire ................ 8.3400% 171 171 1.68x 38.19% 0.99%
Idaho ........................ 8.3700% 114 294 1.65x 43.25% 36.21%
Tennessee .................... 9.3100% 119 299 1.36x 62.94% 53.79%
Mississippi .................. 9.3100% 119 299 1.36x 62.94% 53.79%
------ --- --- ---- ----- -----
Totals/Weighted Avg. ......... 8.2490% 122 315 1.52x 60.71% 48.10%
</TABLE>
S-67
<PAGE>
The following tables set forth the original term and the remaining term of
the mortgage loans.
RANGE OF ORIGINAL TERMS IN MONTHS
<TABLE>
<CAPTION>
AGGREGATE % OF
CUT-OFF INITIAL
RANGE OF ORIGINAL TERMS NUMBER NUMBER OF DATE POOL
TO MATURITY (MO.) OF LOANS PROPERTIES BALANCE BALANCE
------------------------------ ---------- ------------ -------------- -----------
<S> <C> <C> <C> <C>
84 ........................... 1 2 $ 11,984,978 1.43%
101 to 120 ................... 116 149 735,961,490 87.77
121 to 140 ................... 1 1 8,000,000 0.95
161 to 180 ................... 19 24 55,929,261 6.67
201 to 241 ................... 8 8 26,634,511 3.18
--- --- ------------ ------
Totals/Weighted Avg. ......... 145 184 $838,510,239 100.00%
=== === ============ ======
<CAPTION>
WEIGHTED AVERAGES
-------------------------------------------------------------------------
STATED REMAINING CUT-OFF
RANGE OF ORIGINAL TERMS MORTGAGE REMAINING AMORT. DATE MATURITY
TO MATURITY (MO.) RATE TERM (MO.) TERM (MO.) DSCR LTV LTV
------------------------------ ------------ ------------ ------------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
84 ........................... 8.7390% 81 357 1.45x 57.48% 54.41%
101 to 120 ................... 8.2423% 115 324 1.52x 61.29% 51.85%
121 to 140 ................... 7.7500% 128 0 1.80x 50.00% 50.00%
161 to 180 ................... 9.2291% 176 234 1.46x 55.81% 18.67%
201 to 241 ................... 8.4035% 234 234 1.46x 59.86% 2.81%
------ --- --- ---- ----- -----
Totals/Weighted Avg. ......... 8.2490% 122 315 1.52x 60.71% 48.10%
</TABLE>
RANGE OF REMAINING TERMS IN MONTHS
<TABLE>
<CAPTION>
AGGREGATE % OF
CUT-OFF INITIAL
RANGE OF NUMBER NUMBER OF DATE POOL
REMAINING TERMS (MO.) OF LOANS PROPERTIES BALANCE BALANCE
------------------------------ ---------- ------------ -------------- -----------
<S> <C> <C> <C> <C>
81 ........................... 1 2 $ 11,984,978 1.43%
101 to 120 ................... 116 149 735,961,490 87.77
121 to 140 ................... 1 1 8,000,000 0.95
161 to 180 ................... 19 24 55,929,261 6.67
181 to 240 ................... 8 8 26,634,511 3.18
--- --- ------------ ------
Totals/Weighted Avg. ......... 145 184 $838,510,239 100.00%
=== === ============ ======
<CAPTION>
WEIGHTED AVERAGES
-------------------------------------------------------------------------
STATED REMAINING CUT-OFF
RANGE OF MORTGAGE REMAINING AMORT. DATE MATURITY
REMAINING TERMS (MO.) RATE TERM (MO.) TERM (MO.) DSCR LTV LTV
------------------------------ ------------ ------------ ------------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
81 ........................... 8.7390% 81 357 1.45x 57.48% 54.41%
101 to 120 ................... 8.2423% 115 324 1.52x 61.29% 51.85%
121 to 140 ................... 7.7500% 128 0 1.80x 50.00% 50.00%
161 to 180 ................... 8.2291% 176 234 1.46x 55.81% 18.67%
181 to 240 ................... 8.4035% 234 234 1.46x 59.86% 2.81%
------ --- --- ---- ----- -----
Totals/Weighted Avg. ......... 8.2490% 122 315 1.52x 60.71% 48.10%
</TABLE>
S-68
<PAGE>
The following table sets forth the range of original amortization periods of
the mortgage loans.
RANGE OF ORIGINAL AMORTIZATION TERMS IN MONTHS
<TABLE>
<CAPTION>
AGGREGATE % OF
CUT-OFF INITIAL
RANGE OF ORIGINAL NUMBER NUMBER OF DATE POOL
AMORTIZATION TERMS (MO.) OF LOANS PROPERTIES BALANCE BALANCE
------------------------------ ---------- ------------ -------------- -----------
<S> <C> <C> <C> <C>
0 to 59 ...................... 2 2 $ 14,950,000 1.78%
60 to 120 .................... 2 2 32,868,108 3.92
121 to 180 ................... 13 15 28,664,609 3.42
181 to 240 ................... 19 22 61,400,256 7.32
241 to 300 ................... 39 63 198,028,556 23.62
301 to 360 ................... 70 80 502,598,710 59.94
-- -- ------------ ------
Totals/Weighted Avg. ......... 145 184 $838,510,239 100.00%
=== === ============ ======
<CAPTION>
WEIGHTED AVERAGES
---------------------------------------------------------------------------
ORIGINAL REMAINING CUT-OFF
RANGE OF ORIGINAL MORTGAGE AMORTIZATION AMORT. DATE MATURITY
AMORTIZATION TERMS (MO.) RATE TERM (MO.) TERM (MO.) DSCR LTV LTV
------------------------------ ------------ -------------- ------------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
0 to 59 ...................... 7.6942% 121 0 1.94x 49.19% 49.19%
60 to 120 .................... 8.7327% 106 106 1.72x 49.58% 0.02%
121 to 180 ................... 8.1132% 176 176 1.42x 54.21% 1.35%
181 to 240 ................... 8.3171% 176 231 1.49x 58.57% 21.56%
241 to 300 ................... 8.2401% 116 293 1.68x 54.33% 45.05%
301 to 360 ................... 8.2368% 116 356 1.44x 64.93% 58.32%
------ --- --- ---- ----- -----
Totals/Weighted Avg. ......... 8.2490% 122 315 1.52x 60.71% 48.10%
</TABLE>
The following table sets forth the years of scheduled maturity of the
mortgage loans.
YEARS OF SCHEDULED MATURITY OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
CUM.
AGGREGATE % OF % OF
CUT-OFF INITIAL CUT-OFF
SCHEDULED NUMBER OF NUMBER OF DATE POOL DATE
MATURITY YEAR LOANS PROPERTIES BALANCE BALANCE BALANCE
--------------------- ----------- ------------ -------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
2007 ................ 1 2 $ 11,984,978 1.43% 1.43%
2009 ................ 9 27 110,304,398 13.15 14.58
2010 ................ 107 122 625,657,091 74.62 89.20
2011 ................ 1 1 8,000,000 0.95 90.15
2014 ................ 1 1 1,985,421 0.24 90.39
2015 ................ 18 23 53,943,840 6.43 96.82
2018 ................ 1 1 1,480,523 0.18 97.00
2020 ................ 7 7 25,153,988 3.00 100.00
--- --- ------------ ------ ------
Totals/Weighted Avg. 145 184 $838,510,239 100.00% 100.00%
=== === ============ ====== ======
<CAPTION>
WEIGHTED AVERAGES
-------------------------------------------------------------------------
STATED REMAINING CUT-OFF
SCHEDULED MORTGAGE REMAINING AMORT. DATE MATURITY
MATURITY YEAR RATE TERM (MO.) TERM (MO.) DSCR LTV LTV
--------------------- ------------ ------------ ------------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
2007 ................ 8.7390% 81 357 1.45x 57.48% 54.41%
2009 ................ 8.3231% 107 241 1.64x 58.57% 37.47%
2010 ................ 8.2281% 116 339 1.50x 61.77% 54.39%
2011 ................ 7.7500% 128 0 1.80x 50.00% 50.00%
2014 ................ 7.8300% 168 348 2.13x 53.66% 42.91%
2015 ................ 8.2438% 177 230 1.44x 55.89% 17.78%
2018 ................ 8.2300% 215 215 1.29x 64.37% 0.00%
2020 ................ 8.4137% 235 235 1.47x 59.60% 2.98%
------ --- --- ---- ----- -----
Totals/Weighted Avg. 8.2490% 122 315 1.52x 60.71% 48.10%
</TABLE>
S-69
<PAGE>
The following table sets forth the range of years in which the mortgaged
properties were built or renovated.
RANGE OF YEARS BUILT/RENOVATED FOR MORTGAGED PROPERTIES
<TABLE>
<CAPTION>
AGGREGATE % OF
CUT-OFF INITIAL
RANGE OF YEARS NUMBER DATE POOL
BUILT/RENOVATED OF PROPERTIES BALANCE BALANCE
------------------------------ --------------- --------------- -----------
<S> <C> <C> <C>
1900 to 1919 ................. 1 $ 2,988,263 0.36%
1920 to 1939 ................. 2 12,444,237 1.48
1940 to 1959 ................. 1 2,067,256 0.25
1960 to 1969 ................. 8 56,270,003 6.71
1970 to 1979 ................. 25 110,913,443 13.23
1980 to 1989 ................. 42 173,362,293 20.68
1990 to 1999 ................. 94 416,187,320 49.63
2000 ......................... 11 64,277,426 7.67
-- ------------ ------
Totals/Weighted Avg. ......... 184 $838,510,239 100.00%
=== ============ ======
<CAPTION>
WEIGHTED AVERAGES
-------------------------------------------------------------------------
STATED REMAINING CUT-OFF
RANGE OF YEARS MORTGAGE REMAINING AMORT. DATE MATURITY
BUILT/RENOVATED RATE TERM (MO.) TERM (MO.) DSCR LTV LTV
------------------------------ ------------ ------------ ------------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
1900 to 1919 ................. 7.8500% 116 296 2.03x 46.69% 38.46%
1920 to 1939 ................. 8.3741% 112 338 1.42x 72.77% 64.70%
1940 to 1959 ................. 8.5230% 107 287 1.41x 68.99% 58.39%
1960 to 1969 ................. 7.8978% 119 342 1.47x 62.69% 54.30%
1970 to 1979 ................. 8.0654% 119 338 1.46x 62.26% 53.48%
1980 to 1989 ................. 8.5076% 118 333 1.43x 64.41% 54.28%
1990 to 1999 ................. 8.2225% 123 296 1.59x 58.20% 43.11%
2000 ......................... 8.3326% 140 328 1.44x 60.68% 45.92%
------ --- --- ---- ----- -----
Totals/Weighted Avg. ......... 8.2490% 122 315 1.52 60.71% 48.10%
</TABLE>
The following table sets forth a range of Debt Service Coverage Ratios for
the mortgage loans as of the Cut-Off Date.
RANGE OF DEBT SERVICE COVERAGE RATIOS AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
AGGREGATE % OF
CUT-OFF INITIAL
RANGE OF DEBT NUMBER NUMBER DATE POOL
SERVICE COVERAGE RATIOS OF LOANS OF PROPERTIES BALANCE BALANCE
------------------------------ ---------- --------------- --------------- -----------
<S> <C> <C> <C> <C>
1.14x......................... 1 1 $ 2,374,447 0.28%
1.15x to 1.19x ............... 3 3 15,707,554 1.87
1.20x to 1.24x ............... 3 3 11,590,656 1.38
1.25x to 1.29x ............... 12 12 59,486,149 7.09
1.30x to 1.34x ............... 19 25 114,118,364 13.61
1.35x to 1.39x ............... 16 21 52,613,267 6.27
1.40x to 1.44x ............... 27 50 241,150,608 28.76
1.45x to 1.49x ............... 10 11 58,901,577 7.02
1.50x to 1.59x ............... 11 13 51,046,840 6.09
1.60x to 1.69x ............... 9 11 40,972,556 4.89
1.70x to 1.79x ............... 8 8 55,714,594 6.64
1.80x to 1.89x ............... 9 9 44,190,685 5.27
1.90x to 1.99x ............... 4 4 24,253,658 2.89
2.00x to 2.49x ............... 11 11 64,098,612 7.64
2.50x to 2.99x ............... 1 1 998,427 0.12
3.49x ........................ 1 1 1,292,247 0.15
-- -- ------------ ------
Totals/Weighted Avg. ......... 145 184 $838,510,239 100.00%
=== === ============ ======
<CAPTION>
WEIGHTED AVERAGES
-----------------------------------------------------------------------
STATED REMAINING CUT-OFF
RANGE OF DEBT MORTGAGE REMAINING AMORT. DATE MATURITY
SERVICE COVERAGE RATIOS RATE TERM (MO.) TERM (MO.) DSCR LTV LTV
------------------------------ ------------ ------------ ------------ ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
1.14x......................... 8.5500% 176 176 1.14x 72.17% 1.96%
1.15x to 1.19x ............... 8.5391% 200 232 1.18x 68.00% 15.81%
1.20x to 1.24x ............... 8.5313% 120 342 1.22x 75.20% 63.61%
1.25x to 1.29x ............... 8.4901% 125 346 1.27x 67.27% 56.39%
1.30x to 1.34x ............... 8.6158% 121 335 1.32x 68.68% 59.21%
1.35x to 1.39x ............... 8.3815% 147 287 1.37x 64.76% 39.57%
1.40x to 1.44x ............... 8.0848% 114 338 1.42x 65.58% 57.36%
1.45x to 1.49x ............... 8.3072% 109 349 1.47x 62.79% 56.49%
1.50x to 1.59x ............... 8.0777% 122 318 1.53x 58.41% 47.30%
1.60x to 1.69x ............... 8.1337% 117 289 1.64x 48.37% 39.04%
1.70x to 1.79x ............... 8.4743% 122 194 1.73x 50.23% 16.55%
1.80x to 1.89x ............... 7.9244% 136 313 1.82x 48.53% 36.17%
1.90x to 1.99x ............... 8.2080% 118 304 1.97x 48.71% 40.02%
2.00x to 2.49x ............... 7.9465% 118 303 2.07x 44.99% 37.82%
2.50x to 2.99x ............... 8.0100% 117 357 2.62x 32.21% 28.86%
3.49x ........................ 8.5000% 113 293 3.49x 25.84% 21.74%
------ --- --- ---- ----- -----
Totals/Weighted Avg. ......... 8.2490% 122 315 1.52x 60.71% 48.10%
</TABLE>
S-70
<PAGE>
The following table sets forth the range of Cut-Off Date Balances.
RANGE OF CUT-OFF DATE BALANCES
<TABLE>
<CAPTION>
AGGREGATE % OF
RANGE OF CUT-OFF INITIAL
CUT-OFF NUMBER NUMBER DATE POOL
DATE BALANCES OF LOANS OF PROPERTIES BALANCE BALANCE
-------------------------------- ---------- --------------- --------------- -----------
<S> <C> <C> <C> <C>
$ 0 to $ 999,999 ..... 11 11 $ 9,351,620 1.12%
$ 1,000,000 to $ 1,999,999 ..... 43 49 67,311,278 8.03
$ 2,000,000 to $ 3,999,999 ..... 35 36 103,296,065 12.32
$ 4,000,000 to $ 5,999,999 ..... 20 20 95,435,956 11.38
$ 6,000,000 to $ 7,999,999 ..... 7 10 48,920,383 5.83
$ 8,000,000 to $ 9,999,999 ..... 10 13 89,826,434 10.71
$10,000,000 to $11,999,999 ..... 2 3 22,226,388 2.65
$12,000,000 to $13,999,999 ..... 5 6 65,662,089 7.83
$14,000,000 to $15,999,999 ..... 2 3 30,871,858 3.68
$16,000,000 to $17,999,999 ..... 2 2 35,568,820 4.24
$18,000,000 to $19,999,999 ..... 2 2 36,294,057 4.33
$20,000,000 to $24,999,999 ..... 1 1 21,157,357 2.52
$25,000,000 to $26,999,999...... 1 1 25,406,203 3.03
$27,000,000 to $59,999,999 ..... 3 21 93,254,583 11.12
$93,927,147..................... 1 6 93,927,147 11.20
-- -- ------------ ------
Totals/Weighted Avg. ........... 145 184 $838,510,239 100.00%
=== === ============ ======
<CAPTION>
WEIGHTED AVERAGES
-------------------------------------------------------------------------
RANGE OF STATED REMAINING CUT-OFF
CUT-OFF MORTGAGE REMAINING AMORT. DATE MATURITY
DATE BALANCES RATE TERM (MO.) TERM (MO.) DSCR LTV LTV
-------------------------------- ------------ ------------ ------------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
$ 0 to $ 999,999 ..... 8.3873% 170 247 1.80x 47.58% 16.69%
$ 1,000,000 to $ 1,999,999 ..... 8.3113% 131 291 1.54x 59.58% 41.65%
$ 2,000,000 to $ 3,999,999 ..... 8.2978% 123 311 1.52x 60.83% 48.35%
$ 4,000,000 to $ 5,999,999 ..... 8.1910% 129 309 1.46x 62.81% 48.54%
$ 6,000,000 to $ 7,999,999 ..... 8.1447% 124 323 1.60x 57.49% 48.42%
$ 8,000,000 to $ 9,999,999 ..... 8.2204% 128 323 1.46x 64.14% 52.11%
$10,000,000 to $11,999,999 ..... 8.7832% 152 301 1.33x 62.46% 31.07%
$12,000,000 to $13,999,999 ..... 8.1154% 117 335 1.78x 45.80% 39.99%
$14,000,000 to $15,999,999 ..... 7.9551% 118 358 1.49x 65.15% 58.29%
$16,000,000 to $17,999,999 ..... 8.2125% 111 291 2.02x 53.02% 44.30%
$18,000,000 to $19,999,999 ..... 8.4805% 117 357 1.27x 67.76% 61.33%
$20,000,000 to $24,999,999 ..... 8.4300% 116 356 1.33x 73.98% 66.95%
$25,000,000 to $26,999,999...... 7.8800% 112 352 1.41x 68.67% 60.43%
$27,000,000 to $59,999,999 ..... 8.7569% 110 248 1.50x 61.14% 38.73%
$93,927,147..................... 7.8200% 117 357 1.42x 62.17% 55.51%
------ --- --- ---- ----- -----
Totals/Weighted Avg. ........... 8.2490% 122 315 1.52x 60.71% 48.10%
</TABLE>
S-71
<PAGE>
The following two tables set forth the range of LTV Ratios of the mortgage
loans as of the Cut-Off Date and the maturity date of the mortgage loans. The
LTV Ratio as of the maturity date referred to below and in the foregoing tables
was calculated based on the principal balance of the related mortgage loan
scheduled to be due on the maturity date, assuming that no mortgage loan is
prepaid in whole or in part prior to its maturity date (or, in the case of the
ARD Loan, its Anticipated Repayment Date). In addition, because it is based on
the value of a mortgaged property determined as of loan origination, the
information set forth in the table below is not necessarily a reliable measure
of the related equity that the borrower will possess in each mortgaged property
or of the borrower's equity in each mortgaged property as of the maturity date
of the mortgage loan. In a declining real estate market, the appraised value of
a mortgaged property could have decreased from the appraised value determined
at origination, and the LTV Ratio of a mortgage loan as of the maturity date
may be higher than its LTV Ratio at origination, even after taking into account
amortization since origination.
RANGE OF LOAN-TO-VALUE RATIOS AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
AGGREGATE % OF CUM. % OF
CUT-OFF INITIAL CUT-OFF
RANGE OF CUT-OFF DATE NUMBER NUMBER DATE POOL DATE
LTV RATIOS OF LOANS OF PROPERTIES BALANCE BALANCE BALANCE
---------------------------- ---------- --------------- --------------- ----------- ----------
<S> <C> <C> <C> <C> <C>
25.84% ................ 1 1 $ 1,292,247 0.15% 0.15%
30.01% to 40.00% ........... 12 13 32,378,523 3.86 4.02
40.01% to 45.00% ........... 8 10 40,001,697 4.77 8.79
45.01% to 50.00% ........... 12 12 69,790,416 8.32 17.11
50.01% to 55.00% ........... 15 18 81,640,308 9.74 26.85
55.01% to 60.00% ........... 19 20 101,547,572 12.11 38.96
60.01% to 65.00% ........... 19 30 188,432,532 22.47 61.43
65.01% to 70.00% ........... 27 45 187,560,785 22.37 83.80
70.01% to 75.00% ........... 25 25 105,355,009 12.56 96.36
75.01% to 80.00% ........... 7 10 30,511,151 3.64 100.00
-- -- ------------ ------ ------
Totals/Weighted Avg. ....... 145 184 $838,510,239 100.00% 100.00%
=== === ============ ====== ======
<CAPTION>
WEIGHTED AVERAGES
-------------------------------------------------------------------------
STATED REMAINING CUT-OFF
RANGE OF CUT-OFF DATE MORTGAGE REMAINING AMORT. DATE MATURITY
LTV RATIOS RATE TERM (MO.) TERM (MO.) DSCR LTV LTV
---------------------------- ------------ ------------ ------------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
25.84% ................ 8.5000% 113 293 3.49x 25.84% 21.74%
30.01% to 40.00% ........... 7.9722% 126 272 1.98x 33.78% 23.01%
40.01% to 45.00% ........... 8.1159% 127 286 1.69x 42.66% 31.14%
45.01% to 50.00% ........... 8.0235% 119 323 1.92x 48.22% 41.36%
50.01% to 55.00% ........... 8.3592% 137 215 1.66x 51.95% 19.15%
55.01% to 60.00% ........... 8.2366% 117 302 1.60x 57.73% 44.07%
60.01% to 65.00% ........... 8.1659% 122 347 1.42x 62.42% 53.71%
65.01% to 70.00% ........... 8.3585% 122 329 1.35x 68.15% 55.87%
70.01% to 75.00% ........... 8.4403% 117 335 1.35x 73.12% 63.28%
75.01% to 80.00% ........... 8.1481% 116 356 1.34x 77.33% 69.52%
------ --- --- ---- ----- -----
Totals/Weighted Avg. ....... 8.2490% 122 315 1.52x 60.71% 48.10%
</TABLE>
S-72
<PAGE>
RANGE OF LOAN-TO-VALUE RATIOS AT MATURITY
<TABLE>
<CAPTION>
AGGREGATE % OF CUM. % OF
CUT-OFF INITIAL CUT-OFF
RANGE OF MATURITY NUMBER NUMBER DATE POOL DATE
LTV RATIOS OF LOANS OF PROPERTIES BALANCE BALANCE BALANCE
---------------------------- ---------- --------------- -------------- ----------- ----------
<S> <C> <C> <C> <C> <C>
0.00% to 10.00% ........... 23 25 $ 88,167,227 10.51% 10.51%
10.01% to 20.00% ........... 2 2 2,865,697 0.34 10.86
20.01% to 30.00% ........... 7 10 30,520,657 3.64 14.50
30.01% to 35.00% ........... 5 5 18,434,455 2.20 16.69
35.01% to 40.00% ........... 7 8 40,002,327 4.77 21.47
40.01% to 45.00% ........... 10 10 55,961,604 6.67 28.14
45.01% to 50.00% ........... 17 17 79,302,996 9.46 37.60
50.01% to 55.00% ........... 17 24 85,637,611 10.21 47.81
55.01% to 60.00% ........... 20 43 228,079,334 27.20 75.01
60.01% to 65.00% ........... 15 15 107,078,758 12.77 87.78
65.01% to 70.00% ........... 18 18 88,456,957 10.55 98.33
70.01% to 75.00% ........... 4 7 14,002,617 1.67 100.00
-- -- ------------ ------ ------
Totals/Weighted Avg. ....... 145 184 $838,510,239 100.00% 100.00%
=== === ============ ====== ======
<CAPTION>
WEIGHTED AVERAGES
-----------------------------------------------------------------------
STATED REMAINING CUT-OFF
RANGE OF MATURITY MORTGAGE REMAINING AMORT. DATE MATURITY
LTV RATIOS RATE TERM (MO.) TERM (MO.) DSCR LTV LTV
---------------------------- ------------ ------------ ------------ ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
0.00% to 10.00% ........... 8.4318% 167 167 1.55x 54.19% 1.30%
10.01% to 20.00% ........... 8.2600% 148 268 1.22x 58.61% 13.44%
20.01% to 30.00% ........... 8.1291% 132 277 1.94x 37.27% 25.48%
30.01% to 35.00% ........... 7.8816% 113 266 1.77x 44.48% 33.32%
35.01% to 40.00% ........... 8.1611% 130 299 1.70x 45.58% 35.97%
40.01% to 45.00% ........... 8.1294% 117 325 1.90x 49.07% 41.80%
45.01% to 50.00% ........... 8.0511% 117 303 1.74x 55.61% 47.83%
50.01% to 55.00% ........... 8.3188% 111 336 1.47x 60.77% 53.37%
55.01% to 60.00% ........... 8.2536% 116 342 1.40x 64.76% 57.41%
60.01% to 65.00% ........... 8.2694% 116 354 1.37x 69.02% 61.86%
65.01% to 70.00% ........... 8.3768% 115 355 1.36x 74.23% 67.15%
70.01% to 75.00% ........... 8.2235% 117 357 1.29x 78.34% 70.55%
------ --- --- ---- ----- -----
Totals/Weighted Avg. ....... 8.2490% 122 315 1.52x 60.71% 48.10%
</TABLE>
S-73
<PAGE>
The following table sets forth the mortgage loans subject to
lockout/prepayment restrictions, expressed as a percentage of the outstanding
principal balance at each period, assuming that each mortgage loan is repaid in
accordance with its amortization schedule.
REMAINING POOL BALANCE SUBJECT TO PREPAYMENT RESTRICTIONS
<TABLE>
<CAPTION>
(greater than)
PERIOD LOCKOUT/DEFEASANCE 1% OR YM(1) 5% 4% 3%
--------- --------------------- ------------------ ------------------ ------------------ ------------------
$ (MM) % $ (MM) % $ (MM) % $ (MM) % $ (MM) %
---------- ---------- -------- --------- -------- --------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Current 818.2 97.6% 20.3 2.4% -- 0.0% -- 0.0% -- 0.0%
Year 1 808.0 97.5% 20.3 2.5% -- 0.0% -- 0.0% -- 0.0%
Year 2 788.1 96.5% 29.0 3.5% -- 0.0% -- 0.0% -- 0.0%
Year 3 774.5 96.3% 30.1 3.7% -- 0.0% -- 0.0% -- 0.0%
Year 4 760.4 96.1% 30.8 3.9% -- 0.0% -- 0.0% -- 0.0%
Year 5 745.8 96.1% 30.4 3.9% -- 0.0% -- 0.0% -- 0.0%
Year 6 729.7 96.1% 28.7 3.8% 1.2 0.2% -- 0.0% -- 0.0%
Year 7 700.7 96.0% 28.2 3.9% 1.1 0.2% -- 0.0% -- 0.0%
Year 8 681.6 96.0% 27.6 3.9% 1.1 0.2% -- 0.0% -- 0.0%
Year 9 599.6 95.5% 21.2 3.4% -- 0.0% 1.0 0.2% -- 0.0%
Year 10 60.5 97.7% 0.5 0.8% -- 0.0% 0.9 1.5% -- 0.0%
Year 11 48.3 97.5% 0.4 0.8% -- 0.0% -- 0.0% 0.8 1.7%
Year 12 43.7 97.7% 0.3 0.7% -- 0.0% -- 0.0% 0.7 1.7%
Year 13 38.7 97.9% 0.2 0.5% -- 0.0% -- 0.0% -- 0.0%
Year 14 31.7 98.2% 0.2 0.1% -- 0.0% -- 0.0% -- 0.0%
Year 15 10.7 96.3% -- 0.0% -- 0.0% -- 0.0% -- 0.0%
Year 16 9.0 97.0% -- 0.0% -- 0.0% -- 0.0% -- 0.0%
Year 17 7.0 98.1% -- 0.0% -- 0.0% -- 0.0% -- 0.0%
Year 18 4.9 100.0% -- 0.0% -- 0.0% -- 0.0% -- 0.0%
Year 19 2.6 100.0% -- 0.0% -- 0.0% -- 0.0% -- 0.0%
Year 20 -- -- -- -- --
<CAPTION>
PERIOD 2% 1% FREE WINDOW TOTALS
--------- ------------------ ------------------ ------------------ -----------------------------
% OF
$ (MM) % $ (MM) % $ (MM) % % $ (MM) IPB(2)
-------- --------- -------- --------- -------- --------- ------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Current -- 0.0% -- 0.0% -- 0.0% 100% 838.5 100.0%
Year 1 -- 0.0% -- 0.0% -- 0.0% 100% 828.3 98.8%
Year 2 -- 0.0% -- 0.0% -- 0.0% 100% 817.0 97.4%
Year 3 -- 0.0% -- 0.0% -- 0.0% 100% 804.6 96.0%
Year 4 -- 0.0% -- 0.0% -- 0.0% 100% 791.2 94.4%
Year 5 -- 0.0% -- 0.0% -- 0.0% 100% 776.2 92.6%
Year 6 -- 0.0% -- 0.0% -- 0.0% 100% 759.6 90.6%
Year 7 -- 0.0% -- 0.0% -- 0.0% 100% 730.1 87.1%
Year 8 -- 0.0% -- 0.0% -- 0.0% 100% 710.2 84.7%
Year 9 -- 0.0% -- 0.0% 5.7 0.9% 100% 627.6 74.8%
Year 10 -- 0.0% -- 0.0% -- 0.0% 100% 61.9 7.4%
Year 11 -- 0.0% -- 0.0% -- 0.0% 100% 49.5 5.9%
Year 12 -- 0.0% -- 0.0% -- 0.0% 100% 44.7 5.3%
Year 13 0.6 1.6% -- 0.0% -- 0.0% 100% 39.5 4.7%
Year 14 0.5 1.6% -- 0.0% -- 0.0% 100% 32.3 3.9%
Year 15 -- 0.0% 0.4 3.7% -- 0.0% 100% 11.1 1.3%
Year 16 -- 0.0% 0.3 3.0% -- 0.0% 100% 9.2 1.1%
Year 17 -- 0.0% 0.1 1.9% -- 0.0% 100% 7.2 0.9%
Year 18 -- 0.0% -- 0.0% -- 0.0% 100% 4.9 0.6%
Year 19 -- 0.0% -- 0.0% -- 0.0% 100% 2.6 0.3%
Year 20 -- -- -- -- 0.0%
</TABLE>
-------
(1) As used above, "YM" means that prepayments are permitted if they are
accompanied by the payment of a yield maintenance charge.
(2) As used above, "IPB" means the initial pool balance.
S-74
<PAGE>
The following table sets forth the mortgage loans according to the
mortgage loan seller that will sell those mortgage loans to us.
MORTGAGE LOANS BY MORTGAGE LOAN SELLER
<TABLE>
<CAPTION>
% OF
AGGREGATE INITIAL
MORTGAGE NUMBER OF NUMBER OF CUT-OFF DATE POOL
LOAN SELLER LOANS PROPERTIES BALANCE BALANCE
--------------------------------- ----------- ------------ -------------- -----------
<S> <C> <C> <C> <C>
Bear, Stearns Funding, Inc. ..... 51 67 $366,407,815 43.70%
Wells Fargo Bank, National
Association .................... 87 110 414,221,687 49.40
Morgan Stanley Dean Witter
Mortgage Capital Inc. .......... 7 7 57,880,737 6.90
-- --- ------------ ------
Totals/Weighted Avg. ............ 145 184 $838,510,239 100.00%
=== === ============ ======
<CAPTION>
WEIGHTED AVERAGES
---------------------------------------------------------------------------
STATED REMAINING CUT-OFF
MORTGAGE MORTGAGE REMAINING AMORT. DATE MATURITY
LOAN SELLER RATE TERM (MOS.) TERM (MOS.) DSCR LTV LTV
--------------------------------- ------------ ------------- ------------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Bear, Stearns Funding, Inc. ..... 8.2661% 119 306 1.61x 58.42% 45.78%
Wells Fargo Bank, National
Association .................... 8.1851% 126 318 1.45x 62.34% 48.78%
Morgan Stanley Dean Witter
Mortgage Capital Inc. .......... 8.5974% 115 355 1.39x 63.62% 57.88%
------ --- --- ---- ----- -----
Totals/Weighted Avg. ............ 8.2490% 122 315 1.52x 60.71% 48.10%
</TABLE>
S-75
<PAGE>
The following table sets forth some of the characteristics of the ten
largest mortgage loans.
TEN LARGEST MORTGAGE LOANS
<TABLE>
<CAPTION>
AGGREGATE
NUMBER OF CUT-OFF DATE % OF INITIAL
PROPERTY NAME PROPERTIES BALANCE POOL BALANCE
---------------------------- ------------ -------------- --------------
<S> <C> <C> <C>
MHC Portfolio .............. 6 $ 93,927,147 11.20%
FM Global Headquarters ..... 1 31,802,702 3.79
U-Haul Portfolio ........... 19 31,726,782 3.78
Trolley Square ............. 1 29,725,099 3.54
Jefferson Hill Apartments... 1 25,406,203 3.03
Long Beach Marketplace ..... 1 21,157,357 2.52
World Kitchen Warehouse..... 1 18,205,435 2.17
San Francisco Medical
Center .................... 1 18,088,622 2.16
Hilton Garden Cupertino .... 1 17,797,958 2.12
AMC Cantera 30 ............. 1 17,770,862 2.12
-- ------------ -----
Totals/Weighted Avg. ...... 33 $305,608,167 36.45%
== ============ =====
<CAPTION>
WEIGHTED AVERAGES
------------------------------------------------------------------------
STATED MATURITY
REMAINING REMAINING CUT-OFF DATE
MORTGAGE TERM AMORT. DATE LTV
PROPERTY NAME RATE (MOS.) TERM (MOS.) DSCR LTV RATIO RATIO
---------------------------- ------------ ----------- ------------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
MHC Portfolio .............. 7.8200% 117 357 1.42 62.17% 55.51%
FM Global Headquarters ..... 8.7350 106 106 1.73 50.07 0.00
U-Haul Portfolio ........... 8.5230 107 287 1.41 68.99 58.39
Trolley Square ............. 9.0300 118 358 1.34 64.62 59.19
Jefferson Hill Apartments... 7.8800 112 352 1.41 68.67 60.43
Long Beach Marketplace ..... 8.4300 116 356 1.33 73.98 66.95
World Kitchen Warehouse..... 8.6400 116 356 1.27 65.96 59.97
San Francisco Medical
Center .................... 8.3200 119 359 1.26 69.57 62.70
Hilton Garden Cupertino .... 8.1900 108 288 2.04 56.14 47.02
AMC Cantera 30 ............. 8.2350 115 295 1.99 49.88 41.58
------ --- --- ---- ----- -----
Totals/Weighted Avg. ...... 8.2772% 114 316 1.49 62.81% 50.98%
</TABLE>
Specified in Annex A to this prospectus supplement are additional
characteristics of the mortgage loans and mortgaged properties set forth on a
loan-by-loan basis. Additional information regarding the related mortgage loans
also is contained in this prospectus supplement under "--Underwritten Cash
Flow," "--Assessments of Property Condition" and "--Representations and
Warranties; Repurchases" and in the prospectus under "Description of the Trust
Funds" and "Legal Aspects of Mortgage Loans."
TEN LARGEST MORTGAGE LOANS
Annex B contains a brief summary of the ten largest mortgage loans in the
pool. The ten largest mortgage loans represent, in the aggregate, less than
36.5% of the initial pool balance and no single mortgage loan represents more
than 11.2% of the initial pool balance.
UNDERWRITTEN CASH FLOW
In general, the "Underwritten Cash Flow" for a mortgaged property is the
estimated stabilized revenue derived from the use and operation of the
mortgaged property (consisting primarily of rental income) less the sum of:
o estimated stabilized operating expenses (such as utilities,
administrative expenses, repairs and maintenance, management fees and
advertising);
o fixed expenses (such as insurance, real estate taxes and, if applicable,
ground lease payments); and
o reserves for capital expenditures, including tenant improvement costs
and leasing commissions.
Underwritten Cash Flow generally does not reflect interest expense and
non-cash items such as depreciation and amortization. In determining
Underwritten Cash Flow for a mortgaged property, the related mortgage loan
seller relied on rent rolls and other generally unaudited financial information
provided by the respective borrowers and calculated stabilized estimates of
cash flow that took into consideration historical financial statements,
material changes in the operating position of the mortgaged property of which
the related mortgage loan seller was aware (e.g., newly signed leases or end of
"free rent" periods and market data), and estimated capital expenditure,
leasing commission and tenant improvement reserves. The related mortgage loan
seller made changes to operating statements and operating information obtained
from the respective borrowers, resulting in either an
S-76
<PAGE>
increase or decrease in the estimate of Underwritten Cash Flow derived
therefrom, based upon the related mortgage loan seller's evaluation of the
operating statements and operating information and the assumptions applied by
the respective borrowers in preparing the statements and information. In most
cases, borrower-supplied "trailing-12 months" income and/or expense information
was utilized. In some cases, partial year operating income data was annualized,
with adjustments for items deemed not appropriate to be annualized. In some
instances, historical expenses were increased for underwriting purposes. For
purposes of calculating Underwritten Cash Flow, the rents under some leases
have been adjusted downward to reflect market rents for similar properties if
the rent actually being paid under the lease was significantly higher than the
market rent for similar properties. Several mortgage loans are secured by
mortgaged properties with recently constructed improvements and, accordingly,
there were no historical operating results or financial statements available
with respect to these mortgaged properties. In these cases, items of revenue
and expense used in calculating Underwritten Cash Flow were generally derived
from rent rolls, estimates set forth in the related appraisal or from
borrower-supplied information. No assurance can be given with respect to the
accuracy of the information provided by any borrowers, or the adequacy of the
procedures used by the related mortgage loan seller in determining the
presented operating information.
ASSESSMENTS OF PROPERTY CONDITION
Property Inspection. All of the mortgaged properties were inspected by a
member of the related mortgage loan seller's professional staff or, in some
cases, by a third party professional engaged by the related mortgage loan
seller, to assess the mortgaged property's general condition. No inspection
revealed any patent structural deficiency or any deferred maintenance
considered material and adverse to the interest of the lender for which the
related mortgage loan seller has not established an escrow arrangement that it
deemed adequate to cover this deficiency.
Appraisals. In connection with the origination or acquisition of each
mortgage loan, the related mortgaged property was appraised by an independent
appraiser who, generally, was a member of the Appraisal Institute. Each of
these appraisals complied with the real estate appraisal regulations issued
jointly by the federal bank regulatory agencies under the Financial
Institutions Reform, Recovery, and Enforcement Act of 1989. In general, those
appraisals represent the analysis and opinion of the person performing the
appraisal and are not guarantees of, and may not be indicative of, present or
future value. There can be no assurance that another person would not have
arrived at a different valuation, even if that person used the same general
approach to and same method of valuing the property. Moreover, the appraisals
sought 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. Information regarding the values of the mortgaged properties
as of the Cut-Off Date is presented in this prospectus supplement for
illustrative purposes only.
Property Condition Assessments. Except as described below, in connection
with the origination of each mortgage loan, a professional engineer, licensed
architect or qualified consultant inspected each related mortgaged property to
assess the condition of the structure, exterior walls, roofing, interior
structure and mechanical and electrical systems. The resulting reports
indicated deferred maintenance items on some mortgaged properties, which were
generally required to be remediated, and recommended certain capital
improvements, which generally were required to be made or for which reserves
were established at origination. In addition, the property condition
assessments provided a projection of necessary replacements and repair of
structural and mechanical systems over the life of the related mortgage loan,
which were used to establish replacement reserve requirements and to derive
Underwritten Cash Flow.
One mortgaged property, representing security for approximately 0.6% of
the initial pool balance, had been recently constructed as of the origination
of the related mortgage loan and therefore were not the subject of a property
condition assessment. In addition, the mortgaged property that is ground leased
to a third party, which mortgaged property represents security for 0.2% of the
initial pool balance, was not the subject of a property condition assessment.
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<PAGE>
Environmental Assessments. "Phase I" environmental site assessments were
performed at the mortgaged properties during the 12-month period prior to the
respective dates of origination of the mortgage loans, except in the case of
mortgaged properties securing mortgage loans that are the subject of the group
secured creditor impaired property policy that we describe in this prospectus
supplement. See "--Environmental Insurance" above and "Risk Factors--The Trust
May Become Liable for the Costs of Environmental Clean-Up."
Seismic Review Process. For the loans to be sold by Wells Fargo Bank,
National Association, requests for loans to be secured by properties located in
areas classified by the United States Geological Survey as seismic zones 3 or 4
underwent a preliminary probable maximum loss (PML) analysis. Properties
located in California were screened using a software system to perform a
preliminary PML analysis. Properties with any one of the following
characteristics underwent a third party seismic survey performed by a seismic
engineering firm:
o a property with a preliminary PML over 20% of the estimated replacement
cost of the improvements;
o a loan of more than $10,000,000;
o a property constructed of non-reinforced masonry; or
o a property found to exhibit indications of significant seismic stress
during the completion of the property condition assessment or a property
located in a county having special inspection or retrofit requirements.
For the loans sold by Bear, Stearns Funding, Inc. and Morgan Stanley Dean
Witter Mortgage Capital Inc., seismic reports were completed for each mortgaged
property located in areas classified by the United States Geological Survey as
seismic zones 3 or 4 in order to determine a PML estimate. For the mortgage
loans sold by Bear, Stearns Funding, Inc., Bear, Stearns Funding, Inc.'s
technical services director, who is not a member of its underwriting group, has
reviewed all seismic, environmental and property condition reports in
conjunction with the professional consultant who prepared the report.
Generally, any of the mortgage loans as to which the property was
estimated to have a PML in excess of 20% of the estimated replacement cost of
the improvements would either be subject to a lower loan to value limit at
origination, be conditioned on seismic upgrading, or be conditioned on
satisfactory earthquake insurance.
THE MORTGAGE LOAN SELLERS
On the date of initial issuance of the certificates, we will acquire the
mortgage loans from Wells Fargo Bank, National Association, Bear, Stearns
Funding, Inc. and Morgan Stanley Dean Witter Mortgage Capital Inc., as
"mortgage loan sellers," in each case pursuant to a mortgage loan purchase
agreement between us and the respective mortgage loan seller.
A description of Wells Fargo Bank, National Association is contained under
"Servicing of the Mortgage Loans--The Servicer" in this prospectus supplement.
Bear, Stearns Funding, Inc. ("BSFI") is a wholly-owned subsidiary of Bear
Stearns Mortgage Capital Corporation, and is a Delaware corporation and an
affiliate of Bear, Stearns & Co. Inc., one of the underwriters. BSFI originated
and underwrote all of the mortgage loans sold by it.
Morgan Stanley Dean Witter Mortgage Capital Inc. ("MSDWMC"), a subsidiary
of Morgan Stanley & Co. Incorporated, is a New York corporation formed to
originate and acquire loans secured by mortgages on commercial and multifamily
real estate. Each of the mortgage loans sold by MSDWMC was originated by one of
the participants in MSDWMC's commercial and multifamily mortgage loan conduit
program and was originated directly by MSDWMC. MSDWMC underwrote all of the
mortgage loans sold by it.
S-78
<PAGE>
The information set forth in this prospectus supplement concerning each
mortgage loan seller has been provided by the respective mortgage loan seller.
Neither we nor any underwriter makes any representation or warranty as to the
accuracy or completeness of that information.
REPRESENTATIONS AND WARRANTIES; REPURCHASES
In each mortgage loan purchase agreement, the related mortgage loan seller
will make representations and warranties with respect to each of the mortgage
loans that it will sell to us, subject to the exceptions specified in that
mortgage loan purchase agreement, as of the date of initial issuance of the
certificates or other date specifically provided in the representation and
warranty. Included in those representations and warranties are statements
generally to the effect described below.
o Mortgage Loan Schedule. The schedule attached to the related mortgage
loan purchase agreement setting forth the Cut-Off Date Balance, Mortgage
Rate, maturity date and other similar characteristics of the mortgage
loans is true and correct in all material respects as of the Cut-Off
Date.
o Ownership of Mortgage Loans. Immediately prior to the transfer to the
depositor of the mortgage loans, the mortgage loan seller had good title
to, and was the sole owner of, the mortgage loan, free and clear of any
and all pledges, liens and/or other encumbrances.
o Payment Record. No scheduled payment of principal and interest under any
mortgage loan was 30 days or more past due as of the Cut-Off Date, and no
mortgage loan was 30 days or more delinquent in the twelve-month period
immediately preceding the Cut-Off Date.
o Lien; Valid Assignment. The related mortgage constitutes a valid and,
subject to laws affecting creditors' rights generally, enforceable first
priority mortgage lien (subject to certain permitted encumbrances) upon
the related mortgaged property, and the assignment of the related
mortgage in favor of the trustee constitutes a legal, valid and binding
assignment.
o Assignment of Leases and Rents. The assignment of leases set forth in
the mortgage establishes and creates a valid and, subject to laws
affecting certain creditors' rights generally, enforceable first priority
lien in the related borrower's interest in all leases of the related
mortgaged property.
o Mortgage Status. The mortgage has not been satisfied, cancelled,
rescinded or subordinated in whole or in part in any manner that, and the
related mortgaged property has not been released from the lien of the
mortgage in whole or in part in any manner that, materially and adversely
affects the value of the mortgaged property.
o Condition of Property; Condemnation. Except as set forth in a property
inspection report prepared in connection with the origination of the
mortgage loan, the related mortgaged property is, to the mortgage loan
seller's knowledge, free and clear of any damage that would materially
and adversely affect its value as security for the mortgage loan and, to
the mortgage loan seller's knowledge, there is no proceeding pending for
the condemnation of all or any material portion of the related mortgaged
property.
o Title Insurance. The mortgaged property is covered by a Title Policy
that insures that the related mortgage is a valid, first priority lien on
the mortgaged property, subject only to certain permitted encumbrances.
o No Holdbacks. The proceeds of the mortgage loan have been fully
disbursed and there is no obligation for future advances with respect to
the mortgage loan.
o Environmental Conditions. Except in the case of the mortgage loans
covered by the group secured creditor impaired property policy that we
describe in this prospectus supplement, the mortgage loan seller has no
knowledge of any material and adverse environmental condition or
circumstance affecting the mortgaged property that was not disclosed in
the report of the environmental assessment that was conducted in
connection with the origination of the mortgage loan.
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<PAGE>
o Loan Document Status. Each mortgage note, mortgage and other document
conveyed to the depositor with respect to the mortgage loan that
evidences or secures the mortgage loan and was executed by or on behalf
of the related mortgagor is the legal, valid and binding obligation of
the maker thereof enforceable in accordance with its terms, and knowledge
of the mortgage loan seller there is no valid defense, counterclaim or
right of offset or rescission available to the related borrower with
respect to any mortgage note, mortgage or other agreement.
o Insurance. The related mortgaged property is, and is required pursuant
to the related mortgage to be, insured by casualty and liability
insurance policies of a type specified in the related mortgage loan
purchase agreement.
o Taxes and Assessments. To the mortgage loan seller's knowledge, there
are no delinquent or unpaid taxes that are due and payable, assessments
or other outstanding charges affecting the related mortgaged property
that are or may become a lien of priority equal to or higher than the
lien of the related mortgage.
o Mortgagor Bankruptcy. The mortgagor is not, to the mortgage loan
seller's knowledge, a debtor in any state or federal bankruptcy or
insolvency proceeding.
o Fee Simple or Leasehold Estate. The related mortgaged property consists
of the related mortgagor's fee simple estate in real estate or, if the
related mortgage loan is not secured by the related fee interest in the
mortgaged property, then either (i) the mortgage loan is secured by the
interest of a mortgagor as a lessee under a ground lease of the related
mortgaged property or (ii) the mortgage loan is secured by the interest
of a mortgagor as a sublessee under a ground sublease of a mortgaged
property and with respect to that ground lease or ground sublease as
applicable:
-- the ground lease or ground sublease or a memorandum thereof has been
or will be duly recorded and permits the interest of the lessee or
sublessee under the ground lease or ground sublease to be encumbered
by the related mortgage;
-- the lessee's or sublessee's interest in the ground lease or ground
sublease is not subject to any liens or encumbrances superior to, or
of equal priority with, the related mortgage, other than permitted
encumbrances;
-- the mortgagor's interest in the ground lease or ground sublease is
assignable to the depositor and its successors and assigns upon notice
to, but (except in the case of the ground sublease where consent
cannot be unreasonably withheld) without the consent of, the lessor
under the ground lease or sublessor or fee owner under the ground
sublease (or, if consent is required, it has been obtained);
-- the ground lease or ground sublease is in full force and effect and,
to the knowledge of the seller, no material default has occurred under
the ground lease or ground sublease;
-- the ground lease or ground sublease, or an estoppel letter related
thereto, requires the lessor or sublessor under the ground lease or
ground sublease to give notice of any default by the lessee or
sublessee to the holder of the mortgage, and further provides that no
notice of termination given under the ground lease or ground sublease
is effective against the holder of the mortgage unless a copy has been
delivered to that holder;
-- the holder of the mortgage is permitted a reasonable opportunity
(including, where necessary, sufficient time to gain possession of the
interest of the lessee or sublessee under the ground lease) to cure
any default under the ground lease, which is curable after the receipt
of notice of any default under the ground lease, before the lessor
under the ground lease may terminate the ground lease;
-- the ground lease has an original term (including any extension options
set forth therein) which extends not less than ten years beyond the
maturity date of the mortgage loan; and
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<PAGE>
-- with respect to the ground sublease, if the lessee under the ground
lease is terminated, the ground sublease will become a direct lease
with the lessor upon the terms and conditions contained in the ground
sublease.
o Cross-collateralization. Except in the case of the pari passu loans, no
mortgage loan is cross-collateralized or cross-defaulted with any loan
other than one or more other mortgage loans included in the mortgage
pool.
o Releases of Mortgaged Property. Except pursuant to the provisions that
we describe under "Description of the Mortgage Pool--Defeasance,"
"--Substitution" and "--Other Property Releases," no mortgage note or
mortgage requires the mortgagee to release all or any material portion of
the related mortgaged property from the lien of the related mortgage
except upon payment in full of all amounts due under the mortgage loan.
o No Material Default. To the mortgage loan seller's knowledge, there
exists no default, breach, violation or event of acceleration (and no
event which, with the passage of time or the giving of notice, or both,
would constitute any of the foregoing) under the related mortgage note or
mortgage that materially and adversely affects the value of the mortgage
loan and the related mortgaged property.
In addition, for each mortgage loan the related mortgage loan seller is
required to deliver to the trustee a mortgage file containing, among other
things, the original mortgage note, the original or a copy of the mortgage and
an assignment of the mortgage to the trustee, an original or a copy of the
title insurance policy and various other security documents and assignments of
those documents to the trustee.
If any document that is required to be delivered to the trustee for any
mortgage loan has not been delivered as and when required, has not been
properly executed or is defective on its face, or if there exists a breach of
any of the representations and warranties made with respect to a mortgage loan
and, in either such case, either:
o the document defect or breach materially and adversely affects the
interests of the certificateholders in the related mortgage loan, or
o both (a) the document defect or breach materially and adversely affects
the value of the mortgage loan and (b) the mortgage loan is a Specially
Serviced Mortgage Loan or Rehabilitated Mortgage Loan,
then the document defect or breach will constitute a "Material Document Defect"
or "Material Breach" for purposes of the applicable mortgage loan purchase
agreement. If a mortgage loan seller receives notice of a Material Document
Defect or Material Breach with respect to the mortgage loans sold to us by that
mortgage loan seller, and if the related mortgage loan seller cannot cure that
Material Breach or Material Document Defect within a period of 90 days
following the earlier of its receipt of that notice or its discovery of that
Material Breach or Material Document Defect (as that period may be extended by
up to an additional 90 days under the limited circumstances specified in the
related mortgage loan purchase agreement), then the related mortgage loan
seller will be obligated pursuant to the related mortgage loan purchase
agreement (the relevant rights under which will be assigned, together with its
interests in the mortgage loans, by us to the trustee) to (a) repurchase the
affected mortgage loan within that period at a price (the "Purchase Price")
equal to the sum of:
o the outstanding principal balance of that mortgage loan as of the date
of purchase;
o all accrued and unpaid interest on that mortgage loan at the related
Mortgage Rate, to but not including the due date in the Collection Period
of purchase; and
o the amount of any expenses related to that mortgage loan or REO Property
(including unreimbursed Servicing Advances plus accrued and unpaid
interest on related Advances at the Advance Rate, unpaid Special
Servicing Fees and Liquidation Fees),
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or (b) at the related mortgage loan seller's option and if within the
three-month period commencing on the date of initial issuance of the
certificates (or within the two-year period thereafter if the related mortgage
loan is a "defective obligation" within the meaning of Section
860G(a)(4)(B)(ii) of the Internal Revenue Code and Treasury Regulation Section
1.860G-2(f)), (i) replace that mortgage loan with a mortgage loan having
specified payment terms comparable to the mortgage loan to be replaced and that
has been the subject of a ratings confirmation from each of S&P and Fitch (a
"Qualifying Substitute Mortgage Loan") and (ii) pay an amount generally equal
to the excess of the applicable Purchase Price for the mortgage loan to be
replaced (calculated as if it were to be repurchased instead of replaced), over
the unpaid principal balance of the applicable Qualifying Substitute Mortgage
Loan as of the date of substitution, after application of all payments due on
or before that date, whether or not received. If a Material Breach or Material
Document Defect would cause the mortgage loan to be other than a "qualified
mortgage" (as defined in the Internal Revenue Code), then notwithstanding the
previous sentence, repurchase must occur within 90 days from the date the
related mortgage loan seller was notified of the defect and substitution must
occur within the sooner of (i) 90 days from the date the related mortgage loan
seller was notified of the defect or (ii) two years from the date of initial
issuance of the certificates.
On the date of initial issuance of the certificates, we will assign to the
trustee the representations and warranties made by each mortgage loan seller
with respect to the mortgage loans sold to us by that mortgage loan seller, the
obligation of each mortgage loan seller to deliver the mortgage files with
respect to those mortgage loans and our remedies in respect of those
representations and warranties.
The foregoing obligations of each mortgage loan seller to either cure a
Material Document Defect or a Material Breach with respect to any of its
mortgage loans within the permitted cure period or repurchase or replace the
defective mortgage loan will constitute the only remedies available to the
certificateholders and the trustee with respect to that Material Document
Defect or Material Breach. The related mortgage loan seller will be the only
party making representations and warranties in respect of the mortgage loans
sold by that mortgage loan seller to us, and neither we, the servicer (other
than in its capacity as a mortgage loan seller), the special servicer, the
trustee, the fiscal agent, the underwriters or any of their respective
affiliates (other than a mortgage loan seller that is an affiliate of an
underwriter) will be obligated to repurchase any affected mortgage loan in
connection with a breach of the related mortgage loan seller's representations
and warranties if the related mortgage loan seller defaults on its obligation
to do so. However, we will not include any mortgage loan in the mortgage pool
if anything has come to our attention prior to the closing date for the sale of
the offered certificates to the underwriters that causes us to believe that the
representations and warranties made by the related mortgage loan seller
regarding that mortgage loan, subject to the exceptions set forth in the
applicable mortgage loan purchase agreement, will not be correct in all
material respects when made. See "Description of the Pooling and Servicing
Agreements-- Representations and Warranties; Repurchases" in the prospectus.
MORTGAGED PROPERTY ACCOUNTS
Lock Box Accounts. With respect to 18 mortgage loans, representing
approximately 23.8% of the initial pool balance, one or more accounts
(collectively, the "Lock Box Accounts") have been, or may be, established in
the name of the lender and on behalf of the borrower pursuant to the related
loan documents (such mortgage loans, the "Lock Box Loans"). With respect to 10
Lock Box Loans, representing approximately 16.5% of the initial pool balance,
the tenants, the related property manager or the borrower's bank are required
to deposit property operating income directly into the related Lock Box
Account. The terms of eight Lock Box Loans, representing approximately 7.3% of
the initial pool balance, provide for the establishment of a Lock Box Account
upon the occurrence and continuation of certain events, generally relating to
the failure of major tenants to renew or extend their respective leases, or the
failure of the related borrower to lease the related premises to new tenants
acceptable to the lender, or the failure of the mortgaged property to meet
specified DSCR requirements. The agreements that govern the Lock Box Accounts
provide that the borrower has no withdrawal or transfer rights with respect
thereto except to the extent that funds on deposit in the related Lock Box
Account are released to the borrower in accordance with the applicable
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agreement. Pursuant to the terms of the agreements governing the Lock Box
Account for the ARD Loan, the funds in the Lock Box Account may be released to
the related borrowers prior to the Anticipated Repayment Date to the extent
that those amounts are in excess of amounts needed to pay debt service and
property operating expenses and reserves. After the Anticipated Repayment
Dates, all funds on deposit in the Lock Box Accounts in excess of amounts
needed to pay property operating expenses and reserves will be applied to
repayment of the applicable mortgage loan. The Lock Box Accounts will not be
assets of any REMIC.
Escrow Requirements. In some cases, borrowers are required to fund escrows
for taxes, insurance and future capital expenditures. In some cases, these
escrows are not required prior to a default under the mortgage loan or upon the
occurrence of some other event. Escrows for taxes and insurance typically
entail a pro rated initial deposit and monthly deposits equal to 1/12 of the
annual property taxes (based on the most recent property assessment and the
current mill rate) and annual property insurance premiums. Escrows for future
capital expenditures typically entail an initial deposit and/or monthly
deposits determined at the time of origination of the mortgage loan to be
sufficient to pay for anticipated capital expenditures. 134 mortgage loans,
representing approximately 95.9% of the initial pool balance, require escrows
for taxes; 133 mortgage loans, representing approximately 92.1% of the initial
pool balance, require escrows for property insurance premiums; and 101 mortgage
loans, representing approximately 84.5% of the initial pool balance, require
escrows for capital expenditures.
UNDERWRITING STANDARDS
Each mortgage loan was originated by or on behalf of the related mortgage
loan seller generally in accordance with the underwriting guidelines of that
mortgage loan seller.
CHANGES IN MORTGAGE POOL CHARACTERISTICS
The description in this prospectus supplement of the mortgage pool and the
mortgaged properties is based upon the mortgage pool as expected to be
constituted at the time the offered certificates are issued, as adjusted for
the scheduled principal payments due on 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 we consider the removal to be necessary or appropriate or
if the mortgage loan 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 the mortgage loans would materially alter the
characteristics of the mortgage pool as described in this prospectus
supplement. We believe 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 and other characteristics
of the mortgage loans in the mortgage pool may vary.
A Current Report on Form 8-K will be available to purchasers of the
offered certificates on or shortly after the initial issuance of the offered
certificates and will be filed, together with the pooling and servicing
agreement, with the Securities and Exchange Commission thereafter. If mortgage
loans are removed from or added to the mortgage pool as set forth in the
preceding paragraph, the removal or addition will be disclosed in the Form 8-K.
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DESCRIPTION OF THE CERTIFICATES
GENERAL
The certificates will be issued pursuant to a pooling and servicing
agreement, to be dated as of the Cut-Off Date, between us, the servicer, the
special servicer, the trustee, the fiscal agent and the paying agent, and will
represent in the aggregate the entire beneficial ownership interest in a trust
fund consisting of:
o the mortgage loans and all payments under and proceeds of the mortgage
loans received after the Cut-Off Date, exclusive of payments of principal
and interest due on or before the Cut-Off Date and Principal Prepayments
received prior to the Cut-Off Date;
o any REO Property the trust fund may acquire in respect of a defaulted
mortgage loan;
o the funds or assets as from time to time are deposited in the
certificate account;
o the rights of the lender under all insurance policies with respect to
the mortgage loans; and
o some of our rights under the mortgage loan purchase agreements relating
to mortgage loan document delivery requirements and the representations
and warranties of the mortgage loan sellers regarding the mortgage loans,
including the rights to enforce the obligations of the mortgage loan
sellers to repurchase defective mortgage loans or substitute Qualifying
Substitute Mortgage Loans for defective mortgage loans.
The certificates will consist of the following 19 classes: Class A-1,
Class A-2, Class X, Class B, Class C, Class D, Class E, Class F, Class G, Class
H, Class I, Class J, Class K, Class L, Class M, Class N, Class R-I, Class R-II
and Class R-III. The certificates will have the following designations:
<TABLE>
<S> <C>
Class A Certificates ................... Class A-1 and Class A-2 Certificates
Interest Only Certificates ............. Class X Certificates
Senior Certificates .................... Class A and Class X Certificates
Subordinate Certificates ............... Class B, Class C, Class D, Class E, Class F, Class G,
Class H, Class I, Class J, Class K, Class L, Class M and
Class N Certificates
REMIC Regular Certificates ............. Senior Certificates and Subordinate Certificates
Residual Certificates .................. Class R-I, Class R-II and Class R-III Certificates
Private Certificates ................... Class G, Class H, Class I, Class J, Class K, Class L,
Class M and Class N Certificates
Principal Balance Certificates ......... Class A-1, Class A-2, Class B, Class C, Class D, Class E,
Class F, Class G, Class H, Class I, Class J, Class K,
Class L, Class M and Class N Certificates
</TABLE>
Only the Class A, Class X, Class B, Class C, Class D, Class E and Class F
Certificates are offered hereby. The Private Certificates have not been
registered under the Securities Act of 1933 and are not offered hereby.
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Upon initial issuance, the Principal Balance Certificates will have the
following aggregate certificate balances (in each case, subject to a variance
of plus or minus 5%):
<TABLE>
<CAPTION>
INITIAL AGGREGATE APPROXIMATE APPROXIMATE
CERTIFICATE PERCENT OF INITIAL PERCENT OF
CLASS BALANCE POOL BALANCE CREDIT SUPPORT
------------------------ ------------------- -------------------- ---------------
<S> <C> <C> <C>
Class A-1 ........... $170,728,000 20.36% 16.50%
Class A-2 ........... $529,432,000 63.14% 16.50%
Class B ............. $ 28,300,000 3.375% 13.125%
Class C ............. $ 26,200,000 3.125% 10.00%
Class D ............. $ 8,390,000 1.00% 9.00%
Class E ............. $ 23,060,000 2.75% 6.25%
Class F ............. $ 7,340,000 0.875% 5.375%
Classes G-N ......... $ 45,060,239 5.375% N/A
</TABLE>
The certificate balance of any Principal Balance Certificate outstanding
at any time will equal the then maximum amount that the holder thereof will be
entitled to receive in respect of principal out of future cash flow on the
mortgage loans and other assets included in the trust fund. The initial
certificate balance of each Principal Balance Certificate will be set forth on
the face thereof. On each Distribution Date, the certificate balance of each
Principal Balance Certificate will be reduced by any distributions of principal
actually made on that certificate on that Distribution Date, and will be
further reduced by any Realized Losses allocated to that certificate on that
Distribution Date. See "--Distributions--Application of Available Distribution
Amount" and "--Subordination; Allocation of Losses, Shortfalls and Expenses"
below.
The Interest Only Certificates will not have a certificate balance. That
class of certificates will represent the right to receive distributions of
interest accrued, as described in this prospectus supplement, on a notional
amount equal to 100% of the aggregate Scheduled Principal Balance of the
mortgage loans outstanding from time to time. The Interest Only Certificates
will have an initial aggregate notional amount of $838,510,239, subject to a
permitted variance of plus or minus 5%. The notional amount of each Interest
Only Certificate is used solely for the purpose of determining the amount of
interest to be distributed on that certificate and does not represent the right
to receive any distributions of principal.
The Residual Certificates will not have certificate balances or notional
amounts.
BOOK-ENTRY REGISTRATION AND DEFINITIVE CERTIFICATES
You may hold and trade the Class A-1 and Class A-2 Certificates only in
minimum denominations of $25,000. You may hold and trade the Class X
Certificates only in minimum denominations of $1,000,000 (notional amount). The
remaining offered certificates will be offered in minimum denominations of
$100,000. Investments in excess of the minimum denominations may be made in any
whole dollar denomination in excess thereof.
Each class of offered certificates will initially be represented by one or
more global certificates registered in the name of the nominee of DTC. We have
been informed by DTC that DTC's nominee initially will be Cede & Co. No
Certificate Owner will be entitled to receive a Definitive Certificate
representing that interest, except as set forth in the prospectus under
"Description of the Certificates--Book-Entry Registration and Definitive
Certificates." Unless and until Definitive Certificates are issued in respect
of any class of offered certificates, all references to actions by holders of
the offered certificates refer to actions taken by DTC upon instructions
received from the related Certificate Owners through DTC's Participants, and
all references in this prospectus supplement to payments, notices, reports and
statements to holders of the offered certificates refer to payments, notices,
reports and statements to DTC or Cede & Co., as the registered holder of the
offered certificates, for distribution to the related Certificate Owners
through DTC's Participants in
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accordance with DTC procedures. Unless and until Definitive Certificates are
issued in respect of any class of offered certificates, interests in those
certificates will be transferred on the book-entry records of DTC (and its
Participants). See "Description of the Certificates--Book-Entry Registration
and Definitive Certificates" in the prospectus.
Certificateholders must hold their offered certificates in book-entry
form, and delivery of the offered certificates will be made through the
facilities of DTC (in the United States) and may be made through the facilities
of Clearstream or Euroclear (in Europe). Transfers within DTC, Clearstream or
Euroclear, as the case may be, will be in accordance with the usual rules and
operating procedures of the relevant system. Crossmarket transfers between
persons holding directly or indirectly through DTC, on the one hand, and
counterparties holding directly or indirectly through Clearstream or Euroclear,
on the other, will be effected in DTC through Citibank, N.A. or The Chase
Manhattan Bank, the relevant depositaries of Clearstream and Euroclear,
respectively.
Because of time-zone differences, credits of securities received in
Clearstream or Euroclear as a result of a transaction with a DTC Participant
will be made during subsequent securities settlement processing and dated the
business day following the DTC settlement date. Those credits or any
transactions in those securities settled during this processing will be
reported to the relevant Euroclear participant or Clearstream customer on that
business day. Cash received in Clearstream or Euroclear as a result of sales of
securities by or through a Clearstream customer or a Euroclear participant to a
DTC Participant will be received with value on the DTC settlement date but will
be available in the relevant Clearstream or Euroclear cash account only as of
the business day following settlement in DTC.
According to DTC, the foregoing information with respect to DTC has been
provided to its Participants and other members of the financial community for
informational purposes only and is not intended to serve as a representation,
warranty, or contract modification of any kind.
Until the time, if any, when Definitive Certificates are issued in respect
of the offered certificates, the foregoing information and access will be
available to the related Certificate Owners only to the extent it is forwarded
by, or otherwise available through, DTC and its Participants or otherwise made
available publicly by the paying agent. The manner in which notices and other
communications are conveyed by DTC to its Participants, and by the Participants
to the Certificate Owners, will be governed by arrangements among them, subject
to any statutory or regulatory requirements as may be in effect from time to
time. The servicer, the special servicer, the trustee, the paying agent and the
depositor 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 as of the related Record Date.
DISTRIBUTIONS
Method, Timing and Amount. Distributions on or with respect to the
certificates will be made by the paying agent, to the extent of available
funds, and in accordance with the manner and priority set forth in this
prospectus supplement, on the 15th day of each month, or if any such 15th day
is not a business day, on the next succeeding business day, commencing in
November, 2000. Except as otherwise described below, all of these distributions
will be made to the persons in whose names the certificates are registered at
the close of business on the related Record Date (as defined below) and, as to
each of these certificateholders, will be made by wire transfer in immediately
available funds to the account specified by the certificateholder at a bank or
other entity having appropriate facilities therefor, if that certificateholder
will have provided the paying agent with wiring instructions on or before the
related Record Date, or otherwise by check mailed to that certificateholder.
The final distribution on any certificate (determined without regard to any
possible future reimbursement of any Realized Losses previously allocated to
that certificate) will be made in a like manner, but only upon presentation and
surrender of that certificate at the location that will be specified in a
notice of the pendency of that final distribution. Any distribution that is to
be made with respect to a certificate in reimbursement of a Realized Loss
previously allocated to that certificate, which reimbursement is to occur after
the date on which that certificate is surrendered as contemplated by the
preceding
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sentence (the likelihood of any such distribution being remote), will be made
by check mailed to the certificateholder that surrendered that certificate. All
distributions made on or with respect to a class of certificates will be
allocated pro rata among the certificates of that class based on their
respective Percentage Interests (as defined below) in that class.
Available Distribution Amount. With respect to any Distribution Date,
distributions of interest on and principal of the certificates will be made
from the Available Distribution Amount for that Distribution Date. The
"Available Distribution Amount" for any Distribution Date will, in general,
equal the sum of:
1. all amounts on deposit in the Distribution Account (described
below) as of the commencement of business on that Distribution
Date, exclusive of any portion thereof that represents one or
more of the following:
o scheduled payments collected but due on a due date
subsequent to the related Collection Period;
o yield maintenance charges and prepayment premiums (which
are separately distributable on the certificates as
hereinafter described);
o amounts that are payable or reimbursable to any person
other than the certificateholders (including, among other
things, amounts payable to the servicer, the special
servicer, the paying agent and the trustee as compensation
or in reimbursement of outstanding Advances);
o amounts deposited in the Distribution Account in error;
and
o if that Distribution Date occurs during January or
February of any year, the Interest Reserve Amounts with
respect to the Interest Reserve Loans to be deposited into
the Interest Reserve Account;
2. to the extent not already included in the amount described in
clause 1, any P&I Advances made and any Compensating Interest
Payments paid with respect to that Distribution Date; and
3. if that Distribution Date occurs during March of any year, the
aggregate of the Interest Reserve Amounts then on deposit in the
Interest Reserve Account in respect of each Interest Reserve
Loan.
With respect to the Distribution Date occurring in each January (other
than a leap year) and each February, there will be deposited to the Interest
Reserve Account in respect of the Interest Reserve Loans an amount equal to one
day's interest at the related Net Mortgage Rate (without regard to any
adjustment for Interest Reserve Amounts or the interest accrual basis as
described above) on its principal balance as of the due date in the month in
which that Distribution Date occurs, to the extent a scheduled payment or P&I
Advance is timely made in respect thereof for that due date (all amounts so
deposited with respect to scheduled payments due in any applicable January and
February, the "Interest Reserve Amount"). With respect to the Distribution Date
occurring in March of each year, an amount is required to be withdrawn from the
Interest Reserve Account in respect of each Interest Reserve Loan equal to the
related Interest Reserve Amount from the preceding January (if applicable) and
February, and that withdrawn amount is to be included as part of the Available
Distribution Amount for that Distribution Date.
Application of Available Distribution Amount. On each Distribution Date,
except as described under "Optional Termination; Retirement of Certificates"
below, for so long as any class of offered certificates remains outstanding,
the paying agent will apply the Available Distribution Amount (other than
Excess Interest and Excess Liquidation Proceeds, if any) for that Distribution
Date for the following purposes and in the following order of priority:
1. to the holders of the Class A-1, Class A-2 and Class X
Certificates, the Distributable Certificate Interest Amount in
respect of each of those classes of certificates for that
Distribution Date, pro rata in proportion to the Distributable
Certificate Interest Amount payable in respect of each of those
classes;
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2. to the holders of the Class A-1 Certificates, the Principal
Distribution Amount for that Distribution Date, until the aggregate
certificate balance of the Class A-1 Certificates has been reduced to
zero;
3. upon payment in full of the aggregate certificate balance of the Class
A-1 Certificates, to the holders of the Class A-2 Certificates, the
Principal Distribution Amount for that Distribution Date (reduced by any
portion thereof distributed to the holders of the Class A-1
Certificates), until the aggregate certificate balance of the Class A-2
Certificates has been reduced to zero;
4. to the holders of the Class A and Class X Certificates, pro rata in
proportion to their respective entitlements to reimbursement described
in this clause (4), to reimburse them for any Realized Losses previously
allocated to those classes of certificates (in the case of the Class X
Certificates, only insofar as Realized Losses have resulted in
shortfalls in the amount of interest distributed thereto, other than by
reason of a reduction of the notional amount thereof), plus interest on
those Realized Losses at the applicable pass-through rate;
5. to the holders of the Class B Certificates, the Distributable
Certificate Interest Amount in respect of that class of certificates for
that Distribution Date;
6. upon payment in full of the aggregate certificate balance of the Class
A-2 Certificates, to the holders of the Class B Certificates, the
Principal Distribution Amount for that Distribution Date (reduced by any
portion thereof distributed to the holders of the Class A Certificates),
until the aggregate certificate balance of the Class B Certificates has
been reduced to zero;
7. to the holders of the Class B Certificates, to reimburse them for any
Realized Losses previously allocated to that class of certificates, plus
interest on those Realized Losses at the applicable pass-through rate;
8. to the holders of the Class C Certificates, the Distributable
Certificate Interest Amount in respect of that class of certificates for
that Distribution Date;
9. upon payment in full of the aggregate certificate balance of the Class
B Certificates, to the holders of the Class C Certificates, the
Principal Distribution Amount for that Distribution Date (reduced by any
portion thereof distributed to the holders of the Class A and Class B
Certificates), until the aggregate certificate balance of the Class C
Certificates has been reduced to zero;
11. to the holders of the Class C Certificates, to reimburse them for any
Realized Losses previously allocated to that class of certificates, plus
interest on those Realized Losses at the applicable pass-through rate;
12. to the holders of the Class D Certificates, the Distributable
Certificate Interest Amount in respect of that class of certificates for
that Distribution Date;
13. upon payment in full of the aggregate certificate balance of the Class
C Certificates, to the holders of the Class D Certificates, the
Principal Distribution Amount for that Distribution Date (reduced by any
portion thereof distributed to the holders of the Class A, Class B and
Class C Certificates), until the aggregate certificate balance of the
Class D Certificates has been reduced to zero;
14. to the holders of the Class D Certificates, to reimburse them for any
Realized Losses previously allocated to that class of certificates, plus
interest on those Realized Losses at the applicable pass-through rate;
15. to the holders of the Class E Certificates, the Distributable
Certificate Interest Amount in respect of that class of certificates for
that Distribution Date;
16. upon payment in full of the aggregate certificate balance of the Class
D Certificates, to the holders of the Class E Certificates, the
Principal Distribution Amount for that Distribution Date (reduced by any
portion thereof distributed to the holders of the Class A, Class B,
Class C and Class D Certificates), until the aggregate certificate
balance of the Class E Certificates has been reduced to zero;
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17. to the holders of the Class E Certificates, to reimburse them for any
Realized Losses previously allocated to that class of certificates, plus
interest on those Realized Losses at the applicable pass-through rate;
18. to the holders of the Class F Certificates, the Distributable
Certificate Interest Amount in respect of that class of certificates for
that Distribution Date;
19. upon payment in full of the aggregate certificate balance of the Class
E Certificates, to the holders of the Class F Certificates, the
Principal Distribution Amount for that Distribution Date (reduced by any
portion thereof distributed to the holders of the Class A, Class B,
Class C, Class D and Class E Certificates), until the aggregate
certificate balance of the Class F Certificates has been reduced to
zero;
20. to the holders of the Class F Certificates, to reimburse them for any
Realized Losses previously allocated to that class of certificates, plus
interest on those Realized Losses at the applicable pass-through rate;
and
21. to make payments to the holders of the Private Certificates as
contemplated below.
Notwithstanding the foregoing, on each Distribution Date occurring on or
after the date, if any, upon which the aggregate certificate balance of all
classes of Subordinate Certificates has been reduced to zero or the aggregate
Appraisal Reduction in effect is greater than or equal to the aggregate
certificate balance of all classes of Subordinate Certificates, the Principal
Distribution Amount will be distributed, first, to the Class A-1 and Class A-2
Certificates, pro rata, based on their respective certificate balances, in
reduction of their respective certificate balances, until the aggregate
certificate balance of each of those classes is reduced to zero; and, second,
to the Class A-1 and Class A-2 Certificates to reimburse them for any Realized
Losses previously allocated to those classes of certificates, pro rata, based
on their respective entitlements to reimbursement, for the unreimbursed amount
of Realized Losses previously allocated to those classes.
On each Distribution Date, following the above-described distributions on
the offered certificates, the paying agent will apply the remaining portion, if
any, of the Available Distribution Amount for that Distribution Date to make
payments to the holders of each of the respective classes of Private
Certificates (other than the Residual Certificates), in alphabetical order of
class designation, in each case for the following purposes and in the following
order of priority (i.e., payments under clauses 1, 2, and 3 below, in that
order, to the holders of the Class G Certificates, then payments under clauses
1, 2, and 3 below, in that order, to the holders of the Class H, Class I, Class
J, Class K, Class L, Class M and Class N Certificates):
1. to pay interest to the holders of the particular class of certificates,
up to an amount equal to the Distributable Certificate Interest Amount
in respect of that class of certificates for that Distribution Date;
2. if the aggregate certificate balance of each other class of Subordinate
Certificates, if any, with an earlier alphabetical class designation has
been reduced to zero, to pay principal to the holders of the particular
class of certificates, up to an amount equal to the lesser of (a) the
then outstanding aggregate certificate balance of that class of
certificates and (b) the aggregate of the remaining Principal
Distribution Amount for that Distribution Date; and
3. to reimburse the holders of the particular class of certificates, up to
an amount equal to (a) all Realized Losses, if any, previously allocated
to that class of certificates and for which no reimbursement has
previously been paid, plus (b) all unpaid interest on those amounts
accrued at the pass-through rate for that class.
Any portion of the Available Distribution Amount for any Distribution Date
that is not otherwise payable to the holders of REMIC Regular Certificates as
contemplated above will be paid to the holders of the Class R-I Certificates.
Excess Interest, if any, will be paid on each Distribution Date to the
holders of the Class N Certificates (regardless of whether the certificate
principal balance of the Class N Certificates has been
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reduced to zero) and Excess Liquidation Proceeds will be deposited to the
Reserve Account. On each Distribution Date, amounts on deposit in the Reserve
Account will be used, first, to reimburse the holders of the Principal Balance
Certificates (in order of alphabetical class designation) for any, and to the
extent of, Realized Losses previously allocated to them; second, to fund
current shortfalls that otherwise would constitute Realized Losses reimbursable
on future Distribution Dates; and third, upon the reduction of the aggregate
certificate balance of the Principal Balance Certificates to zero, to pay any
amounts remaining on deposit in the Reserve Account to the special servicer as
additional special servicer compensation.
Pass-Through Rates. The pass-through rates applicable to the Class A-1,
Class A-2, Class B, Class C, and Class D Certificates for each Distribution
Date will, at all times, be equal to %, %, %, % and % per annum,
respectively; provided, however, that each of those pass-through rates will not
exceed the NWAC Rate (as defined below) for that Distribution Date.
The pass-through rates of the Class E and Class F Certificates for the
initial Distribution Date will be % and % per annum, respectively. For
interest periods relating to Distribution Dates after November 15, 2000, the
pass-through rate of the Class E Certificates will be the NWAC Rate for that
Distribution Date minus % per annum, and the pass-through rate of the Class F
Certificates will be a per annum rate equal to the NWAC Rate for that
Distribution Rate.
The pass-through rate applicable to the Class G Certificates, which are
Private Certificates, for each Distribution Date will be a per annum rate equal
to the NWAC Rate for that Distribution Date. The pass-through rate applicable
to the Class H, Class I, Class J, Class K, Class L, Class M and Class N
Certificates, which are Private Certificates, for each Distribution Date will
each, at all times, be equal to 6.625% per annum; provided, however, that this
pass-through rate will not exceed the NWAC Rate (as defined below) for that
Distribution Date.
The pass-through rate applicable to the Class X Certificates for the
initial Distribution Date will initially equal approximately % per annum. The
pass-through rate applicable to the Class X Certificates for each Distribution
Date subsequent to the initial Distribution Date will, in general, equal the
excess, if any, of (i) the NWAC Rate for that Distribution Date, over (ii) the
weighted average of the pass-through rates applicable to the respective classes
of Principal Balance Certificates for that Distribution Date, the relevant
weighting to be on the basis of the respective aggregate certificate balances
of the Principal Balance Certificates immediately prior to that Distribution
Date.
The "NWAC Rate" for any Distribution Date is the weighted average of the
Net Mortgage Rates for the mortgage loans, weighted on the basis of their
respective Scheduled Principal Balances as of the close of business on the
preceding Distribution Date; provided, however, that:
o for purposes of calculating the limit on the pass-through rates for the
Class A-1, Class A-2, Class B, Class C, Class D, Class H, Class I, Class
J, Class K, Class L, Class M and Class N Certificates, or the
pass-through rates for the Class E, Class F and Class G Certificates
from time to time, the Net Mortgage Rate for any mortgage loan will be
calculated without regard to any reduction to that rate resulting from
any modification, waiver or amendment of the terms of that mortgage loan
subsequent to the date of initial issuance of the certificates;
o for purposes of calculating the pass-through rate for the Class X
Certificates (except to the extent such rate is calculated by reference
to the pass-through rates for the other classes of certificates), the
Net Mortgage Rate for any mortgage loan will be calculated in a manner
that takes into account any reduction to that rate resulting from any
modification, waiver or amendment of the terms of that mortgage loan
subsequent to the date of initial issuance of the certificates; and
o for purposes of calculating the pass-through rates, or the limits on
the pass-through rates, for the classes of certificates that have
pass-through rates, if any mortgage loan does not accrue interest on the
basis of a 360-day year consisting of twelve 30-day months, then the Net
Mortgage Rate of that mortgage loan for any one month period preceding a
related due date will be the annualized rate at which interest would
have to accrue on the basis of a 360-day
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year consisting of twelve 30-day months in order to result in the
accrual of the aggregate amount of interest actually accrued (exclusive
of default interest or Excess Interest) on that mortgage loan in that
month, as adjusted by the Interest Reserve Amount, if any, required to
be deposited into or withdrawn from the Interest Reserve Account with
respect to that loan and month.
The "Net Mortgage Rate" for any mortgage loan is a per annum rate equal to
the related Mortgage Rate minus the related Administrative Cost Rate (except as
it may be adjusted for purposes of calculating the NWAC Rate).
Interest will accrue on each class of offered certificates at its
respective pass-through rate on the basis of a 360-day year consisting of
twelve 30-day months.
Distributable Certificate Interest Amount. The "Distributable Certificate
Interest Amount" in respect of any class of REMIC Regular Certificates for any
Distribution Date will equal the sum of (a) Accrued Certificate Interest in
respect of that class of certificates for that Distribution Date, reduced (to
not less than zero) by any Net Aggregate Prepayment Interest Shortfalls and Net
Aggregate Balloon Interest Shortfalls and Realized Losses specifically
allocated with respect to that Distribution Date to reduce the Distributable
Certificate Interest Amount payable in respect of that class in accordance with
the terms of the pooling and servicing agreement and (b) the portion of the
Distributable Certificate Interest Amount for that class remaining unpaid as of
the close of business on the preceding Distribution Date, plus interest accrued
thereon at the applicable pass-through rate (such amount, "Unpaid Interest").
Prepayment Interest Shortfalls and Prepayment Interest Excesses. For any
Distribution Date, a "Prepayment Interest Shortfall" will arise with respect to
any mortgage loan if the related borrower makes a full or partial Principal
Prepayment (including any Balloon Payment received within 60 days after the
maturity date thereof) prior to the due date for that mortgage loan in the
related Collection Period. For any Distribution Date, a "Balloon Interest
Shortfall" will arise with respect to any Balloon Payment (other than with
respect to voluntary Balloon Payments made with respect to any Specially
Serviced Mortgage Loans) made more than 60 days after its maturity date but
prior to the due date for that mortgage loan in the related Collection Period.
Those shortfalls arise because the amount of interest (net of the Servicing Fee
and Special Servicing Fee, if applicable, and the Trustee Fee and any Excess
Interest) accrued on the amount of that Principal Prepayment or Balloon Payment
will be less than the corresponding amount of interest accruing on the
certificates. The related Prepayment Interest Shortfall will generally equal
the excess of (a) the aggregate amount of interest that would have accrued on
the Scheduled Principal Balance of that mortgage loan or on that Balloon
Payment for the 30 days ending on that due date if that Principal Prepayment or
Balloon Payment had not been made prior to that due date (net of the Servicing
Fee or the Special Servicing Fee, as applicable, and the Trustee Fee) over (b)
the aggregate interest that did accrue on that mortgage loan through the date
that payment was made. The related Balloon Interest Shortfall will generally
equal the excess of (a) the aggregate amount of interest that would have
accrued on that Balloon Payment made more than 60 days after its maturity date
for the 30 days ending on the related due date if that Balloon Payment had not
been made prior to that due date (net of the Servicing Fee, the Special
Servicing Fee and the Trustee Fee) over (b) the aggregate interest that did so
accrue on that Balloon Payment through the date that payment was made.
In any case in which a full or partial Principal Prepayment, or Balloon
Payment that is made not more than 60 days after its related due date, is made
during any Collection Period after the due date for the related mortgage loan
or Balloon Payment, a "Prepayment Interest Excess" will arise since the amount
of interest that accrued on the amount of that Principal Prepayment or Balloon
Payment will exceed the corresponding amount of interest accruing on the
certificates. The amount of the Prepayment Interest Excess in any such case
will generally equal the interest that accrued on the Principal Prepayment or
Balloon Payment from that due date to the date that payment was made (net of
the Servicing Fee and Special Servicing Fee, if applicable, and the Trustee Fee
and any Excess Interest), to the extent collected.
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In any case in which a Balloon Payment is made 60 or more days after the
related maturity date and after the related due date in the related Collection
Period, a "Balloon Interest Excess" will arise since the amount of interest
accrued on the amount of that Balloon Payment will exceed the amount of
interest accruing on the corresponding principal amount of the certificates.
The amount of the Balloon Interest Excess in any such case will generally equal
the interest that accrued on the Balloon Payment from that due date to the date
that payment was made (net of the Servicing Fee and Special Servicing Fee, if
applicable, and the Trustee Fee and any Excess Interest), to the extent
collected.
To the extent that the aggregate Prepayment Interest Shortfalls on all
mortgage loans other than Specially Serviced Mortgage Loans exceed the
aggregate Prepayment Interest Excesses for those mortgage loans for the
Collection Period related to a Distribution Date, the Servicing Fee (other than
the portion thereof payable to sub-servicers) will be reduced by the amount of
that excess. See "Servicing of the Mortgage Loans--Servicing and Other
Compensation and Payment of Expenses--Servicer Compensation" in this prospectus
supplement. Any such reduction of the Servicing Fee to cover those shortfalls
will constitute a "Compensating Interest Payment" by the servicer. The
aggregate of all Prepayment Interest Shortfalls incurred in respect of all of
the mortgage loans during any Collection Period that are neither offset by
Prepayment Interest Excesses collected on the mortgage loans during that
Collection Period nor covered by a Compensating Interest Payment paid by the
servicer will constitute the "Net Aggregate Prepayment Interest Shortfall" for
the related Distribution Date. The aggregate of all Balloon Interest Shortfalls
incurred in respect of all of the Balloon Loans during any Collection Period
that are not offset by Balloon Interest Excesses or Compensating Interest
Payments paid by the servicer will constitute "Net Aggregate Balloon Interest
Shortfalls" for the related Distribution Date. Compensating Interest Payments
will not be required to be made in connection with Prepayment Interest
Shortfalls or Balloon Interest Shortfalls relating to involuntary prepayments
or Specially Serviced Mortgage Loans.
Any Net Aggregate Prepayment Interest Shortfall and any Net Aggregate
Balloon Interest Shortfall for a Distribution Date will be allocated to each
class of certificates, pro rata, in each case reducing interest otherwise
payable thereon. The Distributable Certificate Interest Amount in respect of
any class of REMIC Regular Certificates will be reduced to the extent any Net
Aggregate Prepayment Interest Shortfalls and any Net Aggregate Balloon Interest
Shortfalls are allocated to that class of certificates. See "Servicing of the
Mortgage Loans--Servicing and Other Compensation and Payment of Expenses" in
this prospectus supplement.
On any Distribution Date, to the extent that the aggregate Prepayment
Interest Excesses on all mortgage loans other than Specially Serviced Mortgage
Loans exceed the aggregate Prepayment Interest Shortfalls for those mortgage
loans for that Distribution Date, the excess amount will be payable to the
servicer as additional servicing compensation. Likewise, to the extent that the
aggregate Prepayment Interest Excesses on all Specially Serviced Mortgage Loans
exceed the aggregate Prepayment Interest Shortfalls for those mortgage loans
for that Distribution Date, or to the extent that any Balloon Interest Excesses
on all Balloon Loans exceed the aggregate Balloon Interest Shortfalls for those
Balloon Loans for that Distribution Date, the excess amount will be payable to
the special servicer as additional servicing compensation.
Principal Distribution Amount. The "Principal Distribution Amount" for any
Distribution Date will, in general, equal the aggregate of the following:
o the principal portions of all scheduled payments (other than the
principal portion of Balloon Payments) and any Assumed Scheduled
Payments due or deemed due, as the case may be, in respect of the
mortgage loans for their respective due dates occurring during the
related Collection Period; and
o all payments (including Principal Prepayments and the principal portion
of Balloon Payments) and other collections (including Liquidation
Proceeds, condemnation proceeds, Insurance Proceeds and REO Income (each
as defined in this prospectus supplement) and proceeds of mortgage loan
repurchases) that were received on or in respect of the mortgage loans
during the related Collection Period and that were identified and
applied by the
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servicer as recoveries of principal thereof, in each case net of any
portion of that payment or other collection that represents a recovery
of the principal portion of any scheduled payment (other than a Balloon
Payment) due, or the principal portion of any Assumed Scheduled Payment
deemed due, in respect of the related mortgage loan on a due date during
or prior to the related Collection Period and not previously recovered.
The scheduled payment for any mortgage loan on any due date will, in
general, be the amount of the scheduled payment of principal and interest (or
interest only) due thereon on that due date (taking into account any waiver,
modification or amendment of the terms of that mortgage loan subsequent to the
date of initial issuance of the certificates, whether agreed to by the special
servicer or occurring in connection with a bankruptcy proceeding involving the
related borrower).
The Assumed Scheduled Payment deemed due on any Balloon Loan on its
original stated maturity date and on each successive due date that it remains
or is deemed to remain outstanding will equal the scheduled payment that would
have been due thereon on that date if the related Balloon Payment had not come
due, but rather that Balloon Loan had continued to amortize in accordance with
its amortization schedule in effect immediately prior to its maturity date.
With respect to any mortgage loan as to which the related mortgaged property
has become an REO Property, the Assumed Scheduled Payment deemed due on each
due date for so long as the REO Property remains part of the trust fund, equals
the scheduled payment (or Assumed Scheduled Payment) due on the last due date
prior to the acquisition of that REO Property.
Allocation of Yield Maintenance Charges and Prepayment Premiums. On any
Distribution Date, yield maintenance charges collected during the related
Collection Period will be distributed by the paying agent on the classes of
offered certificates as follows: to the holders of each of the Class A, Class
B, Class C, Class D, Class E, Class F and Class G Certificates, an amount equal
to the product of (a) a fraction, the numerator of which is the amount
distributed as principal to the holders of that class on that Distribution
Date, and the denominator of which is the total amount distributed as principal
to the holders of all classes of certificates on that Distribution Date, (b)
the Base Interest Fraction for the related principal prepayment and that class
of offered certificates and (c) the aggregate amount of yield maintenance
charges collected on that principal prepayment during the related Collection
Period. Any yield maintenance charges collected during the related Collection
Period remaining after those distributions will be distributed to the holders
of the Class X Certificates.
The "Base Interest Fraction" with respect to any Principal Prepayment of
any mortgage loan that provides for payment of a yield maintenance charge and
with respect to any class of offered certificates is a fraction (A) whose
numerator is the greater of (x) zero and (y) the difference between (i) the
pass-through rate on that class of offered certificates and (ii) the Yield Rate
used in calculating the yield maintenance charge with respect to that principal
prepayment and (B) whose denominator is the difference between (i) the Mortgage
Rate on the related mortgage loan and (ii) the Yield Rate used in calculating
the yield maintenance charge with respect to that principal prepayment;
provided, however, that under no circumstances will Base Interest Fraction be
greater than one. If that Yield Rate is greater than the Mortgage Rate on the
related mortgage loan, then the Base Interest Fraction will equal zero.
On each Distribution Date, any prepayment premiums collected during the
related Collection Period will be distributed by the paying agent as follows:
to the holders of the class of offered certificates or Class G Certificates
then entitled to distributions of principal (or if the holders of two such
classes are so entitled, pro rata to such holders according to the amount of
principal distributable to each), if any, an amount equal to 25% of such
prepayment premiums and to the holders of the Class X Certificates the
remainder of such prepayment premiums.
No yield maintenance charges or prepayment premiums will be distributed to
holders of the Private Certificates (other than the Class G Certificates) or
Residual Certificates. Any yield maintenance charges or prepayment premiums
distributed to holders of a class of certificates may not be sufficient to
compensate those holders for any loss in yield attributable to the related
Principal Prepayments.
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For a description of yield maintenance charges and prepayment premiums,
see "Description of the Mortgage Pool--Yield Maintenance, Prepayment and
Lockout Provisions" in this prospectus supplement. See also "Legal Aspects of
Mortgage Loans--Default Interest and Limitations on Prepayments" in the
prospectus regarding the enforceability of yield maintenance charges.
Expected Final Distribution Date; Rated Final Distribution Date. The
"Expected Final Distribution Date" with respect to any class of offered
certificates is the Distribution Date on which the aggregate certificate
balance of that class of certificates would be reduced to zero based on the
assumptions set forth below. That Expected Final Distribution Date for each
class of offered certificates is set forth below:
<TABLE>
<CAPTION>
EXPECTED FINAL
CLASS DISTRIBUTION DATE
---------------------------- -------------------
<S> <C>
Class A-1 ................ September 15, 2009
Class A-2 ................ August 15, 2010
Class B .................. September 15, 2010
Class C .................. September 15, 2010
Class D .................. September 15, 2010
Class E .................. June 15, 2011
Class F .................. October 15, 2012
Class X .................. June 15, 2020
</TABLE>
The Expected Final Distribution Dates set forth above were calculated on
the basis of (a) the assumptions that each borrower timely makes all scheduled
payments on its mortgage loan, none of the mortgage loans is prepaid and the
ARD Loan is prepaid on its Anticipated Repayment Date and (b) the other
Maturity Assumptions that we describe under "Yield and Maturity
Considerations". See "Yield and Maturity Considerations" herein.
The "Rated Final Distribution Date" for each class of offered certificates
will be October 15, 2032. which is the first Distribution Date after the 24th
month following the end of the amortization term for the mortgage loan that, as
of the Cut-Off Date, has the longest remaining amortization term. See "Ratings"
in this prospectus supplement.
Examples of Distributions. The following chart sets forth an example of
distributions on the certificates for the first month of the trust fund's
existence, assuming the certificates are issued in October 2000:
<TABLE>
<S> <C> <C>
The close of business on
October 1 (A) Cut-Off Date.
October 31 (B) Record Date for all classes of certificates.
October 1 -- November 8 (C) The Collection Period. The Servicer receives
scheduled payments due on November 1 and any
Principal Prepayments made after the Cut-Off Date
and on or prior to November 8.
November 8 (D) Determination Date.
November 14 (E) Servicer Remittance Date.
November 15 (F) Distribution Date.
</TABLE>
Succeeding monthly periods follow the pattern of (B) through (F) (except
as described below).
(A) The outstanding principal balance of the mortgage loans will be the
aggregate scheduled outstanding principal balance of the mortgage loans at the
close of business on October 1, 2000 (after deducting principal payments due on
or before that date, whether or not received). Principal payments due on or
before that date, and the accompanying interest payments, are not part of the
trust fund.
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(B) Distributions on the next Distribution Date will be made to those
persons that are certificateholders of record on this date. Each subsequent
Record Date will be the last business day of the month preceding the related
Distribution Date.
(C) Any scheduled payments due and collected and Principal Prepayments
collected, after the Cut-Off Date and on or prior to November 8, 2000 will be
deposited in the Certificate Account. Each subsequent Collection Period will
begin on the day after the Determination Date in the month preceding the month
of each Distribution Date and will end on the Determination Date in the month
in which the Distribution Date occurs.
(D) As of the close of business on the Determination Date, the servicer
will have determined the amounts of principal and interest that will be
remitted with respect to the related Collection Period.
(E) The servicer will remit to the paying agent on the business day
preceding the related Distribution Date all amounts held by the servicer, and
any P&I Advances required to be made by the servicer, that together constitute
the Available Distribution Amount for that Distribution Date.
(F) The paying agent will make distributions to certificateholders on the
15th day of each month or, if that day is not a business day, the next
succeeding business day.
SUBORDINATION; ALLOCATION OF LOSSES, SHORTFALLS AND EXPENSES
As and to the extent described in this prospectus supplement, the rights
of holders of the Subordinate Certificates to receive distributions of amounts
collected or advanced on the mortgage loans will be subordinated to the rights
of holders of the Senior Certificates, and to the rights of the holders of each
other class of Subordinate Certificates with an earlier alphabetical class
designation. This subordination is intended to enhance the likelihood of timely
receipt by the holders of the Senior Certificates of the full amount of all
interest payable in respect of the Senior Certificates on each Distribution
Date, and the ultimate receipt by the holders of each class of Class A
Certificates of principal in an amount equal to the entire certificate balance
of their Class A Certificates. Similarly, but to decreasing degrees (in
alphabetical order of class designation), this subordination is also intended
to enhance the likelihood of timely receipt by the holders of the Subordinate
Certificates (other than the Class N Certificates, which do not have the
benefit of any effective subordination) of the full amount of interest payable
in respect of those classes of certificates on each Distribution Date, and the
ultimate receipt by those holders of principal equal to, in each case, the
entire certificate balance of that class of certificates. This subordination
will be accomplished by the application of the Available Distribution Amount on
each Distribution Date in accordance with the order of priority described above
under "Distributions--Application of the Available Distribution Amount" and by
the allocation of Realized Losses as described below. No other form of credit
support will be available for the benefit of the holders of the certificates.
Allocation to the Class A-1 Certificates, for so long as they are
outstanding, and then to the Class A-2 Certificates, for so long as they are
outstanding, of the entire Principal Distribution Amount for each Distribution
Date will generally have the effect of reducing the certificate balances of
those classes at a faster rate than would be the case if principal payments
were allocated pro rata to all classes of certificates with certificate
balances. Thus, as principal is distributed to the holders of the Class A
Certificates, the percentage interest in the trust fund evidenced first by the
Class A-1 Certificates, for so long as they are outstanding, and then by the
Class A-2 Certificates will be decreased (with a corresponding increase in the
percentage interest in the trust fund evidenced by the Subordinate
Certificates), thereby increasing, relative to their respective certificate
balances, the subordination afforded the Class A Certificates by the
Subordinate Certificates. Following retirement of the Class A Certificates, the
herein described successive allocation to the Subordinate Certificates, in
alphabetical order of class designation, in each case until that class is paid
in full, of the entire Principal Distribution Amount for each Distribution Date
will provide a similar benefit to each of those classes of certificates as
regards the relative amount of subordination afforded thereto by the other
classes of certificates with later alphabetical class designations.
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Realized Losses of principal and interest on the mortgage loans for any
Distribution Date (to the extent not previously allocated and net of amounts,
if any, on deposit in the Reserve Account) will be allocated to the Class N,
Class M, Class L, Class K, Class J, Class I, Class H, Class G, Class F, Class
E, Class D, Class C and Class B Certificates, in that order, and then to the
Class A-1 and Class A-2 Certificates and, solely with respect to Realized
Losses that reduce the amount of interest otherwise distributable to the
holders of the Class X Certificates (other than as a reduction of the notional
amount thereof), pro rata, in each case reducing principal and/or interest
otherwise payable thereon.
"Realized Losses" are losses arising from the inability of the servicer,
the trustee or the special servicer to collect all amounts due and owing under
any defaulted mortgage loan, including by reason of any modifications to the
terms of a mortgage loan, bankruptcy of the related borrower or a casualty of
any nature at the related mortgaged property, to the extent not covered by
insurance. The Realized Loss, if any, in respect of a liquidated mortgage loan
(or related REO Property) will generally equal the excess, if any, of:
o the outstanding principal balance of that mortgage loan as of the date
of liquidation, together with all accrued and unpaid interest thereon at
the related Mortgage Rate; over
o the aggregate amount of Liquidation Proceeds, if any, recovered in
connection with that liquidation (net of any portion of those
liquidation proceeds that is payable or reimbursable in respect of
related liquidation and other servicing expenses), plus any Expense
Losses.
If the Mortgage Rate on any mortgage loan is reduced or a portion of the
debt due under any mortgage loan is forgiven, whether in connection with a
modification, waiver or amendment granted or agreed to by the special servicer
or in connection with a bankruptcy or similar proceeding involving the related
borrower, the resulting reduction in interest paid and the principal amount so
forgiven, as the case may be, also will be treated as a Realized Loss.
"Expense Losses," which are included among Realized Losses, include, among
other things:
o any interest paid to the servicer, trustee, fiscal agent in respect of
unreimbursed Advances;
o all Special Servicer Compensation payable to the special servicer from
amounts that are part of the trust fund;
o certain other expenses of the trust fund specified in the pooling and
servicing agreement, including, but not limited to, reimbursements and
indemnification payments to the trustee, the paying agent and related
persons, reimbursements and indemnification payments to us, the
servicer, the special servicer and related persons, taxes payable from
the assets of the trust fund, the costs and expenses of any tax audits
with respect to the trust fund and other tax-related expenses and the
cost of various opinions of counsel required to be obtained in
connection with the servicing of the mortgage loans and administration
of the trust fund; and
o Servicing Advances and any other expense of the trust fund not
otherwise specifically included in the calculation of "Realized Loss"
for which there is no corresponding collection from the borrower.
Any shortfall in the amount of the Distributable Certificate Interest
Amount paid to the certificateholders of any class of certificates on any
Distribution Date will result in Unpaid Interest for that class which, together
with interest thereon accrued at the applicable pass-through rate, will be
distributable in subsequent periods to the extent of funds available therefor.
ADVANCES
P&I Advances. On the business day prior to each Distribution Date, the
servicer will generally be obligated to make an advance (each a "P&I Advance")
in an amount that is equal to the sum of: (a) for mortgage loans that pay
monthly, the sum of the following amounts: (1) all scheduled payments (net of
the related Servicing Fees), other than the principal portion of any balloon
payment, due on such mortgage loans during the related Collection Period that
are delinquent as of the close of
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business on the Determination Date for such Distribution Date, and (2) any
Assumed Scheduled Payments (net of related Servicing Fees) due or deemed due,
as the case may be, in respect of such mortgage loans during the related
Collection Period, to the extent such amount was not paid by or on behalf of
the borrowers or otherwise collected as of the close of business on the
Determination Date for such Distribution Date; and (b) for the mortgage loan
that pays semiannually, either (1) if a scheduled payment was not due or an
Assumed Scheduled Payment was not deemed due, as the case may be, on the
mortgage loan during the related Collection Period, one-sixth of the interest
portion of the scheduled payment that will be due or the Assumed Scheduled
Payment that would be deemed due on the immediately succeeding due date for the
mortgage loan, to the extent such amount was not paid by or on behalf of the
related borrower as of the close of business on the Determination Date for such
Distribution Date, or (2) if a scheduled payment is due or an Assumed Scheduled
Payment was deemed due, as the case may be, on the mortgage loan during the
Collection Period for such Distribution Date, one-sixth of the interest portion
(net of related Servicing Fees) and the entire principal portion of such
scheduled payment or Assumed Scheduled Payment, to the extent such amount was
not paid by or on behalf of the related borrower or otherwise collected as of
the close of business on the Determination Date for such Distribution Date.
Notwithstanding the provisions described above, the amount of any P&I Advance
required to be made by the servicer with respect to a mortgage loan as to which
there has been an Appraisal Reduction will be an amount equal to the product of
(i) the amount required to be advanced by the servicer without giving effect to
this sentence and (ii) a fraction, the numerator of which is the principal
balance of that mortgage loan as of the immediately preceding Determination
Date less any Appraisal Reduction in effect with respect to that mortgage loan
and the denominator of which is the Scheduled Principal Balance of the mortgage
loan as of that Determination Date; and provided, further, that with respect to
scheduled payments on any mortgage loan that has been modified and as to which
the servicer is obligated to make a P&I Advance, the amount of that P&I Advance
shall be adjusted in conformity with the modification.
With respect to any mortgage loan that is delinquent in respect of its
Balloon Payment (including any REO Property as to which the related mortgage
loan provided for a Balloon Payment), P&I Advances will be required in an
amount equal to the Assumed Scheduled Payment, less the related Servicing Fee,
subject to the same conditions and limitations (as described above) that apply
to P&I Advances of other scheduled payments. The servicer will not be required
to advance interest accrued above the non-default Mortgage Rate as a result of
the imposition of any default rate.
The servicer will generally be entitled to interest on P&I Advances, which
interest will accrue at a rate equal to the Advance Rate. However, in the case
of the mortgage loan that pays semiannually, that interest will not accrue on
any such advance of the interest portion of a scheduled payment due in a month
subsequent to the advance date unless and until the borrower fails to make the
scheduled payment when it subsequently becomes due and payable.
P&I Advances (and interest accrued thereon at the Advance Rate) will be
reimbursable (or payable) from recoveries on the related mortgage loans and, to
the extent the servicer determines in its sole discretion, exercised in good
faith, that a P&I Advance will not be ultimately recoverable from related
recoveries, from any funds on deposit in the Certificate Account and
Distribution Account. In no event will the servicer be required to make
aggregate P&I Advances with respect to any mortgage loan that, when including
the amount of interest accrued thereon at the Advance Rate, equals an amount
greater than the principal balance (plus all overdue amounts) thereof, less any
Appraisal Reductions with respect thereto. This right of the servicer to
reimbursement (or payment) out of recoveries will be prior to the right of the
certificateholders to receive any amounts recovered with respect to any
mortgage loan. If the servicer fails to make a required P&I Advance, the
trustee is required to make that P&I Advance, and if the trustee fails to make
any required P&I Advance, the fiscal agent is required to make that P&I
Advance, in each case subject to a determination of recoverability.
Servicing Advances. In general, customary, reasonable and necessary
"out-of-pocket" costs and expenses required to be incurred by the servicer in
connection with the servicing of a mortgage loan
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after a default (whether or not a payment default), delinquency or other
unanticipated event, or in connection with the administration of any REO
Property, will constitute "Servicing Advances" and, in all cases, will be
reimbursable as described below. The servicer will be permitted to pay, or to
direct the payment of, certain servicing expenses directly out of the
Certificate Account or Distribution Account and under some circumstances
without regard to the relationship between the expense and the funds from which
it is being paid.
With respect to mortgage loans, the servicer will be obligated to make
Servicing Advances for real estate taxes and insurance premiums not paid by the
related borrower on a timely basis and for collection or foreclosure costs
(including reasonable attorneys fees). With respect to REO Properties, the
servicer will be obligated, following the request of the special servicer, to
make Servicing Advances, if necessary and to the extent that funds from the
operation of the related REO Property are unavailable to pay any amounts due
and payable, for:
o insurance premiums;
o real estate taxes and assessments in respect of that REO Property that
may result in the imposition of a lien; and
o costs and expenses necessary to maintain, manage or operate that REO
Property.
Notwithstanding the foregoing, the servicer will be obligated to make
Servicing Advances only to the extent that the servicer determines that the
amount so advanced will be recoverable from subsequent payments or collections
(including Insurance Proceeds, Liquidation Proceeds and REO Income) in respect
of the mortgage loan or REO Property for which the Servicing Advances will be
made. Servicing Advances (including interest accrued thereon at the Advance
Rate) will be reimbursable from recoveries or collections on the related
mortgage loan or REO Property. However, if the servicer determines (as
described below) that any Servicing Advance previously made (and accrued
interest thereon at the Advance Rate) will not be ultimately recoverable from
related recoveries, those advances will be reimbursable from any amounts on
deposit in the Certificate Account or Distribution Account. If the servicer
fails to make a required Servicing Advance, the trustee is required to make
that Servicing Advance, and if the trustee fails to make any required Servicing
Advance, the fiscal agent is required to make that Servicing Advance, in each
case subject to a recoverability determination.
Nonrecoverable Advances. The determination by the servicer that any P&I
Advance or Servicing Advance, previously made or proposed to be made, would not
be recoverable will be made in the sole discretion of the servicer, exercising
good faith, and is required to be accompanied by an officer's certificate
delivered to the trustee and the paying agent and setting forth the reasons for
that determination, with copies of appraisals or internal valuations, if any,
or other information that supports that determination. The servicer's
determination of nonrecoverability will be conclusive and binding upon the
certificateholders, the trustee and the fiscal agent. The trustee and the
fiscal agent will be entitled to rely conclusively on any determination by the
servicer of nonrecoverability with respect to that Advance and will have no
obligation (but will be entitled) to make a separate determination of
recoverability.
APPRAISAL REDUCTIONS
Not later than the earliest of:
1. the date 120 days after the occurrence of any delinquency in payment
with respect to a mortgage loan if that delinquency remains uncured;
2. the date 30 days after receipt of notice that the related borrower has
filed a bankruptcy petition or a receiver is appointed in respect of the
related mortgaged property, provided that the petition or appointment
remains in effect;
3. the effective date of any modification to a Money Term of a mortgage
loan, other than an extension of the date that a Balloon Payment is due
for a period of less than six months; and
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4. the date 30 days following the date a mortgaged property becomes an REO
Property (each of 1, 2, 3 and 4, an "Appraisal Event"),
the special servicer is required to obtain an MAI appraisal (if the Scheduled
Principal Balance of the mortgage loan is greater than $2,000,000) or an
internal valuation (if the Scheduled Principal Balance of the mortgage loan is
equal to or less than $2,000,000) of the related mortgaged property or REO
Property, as the case may be, unless such an appraisal or valuation had been
obtained within the prior twelve months; provided, that if the special servicer
is required to obtain an MAI appraisal of a mortgaged property after receipt of
the notice described in 2 above, that appraisal must be obtained no later than
60 days after receipt of the notice described in 2 above and an internal
valuation must be obtained no later than 30 days after receipt of that notice.
As a result of that appraisal or internal valuation, an "Appraisal Reduction"
may be created.
The "Appraisal Reduction" for any mortgage loan, including a mortgage loan
as to which the related mortgaged property has become an REO Property, will be
an amount, calculated as of the first Determination Date that is at least
fifteen days after the date on which the appraisal is obtained or the internal
valuation is performed, equal to the excess, if any, of the sum of:
o the Scheduled Principal Balance of that mortgage loan;
o to the extent not previously advanced by the servicer, the trustee or
the fiscal agent, all accrued and unpaid interest on that mortgage loan;
o all related unreimbursed Advances and interest on those Advances at the
Advance Rate (as defined in this prospectus supplement); and
o to the extent not previously advanced by the servicer, the trustee or
the fiscal agent, all currently due and unpaid real estate taxes and
assessments, insurance premiums and, if applicable, ground rents and
other amounts in respect of the related mortgaged property or REO
Property, as the case may be (in each case, net of any amounts escrowed
for that item, including, but not limited to maintenance reserves,
replacement reserves and environmental reserves);
over 90% of the value (net of any prior mortgage liens) of the related
mortgaged property or REO Property, as determined by the appraisal or internal
valuation, or with respect to the pari passu loans, the pro rata portion of the
value allocable thereto. An Appraisal Reduction will be reduced to zero as of
the date the related mortgage loan is brought current under the then current
terms of the mortgage loan for at least three consecutive months (and no
Appraisal Reduction will exist as to any mortgage loan after it has been paid
in full, liquidated, repurchased or otherwise disposed of). An appraisal for
any mortgage loan that has not been brought current for at least three
consecutive months (or paid in full, liquidated, repurchased or otherwise
disposed of) must be updated annually, with a corresponding adjustment to the
amount of the related Appraisal Reduction.
The existence of an Appraisal Reduction will proportionately reduce the
servicer's, the trustee's or the fiscal agent's, as the case may be, obligation
to make P&I Advances in respect of the related mortgage loan, which will
generally result in a reduction in current distributions of interest in respect
of the then most subordinate class of Principal Balance Certificates. See
"Advances--P&I Advances" above.
REPORTS TO CERTIFICATEHOLDERS; CERTAIN AVAILABLE INFORMATION
Distribution Date Statements. Based solely on information provided in
monthly reports prepared by the servicer and the special servicer and delivered
to the trustee and the paying agent, the paying agent will be required to
provide or make available to each certificateholder on each Distribution Date a
distribution date statement, in the form of Annex C to this prospectus
supplement, setting forth, to the extent applicable:
1. the amount of the distribution made on that Distribution Date to the
holders of each class of Principal Balance Certificates applied to
reduce the aggregate certificate balance thereof;
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2. the amount of the distribution made on that Distribution Date to
holders of each class of REMIC Regular Certificates allocable to (a)
interest and (b) yield maintenance charges and prepayment premiums;
3. the number of outstanding mortgage loans and the aggregate principal
balance and Scheduled Principal Balance of the mortgage loans at the
close of business on the related Determination Date;
4. as of the related Determination Date, the number, the aggregate
principal balance and aggregate Scheduled Principal Balance of mortgage
loans (a) delinquent 30 to 59 days, (b) delinquent 60 to 89 days, (c)
delinquent 90 days or more, or (d) as to which foreclosure proceedings
have been commenced;
5. with respect to any REO Property included in the trust fund, the
principal balance of the related mortgage loan as of the date of
acquisition of the REO Property, and the Scheduled Principal Balance
thereof;
6. as of the related Determination Date (a) as to any REO Property sold
during the related Collection Period, the date of the related
determination by the special servicer or servicer, as the case may be,
that it has recovered all payments that it expects to be finally
recoverable and the amount of the proceeds of that sale deposited into
the Certificate Account, and (b) the aggregate amount of other revenues
collected by the special servicer with respect to each REO Property
during the related Collection Period and credited to the Certificate
Account, in each case identifying the REO Property by the loan number of
the related mortgage loan;
7. the aggregate certificate balance or notional amount of each class of
REMIC Regular Certificates before and after giving effect to the
distribution made on that Distribution Date;
8. the aggregate amount of Principal Prepayments made during the related
Collection Period;
9. the pass-through rate applicable to each class of REMIC Regular
Certificates for that Distribution Date;
10. the aggregate amount of servicing fees paid to the servicer and the
special servicer;
11. the amount of Unpaid Interest and Realized Losses, if any, incurred
with respect to the mortgage loans;
12. the aggregate amount of Servicing Advances and P&I Advances outstanding
that have been made by the servicer, the trustee and the fiscal agent
separately stated;
13. the amount of any Appraisal Reductions effected during the related
Collection Period on a loan-by-loan basis and the total Appraisal
Reductions in effect as of the related Determination Date; and
14. any other information as is specified in the pooling and servicing
agreement.
In the case of information furnished pursuant to items 1, 2 and 11 above,
the amounts will be expressed as a dollar amount per $1,000 of original actual
principal amount of the certificates for all certificates of each applicable
class.
The paying agent will be required to make available each month, to any
interested party, the foregoing distribution date reports, the CMSA bond file
and the CMSA collateral summary file via its website, initially located at
"www.ctslink.com/cmbs." The distribution date reports will also be required to
be made available via the paying agent's fax on demand service to any
interested party. The paying agent's fax-on-demand service may be accessed by
calling (301) 815-6610. For assistance with the above-mentioned services, you
may call (301) 815-6600.
The paying agent will also be required to make the following CMSA reports
available via its website, to the extent timely received from the servicer: the
loan setup file, the loan periodic update
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file, the property file, the comparative financial status report, the
delinquent loan status report, the historical loan modification report, the
historical liquidation report, the REO status report and the servicer watch
list. The paying agent will be required to make these reports available each
month to any Privileged Person via its website. The comparative financial
status report, the delinquent loan status report, the historical loan
modification report, the historical liquidation report, the REO status report
and the servicer watch list will be substantially in the form included in Annex
C to this prospectus supplement. The paying agent will not be required to make
the property file available until the Distribution Date in December 2000. In
addition, pursuant to the pooling and servicing agreement, the paying agent
will be required to make available to Privileged Persons as a convenience (and
not in furtherance of the distribution of the prospectus or the prospectus
supplement under the securities laws), the pooling and servicing agreement, the
prospectus and the prospectus supplement via the paying agent's website. We
may, at any time, direct the paying agent to make any or all of the foregoing
reports available to any interested party. The paying agent will make no
representations or warranties as to the accuracy or completeness of those
documents and will assume no responsibility therefor. In addition, the paying
agent may disclaim responsibility for any information of which it is not the
original source.
In connection with providing access to the paying agent's website, the
paying agent may require registration and the acceptance of a disclaimer. The
paying agent will not be liable for the dissemination of information in
accordance with the pooling and servicing agreement.
Operating Statement Analysis Reports. On an annual basis, the servicer
will be required to deliver to the trustee and the paying agent an operating
statement analysis report (in CMSA format) for each mortgage loan based on the
most recently available year-end financial statements and most recently
available rent rolls of each applicable borrower (to the extent that
information is provided to the servicer) containing the information and
analyses required by the pooling and servicing agreement, including, without
limitation, debt service coverage ratios, to the extent available. This report
will be substantially in the form included in Annex C to this prospectus
supplement. Subject to satisfaction of the conditions described above under
"--Distribution Date Statements," the paying agent will be required to make the
most recent operating statement analysis report available to Privileged Persons
via its website, initially located at "www.ctslink.com/cmbs."
Other Information. The pooling and servicing agreement generally will
require that the servicer make available, at its offices primarily responsible
for servicing the mortgage loans or at any other office as it may reasonably
designate, during normal business hours and upon reasonable advance notice, for
review by any holder of a certificate, each rating agency or us, originals or
copies of, among other things, the following items (except to the extent not
permitted by applicable law or under any of the mortgage loan documents):
o the pooling and servicing agreement and any amendments thereto;
o all reports or statements delivered to the paying agent since the date
of initial issuance of the certificates;
o all officer's certificates delivered to the trustee or the paying agent
since the date of initial issuance of the certificates;
o all accountants' reports delivered to the trustee or the paying agent
since the date of initial issuance of the certificates;
o the most recent property inspection report prepared by or on behalf of
the servicer or the special servicer in respect of each mortgaged
property and any appraisal or internal valuation obtained or performed
by the special servicer;
o the most recent mortgaged property annual operating statements and rent
rolls, if any, collected by or on behalf of the servicer or the special
servicer;
o any and all modifications, waivers and amendments of the terms of a
mortgage loan entered into by the servicer and/or the special servicer;
and
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o any and all officer's certificates and other evidence delivered to the
trustee or the paying agent to support the servicer's determination that
any Advance was not or, if made, would not be, recoverable.
Copies of any and all of the foregoing items and any servicer reports will
be available from the servicer upon request; however, the servicer will be
permitted to require payment of a sum sufficient to cover the reasonable costs
and expenses of providing these copies. Recipients of this information will
generally be required to acknowledge that the information may be used only in
connection with an evaluation of the certificates by the recipient.
OPTIONAL TERMINATION; RETIREMENT OF CERTIFICATES
We, the servicer, the special servicer, the majority of the holders of the
Controlling Class, the operating advisor and the holder of the majority
interest in the Class R-I Certificates, each in turn, will have the option to
purchase, in whole but not in part, the mortgage loans and any other property
remaining in the trust fund on any Distribution Date on or after the
Distribution Date on which the aggregate certificate balance of all classes of
Principal Balance Certificates then outstanding is less than or equal to 1% of
the initial pool balance. The purchase price for any such purchase will be:
o 100% of the aggregate unpaid principal balances of the mortgage loans
(other than any mortgage loans as to which the servicer has determined
that all payments or recoveries with respect thereto have been made),
plus accrued and unpaid interest at the Mortgage Rate (or the Mortgage
Rate less the Servicing Fee Rate if the servicer is the purchaser) to
the due date for each mortgage loan ending in the Collection Period with
respect to which the purchase occurs; plus
o unreimbursed Advances, with interest thereon at the Advance Rate; plus
o the fair market value of any other property remaining in the trust
fund.
The optional termination of the trust fund must be conducted so as to
constitute a "qualified liquidation" of each REMIC under Section 860F of the
Internal Revenue Code. Upon any such termination, the purchase price for the
mortgage loans and the other property in the trust fund will be applied to pay
accrued and unpaid interest on and reduce the certificate balance of all
outstanding classes to zero in the manner provided under "Description of the
Certificates--Distributions--Application of Available Distribution Amount" in
this prospectus supplement. Notice of any optional termination must be mailed by
the paying agent on behalf of the trustee to the certificateholders and the
Rating Agencies upon the receipt of written notice of the optional termination
by the paying agent on behalf of the trustee.
TREATMENT OF REO PROPERTIES
Notwithstanding that any mortgaged property may be acquired as part of the
trust fund through foreclosure, deed in lieu of foreclosure or otherwise, the
related mortgage loan will, for purposes of, among other things, determining
pass-through rates of, distributions on and allocations of Realized Losses to
the certificates, as well as the amount of Servicing Fees, Trustee Fees and
Special Servicing Fees payable under the pooling and servicing agreement, be
treated as having remained outstanding until that REO Property is liquidated.
In connection therewith, operating revenues and other proceeds derived from
that REO Property (exclusive of related operating costs) will be "applied" by
the servicer as principal, interest and other amounts "due" on the related
mortgage loan and, subject to the recoverability determination described under
"--Advances" above and the effect of any Appraisal Reductions described under
"--Appraisal Reductions" above, the servicer will be required to make P&I
Advances in respect of the related mortgage loan, in all cases as if the
related mortgage loan had remained outstanding. References to "mortgage loan"
and "mortgage loans" in the definitions of "NWAC Rate" and "Principal
Distribution Amount" are intended to include any mortgage loan or mortgage
loans as to which the related mortgaged property has become an REO Property.
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THE TRUSTEE
LaSalle Bank National Association will act as trustee. LaSalle Bank
National Association is a subsidiary of LaSalle National Corporation, which, in
turn, is a subsidiary of the fiscal agent. The trustee is at all times required
to be, and will be required to resign if it fails to be:
o an institution insured by the FDIC;
o a corporation or national bank, organized and doing business under the
laws of the United States of America or any state thereof, authorized
under those 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 an institution whose short-term debt obligations are at all times rated
not less than "A-1" by S&P and whose long-term senior unsecured debt (or
that of its fiscal agent, if applicable) is rated not less than "AA" by
each of S&P and Fitch (or any other ratings as each of S&P and Fitch
would permit without resulting in a withdrawal, downgrade or
qualification (if applicable) of the then current rating on any class of
certificates).
The corporate trust office of the trustee responsible for administration
of the trust fund is located at 135 South LaSalle Street, Suite 1625, Chicago,
Illinois 60603, Attention: Asset-Backed Securities Trust Services Group--Bear
Stearns Commercial Mortgage Securities Inc., Commercial Mortgage Pass-Through
Certificates, Series 2000-WF2. See "Description of the Pooling and Servicing
Agreements--The Trustee", "--Duties of the Trustee", "--Regarding the Fees,
Indemnities and Powers of the Trustee" and "--Resignation and Removal of the
Trustee" in the prospectus.
As compensation for the performance of its duties, the trustee will be
paid the Trustee Fee.
THE FISCAL AGENT
ABN AMRO Bank N.V., a Netherlands banking corporation and the indirect
corporate parent of the trustee, will act as fiscal agent for the trust fund
and will be obligated to make any Advance required to be made, and not made, by
the servicer and the trustee under the pooling and servicing agreement,
provided that the fiscal agent will not be obligated to make any Advance that
it determines, in its sole discretion, exercised in good faith, to be a
Nonrecoverable Advance. The fiscal agent will be entitled to rely conclusively
on any determination by the servicer, the special servicer (solely in the case
of Servicing Advances) or the trustee that an Advance, if made, would be a
Nonrecoverable Advance. The fiscal agent will be entitled to reimbursement for
each Advance made by it in the same manner and to the same extent as, but prior
to, the servicer and the trustee. See "--Advances" above. The fiscal agent will
be entitled to various rights, protections and indemnities similar to those
afforded the trustee. The trustee will be responsible for payment of the
compensation of the fiscal agent. As of December 31, 1999, the fiscal agent had
consolidated assets of approximately $460.1 billion. In the event that LaSalle
Bank National Association, for any reason, ceases to act as trustee under the
pooling and servicing agreement, ABN AMRO Bank N.V. likewise will no longer
serve in the capacity of fiscal agent thereunder.
THE PAYING AGENT, CERTIFICATE REGISTRAR AND AUTHENTICATING AGENT
Wells Fargo Bank Minnesota, N.A. will serve as the paying agent. In
addition, Wells Fargo Bank Minnesota, N.A. will serve as registrar for purposes
of recording and otherwise providing for the registration of the offered
certificates and of transfers and exchanges of the Definitive Certificates, if
issued, and as authenticating agent of the certificates. Wells Fargo Bank
Minnesota, N.A.'s principal office is located at Wells Fargo Center, Sixth and
Marquette, Minneapolis, Minnesota 55479-0113. Wells Fargo Bank Minnesota, N.A.
is an affiliate of the servicer. As compensation for the performance of its
duties as paying agent, certificate registrar and authenticating agent, Wells
Fargo Bank Minnesota, N.A. will be paid a portion of the monthly Trustee Fee as
set forth in the pooling and servicing agreement.
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YIELD AND MATURITY CONSIDERATIONS
YIELD CONSIDERATIONS
General. The yield on any offered certificate will be affected by:
o the pass-through rate in effect from time to time for that offered
certificate;
o the price paid for that offered certificate and, if the price was other
than par, the rate and timing of principal payments (including voluntary
and involuntary principal prepayments, repurchases as a result of
breaches of a mortgage loan seller's representations and warranties and
delinquent payments);
o losses and shortfalls on the mortgage loans and expenses of the trust
fund; and
o the extent to which principal payments or losses are applied or losses
are allocated on any Distribution Date in reduction of the certificate
balance or notional amount of the class to which that certificate
belongs or in reduction of amounts distributable thereon. See
"Description of the Certificates--Distributions--Application of
Available Distribution Amount" and "--Distributions--Principal
Distribution Amount" in this prospectus supplement.
Pass-Through Rates. The pass-through rates applicable to the Class A-1
Class A-2, Class B, Class C and Class D Certificates for each Distribution Date
will, at all times, be equal to %, %, %, % and % per annum, respectively;
provided, however, that each of these pass-through rates will not exceed the
NWAC Rate for that Distribution Date. The initial pass-through rates for the
Class E, and Class F Certificates will be % and %, respectively. For interest
accrual periods relating to Distribution Dates after November 15, 2000, the
pass-through rate of the Class E Certificates will be the NWAC Rate for that
Distribution Date minus % per annum, and the pass-through rate of the Class F
Certificates will be a per annum rate equal to the NWAC Rate for that
Distribution Date. Because the pass-through rate for the Class A, Class B,
Class C and Class D Certificates are limited by the NWAC Rate, those classes
may be sensitive to changes in the relative composition of the mortgage pool as
a result of scheduled amortization, voluntary and involuntary prepayments and
liquidations of the mortgage loans following default. Because the pass-through
rates for the Class E and Class F Certificates will adjust with the NWAC Rate,
the yield on each of those classes of certificates will be sensitive to changes
in the relative composition of the mortgage pool as a result of scheduled
amortization, voluntary and involuntary prepayments and liquidations of the
mortgage loans following default. The pass-through rate of the Class X
Certificates for each Distribution Date will be based in part on the NWAC Rate.
Accordingly, the yield on the Class X Certificates will also be sensitive to
changes in the relative composition of the mortgage pool as a result of
scheduled amortization, voluntary and involuntary prepayments and liquidations
of the mortgage loans following default. In addition, the yield on the Class X
Certificates will be adversely affected by any reductions to the Net Mortgage
Rates resulting from modifications of the mortgage loans following default,
although the special servicer will be subject to limitations on its ability to
enter into such modifications. See "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 holders of offered
certificates that are purchased at a discount or premium will be affected by
the rate and timing of principal payments on the mortgage loans (including
principal prepayments on the mortgage loans resulting from both voluntary
prepayments by the mortgagors and involuntary liquidations and repurchases as a
result of breaches of representations and warranties made by the mortgage loan
sellers). The rate and timing of principal payments on the mortgage loans will
in turn be affected by the amortization schedules thereof, the dates on which
Balloon Payments are due, any extensions of maturity dates by the special
servicer 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). In addition, although the borrower under the ARD
Loan may have
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incentives to prepay that mortgage loan on its related Anticipated Repayment
Date, there can be no assurance that the borrower under the ARD Loan will be
able to prepay that mortgage loan on its related Anticipated Repayment Date.
The failure of the related borrower to prepay the ARD Loan on its Anticipated
Repayment Date will not be an event of default under the terms of that Mortgage
Loan. However, the servicer or the special servicer, as the case may be, will
be required under the pooling and servicing agreement to take action to enforce
the trust fund's right to apply excess cash flow to principal in accordance
with the terms of the related mortgage loan documents.
Prepayments and, assuming the respective maturity dates therefor have not
occurred, liquidations and purchases of the mortgage loans, will result in
distributions on the offered certificates of amounts that would otherwise be
distributed over the remaining terms of the mortgage loans. Defaults on the
mortgage loans, particularly at or near their stated maturity dates, may result
in significant delays in payments of principal on the mortgage loans (and,
accordingly, on the offered certificates) while work-outs are negotiated or
foreclosures are completed. See "Servicing of the Mortgage
Loans--Modifications, Waiver and Amendments" and "--Realization Upon Defaulted
Mortgage Loans" in this prospectus supplement and "Legal Aspects of Mortgage
Loans--Foreclosure" in the prospectus. Because the rate of principal payments
on the mortgage loans will depend on future events and a variety of factors (as
described below), no assurance can be given as to that rate or the rate of
principal prepayments in particular. We are not aware of any relevant publicly
available or authoritative statistics with respect to the historical prepayment
experience of a large group of mortgage loans comparable to the mortgage loans
in the mortgage pool.
The extent to which the yield to maturity of any class of offered
certificates may vary from the anticipated yield will depend upon, among other
things, the degree to which those certificates are purchased at a discount or
premium and when, and to what degree, payments of principal on the mortgage
loans are in turn distributed on those certificates. You 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 will
result in an actual yield to you 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 the mortgage loans will
result in an actual yield to you that is lower than the anticipated yield. In
general, the earlier a payment of principal is distributed on an offered
certificate purchased at a discount or premium, the greater will be the effect
on your yield to maturity. As a result, the effect on your yield of principal
payments distributed on offered certificates purchased by you occurring at a
rate higher (or lower) than the rate anticipated by you during any particular
period would not be fully offset by a subsequent like reduction (or increase)
in the rate of principal payments.
Losses and Shortfalls. The yield to holders of the offered certificates
will also depend on the extent to which those holders are required to bear the
effects of any losses or shortfalls on the mortgage loans or shortfalls or
losses otherwise resulting in the reduction of the assets of the trust fund.
Losses and other shortfalls on the mortgage loans will generally be borne by
the holders of the Class N, Class M, Class L, Class K, Class J, Class I, Class
H, Class G, Class F, Class E, Class D, Class C and Class B Certificates, in
that order, and in each case to the extent of amounts otherwise distributable
in respect of that class of certificates. In the event of the reduction of the
certificate balances of all those classes of certificates to zero, losses and
shortfalls will then be borne, pro rata, by the Class A-1 and Class A-2
Certificates (and Class X Certificates with respect to shortfalls of interest).
As more fully described in this prospectus supplement under "Description of the
Certificates--Distributions-- Prepayment Interest Shortfalls and Prepayment
Interest Excesses," Net Aggregate Prepayment Interest Shortfalls and Net
Aggregate Balloon Interest Shortfalls will be allocated to each class of
certificates, pro rata, in each case reducing interest otherwise distributable
thereon.
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, without limitation:
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o prevailing interest rates;
o the terms of the mortgage loans (for example, due-on-sale and
due-on-encumbrance clauses, Lockout Periods, yield maintenance charges
and amortization terms that require Balloon Payments);
o the demographics and relative economic vitality of the areas in which
the mortgaged properties are located and the general supply and demand
for rental properties in those areas;
o the quality of management of the mortgaged properties;
o the servicing of the mortgage loans; and
o possible changes in tax laws and other opportunities for investment.
See "Risk Factors" and "Description of the Mortgage Pool" in this
prospectus supplement and "Risk Factors" and "Yield and Maturity
Considerations--Yield and Prepayment Considerations" in the prospectus.
The rate of prepayment on the mortgage pool is likely to be affected by
prevailing market interest rates for mortgage loans of a comparable type, term
and risk level as the mortgage loans. When the prevailing market interest rate
is below a mortgage coupon, a borrower may have an increased incentive to
refinance its mortgage loan. However, voluntary prepayments are in all cases
subject to Lockout Periods, Yield Maintenance Periods and/or Prepayment Premium
Periods, although the enforceability of those provisions is, in many states,
subject to certain equitable principles even outside of bankruptcy proceedings.
See "Description of the Mortgage Pool--Yield Maintenance, Prepayment and
Lockout Provisions" in this prospectus supplement.
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.
We make no representation 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 those 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.
Delay in Payment of Distributions. Because each monthly distribution is
made on each Distribution Date, which is at least 15 days after the end of the
related interest accrual period, the effective yield to the holders of the
offered certificates will be lower than the yield that would otherwise be
produced by the applicable pass-through rates and purchase prices in the
absence of such delay.
Unpaid Distributable Certificate Interest. As described under "Description
of the Certificates-- Distributions--Application of Available Distribution
Amount" in this prospectus supplement, if the portion of the Available
Distribution Amount distributable in respect of interest on any class of
offered certificates on any Distribution Date is less than the Distributable
Certificate Interest then payable for that class, the shortfall will be
distributable to holders of that class of certificates on subsequent
Distribution Dates, to the extent of available funds. Any such shortfall (which
would not include interest shortfalls in connection with a principal prepayment
accompanied by less than a full month's interest) will bear interest at the
applicable pass-through rate, however, and will therefore adversely affect the
yield to maturity of that class of certificates for so long as it is
outstanding.
S-106
<PAGE>
YIELD SENSITIVITY OF THE CLASS X CERTIFICATES
The table below indicates the sensitivity of the pre-tax corporate bond
equivalent yields to maturity of the Class X Certificates at various prices
(expressed as a percentage of notional amount) and constant prepayment rates.
The allocations and calculations do not take into account any yield maintenance
charges (but do take into account prepayment premiums). The yields set forth in
the table were calculated by determining the monthly discount rates that, when
applied to the assumed stream of cash flows to be paid on the Class X
Certificates, would cause the discounted present value of that assumed stream
of cash flows to equal the assumed purchase prices plus accrued interest of
that class of certificates and converting those monthly rates to corporate bond
equivalent rates. These calculations do not take into account variations that
may occur in the interest rates at which you may be able to reinvest funds
received as distributions on the Class X Certificates and, consequently, do not
purport to reflect the return on any investment in that class of certificates
when those reinvestment rates are considered.
Prepayments on mortgage loans may be measured by a prepayment standard or
model. The model used in this prospectus supplement is the "Constant Prepayment
Rate" or "CPR" model. The CPR model represents an assumed constant rate of
prepayment each month, expressed as a per annum percentage of the
then-Scheduled Principal Balance of the pool of mortgage loans. As used in each
of the following tables, the column headed "0% CPR" assumes that none of the
mortgage loans is prepaid before its maturity date. The columns headed "3%
CPR", "6% CPR", "9% CPR" and "12% CPR" assume that prepayments on the mortgage
loans are made at those levels of CPR following the expiration of any Lockout
Period and/or Yield Maintenance Period. There is no assurance, however, that
prepayments of the mortgage loans will conform to any level of CPR, and no
representation is made that the mortgage loans will prepay at the levels of CPR
shown or at any other prepayment rate.
The following table has been prepared on the basis of the following
assumptions (collectively, the "Maturity Assumptions"), among others:
o scheduled monthly payments of principal and/or interest on the mortgage
loans, in each case prior to any prepayment of the mortgage loan, will
be timely received (with no defaults) and will be distributed on the
15th day of each month;
o the Mortgage Rate in effect for a mortgage loan as of the Cut-Off Date
will remain in effect until the maturity date of that mortgage loan;
o the scheduled payment of principal and interest due for each mortgage
loan on the first due date following the Cut-Off Date will continue to
be due on each due date until the maturity date of such mortgage loan;
o any Principal Prepayments on the mortgage loans will be received on
their respective due dates after the expiration of any applicable
Lockout Period and/or Yield Maintenance Period at the respective levels
of CPR set forth in the tables;
o the mortgage loan sellers will not be required to repurchase any
mortgage loan, and no party will exercise its option to purchase all the
mortgage loans and thereby cause an early termination of the trust fund;
o no yield maintenance charges are paid to the holders of the Class X
Certificates;
o no Expense Losses will be incurred;
o the closing date for the sale of the certificates to the underwriters
is October 5, 2000; and
o the ARD Loan prepays in full on its Anticipated Repayment Date.
S-107
<PAGE>
SENSITIVITY TO PRINCIPAL PREPAYMENTS OF THE PRE-TAX YIELDS TO MATURITY OF THE
CLASS X CERTIFICATES
<TABLE>
<CAPTION>
ASSUMED
PURCHASE
PRICE 0% CPR 3% CPR 6% CPR 9% CPR 12% CPR
---------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
5.600% 9.699% 9.698% 9.698% 9.697% 9.697%
5.725% 9.150% 9.150% 9.149% 9.148% 9.148%
5.850% 8.620% 8.620% 8.619% 8.618% 8.618%
</TABLE>
There can be no assurance that the mortgage loans will prepay at any of
the rates shown in the table or at any other particular rate, that the cash
flows on the Class X Certificates will correspond to the cash flows assumed for
purposes of the above table or that the actual purchase price of the Class X
Certificates will be as assumed. In addition, it is unlikely that the mortgage
loans will prepay at any of the specified percentages of CPR 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 your actual yield to
maturity, even if the average rate of principal prepayments is consistent with
your expectations. You must make your own decisions as to the appropriate
prepayment assumption to be used in deciding whether to purchase the Class X
Certificates.
THE YIELD TO MATURITY ON THE CLASS X CERTIFICATES WILL BE SENSITIVE TO THE
RATE AND TIMING OF PRINCIPAL PAYMENTS (INCLUDING PREPAYMENTS), PRINCIPAL LOSSES
AND INTEREST RATE DECREASES DUE TO MODIFICATIONS ON THE MORTGAGE LOANS AND TO
OTHER FACTORS SET FORTH IN THIS PROSPECTUS SUPPLEMENT. YOU SHOULD FULLY
CONSIDER THE ASSOCIATED RISKS, INCLUDING THE RISK THAT A RAPID RATE OF
PRINCIPAL PAYMENTS AND/OR PRINCIPAL LOSSES ON THE MORTGAGE POOL COULD RESULT IN
YOUR FAILURE TO FULLY RECOUP YOUR INVESTMENT IN THE CLASS X CERTIFICATES.
WEIGHTED AVERAGE LIFE
The weighted average life of an 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 allocable to principal of that
certificate is distributed to the investor. The weighted average life of any
Class of Principal Balance Certificates is determined by (i) multiplying the
amount of each principal distribution thereon by the number of years from the
date of issuance of the certificates to the related Distribution Date, (ii)
summing the results and (iii) dividing the sum by the aggregate amount of the
reductions in the principal balance of such class of certificates. For purposes
of the table presented under "Certificate Summary" in this prospectus
supplement, the weighted average life of the Class X Certificates is determined
by (i) multiplying the amount of each reduction in the notional amount of the
Class X Certificates by the number of years from the date of issuance of the
Class X Certificates to the related Distribution Date, (ii) summing the results
and (iii) dividing the sum by the aggregate amount of reductions in the
notional amount of the Class X Certificates. The weighted average life of any
certificate will be influenced by, among other things, the rate at which
principal on the mortgage loans is paid or otherwise collected, which may be in
the form of scheduled amortization, voluntary prepayments, condemnation
proceeds, Insurance Proceeds and Liquidation Proceeds.
Prepayments on mortgage loans may be measured by a prepayment standard or
model. The model used in this prospectus supplement is the "Constant Prepayment
Rate" or "CPR" model. The CPR model represents an assumed constant rate of
prepayment each month, expressed as a per annum percentage of the
then-outstanding principal balance of the pool of mortgage loans. As used in
each of the following tables, the column headed "0% CPR" assumes that none of
the mortgage loans is prepaid before its maturity date. The columns headed "3%
CPR", "6% CPR", "9% CPR" and "12% CPR" assume that prepayments on the mortgage
loans are made at those levels of CPR following the expiration of any Lockout
Period and/or Yield Maintenance Period. There is no assurance, however, that
prepayments of the mortgage loans will conform to any level of CPR, and no
representation is made that the mortgage loans will prepay at the levels of CPR
shown or at any other prepayment rate.
S-108
<PAGE>
The following tables indicate the percentage of the initial certificate
balance of each class of the offered certificates (other than the Class X
Certificates) that would be outstanding after each of the dates shown at
various CPRs and the corresponding weighted average life of each of those
classes of certificates. The tables have been prepared on the basis of the
Maturity Assumptions, among others. To the extent that the mortgage loans have
characteristics that differ from those assumed in preparing the tables set
forth below (and the weighted average lives and principal or notional windows
set forth under "Certificate Summary" in this prospectus supplement), a class
of offered certificates may mature earlier (or later) than indicated therein
and experience a corresponding decrease (or increase) in weighted average life.
It is highly unlikely that the mortgage loans will prepay at any constant rate
until maturity or that all the mortgage loans will 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
and the weighted average lives and principal or notional windows set forth
under "Certificate Summary" in this prospectus supplement. These variations may
occur even if the average prepayment experience of the mortgage loans were to
equal any of the specified CPR percentages. You are urged to conduct your own
analyses of the rates at which the mortgage loans may be expected to prepay.
Based on the foregoing assumptions, the following tables indicate the resulting
weighted average lives of each class of offered certificates (other than the
Class X Certificates) and set forth the percentage of the initial certificate
balance of that class of offered certificate that would be outstanding after
each of the dates shown at the indicated CPRs.
S-109
<PAGE>
PERCENTAGE OF THE INITIAL CERTIFICATE BALANCE
OF THE CLASS A-1 CERTIFICATES AT THE RESPECTIVE CPRS
<TABLE>
<CAPTION>
DATE 0% CPR 3% CPR 6% CPR 9% CPR 12% CPR
---------------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Initial Percentage ..................... 100 100 100 100 100
October 15, 2001 ....................... 94 94 94 94 94
October 15, 2002 ....................... 87 87 87 87 87
October 15, 2003 ....................... 80 80 80 80 80
October 15, 2004 ....................... 72 72 72 72 72
October 15, 2005 ....................... 63 63 63 63 63
October 15, 2006 ....................... 54 54 54 54 54
October 15, 2007 ....................... 36 36 36 36 36
October 15, 2008 ....................... 25 25 25 25 25
October 15, 2009 ....................... 0 0 0 0 0
Weighted Average Life (Years) .......... 5.75 5.75 5.75 5.75 5.75
</TABLE>
PERCENTAGE OF THE INITIAL CERTIFICATE BALANCE
OF THE CLASS A-2 CERTIFICATES AT THE RESPECTIVE CPRS
<TABLE>
<CAPTION>
DATE 0% CPR 3% CPR 6% CPR 9% CPR 12% CPR
---------------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Initial Percentage ..................... 100 100 100 100 100
October 15, 2001 ....................... 100 100 100 100 100
October 15, 2002 ....................... 100 100 100 100 100
October 15, 2003 ....................... 100 100 100 100 100
October 15, 2004 ....................... 100 100 100 100 100
October 15, 2005 ....................... 100 100 100 100 100
October 15, 2006 ....................... 100 100 100 100 100
October 15, 2007 ....................... 100 100 100 100 100
October 15, 2008 ....................... 100 100 100 100 100
October 15, 2009 ....................... 92 92 92 92 92
October 15, 2010 ....................... 0 0 0 0 0
Weighted Average Life (Years) .......... 9.61 9.61 9.61 9.60 9.60
</TABLE>
PERCENTAGE OF THE INITIAL CERTIFICATE BALANCE
OF THE CLASS B CERTIFICATES AT THE RESPECTIVE CPRS
<TABLE>
<CAPTION>
DATE 0% CPR 3% CPR 6% CPR 9% CPR 12% CPR
---------------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Initial Percentage ..................... 100 100 100 100 100
October 15, 2001 ....................... 100 100 100 100 100
October 15, 2002 ....................... 100 100 100 100 100
October 15, 2003 ....................... 100 100 100 100 100
October 15, 2004 ....................... 100 100 100 100 100
October 15, 2005 ....................... 100 100 100 100 100
October 15, 2006 ....................... 100 100 100 100 100
October 15, 2007 ....................... 100 100 100 100 100
October 15, 2008 ....................... 100 100 100 100 100
October 15, 2009 ....................... 100 100 100 100 100
October 15, 2010 ....................... 0 0 0 0 0
Weighted Average Life (Years) .......... 9.88 9.87 9.87 9.87 9.87
</TABLE>
S-110
<PAGE>
PERCENTAGE OF THE INITIAL CERTIFICATE BALANCE
OF THE CLASS C CERTIFICATES AT THE RESPECTIVE CPRS
<TABLE>
<CAPTION>
DATE 0% CPR 3% CPR 6% CPR 9% CPR 12% CPR
---------------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Initial Percentage ..................... 100 100 100 100 100
October 15, 2001 ....................... 100 100 100 100 100
October 15, 2002 ....................... 100 100 100 100 100
October 15, 2003 ....................... 100 100 100 100 100
October 15, 2004 ....................... 100 100 100 100 100
October 15, 2005 ....................... 100 100 100 100 100
October 15, 2006 ....................... 100 100 100 100 100
October 15, 2007 ....................... 100 100 100 100 100
October 15, 2008 ....................... 100 100 100 100 100
October 15, 2009 ....................... 100 100 100 100 100
October 15, 2010 ....................... 0 0 0 0 0
Weighted Average Life (Years) .......... 9.94 9.94 9.94 9.94 9.94
</TABLE>
PERCENTAGE OF THE INITIAL CERTIFICATE BALANCE
OF THE CLASS D CERTIFICATES AT THE RESPECTIVE CPRS
<TABLE>
<CAPTION>
DATE 0% CPR 3% CPR 6% CPR 9% CPR 12% CPR
---------------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Initial Percentage ..................... 100 100 100 100 100
October 15, 2001 ....................... 100 100 100 100 100
October 15, 2002 ....................... 100 100 100 100 100
October 15, 2003 ....................... 100 100 100 100 100
October 15, 2004 ....................... 100 100 100 100 100
October 15, 2005 ....................... 100 100 100 100 100
October 15, 2006 ....................... 100 100 100 100 100
October 15, 2007 ....................... 100 100 100 100 100
October 15, 2008 ....................... 100 100 100 100 100
October 15, 2009 ....................... 100 100 100 100 100
October 15, 2010 ....................... 0 0 0 0 0
Weighted Average Life (Years) .......... 9.94 9.94 9.94 9.94 9.94
</TABLE>
PERCENTAGE OF THE INITIAL CERTIFICATE BALANCE
OF THE CLASS E CERTIFICATES AT THE RESPECTIVE CPRS
<TABLE>
<CAPTION>
DATE 0% CPR 3% CPR 6% CPR 9% CPR 12% CPR
---------------------------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Initial Percentage ..................... 100 100 100 100 100
October 15, 2001 ....................... 100 100 100 100 100
October 15, 2002 ....................... 100 100 100 100 100
October 15, 2003 ....................... 100 100 100 100 100
October 15, 2004 ....................... 100 100 100 100 100
October 15, 2005 ....................... 100 100 100 100 100
October 15, 2006 ....................... 100 100 100 100 100
October 15, 2007 ....................... 100 100 100 100 100
October 15, 2008 ....................... 100 100 100 100 100
October 15, 2009 ....................... 100 100 100 100 100
October 15, 2010 ....................... 41 41 40 40 40
October 15, 2011 ....................... 0 0 0 0 0
Weighted Average Life (Years) .......... 10.22 10.22 10.21 10.21 10.20
</TABLE>
S-111
<PAGE>
PERCENTAGE OF THE INITIAL CERTIFICATE BALANCE
OF THE CLASS F CERTIFICATES AT THE RESPECTIVE CPRS
<TABLE>
<CAPTION>
DATE 0% CPR 3% CPR 6% CPR 9% CPR 12% CPR
---------------------------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Initial Percentage ..................... 100 100 100 100 100
October 15, 2001 ....................... 100 100 100 100 100
October 15, 2002 ....................... 100 100 100 100 100
October 15, 2003 ....................... 100 100 100 100 100
October 15, 2004 ....................... 100 100 100 100 100
October 15, 2005 ....................... 100 100 100 100 100
October 15, 2006 ....................... 100 100 100 100 100
October 15, 2007 ....................... 100 100 100 100 100
October 15, 2008 ....................... 100 100 100 100 100
October 15, 2009 ....................... 100 100 100 100 100
October 15, 2010 ....................... 100 100 100 100 100
October 15, 2011 ....................... 61 59 58 56 55
October 15, 2012 ....................... 0 0 0 0 0
Weighted Average Life (Years) .......... 11.25 11.23 11.21 11.20 11.18
</TABLE>
S-112
<PAGE>
SERVICING OF THE MORTGAGE LOANS
GENERAL
The servicer and the special servicer, either directly or through
sub-servicers, will be required to service and administer the mortgage loans in
the best interests of and for the benefit of the certificateholders, as
determined by the servicer or the special servicer, as the case may be, in its
good faith and reasonable judgment, in accordance with applicable law, the
terms of the pooling and servicing agreement and to the extent consistent with
the foregoing, further as follows:
o with the same care, skill and diligence as is normal and usual in
its general mortgage servicing and property management activities
on behalf of third parties or on behalf of itself, whichever is
higher, with respect to mortgage loans and REO properties that
are comparable to those for which it is responsible under the
pooling and servicing agreement;
o with a view to the timely collection of all scheduled payments of
principal and interest under the mortgage loans or, if a mortgage
loan comes into and continues in default and if, in the good
faith and reasonable judgment of the special servicer, no
satisfactory arrangements can be made for the collection of
delinquent payments, the maximization of the recovery on the
mortgage loan on a present value basis; and
o without regard to any of the following:
o any relationship that the servicer or the special
servicer, as the case may be, or any affiliate thereof may
have with the related mortgagor;
o the ownership of any certificate by the servicer or the
special servicer, as the case may be, or any affiliate
thereof;
o if the servicer or the special servicer, as the case may
be, or any affiliate thereof owns any junior indebtedness
with respect to the related mortgaged property, such
ownership;
o the servicer's or special servicer's right to receive
compensation for services under the pooling and servicing
agreement or with respect to any particular transaction;
o the servicing of the mortgage loans that are not Specially
Serviced Mortgage Loans by the servicer;
o the servicer's obligation to make Advances or repurchase
any mortgage loan that it has sold to the depositor under
the related mortgage loan purchase agreement.
Notwithstanding the provisions described above, no provision of the
pooling and servicing agreement may be construed as an express or implied
guarantee by the servicer or the special servicer of the collectability of
payments on the mortgage loans or as impairing or adversely affecting any
rights or benefits specifically provided by the pooling and servicing agreement
to the servicer or special servicer.
We refer to the standards described above collectively as the "Servicing
Standard."
Each of the servicer and the special servicer may become the owner or
pledgee of certificates with the same rights as each would have if it were not
the servicer or the special servicer, as the case may be. Any such interest of
the servicer or the special servicer in the certificates will not be taken into
account when evaluating whether actions of the servicer or the special servicer
are consistent with their respective obligations in accordance with the
Servicing Standard, regardless of whether those actions may have the effect of
benefiting the class or classes of certificates owned by the servicer or the
special servicer. In addition, the servicer or the special servicer may, under
some limited circumstances, lend money on an unsecured basis, accept deposits
from, and otherwise generally engage in any kind of business or dealings with,
any borrower as though the servicer or the special servicer were not a party to
the transactions contemplated hereby.
S-113
<PAGE>
Each of the servicer and the special servicer is permitted to enter into a
sub-servicing agreement with a sub-servicer, and any such sub-servicer will
receive a fee for the services specified in that sub-servicing agreement.
However, the servicer or the special servicer, as the case may be, will remain
liable for its servicing obligations under the pooling and servicing agreement.
The servicer or the special servicer, as the case may be, will be required to
pay any servicing compensation due to any sub-servicer out of its own funds.
The servicer or the special servicer may resign from the obligations and
duties imposed on it under the pooling and servicing agreement, upon 30 days
notice to the trustee, provided that:
o a successor servicer or special servicer is available and willing to
assume the obligations of the servicer or special servicer on
substantially the same terms and conditions, and for not more than
equivalent compensation;
o the successor servicer or special servicer has assets of at least $15
million;
o the servicer or special servicer bears all costs associated with its
resignation and the transfer of servicing; and
o each Rating Agency has confirmed in writing that the servicing transfer
will not result in a withdrawal, downgrade or qualification (if
applicable) of the then current rating on any class of certificates.
Furthermore, the servicer or special servicer may resign as servicer or
special servicer if it determines that its duties 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 shall become effective until a successor servicer or
special servicer designated by the trustee, with the consent of the depositor,
has assumed the servicer's or special servicer's responsibilities and
obligations under the pooling and servicing agreement. The relationship of each
of the servicer and the special servicer to the trustee is intended to be that
of an independent contractor and not that of a joint venturer, partner or
agent.
The servicer will have no responsibility for the performance by the
special servicer of its duties under the pooling and servicing agreement, and
the special servicer will have no responsibility for the performance by the
servicer of its duties under the pooling and servicing agreement.
The servicer initially will be responsible for the servicing and
administration of the entire mortgage pool. However, the special servicer will
be responsible for servicing and administering:
o any mortgage loan as to which a Balloon Payment is past due, and the
servicer has determined that payment is unlikely to be made on or before
the second due date succeeding the date the Balloon Payment was due, or
any other payment is more than 60 days past due or has not been made on
or before the second due date following the date that payment was due;
o any mortgage loan as to which, to the servicer's knowledge, the related
borrower has consented to the appointment of a receiver or conservator in
any insolvency or similar proceeding of or relating to that borrower or
to all or substantially all of its property, or that borrower has become
the subject of a decree or order issued under a bankruptcy, insolvency or
similar law and the decree or order shall have remained undischarged or
unstayed for a period of 60 days;
o any mortgage loan as to which the servicer shall have received notice of
the foreclosure or proposed foreclosure of any other lien on the
mortgaged property;
o any mortgage loan as to which the servicer has knowledge of a default
(other than a failure by the related borrower to pay principal or
interest) that, in the judgment of the servicer, materially and adversely
affects the interests of the certificateholders and that, has occurred
and remains unremedied for the applicable grace period specified in the
loan documents for that mortgage loan (or, if no grace period is
specified, 60 days);
S-114
<PAGE>
o any mortgage loan as to which the related borrower admits in writing its
inability to pay its debts generally as they become due, files a petition
to take advantage of any applicable insolvency or reorganization statute,
makes an assignment for the benefit of its creditors or voluntarily
suspends payment of its obligations; and
o any mortgage loan as to which, in the judgment of the servicer, a
default has occurred or in the judgment of the servicer is imminent or is
likely to occur within 60 days (any of the foregoing events, a "Servicing
Transfer Event").
In the event of any of the foregoing with respect to any mortgage loan,
the servicer will be required to transfer its principal servicing
responsibilities with respect thereto to the special servicer in accordance
with certain procedures set forth in the pooling and servicing agreement.
Notwithstanding this transfer, the servicer will continue to receive payments
on the mortgage loan (including amounts collected by the special servicer), to
make required calculations with respect to such mortgage loan, to make
remittances to the paying agent and to prepare required reports to the trustee
and the paying agent with respect to such mortgage loan. If title to the
related mortgaged property is acquired by the trust fund, whether through
foreclosure, deed-in-lieu of foreclosure or otherwise, the special servicer
will be responsible for the operation and management of the related REO
Property.
A mortgage loan will cease to be a Specially Serviced Mortgage Loan (and
will become a "Rehabilitated Mortgage Loan" as to which the servicer will
re-assume all servicing responsibilities) when:
o three consecutive scheduled payments have been made (in the case of any
mortgage loan that was modified, based on the modified terms);
o no other Servicing Transfer Event has occurred and is continuing with
respect to that mortgage loan; and
o the trust fund has been reimbursed for all costs incurred as a result of
the occurrence of the Servicing Transfer Event or those amounts have been
forgiven.
The servicer and the special servicer will, in general, each be required
to pay all ordinary expenses incurred by it in connection with its servicing
activities under the pooling and servicing agreement and will not be entitled
to reimbursement therefor except as expressly provided in the pooling and
servicing agreement. See "Description of The Certificates--Advances--Servicing
Advances" in this prospectus supplement.
The servicer and the special servicer and any director, officer, employee
or agent of either of them will be entitled to indemnification from the trust
fund against any loss, liability or expense incurred in connection with any
legal action relating to the pooling and servicing agreement, the mortgage
loans or the certificates other than any loss, liability or expense incurred by
reason of the servicer's or special servicer's willful misfeasance, bad faith
or negligence in the performance of their respective duties under the pooling
and servicing agreement.
THE SERVICER
Wells Fargo Bank, National Association, in its capacity as servicer under
the pooling and servicing agreement, will be responsible for servicing the
mortgage loans (other than the Specially Serviced Mortgage Loans and REO
Properties). Although the servicer is authorized to employ agents, including
sub-servicers, to directly service the mortgage loans for which it is
responsible, the servicer will remain liable for its servicing obligations
under the pooling and servicing agreement. Wells Fargo Bank, National
Association provides a full range of banking services to individual,
agribusiness, real estate, commercial and small business customers. Wells Fargo
Bank, National Association is an affiliate of the paying agent and one of the
underwriters. See "Servicing of the Mortgage Loans--General" above.
The servicer's principal servicing offices are presently located at 420
Montgomery Street, San Francisco, California 94104.
S-115
<PAGE>
As of June 30, 2000, Wells Fargo Bank, National Association was
responsible for servicing approximately 2,168 commercial and multifamily
mortgage loans, totaling approximately $12.51 billion in aggregate outstanding
principal amounts, including loans securitized in securitization transactions.
Wells Fargo & Company is the holding company for the servicer. Wells Fargo
& Company files reports with the Securities and Exchange Commission that are
required under the Securities Exchange Act of 1934. Those reports include
information regarding the servicer and may be obtained at the website
maintained by the Securities and Exchange Commission at http://www.sec.gov.
The information set forth in this prospectus supplement concerning the
servicer has been provided by Wells Fargo Bank, National Association.
Accordingly, we make no representations or warranties as to the accuracy or
completeness of that information.
SERVICER EVENTS OF DEFAULT
An "Event of Default" with respect to the servicer under the pooling and
servicing agreement will include any one or more of the following events:
1. (a) any failure by the servicer to remit to the paying agent any payment
required to be remitted by the servicer under the terms of the pooling
and servicing agreement, including any required Advances, or (b) any
failure of the servicer to make any deposit into the Certificate Account
within two business days following the date on which such deposit was
required to be made;
2. any failure on the part of the servicer duly to observe or perform in
any material respect any other of the duties, covenants or agreements on
the part of the servicer contained in the pooling and servicing agreement
which continues unremedied for a period of 30 days after the date on
which notice shall have been given by us or the trustee; provided,
however, that if the servicer certifies to the trustee and to us that the
servicer is in good faith attempting to remedy that failure, the cure
period will be extended to the extent necessary to permit the servicer to
cure that failure; provided, further that the cure period may not exceed
90 days;
3. any breach of the representations and warranties of the servicer in the
pooling and servicing agreement that materially and adversely affects the
interest of any holder of any class of certificates and that continues
unremedied for a period of 30 days after notice shall have been given to
the servicer by us or the trustee, provided, however, that if the
servicer certifies to the trustee and to us that the servicer is in good
faith attempting to remedy that breach, the cure period will be extended
to the extent necessary to permit the servicer to cure that breach;
provided, further that the cure period may not exceed 90 days;
4. the trustee shall have received written notice from Fitch that the
continuation of the servicer in that capacity would result in a
withdrawal, downgrade or qualification (if applicable) of the then
current rating assigned by Fitch to any class of certificates;
5. the servicer is removed from S&P's approved servicer list and the
ratings then assigned by S&P to any class of certificates are downgraded,
qualified or withdrawn (including, without limitation, being placed on
"negative credit watch") in connection with such removal; or
6. events of insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings and actions by or on behalf of the
servicer indicating its insolvency or inability to pay its obligations,
in each case as specified in the pooling and servicing agreement.
RIGHTS UPON SERVICER EVENT OF DEFAULT
If an Event of Default described in clauses 2, 3, 4 or 5 above has
occurred, the obligations and responsibilities of the servicer under the
pooling and servicing agreement will terminate on the date which is 60 days
following the date on which we or the trustee give written notice to the
servicer that the servicer is terminated. If an Event of Default described in
clauses 1 or 6 above has occurred, the obligations and responsibilities of the
servicer under the pooling and servicing agreement will
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terminate immediately upon the date on which we or the trustee give written
notice to the servicer that the servicer is terminated. After any Event of
Default, the trustee may elect to terminate the servicer by providing notice to
the servicer of its termination, and must provide notice to the servicer of its
termination if holders of certificates representing more than 25% of the
aggregate certificate balance of all certificates so direct the trustee. On the
date the servicer is terminated, all authority, power and rights of the
servicer under the pooling and servicing agreement, whether with respect to the
mortgage loans or otherwise, will terminate; provided that in no event will the
termination of the servicer be effective until a successor servicer has
succeeded the servicer as successor servicer, notified the servicer of its
designation, and assumed the servicer's obligations and responsibilities with
respect to the mortgage loans, as set forth in an agreement substantially in
the form of the pooling and servicing agreement. The trustee may not succeed
the servicer as servicer until and unless it has satisfied the provisions
specified in the pooling and servicing agreement. However, if the servicer is
terminated as a result of an Event of Default described in clause 6 of the
definition thereof, the trustee must act as successor servicer immediately and
must use its best efforts to either satisfy the conditions specified in the
pooling and servicing agreement or transfer the duties of the servicer to a
successor servicer who has satisfied those conditions.
If the servicer is terminated on the basis of an Event of Default
described in clause 4 or 5 of the definition thereof and the servicer provides
the trustee appropriate "request for proposal" materials, then the trustee will
solicit good faith bids for the right to service the mortgage loans from at
least three persons that are qualified to act as servicers under the pooling
and servicing agreement and as to whom each Rating Agency has delivered written
confirmation that the appointment of that person as successor servicer would
not result in a withdrawal, downgrade or qualification (if applicable) of the
then current rating on any class of certificates (any such person so qualified,
a "Qualified Bidder"), or, if three Qualified Bidders cannot be located, then
from as many persons as the trustee can determine are Qualified Bidders. The
trustee will select the Qualified Bidder that makes the highest cash bid or any
other Qualified Bidder as the terminated servicer may direct to act as
successor servicer (the "Successful Bidder"). The trustee will direct the
Successful Bidder to enter into the pooling and servicing agreement as
successor servicer pursuant to the terms thereof. Upon the assignment and
acceptance of the servicing rights under the pooling and servicing agreement by
the Successful Bidder, the trustee will remit to the terminated servicer the
amount of the cash bid received from the Successful Bidder (net of
out-of-pocket expenses incurred in connection with obtaining that bid and
transferring servicing). If a Successful Bidder has not entered into the
pooling and servicing agreement as successor servicer within a specified period
of time, the trustee may select another successor to act as servicer under the
pooling and servicing agreement.
THE SPECIAL SERVICER
The initial special servicer will be GMAC Commercial Mortgage Corporation.
GMAC Commercial Mortgage Corporation will oversee the resolution of Specially
Serviced Mortgage Loans, act as disposition manager of REO Properties acquired
on behalf of the trust fund through foreclosure or deed in lieu of foreclosure,
maintain insurance with respect to REO Properties and provide monthly reports
to the servicer, the trustee and the paying agent. As of June 30, 2000, GMAC
Commercial Mortgage Corporation was responsible for performing certain special
servicing functions with respect to commercial and multifamily loans with an
aggregate principal balance of approximately $43 billion. It is anticipated
that GMAC Commercial Mortgage Corporation or one of its affiliates will
purchase all or a significant portion of certain classes of the Subordinate
Certificates on or about the closing date. GMAC Commercial Mortgage
Corporation's principal offices are located at 200 Witmer Road, Horsham,
Pennsylvania 19044.
The information set forth in this prospectus supplement concerning GMAC
Commercial Mortgage Corporation has been provided by GMAC Commercial Mortgage
Corporation. Accordingly, we make no representations or warranties as to the
accuracy or completeness of that information.
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TERMINATION OF THE SPECIAL SERVICER
An "Event of Default" with respect to the special servicer under the
pooling and servicing agreement will include any one or more of the following
events:
1. any failure by the special servicer to remit to the paying agent, the
servicer, the trustee, the fiscal agent or to us within one business day
of the date when due any amount required to be so remitted under the
terms of the pooling and servicing agreement;
2. any failure on the part of the special servicer duly to observe or
perform in any material respect any other of the covenants or agreements
on the part of the special servicer contained in the pooling and
servicing agreement which continues unremedied for a period of 30 days
after the date on which written notice of that failure, requiring the
same to be remedied, shall have been given to the special servicer by the
servicer or the trustee; provided, however, that to the extent that the
special servicer certifies to the trustee and us that the special
servicer is in good faith attempting to remedy that failure and the
certificateholders shall not be materially and adversely affected
thereby, the cure period will be extended to the extent necessary to
permit the special servicer to cure such failure by not more than an
additional 90 days;
3. any breach by the special servicer of the representations and warranties
contained in the pooling and servicing agreement that materially and
adversely affects the interests of the holders of any class of
certificates and that continues unremedied for a period of 30 days after
the date on which notice of that breach, requiring the same to be
remedied, shall have been given to the special servicer by the servicer
or the trustee;
4. the trustee shall have received written notice from Fitch that the
continuation of the special servicer in that capacity would result in the
withdrawal, downgrade or qualification (if applicable) of the then
current rating assigned by Fitch to any class of certificates;
5. the special servicer is removed from S&P's approved special servicer
list and the ratings then assigned by S&P to any class of certificates
are downgraded, qualified or withdrawn (including, without limitation,
being placed on "negative credit watch") in connection with such removal;
or
6. events of insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings and actions by or on behalf of the
special servicer indicating its insolvency or inability to pay its
obligations, in each case as specified in the pooling and servicing
agreement.
The trustee will be entitled to terminate the special servicer upon the
occurrence of an Event of Default with respect to the special servicer.
In addition to the above events of termination, upon the direction of the
operating advisor, subject to the satisfaction of the conditions specified in
the pooling and servicing agreement, the trustee will remove the special
servicer from its duties as special servicer at any time upon the appointment
and acceptance of that appointment by a successor special servicer appointed by
the operating advisor. The operating advisor will have the right to appoint any
successor special servicer provided that, prior to the effectiveness of that
appointment, the trustee shall have received a letter from each Rating Agency
to the effect that the appointment of that successor special servicer would not
result in a withdrawal, downgrade or qualification (if applicable) of the then
current rating assigned by that Rating Agency to any class of certificates.
THE OPERATING ADVISOR
An operating advisor appointed by the holders of a majority of the
Controlling Class will have the right to receive notification from the special
servicer and advise the special servicer in regard to some actions of the
special servicer. The special servicer will be required to notify the operating
advisor of, among other things:
o any proposed modification of a Money Term of a mortgage loan other than
an extension of the original maturity date for two years or less;
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o any foreclosure or comparable conversion of the ownership of a Mortgaged
Property;
o any proposed sale of a defaulted mortgage loan (other than in connection
with the termination of the trust fund as described in this prospectus
supplement under "Description of the Certificate--Optional Termination;
Retirement of the Certificates");
o any proposal to bring an REO Property into compliance with applicable
environmental laws; and
o any acceptance of substitute or additional collateral for a mortgage
loan.
In addition, subject to the satisfaction of the conditions specified in
the pooling and servicing agreement, the operating advisor will have the right
to direct the trustee to remove the special servicer at any time upon the
appointment and acceptance of that appointment by a successor special servicer
appointed by the operating advisor; provided that, prior to the effectiveness
of that appointment, the trustee must have received a letter from each Rating
Agency to the effect that the appointment of that successor special servicer
would not result in a withdrawal, downgrade or qualification (if applicable) of
the then current rating assigned by that Rating Agency to any class of
certificates.
At any time, the holders representing of a majority of the certificate
balance of the certificates of the then Controlling Class may direct the
trustee in writing to hold an election for an operating advisor, which election
will be held commencing as soon as practicable thereafter or upon the
resignation or removal of the person acting as operating advisor. After receipt
of that direction or upon that resignation or removal, the trustee is required
to call a meeting of the holders of the Controlling Class (which may be held by
telephone) in the manner specified in the pooling and servicing agreement. The
meeting will be held in accordance with the procedures specified in the pooling
and servicing agreement. At the meeting, each holder of the Controlling Class
will be entitled to nominate one person to act as operating advisor.
SERVICING AND OTHER COMPENSATION AND PAYMENT OF EXPENSES
Servicer Compensation. The servicer will be entitled to receive each month
a servicing fee (the "Servicing Fee") equal to the portion of a specified rate
per annum (the "Servicing Fee Rate") applicable to that month (determined in
the same manner as the applicable Mortgage Rate is determined for each mortgage
loan for that month) applied to the outstanding Scheduled Principal Balance of
each mortgage loan (including REO Properties) as compensation for servicing the
mortgage loans.
The servicer will be entitled to retain as additional servicing
compensation all investment income earned on amounts on deposit in the
Certificate Account, and (in each case to the extent not payable to the special
servicer or any sub-servicer as provided in the pooling and servicing agreement
or any sub-servicing agreement) assumption fees, modification fees, extension
fees, defeasance fees, partial defeasance fees and default interest payable at
a rate above the related Mortgage Rate. The servicer will also be entitled to
retain as additional servicing compensation any late payment charges paid by
any one or more mortgagors with respect to the mortgage loans (other than the
Specially Serviced Mortgage Loans) to the extent such late fees exceed
outstanding and unpaid Advance Interest on Advances previously made in respect
of the mortgage loans (other than the Specially Serviced Mortgage Loans.
However, the amount of the related Servicing Fee (but not the fee payable to
the trustee or, in general, the portion of the Servicing Fee payable to
sub-servicers) will be reduced (to not less than zero) on each Distribution
Date by the amount (if any) of Compensating Interest paid by the servicer on
that Distribution Date.
Any Net Aggregate Prepayment Interest Shortfall will be allocated as set
forth under "Description of the Certificates--Distributions--Prepayment
Interest Shortfalls and Prepayment Interest Excesses" in this prospectus
supplement. If Prepayment Interest Excesses for all mortgage loans other than
Specially Serviced Mortgage Loans exceed Prepayment Interest Shortfalls for
those mortgage loans as of any Distribution Date, that excess amount will be
payable to the servicer as additional servicing compensation.
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Special Servicer Compensation. The special servicer will be entitled to
receive:
o a special servicing fee (the "Special Servicing Fee") equal to, in any
month, the portion of a rate equal to 0.25% per annum applicable to that
month (determined in the same manner as the applicable Mortgage Rate is
determined for each Specially Serviced Mortgage Loan for that month) of
the outstanding Scheduled Principal Balance of each Specially Serviced
Mortgage Loan;
o a fee (the "Workout Fee"), payable with respect to any Rehabilitated
Mortgage Loan equal to the product of (x) 1.0% and (y) the amount of each
collection of interest (other than default interest and Excess Interest)
and principal received on that mortgage loan for so long as it remains a
Rehabilitated Mortgage Loan; and
o a fee (the "Liquidation Fee") equal to the product of (x) 1.0% and (y)
the related Liquidation Proceeds in connection with a final disposition
of, and any condemnation proceeds received in connection with, a
specially serviced mortgage loan or REO Property (collectively, such fees
payable to the special servicer, the "Special Servicer Compensation").
The Workout Fee with respect to any Rehabilitated Mortgage Loan will cease
to be payable if that loan again becomes a Specially Serviced Mortgage Loan or
if the related Mortgaged Property becomes an REO Property. The special servicer
is also permitted to retain, in general, assumption fees, modification fees and
extension fees collected on Specially Serviced Mortgage Loans, borrower-paid
fees and investment income earned on amounts on deposit in any accounts
maintained for REO Property collections to the extent such income for any month
exceeds the sum of any Unpaid Interest on the certificates and any Realized
Losses previously allocated and not reimbursed to any class of certificates.
The special servicer will also be entitled retain certain other charges
specified in the pooling and servicing agreement. The Special Servicing Fee,
the Liquidation Fee and the Workout Fee will be obligations of the trust fund
and will represent Expense Losses. The Special Servicer Compensation will be
payable in addition to the Servicing Fee payable to the servicer. The special
servicer will be entitled to 100% of any fees collected in connection with the
assumption of Specially Serviced Mortgage Loans. The special servicer is
entitled to 50% of any other assumption fees. If Prepayment Interest Excesses
for all Specially Serviced Mortgage Loans exceed Prepayment Interest Shortfalls
for those mortgage loans as of any Distribution Date, that excess amount will
be payable to the special servicer as additional servicing compensation. The
special servicer will be entitled to approve assumptions with respect to all
Specially Serviced Mortgage Loans and mortgage loans which are not specially
serviced, but contain "due-on-sale" provisions or require the consent of the
lender.
As described in this prospectus supplement under "--The Operating
Advisor," the operating advisor will have the right to receive notification of
certain actions of the special servicer, subject to the limitations described
in this prospectus supplement.
MODIFICATIONS, WAIVERS AND AMENDMENTS
Subject to any restrictions applicable to REMICs, and to the limitations
imposed by the pooling and servicing agreement, the servicer may modify, waive,
amend or consent to any term, other than a Money Term, of a mortgage loan that
is not a Specially Serviced Mortgage Loan and may extend the maturity date of
any Balloon Loan (other than a Specially Serviced Mortgage Loan) to a date not
more than 60 days beyond the original maturity date.
Subject to any restrictions applicable to REMICs, the special servicer
will be permitted to enter into a modification, waiver or amendment of the
terms of any Specially Serviced Mortgage Loan, including any modification,
waiver or amendment to:
o reduce the amounts owing under any Specially Serviced Mortgage Loan by
forgiving principal, accrued interest and/or any prepayment premium or
yield maintenance charge;
o reduce the amount of the scheduled payment on any Specially Serviced
Mortgage Loan, including by way of a reduction in the related Mortgage
Rate;
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o forbear in the enforcement of any right granted under any Mortgage Note
or Mortgage relating to a Specially Serviced Mortgage Loan;
o extend the maturity date of any Specially Serviced Mortgage Loan; and/or
o accept a Principal Prepayment during any Lockout Period;
provided in each case that (i) the related borrower is in default with respect
to the Specially Serviced Mortgage Loan or, in the reasonable judgment of the
special servicer, default is reasonably foreseeable, and (ii) in the reasonable
judgment of the special servicer, modification, waiver or amendment would
increase the recovery to certificateholders on a net present value basis, as
demonstrated in writing to the trustee and the paying agent.
In no event, however, will the special servicer be permitted to:
o extend the maturity date of a Specially Serviced Mortgage Loan beyond a
date that is two years prior to the Rated Final Distribution Date;
o if the Specially Serviced Mortgage Loan is secured by a ground lease,
extend the maturity date of that Specially Serviced Mortgage Loan beyond
a date that is ten (10) years prior to the expiration of the term of that
ground lease;
o reduce the related Mortgage Rate to a rate such that the resulting Net
Mortgage Rate is less than the lesser of (i) the original Net Mortgage
Rate and (ii) the highest pass-through rate on any class of certificates
(other than the Class X Certificates); or
o defer interest due on any Specially Serviced Mortgage Loan in excess of
10% of the Scheduled Principal Balance of that Specially Serviced
Mortgage Loan or defer the collection of interest on any Specially
Serviced Mortgage Loan without accruing interest on that deferred
interest at a rate at least equal to the related Mortgage Rate.
Notwithstanding the foregoing, if a borrower fails to make a Balloon
Payment at scheduled maturity, and the mortgage loan is not a Specially
Serviced Mortgage Loan (other than by reason of failure to make the Balloon
Payment) and has not been delinquent in the preceding 12 months (other than
with respect to the Balloon Payment), then in addition to the other
alternatives specified above, the special servicer may agree to one or more
extensions of the maturity of the mortgage loan in the aggregate not exceeding
five years, in each case at the existing Mortgage Rate.
Modifications that forgive principal or interest of a mortgage loan will
result in Realized Losses on that mortgage loan and those Realized Losses will
be allocated among the various classes of certificates in the manner described
under "Description of the Certificates--Subordination; Allocation of Losses,
Shortfalls and Expenses" in this prospectus supplement.
The modification of a mortgage loan may tend to reduce prepayments by
avoiding liquidations and therefore may extend the weighted average life of one
or more classes of certificates beyond that which might otherwise be the case.
See "Yield and Maturity Considerations" in this prospectus supplement.
REALIZATION UPON DEFAULTED MORTGAGE LOANS
The special servicer may, with notification to the operating advisor,
offer to sell for cash to any person, for an amount equal to the Purchase
Price, any REO Property or any mortgage loan that is in default or as to which
the special servicer has made a determination that default is imminent. The
special servicer is required to give the operating advisor, the trustee and the
paying agent not less than five days' prior written notice of its intention to
sell any such defaulted mortgage loan or REO Property, to offer such defaulted
mortgage loan or REO Property for sale in a fair auction or other manner as is
consistent with the Servicing Standard, and to accept the highest cash bid
received in that auction or other procedure from any person other than an
interested person (as described in the pooling and servicing agreement) for any
defaulted mortgage loan or REO Property in an amount, except as otherwise
provided in the pooling and servicing agreement in the case of REO Property, at
least equal to the Purchase Price.
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In the absence of any bid in the amount of the Purchase Price, the special
servicer may accept the highest cash bid, if the special servicer determines,
consistent with the Servicing Standard and with notification to the operating
advisor, that the sale at that price is in the best interest of
certificateholders; provided that the special servicer may not accept that bid
if made by the trustee in its individual capacity, any of the trustee's
affiliates, or any interested person (as described in the pooling and servicing
agreement), except in limited circumstances described in the pooling and
servicing agreement, including the ability of the special servicer to purchase
a defaulted mortgage loan or REO Property only if it is the highest bidder and
at least three offers are received from independent third parties.
FORECLOSURES
The special servicer may at any time, with notification to the operating
advisor and in accordance with the pooling and servicing agreement, institute
foreclosure proceedings, exercise any power of sale contained in any mortgage,
accept a deed in lieu of foreclosure or otherwise acquire title to a mortgaged
property, by operation of law or otherwise, if that action is consistent with
the Servicing Standard and a default on the related mortgage loan has occurred,
but subject, in all cases, to limitations concerning environmental matters and,
in some cases, the receipt of an opinion of counsel relating to REMIC
requirements.
If any mortgaged property is acquired as described in the preceding
paragraph, the special servicer is required to sell the REO Property within
three years after the end of the year in which it was acquired, or any
applicable extension period, unless the special servicer has previously
delivered to the trustee an opinion of counsel to the effect that the holding
of the REO Property by the trust fund subsequent to three years after the end
of the year in which it was acquired, or to the expiration of that extension
period, will not result in the failure of that REO Property to qualify as
"foreclosure property" under the REMIC provisions of the Internal Revenue Code.
In addition, the special servicer is required to use its best efforts to sell
any REO Property prior to the Rated Final Distribution Date.
In general, the special servicer will be obligated to, or may contract
with a third party to, operate and manage any mortgaged property acquired as
REO Property in a manner that would, to the extent commercially feasible,
maximize the trust fund's net after-tax proceeds from that property. After the
special servicer reviews the operation of that property and consults with the
trustee to determine the trust fund's federal income tax reporting position
with respect to income it is anticipated that the trust fund would derive from
that property, the special servicer could determine that it would not be
commercially feasible to manage and operate that property in a manner that
would avoid the imposition of an REO Tax. To the extent that income the trust
fund receives from an REO Property is subject to a tax on (i) "net income from
foreclosure property", that income would be subject to federal tax at the
highest marginal corporate tax rate (currently 35%) and (ii) "prohibited
transactions," that 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, but is particularly an issue as
to an REO Property operated as a hotel. 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 that
income could be subject to federal tax either at the highest marginal corporate
tax rate or, although it appears unlikely, at the 100% rate applicable to
"prohibited transactions." Any REO Tax imposed on the trust fund's income from
an REO Property would reduce the amount available for distribution to
certificateholders. We advise you to consult your own tax advisors regarding
the possible imposition of REO Taxes in connection with the operation of
commercial REO Properties by REMICs.
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MATERIAL FEDERAL INCOME TAX CONSEQUENCES
Upon the issuance of the offered certificates, Shearman & Sterling, New
York, New York, our special tax counsel, will deliver its opinion that,
assuming (a) the making of appropriate elections, (b) compliance with the
provisions of the pooling and servicing agreement and (c) compliance with
applicable changes in the Internal Revenue Code, including the REMIC
Provisions, for federal income tax purposes, the trust fund will qualify as
three separate REMICs, REMIC I, REMIC II and REMIC III, within the meaning of
Sections 860A through 860G (the "REMIC Provisions") of the Internal Revenue
Code, and (i) the Class A-1, Class A-2, Class X, Class B, Class C, Class D,
Class E, Class F, Class G, Class H, Class I, Class J, Class K, Class L and
Class M Certificates will evidence "regular interests" in REMIC III, (ii) the
Class N Certificates will evidence ownership of both a "regular interest" in a
REMIC and the right to receive the Excess Interest, if any, on the ARD Loan and
(iii) each of the Class R-I, Class R-II and Class R-III Certificates will be
the sole class of "residual interests" in REMIC I, REMIC II and REMIC III,
respectively, within the meaning of the REMIC Provisions in effect on the date
hereof. The offered certificates are "REMIC Regular Certificates" as defined in
the prospectus.
Each class of offered certificates represents regular interests in a REMIC
and generally will be treated as newly originated debt instruments for federal
income tax purposes. Certificateholders will be required to include in income
all interest on those certificates in accordance with the accrual method of
accounting, regardless of a certificateholder's usual method of accounting. It
is anticipated that the Class X and Class Certificates will be issued with
more than de minimis OID for federal income tax purposes in an amount equal to
the excess of the initial certificate balances thereof over their respective
issue prices (including accrued interest) or, in the case of the Class X
Certificates, the excess of all distributions of interest expected to be
received thereon over the issue price (including accrued interest). We also
anticipate that the Class , Class and Class Certificates will be issued at
a premium and that the Class and Class Certificates will be issued with de
minimus OID for federal income tax purposes. The prepayment assumption that
will be used in determining the rate of accrual of OID and that may be used to
amortize 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 prepay at a rate equal to a CPR of 0%; provided, however, that it is
further assumed that the ARD Loan prepays on its Anticipated Repayment Date
(the "Prepayment Assumption"). No representation is made that the mortgage
loans will prepay at that rate or at any other rate. See "Material Federal
Income Tax Consequences--Taxation of Regular Certificates--Original Issue
Discount" and "--Premium" in the prospectus.
Yield maintenance charges and prepayment premiums actually collected will
be distributed among the holders of the respective classes of certificates as
described under "Description of the Certificates--Distributions-- Allocation of
Yield Maintenance Charges and Prepayment Premiums" in this prospectus
supplement. It is not entirely clear under the Internal Revenue Code when the
amount of yield maintenance charges and prepayment premiums so allocated should
be taxed to the certificateholder, but it is not expected, for federal income
tax reporting purposes, that yield maintenance charges and prepayment premiums
will be treated as giving rise to any income to the certificateholder prior to
the certificateholder's actual receipt thereof. The IRS may nevertheless seek
to require that an assumed amount of yield maintenance charges and prepayment
premiums be included in payments projected to be made on the offered
certificates and that taxable income be reported based on the projected
constant yield to maturity of the offered certificates. Therefore, the
projected yield maintenance charges and prepayment premiums would be included
prior to their actual receipt by holders of the offered certificates. If the
projected yield maintenance charges and prepayment premiums were not actually
received, presumably the holder of an offered certificate would be allowed to
claim a deduction or reduction in gross income at the time the unpaid
prepayment premiums and yield maintenance charges had been projected to be
received. It appears that yield maintenance charges and prepayment premiums, if
any, will be treated as ordinary income rather than capital gain. However, that
result is not entirely clear and certificateholders should consult their own
tax advisors concerning the treatment of yield maintenance charges and
prepayment premiums.
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The offered certificates will be treated as "real estate assets" within
the meaning of Section 856(c)(5)(B) of the Internal Revenue Code in the same
proportion that the assets of the trust would be so treated, and interest
(including OID, if any) on the offered certificates will be interest described
in Section 856(c)(3)(B) of the Internal Revenue Code to the extent these assets
are "real estate assets" within the meaning of Section 856(c)(5)(B) of the
Internal Revenue Code. Moreover, the offered certificates will be "qualified
mortgages" within the meaning of Section 860G(a)(3) of the Internal Revenue
Code. The offered certificates generally will be treated as "loans . . .
secured by an interest in real property which is . . . residential real
property" within the meaning of Section 7701(a)(19)(C)(v) of the Internal
Revenue Code to the extent the mortgage loans are secured by multifamily
properties. In the case of the mortgage loans secured by multifamily
properties, however, if the related mortgaged properties are used in part for
nonresidential purposes, each of those mortgage loans will qualify for the
treatment described in the preceding sentence in their entirety only if the
planned residential use with respect to the related mortgaged property exceeds
80 percent of the mortgaged property's planned use, determined as of the time
the mortgage loan was originated. According to the legislative history of this
provision, Congress intended that this determination be based on the usable
space in the building. You should consult your own tax advisor regarding
whether mortgage loans secured by manufactured housing communities would also
constitute qualifying assets under Section 7701(a)(19)(C)(v) of the Internal
Revenue Code. Mortgage loans secured by manufactured housing communities
represented approximately 13.5% of the initial pool balance. Mortgage loans
secured by multifamily properties represented approximately 11.0% of the
initial pool balance. See "Material Federal Income Tax Consequences--Federal
Income Tax Consequences for REMIC Certificates--Status of REMIC Certificates"
in the prospectus.
The Treasury Department has issued new regulations which modify the
withholding and backup withholding rules. The new regulations generally are
effective for payments made after December 31, 2000. You should consult your
tax advisors regarding those regulations.
For further information regarding the federal income tax consequences of
investing in the offered certificates, See "Material Federal Income Tax
Consequences--Federal Income Tax Consequences for REMIC Certificates--Taxation
of Regular Certificates" in the prospectus.
METHOD OF DISTRIBUTION
We have entered into an underwriting agreement with Bear, Stearns & Co.
Inc., Morgan Stanley & Co. Incorporated and Wells Fargo Brokerage Services,
L.L.C., the underwriters. Bear, Stearns & Co. Inc. and Morgan Stanley & Co.
Incorporated will act as co-lead and joint book-running managers. Each of the
underwriters is an affiliate of a mortgage loan seller. Subject to the terms
and conditions set forth in the underwriting agreement, the offered
certificates will be purchased from us by the underwriters upon issuance, in
the percentages of the respective aggregate certificate balance or notional
amount of each class of offered certificates set forth below.
<TABLE>
<CAPTION>
UNDERWRITER CLASS A-1 CLASS A-2 CLASS X CLASS B CLASS C CLASS D CLASS E CLASS F
----------------------------------- ----------- ----------- --------- --------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Bear, Stearns & Co. Inc. .......... % % % % % % % %
Morgan Stanley & Co.
Incorporated ..................... % % % % % % % %
Wells Fargo Brokerage
Services, L.L.C. ................. % % % % % % % %
--- --- --- --- --- --- --- ---
Total ........................... 100% 100% 100% 100% 100% 100% 100% 100%
=== === === === === === === ===
</TABLE>
Proceeds to us from the sale of offered certificates, before deducting
expenses payable by us, estimated to be approximately $ , will be %
of the initial aggregate certificate balance of the offered certificates, plus
accrued interest on the offered certificates from the Cut-Off Date. We have
been advised by the underwriters that they propose to offer the offered
certificates from time to time in one or more negotiated transactions, or
otherwise, at varying prices to be determined at the time of sale. The
underwriters may effect those transactions by selling offered certificates to
or
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through dealers, and those dealers may receive compensation in the form of
underwriting discounts, concessions or commissions from the underwriters. In
connection with their purchase and sale of the offered certificates, the
underwriters may be deemed to have received compensation from us in the form of
underwriting discounts.
There can be no assurance that a secondary market for the offered
certificates will develop or, if it does develop, that it will continue. The
underwriters expect to make, but are not obligated to make, a secondary market
in the offered certificates. The primary source of ongoing information
available to you concerning the offered certificates will be the distribution
date statements discussed in the prospectus under "Description of the
Certificates--Reports to Certificateholders," which will include information as
to the outstanding principal balance of the offered certificates. Except as
described under "Description of the Certificates--Reports to
Certificateholders; Certain Available Information" in this prospectus
supplement, there can be no assurance that any additional information regarding
the offered certificates will be available through any other source. In
addition, we are not aware of any source through which price information about
the offered certificates will be generally available on an ongoing basis. The
limited nature of the information regarding the offered certificates may
adversely affect the liquidity of the offered certificates, even if a secondary
market for the offered certificates becomes available.
If and to the extent required by applicable law or regulation, this
prospectus supplement and the prospectus will be used by the underwriters in
connection with offers and sales related to market-making transactions in the
offered certificates with respect to which the underwriter acts as principal.
The underwriters may also act as agent in these transactions. Sales may be made
at negotiated prices determined at the time of sale.
LEGAL MATTERS
Certain legal matters will be passed upon for us and the underwriters, as
special counsel, and for Wells Fargo Bank, National Association, by Sidley &
Austin, New York, New York. Certain legal matters will be passed upon for us
and the underwriters by Shearman & Sterling, New York, New York.
RATINGS
It is a condition to issuance that the offered certificates be rated not
lower than the following ratings by the Rating Agencies:
<TABLE>
<CAPTION>
CLASS FITCH S&P
------------------------ ------- ------
<S> <C> <C>
A-1 .................. AAA AAA
A-2 .................. AAA AAA
X .................... AAA AAA
B .................... AA AA
C .................... A A
D .................... A-- A--
E .................... BBB BBB
F .................... BBB-- BBB--
</TABLE>
A securities rating on mortgage pass-through certificates addresses the
likelihood of the timely payment of interest on the certificates and ultimate
payment of principal thereof by the Rated Final Distribution Date. The rating
takes into consideration the credit quality of the mortgage pool, structural
and legal aspects associated with the certificates, and the extent to which the
payment stream from the mortgage pool is adequate to make payments required
under the certificates.
There can be no assurance as to whether any rating agency not requested to
rate the offered certificates will nonetheless issue a rating to any class
thereof and, if so, what that rating would be. A rating assigned to any class
of offered certificates by a rating agency that has not been requested by us to
do so may be lower than the rating assigned thereto by either Rating Agency.
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The ratings of the certificates do not represent any assessment of:
o the likelihood or frequency of principal prepayments, voluntary or
involuntary, on the mortgage loans;
o the degree to which those prepayments might differ from those originally
anticipated;
o whether and to what extent yield maintenance charges, prepayment
premiums, default interest or Excess Interest will be received or the
corresponding effect on yield to investors; or
o whether and to what extent Net Aggregate Prepayment Interest Shortfalls
or Net Aggregate Balloon Interest Shortfalls will occur.
A security rating does not represent any assessment of the yield to
maturity that investors may experience or the possibility that the holders of
Class X Certificates might not fully recover their investments in the event of
rapid prepayments (voluntary or involuntary). In general, the ratings thus
address credit risk and not prepayment risk.
As described in this prospectus supplement, the amounts payable with
respect to the Class X Certificates consist only of interest. If the entire
pool were to prepay in the initial month, with the result that the holders of
the Class X Certificates receive only a single month's interest and thus suffer
a nearly complete loss of their investment, all amounts "due" to holders of the
Class X Certificates nevertheless will have been paid, and this result is
consistent with the "AAA" rating received on the Class X Certificates. The
notional amount upon which interest is calculated for the Class X Certificates
is reduced by the allocation of Realized Losses and prepayments, whether
voluntary or involuntary. The rating does not address the timing or magnitude
of reductions of that notional amount, but only the obligation to pay interest
timely on the notional amount as so reduced from time to time. Accordingly, the
ratings of the Class X Certificates should be evaluated independently from
similar ratings on other types of securities.
The ratings on the other offered certificates should also 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.
LEGAL INVESTMENT CONSIDERATIONS
The offered certificates will not constitute "mortgage related securities"
within the meaning of the Secondary Mortgage Market Enhancement Act of 1984. As
a result, the appropriate characterization of the offered certificates under
various legal investment restrictions, and thus the ability of investors
subject to these restrictions to purchase the offered certificates, is subject
to significant interpretive uncertainties.
We make no representation 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 the offered certificates under
applicable legal investment or other restrictions. All institutions whose
investment activities are subject to legal investment laws and regulations,
regulatory capital requirements or review by regulatory authorities should
consult with their own legal advisors in determining whether and to what extent
the offered certificates constitute legal investments for them or are subject
to investment, capital or other restrictions. See "Legal Investment" in the
prospectus.
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 insurance company general and
separate accounts in which any such plans, annuities, accounts or arrangements
are invested), that is subject to Title I of ERISA or Section 4975 of the
Internal Revenue Code should carefully review with its legal advisors whether
the purchase or holding of offered certificates could give rise to a
transaction that is prohibited or is not otherwise permitted under either ERISA
or Section 4975 of the Internal Revenue Code or whether there exists any
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statutory or administrative exemption applicable to an investment in the
offered certificates. Moreover, each Plan fiduciary should determine whether an
investment in the offered certificates is appropriate for the Plan, taking into
account the overall investment policy of the Plan and the composition of the
Plan's investment portfolio.
The U.S. Department of Labor has issued individual prohibited transaction
exemptions to each of the underwriters, which generally exempt from the
application of the prohibited transaction provisions of Section 406 of ERISA,
and the excise taxes imposed on the related prohibited transactions pursuant to
Sections 4975(a) and (b) of the Internal Revenue Code, certain transactions,
among others, relating to the servicing and operation of mortgage pools,
including the mortgage pool, and the purchase, sale and holding of mortgage
pass-through certificates, including the Class A and Class X Certificates,
underwritten by an "underwriter," as defined below, provided that certain
conditions set forth in the individual exemptions are satisfied. For purposes
of this "ERISA Considerations" section, the term "underwriter" includes:
1. each of the underwriters;
2. any person, directly or indirectly, through one or more intermediaries,
controlling, controlled by or under common control with any of the
underwriters; and
3. any member of the underwriting syndicate or selling group of which a
person described in clause 1 or 2 is a manager or co-manager with respect
to the Class A and Class X Certificates.
The individual exemptions set forth six general conditions which must be
satisfied for a transaction involving the purchase, sale and holding of the
Class A or Class X Certificates to be eligible for exemptive relief under the
exemptions.
o First, the acquisition of those certificates 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.
o Second, the rights and interests evidenced by those certificates must
not be subordinated to the rights and interests evidenced by other
certificates of the same trust.
o Third, those certificates at the time of acquisition by the Plan must be
rated in one of the three highest generic rating categories by Moody's
Investors Service, Inc., S&P or Fitch.
o Fourth, the trustee cannot be an affiliate of any other member of the
"Restricted Group," which consists of:
o any underwriter;
o the depositor;
o the servicer;
o the special servicer;
o the trustee;
o any sub-servicer; and
o any mortgagor with respect to mortgage loans constituting more than 5%
of the aggregate unamortized principal balance of the mortgage loans as of
the date of initial issuance of the Senior Certificates.
o Fifth, the following additional requirements must be met:
o the sum of all payments made to and retained by the underwriter must
represent not more than reasonable compensation for underwriting the
Senior Certificates;
o the sum of all payments made to and retained by us pursuant to the
assignment of the mortgage loans to the trust fund must represent not more
than the fair market value of the related obligations; and
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o the sum of all payments made to and retained by the
servicer, the special servicer and any sub-servicer must
represent not more than reasonable compensation for that
person's services under the pooling and servicing
agreement and reimbursement of that person's reasonable
expenses in connection therewith.
o Sixth, the investing Plan must be an "accredited investor" as
defined in Rule 501(a)(1) of Regulation D of the SEC under the
Securities Act of 1933, as amended.
Because the Class A and Class X Certificates are not subordinated to any
other class of certificates, the second general condition set forth above is
satisfied with respect to those certificates. With respect to the third general
condition, it is a condition of the issuance of the Class A and Class X
Certificates that they be rated not lower than "AAA" by each of S&P and Fitch.
As of the closing date, the fourth general condition set forth above will be
satisfied with respect to the Class A and Class X Certificates. A fiduciary of
a Plan contemplating purchasing a Class A or Class X Certificate in the
secondary market must make its own determination that, at the time of the
purchase, those certificates continue to satisfy the third and fourth general
conditions set forth above. A fiduciary of a Plan contemplating purchasing a
Class A or Class X Certificate, whether in the initial issuance of the
certificates or in the secondary market, must make its own determination that
the first, fifth and sixth general conditions set forth above will be satisfied
with respect to that certificate.
The individual exemptions also require that the trust fund 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 in the other investment pools must have been rated in one
of the three highest categories of Moody's Investors Service, Inc., S&P
or Fitch for at least one year prior to the Plan's acquisition of Class A
or Class X Certificates; and
o certificates in the other investment pools must have been purchased by
investors other than Plans for at least one year prior to any Plan's
acquisition of Class A or Class X Certificates.
If the general conditions of the individual exemptions are satisfied, the
individual exemptions may provide an exemption from the restrictions imposed by
Sections 406(a) and 407(a) of ERISA (as well as the excise taxes imposed by
Sections 4975(a) and (b) of the Internal Revenue Code by reason of Sections
4975(c)(1) (A) through (D) of the Internal Revenue Code) in connection with:
o the direct or indirect sale, exchange or transfer of Class A or Class X
Certificates in the initial issuance of Certificates between us or an
underwriter and a Plan when we, the underwriter, the trustee, the
servicer, a sub-servicer or a mortgagor is a Party in Interest with
respect to the investing Plan;
o the direct or indirect acquisition or disposition in the secondary
market of the Class A or Class X Certificates by a Plan; and
o the holding of Class A or Class X 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
Class A or Class X Certificate on behalf of an Excluded Plan by any person who
has discretionary authority or renders investment advice with respect to the
assets of the Excluded Plan.
If certain specific conditions of the individual exemption are also
satisfied, the individual exemption may provide an exemption from the
restrictions imposed by Sections 406(b)(1) and (b)(2) of ERISA (as well as the
excise taxes imposed by Sections 4975(a) and (b) of the Internal Revenue Code
by reason of Section 4975(c)(1)(E) of the Internal Revenue Code) in connection
with:
o the direct or indirect sale, exchange or transfer of Class A and Class X
Certificates in the initial issuance of certificates between us or an
underwriter and a Plan when the person who has discretionary authority or
renders investment advice with respect to the investment of Plan assets
in the certificates is either a mortgagor with respect to 5% or less of
the fair market value of the mortgage loans or an affiliate of that
person;
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o the direct or indirect acquisition or disposition in the secondary
market of Class A or Class X Certificates by a Plan; and
o the holding of Class A or Class X Certificates by a Plan.
Further, if certain specific conditions of the individual exemption are
satisfied, the individual exemption may provide an exemption from the
restrictions imposed by Sections 406(a), 406(b) and 407(a) of ERISA (as well as
the excise taxes imposed by Sections 4975(a) and (b) of the Internal Revenue
Code by reason of Section 4975(c) of the Internal Revenue Code) for
transactions in connection with the servicing, management and operation of the
mortgage pool.
Before purchasing a Class A or Class X Certificate, a fiduciary of a Plan
should itself confirm that the specific and general conditions and the other
requirements set forth in the individual exemptions would be satisfied. In
addition to making its own determination as to the availability of the
exemptive relief provided in the individual exemptions, the Plan fiduciary
should consider the availability of any other individual or class prohibited
transaction exemptions. See "ERISA Considerations" in the prospectus. A
purchaser of a Class A or Class X 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 U.S. Department of Labor has proposed amendments (the "Proposed
Amendments") to the individual prohibited transaction exemptions described
above that, if adopted as proposed, would among other things:
o modify the "second" general condition of the exemptions to make them
inapplicable to the securities generally of the same type as the
certificates; and
o modify the "third" general condition of the exemptions to require a
rating in one of the four highest generic rating categories by Fitch, S&P
or Moody's Investors Service, Inc. at the time of acquisition by a Plan.
The Proposed Amendments, if adopted as proposed, would be effective as of
August 23, 2000. Thus, it is anticipated that, if the Proposed Amendments are
adopted as proposed, they would permit Plans (subject to the satisfaction of
the terms and conditions of the exemptions as modified) to acquire Class B,
Class C, Class D, Class E and Class F Certificates and, in connection with
those classes of Certificates, afford substantially the same relief as that
described above with respect to the Class A and Class X Certificates.
It is not certain whether or when the Proposed Amendments may be adopted
or whether or to what extent they may be adopted as proposed or, if adopted,
afford the same relief as currently proposed. Plan fiduciaries should, and
other potential investors who may be analyzing the potential liquidity of their
investment may wish to, consult with their advisors regarding the Proposed
Amendments.
Because the characteristics of the subordinate offered certificates
currently do not meet the requirements of the individual exemptions, the
purchase or holding of those certificates by a Plan may result in prohibited
transactions and the imposition of excise taxes or civil penalties. As a
result, no transfer of a subordinate offered certificate or any interest in a
subordinate offered certificate may be made to a Plan or to any person who is
directly or indirectly purchasing a subordinate offered certificate or interest
in a subordinate offered certificate on behalf of, as named fiduciary of, as
trustee of, or with assets of a Plan, unless either (i) the transfer will be
exempt from the prohibited transaction provisions of Section 406 of ERISA and
Section 4975 of the Internal Revenue Code under Section III of Prohibited
Transaction Class Exemption 95-60, which provides an exemption from the
prohibited transaction rules for certain transactions involving an insurance
company general account or (ii) the transferee delivers or causes to be
delivered to the paying agent and the depositor any opinions of counsel,
officer's certificates or agreements that may be required by the paying agent
or the depositor to the effect that the acquisition and holding of those
certificates will not (a) result in the assets of the trust being deemed to be
"plan assets" under or subject to the prohibited transaction
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provisions of ERISA, the Code or other similar law or (b) subject the parties
to the pooling and servicing agreement to any obligation in addition to those
set forth in the pooling and servicing agreement. Any such Plan or person to
whom a transfer of any subordinate offered certificate or interest therein is
made will be deemed to have represented to us, the servicer, the special
servicer, the trustee, the paying agent, the underwriters, any sub-servicer and
each borrower that the purchase and holding of that certificate or interest is
exempt on the basis of Prohibited Transaction Class Exemption 95-60. See "ERISA
Considerations" in the prospectus.
The Small Business Job Protection Act of 1996 added a new Section 401(c)
to ERISA, to define whether assets held by an insurance company general account
constitute plan assets by reason of the insurance company issuing one or more
policies to employee benefit plans. Pursuant to Section 401(c), the Department
of Labor published final regulations on January 5, 2000, but these final
regulations are not generally applicable until July 5, 2001. These regulations
provide guidance for the purpose of determining, in cases where insurance
policies or annuity contracts supported by an insurer's general account are
issued to or for the benefit of a Plan on or before December 31, 1998, which
general account assets constitute plan assets. Section 401(c) of ERISA
generally provides that, until the date which is 18 months after the
regulations issued by the Department of Labor become final, no person will be
subject to liability under Part 4 of Title I of ERISA, including the prohibited
transaction provisions of Sections 406 and 407 of ERISA, or Section 4975 of the
Internal Revenue Code on the basis of a claim that the assets of an insurance
company general account constitute plan assets, except as otherwise provided by
the Secretary of Labor in regulations intended to prevent avoidance of the
regulations proposed by the Department of Labor or in an action brought by the
Secretary of Labor for certain breaches of fiduciary duty which would also
constitute a violation of federal or state criminal law. Absent further changes
to the law, any assets of an insurance company general account which support
insurance policies issued to a Plan after December 31, 1998, or issued to Plans
on or before December 31, 1998 for which the insurance company does not comply
with the regulations issued by the Department of Labor 18 months after those
regulations become final, may be treated as plan assets. In addition, because
Section 401(c) does not relate to insurance company separate accounts, separate
account assets are treated as plan assets of any Plan invested in the separate
account. Insurance companies contemplating the investment of general account
assets in the offered certificates should consult with their legal counsel with
respect to the applicability of Section 401(c) of ERISA, including the general
account's ability to continue to hold the offered certificates after the date
which is 18 months after the regulations issued by the Department of Labor
become final.
Any Plan fiduciary considering whether to purchase an offered certificate
on behalf of or with assets of a Plan should consult with its counsel regarding
the applicability of the fiduciary responsibility and prohibited transaction
provisions of ERISA and the Internal Revenue Code to the related investment.
The sale of certificates to a Plan is in no respect a representation by us
or the underwriters that this investment meets all relevant legal requirements
with respect to investments by Plans generally or to any particular Plan, or
that this investment is appropriate for Plans generally or any particular Plan.
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GLOSSARY
"Accrued Certificate Interest" means, in respect of each class of REMIC
Regular Certificates for each Distribution Date, the amount of interest for the
calendar month immediately preceding the month in which that Distribution Date
occurs accrued at the applicable pass-through rate on the aggregate certificate
balance or notional amount, as the case may be, of that class of certificates
outstanding immediately prior to that Distribution Date. Accrued Certificate
Interest will be calculated on the basis of a 360-day year consisting of twelve
30-day months.
"Administrative Cost Rate" means, for any mortgage loan in any month, an
amount equal to the sum of the related Servicing Fee Rate and the Trustee Fee
Rate for that month (in each case, expressed as a per annum rate). The
Administrative Cost Rate for each mortgage loan is set forth in Annex A to this
prospectus supplement. The Administrative Cost Rate will be payable on the
Scheduled Principal Balance of each mortgage loan outstanding from time to
time. The Administrative Cost Rate applicable to a mortgage loan in any month
will be determined using the same interest accrual basis (i.e., a 360-day year
consisting of twelve 30-day months or a 360-day year and the actual number of
days elapsed) on which interest accrues under the terms of that mortgage loan.
"Advance Rate" means the "Prime Rate" as reported in The Wall Street
Journal from time to time.
"Advances" means all Servicing Advances and P&I Advances.
"Anticipated Repayment Date" means, with respect to any ARD Loan, the date
upon which any principal outstanding thereunder shall begin to accrue interest
at an increased interest rate.
"Appraisal Event" has the meaning set forth under "Description of the
Certificates--Appraisal Reductions" in this prospectus supplement.
"Appraisal Reduction" has the meaning set forth under "Description of the
Certificates--Appraisal Reductions" in this prospectus supplement.
"ARD Loan" means a mortgage loan that provides for the automatic
imposition of rapid amortization features and an interest rate increase
beginning on a date substantially prior to the maturity date for the mortgage
loan such that the borrower is expected to repay the mortgage loan on that
earlier date.
"Assumed Scheduled Payment" means an amount deemed due in respect of (i)
any Balloon Loan that is delinquent in respect of its Balloon Payment beyond
the first Determination Date that follows its original stated maturity date or
(ii) any mortgage loan as to which the related mortgaged property has become an
REO Property.
"Available Distribution Amount" has the meaning set forth under
"Description of the Certificates--Distributions--Available Distribution Amount"
in this prospectus supplement.
"Balloon Interest Excess" has the meaning set forth under "Description of
the Certificates--Distributions--Prepayment Interest Shortfalls and Prepayment
Interest Excesses" in this prospectus supplement.
"Balloon Interest Shortfall" has the meaning set forth under "Description
of the Certificates--Distributions--Prepayment Interest Shortfalls and
Prepayment Interest Excesses" in this prospectus supplement.
"Balloon Loan" is a mortgage loan that does not fully amortize over its
stated term to maturity and has substantial payments of principal due at
maturity unless previously prepaid.
"Balloon Payment" is the principal payment that is due at maturity of a
Balloon Loan, unless previously prepaid.
"Base Interest Fraction" has the meaning set forth under "Description of
the Certificates--Distributions--Allocation of Yield Maintenance Charges" in
this prospectus supplement.
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"BSFI" has the meaning set forth under "Description of the Mortgage
Pool--The Mortgage Loan Sellers" in this prospectus supplement.
"Certificate Account" means the account established and maintained by the
servicer in the name of the trustee for the benefit of the holders of the
certificates for the deposit of collections on the mortgage loans.
"Certificate Owner" means any person acquiring an interest in a
certificate.
"Class A Certificates" means, collectively, the Class A-1 and Class A-2
Certificates.
"Clearstream" means Clearstream Banking, societe anonyme.
"CMSA" means the Commercial Mortgage Securities Association.
"Collection Period" means, with respect to any Distribution Date, the
period beginning with the day after the Determination Date in the month
preceding that Distribution Date (or, in the case of the first Distribution
Date, the Cut-Off Date) and ending with the Determination Date occurring in the
month in which that Distribution Date occurs.
"Compensating Interest Payment" has the meaning set forth under
"Description of the Certificates--Distributions--Prepayment Interest Shortfalls
and Prepayment Interest Excesses."
"Constant Prepayment Rate" means an assumed constant rate of prepayment
each month, expressed as a per annum percentage of the then-Scheduled Principal
Balance of the pool of mortgage loans.
"Controlling Class" means the most subordinate class of Subordinate
Certificates outstanding at any time of determination; provided, however, that
if the aggregate certificate balance of that class of certificates is less than
25% of the initial aggregate certificate balance of that class, the Controlling
Class shall be the next most subordinate class of certificates. Appraisal
Reductions will not affect the certificate balances of any class for purposes
of determining the Controlling Class.
"CPR" means the Constant Prepayment Rate.
"Cut-Off Date" means October 1, 2000.
"Cut-Off Date Balance" generally means, with respect to any mortgage loan,
its scheduled principal balance outstanding as of the Cut-Off Date, after
application of all payments of principal due on or before that date, whether or
not received.
"Cut-Off Date LTV" means the LTV Ratio based on the scheduled Cut-Off Date
Balance.
"Debt Service Coverage Ratio" means, for any mortgage loan means, the
ratio of (i) Underwritten Cash Flow produced by the related mortgaged property
or mortgaged properties to (ii) the aggregate amount of the scheduled payments
due for the 12-month period immediately following the Cut-Off Date (or, in the
case of the mortgage loan that pays semiannually, the aggregate amount of the
scheduled payments due on the two due dates that occur immediately following
the Cut-Off Date).
"DSCR" means Debt Service Coverage Ratio.
"Definitive Certificate" means a fully registered physical certificate
representing an interest in a certificate.
"Determination Date" means, with respect to any Distribution Date, the 5th
business day prior to that Distribution Date.
"Distributable Certificate Interest Amount" has the meaning set forth
under "Description of the Certificates--Distributions--Distributable
Certificate Interest Amount" in this prospectus supplement.
"Distribution Account" means the account established and maintained by the
paying agent in the name of the trustee for the benefit of the holders of the
certificates for the deposit of amounts remitted by the servicer in respect to
the mortgage loans prior to distribution to the certificateholders.
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"Distribution Date" means the 15th day of each month or, if the 15th day
is not a business day then the next succeeding business day, beginning on
November 15, 2000.
"Document Defect" has the meaning set forth under "Description of the
Mortgage Pool--Representations and Warranties; Repurchases" in this prospectus
supplement.
"DTC" means The Depository Trust Company.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Euroclear" means The Euroclear System.
"Event of Default" has the meaning set forth under "Servicing of the
Mortgage Loans--Servicer Events of Default" in this prospectus supplement.
"Excess Interest" means, with respect to an ARD Loan that does not repay
on its Anticipated Repayment Date, the excess, if any, of interest accrued at
the Revised Rate for that ARD Loan over interest accrued at the Initial Rate
for that ARD Loan. Excess Interest on an ARD Loan is not due and payable until
that ARD Loan is paid in full.
"Excess Liquidation Proceeds" are the excess of (i) proceeds from the sale
or liquidation of a mortgage loan or related REO Property, net of expenses and
any related Advances and interest thereon over (ii) the amount that would have
been received if a prepayment in full had been made with respect to that
mortgage loan on the date those proceeds were received.
"Excluded Plan" means a Plan sponsored by any member of the Restricted
Group.
"Expected Final Distribution Date" has the meaning set forth under
"Description of the Certificates--Distributions--Expected Final Distribution
Date; Rated Final Distribution Date" in this prospectus supplement.
"Expense Losses" has the meaning set forth under "Description of the
Certificates--Subordination; Allocation of Losses, Shortfalls and Expenses" in
this prospectus supplement.
"Fitch" means Fitch, Inc.
"Initial Rate" means, with respect to an ARD Loan, the Mortgage Rate for
that ARD Loan before the Anticipated Repayment Date for that ARD Loan.
"Insurance Proceeds" means, with respect to any mortgage loan, all amounts
paid by an insurer in connection with that mortgage loan, other than any
amounts required to be paid to the related borrower; provided that, with
respect to the trust fund's interest in a pari passu loan, Insurance Proceeds
means any portion of those amounts allocable to the pari passu loan.
"Interest Only Certificates" means the Class X Certificates.
"Interest Reserve Account" means the account, which may be a subaccount of
the Collection Account, established and maintained by the servicer in the name
of the trustee for the benefit of the holders of the certificates for the
deposit of Interest Reserve Amounts.
"Interest Reserve Amount" has the meaning set forth under "Description of
the Certificates--Distributions--Available Distribution Amount" in this
prospectus supplement.
"Interest Reserve Loans" means those mortgage loans that accrue interest
on the basis of the actual number of days elapsed each month in a year assumed
to consist of 360 days (an "actual/360 basis") as set forth in Annex A to this
prospectus supplement.
"Liquidation Fee" has the meaning set forth under "Servicing of the
Mortgage Loans--Servicing and Other Compensation and Payment of
Expenses--Special Servicer Compensation" in this prospectus supplement.
"Liquidation Proceeds" means proceeds from the sale or liquidation of a
mortgage loan or related REO Property (exclusive of Excess Liquidation
Proceeds), net of expenses and any related Advances
S-133
<PAGE>
and interest thereon; provided that, with respect to the sale or liquidation of
a pari passu loan or any related REO Property, Liquidation Proceeds means any
portion of those amounts allocable to the pari passu loan.
"Lock Box Accounts" has the meaning set forth under "Description of the
Mortgage Pool--Mortgaged Property Accounts--Lock Box Accounts" in this
prospectus supplement.
"Lock Box Loans" has the meaning set forth under "Description of the
Mortgage Pool--Mortgaged Property Accounts--Lock Box Accounts" in this
prospectus supplement.
"Lockout Period" means, with respect to any mortgage loan, a specified
period of time, after the date of origination of that mortgage loan during
which time voluntary prepayments are prohibited.
"LTV Ratio" means, for any mortgage loan as of any date of determination,
a fraction, expressed as a percentage, the numerator of which is the principal
balance of that mortgage loan as of that date (assuming no defaults or
prepayments on that mortgage loan prior to that date), and the denominator of
which is the appraised value of the related mortgaged property or mortgaged
properties as determined by an appraisal thereof obtained in connection with
the origination of that mortgage loan.
"Material Breach" has the meaning set forth under "Description of the
Mortgage Pool--Representations and Warranties; Repurchases" in this prospectus
supplement.
"Material Document Defect" has the meaning set forth under "Description of
the Mortgage Pool--Representations and Warranties; Repurchases" in this
prospectus supplement.
"Maturity Assumptions" has the meaning set forth under "Yield and Maturity
Considerations--Yield Sensitivity of the Class X Certificates" in this
prospectus supplement.
"Maturity LTV" means the LTV Ratio as of the maturity date of the mortgage
loan based on the principal balance of the mortgage loan that will be due on
its maturity date (assuming no prepayments and that all scheduled payments have
been made as of the date due) and the original appraised value of the mortgaged
property.
"Money Term" means, with respect to any mortgage loan, the maturity date,
Mortgage Rate, principal balance, amortization term or payment frequency
thereof or any provision thereof requiring the payment of a prepayment premium
or yield maintenance charge in connection with a Principal Prepayment (but
shall not include late fees or default interest provisions).
"Mortgage Rate" means, with respect to any mortgage loan, the stated
annual rate of interest that accrues on the principal amount of the mortgage
loan.
"MSDWMC" has the meaning set forth under "Description of the Mortgage
Pool--The Mortgage Loan Sellers" in this prospectus supplement.
"Net Aggregate Balloon Interest Shortfall" has the meaning set forth under
"Description of the Certificates--Distributions--Prepayment Interest Shortfalls
and Prepayment Interest Excesses" in this prospectus supplement.
"Net Aggregate Prepayment Interest Shortfall" has the meaning set forth
under "Description of the Certificates--Distributions--Prepayment Interest
Shortfalls and Prepayment Interest Excesses" in this prospectus supplement.
"Net Mortgage Rate" has the meaning set forth under "Description of the
Certificates--Distributions--Pass-Through Rates" in this prospectus supplement.
"NWAC Rate" has the meaning set forth under "Description of the
Certificates--Distributions--Pass-Through Rates" in this prospectus supplement.
"Participants" means DTC's participating organizations.
"Percentage Interest" evidenced by any REMIC Regular Certificate in the
class to which it belongs means a fraction, expressed as a percentage, the
numerator of which is equal to the initial
S-134
<PAGE>
certificate balance or notional amount, as the case may be, of that certificate
as set forth on the face thereof, and the denominator of which is equal to the
initial aggregate certificate balance or notional amount, as the case may be,
of that class.
"P&I Advance" has the meaning set forth under "Description of the
Certificates--Advances--P&I Advances" in this prospectus supplement.
"Plan" means any plan subject to Title I of the Employee Retirement Income
Security Act of 1974, as amended, or Section 4975 of the Internal Revenue Code.
"PML" means probable maximum loss.
"Prepayment Assumption" has the meaning set forth under "Material Federal
Income Tax Consequences" in this prospectus supplement.
"Prepayment Interest Excess" has the meaning set forth under "Description
of the Certificates--Distributions--Prepayment Interest Shortfalls and
Prepayment Interest Excesses" in this prospectus supplement.
"Prepayment Interest Shortfall" has the meaning set forth under
"Description of the Certificates--Distributions--Prepayment Interest Shortfalls
and Prepayment Interest Excesses" in this prospectus supplement.
"Prepayment Premium Period" means, with respect to any mortgage loan, a
specified period of time after the date of origination of that mortgage loan,
or in the case of a mortgage loan also subject to a Lockout Period, after the
expiration of that Lockout Period, during which time voluntary prepayments must
be accompanied by a prepayment premium.
"Principal Balance Certificates" means, collectively, the Class A-1, Class
A-2, Class B, Class C, Class D, Class E, Class F, Class G, Class H, Class I,
Class J, Class K, Class L, Class M and Class N Certificates.
"Principal Distribution Amount" has the meaning set forth under
"Description of the Certificates--Distributions--Principal Distribution Amount"
in this prospectus supplement.
"Principal Prepayments" means, with respect to the mortgage loans, all
voluntary and involuntary prepayments of principal made thereon prior to their
scheduled due dates.
"Private Certificates" means, collectively, the Class G, Class H, Class I,
Class J, Class K, Class L, Class M and Class N Certificates.
"Privileged Person" means (i) any certificateholder, (ii) each of the
parties to the pooling and servicing agreement, (iii) each Rating Agency, (iv)
each of the underwriters, (v) any person identified to the paying agent as a
Certificate Owner or prospective purchaser of a certificate that delivers to
the paying agent an investor certification (which may be in electronic form) in
the form prescribed by the pooling and servicing agreement, and (vi) any other
party designated by the depositor.
"Purchase Price" has the meaning set forth under "Description of the
Mortgage Pool--Representations and Warranties; Repurchases" in this prospectus
supplement.
"Qualified Bidder" has the meaning set forth under "Servicing of the
Mortgage Loans--Rights Upon Event of Default" in this prospectus supplement.
"Qualified Mortgage" has the meaning set forth under "Description of the
Mortgage Pool--Representations and Warranties; Repurchases" in this prospectus
supplement.
"Qualifying Substitute Mortgage Loan" has the meaning set forth under
"Description of the Mortgage Pool--Representations and Warranties; Repurchases"
in this prospectus supplement.
"Rated Final Distribution Date" has the meaning set forth under
"Description of the Certificates--Distributions--Expected Final Distribution
Date; Rated Final Distribution Date" in this prospectus supplement.
S-135
<PAGE>
"Rating Agency" means, either of Fitch and S&P, in each case for so long
as such rating agency has assigned a rating to any class of certificates.
"Realized Losses" has the meaning set forth under "Description of the
Certificates--Subordination; Allocation of Losses, Shortfalls and Expenses" in
this prospectus supplement.
"Record Date" means, with respect to each class of offered certificates
for each Distribution Date, the last business day of the calendar month
immediately preceding the month in which that Distribution Date occurs.
"Rehabilitated Mortgage Loan" has the meaning set forth under "Servicing
of the Mortgage Loans--General" in this prospectus supplement.
"REMIC" means a real estate mortgage investment conduit within the meaning
of Sections 860A through 860G of the Internal Revenue Code.
"REMIC Regular Certificates" means, collectively, the Senior Certificates
and the Subordinate Certificates.
"REO Income" means income received in connection with the operation of an
REO Property, or in the case of REO Income received in connection with a pari
passu loan, the portion thereof allocable to the pari passu loan, in each case
net of the expenses specified in the pooling and servicing agreement.
"REO Property" means any mortgaged property (or an interest therein, in
the case of the mortgaged property related to a pari passu loan) acquired by
the trust fund through foreclosure, deed-in-lieu of foreclosure or otherwise.
"REO Tax" means either a tax on "net income from foreclosure property"
within the meaning of the REMIC provisions of the Internal Revenue Code or a
tax on "prohibited transactions" under Section 860F of the Internal Revenue
Code.
"Reserve Account" means the account established in the name of the trustee
by the paying agent for the deposit of any Excess Liquidation Proceeds.
"Residual Certificates" means, collectively, the Class R-I, Class R-II and
Class R-III Certificates.
"Restricted Group" has the meaning set forth under "ERISA Considerations"
in this prospectus supplement.
"Revised Rate" means, with respect to an ARD Loan, the Mortgage Rate for
that ARD Loan on and after the Anticipated Repayment Date for that ARD Loan.
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc.
"Scheduled Principal Balance" means, with respect to any mortgage loan on
any Distribution Date, a principal amount equal to the Cut-Off Date Balance
thereof, reduced (to not less than zero) by (a) any payments or other
collections of principal (or Advances in lieu thereof) on that mortgage loan
that have been collected or received during any preceding Collection Period,
other than any scheduled payments due in any subsequent Collection Period, and
(b) the principal portion of any Realized Loss incurred in respect of that
mortgage loan during any preceding Collection Period.
"Senior Certificates" means, collectively, the Class A and Class X
Certificates.
"Servicing Advances" has the meaning set forth under "Description of the
Certificates--Advances--Servicing Advances" in this prospectus supplement.
"Servicing Fee" has the meaning set forth under "Servicing of the Mortgage
Loans--Servicing and Other Compensation and Payment of Expenses" in this
prospectus supplement.
"Servicing Fee Rate" has the meaning set forth under "Servicing of the
Mortgage Loans--Servicing and Other Compensation and Payment of Expenses" in
this prospectus supplement.
S-136
<PAGE>
"Servicing Standard" has the meaning set forth under "Servicing of the
Mortgage Loans--General" in this prospectus supplement.
"Servicing Transfer Event" has the meaning set forth under "Servicing of
the Mortgage Loans--General" in this prospectus supplement.
"Specially Serviced Mortgage Loan" means any mortgage loan as to which a
Servicing Transfer Event has occurred.
"Special Servicer Compensation" has the meaning set forth under "Servicing
of the Mortgage Loans--Servicing and Other Compensation and Payment of
Expenses--Special Servicer Compensation" in this prospectus supplement.
"Special Servicing Fee" has the meaning set forth under "Servicing of the
Mortgage Loans--Servicing and Other Compensation and Payment of
Expenses--Special Servicer Compensation" in this prospectus supplement.
"Subordinate Certificates" means, collectively, the Class B, Class C,
Class D, Class E, Class F, Class G, Class H, Class I, Class J, Class K, Class
L, Class M and Class N Certificates.
"Successful Bidder" has the meaning set forth under "Servicing of the
Mortgage Loans--Rights Upon Servicer Event of Default" in this prospectus
supplement.
"Title Policy" means, with respect to any mortgaged property, an American
Land Title Association (or an equivalent form of) lender's title insurance
policy or marked-up title insurance commitment (on which the required premium
has been paid) which evidences that title insurance policy.
"Trustee Fee" means a monthly fee as set forth in the pooling and
servicing agreement, which fee will include the paying agent's fee.
"Trustee Fee Rate" means the portion of a rate per annum set forth in the
pooling and servicing agreement applied to the Scheduled Principal Balance of
the mortgage loans each month to calculate the Trustee Fee for that month.
"Underwritten Cash Flow" has the meaning set forth under "Description of
the Mortgage Pool--Underwritten Cash Flow" in this prospectus supplement.
"Unpaid Interest" has the meaning set forth under "Description of the
Certificates--Distributions--Distributable Certificate Interest Amount" in this
prospectus supplement.
"Workout Fee" has the meaning set forth under "Servicing of the Mortgage
Loans--Servicing and Other Compensation and Payment of Expenses--Special
Servicer Compensation" in this prospectus supplement.
"Yield Maintenance Period" means, with respect to any mortgage loan, a
specified period of time after the date of origination of that mortgage loan,
or in the case of a mortgage loan also subject to a Lockout Period, after the
expiration of that Lockout Period, during which time voluntary prepayments must
be accompanied by a yield maintenance charge intended to compensate the lender
for foregone interest.
"Yield Rate" has the meaning set forth under "Description of the Mortgage
Pool--Yield Maintenance, Prepayment and Lockout Provisions" in this prospectus
supplement
S-137
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<PAGE>
<TABLE>
<CAPTION>
Mortgage
Loan Number Count Loan Seller Loan Name
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
310900140 1 WFBNA MHC Portfolio
310900140A
310900140B
310900140C
310900140D
310900140E
310900140F
---------------------------------------------------------------------------------------------------------------------------
28983 2 BSFI FM Global Headquarters
310851623 3 WFBNA U-Haul Storage Portfolio
310851623A
310851623B
310851623C
310851623D
310851623E
310851623F
310851623G
310851623H
310851623I
310851623J
310851623K
310851623L
310851623M
310851623N
310851623O
310851623P
310851623Q
310851623R
310851623S
---------------------------------------------------------------------------------------------------------------------------
10006891 4 MSMCI Trolley Square
28326 5 BSFI Jefferson Hill Apartments
28750 6 BSFI Long Beach Marketplace
310900049 7 WFBNA World Kitchen Warehouse
310900130 8 WFBNA San Francisco Medical Center
---------------------------------------------------------------------------------------------------------------------------
26908 9 BSFI Hilton Garden Cupertino
29198 10 BSFI AMC Cantera 30
310900195 11 WFBNA MHC- Date Palm Country Club
29083 12 BSFI 17 East 13th, 18-20 East 14th, 58-60 West 14th
29083A
29083B
---------------------------------------------------------------------------------------------------------------------------
29106 13 BSFI Festival At Woodholme
28225 14 BSFI Kwasha Lipton Building
29453 15 BSFI 410 Jessie Street
310900170 16 WFBNA Shoreline Investments III
26188 17 BSFI 855 Publishers Parkway & 655 ABC Basket Rd
26188A
26188B
---------------------------------------------------------------------------------------------------------------------------
29476 18 BSFI DeAnza Plaza
29476A
29476B
310900086 19 WFBNA Mary's Vineyard
310900112 20 WFBNA Golden Town Center
---------------------------------------------------------------------------------------------------------------------------
310900190 21 WFBNA West Valley Corporate Center
27752 22 BSFI 230 South Broad Street
29028 23 BSFI L&S Portfolio
29028A
29028B
29028C
29028D
---------------------------------------------------------------------------------------------------------------------------
310900040 24 WFBNA Winepress Shopping Center
29136 25 BSFI Solectron Building
310900044 26 WFBNA IDC Building
29676 27 BSFI 161 Nortech Parkway
310851554 28 WFBNA Plaza Del Obispo
28636 29 BSFI HomeSide Lending Building
---------------------------------------------------------------------------------------------------------------------------
29458 30 BSFI Centennial Portfolio
29458A
29458B
29458C
29458D
---------------------------------------------------------------------------------------------------------------------------
10006313 31 MSMCI Zocallo Plaza
26301 32 BSFI The Gelman Building
29003 33 BSFI Hacienda Isbell Apartments
28935 34 BSFI Carrier World Headquarters
28431 35 BSFI Miami Gardens Plaza
---------------------------------------------------------------------------------------------------------------------------
310900090 36 WFBNA Golden Van Building
9905316 37 MSMCI Green Arbor Apartments
310900055 38 WFBNA Natrol Building No. 2
310900073 39 WFBNA Wal-Mart Land
26508 40 BSFI Pencader IV
---------------------------------------------------------------------------------------------------------------------------
9905051 41 MSMCI 121 High Street Office Building
28244 42 BSFI Pier Plaza
310851629 43 WFBNA South City Business Center
310900123 44 WFBNA South Point Village Apartments
310900009 45 WFBNA Live Oak Drive
---------------------------------------------------------------------------------------------------------------------------
310900176 46 WFBNA Pacific Rim Business Centre
310900082 47 WFBNA LAX Logistics Center
310900056 48 WFBNA Ponca City Shopping Center
310900158 49 WFBNA El Dorado Hills Business Park
28686 50 BSFI Giant Eagle Shopping Center
---------------------------------------------------------------------------------------------------------------------------
28835 51 BSFI Crestwood Apartments
310900074 52 WFBNA Currell Centre
28387 53 BSFI 450 Post Street
310851537 54 WFBNA Coaster of America Building
28919 55 BSFI Staples Costa Mesa
---------------------------------------------------------------------------------------------------------------------------
28850 56 BSFI Space Plus Storage Center
28995 57 BSFI Capitol Hills Mobile Home Park
310900084 58 WFBNA Terminal Corporation Warehouse
310900106 59 WFBNA Office Depot - Anaheim
29987 60 BSFI Logan Crossing
---------------------------------------------------------------------------------------------------------------------------
10006546 61 MSMCI Town Center Office Building
310900057 62 WFBNA Monterey Townhouse Apartments
29720 63 BSFI Garden Grove Center
28494 64 BSFI Kings Supermarket
29643 65 BSFI The Vineyard at Palm Springs
---------------------------------------------------------------------------------------------------------------------------
28009 66 BSFI Med Park Mall
10006364 67 MSMCI Remington Health Center
25310 68 BSFI 981 Worcester Street
28002 69 BSFI Brownsburg Square
28104 70 BSFI 100 Jersey Street
---------------------------------------------------------------------------------------------------------------------------
29570 71 BSFI Linden Oaks/Parkway Commons
29570A
29570B
310900045 72 WFBNA Jorgensen Steel
28868 73 BSFI The Shoppes at Albrecht's
---------------------------------------------------------------------------------------------------------------------------
29267 74 BSFI 360 West Broadway
310900065 75 WFBNA 48th Avenue
310900094 76 WFBNA Luminate Building
10006389 77 MSMCI Roseburg Square
310900053 78 WFBNA Orange Grove Avenue / Roseville Road
---------------------------------------------------------------------------------------------------------------------------
310900147 79 WFBNA Countryview Apartments
310900097 80 WFBNA Social Security Building
310900118 81 WFBNA Lee Park Center
310900153 82 WFBNA The Shops at Hampden Crossing
310900120 83 WFBNA Core-Mark Building
---------------------------------------------------------------------------------------------------------------------------
310900126 84 WFBNA Fabian Way
310851628 85 WFBNA Washington Plaza
310900039 86 WFBNA Treasure Hills Plaza
310928353 87 WFBNA Otterson Drive
310900111 88 WFBNA Willard Road
---------------------------------------------------------------------------------------------------------------------------
29512 89 BSFI Walgreens Amarillo
28762 90 BSFI 405 Queen Street
25481 91 BSFI 1885 Hylan Boulevard
26777 92 BSFI CVS Staten Island
26216 93 BSFI Park Circle Apartments
---------------------------------------------------------------------------------------------------------------------------
28353 94 BSFI Bagby Restaurant Portfolio
28353A
28353B
28353C
28353D
28353E
28353F
---------------------------------------------------------------------------------------------------------------------------
28550 95 BSFI 1415 Beacon Street
29397 96 BSFI A1 Self Storage
310900062 97 WFBNA Minolta Building
310900113 98 WFBNA Maple Trails Apartments
310900121 99 WFBNA Otis Spunkmeyer Building
---------------------------------------------------------------------------------------------------------------------------
29914 100 BSFI The Meadows
310900116 101 WFBNA Fort Wayne Pools
310900042 102 WFBNA Staples-Oroville
310900131 103 WFBNA 8215 Dorsey Run Road
310900119 104 WFBNA Liberace Plaza
---------------------------------------------------------------------------------------------------------------------------
310900069 105 WFBNA Office Max
310900096 106 WFBNA Margay Avenue
310900114 107 WFBNA Ninth Street
310900127 108 WFBNA Eckerd Drug Store
310900066 109 WFBNA Alcosta Boulevard
---------------------------------------------------------------------------------------------------------------------------
310900080 110 WFBNA Raley's Annex
310900091 111 WFBNA Ramsey Building
310900138 112 WFBNA Village East Apartments
310851150 113 WFBNA Bellcrest Shops
310900048 114 WFBNA River Park Drive
---------------------------------------------------------------------------------------------------------------------------
310900085 115 WFBNA East Maple Avenue
310900122 116 WFBNA Ford Industrial
310900132 117 WFBNA Walgreens
310900152 118 WFBNA 5508 S. Nogales Highway
310900161 119 WFBNA Alamo Self Storage
---------------------------------------------------------------------------------------------------------------------------
310900107 120 WFBNA Sacramento Road
310900060 121 WFBNA Technology Drive
310900092 122 WFBNA Walnut Estates Apartments
310900144 123 WFBNA Forming Specialties Building
28578 124 BSFI Curtis Park Warehouse
---------------------------------------------------------------------------------------------------------------------------
310900070 125 WFBNA Bubb Road
310900095 126 WFBNA Staples (Red Bluff)
310900093 127 WFBNA Edward Avenue Industrial
310900108 128 WFBNA Motorola Industrial Building
26843 129 BSFI Prince Haven & Hillside Apartments
26843A
26843B
---------------------------------------------------------------------------------------------------------------------------
310900081 130 WFBNA Washington Mutual Bank
310900148 131 WFBNA A-Atlas - E. 22nd Street
310900157 132 WFBNA East Pointe Apartments
310900143 133 WFBNA Highland Park Industrial
310900117 134 WFBNA Oak Creek Apartments
---------------------------------------------------------------------------------------------------------------------------
310900087 135 WFBNA Steelhead Way
310900100 136 WFBNA Bernoulli Circle
310900104 137 WFBNA New Park West Office Building
310900136 138 WFBNA 65 Mitchell Boulevard
310900159 139 WFBNA Tatum & Greenway Shops
---------------------------------------------------------------------------------------------------------------------------
310900110 140 WFBNA 50 East Great Southwest Parkway
310900103 141 WFBNA Pine Avenue Industrial
310900134 142 WFBNA Juniper Building
310900150 143 WFBNA A-Atlas -N. Romero Road
310900179 144 WFBNA Barclay Office Building
310900101 145 WFBNA Bermuda Road Industrial
---------------------------------------------------------------------------------------------------------------------------
Totals/Weighted Avg.
</TABLE>
Notes / Footnotes
*** As Used above, "WFBNA" represents Wells Fargo Bank, National Association;
"BSFI" represents Bear Stearns, Funding Inc.; "MSMCI" represents Morgan
Stanley Mortgage Capital, Inc.
*** Due to fluctuations in actual day count, interest only payments may be
approximate in the case of loans that accrue on an Actual/360 basis.
*** Loan #28225 amortizes pursuant to a fixed schedule. Annual debt service and
the corresponding DSCR have been approximated to reflect average over the
term.
*** Loan #28983 pays pursuant to a fixed semi-annual schedule. Annual debt
service and the corresponding DSCR are based on the first year of full
payments scheduled under the mortgage loan.
*** Loan #28353 permits limited property substitution at any time. No lockout
period applies.
*** Loan #28750 provides pre-defeasance lockout tied to the securitization of
the companion loan - which has not yet occurred. No assurance can be
provided that the companion loan will be sold pursuant to a securitization.
*** In certain limited cases, the Annual Replacement Reserve Per Square Foot or
Unit may represent a single initial deposit made by the borrower at the
closing of the related mortgage loan.
*** As Used above, "WFBNA" represents Wells Fargo Bank, National Association;
"BSFI" represents Bear Stearns, Funding Inc.; "MSMCI" represents Morgan
Stanley Mortgage Capital, Inc.
*** In the case of certain loans, the interest rate, balance or loan terms may
have been subject to a one time modification under the related mortgage
note following origination.
As a result, for analytical purposes, it may be difficult to derive the
actual Cut-Off Date Balance (detailed herein) using the actual applicable
loan terms.
(a) 1999 / T-12 Net Operating Income may reflect the property's historical
operating performance over the most recent 12 month period for which
operating statements are available. 1999 Net Operating Income reflects the
property's historical Net Operating Performance for a previous 12 month
period which, in most cases, is equivalent to calendar year 1999.
<PAGE>
<TABLE>
<CAPTION>
% of
Original Cut-Off Initial Pool
Loan Number Count Property Name Balance Balance Balance
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
310900140 1 94,250,000 93,927,147 11.20%
310900140A MHC- Mid Florida Lakes 24,000,000
310900140B MHC- Colonies of Margate 20,500,000
310900140C MHC- Willow Lake Estates 19,500,000
310900140D MHC- Buccaneer Estates 19,300,000
310900140E MHC- DeAnza Santa Cruz 6,160,000
310900140F MHC- Bay Lake Estates 4,790,000
------------------------------------------------------------------------------------------------------------------------------------
28983 2 FM Global Headquarters 32,676,000 31,802,702 3.79%
310851623 3 32,100,000 31,726,782 3.78%
310851623A U-Haul Storage Belt Boulevard 2,260,549
310851623B U-Haul Storage Cactus & 51st 1,211,723
310851623C U-Haul Storage Boone 863,662
310851623D U-Haul Storage Highland Avenue. 2,359,560
310851623E U-Haul Storage Marietta Street 2,132,080
310851623F U-Haul Storage Decker Park Road 1,630,286
310851623G U-Haul Storage Jamil Road 1,466,505
310851623H U-Haul Storage Holland Road 1,058,385
310851623I U-Haul Storage Elm Drive 1,300,402
310851623J U-Haul Storage Washington Road 1,516,658
310851623K U-Haul Storage Asher Avenue 1,572,616
310851623L U-Haul Storage Myrtle Beach 605,545
310851623M U-Haul Storage North Boulevard 2,091,574
310851623N U-Haul Storage Odenton 1,853,234
310851623O U-Haul Storage Sterling 2,541,950
310851623P U-Haul Storage Westwood 962,106
310851623Q U-Haul Storage Marrero 917,767
310851623R U-Haul Storage Carlsbad 4,471,372
310851623S U-Haul Storage Rialto 1,284,026
------------------------------------------------------------------------------------------------------------------------------------
10006891 4 Trolley Square 29,750,000 29,725,099 3.54%
28326 5 Jefferson Hill Apartments 25,550,000 25,406,203 3.03%
28750 6 Long Beach Marketplace 21,200,000 21,157,357 2.52%
310900049 7 World Kitchen Warehouse 18,240,000 18,205,435 2.17%
310900130 8 San Francisco Medical Center 18,100,000 18,088,622 2.16%
------------------------------------------------------------------------------------------------------------------------------------
26908 9 Hilton Garden Cupertino 18,000,000 17,797,958 2.12%
29198 10 AMC Cantera 30 17,850,000 17,770,862 2.12%
310900195 11 MHC- Date Palm Country Club 15,750,000 15,732,127 1.88%
29083 12 15,150,000 15,139,731 1.81%
29083A 17 E. 13th Street & 18-20 E. 14th Street 7,550,000
29083B 58-60 E. 14th Street 7,600,000
------------------------------------------------------------------------------------------------------------------------------------
29106 13 Festival At Woodholme 13,800,000 13,780,483 1.64%
28225 14 Kwasha Lipton Building 13,350,000 13,350,000 1.59%
29453 15 410 Jessie Street 13,000,000 12,978,880 1.55%
310900170 16 Shoreline Investments III 13,000,000 12,974,896 1.55%
26188 17 12,600,000 12,577,829 1.50%
26188A 855 Publishers Parkway 9,326,000
26188B 655 A, B, C Basket Road 3,274,000
------------------------------------------------------------------------------------------------------------------------------------
29476 18 12,000,000 11,984,978 1.43%
29476A 10001 N. DeAnza Boulevard 5,500,000
29476B 10101 N. DeAnza Boulevard 6,500,000
310900086 19 Mary's Vineyard 10,300,000 10,241,410 1.22%
310900112 20 Golden Town Center 10,000,000 9,976,206 1.19%
------------------------------------------------------------------------------------------------------------------------------------
310900190 21 West Valley Corporate Center 9,875,000 9,864,583 1.18%
27752 22 230 South Broad Street 9,500,000 9,457,968 1.13%
29028 23 9,300,000 9,286,309 1.11%
29028A Drexel View Club Apartments 2,640,000
29028B Lansdowne Station Apartments 2,680,000
29028C Glenmore Place Apartments 2,049,000
29028D Springfield Green Apartments 1,931,000
------------------------------------------------------------------------------------------------------------------------------------
310900040 24 Winepress Shopping Center 8,870,000 8,745,550 1.04%
29136 25 Solectron Building 8,750,000 8,738,941 1.04%
310900044 26 IDC Building 8,720,000 8,699,856 1.04%
29676 27 161 Nortech Parkway 8,600,000 8,584,094 1.02%
310851554 28 Plaza Del Obispo 8,500,000 8,472,929 1.01%
28636 29 HomeSide Lending Building 8,000,000 8,000,000 0.95%
------------------------------------------------------------------------------------------------------------------------------------
29458 30 7,500,000 7,488,395 0.89%
29458A 4000 Paige Road/State Highway 121 1,440,000
29458B 10967 & 10969 Walnut Hill Lane 1,715,000
29458C 15055-15065 Inwood Road 3,450,000
29458D 8123 Preston Road 895,000
------------------------------------------------------------------------------------------------------------------------------------
10006313 31 Zocallo Plaza 7,500,000 7,476,495 0.89%
26301 32 The Gelman Building 7,000,000 6,918,402 0.83%
29003 33 Hacienda Isbell Apartments 7,000,000 6,984,954 0.83%
28935 34 Carrier World Headquarters 6,950,000 6,950,000 0.83%
28431 35 Miami Gardens Square 6,800,000 6,778,394 0.81%
------------------------------------------------------------------------------------------------------------------------------------
310900090 36 Golden Van Building 6,340,000 6,323,743 0.75%
9905316 37 Green Arbor Apartments 5,590,000 5,536,028 0.66%
310900055 38 Natrol Building No. 2 5,400,000 5,323,562 0.63%
310900073 39 Wal-Mart Land 5,400,000 5,353,589 0.64%
26508 40 Pencader IV 5,360,000 5,352,712 0.64%
------------------------------------------------------------------------------------------------------------------------------------
9905051 41 121 High Street Office Building 5,330,000 5,286,688 0.63%
28244 42 Pier Plaza 5,125,000 5,102,701 0.61%
310851629 43 South City Business Center 5,000,000 4,928,142 0.59%
310900123 44 South Point Village Apartments 4,946,000 4,936,735 0.59%
310900009 45 Live Oak Drive 4,840,000 4,823,970 0.58%
------------------------------------------------------------------------------------------------------------------------------------
310900176 46 Pacific Rim Business Centre 4,800,000 4,794,744 0.57%
310900082 47 LAX Logistics Center 4,750,000 4,736,283 0.56%
310900056 48 Ponca City Shopping Center 4,700,000 4,670,429 0.56%
310900158 49 El Dorado Hills Business Park 4,600,000 4,588,925 0.55%
28686 50 Giant Eagle Shopping Center 4,500,000 4,487,157 0.54%
------------------------------------------------------------------------------------------------------------------------------------
28835 51 Crestwood Apartments 4,450,000 4,445,523 0.53%
310900074 52 Currell Centre 4,450,000 4,437,884 0.53%
28387 53 450 Post Street 4,400,000 4,343,178 0.52%
310851537 54 Coaster of America Building 4,200,000 4,122,650 0.49%
28919 55 Staples Costa Mesa 4,125,000 4,118,759 0.49%
------------------------------------------------------------------------------------------------------------------------------------
28850 56 Space Plus Storage Center 4,050,000 4,046,296 0.48%
28995 57 Capitol Hills Mobile Home Park 4,000,000 3,986,468 0.48%
310900084 58 Terminal Corporation Warehouse 3,925,000 3,893,841 0.46%
310900106 59 Office Depot - Anaheim 3,905,000 3,873,910 0.46%
29987 60 Logan Crossing 3,700,000 3,696,508 0.44%
------------------------------------------------------------------------------------------------------------------------------------
10006546 61 Town Center Office Building 3,640,000 3,635,399 0.43%
310900057 62 Monterey Townhouse Apartments 3,575,000 3,562,056 0.42%
29720 63 Garden Grove Center 3,550,000 3,546,746 0.42%
28494 64 Kings Supermarket 3,500,000 3,495,750 0.42%
29643 65 The Vineyard at Palm Springs 3,500,000 3,496,479 0.42%
------------------------------------------------------------------------------------------------------------------------------------
28009 66 Med Park Mall 3,425,000 3,402,721 0.41%
10006364 67 Remington Health Center Office 3,425,000 3,425,000 0.41%
25310 68 981 Worcester Street 3,400,000 3,395,101 0.40%
28002 69 Brownsburg Square 3,400,000 3,396,366 0.41%
28104 70 100 Jersey Street 3,350,000 3,301,242 0.39%
------------------------------------------------------------------------------------------------------------------------------------
29570 71 3,300,000 3,272,488 0.39%
29570A Linden Oaks 1,842,000
29570B Parkway Commons 1,458,000
310900045 72 Jorgensen Steel 3,300,000 3,287,603 0.39%
28868 73 The Shoppes at Albrecht's 3,000,000 2,994,282 0.36%
------------------------------------------------------------------------------------------------------------------------------------
29267 74 360 West Broadway 3,000,000 2,988,263 0.36%
310900065 75 48th Avenue 3,000,000 2,986,269 0.36%
310900094 76 Luminate Building 3,000,000 2,993,769 0.36%
10006389 77 Roseburg Square 2,800,000 2,796,028 0.33%
310900053 78 Orange Grove Avenue / Roseville Road 2,600,000 2,585,317 0.31%
------------------------------------------------------------------------------------------------------------------------------------
310900147 79 Countryview Apartments 2,500,000 2,497,091 0.30%
310900097 80 Social Security Building 2,400,000 2,374,447 0.28%
310900118 81 Lee Park Center 2,400,000 2,395,057 0.29%
310900153 82 The Shops at Hampden Crossing 2,400,000 2,397,728 0.29%
310900120 83 Core-Mark Building 2,350,000 2,345,661 0.28%
------------------------------------------------------------------------------------------------------------------------------------
310900126 84 Fabian Way 2,300,000 2,291,893 0.27%
310851628 85 Washington Plaza 2,215,000 2,185,045 0.26%
310900039 86 Treasure Hills Plaza 2,200,000 2,171,854 0.26%
310928353 87 Otterson Drive 2,200,000 2,189,395 0.26%
310900111 88 Willard Road 2,200,000 2,196,721 0.26%
------------------------------------------------------------------------------------------------------------------------------------
29512 89 Walgreens Amarillo 2,125,000 2,123,693 0.25%
28762 90 405 Queen Street 2,100,000 2,095,975 0.25%
25481 91 1885 Hylan Boulevard 2,025,000 2,019,898 0.24%
26777 92 CVS Staten Island 2,025,000 1,999,125 0.24%
26216 93 Park Circle Apartments 2,000,000 1,985,421 0.24%
------------------------------------------------------------------------------------------------------------------------------------
28353 94 2,000,000 1,998,306 0.24%
28353A Hardee's - 300 Cumberland Street 335,042
28353B Hardee's - 1602 Roane Street 337,864
28353C Hardee's - 2621 Ellisville Boulevard 231,511
28353D Hardee's - 3926 Asheville Highway 332,638
28353E Hardee's - 324 W. John C. Sims Parkway 402,294
28353F Hardee's - 210 Praley Street NW 360,651
------------------------------------------------------------------------------------------------------------------------------------
28550 95 1415 Beacon Street 2,000,000 1,971,002 0.24%
29397 96 A1 Self Storage 2,000,000 1,996,319 0.24%
310900062 97 Minolta Building 2,000,000 1,979,359 0.24%
310900113 98 Maple Trails Apartments 2,000,000 1,995,583 0.24%
310900121 99 Otis Spunkmeyer Building 2,000,000 1,995,852 0.24%
------------------------------------------------------------------------------------------------------------------------------------
29914 100 The Meadows 1,975,000 1,972,874 0.24%
310900116 101 Fort Wayne Pools 1,960,000 1,947,451 0.23%
310900042 102 Staples-Oroville 1,955,000 1,945,462 0.23%
310900131 103 8215 Dorsey Run Road 1,920,000 1,917,216 0.23%
310900119 104 Liberace Plaza 1,900,000 1,890,031 0.23%
------------------------------------------------------------------------------------------------------------------------------------
310900069 105 Office Max 1,725,000 1,692,530 0.20%
310900096 106 Margay Avenue 1,700,000 1,693,850 0.20%
310900114 107 Ninth Street 1,700,000 1,695,935 0.20%
310900127 108 Eckerd Drug Store 1,650,000 1,646,385 0.20%
310900066 109 Alcosta Boulevard 1,625,000 1,615,065 0.19%
------------------------------------------------------------------------------------------------------------------------------------
310900080 110 Raley's Annex 1,610,000 1,592,234 0.19%
310900091 111 Ramsey Building 1,600,000 1,595,593 0.19%
310900138 112 Village East Apartments 1,600,000 1,597,579 0.19%
310851150 113 Bellcrest Shops 1,550,000 1,480,523 0.18%
310900048 114 River Park Drive 1,500,000 1,488,331 0.18%
------------------------------------------------------------------------------------------------------------------------------------
310900085 115 East Maple Avenue 1,500,000 1,491,778 0.18%
310900122 116 Ford Industrial 1,500,000 1,497,689 0.18%
310900132 117 Walgreens 1,500,000 1,489,930 0.18%
310900152 118 5508 S. Nogales Highway 1,500,000 1,491,996 0.18%
310900161 119 Alamo Self Storage 1,500,000 1,497,563 0.18%
------------------------------------------------------------------------------------------------------------------------------------
310900107 120 Sacramento Road 1,402,000 1,395,803 0.17%
310900060 121 Technology Drive 1,370,000 1,360,555 0.16%
310900092 122 Walnut Estates Apartments 1,325,000 1,321,226 0.16%
310900144 123 Forming Specialties Building 1,325,000 1,323,671 0.16%
28578 124 Curtis Park Warehouse 1,300,000 1,296,408 0.15%
------------------------------------------------------------------------------------------------------------------------------------
310900070 125 Bubb Road 1,300,000 1,292,247 0.15%
310900095 126 Staples (Red Bluff) 1,300,000 1,273,463 0.15%
310900093 127 Edward Avenue Industrial 1,200,000 1,196,045 0.14%
310900108 128 Motorola Industrial Building 1,200,000 1,195,787 0.14%
26843 129 1,175,000 1,145,614 0.14%
26843A Prince Haven Apartments 519,943
26843B Hillside Apartments 655,057
------------------------------------------------------------------------------------------------------------------------------------
310900081 130 Washington Mutual Bank 1,100,000 1,065,406 0.13%
310900148 131 A-Atlas - E. 22nd Street 1,100,000 1,094,414 0.13%
310900157 132 East Pointe Apartments 1,100,000 1,098,832 0.13%
310900143 133 Highland Park Industrial 1,075,000 1,072,299 0.13%
310900117 134 Oak Creek Apartments 1,020,000 1,018,526 0.12%
------------------------------------------------------------------------------------------------------------------------------------
310900087 135 Steelhead Way 1,000,000 994,664 0.12%
310900100 136 Bernoulli Circle 1,000,000 993,589 0.12%
310900104 137 New Park West Office Building 1,000,000 991,937 0.12%
310900136 138 65 Mitchell Boulevard 1,000,000 998,427 0.12%
310900159 139 Tatum & Greenway Shops 1,000,000 997,138 0.12%
------------------------------------------------------------------------------------------------------------------------------------
310900110 140 50 East Great Southwest Parkway 880,000 870,902 0.10%
310900103 141 Pine Avenue Industrial 760,000 755,468 0.09%
310900134 142 Juniper Building 760,000 758,222 0.09%
310900150 143 A-Atlas -N. Romero Road 719,000 715,349 0.09%
310900179 144 Barclay Office Building 680,000 679,586 0.08%
310900101 145 Bermuda Road Industrial 600,000 596,339 0.07%
------------------------------------------------------------------------------------------------------------------------------------
Totals/Weighted Avg. $838,510,239
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Cumulative Gross Interest
% of Initial Number of Mortgage Accrual Administrative
Loan Number Count Pool Balance Properties Rate Method Cost Rate
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
310900140 1 11.20% 6 7.8200% Actual/360 0.0432%
310900140A 1
310900140B 1
310900140C 1
310900140D 1
310900140E 1
310900140F 1
-----------------------------------------------------------------------------------------------------------------------------
28983 2 14.99% 1 8.7350% 30/360 0.0532%
310851623 3 18.78% 19 8.5230% Actual/360 0.0432%
310851623A 1
310851623B 1
310851623C 1
310851623D 1
310851623E 1
310851623F 1
310851623G 1
310851623H 1
310851623I 1
310851623J 1
310851623K 1
310851623L 1
310851623M 1
310851623N 1
310851623O 1
310851623P 1
310851623Q 1
310851623R 1
310851623S 1
-----------------------------------------------------------------------------------------------------------------------------
10006891 4 22.32% 1 9.0300% Actual/360 0.0532%
28326 5 25.35% 1 7.8800% 30/360 0.0532%
28750 6 27.88% 1 8.4300% Actual/360 0.0532%
310900049 7 30.05% 1 8.6400% Actual/360 0.0432%
310900130 8 32.20% 1 8.3200% Actual/360 0.0432%
-----------------------------------------------------------------------------------------------------------------------------
26908 9 34.33% 1 8.1900% Actual/360 0.0532%
29198 10 36.45% 1 8.2350% Actual/360 0.0532%
310900195 11 38.32% 1 7.9600% Actual/360 0.0432%
29083 12 40.13% 2 7.9500% Actual/360 0.0532%
29083A 1
29083B 1
-----------------------------------------------------------------------------------------------------------------------------
29106 13 41.77% 1 8.3600% Actual/360 0.0532%
28225 14 43.36% 1 8.0800% Actual/360 0.0532%
29453 15 44.91% 1 7.9000% Actual/360 0.0532%
310900170 16 46.46% 1 7.8800% Actual/360 0.0432%
26188 17 47.96% 2 8.3500% Actual/360 0.0532%
26188A 1
26188B 1
-----------------------------------------------------------------------------------------------------------------------------
29476 18 49.39% 2 8.7390% Actual/360 0.0532%
29476A 1
29476B 1
310900086 19 50.61% 1 8.8350% Actual/360 0.0432%
310900112 20 51.80% 1 7.8090% Actual/360 0.0432%
-----------------------------------------------------------------------------------------------------------------------------
310900190 21 52.98% 1 7.9800% Actual/360 0.0432%
27752 22 54.10% 1 8.4670% Actual/360 0.0532%
29028 23 55.21% 4 8.2300% Actual/360 0.0532%
29028A 1
29028B 1
29028C 1
29028D 1
-----------------------------------------------------------------------------------------------------------------------------
310900040 24 56.25% 1 7.9550% Actual/360 0.0432%
29136 25 57.30% 1 8.7100% Actual/360 0.0532%
310900044 26 58.33% 1 8.5600% Actual/360 0.0432%
29676 27 59.36% 1 8.1000% Actual/360 0.0532%
310851554 28 60.37% 1 8.6850% Actual/360 0.0432%
28636 29 61.32% 1 7.7500% Actual/360 0.0532%
-----------------------------------------------------------------------------------------------------------------------------
29458 30 62.22% 4 8.7400% Actual/360 0.0532%
29458A 1
29458B 1
29458C 1
29458D 1
-----------------------------------------------------------------------------------------------------------------------------
10006313 31 63.11% 1 8.3200% Actual/360 0.0532%
26301 32 63.93% 1 7.6000% Actual/360 0.0532%
29003 33 64.77% 1 8.1900% Actual/360 0.0532%
28935 34 65.59% 1 7.6300% Actual/360 0.0532%
28431 35 66.40% 1 8.2700% Actual/360 0.0532%
-----------------------------------------------------------------------------------------------------------------------------
310900090 36 67.16% 1 8.2100% Actual/360 0.0432%
9905316 37 67.82% 1 7.3520% Actual/360 0.0532%
310900055 38 68.45% 1 8.3200% Actual/360 0.0432%
310900073 39 69.09% 1 7.4300% Actual/360 0.0432%
26508 40 69.73% 1 8.4850% Actual/360 0.0532%
-----------------------------------------------------------------------------------------------------------------------------
9905051 41 70.36% 1 8.0300% Actual/360 0.0532%
28244 42 70.97% 1 8.8800% Actual/360 0.0532%
310851629 43 71.56% 1 7.7700% Actual/360 0.0432%
310900123 44 72.14% 1 8.6800% Actual/360 0.0432%
310900009 45 72.72% 1 8.5550% Actual/360 0.0432%
-----------------------------------------------------------------------------------------------------------------------------
310900176 46 73.29% 1 7.7500% Actual/360 0.0432%
310900082 47 73.86% 1 7.7900% Actual/360 0.0432%
310900056 48 74.41% 1 8.2400% Actual/360 0.0432%
310900158 49 74.96% 1 8.5800% Actual/360 0.0432%
28686 50 75.50% 1 7.7800% Actual/360 0.0532%
-----------------------------------------------------------------------------------------------------------------------------
28835 51 76.03% 1 8.4000% Actual/360 0.0532%
310900074 52 76.55% 1 8.8150% Actual/360 0.0432%
28387 53 77.07% 1 8.3650% Actual/360 0.0532%
310851537 54 77.56% 1 7.8600% Actual/360 0.0432%
28919 55 78.06% 1 8.1400% Actual/360 0.0532%
-----------------------------------------------------------------------------------------------------------------------------
28850 56 78.54% 1 8.8500% Actual/360 0.0532%
28995 57 79.01% 1 7.5650% Actual/360 0.0532%
310900084 58 79.48% 1 7.9900% Actual/360 0.0432%
310900106 59 79.94% 1 7.9700% Actual/360 0.0432%
29987 60 80.38% 1 8.6250% Actual/360 0.0532%
-----------------------------------------------------------------------------------------------------------------------------
10006546 61 80.81% 1 8.7100% Actual/360 0.0532%
310900057 62 81.24% 1 8.2500% Actual/360 0.0432%
29720 63 81.66% 1 8.7250% Actual/360 0.0532%
28494 64 82.08% 1 8.8300% Actual/360 0.0532%
29643 65 82.50% 1 8.4000% Actual/360 0.0532%
-----------------------------------------------------------------------------------------------------------------------------
28009 66 82.90% 1 8.0750% Actual/360 0.0532%
10006364 67 83.31% 1 8.4200% Actual/360 0.0532%
25310 68 83.72% 1 8.3000% Actual/360 0.0532%
28002 69 84.12% 1 7.9000% Actual/360 0.0532%
28104 70 84.51% 1 7.5750% Actual/360 0.0532%
-----------------------------------------------------------------------------------------------------------------------------
29570 71 84.90% 2 7.9300% Actual/360 0.0532%
29570A 1
29570B 1
310900045 72 85.30% 1 8.1200% Actual/360 0.0432%
28868 73 85.65% 1 8.6200% Actual/360 0.0532%
-----------------------------------------------------------------------------------------------------------------------------
29267 74 86.01% 1 7.8500% Actual/360 0.0532%
310900065 75 86.37% 1 8.0800% Actual/360 0.0432%
310900094 76 86.72% 1 8.3150% Actual/360 0.0432%
10006389 77 87.06% 1 8.3500% Actual/360 0.0532%
310900053 78 87.36% 1 8.7600% Actual/360 0.0432%
-----------------------------------------------------------------------------------------------------------------------------
310900147 79 87.66% 1 7.8650% Actual/360 0.0432%
310900097 80 87.95% 1 8.5500% Actual/360 0.0432%
310900118 81 88.23% 1 8.3450% Actual/360 0.0432%
310900153 82 88.52% 1 8.6140% Actual/360 0.0432%
310900120 83 88.80% 1 8.7300% Actual/360 0.0432%
-----------------------------------------------------------------------------------------------------------------------------
310900126 84 89.07% 1 8.3800% Actual/360 0.0432%
310851628 85 89.33% 1 8.0900% Actual/360 0.0432%
310900039 86 89.59% 1 9.0400% Actual/360 0.0432%
310928353 87 89.85% 1 8.8700% Actual/360 0.0432%
310900111 88 90.11% 1 8.1900% Actual/360 0.0432%
-----------------------------------------------------------------------------------------------------------------------------
29512 89 90.37% 1 8.4250% Actual/360 0.0532%
28762 90 90.62% 1 8.6000% Actual/360 0.0532%
25481 91 90.86% 1 8.2700% Actual/360 0.0532%
26777 92 91.10% 1 8.2600% Actual/360 0.0532%
26216 93 91.33% 1 7.8300% Actual/360 0.0532%
-----------------------------------------------------------------------------------------------------------------------------
28353 94 91.57% 6 9.3100% Actual/360 0.3032%
28353A 1
28353B 1
28353C 1
28353D 1
28353E 1
28353F 1
-----------------------------------------------------------------------------------------------------------------------------
28550 95 91.81% 1 7.6150% Actual/360 0.0532%
29397 96 92.04% 1 8.1250% Actual/360 0.0532%
310900062 97 92.28% 1 8.5800% Actual/360 0.1032%
310900113 98 92.52% 1 8.0900% Actual/360 0.1032%
310900121 99 92.76% 1 8.3200% Actual/360 0.1032%
-----------------------------------------------------------------------------------------------------------------------------
29914 100 92.99% 1 8.1550% Actual/360 0.0532%
310900116 101 93.22% 1 8.0100% Actual/360 0.1032%
310900042 102 93.46% 1 8.3150% Actual/360 0.1032%
310900131 103 93.68% 1 8.2800% Actual/360 0.1032%
310900119 104 93.91% 1 9.3800% Actual/360 0.1032%
-----------------------------------------------------------------------------------------------------------------------------
310900069 105 94.11% 1 8.4900% Actual/360 0.1032%
310900096 106 94.31% 1 8.2500% Actual/360 0.1032%
310900114 107 94.52% 1 7.7900% Actual/360 0.1032%
310900127 108 94.71% 1 8.1200% Actual/360 0.1032%
310900066 109 94.90% 1 8.3800% Actual/360 0.1032%
-----------------------------------------------------------------------------------------------------------------------------
310900080 110 95.09% 1 8.0200% Actual/360 0.1032%
310900091 111 95.28% 1 7.9600% Actual/360 0.1032%
310900138 112 95.48% 1 8.1400% Actual/360 0.1032%
310851150 113 95.65% 1 8.2300% 30/360 0.1032%
310900048 114 95.83% 1 8.1100% Actual/360 0.1032%
-----------------------------------------------------------------------------------------------------------------------------
310900085 115 96.01% 1 8.2350% Actual/360 0.1032%
310900122 116 96.19% 1 8.0800% Actual/360 0.1032%
310900132 117 96.36% 1 7.6700% Actual/360 0.1032%
310900152 118 96.54% 1 8.4500% Actual/360 0.1032%
310900161 119 96.72% 1 8.7400% Actual/360 0.1032%
-----------------------------------------------------------------------------------------------------------------------------
310900107 120 96.89% 1 8.2500% Actual/360 0.1032%
310900060 121 97.05% 1 8.7500% Actual/360 0.1032%
310900092 122 97.21% 1 7.8400% Actual/360 0.1032%
310900144 123 97.36% 1 8.4100% Actual/360 0.1032%
28578 124 97.52% 1 8.7650% Actual/360 0.0532%
-----------------------------------------------------------------------------------------------------------------------------
310900070 125 97.67% 1 8.5000% Actual/360 0.1032%
310900095 126 97.82% 1 8.5600% Actual/360 0.1032%
310900093 127 97.97% 1 8.7100% Actual/360 0.1032%
310900108 128 98.11% 1 8.4000% Actual/360 0.1032%
26843 129 98.25% 2 8.3400% Actual/360 0.0532%
26843A 1
26843B 1
-----------------------------------------------------------------------------------------------------------------------------
310900081 130 98.37% 1 8.6650% Actual/360 0.1032%
310900148 131 98.50% 1 8.9500% Actual/360 0.1032%
310900157 132 98.64% 1 8.2050% Actual/360 0.1032%
310900143 133 98.76% 1 8.3850% Actual/360 0.1032%
310900117 134 98.88% 1 8.2900% Actual/360 0.1032%
-----------------------------------------------------------------------------------------------------------------------------
310900087 135 99.00% 1 8.3700% Actual/360 0.1032%
310900100 136 99.12% 1 8.0000% Actual/360 0.1032%
310900104 137 99.24% 1 8.2650% Actual/360 0.1032%
310900136 138 99.36% 1 8.0100% Actual/360 0.1032%
310900159 139 99.48% 1 8.1100% Actual/360 0.1032%
-----------------------------------------------------------------------------------------------------------------------------
310900110 140 99.58% 1 8.8500% Actual/360 0.1032%
310900103 141 99.67% 1 8.5100% Actual/360 0.1032%
310900134 142 99.76% 1 8.7100% Actual/360 0.1032%
310900150 143 99.85% 1 8.9500% Actual/360 0.1032%
310900179 144 99.93% 1 8.4700% Actual/360 0.1032%
310900101 145 100.00% 1 8.3500% Actual/360 0.1032%
-----------------------------------------------------------------------------------------------------------------------------
Totals/Weighted Avg.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Remaining
Net Stated Term to Original Interest
Mortgage Original Term Maturity Amortization Only
Loan Number Count Rate to Maturity (mos.) (mos.) (mos.) Months
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
310900140 1 7.7768% 120 117 360
310900140A
310900140B
310900140C
310900140D
310900140E
310900140F
----------------------------------------------------------------------------------------------------------------------------------
28983 2 8.6818% 109 106 109
310851623 3 8.4798% 120 107 300
310851623A
310851623B
310851623C
310851623D
310851623E
310851623F
310851623G
310851623H
310851623I
310851623J
310851623K
310851623L
310851623M
310851623N
310851623O
310851623P
310851623Q
310851623R
310851623S
----------------------------------------------------------------------------------------------------------------------------------
10006891 4 8.9768% 120 118 360
28326 5 7.8268% 120 112 360
28750 6 8.3768% 120 116 360
310900049 7 8.5968% 120 116 360
310900130 8 8.2768% 120 119 360
----------------------------------------------------------------------------------------------------------------------------------
26908 9 8.1368% 120 108 300
29198 10 8.1818% 120 115 300
310900195 11 7.9168% 119 117 360
29083 12 7.8968% 120 119 360
29083A
29083B
----------------------------------------------------------------------------------------------------------------------------------
29106 13 8.3068% 120 117 360
28225 14 8.0268% 120 113 360 22
29453 15 7.8468% 120 117 360
310900170 16 7.8368% 120 118 300
26188 17 8.2968% 120 118 300
26188A
26188B
----------------------------------------------------------------------------------------------------------------------------------
29476 18 8.6858% 84 81 360
29476A
29476B
310900086 19 8.7918% 240 236 240
310900112 20 7.7658% 120 116 360
----------------------------------------------------------------------------------------------------------------------------------
310900190 21 7.9368% 120 119 300
27752 22 8.4138% 120 111 360
29028 23 8.1768% 120 117 360
29028A
29028B
29028C
29028D
----------------------------------------------------------------------------------------------------------------------------------
310900040 24 7.9118% 180 175 180
29136 25 8.6568% 120 117 360
310900044 26 8.5168% 120 115 360
29676 27 8.0468% 180 178 300
310851554 28 8.6418% 120 113 360
28636 29 7.6968% 132 128 0 132
----------------------------------------------------------------------------------------------------------------------------------
29458 30 8.6868% 180 179 240
29458A
29458B
29458C
29458D
----------------------------------------------------------------------------------------------------------------------------------
10006313 31 8.2668% 120 114 360
26301 32 7.5468% 120 109 300
29003 33 8.1368% 120 116 360
28935 34 7.5768% 120 114 0 120
28431 35 8.2168% 120 114 360
----------------------------------------------------------------------------------------------------------------------------------
310900090 36 8.1668% 120 115 360
9905316 37 7.2988% 120 106 360
310900055 38 8.2768% 240 231 240
310900073 39 7.3868% 240 235 240
26508 40 8.4318% 120 117 360
----------------------------------------------------------------------------------------------------------------------------------
9905051 41 7.9768% 120 106 360
28244 42 8.8268% 120 115 288
310851629 43 7.7268% 120 106 300
310900123 44 8.6368% 120 116 360
310900009 45 8.5118% 120 113 360
----------------------------------------------------------------------------------------------------------------------------------
310900176 46 7.7068% 120 119 300
310900082 47 7.7468% 120 115 360
310900056 48 8.1968% 120 113 300
310900158 49 8.5368% 120 117 300
28686 50 7.7268% 120 117 300
----------------------------------------------------------------------------------------------------------------------------------
28835 51 8.3468% 120 118 360
310900074 52 8.7718% 120 114 360
28387 53 8.3118% 120 114 204
310851537 54 7.8168% 120 102 300
28919 55 8.0868% 180 177 360
----------------------------------------------------------------------------------------------------------------------------------
28850 56 8.7968% 120 119 300
28995 57 7.5118% 120 118 240
310900084 58 7.9468% 120 115 240
310900106 59 7.9268% 120 115 240
29987 60 8.5718% 120 118 360
----------------------------------------------------------------------------------------------------------------------------------
10006546 61 8.6568% 120 117 360
310900057 62 8.2068% 120 113 360
29720 63 8.6718% 120 118 360
28494 64 8.7768% 180 177 360
29643 65 8.3468% 120 118 360
----------------------------------------------------------------------------------------------------------------------------------
28009 66 8.0218% 120 113 300
10006364 67 8.3668% 120 114 360 12
25310 68 8.2468% 120 117 360
28002 69 7.8468% 120 119 300
28104 70 7.5218% 180 175 180
----------------------------------------------------------------------------------------------------------------------------------
29570 71 7.8768% 180 177 180
29570A
29570B
310900045 72 8.0768% 120 113 360
28868 73 8.5668% 120 116 360
----------------------------------------------------------------------------------------------------------------------------------
29267 74 7.7968% 120 116 300
310900065 75 8.0368% 120 115 300
310900094 76 8.2718% 120 116 360
10006389 77 8.2968% 120 117 360
310900053 78 8.7168% 120 113 300
----------------------------------------------------------------------------------------------------------------------------------
310900147 79 7.8218% 120 118 360
310900097 80 8.5068% 180 176 180
310900118 81 8.3018% 120 116 360
310900153 82 8.5708% 120 118 360
310900120 83 8.6868% 120 116 360
----------------------------------------------------------------------------------------------------------------------------------
310900126 84 8.3368% 120 116 300
310851628 85 8.0468% 120 106 300
310900039 86 8.9968% 120 111 240
310928353 87 8.8268% 120 114 300
310900111 88 8.1468% 120 117 360
----------------------------------------------------------------------------------------------------------------------------------
29512 89 8.3718% 120 119 360
28762 90 8.5468% 120 116 360
25481 91 8.2168% 120 115 360
26777 92 8.2068% 120 112 240
26216 93 7.7768% 180 168 360
----------------------------------------------------------------------------------------------------------------------------------
28353 94 9.0068% 120 119 300
28353A
28353B
28353C
28353D
28353E
28353F
----------------------------------------------------------------------------------------------------------------------------------
28550 95 7.5618% 180 175 180
29397 96 8.0718% 120 118 300
310900062 97 8.4768% 120 113 240
310900113 98 7.9868% 120 116 360
310900121 99 8.2168% 120 116 360
----------------------------------------------------------------------------------------------------------------------------------
29914 100 8.1018% 120 118 360
310900116 101 7.9068% 120 116 240
310900042 102 8.2118% 120 111 360
310900131 103 8.1768% 120 117 360
310900119 104 9.2768% 240 236 240
----------------------------------------------------------------------------------------------------------------------------------
310900069 105 8.3868% 180 173 180
310900096 106 8.1468% 120 116 300
310900114 107 7.6868% 120 116 360
310900127 108 8.0168% 120 116 360
310900066 109 8.2768% 120 113 300
----------------------------------------------------------------------------------------------------------------------------------
310900080 110 7.9168% 180 175 204
310900091 111 7.8568% 120 115 360
310900138 112 8.0368% 120 117 360
310851150 113 8.1268% 240 215 240
310900048 114 8.0068% 120 112 300
----------------------------------------------------------------------------------------------------------------------------------
310900085 115 8.1318% 120 114 300
310900122 116 7.9768% 120 117 360
310900132 117 7.5668% 120 116 240
310900152 118 8.3468% 180 178 180
310900161 119 8.6368% 120 118 300
----------------------------------------------------------------------------------------------------------------------------------
310900107 120 8.1468% 120 115 300
310900060 121 8.6468% 120 112 300
310900092 122 7.7368% 120 115 360
310900144 123 8.3068% 120 118 360
28578 124 8.7118% 120 114 360
----------------------------------------------------------------------------------------------------------------------------------
310900070 125 8.3968% 120 113 300
310900095 126 8.4568% 120 115 360
310900093 127 8.6068% 120 116 300
310900108 128 8.2968% 120 116 300
26843 129 8.2868% 180 171 180
26843A
26843B
----------------------------------------------------------------------------------------------------------------------------------
310900081 130 8.5618% 120 114 120
310900148 131 8.8468% 180 178 180
310900157 132 8.1018% 120 118 360
310900143 133 8.2818% 120 117 300
310900117 134 8.1868% 120 117 360
----------------------------------------------------------------------------------------------------------------------------------
310900087 135 8.2668% 120 114 300
310900100 136 7.8968% 240 236 240
310900104 137 8.1618% 180 177 180
310900136 138 7.9068% 120 117 360
310900159 139 8.0068% 180 179 180
----------------------------------------------------------------------------------------------------------------------------------
310900110 140 8.7468% 180 176 180
310900103 141 8.4068% 240 236 240
310900134 142 8.6068% 120 117 300
310900150 143 8.8468% 180 178 180
310900179 144 8.3668% 120 119 360
310900101 145 8.2468% 240 236 240
----------------------------------------------------------------------------------------------------------------------------------
Totals/Weighted Avg. 122 320
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
First 1999 Net
Payment Maturity Date Annual Monthly Interest Operating
Loan Number Count Date or ARD P&I Only Payment Income (a)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
310900140 1 8/1/00 7/1/10 8,146,575 12,399,622
310900140A 3,089,705
310900140B 2,849,312
310900140C 2,481,362
310900140D 2,576,873
310900140E 764,663
310900140F 637,707
------------------------------------------------------------------------------------------------------------------------------------
28983 2 8/1/00 8/1/09 4,673,391 5,528,950
310851623 3 10/1/99 9/1/09 3,107,707 4,478,182
310851623A 305,766
310851623B 165,741
310851623C 116,843
310851623D 310,174
310851623E 299,548
310851623F 217,651
310851623G 201,602
310851623H 154,797
310851623I 183,668
310851623J 214,725
310851623K 217,616
310851623L 99,829
310851623M 286,368
310851623N 257,324
310851623O 401,271
310851623P 130,166
310851623Q 126,297
310851623R 614,391
310851623S 174,405
------------------------------------------------------------------------------------------------------------------------------------
10006891 4 9/1/00 8/1/10 2,880,212 3,968,758
28326 5 3/1/00 2/1/10 2,224,127 2,400,444
28750 6 7/1/00 6/1/10 1,943,509 2,611,869
310900049 7 7/1/00 6/1/10 1,704,763
310900130 8 10/1/00 9/1/10 1,642,452 2,225,184
------------------------------------------------------------------------------------------------------------------------------------
26908 9 11/1/99 10/1/09 1,695,761 3,773,078
29198 10 6/1/00 5/1/10 1,686,714
310900195 11 9/1/00 7/1/10 1,381,548 2,025,971
29083 12 10/1/00 9/1/10 1,327,653
29083A
29083B
------------------------------------------------------------------------------------------------------------------------------------
29106 13 8/1/00 7/1/10 1,256,927 2,086,936
28225 14 4/1/00 3/1/10 1,120,058 91,138
29453 15 8/1/00 7/1/10 1,133,816
310900170 16 9/1/00 8/1/10 1,191,659 2,750,081
26188 17 9/1/00 8/1/10 1,202,258 2,242,950
26188A 1,606,094
26188B 636,856
------------------------------------------------------------------------------------------------------------------------------------
29476 18 8/1/00 7/1/07 1,131,717 1,529,762
29476A 701,091
29476B 828,671
310900086 19 7/1/00 6/1/20 1,098,979 1,342,316
310900112 20 7/1/00 6/1/10 864,592 1,343,992
------------------------------------------------------------------------------------------------------------------------------------
310900190 21 10/1/00 9/1/10 913,033 916,250
27752 22 2/1/00 1/1/10 874,554 1,012,600
29028 23 8/1/00 7/1/10 836,845 891,264
29028A 275,069
29028B 279,367
29028C 230,502
29028D 106,326
------------------------------------------------------------------------------------------------------------------------------------
310900040 24 6/1/00 5/1/15 1,014,433 967,834
29136 25 8/1/00 7/1/10 823,038
310900044 26 6/1/00 5/1/10 809,045
29676 27 9/1/00 8/1/15 803,363
310851554 28 4/1/00 3/1/10 797,704 1,068,267
28636 29 7/1/00 6/1/11 628,611 52,384
------------------------------------------------------------------------------------------------------------------------------------
29458 30 10/1/00 9/1/15 794,766 1,210,859
29458A 209,424
29458B 283,385
29458C 568,141
29458D 149,909
------------------------------------------------------------------------------------------------------------------------------------
10006313 31 5/1/00 4/1/10 680,574
26301 32 12/1/99 11/1/09 626,227 1,129,809
29003 33 7/1/00 6/1/10 627,524 1,132,430
28935 34 5/1/00 4/1/10 537,650 44,804
28431 35 5/1/00 4/1/10 614,181 1,099,656
------------------------------------------------------------------------------------------------------------------------------------
310900090 36 6/1/00 5/1/10 569,426
9905316 37 9/1/99 8/1/09 462,254 522,004
310900055 38 2/1/00 1/1/20 554,989
310900073 39 6/1/00 5/1/20 519,254 1,439,802
26508 40 8/1/00 7/1/10 493,882 666,156
------------------------------------------------------------------------------------------------------------------------------------
9905051 41 9/1/99 8/1/09 470,654 531,514
28244 42 6/1/00 5/1/10 516,942 718,308
310851629 43 9/1/99 8/1/09 453,985 536,672
310900123 44 7/1/00 6/1/10 463,958 575,654
310900009 45 4/1/00 3/1/10 448,851 797,838
------------------------------------------------------------------------------------------------------------------------------------
310900176 46 10/1/00 9/1/10 435,069 774,937
310900082 47 6/1/00 5/1/10 409,932
310900056 48 4/1/00 3/1/10 444,309 878,574
310900158 49 8/1/00 7/1/10 447,465 588,139
28686 50 8/1/00 7/1/10 408,942 444,415
------------------------------------------------------------------------------------------------------------------------------------
28835 51 9/1/00 8/1/10 406,821 245,718
310900074 52 5/1/00 4/1/10 422,579
28387 53 5/1/00 4/1/10 485,831 1,019,267
310851537 54 5/1/99 4/1/09 384,333 690,716
28919 55 8/1/00 7/1/15 368,056
------------------------------------------------------------------------------------------------------------------------------------
28850 56 10/1/00 9/1/10 402,869 570,237
28995 57 9/1/00 8/1/10 388,595 974,053
310900084 58 6/1/00 5/1/10 393,670 335,413
310900106 59 6/1/00 5/1/10 391,081
29987 60 9/1/00 8/1/10 345,339 275,451
------------------------------------------------------------------------------------------------------------------------------------
10006546 61 8/1/00 7/1/10 342,384 529,494
310900057 62 4/1/00 3/1/10 322,293 534,973
29720 63 9/1/00 8/1/10 334,374 479,379
28494 64 8/1/00 7/1/15 332,817
29643 65 9/1/00 8/1/10 319,972 565,198
------------------------------------------------------------------------------------------------------------------------------------
28009 66 4/1/00 3/1/10 319,261 677,855
10006364 67 5/1/00 4/1/10 313,696 24,366 351,381
25310 68 8/1/00 7/1/10 307,952
28002 69 10/1/00 9/1/10 312,203 665,374
28104 70 6/1/00 5/1/15 374,374 501,028
------------------------------------------------------------------------------------------------------------------------------------
29570 71 8/1/00 7/1/15 376,840 679,883
29570A 406,543
29570B 273,340
310900045 72 4/1/00 3/1/10 293,890
28868 73 7/1/00 6/1/10 279,876 398,724
------------------------------------------------------------------------------------------------------------------------------------
29267 74 7/1/00 6/1/10 274,286 726,593
310900065 75 6/1/00 5/1/10 279,764
310900094 76 7/1/00 6/1/10 272,103 699,476
10006389 77 8/1/00 7/1/10 254,792 416,755
310900053 78 4/1/00 3/1/10 256,721 468,762
------------------------------------------------------------------------------------------------------------------------------------
310900147 79 9/1/00 8/1/10 217,313 455,744
310900097 80 7/1/00 6/1/15 284,450
310900118 81 7/1/00 6/1/10 218,291 445,772
310900153 82 9/1/00 8/1/10 223,778 345,005
310900120 83 7/1/00 6/1/10 221,447 330,013
------------------------------------------------------------------------------------------------------------------------------------
310900126 84 7/1/00 6/1/10 220,015 332,221
310851628 85 9/1/99 8/1/09 206,736 164,917
310900039 86 2/1/00 1/1/10 238,207 376,732
310928353 87 5/1/00 4/1/10 219,202 285,404
310900111 88 8/1/00 7/1/10 197,222 230,508
------------------------------------------------------------------------------------------------------------------------------------
29512 89 10/1/00 9/1/10 194,719
28762 90 7/1/00 6/1/10 195,555 209,798
25481 91 6/1/00 5/1/10 182,900 230,000
26777 92 3/1/00 2/1/10 207,204 113,934
26216 93 11/1/99 10/1/14 173,268 345,420
------------------------------------------------------------------------------------------------------------------------------------
28353 94 10/1/00 9/1/10 206,526 296,281
28353A 52,597
28353B 49,450
28353C 33,884
28353D 48,685
28353E 58,880
28353F 52,785
------------------------------------------------------------------------------------------------------------------------------------
28550 95 6/1/00 5/1/15 224,054 252,122
29397 96 9/1/00 8/1/10 187,228 318,503
310900062 97 4/1/00 3/1/10 209,494
310900113 98 7/1/00 6/1/10 177,612 284,394
310900121 99 7/1/00 6/1/10 181,486 282,025
------------------------------------------------------------------------------------------------------------------------------------
29914 100 9/1/00 8/1/10 176,470 71,421
310900116 101 7/1/00 6/1/10 196,877
310900042 102 2/1/00 1/1/10 177,320 247,454
310900131 103 8/1/00 7/1/10 173,578 274,669
310900119 104 7/1/00 6/1/20 210,742 97,202
------------------------------------------------------------------------------------------------------------------------------------
310900069 105 4/1/00 3/1/15 203,720 278,192
310900096 106 7/1/00 6/1/10 160,844 299,459
310900114 107 7/1/00 6/1/10 146,712 302,866
310900127 108 7/1/00 6/1/10 146,945
310900066 109 4/1/00 3/1/10 155,446 244,092
------------------------------------------------------------------------------------------------------------------------------------
310900080 110 6/1/00 5/1/15 173,774 320,172
310900091 111 6/1/00 5/1/10 140,348 186,618
310900138 112 8/1/00 7/1/10 142,761 204,062
310851150 113 10/1/98 9/1/18 158,251 227,656
310900048 114 3/1/00 2/1/10 140,241 287,679
------------------------------------------------------------------------------------------------------------------------------------
310900085 115 5/1/00 4/1/10 141,741
310900122 116 8/1/00 7/1/10 133,083 228,595
310900132 117 7/1/00 6/1/10 146,884 286,443
310900152 118 9/1/00 8/1/15 176,726 234,841
310900161 119 9/1/00 8/1/10 147,864 193,282
------------------------------------------------------------------------------------------------------------------------------------
310900107 120 6/1/00 5/1/10 132,649 251,127
310900060 121 3/1/00 2/1/10 135,160 45,703
310900092 122 6/1/00 5/1/10 114,900 170,237
310900144 123 9/1/00 8/1/10 121,245 167,379
28578 124 5/1/00 4/1/10 122,892 148,308
------------------------------------------------------------------------------------------------------------------------------------
310900070 125 4/1/00 3/1/10 125,615 466,461
310900095 126 6/1/00 5/1/10 176,283
310900093 127 7/1/00 6/1/10 117,998 149,614
310900108 128 7/1/00 6/1/10 114,984 232,212
26843 129 2/1/00 1/1/15 137,529 309,958
26843A 133,741
26843B 176,217
------------------------------------------------------------------------------------------------------------------------------------
310900081 130 5/1/00 4/1/10 164,828
310900148 131 9/1/00 8/1/15 133,491 211,832
310900157 132 9/1/00 8/1/10 98,750 151,466
310900143 133 8/1/00 7/1/10 102,876 133,534
310900117 134 8/1/00 7/1/10 92,299 185,581
------------------------------------------------------------------------------------------------------------------------------------
310900087 135 5/1/00 4/1/10 95,578 208,917
310900100 136 7/1/00 6/1/20 100,373 203,471
310900104 137 8/1/00 7/1/15 116,522 176,125
310900136 138 8/1/00 7/1/10 88,135 214,464
310900159 139 10/1/00 9/1/15 115,442 281,807
------------------------------------------------------------------------------------------------------------------------------------
310900110 140 7/1/00 6/1/15 106,166
310900103 141 7/1/00 6/1/20 79,203 192,245
310900134 142 8/1/00 7/1/10 74,732 123,533
310900150 143 9/1/00 8/1/15 87,254 136,634
310900179 144 10/1/00 9/1/10 62,570
310900101 145 7/1/00 6/1/20 61,801 101,786
------------------------------------------------------------------------------------------------------------------------------------
Totals/Weighted Avg.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
1999 / T-12 Underwritten Underwritten Debt Service
Net Operating Net Operating Net Cash Coverage
Loan Number Count Income (a) Income Flow Lockbox Ratio
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
310900140 1 12,484,597 11,829,116 11,602,442 1.42
310900140A 3,055,266 2,983,118 2,921,818
310900140B 2,834,033 2,632,150 2,591,200
310900140C 2,583,711 2,507,856 2,456,032
310900140D 2,596,051 2,351,281 2,302,731
310900140E 752,888 767,725 755,075
310900140F 662,648 586,986 575,586
------------------------------------------------------------------------------------------------------------------------------------
28983 2 8,062,340 8,062,340 In Place 1.73
310851623 3 5,067,964 4,522,392 4,383,542 1.41
310851623A 339,581 333,279 324,249 In Place
310851623B 185,984 166,791 160,723 In Place
310851623C 126,597 122,187 117,732 In Place
310851623D 461,121 411,214 400,639 In Place
310851623E 386,633 345,508 334,505 In Place
310851623F 219,979 195,097 187,823 In Place
310851623G 220,082 202,173 194,579 In Place
310851623H 188,691 168,805 163,495 In Place
310851623I 212,334 188,710 183,400 In Place
310851623J 247,614 209,390 201,117 In Place
310851623K 269,928 248,239 238,158 In Place
310851623L 68,212 43,220 38,015 In Place
310851623M 339,744 338,485 330,773 In Place
310851623N 230,335 213,056 207,018 In Place
310851623O 338,823 226,787 220,453 In Place
310851623P 170,927 147,665 140,709 In Place
310851623Q 133,308 110,500 106,384 In Place
310851623R 715,752 652,729 641,638 In Place
310851623S 212,319 198,560 192,135 In Place
------------------------------------------------------------------------------------------------------------------------------------
10006891 4 4,056,976 4,293,799 3,859,179 In Place 1.34
28326 5 3,563,995 3,227,448 3,126,648 1.41
28750 6 2,680,507 2,583,157 Springing 1.33
310900049 7 2,449,223 2,314,795 2,157,250 1.27
310900130 8 2,243,684 2,197,602 2,069,359 1.26
------------------------------------------------------------------------------------------------------------------------------------
26908 9 4,329,026 3,842,724 3,467,291 Springing 2.04
29198 10 3,512,965 3,362,227 In Place 1.99
310900195 11 2,503,614 2,085,871 2,058,971 1.49
29083 12 2,020,248 1,988,071 1.50
29083A 1,002,687 989,280
29083B 1,017,561 998,792
------------------------------------------------------------------------------------------------------------------------------------
29106 13 1,881,767 1,800,156 1.43
28225 14 2,170,914 2,011,365 1.80
29453 15 2,498,192 2,318,808 2.05
310900170 16 2,914,764 2,578,083 2,419,848 2.03
26188 17 2,103,193 1,923,816 1.60
26188A 1,598,229 1,458,800
26188B 504,965 465,015
------------------------------------------------------------------------------------------------------------------------------------
29476 18 1,570,217 1,740,836 1,645,634 1.45
29476A 719,631 797,825 755,330
29476B 850,586 943,011 890,304
310900086 19 1,415,422 1,390,931 1,302,774 1.19
310900112 20 1,278,284 1,262,801 1,229,440 1.42
------------------------------------------------------------------------------------------------------------------------------------
310900190 21 1,160,176 1,704,999 1,505,602 1.65
27752 22 1,406,501 1,262,514 1.44
29028 23 1,199,749 1,170,630 1,084,880 1.30
29028A 354,541 314,552 293,552
29028B 360,081 352,104 330,604
29028C 252,291 263,147 240,647
29028D 232,837 240,827 220,077
------------------------------------------------------------------------------------------------------------------------------------
310900040 24 1,052,891 1,526,415 1,412,133 1.39
29136 25 1,180,107 1,079,624 In Place 1.31
310900044 26 1,057,689 1,057,689 995,773 1.23
29676 27 1,489,649 1,372,673 1.71
310851554 28 1,179,361 1,161,126 1,103,024 1.38
28636 29 1,243,706 1,131,405 1.80
------------------------------------------------------------------------------------------------------------------------------------
29458 30 1,087,899 1,066,289 1.34
29458A 208,972 204,248
29458B 249,153 243,970
29458C 499,682 490,981
29458D 130,093 127,090
------------------------------------------------------------------------------------------------------------------------------------
10006313 31 418,554 1,044,026 986,234 1.45
26301 32 1,392,978 1,160,731 1.85
29003 33 1,638,052 1,130,198 946,598 1.51
28935 34 1,153,005 1,129,365 2.10
28431 35 1,012,003 902,472 Springing 1.47
------------------------------------------------------------------------------------------------------------------------------------
310900090 36 929,863 887,000 835,801 Springing 1.47
9905316 37 652,511 726,103 663,103 1.43
310900055 38 804,195 812,048 764,405 1.38
310900073 39 563,500 1,083,301 940,464 In Place 1.81
26508 40 755,052 696,842 1.41
------------------------------------------------------------------------------------------------------------------------------------
9905051 41 623,263 742,884 679,516 1.44
28244 42 797,330 733,150 1.42
310851629 43 827,990 824,901 742,942 1.64
310900123 44 606,444 652,242 608,242 1.31
310900009 45 783,848 636,465 573,025 1.28
------------------------------------------------------------------------------------------------------------------------------------
310900176 46 751,284 720,997 657,279 1.51
310900082 47 741,891 655,518 617,940 1.51
310900056 48 827,693 816,373 736,304 1.66
310900158 49 671,364 656,752 585,692 In Place 1.31
28686 50 795,010 710,905 1.74
------------------------------------------------------------------------------------------------------------------------------------
28835 51 558,300 517,050 1.27
310900074 52 597,860 603,035 550,812 1.30
28387 53 864,617 806,227 768,025 1.58
310851537 54 580,482 567,076 543,302 1.41
28919 55 521,661 504,222 1.37
------------------------------------------------------------------------------------------------------------------------------------
28850 56 617,130 590,102 574,965 1.43
28995 57 1,022,076 918,488 901,988 2.32
310900084 58 580,787 571,050 513,550 1.30
310900106 59 472,681 463,132 458,932 1.17
29987 60 387,006 490,896 469,418 1.36
------------------------------------------------------------------------------------------------------------------------------------
10006546 61 542,531 587,814 509,738 1.49
310900057 62 577,483 576,358 550,078 1.71
29720 63 511,544 481,097 1.44
28494 64 442,320 424,981 In Place 1.28
29643 65 231,926 627,536 598,878 1.87
------------------------------------------------------------------------------------------------------------------------------------
28009 66 542,637 506,437 1.59
10006364 67 414,339 460,195 425,185 1.36
25310 68 589,323 551,118 Springing 1.79
28002 69 581,204 521,164 1.67
28104 70 492,135 516,435 506,435 1.35
------------------------------------------------------------------------------------------------------------------------------------
29570 71 645,996 566,346 1.50
29570A 357,881 316,095
29570B 288,114 250,252
310900045 72 471,407 439,921 411,128 In Place 1.40
28868 73 394,697 379,844 1.36
------------------------------------------------------------------------------------------------------------------------------------
29267 74 743,684 562,684 556,834 2.03
310900065 75 391,065 390,096 374,796 1.34
310900094 76 486,417 569,047 519,388 1.91
10006389 77 421,495 440,630 403,616 Springing 1.58
310900053 78 486,844 470,176 392,643 1.53
------------------------------------------------------------------------------------------------------------------------------------
310900147 79 454,396 431,593 412,843 1.90
310900097 80 329,891 335,901 324,596 1.14
310900118 81 466,771 430,480 344,238 1.58
310900153 82 348,332 336,811 320,108 1.43
310900120 83 318,840 308,563 288,413 1.30
------------------------------------------------------------------------------------------------------------------------------------
310900126 84 349,742 332,836 321,605 1.46
310851628 85 296,431 296,167 274,543 1.33
310900039 86 431,670 401,724 338,867 1.42
310928353 87 319,699 316,412 297,611 1.36
310900111 88 232,980 282,731 261,157 1.32
------------------------------------------------------------------------------------------------------------------------------------
29512 89 257,613 256,115 1.32
28762 90 290,843 274,426 1.40
25481 91 218,638 218,638 In Place 1.20
26777 92 359,972 343,806 1.66
26216 93 392,150 369,150 2.13
------------------------------------------------------------------------------------------------------------------------------------
28353 94 296,281 281,012 281,012 1.36
28353A 52,597 47,076 47,076
28353B 49,450 47,472 47,472
28353C 33,884 32,529 32,529
28353D 48,685 46,738 46,738
28353E 58,880 56,525 56,525
28353F 52,785 50,674 50,674
------------------------------------------------------------------------------------------------------------------------------------
28550 95 348,492 321,958 1.44
29397 96 357,475 355,076 350,663 1.87
310900062 97 283,443 292,338 278,738 1.33
310900113 98 258,001 245,748 234,498 1.32
310900121 99 271,518 258,317 229,173 1.26
------------------------------------------------------------------------------------------------------------------------------------
29914 100 286,524 269,112 255,612 1.45
310900116 101 312,076 311,313 284,900 1.45
310900042 102 252,504 234,966 225,347 Springing 1.27
310900131 103 267,820 274,500 249,399 1.44
310900119 104 454,188 423,169 388,598 1.84
------------------------------------------------------------------------------------------------------------------------------------
310900069 105 287,715 268,592 259,192 1.27
310900096 106 325,203 307,712 284,926 1.77
310900114 107 277,151 289,857 272,587 1.86
310900127 108 224,487 213,596 211,960 1.44
310900066 109 246,443 255,690 224,339 1.44
------------------------------------------------------------------------------------------------------------------------------------
310900080 110 339,378 230,511 203,891 1.17
310900091 111 215,174 214,809 197,788 1.41
310900138 112 204,539 197,602 185,902 1.30
310851150 113 221,521 228,601 204,268 1.29
310900048 114 406,656 348,843 284,920 2.03
------------------------------------------------------------------------------------------------------------------------------------
310900085 115 203,093 206,262 194,312 1.37
310900122 116 217,525 194,913 182,913 1.37
310900132 117 286,443 274,004 271,919 1.85
310900152 118 245,165 266,223 238,754 1.35
310900161 119 222,294 213,279 203,075 1.37
------------------------------------------------------------------------------------------------------------------------------------
310900107 120 262,597 233,168 218,907 1.65
310900060 121 202,246 197,830 176,626 1.31
310900092 122 161,971 174,286 161,786 1.41
310900144 123 165,129 163,891 152,487 1.26
28578 124 141,915 189,357 168,795 1.37
------------------------------------------------------------------------------------------------------------------------------------
310900070 125 446,153 478,145 438,666 3.49
310900095 126 237,252 234,443 224,824 Springing 1.28
310900093 127 243,983 221,533 203,494 1.72
310900108 128 246,711 252,787 235,969 2.05
26843 129 307,551 255,694 230,694 1.68
26843A 132,353 102,105 89,605
26843B 175,198 153,590 141,090
------------------------------------------------------------------------------------------------------------------------------------
310900081 130 235,224 232,800 232,800 1.41
310900148 131 226,197 182,040 174,255 1.31
310900157 132 150,331 156,475 138,475 1.40
310900143 133 153,043 155,312 141,156 1.37
310900117 134 147,164 141,341 131,741 1.43
------------------------------------------------------------------------------------------------------------------------------------
310900087 135 142,718 177,472 157,524 1.65
310900100 136 199,552 200,882 179,540 1.79
310900104 137 228,378 243,992 222,618 1.91
310900136 138 250,609 258,467 231,015 2.62
310900159 139 333,843 284,733 265,673 2.30
------------------------------------------------------------------------------------------------------------------------------------
310900110 140 145,873 143,325 128,482 1.21
310900103 141 198,263 192,578 177,726 2.24
310900134 142 139,069 128,872 109,681 1.47
310900150 143 142,097 114,120 109,117 1.25
310900179 144 97,386 95,003 88,889 1.42
310900101 145 105,849 104,396 95,078 1.54
------------------------------------------------------------------------------------------------------------------------------------
Totals/Weighted Avg 1.52x
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Effective
Lockout Effective
Appraised Cut-Off Maturity Period Lockout
Loan Number Count Value LTV LTV (mos.) End Date
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
310900140 1 62.17% 55.51% 117 4/30/10
310900140A 35,800,000 66.81% 59.65%
310900140B 32,300,000 63.25% 56.47%
310900140C 33,600,000 57.84% 51.64%
310900140D 32,675,000 58.86% 52.55%
310900140E 8,800,000 69.76% 62.28%
310900140F 7,900,000 60.43% 53.95%
------------------------------------------------------------------------------------------------------------------------------------
28983 2 63,520,000 50.07% 0.00% 109 7/31/09
310851623 3 68.99% 58.39% 117 6/30/09
310851623A 3,130,000 71.38% 60.42%
310851623B 1,590,000 75.32% 63.76%
310851623C 970,000 88.00% 74.49%
310851623D 3,760,000 62.02% 52.50%
310851623E 3,060,000 68.87% 58.29%
310851623F 1,790,000 90.02% 76.20%
310851623G 1,820,000 79.64% 67.41%
310851623H 1,730,000 60.47% 51.18%
310851623I 1,940,000 66.25% 56.08%
310851623J 2,150,000 69.72% 59.02%
310851623K 2,530,000 61.44% 52.00%
310851623L 630,000 95.00% 80.41%
310851623M 3,360,000 61.53% 52.08%
310851623N 2,470,000 74.16% 62.77%
310851623O 3,520,000 71.37% 60.42%
310851623P 1,370,000 69.41% 58.75%
310851623Q 1,300,000 69.78% 59.06%
310851623R 6,900,000 64.05% 54.21%
310851623S 1,970,000 64.42% 54.53%
------------------------------------------------------------------------------------------------------------------------------------
10006891 4 46,000,000 64.62% 59.19% 117 4/30/10
28326 5 37,000,000 68.67% 60.43% 120 1/31/10
28750 6 28,600,000 73.98% 66.95% 120 5/31/10
310900049 7 27,600,000 65.96% 59.97% 117 3/31/10
310900130 8 26,000,000 69.57% 62.70% 117 6/30/10
------------------------------------------------------------------------------------------------------------------------------------
26908 9 31,700,000 56.14% 47.02% 120 9/30/09
29198 10 35,625,000 49.88% 41.58% 120 4/30/10
310900195 11 22,650,000 69.46% 62.20% 116 4/30/10
29083 12 60.68% 54.22% 120 8/31/10
29083A 12,750,000 59.18% 52.88%
29083B 12,200,000 62.25% 55.63%
------------------------------------------------------------------------------------------------------------------------------------
29106 13 23,000,000 59.92% 54.12% 119 5/31/10
28225 14 28,300,000 47.17% 41.54% 0 2/29/00
29453 15 28,100,000 46.19% 41.28% 120 6/30/10
310900170 16 40,900,000 31.72% 26.10% 117 5/31/10
26188 17 43.00% 35.85% 120 7/31/10
26188A 22,500,000 41.38% 34.50%
26188B 6,750,000 48.42% 40.37%
------------------------------------------------------------------------------------------------------------------------------------
29476 18 57.48% 54.41% 84 6/30/07
29476A 9,382,500 58.55% 55.42%
29476B 11,467,500 56.61% 53.59%
310900086 19 15,000,000 68.28% 3.76% 237 3/31/20
310900112 20 13,000,000 76.74% 68.47% 117 3/31/10
------------------------------------------------------------------------------------------------------------------------------------
310900190 21 23,000,000 42.89% 35.36% 117 6/30/10
27752 22 13,000,000 72.75% 66.04% 119 11/30/09
29028 23 78.04% 70.27% 120 6/30/10
29028A 2,900,000 90.90% 81.86%
29028B 3,400,000 78.71% 70.88%
29028C 2,700,000 75.78% 68.24%
29028D 2,900,000 66.49% 59.88%
------------------------------------------------------------------------------------------------------------------------------------
310900040 24 15,700,000 55.70% 1.34% 174 11/30/14
29136 25 13,200,000 66.20% 60.26% 120 6/30/10
310900044 26 11,600,000 75.00% 68.11% 117 2/28/10
29676 27 16,300,000 52.66% 35.32% 180 7/31/15
310851554 28 12,170,000 69.62% 63.46% 117 12/31/09
28636 29 16,000,000 50.00% 50.00% 129 2/28/11
------------------------------------------------------------------------------------------------------------------------------------
29458 30 53.87% 24.84% 180 8/31/15
29458A 2,600,000 55.30% 25.50%
29458B 3,000,000 57.08% 26.32%
29458C 5,500,000 62.63% 28.88%
29458D 2,800,000 31.91% 14.72%
------------------------------------------------------------------------------------------------------------------------------------
10006313 31 12,500,000 59.81% 54.06% 117 12/31/09
26301 32 16,300,000 42.44% 34.99% 24 10/31/01
29003 33 11,200,000 62.37% 56.14% 120 5/31/10
28935 34 14,400,000 48.26% 48.26% 0 3/31/00
28431 35 9,100,000 74.49% 67.25% 120 3/31/10
------------------------------------------------------------------------------------------------------------------------------------
310900090 36 10,200,000 62.00% 55.87% 114 11/30/09
9905316 37 8,350,000 66.30% 58.94% 117 4/30/09
310900055 38 8,650,000 61.54% 2.95% 237 10/31/19
310900073 39 9,870,000 54.24% 2.04% 237 2/28/20
26508 40 7,600,000 70.43% 63.79% 120 6/30/10
------------------------------------------------------------------------------------------------------------------------------------
9905051 41 8,000,000 66.08% 59.65% 117 4/30/09
28244 42 7,150,000 71.37% 59.23% 120 4/30/10
310851629 43 8,300,000 59.38% 49.34% 117 5/31/09
310900123 44 6,500,000 75.95% 69.12% 117 3/31/10
310900009 45 7,150,000 67.47% 61.33% 117 12/31/09
------------------------------------------------------------------------------------------------------------------------------------
310900176 46 8,350,000 57.42% 47.02% 117 6/30/10
310900082 47 8,100,000 58.47% 52.18% 117 2/28/10
310900056 48 7,875,000 59.31% 49.54% 117 12/31/09
310900158 49 7,600,000 60.38% 50.71% 117 4/30/10
28686 50 12,100,000 37.08% 30.46% 120 6/30/10
------------------------------------------------------------------------------------------------------------------------------------
28835 51 6,200,000 71.70% 64.78% 120 7/31/10
310900074 52 6,100,000 72.75% 66.46% 117 1/31/10
28387 53 7,600,000 57.15% 34.72% 120 3/31/10
310851537 54 7,630,000 54.03% 45.21% 114 10/31/08
28919 55 6,700,000 61.47% 49.51% 180 6/30/15
------------------------------------------------------------------------------------------------------------------------------------
28850 56 5,700,000 70.99% 59.94% 120 8/31/10
28995 57 12,000,000 33.22% 23.15% 120 7/31/10
310900084 58 5,230,000 74.45% 52.92% 117 2/28/10
310900106 59 5,750,000 67.37% 47.85% 117 2/28/10
29987 60 5,100,000 72.48% 65.81% 120 7/31/10
------------------------------------------------------------------------------------------------------------------------------------
10006546 61 7,200,000 50.49% 45.96% 117 3/31/10
310900057 62 6,100,000 58.39% 52.73% 116 11/30/09
29720 63 5,200,000 68.21% 62.07% 120 7/31/10
28494 64 5,000,000 69.92% 57.90% 180 6/30/15
29643 65 6,600,000 52.98% 47.86% 120 7/31/10
------------------------------------------------------------------------------------------------------------------------------------
28009 66 5,400,000 63.01% 52.40% 120 2/28/10
10006364 67 4,760,000 71.95% 65.98% 117 12/31/09
25310 68 6,000,000 56.59% 51.04% 120 6/30/10
28002 69 6,100,000 55.68% 45.79% 117 5/31/10
28104 70 6,200,000 53.25% 1.16% 180 4/30/15
------------------------------------------------------------------------------------------------------------------------------------
29570 71 41.42% 0.98% 180 6/30/15
29570A 4,200,000 43.49% 1.03%
29570B 3,700,000 39.08% 0.92%
310900045 72 5,000,000 65.75% 59.20% 117 12/31/09
28868 73 4,050,000 73.93% 67.19% 120 5/31/10
------------------------------------------------------------------------------------------------------------------------------------
29267 74 6,400,000 46.69% 38.46% 120 5/31/10
310900065 75 4,100,000 72.84% 60.46% 117 2/28/10
310900094 76 7,050,000 42.46% 38.33% 117 3/31/10
10006389 77 4,650,000 60.13% 54.30% 117 3/31/10
310900053 78 4,300,000 60.12% 50.92% 117 12/31/09
------------------------------------------------------------------------------------------------------------------------------------
310900147 79 4,800,000 52.02% 46.42% 117 5/31/10
310900097 80 3,290,000 72.17% 1.96% 177 3/31/15
310900118 81 4,637,000 51.65% 46.66% 117 3/31/10
310900153 82 3,550,000 67.54% 61.31% 117 5/31/10
310900120 83 3,400,000 68.99% 62.85% 117 3/31/10
------------------------------------------------------------------------------------------------------------------------------------
310900126 84 7,200,000 31.83% 26.61% 117 3/31/10
310851628 85 3,075,000 71.06% 59.55% 117 5/31/09
310900039 86 3,300,000 65.81% 48.69% 117 10/31/09
310928353 87 3,205,000 68.31% 57.96% 117 1/31/10
310900111 88 2,950,000 74.47% 67.00% 117 4/30/10
------------------------------------------------------------------------------------------------------------------------------------
29512 89 3,100,000 68.51% 61.89% 120 8/31/10
28762 90 3,300,000 63.51% 57.70% 120 5/31/10
25481 91 2,575,000 78.44% 70.78% 120 4/30/10
26777 92 4,100,000 48.76% 35.13% 120 1/31/10
26216 93 3,700,000 53.66% 42.91% 180 9/30/14
------------------------------------------------------------------------------------------------------------------------------------
28353 94 62.94% 53.79% 24 8/31/02
28353A 470,000 71.23% 60.87%
28353B 550,000 61.38% 52.46%
28353C 375,000 61.68% 52.72%
28353D 540,000 61.55% 52.60%
28353E 655,000 61.37% 52.45%
28353F 585,000 61.60% 52.64%
------------------------------------------------------------------------------------------------------------------------------------
28550 95 3,600,000 54.75% 1.21% 180 4/30/15
29397 96 3,700,000 53.95% 44.71% 120 7/31/10
310900062 97 3,450,000 57.37% 41.71% 117 12/31/09
310900113 98 2,700,000 73.91% 66.38% 117 3/31/10
310900121 99 2,750,000 72.58% 65.52% 117 3/31/10
------------------------------------------------------------------------------------------------------------------------------------
29914 100 2,975,000 66.32% 59.58% 120 7/31/10
310900116 101 2,685,000 72.53% 51.49% 117 3/31/10
310900042 102 3,000,000 64.85% 58.71% 117 10/31/09
310900131 103 2,600,000 73.74% 66.48% 117 4/30/10
310900119 104 4,500,000 42.00% 2.68% 237 3/31/20
------------------------------------------------------------------------------------------------------------------------------------
310900069 105 2,950,000 57.37% 1.58% 177 12/31/14
310900096 106 3,390,000 49.97% 41.62% 117 3/31/10
310900114 107 3,040,000 55.79% 49.75% 117 3/31/10
310900127 108 2,600,000 63.32% 56.91% 117 3/31/10
310900066 109 3,060,000 52.78% 44.25% 117 12/31/09
------------------------------------------------------------------------------------------------------------------------------------
310900080 110 2,350,000 67.75% 15.41% 177 2/28/15
310900091 111 2,090,000 76.34% 68.40% 117 2/28/10
310900138 112 2,000,000 79.88% 71.79% 117 4/30/10
310851150 113 2,300,000 64.37% 0.00% 59 7/31/03
310900048 114 4,300,000 34.61% 28.84% 117 11/30/09
------------------------------------------------------------------------------------------------------------------------------------
310900085 115 2,300,000 64.86% 54.11% 117 1/31/10
310900122 116 2,000,000 74.88% 67.20% 117 4/30/10
310900132 117 3,470,000 42.94% 30.13% 117 3/31/10
310900152 118 2,250,000 66.31% 1.74% 177 5/31/15
310900161 119 2,450,000 61.13% 51.51% 117 5/31/10
------------------------------------------------------------------------------------------------------------------------------------
310900107 120 2,600,000 53.68% 44.77% 117 2/28/10
310900060 121 2,150,000 63.28% 53.62% 117 11/30/09
310900092 122 1,940,000 68.10% 60.85% 117 2/28/10
310900144 123 2,000,000 66.18% 59.81% 117 5/31/10
28578 124 1,940,000 66.83% 60.98% 120 3/31/10
------------------------------------------------------------------------------------------------------------------------------------
310900070 125 5,000,000 25.84% 21.74% 117 12/31/09
310900095 126 2,700,000 47.17% 10.97% 117 2/28/10
310900093 127 2,475,000 48.33% 40.76% 117 3/31/10
310900108 128 3,000,000 39.86% 33.34% 117 3/31/10
26843 129 38.19% 0.99% 48 12/31/03
26843A 1,300,000 39.00% 1.02%
26843B 1,700,000 37.57% 0.98%
------------------------------------------------------------------------------------------------------------------------------------
310900081 130 3,050,000 34.93% 0.47% 117 1/31/10
310900148 131 1,925,000 56.85% 1.68% 177 5/31/15
310900157 132 1,400,000 78.49% 70.60% 117 5/31/10
310900143 133 1,500,000 71.49% 59.72% 117 4/30/10
310900117 134 1,360,000 74.89% 67.53% 117 4/30/10
------------------------------------------------------------------------------------------------------------------------------------
310900087 135 2,300,000 43.25% 36.21% 117 1/31/10
310900100 136 2,180,000 45.58% 1.99% 237 3/31/20
310900104 137 2,590,000 38.30% 0.98% 177 4/30/15
310900136 138 3,100,000 32.21% 28.86% 117 4/30/10
310900159 139 3,040,000 32.80% 0.78% 177 6/30/15
------------------------------------------------------------------------------------------------------------------------------------
310900110 140 1,250,000 69.67% 2.03% 177 3/31/15
310900103 141 2,075,000 36.41% 1.83% 237 3/31/20
310900134 142 1,300,000 58.32% 49.16% 117 4/30/10
310900150 143 1,200,000 59.61% 1.76% 177 5/31/15
310900179 144 940,000 72.30% 65.38% 117 6/30/10
310900101 145 1,200,000 49.69% 2.39% 237 3/31/20
------------------------------------------------------------------------------------------------------------------------------------
Totals/Weighted Avg. 60.71% 48.10%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Call Free Prepay
Loan Number Count Call Protection Protection Window
End Date (mos.)
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
310900140 1 Defeasance 4/30/10 3
310900140A
310900140B
310900140C
310900140D
310900140E
310900140F
--------------------------------------------------------------------------------------------------------
28983 2 Defeasance 7/31/09 0
310851623 3 Defeasance 6/30/09 3
310851623A
310851623B
310851623C
310851623D
310851623E
310851623F
310851623G
310851623H
310851623I
310851623J
310851623K
310851623L
310851623M
310851623N
310851623O
310851623P
310851623Q
310851623R
310851623S
--------------------------------------------------------------------------------------------------------
10006891 4 Defeasance 4/30/10 3
28326 5 Defeasance 1/31/10 0
28750 6 Defeasance 5/31/10 0
310900049 7 Defeasance 3/31/10 3
310900130 8 Defeasance 6/30/10 3
--------------------------------------------------------------------------------------------------------
26908 9 Defeasance 9/30/09 0
29198 10 Defeasance 4/30/10 0
310900195 11 Defeasance 4/30/10 3
29083 12 Defeasance 8/31/10 0
29083A
29083B
--------------------------------------------------------------------------------------------------------
29106 13 Defeasance 5/31/10 1
28225 14 >1% or Yield Maintenance 2/28/10 0
29453 15 Defeasance 6/30/10 0
310900170 16 Defeasance 5/31/10 3
26188 17 Defeasance 7/31/10 0
26188A
26188B
--------------------------------------------------------------------------------------------------------
29476 18 Defeasance 6/30/07 0
29476A
29476B
310900086 19 Defeasance 3/31/20 3
310900112 20 Defeasance 3/31/10 3
--------------------------------------------------------------------------------------------------------
310900190 21 Defeasance 6/30/10 3
27752 22 Defeasance 11/30/09 1
29028 23 Defeasance 6/30/10 0
29028A
29028B
29028C
29028D
--------------------------------------------------------------------------------------------------------
310900040 24 Defeasance 11/30/14 6
29136 25 Defeasance 6/30/10 0
310900044 26 Defeasance 2/28/10 3
29676 27 Defeasance 7/31/15 0
310851554 28 Defeasance 12/31/09 3
28636 29 Defeasance 2/28/11 3
--------------------------------------------------------------------------------------------------------
29458 30 Defeasance 8/31/15 0
29458A
29458B
29458C
29458D
--------------------------------------------------------------------------------------------------------
10006313 31 Defeasance 12/31/09 3
26301 32 >1% or Yield Maintenance 7/31/09 3
29003 33 Defeasance 5/31/10 0
28935 34 >1% or Yield Maintenance 3/31/10 0
28431 35 Defeasance 3/31/10 0
--------------------------------------------------------------------------------------------------------
310900090 36 Defeasance 11/30/09 6
9905316 37 Defeasance 4/30/09 3
310900055 38 Defeasance 10/31/19 3
310900073 39 Defeasance 2/28/20 3
26508 40 Defeasance 6/30/10 0
--------------------------------------------------------------------------------------------------------
9905051 41 Defeasance 4/30/09 3
28244 42 Defeasance 4/30/10 0
310851629 43 Defeasance 5/31/09 3
310900123 44 Defeasance 3/31/10 3
310900009 45 Defeasance 12/31/09 3
--------------------------------------------------------------------------------------------------------
310900176 46 Defeasance 6/30/10 3
310900082 47 Defeasance 2/28/10 3
310900056 48 Defeasance 12/31/09 3
310900158 49 Defeasance 4/30/10 3
28686 50 Defeasance 6/30/10 0
--------------------------------------------------------------------------------------------------------
28835 51 Defeasance 7/31/10 0
310900074 52 Defeasance 1/31/10 3
28387 53 Defeasance 3/31/10 0
310851537 54 Defeasance 10/31/08 6
28919 55 Defeasance 6/30/15 0
--------------------------------------------------------------------------------------------------------
28850 56 Defeasance 8/31/10 0
28995 57 Defeasance 7/31/10 0
310900084 58 Defeasance 2/28/10 3
310900106 59 Defeasance 2/28/10 3
29987 60 Defeasance 7/31/10 0
--------------------------------------------------------------------------------------------------------
10006546 61 Defeasance 3/31/10 3
310900057 62 Defeasance 11/30/09 4
29720 63 Defeasance 7/31/10 0
28494 64 Defeasance 6/30/15 0
29643 65 Defeasance 7/31/10 0
--------------------------------------------------------------------------------------------------------
28009 66 Defeasance 2/28/10 0
10006364 67 Defeasance 12/31/09 3
25310 68 Defeasance 6/30/10 0
28002 69 Defeasance 5/31/10 3
28104 70 Defeasance 4/30/15 0
--------------------------------------------------------------------------------------------------------
29570 71 Defeasance 6/30/15 0
29570A
29570B
310900045 72 Defeasance 12/31/09 3
28868 73 Defeasance 5/31/10 0
--------------------------------------------------------------------------------------------------------
29267 74 Defeasance 5/31/10 0
310900065 75 Defeasance 2/28/10 3
310900094 76 Defeasance 3/31/10 3
10006389 77 Defeasance 3/31/10 3
310900053 78 Defeasance 12/31/09 3
--------------------------------------------------------------------------------------------------------
310900147 79 Defeasance 5/31/10 3
310900097 80 Defeasance 3/31/15 3
310900118 81 Defeasance 3/31/10 3
310900153 82 Defeasance 5/31/10 3
310900120 83 Defeasance 3/31/10 3
--------------------------------------------------------------------------------------------------------
310900126 84 Defeasance 3/31/10 3
310851628 85 Defeasance 5/31/09 3
310900039 86 Defeasance 10/31/09 3
310928353 87 Defeasance 1/31/10 3
310900111 88 Defeasance 4/30/10 3
--------------------------------------------------------------------------------------------------------
29512 89 Defeasance 8/31/10 0
28762 90 Defeasance 5/31/10 0
25481 91 Defeasance 4/30/10 0
26777 92 Defeasance 1/31/10 0
26216 93 Defeasance 9/30/14 0
--------------------------------------------------------------------------------------------------------
28353 94 >1% or Yield Maintenance 5/31/10 3
28353A
28353B
28353C
28353D
28353E
28353F
--------------------------------------------------------------------------------------------------------
28550 95 Defeasance 4/30/15 0
29397 96 Defeasance 7/31/10 0
310900062 97 Defeasance 12/31/09 3
310900113 98 Defeasance 3/31/10 3
310900121 99 Defeasance 3/31/10 3
--------------------------------------------------------------------------------------------------------
29914 100 Defeasance 7/31/10 0
310900116 101 Defeasance 3/31/10 3
310900042 102 Defeasance 10/31/09 3
310900131 103 Defeasance 4/30/10 3
310900119 104 Defeasance 3/31/20 3
--------------------------------------------------------------------------------------------------------
310900069 105 Defeasance 12/31/14 3
310900096 106 Defeasance 3/31/10 3
310900114 107 Defeasance 3/31/10 3
310900127 108 Defeasance 3/31/10 3
310900066 109 Defeasance 12/31/09 3
--------------------------------------------------------------------------------------------------------
310900080 110 Defeasance 2/28/15 3
310900091 111 Defeasance 2/28/10 3
310900138 112 Defeasance 4/30/10 3
310851150 113 YM and Declining Fee 3/31/18 6
310900048 114 Defeasance 11/30/09 3
--------------------------------------------------------------------------------------------------------
310900085 115 Defeasance 1/31/10 3
310900122 116 Defeasance 4/30/10 3
310900132 117 Defeasance 3/31/10 3
310900152 118 Defeasance 5/31/15 3
310900161 119 Defeasance 5/31/10 3
--------------------------------------------------------------------------------------------------------
310900107 120 Defeasance 2/28/10 3
310900060 121 Defeasance 11/30/09 3
310900092 122 Defeasance 2/28/10 3
310900144 123 Defeasance 5/31/10 3
28578 124 Defeasance 3/31/10 0
--------------------------------------------------------------------------------------------------------
310900070 125 Defeasance 12/31/09 3
310900095 126 Defeasance 2/28/10 3
310900093 127 Defeasance 3/31/10 3
310900108 128 Defeasance 3/31/10 3
26843 129 >1% or Yield Maintenance 12/31/14 0
26843A
26843B
--------------------------------------------------------------------------------------------------------
310900081 130 Defeasance 1/31/10 3
310900148 131 Defeasance 5/31/15 3
310900157 132 Defeasance 5/31/10 3
310900143 133 Defeasance 4/30/10 3
310900117 134 Defeasance 4/30/10 3
--------------------------------------------------------------------------------------------------------
310900087 135 Defeasance 1/31/10 3
310900100 136 Defeasance 3/31/20 3
310900104 137 Defeasance 4/30/15 3
310900136 138 Defeasance 4/30/10 3
310900159 139 Defeasance 6/30/15 3
--------------------------------------------------------------------------------------------------------
310900110 140 Defeasance 3/31/15 3
310900103 141 Defeasance 3/31/20 3
310900134 142 Defeasance 4/30/10 3
310900150 143 Defeasance 5/31/15 3
310900179 144 Defeasance 6/30/10 3
310900101 145 Defeasance 3/31/20 3
--------------------------------------------------------------------------------------------------------
Totals/Weig.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Loan Number Count Address City
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
310900140 1
310900140A 201 Forest Drive Leesburg
310900140B 6603 Colonoial Drive Margate
310900140C 161 Tollview Road Elgin
310900140D 2210 North Tamiami Trail, N.E. North Fort Meyers
310900140E 2395 Delaware Avenue Santa Cruz
310900140F 1200 East Colonia Lane Nokomis
------------------------------------------------------------------------------------------------------------------------------------
28983 2 333 Central Avenue Johnston
310851623 3
310851623A 351 East Belt Boulevard Richmond
310851623B 12280 N. 51st Avenue Glendale
310851623C 849 Highway 105 Bypass Boone
310851623D 1600 Highland Avenue Chester
310851623E 2828 Marietta Street Kenner
310851623F 125 Decker Park Road Columbia
310851623G 156 Jamil Road Columbia
310851623H 1325 Holland Road Suffolk
310851623I 971 Elm Drive Mechanicsville
310851623J 4540 Washington Road College Park
310851623K 6224 Asher Avenue Little Rock
310851623L 5604 S. Kings Highway Myrtle Beach
310851623M 2930 North Boulevard Richmond
310851623N 1480 Annapolis Road Odenton
310851623O 45715 Old Ox Road Sterling
310851623P 5919 Financial Plaza Shreveport
310851623Q 7201 Westbank Expressway Marrero
310851623R 6175 Paseo Del Norte Carlsbad
310851623S 2775 W. Foothill Boulevard Rialto
------------------------------------------------------------------------------------------------------------------------------------
10006891 4 700 East and 600 South Streets Salt Lake City
28326 5 7902 MacArthur Boulevard Irving
28750 6 6451 East Pacific Coast Highway Long Beach
310900049 7 5800 Industrial Drive Monee
310900130 8 1635 Divisadero Street San Francisco
------------------------------------------------------------------------------------------------------------------------------------
26908 9 10741 N. Wolfe Road Cupertino
29198 10 28250 Diehl Road Warrenville
310900195 11 36 Date Palm Drive Cathedral City
29083 12
29083A 17 E. 13th Street & 18-20 E. 14th Street New York
29083B 58-60 W. 14th Street New York
------------------------------------------------------------------------------------------------------------------------------------
29106 13 1809 Reisterstown Road Pikesville
28225 14 2100 North Central Road Fort Lee
29453 15 410 Jessie Street San Francisco
310900170 16 1200, 1202, 1206, 1210, 1220 & 1230 Charleston Road Mountain View
26188 17
26188A 855 Publishers Parkway Webster
26188B 655 A, B, C Basket Road Webster
------------------------------------------------------------------------------------------------------------------------------------
29476 18
29476A 10001 N. DeAnza Boulevard Cupertino
29476B 10101 N. DeAnza Boulevard Cupertino
310900086 19 1305-1699 E. Noble Avenue Visalia
310900112 20 17211, 17205, 17121, 17171 South Golden Road Golden
------------------------------------------------------------------------------------------------------------------------------------
310900190 21 1684-1700 Dell Avenue Campbell
27752 22 230 South Broad Street Philadelphia
29028 23
29028A 3206 Township Line Road Drexel Hill
29028B 504 South Lansdowne Avenue Yeadon
29028C 312 East Baltimore Pike Clifton Heights
29028D 144 South Morton Avenue Delaware County
------------------------------------------------------------------------------------------------------------------------------------
310900040 24 3050 West Shaw Avenue Fresno
29136 25 125 Fisher Street Westborough
310900044 26 13103 Bay Park Drive Pasadena
29676 27 161 Nortech Parkway San Jose
310851554 28 31863 & 31878-31882 Del Obispo Street San Juan Capistrano
28636 29 7255 Baymeadows Way Jacksonville
------------------------------------------------------------------------------------------------------------------------------------
29458 30
29458A 4000 Paige Road/State Highway 121 The Colony
29458B 10967 & 10969 Walnut Hill Lane Dallas
29458C 15055-15065 Inwood Road Addison
29458D 8123 Preston Road Dallas
------------------------------------------------------------------------------------------------------------------------------------
10006313 31 15505-15507 N. Scottsdale Road Scottsdale
26301 32 2120 L Street NW Washington
29003 33 1705 Jenkins Road Pasadena
28935 34 One Carrier Corporation Farmington
28431 35 18201 NW 2nd Avenue Miami
------------------------------------------------------------------------------------------------------------------------------------
310900090 36 180 Redwood Street San Francisco
9905316 37 10601 Sabo Road Houston
310900055 38 9453 Owensmouth Avenue & 9454 Jordan Avenue Chatsworth
310900073 39 7325 N Keystone Avenue Indianapolis
26508 40 Pencader Corporate Center New Castle
------------------------------------------------------------------------------------------------------------------------------------
9905051 41 121 High Street Boston
28244 42 103-131 West Torrance Boulevard Redondo Beach
310851629 43 2240 Main Street Chula Vista
310900123 44 6808 IH-35 S. Austin
310900009 45 815 & 821 Live Oak Drive Chesapeake
------------------------------------------------------------------------------------------------------------------------------------
310900176 46 9543 & 9565 Heinrich Hertz Drive & 2220 Neils Bohr San Diego
310900082 47 5220 W. 102nd Street & 5235 W. 104th Street Los Angeles
310900056 48 2101 North 14th Street Ponca City
310900158 49 1115 & 1117 Windfield Way El Dorado Hills
28686 50 6300-7106 Biddulph Road Cleveland
------------------------------------------------------------------------------------------------------------------------------------
28835 51 3241 Hulmeville Road Bensalem
310900074 52 7600 Currell Boulevard Woodbury
28387 53 448-460 Post Street San Francisco
310851537 54 12909 Sandoval Street Santa Fe Springs
28919 55 241 E17th Street Costa Mesa
------------------------------------------------------------------------------------------------------------------------------------
28850 56 2951 S.W. 14th Street Place Boynton Beach
28995 57 6300 West Adams Street Van Buren Township
310900084 58 2010 Reservoir Road Baltimore
310900106 59 1120 S. Anaheim Boulevard Anaheim
29987 60 1427 North Main Street Logan
------------------------------------------------------------------------------------------------------------------------------------
10006546 61 30131 Town Center Drive Laguna Niguel
310900057 62 825 Casanova Avenue Monterey
29720 63 13004-13112 Harbor Boulevard Garden Grove
28494 64 2291 Merrick Road Merrick
29643 65 245-285 S. Palm Canyon Drive Palm Springs
------------------------------------------------------------------------------------------------------------------------------------
28009 66 1375 & 1395 South Columbia Road Grand Forks
10006364 67 500 East Remington Drive Sunnyvale
25310 68 981 Worcester Street Wellesley
28002 69 95-975 N. Green Street Brownsburg
28104 70 100 Jersey Street Boston
------------------------------------------------------------------------------------------------------------------------------------
29570 71
29570A 220 Linden Oaks Pittsford
29570B 4400 Dewey Avenue Pittsford
310900045 72 601 Redna Terrace Cincinnati
28868 73 701 Montgomery Avenue Narberth
------------------------------------------------------------------------------------------------------------------------------------
29267 74 360 West Broadway New York
310900065 75 30-40 48th Avenue Long Island City
310900094 76 2750 El Camino Real Redwood City
10006389 77 801-917 West Roseburg Avenue Modesto
310900053 78 3000 Orange Grove Avenue North Highlands
------------------------------------------------------------------------------------------------------------------------------------
310900147 79 #1 Doeskin Drive Boerne
310900097 80 22600 Crenshaw Boulevard Torrance
310900118 81 3141 Hood Street Dallas
310900153 82 18121 East Hampden Avenue Aurora
310900120 83 3970 Pell Drive Sacramento
------------------------------------------------------------------------------------------------------------------------------------
310900126 84 3780 - 3788 Fabian Way Palo Alto
310851628 85 800 East 64th Avenue Denver
310900039 86 1514 South 77 Sunshine Strip Harlingen
310928353 87 311-A and 311-B Otterson Drive Chico
310900111 88 13913-13933 Willard Road Chantilly
------------------------------------------------------------------------------------------------------------------------------------
29512 89 1600 S. Western Street Amarillo
28762 90 405 Queen Street Southington
25481 91 1885 Hylan Boulevard Staten Island
26777 92 1955 Victory Boulevard Staten Island
26216 93 3990 Bronx Boulevard Bronx
------------------------------------------------------------------------------------------------------------------------------------
28353 94
28353A 300 Cumberland Street Bogalusa
28353B 1602 Roane Street (US 27 & I-40) Harriman, Roane Cty
28353C 2621 Ellisville Boulevard Laurel
28353D 3926 Asheville Highway Knoxville
28353E 324 W. John C. Sims Parkway Niceville
28353F 210 Praley Street NW Valdese
------------------------------------------------------------------------------------------------------------------------------------
28550 95 1415 Beacon Street Brookline
29397 96 99 Hamilton Avenue Stamford
310900062 97 6001 De Soto Avenue Woodland Hills
310900113 98 2005 Jefferson Road Northfield
310900121 99 167 Overland Drive Columbia
------------------------------------------------------------------------------------------------------------------------------------
29914 100 615 10th Street Northeast Jamestown
310900116 101 6930 Gettysburg Pike Ft. Wayne
310900042 102 2150 Feather River Boulevard Oroville
310900131 103 8215 Dorsey Run Road Jessup
310900119 104 1775 East Tropicana Avenue Las Vegas
------------------------------------------------------------------------------------------------------------------------------------
310900069 105 4901 E. Main Street Farmington
310900096 106 17050 & 17100 Margay Avenue Carson
310900114 107 2501 Ninth Street Berkeley
310900127 108 3701 Kecoughtan Road Hampton
310900066 109 12919 & 12925 Alcosta Boulevard San Ramon
------------------------------------------------------------------------------------------------------------------------------------
310900080 110 681 W. Capitol Avenue West Sacramento
310900091 111 6230 McKinley St. NW Ramsey
310900138 112 610-614 Orion Road Lake Orion
310851150 113 10600 Bellaire Boulevard Houston
310900048 114 1515 River Park Drive Sacramento
------------------------------------------------------------------------------------------------------------------------------------
310900085 115 1924 East Maple Avenue El Segundo
310900122 116 920-960 Ford Street Colorado Springs
310900132 117 3431 West Union Hills Drive Phoenix
310900152 118 5508 S. Nogales Highway Tucson
310900161 119 3707 North Buckner Boulevard Dallas
------------------------------------------------------------------------------------------------------------------------------------
310900107 120 8014 Lower Sacramento Road Stockton
310900060 121 18440 Technology Drive Morgan Hill
310900092 122 3102-3120 14th Avenue NW Olympia
310900144 123 1309 W. Walnut Parkway Compton
28578 124 7311 Old Galveston Road Houston
------------------------------------------------------------------------------------------------------------------------------------
310900070 125 10131 Bubb Road Cupertino
310900095 126 580 South Main Street Red Bluff
310900093 127 3310, 3314 & 3320 Edward Ave Santa Clara
310900108 128 12 Upper Ragsdale Drive Monterey
26843 129
26843A 20-58 Prince Haven Road Plymouth
26843B 23 Gould Avenue Meredith
------------------------------------------------------------------------------------------------------------------------------------
310900081 130 1201 Market Street San Francisco
310900148 131 8125 E. 22nd Street Tucson
310900157 132 743 Harshman Road Riverside
310900143 133 130-138 North Avenue 61 Highland Park
310900117 134 801-832 Oak Hill Drive Ennis
------------------------------------------------------------------------------------------------------------------------------------
310900087 135 255 North Steelhead Way Boise
310900100 136 201 Bernoulli Circle Oxnard
310900104 137 39675 Cedar Boulevard Newark
310900136 138 65 Mitchell Boulevard San Rafael
310900159 139 4737-4757 East Greenway Road Phoenix
------------------------------------------------------------------------------------------------------------------------------------
310900110 140 50 East Great Southwest Parkway Atlanta
310900103 141 375 Pine Avenue Goleta
310900134 142 333 S. Juniper Street Escondido
310900150 143 3939 N. Romero Road Tucson
310900179 144 8145 N. 86th Place Scottsdale
310900101 145 7115 & 7135 Bermuda Road Las Vegas
------------------------------------------------------------------------------------------------------------------------------------
Totals/Weighted Avg.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Loan Number Count State Zip Code Property Type Property Sub-Type
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
310900140 1 Manufactured Housing Community Manufactured Housing Community
310900140A FL 34788 Manufactured Housing Community Manufactured Housing Community
310900140B FL 33063 Manufactured Housing Community Manufactured Housing Community
310900140C IL 60123 Manufactured Housing Community Manufactured Housing Community
310900140D FL 33903 Manufactured Housing Community Manufactured Housing Community
310900140E CA (N) 95060 Manufactured Housing Community Manufactured Housing Community
310900140F FL 34275 Manufactured Housing Community Manufactured Housing Community
------------------------------------------------------------------------------------------------------------------------------------
28983 2 RI 02919 Office Suburban
310851623 3 Self-Storage Self-Storage
310851623A VA 23224 Self-Storage Self-Storage
310851623B AZ 85304 Self-Storage Self-Storage
310851623C NC 28607 Self-Storage Self-Storage
310851623D PA 19013 Self-Storage Self-Storage
310851623E LA 70062 Self-Storage Self-Storage
310851623F SC 29206 Self-Storage Self-Storage
310851623G SC 29210 Self-Storage Self-Storage
310851623H VA 23434 Self-Storage Self-Storage
310851623I VA 23111 Self-Storage Self-Storage
310851623J GA 30349 Self-Storage Self-Storage
310851623K AR 72205 Self-Storage Self-Storage
310851623L SC 29575 Self-Storage Self-Storage
310851623M VA 23220 Self-Storage Self-Storage
310851623N MD 21113 Self-Storage Self-Storage
310851623O VA 20166 Self-Storage Self-Storage
310851623P LA 71129 Self-Storage Self-Storage
310851623Q LA 70072 Self-Storage Self-Storage
310851623R CA-S 92009 Self-Storage Self-Storage
310851623S CA-S 92375 Self-Storage Self-Storage
------------------------------------------------------------------------------------------------------------------------------------
10006891 4 UT 84102 Retail Anchored
28326 5 TX 75063 Multifamily Garden
28750 6 CA-S 90803 Retail Anchored
310900049 7 IL 60449 Industrial/Warehouse Warehouse/Distribution
310900130 8 CA (N) 94115 Office Medical
------------------------------------------------------------------------------------------------------------------------------------
26908 9 CA (N) 95014 Hospitality Limited Service
29198 10 IL 60555 Theater Theater
310900195 11 CA-S 92234 Manufactured Housing Community Manufactured Housing Community
29083 12 Multifamily Mid-Rise
29083A NY 10003 Multifamily Mid-Rise
29083B NY 10003 Multifamily Mid-Rise
------------------------------------------------------------------------------------------------------------------------------------
29106 13 MD 21208 Retail Anchored
28225 14 NJ 07024 Office Suburban
29453 15 CA (N) 94103 Office Urban
310900170 16 CA (N) 94043 Office Suburban
26188 17 Industrial/Warehouse Flex Industrial
26188A NY 14580 Industrial/Warehouse Flex Industrial
26188B NY 14580 Industrial/Warehouse Flex Industrial
------------------------------------------------------------------------------------------------------------------------------------
29476 18 Office Suburban
29476A CA (N) 95014 Office Suburban
29476B CA (N) 95014 Office Suburban
310900086 19 CA (S) 93292 Retail Anchored
310900112 20 CO 80401 Retail Anchored
------------------------------------------------------------------------------------------------------------------------------------
310900190 21 CA (N) 95008 Office Suburban
27752 22 PA 19102 Office Urban
29028 23 Multifamily Garden
29028A PA 19026 Multifamily Garden
29028B PA 19050 Multifamily Garden
29028C PA 19018 Multifamily Garden
29028D PA 19070 Multifamily Garden
------------------------------------------------------------------------------------------------------------------------------------
310900040 24 CA (S) 93711 Retail Anchored
29136 25 MA 01581 Industrial/Warehouse Flex Industrial
310900044 26 TX 77507 Industrial/Warehouse Warehouse/Distribution
29676 27 CA (N) 95134 Office Suburban
310851554 28 CA (S) 92675 Retail Shadow/Weak Anchored
28636 29 FL 32256 Office Suburban
------------------------------------------------------------------------------------------------------------------------------------
29458 30 Retail Specialty
29458A TX 75056 Retail Specialty
29458B TX 75235 Retail Specialty
29458C TX 75001 Retail Specialty
29458D TX 75225 Retail Specialty
------------------------------------------------------------------------------------------------------------------------------------
10006313 31 AZ 85254 Retail Unanchored
26301 32 DC 20037 Office Urban
29003 33 TX 77506 Multifamily Garden
28935 34 CT 06032 Office Suburban
28431 35 FL 33169 Retail Anchored
------------------------------------------------------------------------------------------------------------------------------------
310900090 36 CA (N) 94102 Office Urban
9905316 37 TX 77089 Multifamily Garden
310900055 38 CA (S) 91311 Industrial/Warehouse Warehouse/Distribution
310900073 39 IN 46240 Retail Big Box
26508 40 DE 19720 Office Suburban
------------------------------------------------------------------------------------------------------------------------------------
9905051 41 MA 02110 Office Urban
28244 42 CA (S) 90277 Office Suburban
310851629 43 CA (S) 91911 Industrial/Warehouse Light Industrial
310900123 44 TX 78745 Multifamily Garden
310900009 45 VA 23320 Industrial/Warehouse Warehouse/Distribution
------------------------------------------------------------------------------------------------------------------------------------
310900176 46 CA (S) 92154 Industrial/Warehouse Warehouse/Distribution
310900082 47 CA (S) 90045 Industrial/Warehouse Light Industrial
310900056 48 OK 74601 Retail Anchored
310900158 49 CA (N) 95762 Industrial/Warehouse Flex Industrial
28686 50 OH 44144 Retail Anchored
------------------------------------------------------------------------------------------------------------------------------------
28835 51 PA 19020 Multifamily Garden
310900074 52 MN 55125 Office Suburban
28387 53 CA (N) 94120 Mixed Use Mixed Use
310851537 54 CA (S) 90670 Industrial/Warehouse Warehouse/Distribution
28919 55 CA (S) 92627 Retail Shadow/Weak Anchored
------------------------------------------------------------------------------------------------------------------------------------
28850 56 FL 33426 Self-Storage Self-Storage
28995 57 MI 48111 Manufactured Housing Community Manufactured Housing Community
310900084 58 MD 21219 Industrial/Warehouse Warehouse/Distribution
310900106 59 CA (S) 92805 Retail Big Box
29987 60 UT 84341 Retail Shadow/Weak Anchored
------------------------------------------------------------------------------------------------------------------------------------
10006546 61 CA (S) 92677 Office Suburban
310900057 62 CA (S) 93940 Multifamily Garden
29720 63 CA (S) 92843 Retail Shadow/Weak Anchored
28494 64 NY 11566 Retail Anchored
29643 65 CA (S) 92264 Retail Unanchored
------------------------------------------------------------------------------------------------------------------------------------
28009 66 ND 58201 Retail Shadow/Weak Anchored
10006364 67 CA (N) 94087 Office Medical
25310 68 MA 23669 Office Suburban
28002 69 IN 46112 Retail Anchored
28104 70 MA 02215 Multifamily Mid-Rise
------------------------------------------------------------------------------------------------------------------------------------
29570 71
29570A NY 14625 Office Medical
29570B NY 14616 Retail Unanchored
310900045 72 OH 45215 Industrial/Warehouse Warehouse/Distribution
28868 73 PA 19066 Retail Shadow/Weak Anchored
------------------------------------------------------------------------------------------------------------------------------------
29267 74 NY 10013 Other Parking Garage
310900065 75 NY 11101 Industrial/Warehouse Warehouse/Distribution
310900094 76 CA (N) 94061 Industrial/Warehouse Flex Industrial
10006389 77 CA (N) 95350 Retail Anchored
310900053 78 CA (N) 95660 Industrial/Warehouse Warehouse/Distribution
------------------------------------------------------------------------------------------------------------------------------------
310900147 79 TX 78006 Multifamily Garden
310900097 80 CA (S) 90505 Office Suburban
310900118 81 TX 75219 Office Urban
310900153 82 CO 80013 Retail Shadow/Weak Anchored
310900120 83 CA (N) 95838 Industrial/Warehouse Warehouse/Distribution
------------------------------------------------------------------------------------------------------------------------------------
310900126 84 CA (N) 94303 Industrial/Warehouse Flex Industrial
310851628 85 CO 80229 Industrial/Warehouse Flex Industrial
310900039 86 TX 78550 Retail Unanchored
310928353 87 CA (N) 95928 Industrial/Warehouse Light Industrial
310900111 88 VA 20151 Industrial/Warehouse Warehouse/Distribution
------------------------------------------------------------------------------------------------------------------------------------
29512 89 TX 79106 Retail Anchored
28762 90 CT 06489 Retail Shadow/Weak Anchored
25481 91 NY 10304 Ground Leased Land Ground Leased Land
26777 92 NY 10314 Retail Shadow/Weak Anchored
26216 93 NY 10466 Multifamily Mid-Rise
------------------------------------------------------------------------------------------------------------------------------------
28353 94 Retail Specialty
28353A LA 70427 Retail Specialty
28353B TN 37748 Retail Specialty
28353C MS 39440 Retail Specialty
28353D TN 37914 Retail Specialty
28353E FL 32578 Retail Specialty
28353F NC 28690 Retail Specialty
------------------------------------------------------------------------------------------------------------------------------------
28550 95 MA 02446 Office Urban
29397 96 CT 06902 Self-Storage Self-Storage
310900062 97 CA (S) 91367 Industrial/Warehouse Flex Industrial
310900113 98 MN 55057 Multifamily Low-Rise
310900121 99 SC 29172 Industrial/Warehouse Warehouse/Distribution
------------------------------------------------------------------------------------------------------------------------------------
29914 100 ND 58401 Multifamily Garden
310900116 101 IN 46804 Industrial/Warehouse Warehouse/Distribution
310900042 102 CA (N) 95965 Retail Big Box
310900131 103 MD 20794 Industrial/Warehouse Warehouse/Distribution
310900119 104 NV 89119 Retail Unanchored
------------------------------------------------------------------------------------------------------------------------------------
310900069 105 NM 87402 Retail Big Box
310900096 106 CA (S) 90746 Industrial/Warehouse Warehouse/Distribution
310900114 107 CA (N) 94710 Office Urban
310900127 108 VA 23669 Retail Big Box
310900066 109 CA (N) 94583 Industrial/Warehouse Flex Industrial
------------------------------------------------------------------------------------------------------------------------------------
310900080 110 CA (N) 95605 Office Suburban
310900091 111 MN 55303 Industrial/Warehouse Light Industrial
310900138 112 MI 48362 Multifamily Garden
310851150 113 TX 77072 Retail Unanchored
310900048 114 CA (N) 95815 Office Suburban
------------------------------------------------------------------------------------------------------------------------------------
310900085 115 CA (S) 90245 Industrial/Warehouse Warehouse/Distribution
310900122 116 CO 80915 Industrial/Warehouse Warehouse/Distribution
310900132 117 AZ 85027 Retail Big Box
310900152 118 AZ 85706 Industrial/Warehouse Warehouse/Distribution
310900161 119 TX 75228 Self-Storage Self-Storage
------------------------------------------------------------------------------------------------------------------------------------
310900107 120 CA (N) 95210 Retail Unanchored
310900060 121 CA (N) 95037 Industrial/Warehouse Flex Industrial
310900092 122 WA 98502 Multifamily Garden
310900144 123 CA (S) 90220 Industrial/Warehouse Warehouse/Distribution
28578 124 TX 77034 Industrial/Warehouse Warehouse/Distribution
------------------------------------------------------------------------------------------------------------------------------------
310900070 125 CA (N) 95014 Industrial/Warehouse Flex Industrial
310900095 126 CA (N) 96080 Retail Big Box
310900093 127 CA (N) 95054 Industrial/Warehouse Light Industrial
310900108 128 CA (S) 93940 Industrial/Warehouse Flex Industrial
26843 129 Multifamily Garden
26843A NH 03264 Multifamily Garden
26843B NH 03253 Multifamily Garden
------------------------------------------------------------------------------------------------------------------------------------
310900081 130 CA (N) 94103 Retail Big Box
310900148 131 AZ 85710 Self-Storage Self-Storage
310900157 132 OH 45431 Multifamily Low-Rise
310900143 133 CA (S) 90042 Industrial/Warehouse Light Industrial
310900117 134 TX 75119 Multifamily Low-Rise
------------------------------------------------------------------------------------------------------------------------------------
310900087 135 ID 83704 Industrial/Warehouse Flex Industrial
310900100 136 CA (S) 93030 Industrial/Warehouse Light Industrial
310900104 137 CA (N) 94560 Office Suburban
310900136 138 CA (N) 94903 Office Suburban
310900159 139 AZ 85032 Retail Shadow/Weak Anchored
------------------------------------------------------------------------------------------------------------------------------------
310900110 140 GA 30336 Industrial/Warehouse Warehouse/Distribution
310900103 141 CA (S) 93117 Industrial/Warehouse Light Industrial
310900134 142 CA (S) 92025 Office Suburban
310900150 143 AZ 85705 Self-Storage Self-Storage
310900179 144 AZ 85258 Office Suburban
310900101 145 NV 89119 Industrial/Warehouse Light Industrial
------------------------------------------------------------------------------------------------------------------------------------
Totals/Weighted Avg.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Cut-Off Cut-Off
Year Square Number Balance Per Balance
Loan Number Count Built/Renovated Feet of Units Square Foot Per Unit
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
310900140 1
310900140A 1968 1226 19,508.80
310900140B 1974 819 24,944.78
310900140C 1961 616 31,547.41
310900140D 1974 971 19,808.33
310900140E 1970 198 31,004.54
310900140F 1972 228 20,936.81
-------------------------------------------------------------------------------------------------------------------------
28983 2 1997 328,359 96.85
310851623 3
310851623A 1988 60,200 593 37.11 3,767.73
310851623B 1980 40,455 442 29.60 2,709.58
310851623C 1985 29,700 317 28.74 2,692.81
310851623D 1989 70,500 583 33.08 4,000.22
310851623E 1990 73,350 845 28.73 2,493.84
310851623F 1986 48,496 460 33.23 3,502.89
310851623G 1988 50,625 485 28.63 2,988.57
310851623H 1988 35,400 334 29.55 3,131.97
310851623I 1989 35,400 337 36.31 3,813.89
310851623J 1985 55,150 583 27.18 2,571.23
310851623K 1980 67,206 750 23.13 2,072.44
310851623L 1987 34,700 346 17.25 1,729.78
310851623M 1946 51,414 643 40.21 3,215.02
310851623N 1988 40,255 479 45.50 3,823.98
310851623O 1988 42,225 348 59.50 7,219.53
310851623P 1986 46,375 412 20.51 2,308.06
310851623Q 1985 27,438 288 33.06 3,149.64
310851623R 1996 73,940 1006 59.77 4,393.03
310851623S 1988 42,835 344 29.63 3,689.24
-------------------------------------------------------------------------------------------------------------------------
10006891 4 1986 220,451 134.84
28326 5 1998 504 50,409.13
28750 6 1996 156,343 135.33
310900049 7 2000 700,200 26.00
310900130 8 1989 66,122 273.56
-------------------------------------------------------------------------------------------------------------------------
26908 9 1998 165 107,866.41
29198 10 1997 130,757 135.91
310900195 11 1971 538 29,241.87
29083 12
29083A 2000 29,446 30 256.23 251,496.08
29083B 1999 27,200 32 279.22 237,339.02
-------------------------------------------------------------------------------------------------------------------------
29106 13 1989 81,027 170.07
28225 14 1982 146,000 91.44
29453 15 1999 72,617 178.73
310900170 16 1999 123,293 105.24
26188 17
26188A 1998 371,835 25.04
26188B 1995 92,256 35.43
-------------------------------------------------------------------------------------------------------------------------
29476 18
29476A 1984 26,610 206.43
29476B 1984 47,988 135.28
310900086 19 1990 157,283 65.11
310900112 20 1998 112,101 88.99
-------------------------------------------------------------------------------------------------------------------------
310900190 21 1997 71,648 137.68
27752 22 1925 215,070 43.98
29028 23
29028A 1965 84 31,382.30
29028B 1976 86 31,116.91
29028C 1965 90 22,733.15
29028D 1999 83 23,230.81
-------------------------------------------------------------------------------------------------------------------------
310900040 24 1999 120,068 72.84
29136 25 2000 198,000 44.14
310900044 26 1999 315,896 27.54
29676 27 2000 72,600 118.24
310851554 28 1989 80,425 105.35
28636 29 1999 136,798 58.48
-------------------------------------------------------------------------------------------------------------------------
29458 30
29458A 1997 9,000 159.75
29458B 1997 9,163 186.88
29458C 1996 12,008 286.86
29458D 1996 5,938 150.49
-------------------------------------------------------------------------------------------------------------------------
10006313 31 1999 51,289 145.77
26301 32 1998 110,710 62.49
29003 33 1999 612 11,413.32
28935 34 1990 118,201 58.80
28431 35 1987 183,927 36.85
-------------------------------------------------------------------------------------------------------------------------
310900090 36 1999 37,999 166.42
9905316 37 1998 204,838 252 27.03 21,968.37
310900055 38 1981 132,600 40.15
310900073 39 2000 219,750 24.36
26508 40 1988 74,706 71.65
-------------------------------------------------------------------------------------------------------------------------
9905051 41 1987 44,912 117.71
28244 42 1998 66,380 76.87
310851629 43 1975 167,741 29.38
310900123 44 1984 176 28,049.63
310900009 45 1979 158,600 30.42
-------------------------------------------------------------------------------------------------------------------------
310900176 46 1999 135,571 35.37
310900082 47 1999 76,800 61.67
310900056 48 1978 178,831 26.12
310900158 49 1999 69,067 66.44
28686 50 2000 203,194 22.08
-------------------------------------------------------------------------------------------------------------------------
28835 51 1997 165 26,942.56
310900074 52 1999 43,674 101.61
28387 53 1997 127,729 34.00
310851537 54 1998 120,800 34.13
28919 55 1998 25,500 161.52
-------------------------------------------------------------------------------------------------------------------------
28850 56 1980 184,158 1041 21.97 3,886.93
28995 57 1994 330 12,080.21
310900084 58 1964 200,000 19.47
310900106 59 1999 28,000 138.35
29987 60 1997 58,290 63.42
-------------------------------------------------------------------------------------------------------------------------
10006546 61 1979 50,049 72.64
310900057 62 1995 90 39,578.40
29720 63 1983 37,091 95.62
28494 64 2000 20,000 174.79
29643 65 1999 38,131 91.70
-------------------------------------------------------------------------------------------------------------------------
28009 66 1989 59,177 57.50
10006364 67 1999 23,340 146.74
25310 68 1998 27,200 124.82
28002 69 1992 113,793 29.85
28104 70 1990 40 82,531.06
-------------------------------------------------------------------------------------------------------------------------
29570 71
29570A 1992 23,423 77.99
29570B 1991 54,282 26.64
310900045 72 1995 125,188 26.26
28868 73 1994 15,833 189.12
-------------------------------------------------------------------------------------------------------------------------
29267 74 1918 39,000 76.62
310900065 75 1926 68,000 43.92
310900094 76 1999 24,798 120.73
10006389 77 1999 72,577 38.52
310900053 78 1971 174,861 14.78
-------------------------------------------------------------------------------------------------------------------------
310900147 79 1993 75 33,294.54
310900097 80 2000 19,295 123.06
310900118 81 1999 68,900 34.76
310900153 82 1999 20,020 119.77
310900120 83 1970 108,450 21.63
-------------------------------------------------------------------------------------------------------------------------
310900126 84 1973 30,174 75.96
310851628 85 1999 40,800 53.56
310900039 86 1998 96,985 22.39
310928353 87 1997 90,000 24.33
310900111 88 1988 49,200 44.65
-------------------------------------------------------------------------------------------------------------------------
29512 89 2000 14,976 141.81
28762 90 2000 29,489 71.08
25481 91 1993 55,465 36.42
26777 92 1981 14,088 141.90
26216 93 1965 92 21,580.66
-------------------------------------------------------------------------------------------------------------------------
28353 94
28353A 1999 3,666 91.31
28353B 1999 3,500 96.45
28353C 1999 3,548 65.20
28353D 1999 3,574 92.99
28353E 1999 3,869 103.89
28353F 1999 2,740 131.51
-------------------------------------------------------------------------------------------------------------------------
28550 95 1984 24,628 80.03
29397 96 1997 29,419 67.86
310900062 97 1999 14,500 136.51
310900113 98 1999 45 44,346.29
310900121 99 1995 109,625 18.21
-------------------------------------------------------------------------------------------------------------------------
29914 100 1999 54 36,534.70
310900116 101 1972 161,126 12.09
310900042 102 1999 24,048 80.90
310900131 103 1986 88,339 21.70
310900119 104 1977 50,237 37.62
-------------------------------------------------------------------------------------------------------------------------
310900069 105 1998 23,500 72.02
310900096 106 1981 72,853 23.25
310900114 107 1999 16,348 103.74
310900127 108 1999 10,908 150.93
310900066 109 1978 35,813 45.10
-------------------------------------------------------------------------------------------------------------------------
310900080 110 1991 21,290 74.79
310900091 111 1998 50,194 31.79
310900138 112 1979 39 40,963.57
310851150 113 1983 37,435 39.55
310900048 114 1977 32,122 46.33
-------------------------------------------------------------------------------------------------------------------------
310900085 115 1999 28,131 53.03
310900122 116 1973 45,000 33.28
310900132 117 1998 13,905 107.15
310900152 118 1977 105,647 14.12
310900161 119 1997 63,775 597 23.48 2,508.48
-------------------------------------------------------------------------------------------------------------------------
310900107 120 1999 17,075 81.75
310900060 121 1999 18,000 75.59
310900092 122 1988 50 26,424.52
310900144 123 1979 40,041 33.06
28578 124 1999 56,078 23.12
-------------------------------------------------------------------------------------------------------------------------
310900070 125 1968 18,000 71.79
310900095 126 2000 24,049 52.95
310900093 127 1970 25,770 46.41
310900108 128 1995 17,592 67.97
26843 129
26843A 1978 50 10,138.79
26843B 1980 50 12,773.48
-------------------------------------------------------------------------------------------------------------------------
310900081 130 1964 13,794 77.24
310900148 131 1997 51,895 442 21.09 2,476.05
310900157 132 1971 60 18,313.86
310900143 133 1988 24,407 43.93
310900117 134 1999 32 31,828.93
-------------------------------------------------------------------------------------------------------------------------
310900087 135 1978 60,340 16.48
310900100 136 1999 35,914 27.67
310900104 137 1982 22,738 43.62
310900136 138 1996 15,723 63.50
310900159 139 1990 17,600 56.66
-------------------------------------------------------------------------------------------------------------------------
310900110 140 1980 59,624 14.61
310900103 141 1997 25,200 29.98
310900134 142 1991 13,966 54.29
310900150 143 1996 33,348 303 21.45 2,360.89
310900179 144 1997 5,067 134.12
310900101 145 1994 16,754 35.59
-------------------------------------------------------------------------------------------------------------------------
Totals/Weighted Avg.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Annual Annual
Replacement Replacement
Occupancy Reserves Per Reserves
Loan Number Count Occupancy Date Square Foot Per Unit
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
310900140 1
310900140A 93.5% 4/20/00 50.00
310900140B 96.1% 4/20/00 50.00
310900140C 97.1% 4/20/00 84.13
310900140D 99.4% 4/20/00 50.00
310900140E 100.0% 4/20/00 63.89
310900140F 99.6% 4/20/00 50.00
---------------------------------------------------------------------------------------------------------------------
28983 2 100.0% 4/1/00
310851623 3
310851623A 85.3% 5/31/00 0.15 15.23
310851623B 77.4% 5/31/00 0.15 13.73
310851623C 75.1% 5/31/00 0.15 14.05
310851623D 93.1% 5/31/00 0.15 18.14
310851623E 73.2% 5/31/00 0.15 13.02
310851623F 74.1% 5/31/00 0.15 15.81
310851623G 82.5% 5/31/00 0.15 15.66
310851623H 87.4% 5/31/00 0.15 15.90
310851623I 81.4% 5/31/00 0.15 15.76
310851623J 86.6% 5/31/00 0.15 14.19
310851623K 68.9% 5/31/00 0.15 13.44
310851623L 57.8% 5/31/00 0.15 15.04
310851623M 83.5% 5/31/00 0.15 11.99
310851623N 86.2% 5/31/00 0.15 12.61
310851623O 94.2% 5/31/00 0.15 18.20
310851623P 86.9% 5/31/00 0.15 16.88
310851623Q 84.8% 5/31/00 0.15 14.29
310851623R 95.3% 5/31/00 0.15 11.02
310851623S 93.3% 5/31/00 0.15 18.68
---------------------------------------------------------------------------------------------------------------------
10006891 4 93.8% 8/24/00 0.59
28326 5 90.9% 4/15/00
28750 6 93.3% 1/1/00 0.15
310900049 7 100.0% 4/1/00 0.10
310900130 8 100.0% 4/13/00 0.20
---------------------------------------------------------------------------------------------------------------------
26908 9 73.9% 7/31/00 1,989.35
29198 10 100.0% 5/1/00
310900195 11 92.6% 4/20/00 50.00
29083 12
29083A 100.0% 8/10/00 0.29 285.77
29083B 93.8% 8/10/00 0.32 268.75
---------------------------------------------------------------------------------------------------------------------
29106 13 100.0% 4/1/00 0.17
28225 14 100.0% 2/1/00
29453 15 94.0% 5/15/00 0.15
310900170 16 100.0% 7/1/00
26188 17
26188A 100.0% 7/14/00 0.12
26188B 100.0% 7/14/00 0.10
---------------------------------------------------------------------------------------------------------------------
29476 18
29476A 100.0% 6/15/00 0.15
29476B 100.0% 6/15/00 0.15
310900086 19 96.4% 5/20/00 0.16
310900112 20 100.0% 5/15/00
---------------------------------------------------------------------------------------------------------------------
310900190 21 100.0% 5/20/00 0.49
27752 22 92.5% 6/1/00 0.20
29028 23
29028A 100.0% 5/15/00 230.00
29028B 94.8% 5/12/00 230.00
29028C 93.3% 5/12/00 230.00
29028D 86.7% 5/15/00 230.00
---------------------------------------------------------------------------------------------------------------------
310900040 24 91.6% 7/1/00 0.20
29136 25 100.0% 5/23/00 0.15
310900044 26 100.0% 4/3/00
29676 27 100.0% 4/15/00 0.20
310851554 28 100.0% 7/13/00
28636 29 100.0% 3/31/00
---------------------------------------------------------------------------------------------------------------------
29458 30
29458A 100.0% 7/31/00 0.15
29458B 100.0% 7/31/00 0.15
29458C 100.0% 7/1/00 0.15
29458D 100.0% 7/31/00 0.25
---------------------------------------------------------------------------------------------------------------------
10006313 31 80.9% 6/30/00 0.15
26301 32 100.0% 5/1/00
29003 33 94.0% 6/28/00 250.00
28935 34 100.0% 3/15/00
28431 35 95.5% 8/1/00 0.15
---------------------------------------------------------------------------------------------------------------------
310900090 36 100.0% 4/20/00 0.20
9905316 37 95.2% 7/31/00 0.28 226.00
310900055 38 100.0% 7/31/00
310900073 39 100.0%
26508 40 94.0% 3/29/00 0.24
---------------------------------------------------------------------------------------------------------------------
9905051 41 93.0% 8/1/00 0.20
28244 42 97.7% 6/16/00 0.15
310851629 43 97.7% 7/7/00 0.15
310900123 44 98.9% 6/19/00 250.00
310900009 45 100.0% 8/3/00 0.15
---------------------------------------------------------------------------------------------------------------------
310900176 46 100.0% 6/8/00 0.10
310900082 47 100.0% 4/30/00 0.15
310900056 48 98.6% 7/7/00 0.19
310900158 49 100.0% 5/5/00 0.15
28686 50 90.5% 6/5/00
---------------------------------------------------------------------------------------------------------------------
28835 51 90.9% 5/24/00 250.00
310900074 52 98.3% 6/27/00 0.20
28387 53 100.0% 5/31/00 0.24
310851537 54 100.0% 3/27/00 0.10
28919 55 100.0% 4/10/00 0.10
---------------------------------------------------------------------------------------------------------------------
28850 56 77.3% 8/9/00 0.08 14.54
28995 57 99.7% 8/7/00
310900084 58 100.0% 5/31/00 0.10
310900106 59 100.0% 4/30/00 0.15
29987 60 100.0% 7/1/00 0.14
---------------------------------------------------------------------------------------------------------------------
10006546 61 98.4% 3/31/00
310900057 62 98.9% 7/28/00 291.90
29720 63 91.4% 4/26/00 0.15
28494 64 100.0% 3/31/00 0.15
29643 65 84.0% 4/24/00 0.15
---------------------------------------------------------------------------------------------------------------------
28009 66 100.0% 6/27/00
10006364 67 95.7% 3/1/00 0.07
25310 68 100.0% 7/1/00 0.20
28002 69 100.0% 6/27/00
28104 70 100.0% 5/15/00 250.00
---------------------------------------------------------------------------------------------------------------------
29570 71
29570A 100.0% 6/2/00 0.14
29570B 100.0% 6/2/00 0.15
310900045 72 100.0% 7/31/00
28868 73 100.0% 4/4/00 0.15
---------------------------------------------------------------------------------------------------------------------
29267 74 100.0% 2/29/00 0.15
310900065 75 100.0% 4/24/00 0.51
310900094 76 100.0% 7/11/00 0.20
10006389 77 96.3% 4/30/00 0.15
310900053 78 95.8% 7/13/00 0.15
---------------------------------------------------------------------------------------------------------------------
310900147 79 97.3% 6/15/00
310900097 80 100.0% 4/21/00 0.20
310900118 81 97.5% 5/22/00 0.24
310900153 82 100.0% 7/31/00
310900120 83 100.0% 8/3/00
---------------------------------------------------------------------------------------------------------------------
310900126 84 100.0% 5/23/00
310851628 85 100.0% 6/21/00
310900039 86 97.9% 6/1/00 0.15
310928353 87 100.0% 6/12/00
310900111 88 100.0% 5/18/00 0.15
---------------------------------------------------------------------------------------------------------------------
29512 89 100.0% 7/1/00 0.10
28762 90 81.0% 4/26/00 0.15
25481 91 100.0% 3/1/00
26777 92 100.0% 7/1/00 0.15
26216 93 100.0% 5/17/00
---------------------------------------------------------------------------------------------------------------------
28353 94
28353A 100.0% 7/1/00
28353B 100.0% 7/1/00
28353C 100.0% 7/1/00
28353D 100.0% 7/1/00
28353E 100.0% 7/1/00
28353F 100.0% 7/1/00
---------------------------------------------------------------------------------------------------------------------
28550 95 94.3% 3/31/00 0.15
29397 96 92.5% 5/25/00 0.15
310900062 97 100.0% 4/1/00 0.20
310900113 98 95.6% 4/11/00 250.00
310900121 99 100.0% 5/30/00
---------------------------------------------------------------------------------------------------------------------
29914 100 100.0% 6/21/00
310900116 101 100.0% 5/9/00 0.10
310900042 102 100.0% 12/14/99
310900131 103 100.0% 6/21/00 0.18
310900119 104 100.0% 5/17/00
---------------------------------------------------------------------------------------------------------------------
310900069 105 100.0% 2/23/00
310900096 106 100.0% 5/8/00
310900114 107 100.0% 6/30/00
310900127 108 100.0% 4/28/00
310900066 109 100.0% 5/20/00
---------------------------------------------------------------------------------------------------------------------
310900080 110 100.0% 7/31/00
310900091 111 100.0% 2/14/00
310900138 112 100.0% 3/1/00 300.00
310851150 113 81.6% 6/1/00
310900048 114 100.0% 5/19/00
---------------------------------------------------------------------------------------------------------------------
310900085 115 100.0% 7/17/00 0.14
310900122 116 100.0% 6/2/00
310900132 117 100.0% 4/4/00
310900152 118 100.0% 6/7/00 0.10
310900161 119 85.0% 5/31/00 0.16 16.92
---------------------------------------------------------------------------------------------------------------------
310900107 120 93.5% 5/23/00 0.15
310900060 121 100.0% 8/1/00
310900092 122 100.0% 6/12/00 250.00
310900144 123 100.0% 4/19/00 0.10
28578 124 95.0% 4/24/00 0.15
---------------------------------------------------------------------------------------------------------------------
310900070 125 100.0% 4/30/00
310900095 126 100.0% 2/19/00
310900093 127 100.0% 2/16/00
310900108 128 100.0% 5/1/00
26843 129
26843A 98.0% 6/30/00 250.00
26843B 100.0% 6/30/00 250.00
---------------------------------------------------------------------------------------------------------------------
310900081 130 100.0% 3/14/00
310900148 131 99.5% 5/17/00 0.15 17.61
310900157 132 93.4% 8/3/00 300.00
310900143 133 96.1% 6/13/00 0.18
310900117 134 100.0% 8/2/00 300.00
---------------------------------------------------------------------------------------------------------------------
310900087 135 100.0% 3/22/00
310900100 136 100.0% 8/1/00
310900104 137 99.5% 7/17/00
310900136 138 100.0% 3/30/00
310900159 139 100.0% 8/1/00 0.23
---------------------------------------------------------------------------------------------------------------------
310900110 140 100.0% 4/14/00 0.15
310900103 141 100.0% 5/9/00
310900134 142 94.2% 6/1/00
310900150 143 99.2% 6/27/00 0.15 16.71
310900179 144 100.0% 8/23/00
310900101 145 100.0% 7/31/00
---------------------------------------------------------------------------------------------------------------------
Totals/Weighted Avg.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Largest
Tenant Largest Tenant
Loan Number Count Largest Tenant Square Feet Expiration
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
310900140 1
310900140A
310900140B
310900140C
310900140D
310900140E
310900140F
-------------------------------------------------------------------------------------------------------------------------
28983 2 FM Global 328,359 7/31/09
310851623 3
310851623A
310851623B
310851623C
310851623D
310851623E
310851623F
310851623G
310851623H
310851623I
310851623J
310851623K
310851623L
310851623M
310851623N
310851623O
310851623P
310851623Q
310851623R
310851623S
-------------------------------------------------------------------------------------------------------------------------
10006891 4 Cineplex Odeon 16,686 1/31/09
28326 5
28750 6 United Artists Theatre 20,032 12/31/01
310900049 7 World Kitchen Inc. 700,200 2/28/15
310900130 8 Kaiser Foundation Hospitals, Inc. 32,474 12/31/02
-------------------------------------------------------------------------------------------------------------------------
26908 9
29198 10 AMC 130,757 3/31/13
310900195 11
29083 12
29083A Wendy's 3,200 2/15/20
29083B Vinocur's 4,000 7/1/20
-------------------------------------------------------------------------------------------------------------------------
29106 13 Sutton Place Gourmet 14,207 9/30/06
28225 14 PricewaterhouseCoopers 146,000 1/24/12
29453 15 Venture Factory, Inc. 16,162 10/31/05
310900170 16 Acuson 123,293 5/31/10
26188 17
26188A Boulter Carting Co. 245,543 4/30/15
26188B Fritz Companies 50,000 2/28/05
-------------------------------------------------------------------------------------------------------------------------
29476 18
29476A Exemplary Software 10,145 12/31/04
29476B Trend Micro 24,796 6/30/03
310900086 19 Save Mart 44,865 7/31/15
310900112 20 King Soopers 69,693 1/19/19
-------------------------------------------------------------------------------------------------------------------------
310900190 21 Portera Systems 24,479 6/9/01
27752 22 Orth Rogers 14,958 8/31/01
29028 23
29028A
29028B
29028C
29028D
-------------------------------------------------------------------------------------------------------------------------
310900040 24 Stein Mart 36,000 2/28/15
29136 25 Solectron 198,000 3/31/05
310900044 26 Industrial Distribution Corp. 315,896 12/31/19
29676 27 Chameleon Systems, Inc. 39,300 5/14/06
310851554 28 Marshall's 25,480 1/31/05
28636 29 HomeSide Lending 136,798 12/31/08
-------------------------------------------------------------------------------------------------------------------------
29458 30
29458A Centennial Liquor Stores 5,500 7/31/20
29458B Centennial Liquor Stores 5,000 7/31/20
29458C Centennial Liquor Stores 8,408 7/31/20
29458D Centennial Liquor Stores 5,938 7/31/20
-------------------------------------------------------------------------------------------------------------------------
10006313 31 Legacy Lighting 5,705 3/31/05
26301 32 Hobs, Strauss, Dean & Walk 13,881 4/30/09
29003 33
28935 34 United Technologies Corporation 118,201 2/28/15
28431 35 B.J.'s Wholesale Club 112,896 4/1/07
-------------------------------------------------------------------------------------------------------------------------
310900090 36 DataWay, Inc 10,655 1/31/05
9905316 37
310900055 38 Natrol, Inc. 81,291 12/31/19
310900073 39 Wal-Mart 219,750 1/1/25
26508 40 Coventry Health Care 41,771 8/31/04
-------------------------------------------------------------------------------------------------------------------------
9905051 41 Wells Fargo 6,020 5/14/05
28244 42 Litton Consulting 16,105 8/31/03
310851629 43 Job Options, Inc. 11,816 9/30/07
310900123 44
310900009 45 Marconi Systems 81,800 10/31/04
-------------------------------------------------------------------------------------------------------------------------
310900176 46 Rohm Electronics USA 46,299 6/30/05
310900082 47 Mid-America Overseas, Inc. 48,000 3/31/05
310900056 48 Albertson's 49,158 2/28/13
310900158 49 Hayes Medical 28,500 11/5/08
28686 50 Giant Eagle 80,021 4/1/21
-------------------------------------------------------------------------------------------------------------------------
28835 51
310900074 52 Executive Suites of Woodbury 11,531 9/30/09
28387 53 Kensington Park Hotel 49,198 8/31/13
310851537 54 COA, Inc. 120,800 3/31/14
28919 55 Staples, Inc. 25,500 2/28/15
-------------------------------------------------------------------------------------------------------------------------
28850 56
28995 57
310900084 58 Terminal Corporation 200,000 5/31/05
310900106 59 Office Depot 28,000 3/31/15
29987 60 Staples 24,500 1/20/12
-------------------------------------------------------------------------------------------------------------------------
10006546 61 Helen Condas 2,240 2/28/01
310900057 62
29720 63 Family Christian Books 5,851 10/15/08
28494 64 Kings Supermarket 20,000 9/1/19
29643 65 St. James 6,629 12/31/13
-------------------------------------------------------------------------------------------------------------------------
28009 66 Scheels All Sports 37,849 9/1/14
10006364 67 Dr. Ang 2,467 2/28/05
25310 68 Renaissance Insurance 27,200 4/30/09
28002 69 Big K 82,924 11/30/07
28104 70
-------------------------------------------------------------------------------------------------------------------------
29570 71
29570A Panorama Pediatric 8,140 4/30/02
29570B Bingo World 17,000 9/30/04
310900045 72 Earle M. Jorgensen Company 125,188 12/14/23
28868 73 Philadelphia Lobster Co. 2,602 11/30/00
-------------------------------------------------------------------------------------------------------------------------
29267 74
310900065 75 Hugh O'Kane Electric Co. LLC 68,000 4/30/10
310900094 76 Luminate 15,987 8/31/04
10006389 77 O'Briens' Market 28,000 8/31/09
310900053 78 Glit Disco 20,584 4/30/01
-------------------------------------------------------------------------------------------------------------------------
310900147 79
310900097 80 United States of America 19,295 3/12/15
310900118 81 Lockwood, Andrews & Newman 18,583 1/1/01
310900153 82 Hampden Liquors 4,940 10/31/09
310900120 83 Core-Mark Distributors, Inc. 108,450 1/31/08
-------------------------------------------------------------------------------------------------------------------------
310900126 84 Southwall Technology 16,160 7/31/02
310851628 85 Western Building Services 28,800 4/30/06
310900039 86 SOL Communications 20,000 2/28/04
310928353 87 Alternative Materials Technology 45,000 12/31/07
310900111 88 Big Jim's House of Printing 18,400 4/30/05
-------------------------------------------------------------------------------------------------------------------------
29512 89 Walgreen's 15,120 5/13/60
28762 90 Kinko's 6,580 5/31/09
25481 91 Staples (Ground Lease) 55,465 1/31/13
26777 92 CVS 14,088 6/30/09
26216 93
-------------------------------------------------------------------------------------------------------------------------
28353 94
28353A Hardee's 3,666 3/14/12
28353B Hardee's 3,500 3/14/12
28353C Hardee's 3,548 3/14/12
28353D Hardee's 3,574 3/14/12
28353E Hardee's 3,869 3/14/12
28353F Hardee's 2,740 3/14/12
-------------------------------------------------------------------------------------------------------------------------
28550 95 Boston Institute for Psychotherapy 5,264 11/14/09
29397 96
310900062 97 Minolta Business Systems, Inc. 14,500 9/30/06
310900113 98
310900121 99 Otis Spunkmeyer 109,625 8/31/09
-------------------------------------------------------------------------------------------------------------------------
29914 100
310900116 101 Fort Wayne Pools, Inc. 161,126 5/31/15
310900042 102 Staples The Office Superstore, Inc. 24,048 7/31/14
310900131 103 Sterling Moving & Storage 51,390 7/31/10
310900119 104 Liberace Foundation 28,560 4/30/20
-------------------------------------------------------------------------------------------------------------------------
310900069 105 Office Max 23,500 10/31/13
310900096 106 Manhattan Transportation Co. 38,160 1/31/04
310900114 107 Economic & Planning Systems 8,831 6/11/10
310900127 108 Eckerd Corporation 10,908 1/24/20
310900066 109 Prestige Printing (Bruce Fornoff Soreson) 4,884 3/14/04
-------------------------------------------------------------------------------------------------------------------------
310900080 110 Raley's 22,000 7/31/14
310900091 111 QED Manufacturing 13,032 10/31/01
310900138 112
310851150 113 Lucky Dragon III 7,560 8/1/05
310900048 114 Commerce Security Bank 23,258 3/31/04
-------------------------------------------------------------------------------------------------------------------------
310900085 115 New Group, LLC 16,760 12/31/09
310900122 116 System Technology Associates 13,700 1/31/05
310900132 117 Walgreen Arizona Drug Co. 13,905 10/31/18
310900152 118 Westmed, Inc. 53,639 8/31/04
310900161 119
-------------------------------------------------------------------------------------------------------------------------
310900107 120 PAQ, Inc. - Food 4 Less Office 5,966 10/31/14
310900060 121 Digital View, Inc. 12,000 4/30/04
310900092 122
310900144 123 Forming Specialties Inc. 40,041 12/31/03
28578 124 Cates Control Systems 18,298 8/31/09
-------------------------------------------------------------------------------------------------------------------------
310900070 125 Silicon Image 18,000 12/14/02
310900095 126 Staples The Office Superstore, Inc. 24,049 2/28/15
310900093 127 Bettcher Process Services 12,770 11/30/03
310900108 128 Motorola, Inc. 17,592 6/30/06
26843 129
26843A
26843B
-------------------------------------------------------------------------------------------------------------------------
310900081 130 Washington Mutual Bank 13,794 12/31/09
310900148 131
310900157 132
310900143 133 Kenco Graphics 5,003 12/31/00
310900117 134
-------------------------------------------------------------------------------------------------------------------------
310900087 135 SCP Global Technologies 60,340 12/31/04
310900100 136 SPW, Inc. 6,153 9/30/02
310900104 137 Clickservice.com 2,636 1/31/01
310900136 138 Totally Games 7,954 10/14/00
310900159 139 Video Update 5,800 11/21/00
-------------------------------------------------------------------------------------------------------------------------
310900110 140 IEM Atlanta 59,624 5/31/15
310900103 141 Artisan (John Avila) 1,800 M-T-M
310900134 142 Springer & Anderson 1,800 6/30/00
310900150 143
310900179 144 Barclay 5,067 7/31/20
310900101 145 Coin Controls, Inc. 8,432 9/30/01
-------------------------------------------------------------------------------------------------------------------------
Totals/Weighted Avg.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Second Second
Largest Largest
Tenant Tenant Cross-
Loan Number Count Second Largest Tenant Square Feet Expiration Collateralized
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
10900140 1 Yes
310900140A Yes
310900140B Yes
310900140C Yes
310900140D Yes
310900140E Yes
310900140F Yes
------------------------------------------------------------------------------------------------------------------------------------
28983 2 No
310851623 3 Yes
310851623A Yes
310851623B Yes
310851623C Yes
310851623D Yes
310851623E Yes
310851623F Yes
310851623G Yes
310851623H Yes
310851623I Yes
310851623J Yes
310851623K Yes
310851623L Yes
310851623M Yes
310851623N Yes
310851623O Yes
310851623P Yes
310851623Q Yes
310851623R Yes
310851623S Yes
------------------------------------------------------------------------------------------------------------------------------------
10006891 4 Restoration Hardware 14,000 1/31/11 No
28326 5 No
28750 6 Claim Jumper 11,630 4/30/15 No
310900049 7 No
310900130 8 HealthSouth Surgery Center 13,218 4/30/09 No
------------------------------------------------------------------------------------------------------------------------------------
26908 9 No
29198 10 No
310900195 11 No
29083 12 Yes
29083A 14th Street Foods (Taco Bell) 2,000 9/1/14 Yes
29083B Yes
------------------------------------------------------------------------------------------------------------------------------------
29106 13 Pier One Imports 8,683 4/30/04 No
28225 14 No
29453 15 MyPrime Time 13,918 1/31/05 No
310900170 16 No
26188 17 Yes
26188A Xerox 126,292 9/30/08 Yes
26188B Ryder Dedicated 42,256 8/31/04 Yes
------------------------------------------------------------------------------------------------------------------------------------
29476 18 Yes
29476A General Bank 6,638 10/31/04 Yes
29476B Communities.com 23,192 2/28/04 Yes
310900086 19 Longs Drugs 31,472 9/30/15 No
310900112 20 Paper Warehouse 9,798 2/28/10 No
------------------------------------------------------------------------------------------------------------------------------------
310900190 21 Peelle 12,259 8/31/04 No
27752 22 Piazza Square Trio 14,105 12/31/04 No
29028 23 Yes
29028A Yes
29028B Yes
29028C Yes
29028D Yes
------------------------------------------------------------------------------------------------------------------------------------
310900040 24 Fashion Q 12,000 12/31/09 No
29136 25 No
310900044 26 No
29676 27 TekEdge 33,300 4/15/05 No
310851554 28 Wherehouse Records 7,000 1/31/01 No
28636 29 No
------------------------------------------------------------------------------------------------------------------------------------
29458 30 Yes
29458A Quik Shop Convenience Store 3,500 7/31/20 Yes
29458B Quik Shop Convenience Store 4,163 7/31/20 Yes
29458C Quik Shop Convenience Store 3,600 7/31/20 Yes
29458D Yes
------------------------------------------------------------------------------------------------------------------------------------
10006313 31 A Touch of History 5,026 4/1/04 No
26301 32 Universal Service Admin 13,381 12/31/03 No
29003 33 No
28935 34 No
28431 35 Happy Floors 45,000 8/1/04 No
------------------------------------------------------------------------------------------------------------------------------------
310900090 36 Uproar 8,856 2/28/05 No
9905316 37 No
310900055 38 Walking Company 51,309 3/31/04 No
310900073 39 No
26508 40 Octel America, Inc. 13,306 12/31/01 No
------------------------------------------------------------------------------------------------------------------------------------
9905051 41 Excaliber 5,802 3/15/03 No
28244 42 County of LA 11,559 8/31/02 No
310851629 43 Aker Leather 8,930 7/31/00 No
310900123 44 No
310900009 45 Cox Communications 76,800 10/31/07 No
------------------------------------------------------------------------------------------------------------------------------------
310900176 46 Konka USA 22,416 3/14/05 No
310900082 47 Lynden Air Freight, Inc. 28,800 12/31/04 No
310900056 48 JC Penney 38,720 2/28/04 No
310900158 49 Powerwave Technologies, Inc. 20,558 1/31/05 No
28686 50 Kronheims Furniture 25,778 1/7/02 No
------------------------------------------------------------------------------------------------------------------------------------
28835 51 No
310900074 52 LGI Entertainment, Inc. 5,183 12/31/04 No
28387 53 Elks Club Lodge 45,476 3/31/13 No
310851537 54 No
28919 55 No
------------------------------------------------------------------------------------------------------------------------------------
28850 56 No
28995 57 No
310900084 58 No
310900106 59 No
29987 60 Michaels 23,715 2/28/09 No
------------------------------------------------------------------------------------------------------------------------------------
10006546 61 Roger Carlton & Associates 2,121 6/30/02 No
310900057 62 No
29720 63 Sizes Unlimited 5,075 1/30/03 No
28494 64 No
29643 65 LG's Prime Steakhouse 6,559 11/30/12 No
------------------------------------------------------------------------------------------------------------------------------------
28009 66 Dagwoods On and Offsale 3,216 1/1/06 No
10006364 67 Larry Hooper 2,390 8/31/09 No
25310 68 No
28002 69 Ace Hardware (Kroger) 10,069 7/31/01 No
28104 70 No
------------------------------------------------------------------------------------------------------------------------------------
29570 71 Yes
29570A Greater Rochester 5,354 6/30/02 Yes
29570B Amos Karate 6,168 M-T-M Yes
310900045 72 No
28868 73 Charles Kremp Florist 2,000 10/31/04 No
------------------------------------------------------------------------------------------------------------------------------------
29267 74 No
310900065 75 No
310900094 76 Echo Online 8,811 9/30/01 No
10006389 77 Valley Hill Dental 5,040 8/31/03 No
310900053 78 Buttes Pipe and Supply 20,000 8/31/02 No
------------------------------------------------------------------------------------------------------------------------------------
310900147 79 No
310900097 80 No
310900118 81 ECOM 15,005 9/1/01 No
310900153 82 American Greetings 4,420 12/3/05 No
310900120 83 No
------------------------------------------------------------------------------------------------------------------------------------
310900126 84 Maxpeed Corporation 14,014 6/30/02 No
310851628 85 Vortex Doors 4,800 7/31/05 No
310900039 86 Valley Design 13,314 11/30/01 No
310928353 87 Cascade Orthopedic Supply 9,000 3/31/02 No
310900111 88 United Healthcare Services 17,600 4/30/03 No
------------------------------------------------------------------------------------------------------------------------------------
29512 89 No
28762 90 Music Shop 4,510 12/1/05 No
25481 91 No
26777 92 No
26216 93 No
------------------------------------------------------------------------------------------------------------------------------------
28353 94 Yes
28353A Yes
28353B Yes
28353C Yes
28353D Yes
28353E Yes
28353F Yes
------------------------------------------------------------------------------------------------------------------------------------
28550 95 GLS, Inc. 3,554 10/31/09 No
29397 96 No
310900062 97 No
310900113 98 No
310900121 99 No
------------------------------------------------------------------------------------------------------------------------------------
29914 100 No
310900116 101 No
310900042 102 No
310900131 103 Resource Recycling 18,929 8/31/02 No
310900119 104 Charles & Helen Harris 6,600 10/1/02 No
------------------------------------------------------------------------------------------------------------------------------------
310900069 105 No
310900096 106 Easterday Janitorial Supply Co. 34,693 3/31/10 No
310900114 107 The Pacific Firm 3,966 12/27/04 No
310900127 108 No
310900066 109 Calcon Systems 3,853 1/14/02 No
------------------------------------------------------------------------------------------------------------------------------------
310900080 110 No
310900091 111 Plateworks, Inc. 12,000 3/31/05 No
310900138 112 No
310851150 113 Amer Choice Children 3,566 5/1/05 No
310900048 114 CA Department of Transportation 8,864 12/31/02 No
------------------------------------------------------------------------------------------------------------------------------------
310900085 115 Transportation Management Inc. 13,500 2/28/05 No
310900122 116 Libby-Owens-Ford Company 13,300 9/20/01 No
310900132 117 No
310900152 118 R&S Chackel Enterprises 43,008 12/31/06 No
310900161 119 No
------------------------------------------------------------------------------------------------------------------------------------
310900107 120 Royal Beauty 1,920 12/31/04 No
310900060 121 Intercon Tool 3,000 4/15/01 No
310900092 122 No
310900144 123 No
28578 124 Prism Resources 12,850 9/30/03 No
------------------------------------------------------------------------------------------------------------------------------------
310900070 125 No
310900095 126 No
310900093 127 Top Gun Industrial Finishing, Inc. 8,000 12/31/05 No
310900108 128 No
26843 129 Yes
26843A Yes
26843B Yes
------------------------------------------------------------------------------------------------------------------------------------
310900081 130 No
310900148 131 No
310900157 132 No
310900143 133 Bachtuyet Trinh 1,982 3/31/02 No
310900117 134 No
------------------------------------------------------------------------------------------------------------------------------------
310900087 135 No
310900100 136 Louis Neukirch GMBH 6,153 1/31/03 No
310900104 137 BARTA 1,996 2/28/02 No
310900136 138 Streamline Solutions 3,765 10/14/04 No
310900159 139 Fitness For Life 2,400 10/31/03 No
------------------------------------------------------------------------------------------------------------------------------------
310900110 140 No
310900103 141 JAE Auto Parts 1,800 M-T-M No
310900134 142 Biffar 1,087 7/31/01 No
310900150 143 No
310900179 144 No
310900101 145 RKS Transport, Inc. 8,322 2/28/03 No
------------------------------------------------------------------------------------------------------------------------------------
Totals/Weighted Avg.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Cross Collateral Release
Loan Number Count Description Provisions Release Provision Terms
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
310900140 1 Multiple Properties Yes
310900140A Multiple Properties Yes 30% max substitution over life - subject to
DSCR & LTV; No prepayment.
310900140B Multiple Properties Yes 30% max substitution over life - subject to
DSCR & LTV; No prepayment.
310900140C Multiple Properties Yes 30% max substitution over life - subject to
DSCR & LTV; No prepayment.
310900140D Multiple Properties Yes 30% max substitution over life - subject to
DSCR & LTV; No prepayment.
310900140E Multiple Properties Yes 30% max substitution over life - subject to
DSCR & LTV; No prepayment.
310900140F Multiple Properties Yes 30% max substitution over life - subject to
DSCR & LTV; No prepayment.
------------------------------------------------------------------------------------------------------------------------------------
28983 2 No
310851623 3 Multiple Properties No
310851623A Multiple Properties No
310851623B Multiple Properties No
310851623C Multiple Properties No
310851623D Multiple Properties No
310851623E Multiple Properties No
310851623F Multiple Properties No
310851623G Multiple Properties No
310851623H Multiple Properties No
310851623I Multiple Properties No
310851623J Multiple Properties No
310851623K Multiple Properties No
310851623L Multiple Properties No
310851623M Multiple Properties No
310851623N Multiple Properties No
310851623O Multiple Properties No
310851623P Multiple Properties No
310851623Q Multiple Properties No
310851623R Multiple Properties No
310851623S Multiple Properties No
------------------------------------------------------------------------------------------------------------------------------------
10006891 4 No
28326 5 No
28750 6 No
310900049 7 No
310900130 8 No
------------------------------------------------------------------------------------------------------------------------------------
26908 9 No
29198 10 No
310900195 11 No
29083 12 Multiple Properties Yes
29083A Multiple Properties Yes 125% Defeasance; 1.45x DSCR; 70% LTV
29083B Multiple Properties Yes 125% Defeasance; 1.45x DSCR; 70% LTV
------------------------------------------------------------------------------------------------------------------------------------
29106 13 No
28225 14 No
29453 15 No
310900170 16 No
26188 17 Multiple Properties No
26188A Multiple Properties No
26188B Multiple Properties No
------------------------------------------------------------------------------------------------------------------------------------
29476 18 Multiple Properties Yes
29476A Multiple Properties Yes 125% Defeasance; 1.45x DSCR; 70% LTV
29476B Multiple Properties Yes 125% Defeasance; 1.45x DSCR; 70% LTV
310900086 19 No
310900112 20 No
------------------------------------------------------------------------------------------------------------------------------------
310900190 21 No
27752 22 No
29028 23 Multiple Properties Yes
29028A Multiple Properties Yes 125% Defeasance; 1.30x DSCR; 80%LTV
29028B Multiple Properties Yes 125% Defeasance; 1.30x DSCR; 80%LTV
29028C Multiple Properties Yes 125% Defeasance; 1.30x DSCR; 80%LTV
29028D Multiple Properties Yes 125% Defeasance; 1.30x DSCR; 80%LTV
------------------------------------------------------------------------------------------------------------------------------------
310900040 24 No
29136 25 Yes Outparcel - no allocated value
310900044 26 No
29676 27 No
310851554 28 No
28636 29 Yes Outparcel - no allocated value
------------------------------------------------------------------------------------------------------------------------------------
29458 30 Multiple Properties Yes
29458A Multiple Properties Yes 125% Defeasance; 1.32x DSCR; 72% LTV
29458B Multiple Properties Yes 125% Defeasance; 1.32x DSCR; 72% LTV
29458C Multiple Properties Yes 125% Defeasance; 1.32x DSCR; 72% LTV
29458D Multiple Properties Yes 125% Defeasance; 1.32x DSCR; 72% LTV
------------------------------------------------------------------------------------------------------------------------------------
10006313 31 No
26301 32 No
29003 33 No
28935 34 No
28431 35 No
------------------------------------------------------------------------------------------------------------------------------------
310900090 36 No
9905316 37 No
310900055 38 No
310900073 39 No
26508 40 No
------------------------------------------------------------------------------------------------------------------------------------
9905051 41 No
28244 42 No
310851629 43 No
310900123 44 Yes Outparcel - no allocated value
310900009 45 No
------------------------------------------------------------------------------------------------------------------------------------
310900176 46 No
310900082 47 No
310900056 48 No
310900158 49 No
28686 50 No
------------------------------------------------------------------------------------------------------------------------------------
28835 51 No
310900074 52 No
28387 53 No
310851537 54 No
28919 55 No
------------------------------------------------------------------------------------------------------------------------------------
28850 56 No
28995 57 No
310900084 58 No
310900106 59 No
29987 60 Yes Outparcel - no allocated value
------------------------------------------------------------------------------------------------------------------------------------
10006546 61 No
310900057 62 No
29720 63 No
28494 64 No
29643 65 No
------------------------------------------------------------------------------------------------------------------------------------
28009 66 No
10006364 67 No
25310 68 No
28002 69 No
28104 70 No
------------------------------------------------------------------------------------------------------------------------------------
29570 71 Multiple Properties Yes
29570A Multiple Properties Yes 125% Defeasance; 1.46x DSCR; 55% LTV;
Outparcel - no allocated value.
29570B Multiple Properties Yes 125% Defeasance; 1.46x DSCR; 55% LTV
310900045 72 No
28868 73 No
------------------------------------------------------------------------------------------------------------------------------------
29267 74 No
310900065 75 No
310900094 76 No
10006389 77 No
310900053 78 No
------------------------------------------------------------------------------------------------------------------------------------
310900147 79 No
310900097 80 No
310900118 81 No
310900153 82 Yes Outparcel - no allocated value; Subject to
rent/LTV constraints.
310900120 83 No
------------------------------------------------------------------------------------------------------------------------------------
310900126 84 No
310851628 85 No
310900039 86 No
310928353 87 Yes 125% of appraised value or free release
subject to DSCR & LTV tests.
310900111 88 No
------------------------------------------------------------------------------------------------------------------------------------
29512 89 No
28762 90 Yes Outparcel - no allocated value
25481 91 No
26777 92 No
26216 93 No
------------------------------------------------------------------------------------------------------------------------------------
28353 94 Multiple Properties Yes
28353A Multiple Properties Yes 125% YM; 1.30x DSCR; 75% LTV
28353B Multiple Properties Yes 125% YM; 1.30x DSCR; 75% LTV
28353C Multiple Properties Yes 125% YM; 1.30x DSCR; 75% LTV
28353D Multiple Properties Yes 125% YM; 1.30x DSCR; 75% LTV
28353E Multiple Properties Yes 125% YM; 1.30x DSCR; 75% LTV
28353F Multiple Properties Yes 125% YM; 1.30x DSCR; 75% LTV
------------------------------------------------------------------------------------------------------------------------------------
28550 95 No
29397 96 No
310900062 97 No
310900113 98 No
310900121 99 No
------------------------------------------------------------------------------------------------------------------------------------
29914 100 Yes Outparcel - no allocated value
310900116 101 No
310900042 102 No
310900131 103 No
310900119 104 No
------------------------------------------------------------------------------------------------------------------------------------
310900069 105 No
310900096 106 No
310900114 107 No
310900127 108 No
310900066 109 No
------------------------------------------------------------------------------------------------------------------------------------
310900080 110 No
310900091 111 No
310900138 112 No
310851150 113 No
310900048 114 No
------------------------------------------------------------------------------------------------------------------------------------
310900085 115 No
310900122 116 No
310900132 117 No
310900152 118 No
310900161 119 No
------------------------------------------------------------------------------------------------------------------------------------
310900107 120 No
310900060 121 No
310900092 122 No
310900144 123 No
28578 124 No
------------------------------------------------------------------------------------------------------------------------------------
310900070 125 No
310900095 126 Yes Outparcel - no allocated value
310900093 127 No
310900108 128 No
26843 129 Multiple Properties No
26843A Multiple Properties No
26843B Multiple Properties No
------------------------------------------------------------------------------------------------------------------------------------
310900081 130 No
310900148 131 No
310900157 132 No
310900143 133 No
310900117 134 No
------------------------------------------------------------------------------------------------------------------------------------
310900087 135 No
310900100 136 No
310900104 137 No
310900136 138 No
310900159 139 No
------------------------------------------------------------------------------------------------------------------------------------
310900110 140 No
310900103 141 No
310900134 142 No
310900150 143 No
310900179 144 No
310900101 145 No
------------------------------------------------------------------------------------------------------------------------------------
Totals/Weighted Avg.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Deferred
Tax Insurance Replacement Maintenance TI/LC
Loan Number Count Escrow Escrow Escrow Escrow Escrow
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
310900140 1 Yes Yes Yes Yes No
310900140A Yes Yes Yes Yes No
310900140B Yes Yes Yes Yes No
310900140C Yes Yes Yes No No
310900140D Yes Yes Yes No No
310900140E Yes Yes Yes Yes No
310900140F Yes Yes Yes No No
---------------------------------------------------------------------------------------------------------------------------
28983 2 No No No No No
310851623 3 Yes No Yes Yes No
310851623A Yes No Yes Yes No
310851623B Yes No Yes Yes No
310851623C Yes No Yes Yes No
310851623D Yes No Yes Yes No
310851623E Yes No Yes Yes No
310851623F Yes No Yes Yes No
310851623G Yes No Yes Yes No
310851623H Yes No Yes Yes No
310851623I Yes No Yes Yes No
310851623J Yes No Yes Yes No
310851623K Yes No Yes Yes No
310851623L Yes No Yes Yes No
310851623M Yes No Yes Yes No
310851623N Yes No Yes Yes No
310851623O Yes No Yes Yes No
310851623P Yes No Yes Yes No
310851623Q Yes No Yes Yes No
310851623R Yes No Yes No No
310851623S Yes No Yes Yes No
---------------------------------------------------------------------------------------------------------------------------
10006891 4 Yes No Yes No Yes
28326 5 Yes Yes Yes No No
28750 6 Yes No Yes Yes Yes
310900049 7 No No Yes No No
310900130 8 Yes Yes Yes No Yes
---------------------------------------------------------------------------------------------------------------------------
26908 9 Yes Yes Yes No No
29198 10 No No No No No
310900195 11 Yes Yes Yes No No
29083 12 Yes Yes Yes Yes Yes
29083A Yes Yes Yes Yes No
29083B Yes Yes Yes No Yes
---------------------------------------------------------------------------------------------------------------------------
29106 13 Yes No Yes Yes No
28225 14 No No No No No
29453 15 Yes Yes Yes No No
310900170 16 No No No No No
26188 17 Yes No Yes Yes Yes
26188A Yes No Yes Yes Yes
26188B Yes No Yes Yes Yes
---------------------------------------------------------------------------------------------------------------------------
29476 18 Yes Yes Yes Yes Yes
29476A Yes Yes Yes Yes Yes
29476B Yes Yes Yes Yes Yes
310900086 19 Yes Yes Yes No No
310900112 20 Yes Yes No No No
---------------------------------------------------------------------------------------------------------------------------
310900190 21 Yes Yes Yes Yes Yes
27752 22 Yes No Yes Yes Yes
29028 23 Yes Yes Yes Yes No
29028A Yes Yes Yes Yes No
29028B Yes Yes Yes Yes No
29028C Yes Yes Yes Yes No
29028D Yes Yes Yes Yes No
---------------------------------------------------------------------------------------------------------------------------
310900040 24 Yes No Yes No No
29136 25 Yes No Yes No No
310900044 26 Yes Yes No No No
29676 27 Yes Yes Yes No No
310851554 28 No No No No No
28636 29 Yes Yes No No No
---------------------------------------------------------------------------------------------------------------------------
29458 30 Yes Yes Yes Yes No
29458A Yes Yes Yes No No
29458B Yes Yes Yes No No
29458C Yes Yes Yes Yes No
29458D Yes Yes Yes Yes No
---------------------------------------------------------------------------------------------------------------------------
10006313 31 Yes Yes Yes No Yes
26301 32 No No No No No
29003 33 Yes Yes Yes Yes No
28935 34 No No No No No
28431 35 Yes Yes Yes Yes Yes
---------------------------------------------------------------------------------------------------------------------------
310900090 36 Yes Yes Yes No Yes
9905316 37 Yes Yes Yes No No
310900055 38 No No No No No
310900073 39 No No No No No
26508 40 Yes Yes Yes Yes Yes
---------------------------------------------------------------------------------------------------------------------------
9905051 41 Yes Yes Yes Yes Yes
28244 42 Yes No Yes Yes No
310851629 43 Yes Yes Yes No No
310900123 44 Yes Yes Yes Yes No
310900009 45 Yes No Yes No Yes
---------------------------------------------------------------------------------------------------------------------------
310900176 46 Yes Yes Yes No No
310900082 47 Yes No Yes No No
310900056 48 Yes Yes Yes No No
310900158 49 Yes Yes Yes No Yes
28686 50 Yes No No Yes No
---------------------------------------------------------------------------------------------------------------------------
28835 51 Yes Yes Yes Yes No
310900074 52 Yes Yes Yes No Yes
28387 53 Yes Yes Yes Yes No
310851537 54 Yes No Yes No No
28919 55 No No Yes No No
---------------------------------------------------------------------------------------------------------------------------
28850 56 Yes Yes Yes Yes No
28995 57 Yes No No No No
310900084 58 Yes Yes Yes Yes Yes
310900106 59 Yes Yes Yes No No
29987 60 Yes Yes Yes Yes No
---------------------------------------------------------------------------------------------------------------------------
10006546 61 Yes Yes No No No
310900057 62 Yes Yes Yes No No
29720 63 Yes Yes Yes Yes Yes
28494 64 Yes No Yes No Yes
29643 65 Yes Yes Yes Yes No
---------------------------------------------------------------------------------------------------------------------------
28009 66 Yes Yes Yes No No
10006364 67 Yes Yes Yes No No
25310 68 Yes Yes Yes No Yes
28002 69 No No No Yes No
28104 70 Yes No Yes No No
---------------------------------------------------------------------------------------------------------------------------
29570 71 Yes Yes Yes Yes No
29570A Yes Yes Yes No No
29570B Yes Yes Yes Yes No
310900045 72 No No No No No
28868 73 Yes No Yes No Yes
---------------------------------------------------------------------------------------------------------------------------
29267 74 Yes Yes Yes Yes No
310900065 75 Yes Yes Yes Yes Yes
310900094 76 Yes No Yes No Yes
10006389 77 Yes Yes Yes Yes No
310900053 78 Yes Yes Yes Yes No
---------------------------------------------------------------------------------------------------------------------------
310900147 79 Yes Yes No No No
310900097 80 Yes Yes Yes No No
310900118 81 No Yes Yes No Yes
310900153 82 Yes Yes No No No
310900120 83 No No No No No
---------------------------------------------------------------------------------------------------------------------------
310900126 84 Yes Yes No No Yes
310851628 85 Yes Yes No No No
310900039 86 Yes Yes Yes No No
310928353 87 Yes No No No No
310900111 88 Yes Yes Yes No Yes
---------------------------------------------------------------------------------------------------------------------------
29512 89 No No Yes No No
28762 90 No Yes Yes No No
25481 91 No No No No No
26777 92 Yes Yes Yes Yes No
26216 93 Yes Yes Yes Yes No
---------------------------------------------------------------------------------------------------------------------------
28353 94 No No No No No
28353A No No No No No
28353B No No No No No
28353C No No No No No
28353D No No No No No
28353E No No No No No
28353F No No No No No
---------------------------------------------------------------------------------------------------------------------------
28550 95 Yes Yes Yes No No
29397 96 Yes Yes Yes Yes No
310900062 97 Yes Yes Yes No No
310900113 98 Yes Yes Yes No No
310900121 99 No No No No No
---------------------------------------------------------------------------------------------------------------------------
29914 100 Yes Yes Yes No No
310900116 101 Yes Yes Yes No No
310900042 102 No No No No No
310900131 103 Yes Yes Yes No Yes
310900119 104 Yes Yes No No No
---------------------------------------------------------------------------------------------------------------------------
310900069 105 Yes Yes No No No
310900096 106 No No No No No
310900114 107 Yes Yes No No No
310900127 108 No No No No No
310900066 109 Yes Yes No No No
---------------------------------------------------------------------------------------------------------------------------
310900080 110 No No No No No
310900091 111 Yes Yes No No Yes
310900138 112 Yes Yes Yes No No
310851150 113 Yes Yes No No No
310900048 114 Yes Yes No No No
---------------------------------------------------------------------------------------------------------------------------
310900085 115 Yes Yes Yes No Yes
310900122 116 No No No No No
310900132 117 No No No No No
310900152 118 Yes Yes Yes No No
310900161 119 Yes Yes Yes No No
---------------------------------------------------------------------------------------------------------------------------
310900107 120 Yes Yes Yes No Yes
310900060 121 Yes Yes No No Yes
310900092 122 Yes Yes Yes Yes No
310900144 123 Yes Yes Yes No No
28578 124 Yes Yes Yes Yes No
---------------------------------------------------------------------------------------------------------------------------
310900070 125 No No No No No
310900095 126 No No No No No
310900093 127 Yes Yes No No No
310900108 128 Yes Yes No No Yes
26843 129 Yes Yes Yes Yes No
26843A Yes Yes Yes Yes No
26843B Yes Yes Yes Yes No
---------------------------------------------------------------------------------------------------------------------------
310900081 130 No No No Yes No
310900148 131 Yes Yes Yes No No
310900157 132 Yes Yes Yes No No
310900143 133 Yes Yes Yes No Yes
310900117 134 Yes Yes Yes No No
---------------------------------------------------------------------------------------------------------------------------
310900087 135 No No No No No
310900100 136 No No No No No
310900104 137 Yes Yes No No No
310900136 138 Yes Yes No No No
310900159 139 Yes Yes Yes No No
---------------------------------------------------------------------------------------------------------------------------
310900110 140 Yes Yes Yes No Yes
310900103 141 No No No No No
310900134 142 Yes Yes No No Yes
310900150 143 Yes Yes Yes No No
310900179 144 Yes Yes No No No
310900101 145 No No No No No
---------------------------------------------------------------------------------------------------------------------------
Totals/Weighted Avg.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Environmental Other
Loan Number Count Escrow Escrow Springing Escrow Description
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
310900140 1 No No
310900140A No No
310900140B No No
310900140C No No
310900140D No No
310900140E No No
310900140F No No
------------------------------------------------------------------------------------------------------------------------------------
28983 2 No No Tax, Insurance, Replacement Reserves
310851623 3 No No
310851623A No No Insurance
310851623B No No Insurance
310851623C No No Insurance
310851623D No No Insurance
310851623E No No Insurance
310851623F No No Insurance
310851623G No No Insurance
310851623H No No Insurance
310851623I No No Insurance
310851623J No No Insurance
310851623K No No Insurance
310851623L No No Insurance
310851623M No No Insurance
310851623N No No Insurance
310851623O No No Insurance
310851623P No No Insurance
310851623Q No No Insurance
310851623R No No Insurance
310851623S No No Insurance
------------------------------------------------------------------------------------------------------------------------------------
10006891 4 No No
28326 5 No No Tax, Insurance, Replacement Reserves
28750 6 No Yes Insurance
310900049 7 No No Tax, Insurance
310900130 8 No No Other
------------------------------------------------------------------------------------------------------------------------------------
26908 9 No No
29198 10 No No Tax, Insurance, Replacement Reserves
310900195 11 No No
29083 12 No Yes
29083A No Yes
29083B No Yes
------------------------------------------------------------------------------------------------------------------------------------
29106 13 No Yes Insurance
28225 14 No No Tax, Insurance
29453 15 No No
310900170 16 No No Tax, Insurance
26188 17 No No
26188A No No Insurance
26188B No No
------------------------------------------------------------------------------------------------------------------------------------
29476 18 No No
29476A No No
29476B No No
310900086 19 Yes No
310900112 20 No No
------------------------------------------------------------------------------------------------------------------------------------
310900190 21 No Yes
27752 22 No Yes Insurance
29028 23 No Yes
29028A No Yes
29028B No Yes
29028C No No
29028D No No
------------------------------------------------------------------------------------------------------------------------------------
310900040 24 No Yes Insurance
29136 25 Yes No Tax, Insurance, TI/LC, Other
310900044 26 No No
29676 27 No No
310851554 28 No No
28636 29 No No Replacement Reserves
------------------------------------------------------------------------------------------------------------------------------------
29458 30 No No
29458A No No
29458B No No
29458C No No
29458D No No
------------------------------------------------------------------------------------------------------------------------------------
10006313 31 No Yes
26301 32 No No Tax, Insurance, Replacement Reserves
29003 33 No No
28935 34 No No Tax, Insurance
28431 35 No No
------------------------------------------------------------------------------------------------------------------------------------
310900090 36 No Yes
9905316 37 No No
310900055 38 No No
310900073 39 No No
26508 40 No Yes
------------------------------------------------------------------------------------------------------------------------------------
9905051 41 No No TI/LC
28244 42 No No Insurance, Other
310851629 43 No No
310900123 44 No No
310900009 45 No No Insurance
------------------------------------------------------------------------------------------------------------------------------------
310900176 46 No No
310900082 47 No No Insurance
310900056 48 No No
310900158 49 No No TI/LC or Letter of Credit
28686 50 No Yes Insurance, Replacement Reserves
------------------------------------------------------------------------------------------------------------------------------------
28835 51 No Yes
310900074 52 No No
28387 53 No No Tax, Insurance
310851537 54 No No
28919 55 No No Tax, Insurance, TI/LC
------------------------------------------------------------------------------------------------------------------------------------
28850 56 No Yes
28995 57 No Yes Insurance, Replacement Reserves
310900084 58 No No
310900106 59 No No
29987 60 No Yes
------------------------------------------------------------------------------------------------------------------------------------
10006546 61 No No
310900057 62 No No
29720 63 No Yes
28494 64 No Yes Insurance
29643 65 No No
------------------------------------------------------------------------------------------------------------------------------------
28009 66 No No Tax, Insurance, Replacement Reserves
10006364 67 No No
25310 68 No No Insurance
28002 69 No No Tax, Insurance, Replacement Reserves
28104 70 No No Insurance
------------------------------------------------------------------------------------------------------------------------------------
29570 71 No No
29570A No No
29570B No No
310900045 72 No Yes
28868 73 No No Insurance
------------------------------------------------------------------------------------------------------------------------------------
29267 74 Yes No Insurance
310900065 75 No No
310900094 76 No No Insurance, TI/LC
10006389 77 No No TI/LC
310900053 78 No No
------------------------------------------------------------------------------------------------------------------------------------
310900147 79 No No
310900097 80 No No
310900118 81 No No Tax
310900153 82 No No
310900120 83 No No Tax, Insurance, TI/LC
------------------------------------------------------------------------------------------------------------------------------------
310900126 84 No No
310851628 85 No No
310900039 86 No No
310928353 87 No No Insurance
310900111 88 No No
------------------------------------------------------------------------------------------------------------------------------------
29512 89 No No Tax, Insurance
28762 90 No Yes
25481 91 No Yes
26777 92 No Yes Tax, Insurance
26216 93 Yes Yes Replacement Reserves
------------------------------------------------------------------------------------------------------------------------------------
28353 94 No No
28353A No No Tax, Insurance, Replacement Reserves
28353B No No Tax, Insurance, Replacement Reserves
28353C No No Tax, Insurance, Replacement Reserves
28353D No No Tax, Insurance, Replacement Reserves
28353E No No Tax, Insurance, Replacement Reserves
28353F No No Tax, Insurance, Replacement Reserves
------------------------------------------------------------------------------------------------------------------------------------
28550 95 No No
29397 96 No No
310900062 97 No No
310900113 98 No No
310900121 99 No No TI/LC
------------------------------------------------------------------------------------------------------------------------------------
29914 100 No No Tax, Insurance, Replacement Reserves
310900116 101 No No
310900042 102 No No
310900131 103 No No
310900119 104 No No
------------------------------------------------------------------------------------------------------------------------------------
310900069 105 No No
310900096 106 No No Tax, Insurance
310900114 107 No No TI/LC
310900127 108 No No Tax, Insurance
310900066 109 No No
------------------------------------------------------------------------------------------------------------------------------------
310900080 110 No No
310900091 111 No No
310900138 112 No No
310851150 113 No No
310900048 114 No No
------------------------------------------------------------------------------------------------------------------------------------
310900085 115 No No
310900122 116 No No
310900132 117 No No Tax, Insurance
310900152 118 No No Real Property Lien and Contract for Improvements in
Public Right of Way
310900161 119 No No
------------------------------------------------------------------------------------------------------------------------------------
310900107 120 No No
310900060 121 No No
310900092 122 No No
310900144 123 No No
28578 124 No Yes
------------------------------------------------------------------------------------------------------------------------------------
310900070 125 No No Tax, Insurance
310900095 126 No No Tax, Insurance, Replacement Reserves
310900093 127 No No
310900108 128 No No
26843 129 No No
26843A No No
26843B No No
------------------------------------------------------------------------------------------------------------------------------------
310900081 130 No No Tax, Insurance
310900148 131 No No
310900157 132 No No
310900143 133 No No
310900117 134 No No
------------------------------------------------------------------------------------------------------------------------------------
310900087 135 No Yes
310900100 136 No No Tax, Insurance
310900104 137 No No
310900136 138 No No
310900159 139 No No
------------------------------------------------------------------------------------------------------------------------------------
310900110 140 No No
310900103 141 No No Tax, Insurance
310900134 142 No No Other
310900150 143 No No
310900179 144 No No
310900101 145 No No Tax, Insurance
------------------------------------------------------------------------------------------------------------------------------------
Totals/Weighted Avg.
</TABLE>
<PAGE>
ANNEX B
LOAN NO. 310900140 -- MANUFACTURED HOME COMMUNITIES, INC.
OVERVIEW
This mortgage loan is secured by first mortgages on the borrowers' fee
interests in six age-restricted manufactured housing communities located in
three states (Florida, California and Illinois) and containing a total of 4,058
sites. As of April 20, 2000, the mortgaged properties were 96.7% occupied,
which is consistent with the portfolio occupancy since 1995. Each community
offers a full amenity package and substantially all of each community's sites
are able to accommodate a doublewide home. The mortgage loan was originated by
Wells Fargo Bank, National Association on June 30, 2000. The information in the
table immediately set forth below is presented on a combined basis for all six
properties.
<TABLE>
<S> <C> <C> <C>
CUT-OFF DATE BALANCE: $93,927,147 PROPERTY TYPE: Manufactured
Housing Community
GROSS MORTGAGE RATE: 7.8200% LOCATION: See Below
INTEREST ACCRUAL METHOD: Actual/360 YEAR BUILT/RENOVATED: See Below
FIRST PAYMENT DATE: 8/1/2000 UNITS: 4,058
MATURITY DATE: 7/1/2010 CUT-OFF DATE
BALANCE/UNIT: $ 23,146.17
ORIGINAL AMORTIZATION: 360
ANNUAL DEBT SERVICE: $8,146,575 OCCUPANCY: 96.7%
LOCKOUT END DATE: 4/30/2010 OCCUPANCY DATE: 4/20/2000
CALL PROTECTION: Defeasance
CALL PROTECTION END DATE: 4/30/2010 APPRAISED VALUE: $151,075,000
ESCROWS CUT-OFF DATE LTV: 62.2%
REAL ESTATE TAXES: Yes BALLOON LTV: 55.5%
INSURANCE: Yes
REPLACEMENT RESERVES: Yes UNDERWRITTEN CASH FLOW: $ 11,602,442
DSCR: 1.42x
</TABLE>
THE PROPERTIES
Set forth below is certain summary information with respect to the
mortgaged properties:
<TABLE>
<CAPTION>
ALLOCATED NO. OF
MHC PROPERTY LOCATION LOAN AMT. PROPERTY TYPE YEAR BUILT OCC.% (1) SITES
---------------------- ------------------- -------------- -------------------------------- ------------ ----------- -------
<S> <C> <C> <C> <C> <C> <C>
Mid Florida Lakes .... Leesburg, FL $24,000,000 Manufactured Housing Community 1968 93.5% 1,226
Colonies of Margate .. Margate, FL $20,500,000 Manufactured Housing Community 1974 96.1% 819
Willow Lake Estates .. Elgin, IL $19,500,000 Manufactured Housing Community 1961 97.1% 616
Buccaneer Estates .... N. Ft. Meyers, FL $19,300,000 Manufactured Housing Community 1974 99.4% 971
DeAnza Santa Cruz .... Santa Cruz, CA $ 6,160,000 Manufactured Housing Community 1970 100.0% 198
Bay Lake Estates ..... Nokomis, FL $ 4,790,000 Manufactured Housing Community 1972 99.6% 228
</TABLE>
----------
(1) Occupancy percentages are as of April 2000.
Set forth below is a general description and certain other information
with respect to each related mortgaged property.
Mid Florida Lakes. Mid Florida Lakes is located in Leesburg, Florida and
contains 1,226 sites. The community was developed in 1968, with an additional
31 sites added in 1999. Mid Florida Lakes is an age-restricted community, with
95% of the residents being 55 years of age or older. 100% of the
B-1
<PAGE>
sites in the community can accommodate doublewide homes. The community offers a
full amenity package including gated access, a clubhouse, two swimming pools,
laundry room, storage, tennis court, 18 shuffleboard courts, bocce courts,
horseshoe pits, fitness center, fishing ponds and a lake with boat docks. All
homes have brick skirting, carports, concrete drives and screened porches.
According to the appraisal, occupancy rates for manufactured housing
communities in the local market range from 94% to 100%. As of April 2000, Mid
Florida Lakes had an occupancy rate of 93.5%, which includes 31 sites added in
1999; excluding the new 31 sites, the occupancy rate is 96%. Mid Florida Lakes
has an appraised value of $35,800,000 based on an appraisal as of May 18, 2000.
The underwritten cash flow for the property is $2,921,818.
SUMMARIZED OPERATING RESULTS
<TABLE>
<CAPTION>
YEAR ENDING YEAR ENDING TRAILING 12 MONTHS
12/31/98 ACTUAL 12/31/99 ACTUAL THROUGH 7/31/00 APPRAISAL UNDERWRITTEN
----------------- ----------------- ------------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Occupancy % .................... 95.6% 95.7% 94.3% 94.0% 94.0%
Effective gross income ......... $4,238,575 $4,413,966 $4,467,718 $4,572,954 $4,632,851
Total expenses ................. $1,266,600 $1,324,262 $1,412,452 $1,587,695 $1,649,733
Net operating income ........... $2,971,975 $3,089,704 $3,055,266 $2,985,259 $2,983,118
Net cash flow .................. $2,954,351 $3,086,692 $3,055,266 $2,954,659 $2,921,818
</TABLE>
Colonies of Margate. Colonies of Margate is located in Margate, Florida
and contains 819 sites. The community was developed in 1974, with additional
sites added in 1981. Colonies of Margate is an age-restricted community, with
95% of the residents being 55 years of age or older. 100% of the sites in the
community can accommodate doublewide homes. The community offers a full amenity
package including gated access, two clubhouses, laundry rooms, two swimming
pools, tennis courts, bocce court, pentanque courts, spa, fitness center,
racquetball and basketball courts and a RV/boat storage area. All homes have
brick skirting, carports, concrete drives and screened porches.
According to the appraisal, occupancy rates for manufactured housing
communities in the local market range from 94% to 100%. As of April 2000,
Colonies of Margate had an occupancy rate of 96.1%. Colonies of Margate has an
appraised value of $32,300,000 based on an appraisal as of May 22, 2000. The
underwritten cash flow for the property is $2,591,200.
SUMMARIZED OPERATING RESULTS
<TABLE>
<CAPTION>
YEAR ENDING YEAR ENDING TRAILING 12 MONTHS
12/31/98 ACTUAL 12/31/99 ACTUAL THROUGH 7/31/00 APPRAISAL UNDERWRITTEN
----------------- ----------------- ------------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Occupancy % .................... 97.7% 96.1% 96.2% 96.0% 95.0%
Effective gross income ......... $4,177,236 $4,204,178 $4,235,609 $4,293,462 $4,219,899
Total expenses ................. $1,403,350 $1,354,866 $1,401,576 $1,517,509 $1,587,749
Net operating income ........... $2,773,886 $2,849,312 $2,834,033 $2,775,953 $2,632,150
Net cash flow .................. $2,763,240 $2,822,526 $2,834,033 $2,755,478 $2,591,200
</TABLE>
Willow Lake Estates. Willow Lake Estates is located in Elgin, Illinois and
contains 616 sites. The community was developed in 1961, and underwent
renovations in 1999. Willow Lake Estates is an age-restricted community, with
95% of the residents being 55 years of age or older. 100% of the sites in the
community can accommodate doublewide homes. The community offers a full amenity
package including a pool, laundry facility, clubhouse, billiard room, fitness
center, horseshoe pits, shuffleboard and a 22-acre private fresh water fishing
lake with a picnic area and boats. All homes have brick skirting, carports,
concrete drives and screened porches.
B-2
<PAGE>
According to the appraisal, occupancy rates for manufactured housing
communities in the local market range from 95% to 98%. As of April 2000, Willow
Lake Estates had an occupancy rate of 97.1%. Willow Lake Estates has an
appraised value of $33,600,000 based on an appraisal as of May 16, 2000. The
underwritten cash flow for the property is $2,456,032.
SUMMARIZED OPERATING RESULTS
<TABLE>
<CAPTION>
YEAR ENDING YEAR ENDING TRAILING 12 MONTHS
12/31/98 ACTUAL 12/31/99 ACTUAL THROUGH 7/31/00 APPRAISAL UNDERWRITTEN
----------------- ----------------- ------------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Occupancy % .................... 98.2% 97.0% 97.3% 96.9% 95.0%
Effective gross income ......... $4,025,090 $4,068,492 $4,172,863 $4,406,303 $4,141,184
Total expenses ................. $1,352,665 $1,587,129 $1,589,152 $1,674,552 $1,633,328
Net operating income ........... $2,672,425 $2,481,363 $2,583,711 $2,731,751 $2,507,856
Net cash flow .................. $2,662,139 $2,437,991 $2,583,711 $2,700,951 $2,456,032
</TABLE>
Buccaneer Estates. Buccaneer Estates is located in North Fort Myers,
Florida and contains 971 sites. The community was developed in 1974. Buccaneer
Estates is an age-restricted community, with 95% of the residents being 55
years of age or older. 99% of the sites in the community can accommodate
doublewide homes. The community offers a full amenity package including gated
access, two clubhouses, two swimming pools, two exercise rooms, putting green,
jacuzzi, sauna, billiards, 12 shuffleboard courts, six horseshoe courts, two
laundry rooms and a RV/boat storage area. All homes have brick skirting,
carports, concrete drives, and screened porches.
According to the appraisal, occupancy rates for manufactured housing
communities in the local market range from 92% to 100%. As of April 2000,
Buccaneer Estates had an occupancy rate of 99.4%. Buccaneer Estates has an
appraised value of $32,675,000 based on an appraisal as of May 17, 2000. The
underwritten cash flow for the property is $2,302,731.
SUMMARIZED OPERATING RESULTS
<TABLE>
<CAPTION>
YEAR ENDING YEAR ENDING TRAILING 12 MONTHS
12/31/98 ACTUAL 12/31/99 ACTUAL THROUGH 7/31/00 APPRAISAL UNDERWRITTEN
----------------- ----------------- ------------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Occupancy % .................... 99.8% 99.5% 99.3% 96.9% 95.0%
Effective gross income ......... $3,521,681 $3,574,584 $3,635,761 $3,662,525 $3,523,330
Total expenses ................. $1,109,365 $ 997,711 $1,039,710 $1,203,904 $1,172,049
Net operating income ........... $2,412,316 $2,576,873 $2,596,051 $2,458,621 $2,351,281
Net cash flow .................. $2,397,436 $2,550,468 $2,596,051 $2,434,121 $2,302,731
</TABLE>
DeAnza Santa Cruz. DeAnza Santa Cruz is located in Santa Cruz, California
and contains 198 sites. The community was developed in 1970. DeAnza Santa Cruz
is an age-restricted community, with residents being 55 years of age or older.
100% of the sites in the community can accommodate doublewide homes. The
community offers a full amenity package including a clubhouse, heated outdoor
pool, exercise room, hot tub, saunas, laundry buildings and a RV/boat storage
area. All homes have brick skirting, carports, concrete drives and screened
porches.
According to the appraisal, the occupancy rate for manufactured housing
communities in the local market is 100%. As of April 2000, DeAnza Santa Cruz
had an occupancy rate of 100%. DeAnza Santa Cruz has an appraised value of
$8,800,000 based on an appraisal as of May 18, 2000. The underwritten cash flow
for the property is $755,075.
B-3
<PAGE>
SUMMARIZED OPERATING RESULTS
<TABLE>
<CAPTION>
YEAR ENDING YEAR ENDING TRAILING 12 MONTHS
12/31/98 ACTUAL 12/31/99 ACTUAL THROUGH 7/31/00 APPRAISAL UNDERWRITTEN
----------------- ----------------- ------------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Occupancy % .................... 100% 100% 100% 98.8% 95.0%
Effective gross income ......... $1,368,895 $1,370,909 $1,383,323 $1,395,819 $1,344,547
Total expenses ................. $ 652,684 $ 606,246 $ 630,435 $ 599,633 $ 576,822
Net operating income ........... $ 716,211 $ 764,663 $ 752,888 $ 796,186 $ 767,725
Net cash flow .................. $ 710,237 $ 762,052 $ 752,888 $ 791,236 $ 755,075
</TABLE>
Bay Lake Estates. Bay Lake Estates is located in Nokomis, Florida and
contains 228 sites. The community was developed in 1972. Bay Lake Estates is an
age-restricted community, with 95% of the residents being 55 years of age or
older. 100% of the sites in the community can accommodate doublewide homes. The
community offers a full amenity package including a clubhouse (consisting of a
large meeting hall with stage area, full kitchen, library and billiard room), a
heated swimming pool, sun deck, 8 shuffleboard courts, bocce court, laundry
facilities, a fishing lake and RV/boat storage area. All homes have brick
skirting, carports, concrete drives and screened porches.
According to the appraisal, the occupancy rate for manufactured housing
communities in the local market is 100%. As of April 2000, Bay Lake Estates had
an occupancy rate of 99.6%. Bay Lake Estates has an appraised value of
$7,900,000 based on an appraisal as of May 17, 2000. The underwritten cash flow
for the property is $575,586.
SUMMARIZED OPERATING RESULTS
<TABLE>
<CAPTION>
YEAR ENDING YEAR ENDING TRAILING 12 MONTHS
12/31/98 ACTUAL 12/31/99 ACTUAL THROUGH 7/31/00 APPRAISAL UNDERWRITTEN
----------------- ----------------- ------------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Occupancy % .................... 99.7% 99.0% 99.1% 96.8% 95.0%
Effective gross income ......... $956,999 $982,011 $1,007,658 $1,056,679 $981,226
Total expenses ................. $345,870 $344,305 $ 345,010 $ 395,384 $394,240
Net operating income ........... $611,129 $637,706 $ 662,648 $ 661,295 $586,986
Net cash flow .................. $601,465 $628,819 $ 662,648 $ 655,595 $575,586
</TABLE>
THE BORROWER
The borrowers are MHC-DeAnza Financing Limited Partnership, an Illinois
limited partnership ("DeAnza"), and Snowbirdland Vistas, Inc., an Illinois
corporation ("Snowbirdland"). The borrowers are affiliates of Manufactured Home
Communities, Inc., a real estate investment trust whose shares are publicly
traded. Each borrower is a single purpose entity whose organizational documents
do not permit it to engage in any business unrelated to the mortgaged
properties or to have any assets, other than its interest in the mortgaged
properties, or any indebtedness (subject to limited exceptions such as trade
payables incurred in the ordinary course of business) other than the mortgage
loan. The general partner of DeAnza is MHC-QRS DeAnza, Inc., an Illinois
corporation that is required to have at least one independent party whose
consent is required for, among other things, the filing of a bankruptcy
petition by DeAnza. Snowbirdland is required to have at least one independent
party who is required to approve, among other things, the filing of a
bankruptcy petition by Snowbirdland. In connection with the closing of the
mortgage loan, the lender received an opinion from the borrowers' counsel to
the effect that, among other things, the assets of the borrowers would not be
consolidated with the assets of any party having a controlling interest in
either borrower in the event of a bankruptcy or insolvency of that party.
MANAGEMENT
The properties are managed by MHC Management Limited Partnership, an
Illinois limited partnership that is an affiliate of the borrowers.
B-4
<PAGE>
ESCROWS
The borrowers funded the following reserve accounts upon the origination
of the mortgage loan: (a) a real estate tax and insurance premium account in
the initial amount of $1,606,379 and (b) a repair and remediation reserve in
the initial amount of $78,410. The loan documents require the borrowers to make
monthly deposits to the tax and insurance premium account in an amount
sufficient to pay real estate taxes and insurance premiums when due. The loan
documents also require the borrowers to make monthly deposits to a replacement
reserve until the balance on deposit therein equals $760,722 and thereafter to
make additional monthly deposits as are necessary to maintain such amount.
ADDITIONAL DEBT/TRANSFERS
Except as described below, the loan documents provide that the mortgage
loan will become immediately due and payable upon (i) any transfer of the
borrowers' interest in any of the mortgaged properties or any transfer of an
interest in either borrower or (ii) any additional encumbrance of any of the
properties, in each case without the prior written consent of the lender.
Defeasance. At any time after the second anniversary of the date of
initial issuance of the certificates, the borrower is entitled to obtain a
release of one or more of the mortgaged properties from the lien of the
mortgages upon the substitution of non-callable United States Treasury
securities that provide for the payment of the remaining scheduled cash flow
attributable to 125% of the portion of the indebtedness allocable to the
mortgaged properties to be released.
Property Transfer to Unaffiliated Third Party. The borrowers have a right,
which right is exercisable one time only, to sell all (but not fewer than all)
of the properties to and cause an assumption of the mortgage loan by a third
party, subject to the satisfaction of various terms and conditions. Conditions
to an assignment and assumption include, among other things, (a) the absence of
a default under the mortgage loan, (b) a satisfactory credit and underwriting
review by the lender, (c) the lender's determination that the transferee has
recent experience in the ownership and operation of properties comparable to
the mortgaged properties, (d) delivery of an endorsement to the title insurance
policy confirming that the liens of the related mortgages will not be impaired
by reason of the transfer, (e) organization of the transferee in a manner that
conforms to the special purpose and entity separateness covenants set forth in
the mortgage loan and delivery of a non-consolidation opinion if required by
the lender, and (f) payment of an assumption fee in an amount equal to 0.5% or
the then unpaid principal balance of the mortgage loan.
Property Transfer to an Affiliate. The borrowers have a right with respect
to each of the mortgaged properties, which right is exercisable one time only
with respect to any mortgaged property, to transfer the mortgaged property to
an affiliate of the borrowers, subject to the satisfaction of various terms and
conditions. Conditions to a transfer include, among other things, (a) the
absence of a default under the mortgage loan, (b) the lender's reasonable
determination that the mortgaged property's cash flow will not be materially
and adversely affected by any increase in real property taxes resulting from
such transfer, (c) delivery of an endorsement to the title insurance policy
confirming that the liens of the related mortgages will not be impaired by
reason of the transfer, and (d) organization of the transferee in a manner that
conforms to the special purpose and entity separateness covenants set forth in
the mortgage loan and delivery of a non-consolidation opinion if required by
the lender.
Replacement Properties. The borrowers are entitled to obtain a release of
one or more of the mortgaged properties from the lien of the mortgages upon
delivery of a mortgage on one or more replacement manufactured housing
communities, provided that the borrowers are not entitled to the release of any
mortgaged property whose allocated portion of the indebtedness, together with
that of any and all other properties previously released, represents more than
30% of the original principal balance of the mortgage loan. Other terms and
conditions to a release and substitution include, among other things, (a) the
absence of a default under the mortgage loan; (b) delivery of an appraisal of
the replacement property and, if required by the holder of the mortgage loan,
the remaining properties,
B-5
<PAGE>
reflecting an aggregate loan-to-value ratio that is not more than 63%; (c) a
determination that the replacement property and remaining properties have a pro
forma debt service coverage ratio that is not less than 1.4x; (d) delivery of a
"Phase I" environmental assessment report (and, if recommended by the "Phase I"
environmental assessment report, a "Phase II" environmental assessment report)
that that does not identify any violations of any applicable environmental
laws; (e) delivery of an engineering report that states that the replacement
property complies with all applicable building laws and does not recommend the
performance of deferred maintenance estimated to cost in excess of $50,000 (and
establishment of a reserve in the amount of 150% of the estimated costs of any
deferred maintenance that is recommended); and (f) delivery of a title
insurance policy for the replacement property.
See Loan no. 310900140 in the mortgage loan schedule.
B-6
<PAGE>
LOAN NO. 28983 -- FM GLOBAL HEADQUARTERS
OVERVIEW
This mortgage loan is secured by a first mortgage on the borrower's
leasehold interest under a ground lease on a 328,359 square foot suburban
office building located in Johnston, Rhode Island, that is 100% sub-leased to
Factory Mutual Insurance Company, and is also secured by a first mortgage on
the ground lessor's fee interest in the mortgaged property. This mortgage loan
is scheduled to amortize fully by its maturity on August 1, 2009 pursuant to a
semi-annual payment schedule. This mortgage loan was originated by Bear,
Stearns Funding, Inc. on July 31, 2000.
<TABLE>
<S> <C> <C> <C>
CUT-OFF DATE BALANCE: $31,802,702 PROPERTY TYPE: Office, Suburban
GROSS MORTGAGE RATE: 8.7350% LOCATION: Johnston, Rhode
Island
INTEREST ACCRUAL METHOD: 30/360 YEAR BUILT/RENOVATED: 1973/1997
FIRST PAYMENT DATE: 8/1/2000 SQUARE FEET: 328,359
MATURITY DATE: 8/1/2009 CUT-OFF DATE $ 96.85
BALANCE/SQ.FT.:
ORIGINAL AMORTIZATION: 109
ANNUAL DEBT SERVICE: $4,673,391 OCCUPANCY: 100.0%
LOCKOUT END DATE: 7/31/2009 OCCUPANCY DATE: 4/1/2000
CALL PROTECTION: Defeasance
CALL PROTECTION END DATE: 7/31/2009 APPRAISED VALUE: $63,520,000
ESCROWS CUT-OFF DATE LTV: 50.1%
REAL ESTATE TAXES: Springing BALLOON LTV: 0.0%
INSURANCE: Springing
REPLACEMENT RESERVES: Springing UNDERWRITTEN CASH $ 8,062,340
FLOW:
DSCR: 1.73x
</TABLE>
THE PROPERTY
The mortgaged property, which consists of one low-rise office building on
a 25.84 acre site in Johnston, Rhode Island, is located approximately 10
minutes from the Providence central business district and less than three miles
from the Interstate 295 interchange. The mortgaged property was constructed in
1973 and was renovated in 1997. As a result of a sale-leaseback transaction,
the fee interest in the mortgaged property is owned by Factory Mutual Insurance
Company and is ground-leased to the borrower, PREFCO II Limited Partnership.
The borrower is 80% owned by Pitney Bowes Credit Corporation, the limited
partner, and 20% owned by PREFCO II, INC., the general partner. PREFCO II
Limited Partnership subleases the building to Factory Mutual Insurance Company
pursuant to a triple net lease that expires July 31, 2009. Factory Mutual
Insurance Company is obligated to pay ground rent as additional rent and to
otherwise perform all obligations of the borrower under the ground lease. Rent
payments are due semi-annually in arrears on the same dates and in at least the
same amounts that payments are due under the mortgage loan and the ground
lease. The ground lease expires on July 31, 2019, but can be extended for up to
20 additional years. The fee owner has granted the lender a mortgage on the fee
estate as additional security for the mortgage loan. The fee mortgage, however,
may only be foreclosed following an event of default by the tenant under the
sublease to Factory Mutual Insurance Company.
The sublease with Factory Mutual Insurance allows the tenant to terminate
the sublease following a substantial casualty or condemnation upon payment of
an amount calculated pursuant to a formula in the sublease, which amount is at
least equal to the outstanding principal balance of the mortgage loan plus
accrued interest, if any. In such event, the mortgage loan will be prepaid at
par without any yield maintenance or prepayment premium. The sublease tenant
also has both an additional option to terminate for uneconomic use and an
option to purchase, both exercisable beginning August 1, 2004 (which date is
after the defeasance lockout period of the mortgage loan). If the tenant
exercises either
B-7
<PAGE>
the termination or purchase option, it must pay the borrower an amount
calculated pursuant to a formula in the sublease, which amount is at least
equal to the outstanding principal balance of the mortgage loan and accrued
interest, if any. In such event, the borrower is required to defease the
mortgage loan.
THE BORROWER
The borrower, PREFCO II Limited Partnership, is owned by Pitney Bowes
Credit Corporation as the 99% limited partner and the indirect owner of the 1%
general partner. Pitney Bowes Credit Corporation is a wholly-owned subsidiary
of Pitney Bowes Corporation. The borrower is a single purpose entity whose
organizational documents do not permit it to engage in any business unrelated
to the mortgaged property, or to have any assets other than the mortgaged
property or any indebtedness (subject to limited exceptions such as trade
payables incurred in the ordinary course of business) other than the mortgage
loan. Additionally, the borrower's organizational documents require two
independent directors of the general partner and the unanimous vote of the
directors of the general partner in order to file a bankruptcy petition related
to the borrower. In connection with the closing of the mortgage loan, the
lender received an opinion from borrower's counsel to the effect that, among
other things, the assets of the borrower would not be consolidated with the
assets of any party having a controlling interest in the borrower in the event
of a bankruptcy or insolvency of that party.
MANAGEMENT
The property is managed by Factory Mutual Insurance Company pursuant to
the sublease.
ESCROWS
Under the sublease, Factory Mutual Insurance Company is required to pay
all real estate taxes and property insurance premiums and to maintain the
property. If the borrower at any time fails to provide the lender with
satisfactory evidence of payment of real estate taxes and property insurance
premiums in accordance with the loan documents, the lender may require the
borrower to thereafter fund escrows for those items. If the property is not
maintained in accordance with the loan documents, the lender may require the
borrower to thereafter fund an additional escrow for future capital
expenditures.
SECONDARY DEBT
There is a second mortgage loan encumbering the borrower's leasehold
interest in the property which will remain outstanding for the entire term of
the mortgage loan. The second mortgage loan is 75% owned by GA Dekalb, Inc., an
affiliate of Shearson Lehman Holdings, Inc., and 25% owned by Factory Mutual
Insurance Company (collectively, the "Subordinate Lender"). The current
principal amount of the second mortgage loan is approximately $14,000,000,
which is scheduled to increase to approximately $17,000,000 as a result of
negative amortization over the next four years, and to then fully amortize over
15 years. The second mortgage loan is scheduled to mature on August 1, 2019,
ten years after the maturity of the self-liquidating first mortgage loan. The
second mortgage loan requires payments of principal and interest, but 75% of
such payments (the portion owed to GA DeKalb, Inc.), have been prepaid through
August 1, 2009 (the maturity date of the mortgage loan). Current payments of
principal and/or interest on the second mortgage loan are made from payments of
rent due to the borrower under the Factory Mutual Insurance Company net lease
that are in excess of payments of principal and interest due under the mortgage
loan and ground lease payments.
The Subordinate Lender has entered into a subordination agreement with the
lender under the first mortgage loan which may not contain all customary
provisions for such an agreement. However, Pitney Bowes Credit Corporation
(whose long term unsecured debt is currently rated Aa3 by Moody's and AA by
Standard & Poor's) has executed a guaranty in favor of the holder of the
mortgage loan holding it harmless for losses incurred as a result of (i) the
failure of any amounts due under the first
B-8
<PAGE>
mortgage loan to be senior to sums due under the second mortgage loan, (ii) the
absence of certain representations and warranties by the Subordinate Lender
relating to the second mortgage loan, and (iii) modifications of the second
mortgage loan made without the consent of the holder of the mortgage loan
contained in the mortgage pool.
Pitney Bowes Credit Corporation has also agreed to indemnify the holder of
the mortgage loan contaned in the mortgage pool for any losses resulting from
the Subordinate Lender's attempt to exercise any rights in a bankruptcy
proceeding involving the borrower. The amount of the indemnity is capped at
$2,500,000, which amount decreases to $700,000 pursuant to a schedule as the
mortgage loan amortizes.
ADDITIONAL DEBT/TRANSFERS
The loan documents provide that the mortgage loan will become immediately
due and payable upon (i) any transfer of the borrower's interest in the
property or any transfer of more than 49% of the interest in the borrower or
(ii) any additional encumbrance of the property other than the existing second
mortgage loan, in each case without the prior written consent of the lender.
See Loan No. 28983 in the mortgage loan schedule.
B-9
<PAGE>
LOAN NO. 310851623 -- U-HAUL PORTFOLIO
OVERVIEW
This mortgage loan is secured by 18 first mortgages on the borrower's
leasehold interests in 18 self-storage facilities and by one first mortgage on
the borrower's fee interest in one self-storage facility. The fee interests in
those leasehold mortgaged properties are owned by a borrower affiliate that has
subjected those fee interests to the lien of the related mortgage. Accordingly,
this mortgage loan is presented in the other sections of this prospectus
supplement as if the borrower's leasehold interests in those mortgaged
properties consisted of a fee interest. All of the borrower's leasehold
interests were created pursuant to ground leases that expire in 2098. The
mortgaged properties are located in the following states: five in Virginia,
three in Louisiana, three in South Carolina, two in California, and one in each
of Arizona, North Carolina, Pennsylvania, Arkansas, Georgia and Maryland. The
19 self-storage facilities include 9,595 units totaling 925,664 square feet.
The mortgage loan was originated by Wells Fargo Bank, National Association on
August 10, 1999. The information in the box immediately below is presented on a
combined basis for all 19 properties.
<TABLE>
<S> <C> <C> <C>
CUT-OFF DATE BALANCE: $31,726,782 PROPERTY TYPE: Self-Storage
GROSS MORTGAGE RATE: 8.5230% LOCATION: See below
INTEREST ACCRUAL METHOD: Actual/360 YEAR BUILT/RENOVATED: See below
FIRST PAYMENT DATE: 10/1/1999 NO. OF UNITS 9,595
MATURITY DATE: 9/1/2009 CUT-OFF DATE BALANCE/UNIT: $ 3,306.60
ORIGINAL AMORTIZATION: 300 WEIGHTED AVERAGE
ANNUAL DEBT SERVICE: $3,107,707 OCCUPANCY: 84.8%
LOCKOUT END DATE: 6/30/2009 OCCUPANCY DATE: 5/31/2000
CALL PROTECTION Defeasance
CALL PROTECTION END DATE: 6/30/2009 APPRAISED VALUE: $45,990,000
ESCROWS CUT-OFF DATE LTV: 69.0%
REAL ESTATE TAXES: Yes BALLOON LTV: 58.4%
INSURANCE: No
REPLACEMENT RESERVES: Yes UNDERWRITTEN CASH FLOW: $ 4,383,542
DSCR: 1.41x
</TABLE>
B-10
<PAGE>
THE PROPERTIES
Set forth below is certain summary information with respect to the
mortgaged properties:
<TABLE>
<CAPTION>
YEAR NUMBER SQUARE
LOAN NO. PROPERTY NAME LOCATION BUILT OF UNITS FEET
<S> <C> <C> <C> <C> <C>
310851623A U-Haul Storage Belt Boulevard Richmond, VA 1988 593 60,200
310851623B U-Haul Storage Cactus & 51st Glendale, AZ 1980 442 40,455
310851623C U-Haul Storage Boone Boone, NC 1985 317 29,700
310851623D U-Haul Storage Highland Avenue Chester, PA 1989 583 70,500
310851623E U-Haul Storage Marietta Street Kenner, LA 1990 845 73,350
310851623F U-Haul Storage Decker Park Road Columbia, SC 1986 460 48,496
310851623G U-Haul Storage Jamil Road Columbia, SC 1988 485 50,625
310851623H U-Haul Storage Holland Road Suffolk, VA 1988 334 35,400
310851623I U-Haul Storage Elm Drive Mechanicsville, VA 1989 337 35,400
310851623J U-Haul Storage Washington Road College Park, GA 1985 583 55,150
310851623K U-Haul Storage Asher Avenue Little Rock, AR 1980 750 67,206
310851623L U-Haul Storage Myrtle Beach Myrtle Beach, SC 1987 346 34,700
310851623M U-Haul Storage North Boulevard Richmond, VA 1946 643 51,414
310851623N U-Haul Storage Odenton Odenton, MD 1988 479 40,255
310851623O U-Haul Storage Sterling Sterling, VA 1988 348 42,225
310851623P U-Haul Storage Westwood Shreveport, LA 1986 412 46,375
310851623Q U-Haul Storage Marrero Marrero, LA 1985 288 27,438
310851623R U-Haul Storage Carlsbad Carlsbad, CA 1996 1,006 73,940
310851623S U-Haul Storage Rialto Rialto, CA 1988 344 42,835
Total 9,595 925,664
</TABLE>
Set forth below is a general description and certain other information
with respect to each related mortgaged property.
U-Haul Storage Belt Boulevard consists of eight single-story warehouse
storage buildings and one single-story office/manager's residence situated on
5.8 acres. The improvements were constructed in 1988 and include 593
self-storage units and 25 parking spaces. The mortgaged property consists of
the borrower's interest as a tenant under a ground lease that expires August
31, 2098. The mortgaged property was 85.3% occupied as of May 31, 2000.
U-Haul Storage Cactus & 51st consists of six single-story warehouse
storage buildings and one two-story office/manager's residence situated on 2.5
acres. The improvements were constructed in 1980 and include 442 self-storage
units and 10 parking spaces. The mortgaged property consists of the borrower's
interest as a tenant under a ground lease that expires August 31, 2098. The
mortgaged property was 77.4% occupied as of May 31, 2000.
U-Haul Storage Boone consists of nine single-story warehouse storage
buildings with a rental office and apartment attached to one of the buildings
situated on 4.2 acres. The improvements were constructed in 1985 and include
317 self-storage units and three parking spaces. The mortgaged property
consists of the borrower's interest as a tenant under a ground lease that
expires August 31, 2098. The mortgaged property was 75.1% occupied as of May
31, 2000.
U-Haul Storage Highland Avenue consists of eight single-story warehouse
storage buildings and one two-story office/manager's residence situated on 3.5
acres. The improvements were constructed in 1989 and include 583 self-storage
units and nine parking spaces. The mortgaged property consists of the
borrower's interest as a tenant under a ground lease that expires August 8,
2029. The mortgaged property was 93.1% occupied as of May 31, 2000.
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<PAGE>
U-Haul Storage Marietta Street consists of six two-story storage buildings
and one office/manager's apartment attached to one of the buildings situated on
2.3 acres. The improvements were constructed in 1990 and include 845
self-storage units and five parking spaces. The mortgaged property consists of
the borrower's interest as a tenant under a ground lease that expires August
31, 2098. The mortgaged property was 73.2% occupied as of May 31, 2000.
U-Haul Storage Decker Park Road consists of 13 single-story warehouse
storage buildings and a two-story office/manager's residence situated on 2.9
acres. The improvements were constructed in 1986 and include 460 self-storage
units and 10 parking spaces. The mortgaged property consists of the borrower's
interest as a tenant under a ground lease that expires August 31, 2098. The
mortgaged property was 74.1% occupied as of May 31, 2000.
U-Haul Storage Jamil Road consists of nine single-story warehouse storage
buildings and one single-story office/manager's residence situated on 2.7
acres. The improvements were constructed in 1988 and include 485 self-storage
units and three parking spaces. The mortgaged property consists of the
borrower's interest as a tenant under a ground lease that expires August 31,
2098. The mortgaged property was 82.5% occupied as of May 31, 2000.
U-Haul Storage Holland Road consists of seven single-story warehouse
storage buildings and one two-story office/manager's residence situated on 4.3
acres. The improvements were constructed in 1988 and include 334 self-storage
units and four parking spaces. The mortgaged property consists of the
borrower's interest as a tenant under a ground lease that expires August 31,
2098. The mortgaged property was 87.4% occupied as of May 31, 2000.
U-Haul Storage Myrtle Beach consists of 14 single-story warehouse storage
buildings and one single-story office/manager's residence situated on 2.7
acres. The improvements were constructed in 1987 and include 346 self-storage
units. The mortgaged property consists of the borrower's interest as a tenant
under a ground lease that expires August 31, 2098. The mortgaged property was
57.8% occupied as of May 31, 2000.
U-Haul Storage Asher Avenue consists of three single-story warehouse
storage buildings and one two-story office/manager's residence situated on 3.3
acres. The improvements were constructed in 1980 and include 750 self-storage
units, eight of which are climate-controlled, and five parking spaces. The
mortgaged property consists of the borrower's interest as a tenant under a
ground lease that expires August 31, 2098. The mortgaged property was 68.9%
occupied as of May 31, 2000.
U-Haul Storage Elm Drive consists of eight single-story warehouse storage
buildings and one two-story office/manager's residence situated on 2.5 acres.
The improvements were constructed in 1989 and include 337 self-storage units
and 10 parking spaces. The mortgaged property consists of the borrower's
interest as a tenant under a ground lease that expires August 31, 2098. The
mortgaged property was 81.4% occupied as of May 31, 2000.
U-Haul Storage Washington Road consists of 22 single-story warehouse
storage buildings and one two-story office/manager's residence situated on 3.1
acres. The improvements were constructed in 1985 and include 583 self-storage
units and four parking spaces. The mortgaged property consists of the
borrower's interest as a tenant under a ground lease that expires August 31,
2098. The mortgaged property was 86.6% occupied as of May 31, 2000.
U-Haul Storage North Boulevard consists of seven single-story warehouse
storage buildings situated on 2.8 acres. The improvements were constructed in
1946 and include 643 self-storage units and 21 parking spaces. The mortgaged
property consists of the borrower's interest as a tenant under a ground lease
that expires August 31, 2098. The mortgaged property was 83.5% occupied as of
May 31, 2000.
U-Haul Storage Odenton consists of three two-story warehouse storage
buildings, one single-story office/manager's residence, and one RV storage
space situated on 2.7 acres. The improvements were constructed in 1988 and
include 479 self-storage units and four parking spaces. The mortgage loan is
secured by the borrower's fee interest in the mortgaged property. The mortgaged
property was 86.2% occupied as of May 31, 2000.
U-Haul Storage Sterling consists of six single-story warehouse storage
buildings and one single-story office/manager's residence situated on 3.0
acres. The improvements were constructed in
B-12
<PAGE>
1988 and include 348 self-storage units and six parking spaces. The mortgaged
property consists of the borrower's interest as a tenant under a ground lease
that expires August 31, 2098. The mortgaged property was 94.2% occupied as of
May 31, 2000.
U-Haul Storage Westwood consists of five single-story warehouse storage
buildings and one two-story office/manager's residence situated on 2.8 acres.
The improvements were constructed in 1986 and include 412 self-storage units
and three parking spaces. The mortgaged property consists of the borrower's
interest as a tenant under a ground lease that expires August 31, 2098. The
mortgaged property was 86.9% occupied as of May 31, 2000.
U-Haul Storage Marrero consists of one single-story building situated on
2.1 acres. The improvements were constructed in 1985 and include 288
self-storage units, a rental office, a manager's apartment, three retail tenant
spaces and five parking spaces. The mortgaged property consists of borrower's
interest as a tenant under a ground lease that expires August 31, 2098. The
mortgaged property was 84.8% occupied as of May 31, 2000.
U-Haul Storage Carlsbad consists of seven interconnecting and one
freestanding warehouse storage buildings and is situated on 3.5 acres. Six
buildings are two-story, one building is one-story, and one building, which
contains the office/manager's residence, has both one-story and two-story
portions. The improvements were constructed in 1996 and include 1,006
self-storage units and six parking spaces. The mortgaged property consists of
the borrower's interest as a tenant under a ground lease that expires August
31, 2098. The mortgaged property was 95.3% occupied as of May 31, 2000.
U-Haul Storage Rialto consists of four single-story and two two-story
warehouse storage buildings, and one two-story office/manager's residence
situated on 1.7 acres. The improvements were constructed in 1988 and include
344 self-storage units and eight parking spaces. The mortgaged property
consists of the borrower's interest as a tenant under a ground lease that
expires August 31, 2098. The mortgaged property was 93.3% occupied as of May
31, 2000.
THE BORROWER
The borrower is XI SAC Self Storage Corporation, a wholly-owned subsidiary
of SAC Holdings Corporation. The borrower is a single purpose entity whose
organizational documents do not permit it to engage in any business unrelated
to the mortgaged property or to have any assets other than the mortgaged
property or any indebtedness (subject to limited exceptions such as trade
payables incurred in the ordinary course of business) other than the mortgage
loan. Additionally, the borrower's organizational documents require an
independent director and the unanimous vote of directors of the borrower in
connection with the filing of a petition of bankruptcy related to the borrower.
In connection with the closing of the mortgage loan, the lender received an
opinion from borrower's counsel to the effect that, among other things, the
assets of the borrower would not be consolidated with the assets of any party
having a controlling interest in the borrower in the event of a bankruptcy or
insolvency of that party.
MANAGEMENT
The mortgaged properties are managed by U-Haul International.
ESCROWS
The loan documents require the borrower to fund monthly escrow deposits in
an amount sufficient to pay real estate taxes when due. In addition, the loan
documents require the borrower to fund monthly escrow deposits in an amount
equal to $11,570.80 for future capital expenditures.
ADDITIONAL DEBT/TRANSFERS
The loan documents provide that the mortgage loan will become immediately
due and payable upon (i) any transfer of the borrower's interest in any
mortgaged property or any transfer of an interest in the borrower or (ii) any
additional encumbrance of any mortgaged property, in each case without the
prior written consent of the lender.
See Loan No. 310851623 in the mortgage loan schedule.
B-13
<PAGE>
LOAN NO. 10006891 -- TROLLEY SQUARE
OVERVIEW
This mortgage loan is secured by a first mortgage on the borrower's fee
interest in a 220,451 square foot anchored shopping center located in Salt Lake
City, Utah. The mortgage loan was originated by or on behalf of Morgan Stanley
Dean Witter Mortgage Capital Inc. on July 13, 2000.
<TABLE>
<S> <C> <C> <C>
CUT-OFF DATE BALANCE: $29,725,099 PROPERTY TYPE: Retail, Anchored
GROSS MORTGAGE RATE: 9.0300% LOCATION: Salt Lake City, Utah
INTEREST ACCRUAL METHOD: Actual/360 YEAR BUILT/RENOVATED: 1908/1986
FIRST PAYMENT DATE: 9/1/2000 SQUARE FEET: 220,451
ANTICIPATED REPAYMENT DATE: 8/1/2010 CUT-OFF DATE BALANCE/SQ.FT.: $ 134.84
ORIGINAL AMORTIZATION: 360
ANNUAL DEBT SERVICE: $2,880,212 OCCUPANCY: 93.8%
LOCKOUT END DATE: 4/30/2010 OCCUPANCY DATE: 8/24/2000
CALL PROTECTION: Defeasance
CALL PROTECTION END DATE: 4/30/2010 APPRAISED VALUE: $46,000,000
ESCROWS CUT-OFF DATE LTV: 64.6%
REAL ESTATE TAXES: Yes BALLOON LTV: 59.2%
INSURANCE: No
REPLACEMENT RESERVES: Yes UNDERWRITTEN CASH FLOW: $ 3,859,179
DSCR: 1.34x
</TABLE>
THE PROPERTY
The mortgaged property, which consists of four buildings, is located on
the eastern periphery of downtown Salt Lake City. The buildings, which were
originally constructed to store, build, repair and maintain Salt Lake City's
trolley cars, were converted to retail use between 1970 and 1972. The mortgaged
property was substantially renovated in 1986 and was added to the National
Register of Historical Places in 1996. Additional retail space was added in
1998, when two of the four buildings were converted from theater use. Major
tenants at the property include Cineplex Odeon (16,686 square feet) under a
lease expiring January 2009, Restoration Hardware (14,000 square feet) under a
lease expiring January 2011, Hard Rock Cafe (10,000 square feet) under a lease
expiring December 2008, Pottery Barn (10,000 square feet) under a lease
expiring January 2009, and Banana Republic (7,246 square feet) under a lease
expiring May 2006.
THE BORROWER
The borrower is Trolley Holdings, LLC, a Delaware limited liability
company. Trolley Holdings, LLC is owned by TS1 Partnership Limited Partnership,
a Delaware limited partnership, which is owned by Simon Property Group, L.P.
and Wally Wright. The borrower is a single purpose entity whose organizational
documents do not permit it to engage in any business unrelated to the mortgaged
property, or to have any assets other than the mortgaged property or any
indebtedness (subject to limited exceptions such as trade payables incurred in
the ordinary course of business) other than the mortgage loan. Additionally,
the borrower's organizational documents require an independent director and the
unanimous vote of directors of the borrower in connection with the filing of a
petition of bankruptcy related to the borrower. In connection with the closing
of the mortgage loan, the lender received an opinion from borrower's counsel to
the effect that, among other things, the assets of the borrower would not be
consolidated with the assets of any party having a controlling interest in the
borrower in the event of a bankruptcy or insolvency of that party.
MANAGEMENT
The mortgaged property is managed by Simon Property Group, which is
affiliated with the borrower.
B-14
<PAGE>
ESCROWS
The loan documents require the borrower to fund the following monthly
escrow deposits: (a) an amount sufficient to pay real estate taxes when due;
(b) $10,839 for future capital expenditures; and (c) $31,674 to cover any
expenses associated with lease roll-over, subject to a cap in the amount of
$500,000. The borrower is required to pay property insurance premiums when they
become due. If the borrower at any time fails to provide the lender with
satisfactory evidence of the payment of property insurance premiums or of the
completion of certain required repairs, the lender may require the borrower to
thereafter fund an escrow to provide for the payment of property insurance
premiums or the completion of these repairs.
ADDITIONAL DEBT/TRANSFERS
The loan documents provide that the mortgage loan will become immediately
due and payable upon (i) any transfer of the borrower's interest in the
mortgaged property or any transfer of an interest in the borrower or (ii) any
additional encumbrance of the mortgaged property, in each case without the
prior written consent of the lender.
The loan documents permit (without payment to the lender of any assumption
fee) transfers of interests in the borrower among any existing interest holders
or their affiliates provided that certain conditions are satisfied, including,
among other conditions, that certain principals continue to own at least 50% of
the total ownership interests in the borrower, directly or indirectly, and
continue to control the management of the borrower and (if any transferee will
hold more than 49% of the interests in the borrower) the lender receives
confirmation from the rating agencies that the transfer would not result in the
downgrade, qualification (if applicable) or withdrawal of the then current
ratings assigned to any class of certificates.
AMORTIZATION
During the period prior to August 1, 2010, the loan documents require the
borrower to make monthly payments of principal and interest, in arrears, in the
combined amount of $240,017.69, which amount was calculated on the basis of a
360-month amortization schedule. In addition to the foregoing payments, if the
interest rate resets on August 1, 2010 because the loan did not pay off on its
Anticipated Repayment Date, the loan documents also require the borrower to pay
to the lender all of the borrower's excess cash flow, monthly, to further
amortize the loan.
See Loan No. 10006891 in the mortgage loan schedule.
B-15
<PAGE>
LOAN NO. 28326 -- JEFFERSON HILL APARTMENTS
OVERVIEW
This mortgage loan is secured by a first mortgage on the borrower's fee
interest in a 504 unit multifamily property located in Irving, Texas. The
mortgage loan was originated by Bear, Stearns Funding, Inc. on February 1,
2000.
<TABLE>
<S> <C> <C> <C>
CUT-OFF DATE BALANCE: $25,406,203 PROPERTY TYPE: Multifamily, Garden
GROSS MORTGAGE RATE: 7.8800% LOCATION: Irving, Texas
INTEREST ACCRUAL METHOD: 30/360 YEAR BUILT/RENOVATED: 1998
FIRST PAYMENT DATE: 3/1/2000 UNITS: 504
MATURITY DATE: 2/1/2010 CUT-OFF DATE $ 50,409.13
BALANCE/UNIT:
ORIGINAL AMORTIZATION: 360
ANNUAL DEBT SERVICE: $2,224,127 OCCUPANCY: 90.9%
LOCKOUT END DATE: 1/31/2010 OCCUPANCY DATE: 4/15/2000
CALL PROTECTION: Defeasance
CALL PROTECTION END DATE: 1/31/2010 APPRAISED VALUE: $37,000,000
ESCROWS CUT-OFF DATE LTV: 68.7%
REAL ESTATE TAXES: Yes BALLOON LTV: 60.4%
INSURANCE: Yes
REPLACEMENT RESERVES: Yes UNDERWRITTEN CASH FLOW: $ 3,126,648
DSCR: 1.41x
</TABLE>
THE PROPERTY
The mortgaged property is a 504 unit multifamily property consisting of 24
three-story wood frame and stucco buildings. The mortgaged property, which was
completed in 1998, is located on MacArthur Boulevard and is approximately 10
miles from Downtown Dallas, five miles from the Las Colinas Business District
and eight miles form the Dallas/Fort Worth International Airport. Amenities at
the complex include a clubhouse, media theater, spa and dry sauna, fitness
center, steam room, and resort style swimming pools.
THE BORROWER
The borrower is Dakota Hill Properties, a Texas limited partnership with
Dakota-IRET Inc., a Texas Corporation, as its sole general partner. Dakota-IRET
Inc. is a subsidiary of Investors Real Estate Trust, a business trust whose
shares are traded on NASDAQ. The borrower is a single purpose entity whose
organizational documents do not permit it to engage in any business unrelated
to the mortgaged property, nor have any assets other than the mortgaged
property or any indebtedness (subject to limited exceptions such as trade
payables incurred in the ordinary course of business) other than the mortgage
loan. In connection with the closing of the mortgage loan, the lender received
an opinion from borrower's counsel to the effect that, among other things, the
assets of the borrower would not be consolidated with the assets of any party
having a controlling interest in the borrower in the event of a bankruptcy or
insolvency of that party.
MANAGEMENT
The mortgaged property is managed by ConAm Management Corporation, which
is unaffiliated with the borrower.
B-16
<PAGE>
ESCROWS
The borrower funded real estate tax, property insurance premium and
replacement reserve escrows at closing, in each case equal to half of one
year's payment (in the case of replacement reserves, based on an annual
requirement of $200 per unit), which will be held for the term of the mortgage
loan. The borrower is required to pay real estate taxes and property insurance
premiums as they become due from time to time. If the borrower at any time
fails to provide the lender with satisfactory evidence of payment of real
estate taxes and property insurance premiums, the lender may require the
borrower to thereafter fund escrows to provide for such items. If the mortgaged
property is not maintained as required by the loan documents, the lender may
require the borrower to fund an additional escrow for future capital
expenditures.
ADDITIONAL DEBT/TRANSFERS
The loan documents provide that the mortgage loan will become immediately
due and payable upon (i) any transfer of the borrower's interest in the
mortgaged property or a transfer of more than 49% of the interests in the
borrower to an unrelated third party or (ii) any additional encumbrance of the
mortgaged property, in each case without the prior written consent of the
lender.
See Loan No. 28326 in the mortgage loan schedule.
B-17
<PAGE>
LOAN NO. 28750 -- LONG BEACH MARKETPLACE
OVERVIEW
This mortgage loan is secured by a first mortgage on the borrower's fee
interest in a 156,343 square foot anchored shopping center located in Long
Beach, California. The mortgage loan was originated by Bear, Stearns Funding,
Inc. on May 15, 2000.
<TABLE>
<S> <C> <C> <C>
CUT-OFF DATE BALANCE: $21,157,357 PROPERTY TYPE: Retail, Anchored
GROSS MORTGAGE RATE: 8.4300% LOCATION: Long Beach,
California
INTEREST ACCRUAL METHOD: Actual/360 YEAR BUILT/RENOVATED: 1974/1996
FIRST PAYMENT DATE: 7/1/2000 SQUARE FEET: 156,343
MATURITY DATE: 6/1/2010 CUT-OFF DATE BALANCE/SQ.FT.: $ 135.33
ORIGINAL AMORTIZATION: 360
ANNUAL DEBT SERVICE: $1,943,509 OCCUPANCY: 93.3%
LOCKOUT END DATE: 5/31/2010 OCCUPANCY DATE: 1/1/2000
CALL PROTECTION: Defeasance
CALL PROTECTION END DATE: 5/31/2010 APPRAISED VALUE: $28,600,000
ESCROWS CUT-OFF DATE LTV: 74.0%
REAL ESTATE TAXES: Yes BALLOON LTV: 67.0%
INSURANCE: No
REPLACEMENT RESERVES: Yes UNDERWRITTEN CASH FLOW: $ 2,583,157
DSCR: 133.x
</TABLE>
THE PROPERTY
The mortgaged property is a 156,343 square foot shopping center, which
consists of seven multi-tenant retail shop buildings and five free-standing
pads. The mortgaged property, which was constructed in 1974 and renovated in
1996, is located on an 18.89 acre parcel located at the intersection of Pacific
Coast Highway and Westminster Avenue. Major tenants at the property include
United Artists Theater (20,032 square feet) under a lease expiring December
2001, Claim Jumper (11,630 square feet) under a lease expiring April 2015, El
Torito (10,041 square feet) under a lease expiring December 2003, Trader Joe's
(10,000 square feet) under a lease expiring January 2013, and Lone Star
Restaurant (6,656 square feet) under a lease expiring July 2008.
PARI PASSU LOAN
The mortgage that secures this mortgage loan, which we refer to as this
"pari passu loan," also secures a separate mortgage loan in the amount of
$1,400,000, which we refer to as the "companion loan." The companion loan has
substantially similar payment terms (other than principal balance) but is not
included in the trust fund or part of the mortgage pool.
This pari passu loan and the companion loan are subject to an
intercreditor agreement that provides that, until the Earnout Date described
below, this pari passu loan will be senior in right of payment to the companion
loan and after such Earnout Date will be pari passu with the companion loan in
right of payment. The servicer and the special servicer of the mortgage pool
will service and administer both this pari passu loan and the related companion
loan. The holder of this pari passu loan, however, will generally be able to
exercise any rights and remedies with respect to the mortgaged property and
both the pari passu loan and the companion loan, including post default workout
and foreclosure (but will not have the right to draw upon the letter of credit
described below).
The companion loan has the benefit of a $1,400,000 letter of credit (the
"letter of credit"). To the extent the borrower satisfies certain criteria (the
"Earnout Criteria"), on or before May 15, 2002 (the "Earnout Date"), the
borrower has the right to have the letter of credit released, or within the
first
B-18
<PAGE>
year, the right to request periodic reductions in the amount of the letter of
credit. The Earnout Criteria include (a) new leases acceptable to the lender
(as described in the loan agreement) and (b) certain financial criteria
including (i) a specified increase in effective gross income (as defined in the
loan agreement) over the effective gross income as of the closing of the
mortgage loan, (ii) a minimum required debt service coverage ratio of 1.31x, or
(iii) a minimum loan-to-value ratio of approximately 80%, based on an updated
appraisal of the mortgaged property.
If the borrower has not achieved the Earnout Criteria by the Earnout Date,
the holder of the companion loan is required to draw on the letter of credit
and apply the proceeds thereof to the repayment of the companion loan (up to
the amount of the letter of credit) in an amount calculated to cause the
combined amount of this pari passu loan and the companion loan to satisfy the
financial component of the Earnout Criteria set forth below. The amount of the
repayment from the proceeds of the letter of credit must be equal to the
greater of (A) the amount such that the combined principal amount of this pari
passu loan plus the companion loan (as reduced) results in a combined debt
service coverage ratio that is no less than 1.31x and a combined loan-to-value
ratio of no more than 80% and (B) an amount equal to $1,400,000 less the
product of (x) $1,400,000 and (y) a fraction, the numerator of which is the
excess of the current effective gross income over $3,496,000 and the
denominator of which is $220,000.
THE BORROWER
The borrower is Long Beach Marketplace, LLC, a Delaware limited liability
company. The borrower is owned by RPP Long Beach LLC, a Delaware limited
liability company, which is controlled by RPP Properties LLC (which is
controlled by Stuart Rubin and Richard Pachulski) and by FL Long Beach, Inc.
(which is controlled by Marty Oliner). The borrower is a single purpose entity
whose organizational documents do not permit it to engage in any business
unrelated to the mortgaged property, or to have any assets other than the
mortgaged property or any indebtedness (subject to limited exceptions such as
trade payables incurred in the ordinary course of business) other than the
mortgage loan. Additionally, the borrower's organizational documents require an
independent director as a special member and the unanimous vote of directors of
all members of the borrower in connection with the filing of a petition of
bankruptcy related to the borrower. In connection with the closing of the
mortgage loan, the lender received an opinion from borrower's counsel to the
effect that, among other things, the assets of the borrower would not be
consolidated with the assets of either RPP Properties, LLC or FL Long Beach,
Inc. in the event of a bankruptcy or insolvency of that party.
MANAGEMENT
The property is managed by Rubin Pachulski Properties 36, LLC, which is an
affiliate of the borrower.
ESCROWS
The loan documents require the borrower to fund monthly escrow deposits in
an amount sufficient to pay real estate taxes when due except for the portion
of the mortgaged property that is leased to Coco's restaurant under a lease
that requires Coco's to pay those taxes directly to the taxing authority (such
portion being a separate tax parcel). In addition, the loan documents require
the borrower to fund escrow deposits for (i) future capital expenditures by
making monthly deposits based on an annual reserve amount of $0.15 per square
foot and (ii) tenant improvements and leasing commissions by making monthly
deposits of $6,250. Upon the occurrence of an event of default, or if the
borrower at any time fails to provide the lender with satisfactory evidence of
payment of property insurance premiums, the lender may require the borrower to
thereafter fund an escrow to provide for the payment of property insurance
premiums. The borrower is required to post a letter of credit in the amount of
$500,000 as additional credit support for the United Artists Theater lease.
B-19
<PAGE>
ADDITIONAL DEBT/TRANSFERS
The loan documents provide that the lender may declare the mortgage loan
immediately due and payable upon (i) any transfer of the borrower's interest in
the mortgaged property, provided that in certain instances the borrower may
transfer its interest in the mortgaged property upon satisfaction of criteria
specified in the loan documents, or a transfer of more than 49% of the
interests in the borrower to an unrelated third party or (ii) any additional
encumbrance of the mortgaged property, in each case without the prior written
consent of the lender.
See Loan No. 28750 in the mortgage loan schedule.
B-20
<PAGE>
LOAN NO. 310900049 -- WORLD KITCHEN WAREHOUSE
OVERVIEW
This mortgage loan is secured by a first mortgage on the borrower's fee
interest in a 700,200 square foot warehouse/distribution building located in
Monee, Illinois. The mortgage loan was originated by Wells Fargo Bank, National
Association on May 5, 2000.
<TABLE>
<S> <C> <C> <C>
CUT-OFF DATE BALANCE: $18,205,435 PROPERTY TYPE: Industrial/Warehouse,
Warehouse/Distribution
GROSS MORTGAGE RATE: 8.6400% LOCATION: Monee, Illinois
INTEREST ACCRUAL METHOD: Actual/360 YEAR BUILT/RENOVATED: 2000
FIRST PAYMENT DATE: 7/1/2000 SQUARE FEET: 700,200
MATURITY DATE: 6/1/2010 CUT-OFF DATE BALANCE/SQ. FT.: $ 26.00
ORIGINAL AMORTIZATION: 360
ANNUAL DEBT SERVICE: $1,704,763 OCCUPANCY: 100.0%
LOCKOUT END DATE: 3/31/2010 OCCUPANCY DATE: 4/1/2000
CALL PROTECTION Defeasance
CALL PROTECTION END DATE: 3/31/2010 APPRAISED VALUE: $27,600,000
ESCROWS CUT-OFF DATE LTV: 66.0%
REAL ESTATE TAXES: Springing BALLOON LTV: 60.0%
INSURANCE: Springing
REPLACEMENT RESERVES: Yes UNDERWRITTEN CASH FLOW: $ 2,157,250
DSCR: 1.27x
</TABLE>
THE PROPERTY
The mortgaged property is a single-tenant, bulk warehouse/distribution
building situated on approximately 34.6 acres and located approximately 45
miles south of Chicago, in Monee, Illinois. The mortgaged property was
constructed in 2000 and is 100% occupied by World Kitchen, Inc. under a lease
expiring February 2015. World Kitchen, Inc. is a major manufacturer and
marketer of oven/bakeware, dinnerware and kitchenware products, including
Corning, Pyrex, Corelle and Revere.
THE BORROWER
The borrower is Will Partners LLC, a Delaware limited liability company
whose managing member is Will Acquisitions, Inc. World Kitchen Inc. has an
ownership interest as a "special member" in the borrower which is limited to a
priority entitlement to approximately 77% of cash flow distributions and the
present value of those distributions over the remaining lease term if the
property is sold during the term of the lease. The lease is non-cancelable
(other than in the case of condemnation), with no abatement or offset from any
casualty.
The borrower is a single purpose entity whose organizational documents do
not permit it to engage in any business unrelated to the mortgaged property, or
to have any assets other than the mortgaged property or any indebtedness
(subject to limited exceptions such as trade payables incurred in the ordinary
course of business) other than the mortgage loan. In connection with the
closing of the mortgage loan, the lender received an opinion from borrower's
counsel to the effect that, among other things, the assets of the borrower
would not be consolidated with the assets of any party having a controlling
interest in the borrower in the event of a bankruptcy or insolvency of that
party.
MANAGEMENT
The mortgaged property is managed by World Kitchen, Inc., a member of the
borrower.
B-21
<PAGE>
ESCROWS
If the borrower at any time fails to provide the lender with satisfactory
evidence of payment of real estate taxes and property insurance premiums in
accordance with the loan documents, the lender may require the borrower to
thereafter fund escrows for those items. The loan documents require the
borrower to fund monthly deposits into an escrow account for future capital
expenditures in the amount of $5,835 monthly ($70,020 annually).
ADDITIONAL DEBT/TRANSFERS
The loan documents provide that the mortgage loan will become immediately
due and payable upon (i) any transfer of the borrower's interest in the
mortgaged property or any transfer of an interest in the borrower or (ii) any
additional encumbrance of the mortgaged property, in each case without the
prior written consent of the lender.
See Loan No. 310900049 in the mortgage loan schedule.
B-22
<PAGE>
LOAN NO. 310900130 -- SAN FRANCISCO MEDICAL CENTER
OVERVIEW
This mortgage loan is secured by a first mortgage on the borrower's
leasehold interest in a 66,122 square foot medical office building located in
San Francisco, California. The mortgage loan was originated by Wells Fargo
Bank, National Association on August 15, 2000.
<TABLE>
<S> <C> <C> <C>
CUT-OFF DATE BALANCE: $18,088,622 PROPERTY TYPE: Office, Medical
GROSS MORTGAGE RATE: 8.3200% LOCATION: San Francisco,
California
INTEREST ACCRUAL METHOD: Actual/360 YEAR BUILT/RENOVATED: 1989
FIRST PAYMENT DATE: 10/1/2000 SQUARE FEET: 66,122
MATURITY DATE: 9/1/2010 CUT-OFF DATE BALANCE/SQ.FT.: $ 273.56
ORIGINAL AMORTIZATION: 360
ANNUAL DEBT SERVICE: $1,642,452 OCCUPANCY: 100.0%
LOCKOUT END DATE: 6/30/2010 OCCUPANCY DATE: 4/13/2000
CALL PROTECTION: Defeasance
CALL PROTECTION END DATE: 6/30/2010 APPRAISED VALUE: $26,000,000
ESCROWS CUT-OFF DATE LTV: 69.6%
REAL ESTATE TAXES: Yes BALLOON LTV: 62.7%
INSURANCE: Yes
REPLACEMENT RESERVES: Yes UNDERWRITTEN CASH FLOW: $ 2,069,359
DSCR: 1.26x
</TABLE>
THE PROPERTY
The mortgaged property is a six-story medical office building with an
adjoining four-story parking garage which contains 530 spaces. Both the office
building and the garage were built in 1989. The buildings are located in a
dense urban neighborhood with a concentration of medical service
establishments. The buildings are located directly across the street from
UCSF/Mount Zion Hospital and the new Clinical Cancer Center, scheduled to open
in September 2000, and three blocks north of Kaiser Permanente Hospital. Major
tenants at the property include Kaiser Foundation Hospitals, Inc. (32,474
square feet) under a lease expiring December 2002, HealthSouth Surgery Center
(13,218 square feet) under a lease expiring April 2009, and University of
California San Francisco (Regents of the University of California) (12,389
square feet) under leases expiring November 2001 (1,954 square feet), September
2007 (9,517 square feet) and May 2003 (918 square feet).
The borrower leases the mortgaged property pursuant to two ground leases
that expire on January 4, 2059. The medical office building is leased from
Mount Zion Hospital, and the parking garage is leased from Medical Center, a
California non-profit corporation.
THE BORROWER
The borrower is WDG III San Francisco Medical Center, a California limited
liability company with WDG San Francisco Medical Center, Inc. as its managing
member. WDG San Francisco Medical Center, Inc. is a special purpose corporation
that is wholly owned by Charles M. Collins, Paula R. Collins, Edward J. Collins
and Hallie A. Beacham, together with UNC Realty, Inc. (owning a 0.833%
interest), who will be liable for the carveout guarantees. The borrower is a
single purpose entity whose organizational documents do not permit it to engage
in any business unrelated to the mortgaged property, or to have any assets
other than the mortgaged property or any indebtedness (subject to limited
exceptions such as trade payables incurred in the ordinary course of business)
other than the mortgage loan. In connection with the closing of the mortgage
loan, the lender received an opinion from the borrower's counsel to the effect
that, among other things, the assets of the borrower would not be consolidated
with the assets of any party having a controlling interest in the borrower in
the event of a bankruptcy or insolvency of that party.
B-23
<PAGE>
MANAGEMENT
The medical office building is managed by the Western Development Group,
an affiliate of the borrower. The parking garage is managed by Central Parking
Corporation, which is unaffiliated with the borrower.
ESCROWS
The loan documents require the borrower to fund the following monthly
escrow deposits: (a) an amount sufficient to pay real estate taxes and property
insurance premiums when due; (b) $1,102 for future capital expenditures; and
(c) $9,585 to cover lease roll-over expenses. In addition, $1,650,000 was
withheld from loan proceeds at funding, and is currently held in escrow. The
borrower has the right to obtain these withheld funds, during the period from
April 1, 2001 through December 31, 2001, upon satisfaction of a debt service
coverage ratio loan-to-value ratio specified in the loan agreement. If the
borrower fails to achieve these criteria by December 31, 2001, the amount in
escrow will be applied toward a partial prepayment of the mortgage and any
yield maintenance charge imposed by the loan documents. Upon any such
prepayment, the mortgage loan will be reamortized to reflect any reduction in
the principal balance resulting from the prepayment.
ADDITIONAL DEBT/TRANSFERS
The loan documents provide that the mortgage loan will become immediately
due and payable upon (i) any transfer of the borrower's interest in the
mortgaged property or any transfer of an interest in the borrower or (ii) any
additional encumbrance of the mortgaged property, in each case without the
prior written consent of the lender.
See Loan No. 310900130 in the mortgage loan schedule.
B-24
<PAGE>
LOAN NO. 26908 -- HILTON GARDEN CUPERTINO
OVERVIEW
This mortgage loan is secured by a first mortgage on the borrower's fee
interest in a hotel located in Cupertino, California. The mortgage loan was
originated by Bear, Stearns Funding, Inc. on September 15, 1999.
<TABLE>
<S> <C> <C> <C>
CUT-OFF DATE BALANCE: $17,797,958 PROPERTY TYPE: Hospitality,
Limited Service
GROSS MORTGAGE RATE: 8.1900% LOCATION: Cupertino,
California
INTEREST ACCRUAL METHOD: Actual/360 YEAR BUILT/RENOVATED: 1998
FIRST PAYMENT DATE: 11/1/1999 NO. OF ROOMS: 165
MATURITY DATE: 10/1/2009 CUT-OFF DATE BALANCE/ROOM: $ 107,866.41
ORIGINAL AMORTIZATION: 300
ANNUAL DEBT SERVICE: $1,659,761 OCCUPANCY: 73.9%
LOCKOUT END DATE: 9/30/2009 OCCUPANCY DATE: 7/31/2000
CALL PROTECTION: Defeasance AVERAGE DAILY RATE: $ 167.46
CALL PROTECTION END DATE: 9/30/2009 APPRAISED VALUE: $ 31,700,000
ESCROWS CUT-OFF DATE LTV: 56.1%
REAL ESTATE TAXES: Yes BALLOON LTV: 47.0%
INSURANCE: Yes
REPLACEMENT RESERVES: Yes UNDERWRITTEN CASH FLOW: $ 3,467,291
DSCR: 2.04x
</TABLE>
THE PROPERTY
The mortgaged property is a 165 room Hilton Garden hotel situated on 2.17
acres. The mortgaged property, which was constructed in 1998, is a limited
service hotel located directly across from the Hewlett-Packard Americas
Headquarters, in the heart of Silicon Valley. The mortgaged property contains
one 1,500 square foot meeting room, which is divisible into three 500 square
foot rooms. In addition, the mortgaged property has an outdoor pool and
jacuzzi, as well as an indoor fitness center.
THE BORROWER
The borrower is Cupertino Hotel Associates, LLC, a California limited
liability company whose managing member is Cupertino Hotel Management, LLC, an
entity controlled by Peter Pau. The borrower is a single purpose entity whose
organizational documents do not permit it to engage in any business unrelated
to the mortgaged property, or to have any assets other than the mortgaged
property or any indebtedness (subject to limited exceptions such as trade
payables incurred in the ordinary course of business) other than the mortgage
loan. In connection with the closing of the mortgage loan, the lender received
an opinion from borrower's counsel to the effect that, among other things, the
assets of the borrower would not be consolidated with the assets of any party
having a controlling interest in the borrower in the event of a bankruptcy or
insolvency of that party.
MANAGEMENT
The mortgaged property is managed by Fred K. Reed & Associates, which is
unaffiliated with the borrower.
ESCROWS
The loan documents require the borrower to fund monthly escrow deposits in
an amount sufficient to pay real estate taxes and property insurance premiums
when due. In addition, the loan
B-25
<PAGE>
documents require the borrower to make monthly deposits of $27,353.50 to a
furniture, fixtures and equipment escrow account until a balance of $750,000 is
achieved and thereafter to make monthly contributions of $27,353.50 or such
lesser amount as is necessary to maintain that balance.
ADDITIONAL DEBT/TRANSFERS
The loan documents provide that the mortgage loan will become immediately
due and payable upon (i) any transfer of the borrower's interest in the
mortgaged property or a transfer of more than 49% of the interests in the
borrower to an unrelated third party or (ii) any additional encumbrance of the
mortgaged property, in each case without the prior written consent of the
lender.
See Loan No. 26908 in the mortgage loan schedule.
B-26
<PAGE>
LOAN NO. 29198 -- AMC CANTERA 30
OVERVIEW
This mortgage loan is secured by a first mortgage on the borrower's fee
interest in a 130,757 square foot megaplex theater located in Warrenville,
Illinois. The mortgage loan was originated by Bear, Stearns Funding, Inc. on
April 27, 2000.
<TABLE>
<S> <C> <C> <C>
CUT-OFF DATE BALANCE: $17,770,862 PROPERTY TYPE: Theater
GROSS MORTGAGE RATE: 8.2350% LOCATION: Warrenville,
Illinois
INTEREST ACCRUAL METHOD: Actual/360 YEAR BUILT/RENOVATED: 1997-1998
FIRST PAYMENT DATE: 6/1/2000 SQUARE FEET: 130,757
MATURITY DATE: 5/1/2010 CUT-OFF DATE BALANCE/SQ.FT.: $ 135.91
ORIGINAL AMORTIZATION: 300
ANNUAL DEBT SERVICE: $1,686,714 OCCUPANCY: 100.0%
LOCKOUT END DATE: 4/30/2010 OCCUPANCY DATE: 5/1/2000
CALL PROTECTION: Defeasance
CALL PROTECTION END DATE: 4/30/2010 APPRAISED VALUE: $35,625,000
ESCROWS CUT-OFF DATE LTV: 49.9%
REAL ESTATE TAXES: Springing BALLOON LTV: 41.6%
INSURANCE: Springing
REPLACEMENT RESERVES: Springing UNDERWRITTEN CASH FLOW: $ 3,362,227
DSCR: 1.99x
</TABLE>
THE PROPERTY
The mortgaged property is a 130,757 square foot, 30-screen two-story
megaplex theater and is located in the western portion of the greater Chicago
Metropolitan Statistical Area. AMC Cantera 30, which was constructed in 1998,
seats 5,883 and includes stadium seating throughout. In addition, the property
contains 18 box office stations, 40 concession registers and 2,398 parking
spaces. The property is 100% leased to American Multi-Cinema, Inc. under a
lease expiring in March 2013.
THE BORROWER
The borrower is Cantera 30 Theatre, L.P., which is controlled by
Entertainment Properties Trust, a Maryland real estate investment trust whose
common shares of beneficial interest are traded on the New York Stock Exchange.
The borrower is a single purpose entity whose organizational documents do not
permit it to engage in any business unrelated to the mortgaged property, to
have any assets other than the mortgaged property or any indebtedness (subject
to limited exceptions such as trade payables incurred in the ordinary course of
business) other than the mortgage loan. In addition, the borrower's
organizational documents require an independent director and the unanimous vote
of directors of the borrower in connection with the filing of a petition of
bankruptcy related to the borrower. In connection with the closing of the
mortgage loan, the lender received an opinion from borrower's counsel to the
effect that, among other things, the assets of the borrower would not be
consolidated with the assets of any party having a controlling interest in the
borrower in the event of a bankruptcy or insolvency of that party.
MANAGEMENT
The mortgaged property is managed by the borrower.
B-27
<PAGE>
ESCROWS
The borrower is required to pay real estate taxes and insurance premiums
as they become due. If the borrower at any time fails to provide the lender
with satisfactory evidence of payment of real estate taxes and property
insurance premiums, the lender may require the borrower to thereafter fund
escrows to provide for the payment of such items. If the mortgaged property is
not maintained in accordance with the loan documents, the lender may require
the borrower to fund an additional escrow for future capital expenditures.
ADDITIONAL DEBT/TRANSFERS
The loan documents provide that the mortgage loan will become immediately
due and payable upon (i) any transfer of the borrower's interest in the
mortgaged property or any transfer of more than 49% of the shares in the
borrower to an unrelated third party or (ii) any additional encumbrance of the
mortgaged property, in each case without the prior written consent of the
lender.
The borrower has the right to transfer the property upon the payment of an
assumption fee in the amount of 1% of the then unpaid principal balance of the
mortgage loan, confirmation from Fitch and S&P that the transfer would not
result in a downgrade, qualification (if applicable) or withdrawal of the then
current ratings assigned to any class of certificates, and satisfaction of
other conditions specified in the loan documents.
See Loan No. 29198 in the mortgage loan schedule.
B-28
<PAGE>
ANNEX C
[WELLS FARGO LOGO]
WELLS FARGO BANK MINNESOTA, N.A.
CORPORATE TRUST SERVICES
11000 BROKEN LAND PARKWAY
COLUMBIA, MD 21044
For Additional Information, please contact
CTSLink Customer Service
(301) 815-6600
Reports Available on the World Wide Web
@ www.ctslink.com/cmbs
PAYMENT DATE: 11/15/2000
RECORD DATE: 10/31/2000
BEAR STEARNS COMMERCIAL MORTGAGE SECURITIES INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-WF2
DISTRIBUTION DATE STATEMENT
TABLE OF CONTENTS
STATEMENT SECTIONS PAGE(S)
------------------ -------
Certificate Distribution Detail 2
Certificate Factor Detail 3
Reconciliation Detail 4
Other Required Information 5
Ratings Detail 6
Current Mortgage Loan and Property Stratification Tables 7-9
Mortgage Loan Detail 10
Principal Prepayment Detail 11
Historical Detail 12
Delinquency Loan Detail 13
Specially Serviced Loan Detail 14-15
Modified Loan Loan 16
Liquidated Loan Detail 17
UNDERWRITER
-----------
Bear, Stearns & Co. Inc.
245 Park Avenue
New York, NY 10019
Contact: General Information Number
Phone Number: (212) 272-2000
UNDERWRITER
-----------
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036
Contact: General Information Number
Phone Number: (212) 761-4700
MASTER SERVICER
---------------
Wells Fargo Bank, National Association
555 Montgomery Street, 17th Floor
San Francisco, CA 94111
Contact: Stewart McAdams
Phone Number: (415) 396-7208
SPECIAL SERVICER
----------------
GMAC Commercial Mortgage
650 Dresher Road
Horsham, PA 10944-8015
Contact: Darri Cunningham
Phone Number: (215) 328-1784 Ext
This report has been compiled from information provided to Wells Fargo Bank MN,
N.A. by various third parties, which may include the Servicer, Master Servicer,
Special Servicer and others. Wells Fargo Bank MN, N.A. has not independently
confirmed the accuracy of information received from these third parties and
assumes no duty to do so. Wells Fargo Bank MN, N.A. expressly disclaims any
responsibility for the accuracy or completeness of information furnished by
third parties.
Copyright 1997, Wells Fargo Bank MN, N.A. Page 1 of 17
C-1
<PAGE>
[WELLS FARGO LOGO]
WELLS FARGO BANK MINNESOTA, N.A.
CORPORATE TRUST SERVICES
11000 BROKEN LAND PARKWAY
COLUMBIA, MD 21044
For Additional Information, please contact
CTSLink Customer Service
(301) 815-6600
Reports Available on the World Wide Web
@ www.ctslink.com/cmbs
PAYMENT DATE: 11/15/2000
RECORD DATE: 10/31/2000
BEAR STEARNS COMMERCIAL MORTGAGE SECURITIES INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-WF2
CERTIFICATE DISTRIBUTION DETAIL
<TABLE>
<CAPTION>
Realized Loss/
Class\ Pass-Through Original Beginning Principal Interest Prepayment Additional Trust Total
Component CUSIP Rate Balance Balance Distribution Distribution Premium Fund Expenses Distribution
--------- ----- ------------ -------- --------- ------------ ------------ ---------- ---------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
A-1 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00
A-2 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00
B 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00
C 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00
D 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00
E 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00
F 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00
G 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00
H 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00
I 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00
J 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00
K 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00
L 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00
M 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00
R-I 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00
R-II 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00
R-III 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Totals
<CAPTION>
Current
Class\ Ending Subordination
Component Balance Balance
--------- -------- -------------
<S> <C> <C>
A-1 0.00 0.00%
A-2 0.00 0.00%
B 0.00 0.00%
C 0.00 0.00%
D 0.00 0.00%
E 0.00 0.00%
F 0.00 0.00%
G 0.00 0.00%
H 0.00 0.00%
I 0.00 0.00%
J 0.00 0.00%
K 0.00 0.00%
L 0.00 0.00%
M 0.00 0.00%
R-I 0.00 0.00%
R-II 0.00 0.00%
R-III 0.00 0.00%
Totals
</TABLE>
<TABLE>
<CAPTION>
Original Beginning Ending
Pass-Through Notional Notional Interest Prepayment Total Notional
Class CUSIP Rate Amount Amount Distribution Premium Distribution Amount
--------- ----- ------------ -------- --------- ------------ ---------- ---------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
X 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00
</TABLE>
(1) Calculated by taking (A) the sum of the ending certificate balance of all
classes less (B) the sum of (i) the ending certificate balance of the designated
class and (ii) the ending certificate balance of all classes which are not
subordinate to the designated class and dividing the result by (A).
Copyright 1997, Wells Fargo Bank MN, N.A. Page 2 of 17
C-2
<PAGE>
[WELLS FARGO LOGO]
WELLS FARGO BANK MINNESOTA, N.A.
CORPORATE TRUST SERVICES
11000 BROKEN LAND PARKWAY
COLUMBIA, MD 21044
For Additional Information, please contact
CTSLink Customer Service
(301) 815-6600
Reports Available on the World Wide Web
@ www.ctslink.com/cmbs
PAYMENT DATE: 11/15/2000
RECORD DATE: 10/31/2000
BEAR STEARNS COMMERCIAL MORTGAGE SECURITIES INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-WF2
CERTIFICATE FACTOR DETAIL
<TABLE>
<CAPTION>
Realized Loss/
Beginning Principal Interest Prepayment Additional Trust Ending
Class CUSIP Balance Distribution Distribution Premium Fund Expenses Balance
--------- ----- ---------- ------------ ------------ ---------- ---------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
A-1 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
A-2 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
B 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
C 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
D 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
E 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
F 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
G 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
H 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
I 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
J 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
K 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
L 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
M 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
R-I 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
R-II 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
R-III 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
</TABLE>
<TABLE>
<CAPTION>
Beginning Ending
Notional Interest Prepayment Notional
Class CUSIP Amount Distribution Premium Amount
--------- ----- ---------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
X 0.00000000 0.00000000 0.00000000 0.00000000
</TABLE>
Copyright 1997, Wells Fargo Bank MN, N.A. Page 3 of 17
C-3
<PAGE>
[WELLS FARGO LOGO]
WELLS FARGO BANK MINNESOTA, N.A.
CORPORATE TRUST SERVICES
11000 BROKEN LAND PARKWAY
COLUMBIA, MD 21044
For Additional Information, please contact
CTSLink Customer Service
(301) 815-6600
Reports Available on the World Wide Web
@ www.ctslink.com/cmbs
PAYMENT DATE: 11/15/2000
RECORD DATE: 10/31/2000
BEAR STEARNS COMMERCIAL MORTGAGE SECURITIES INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-WF2
RECONCILIATION DETAIL
ADVANCE SUMMARY
P&I Advances Outstanding 0.00
Servicing Advances Outstanding 0.00
Reimbursement for Interest on P&I 0.00
Advances paid from general collections
Reimbursement for Interest on Servicing 0.00
Advances paid from general collections
MASTER SERVICING FEE SUMMARY
Current Period Accrued Master Servicing Fees 0.00
Less Master Servicing Fees on Delinquent Payments 0.00
Less Reductions to Master Servicing Fees 0.00
Plus Master Servicing Fees for Delinquent Payments Received 0.00
Plus Adjustments for Prior Master Servicing Calculation 0.00
Total Master Servicing Fees Collected 0.00
<TABLE>
<CAPTION>
CERTIFICATE INTEREST RECONCILIATION
Accrued Uncovered Certificate Unpaid Optimal Interest Interest
Certificate Prepayment Indemnification Deferred Interest Interest Distribution Shortfall
Class Interest Interest Shortfall Expenses Amount Shortfall Amount Amount Amount
----- ----------- ------------------ --------------- ----------------- ---------------- --------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
A-1
A-2
B
C
D
E
F
G
H
I
J
K
L
M
Total
<CAPTION>
Appraisal
Interest Reduction
Class Distribution Amount
----- ------------ ----------
<S> <C> <C>
A-1
A-2
B
C
D
E
F
G
H
I
J
K
L
M
Total
</TABLE>
Copyright 1997, Wells Fargo Bank MN, N.A. Page 4 of 17
C-4
<PAGE>
[WELLS FARGO LOGO]
WELLS FARGO BANK MINNESOTA, N.A.
CORPORATE TRUST SERVICES
11000 BROKEN LAND PARKWAY
COLUMBIA, MD 21044
For Additional Information, please contact
CTSLink Customer Service
(301) 815-6600
Reports Available on the World Wide Web
@ www.ctslink.com/cmbs
PAYMENT DATE: 11/15/2000
RECORD DATE: 10/31/2000
BEAR STEARNS COMMERCIAL MORTGAGE SECURITIES INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-WF2
OTHER REQUIRED INFORMATION
Available Distribution Amount 0.00
Aggregate Number of Outstanding Loans 0
Aggregate Unpaid Principal Balance of Loans 0.00
Aggregate Stated Principal Balance of Loans 0.00
Aggregate Amount of Servicing Fee 0.00
Aggregate Amount of Special Servicing Fee 0.00
Aggregate Amount of Trustee Fee 0.00
Aggregate Amount of Primary Servicing Fee 0.00
Aggregate Trust Fund Expenses 0.00
Specially Serviced Loans not Delinquent
Number of Outstanding Loans 0
Aggregate Unpaid Principal Balance 0.00
Appraisal Reduction Amount
Cumulative
Loan Appraisal ASER Most Recent
Number Reduction Amount App. Red.
------ --------- ---------- -----------
Total
Copyright 1997, Wells Fargo Bank MN, N.A. Page 5 of 17
C-5
<PAGE>
[WELLS FARGO LOGO]
WELLS FARGO BANK MINNESOTA, N.A.
CORPORATE TRUST SERVICES
11000 BROKEN LAND PARKWAY
COLUMBIA, MD 21044
For Additional Information, please contact
CTSLink Customer Service
(301) 815-6600
Reports Available on the World Wide Web
@ www.ctslink.com/cmbs
PAYMENT DATE: 11/15/2000
RECORD DATE: 10/31/2000
BEAR STEARNS COMMERCIAL MORTGAGE SECURITIES INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-WF2
RATINGS DETAIL
<TABLE>
<CAPTION>
Original Ratings Current Ratings (1)
-------------------------- ----------------------------
Class CUSIP Fitch Moody's S&P Fitch Moody's S&P
----- ----- ----- ------- ----- ----- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
A-1
A-2
X
B
C
D
E
F
G
H
I
J
K
L
M
</TABLE>
NR - Designates that the class was not rated by the above agency at the time of
original issuance.
X - Designates that the above rating agency did not rate any classes in this
transaction at the time of original issuance.
N/A - Data not available this period.
1) For any class not rated at the time of original issuance by any particular
rating agency, no request has been made subsequent to issuance to obtain rating
information, if any, from such rating agency. The current ratings were obtained
directly from the applicable rating agency within 30 days of the payment date
listed above. The ratings may have changed since they were obtained. Because
the ratings may have changed, you may want to obtain current ratings directly
from the rating agencies.
<TABLE>
<CAPTION>
<S> <C> <C>
Fitch, Inc. Moody's Investors Service Standard & Poor's Rating Services
One State Street Plaza 99 Church Street 55 Water Street
New York, New York 10004 New York, New York 10007 New York, New York 10041
(212) 908-0500 (212) 553-0300 (212) 438-2000
</TABLE>
Copyright 1997, Wells Fargo Bank MN, N.A. Page 6 of 17
C-6
<PAGE>
[WELLS FARGO LOGO]
WELLS FARGO BANK MINNESOTA, N.A.
CORPORATE TRUST SERVICES
11000 BROKEN LAND PARKWAY
COLUMBIA, MD 21044
For Additional Information, please contact
CTSLink Customer Service
(301) 815-6600
Reports Available on the World Wide Web
@ www.ctslink.com/cmbs
PAYMENT DATE: 11/15/2000
RECORD DATE: 10/31/2000
BEAR STEARNS COMMERCIAL MORTGAGE SECURITIES INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-WF2
CURRENT MORTGAGE LOAN AND PROPERTY STRATIFICATION TABLES
SCHEDULED BALANCE
<TABLE>
<CAPTION>
% of
Scheduled # of Scheduled Agg. WAM Weighted
Balance Loans Balance Bal. (2) WAC Avg DSCR (1)
--------- ----- --------- ---- --- --- ------------
<S> <C> <C> <C> <C> <C> <C>
Totals
</TABLE>
STATE (3)
<TABLE>
<CAPTION>
% of
# of Scheduled Agg. WAM Weighted
State Props Balance Bal. (2) WAC Avg DSCR (1)
--------- ----- --------- ---- --- --- ------------
<S> <C> <C> <C> <C> <C> <C>
Totals
</TABLE>
See footnotes on last page of this section.
Copyright 1997, Wells Fargo Bank MN, N.A. Page 7 of 17
C-7
<PAGE>
[WELLS FARGO LOGO]
WELLS FARGO BANK MINNESOTA, N.A.
CORPORATE TRUST SERVICES
11000 BROKEN LAND PARKWAY
COLUMBIA, MD 21044
For Additional Information, please contact
CTSLink Customer Service
(301) 815-6600
Reports Available on the World Wide Web
@ www.ctslink.com/cmbs
PAYMENT DATE: 11/15/2000
RECORD DATE: 10/31/2000
BEAR STEARNS COMMERCIAL MORTGAGE SECURITIES INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-WF2
CURRENT MORTGAGE LOAN AND PROPERTY STRATIFICATION TABLES
DEBT SERVICE COVERAGE RATIO (1)
<TABLE>
<CAPTION>
% of
Debt Service # of Scheduled Agg. WAM Weighted
Coverage Ratio Loans Balance Bal. (2) WAC Avg DSCR (1)
-------------- ----- --------- ---- --- --- ------------
<S> <C> <C> <C> <C> <C> <C>
Totals
</TABLE>
PROPERTY TYPE (3)
<TABLE>
<CAPTION>
% of
Property # of Scheduled Agg. WAM Weighted
Type Loans Balance Bal. (2) WAC Avg DSCR (1)
--------- ----- --------- ---- --- --- ------------
<S> <C> <C> <C> <C> <C> <C>
Totals
</TABLE>
NOTE RATE
<TABLE>
<CAPTION>
% of
Note # of Scheduled Agg. WAM Weighted
Rate Loans Balance Bal. (2) WAC Avg DSCR (1)
--------- ----- --------- ---- --- --- ------------
<S> <C> <C> <C> <C> <C> <C>
Totals
</TABLE>
SEASONING
<TABLE>
<CAPTION>
% of
# of Scheduled Agg. WAM Weighted
Seasoning Loans Balance Bal. (2) WAC Avg DSCR (1)
--------- ----- --------- ---- --- --- ------------
<S> <C> <C> <C> <C> <C> <C>
Totals
</TABLE>
See footnotes on last page of this section.
Copyright 1997, Wells Fargo Bank MN, N.A. Page 8 of 17
C-8
<PAGE>
[WELLS FARGO LOGO]
WELLS FARGO BANK MINNESOTA, N.A.
CORPORATE TRUST SERVICES
11000 BROKEN LAND PARKWAY
COLUMBIA, MD 21044
For Additional Information, please contact
CTSLink Customer Service
(301) 815-6600
Reports Available on the World Wide Web
@ www.ctslink.com/cmbs
PAYMENT DATE: 11/15/2000
RECORD DATE: 10/31/2000
BEAR STEARNS COMMERCIAL MORTGAGE SECURITIES INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-WF2
CURRENT MORTGAGE LOAN AND PROPERTY STRATIFICATION TABLES
ANTICIPATED REMAINING TERM (ARD AND BALLOON LOANS)
<TABLE>
<CAPTION>
% of
Anticipated Remaining # of Scheduled Agg. WAM Weighted
Term (2) Loans Balance Bal. (2) WAC Avg DSCR (1)
--------------------- ----- --------- ---- --- --- ------------
<S> <C> <C> <C> <C> <C> <C>
Totals
</TABLE>
REMAINING STATED TERM (FULLY AMORTIZING LOANS)
<TABLE>
<CAPTION>
% of
Remaining Stated # of Scheduled Agg. WAM Weighted
Term Loans Balance Bal. (2) WAC Avg DSCR (1)
---------------- ----- --------- ---- --- --- ------------
<S> <C> <C> <C> <C> <C> <C>
Totals
</TABLE>
REMAINING AMORTIZATION TERM (ARD AND BALLOON LOANS)
<TABLE>
<CAPTION>
% of
Remaining Amortization # of Scheduled Agg. WAM Weighted
Term Loans Balance Bal. (2) WAC Avg DSCR (1)
--------------------- ----- --------- ---- --- --- ------------
<S> <C> <C> <C> <C> <C> <C>
Totals
</TABLE>
AGE OF MOST RECENT NOI
<TABLE>
<CAPTION>
% of
Age of Most # of Scheduled Agg. WAM Weighted
Recent NOI Loans Balance Bal. (2) WAC Avg DSCR (1)
-------------- ----- --------- ---- --- --- ------------
<S> <C> <C> <C> <C> <C> <C>
Totals
</TABLE>
(1) Debt Service Coverage Ratios are updated periodically as new NOI figures
become available from borrowers on an asset level. In all cases the most
current DSCR provided by the Servicer is used. To the extent that no
DSCR is provided by the Servicer, information from the offering document is
used. The Trustee makes no representations as to the accuracy of the data
provided by the borrower for this calculation.
(2) Anticipated Remaining Term and WAM are each calculated based upon the
term from the current month to the earlier of the Anticipated Repayment Date,
if applicable, and the Maturity Date.
(3) Data in this table was calculated by allocating pro-rata the current
loan information to the properties based upon the Cut-off Date balance of
each property as disclosed in the offering document.
Copyright 1997, Wells Fargo Bank MN, N.A. Page 9 of 17
C-9
<PAGE>
[WELLS FARGO LOGO]
WELLS FARGO BANK MINNESOTA, N.A.
CORPORATE TRUST SERVICES
11000 BROKEN LAND PARKWAY
COLUMBIA, MD 21044
For Additional Information, please contact
CTSLink Customer Service
(301) 815-6600
Reports Available on the World Wide Web
@ www.ctslink.com/cmbs
PAYMENT DATE: 11/15/2000
RECORD DATE: 10/31/2000
BEAR STEARNS COMMERCIAL MORTGAGE SECURITIES INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-WF2
MORTGAGE LOAN DETAIL
<TABLE>
<CAPTION>
Anticipated Neg. Beginning
Loan Property Interest Principal Gross Repayment Maturity Amort Scheduled
Number ODCR Type (1) City State Payment Payment Coupon Date Date (Y/N) Balance
------ ---- -------- ---- ----- -------- --------- ------ ----------- -------- ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
<CAPTION>
Ending Paid Appraisal Appraisal Res. Mod.
Loan Scheduled Thru Reduction Reduction Strat. Code
Number Balance Date Date Amount (2) (3)
------ --------- ---- --------- --------- ------ ----
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
(1) Property Type Code
----------------------
MF - Multi-Family OF - Office
RT - Retail MU - Mixed Use
HC - Health Care LO - Lodging
IN - Industrial SS - Self Storage
WH - Warehouse OT - Other
MH - Mobile Home Park
(2) Resolution Strategy Code
----------------------------
1 - Modification 6 - DPO 10 - Deed in Lieu Of
2 - Foreclosure 7 - REO Foreclosure
3 - Bankruptcy 8 - Resolved 11 - Full Payoff
4 - Extension 9 - Pending Return 12 - Reps and Warranties
5 - Note Sale to Master Servicer 13 - Other or TBD
(3) Modification Code
---------------------
1 - Maturity Date Extension
2 - Amortization Change
3 - Principal Write-Off
4 - Combination
Copyright 1997, Wells Fargo Bank MN, N.A. Page 10 of 17
C-10
<PAGE>
[WELLS FARGO LOGO]
WELLS FARGO BANK MINNESOTA, N.A.
CORPORATE TRUST SERVICES
11000 BROKEN LAND PARKWAY
COLUMBIA, MD 21044
For Additional Information, please contact
CTSLink Customer Service
(301) 815-6600
Reports Available on the World Wide Web
@ www.ctslink.com/cmbs
PAYMENT DATE: 11/15/2000
RECORD DATE: 10/31/2000
BEAR STEARNS COMMERCIAL MORTGAGE SECURITIES INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-WF2
PRINCIPAL PREPAYMENT DETAIL
<TABLE>
<CAPTION>
Principal Prepayment Amount Prepayment Premium
Offering Document ------------------------------------------------------------------------------------
Loan Number Cross-Reference Payoff Amount Curtailment Amount Precentage Premium Yield Maintenance Charge
----------- ----------------- ------------- ------------------ ------------------ ------------------------
<S> <C> <C> <C> <C> <C>
Totals
</TABLE>
Copyright 1997, Wells Fargo Bank MN, N.A. Page 11 of 17
C-11
<PAGE>
[WELLS FARGO LOGO]
WELLS FARGO BANK MINNESOTA, N.A.
CORPORATE TRUST SERVICES
11000 BROKEN LAND PARKWAY
COLUMBIA, MD 21044
For Additional Information, please contact
CTSLink Customer Service
(301) 815-6600
Reports Available on the World Wide Web
@ www.ctslink.com/cmbs
PAYMENT DATE: 11/15/2000
RECORD DATE: 10/31/2000
BEAR STEARNS COMMERCIAL MORTGAGE SECURITIES INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-WF2
HISTORICAL DETAIL
<TABLE>
<CAPTION>
Delinquencies Prepayments
-------------------------------------------------------------------------------------------------------- -------------------------
Distribution 30-59 Days 60-89 Days 90 Days or More Foreclosure REO Modifications Curtailments Payoff
Date # Balance # Balance # Balance # Balance # Balance # Balance # Amount # Amount
------------ ----------- ----------- --------------- ----------- ----------- ------------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
<CAPTION>
Rate and Maturities
-------------------------------
Next Weighted Avg.
Coupon Remit WAM
------ ----- ---
</TABLE>
Note: Foreclosure and REO Totals are excluded from the delinquencies aging
categories.
Copyright 1997, Wells Fargo Bank MN, N.A. Page 12 of 17
C-12
<PAGE>
[WELLS FARGO LOGO]
WELLS FARGO BANK MINNESOTA, N.A.
CORPORATE TRUST SERVICES
11000 BROKEN LAND PARKWAY
COLUMBIA, MD 21044
For Additional Information, please contact
CTSLink Customer Service
(301) 815-6600
Reports Available on the World Wide Web
@ www.ctslink.com/cmbs
PAYMENT DATE: 11/15/2000
RECORD DATE: 10/31/2000
BEAR STEARNS COMMERCIAL MORTGAGE SECURITIES INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-WF2
DELINQUENCY LOAN DETAIL
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
Offering # of Paid Current Outstanding Status of Resolution
Loan Number Document Months Through P & I P & I Mortgage Strategy
Cross-Reference Delinq. Date Advances Advances** Loan(1) Code(2)
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------
Totals
-----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
Servicing Actual Outstanding
Loan Number Transfer Foreclosure Principal Servicing Bankruptcy REO
Date Date Balance Advances Date Date
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------
Totals
-----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Status of Mortgage Loan
---------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
A - Payment Not Received 0 - Current - Assumed Scheduled Payment
But Still in Grace Period 1 - One Month Delinquent (Performing Matured Balloon)
B - Late Payment But Less 2 - Two Months Delinquent 7 - Foreclosure
Than 1 Month Delinquent 3 - Three or More Months Delinquent 9 - REO
</TABLE>
(2) Resolution Strategy Code
----------------------------
1 - Modification 6 - DPO 10 - Deed in Lieu Of
2 - Foreclosure 7 - REO Foreclosure
3 - Bankruptcy 8 - Resolved 11 - Full Payoff
4 - Extension 9 - Pending Return 12 - Reps and Warranties
5 - Note Sale to Master Servicer 13 - Other or TBD
**Outstanding P&I Advances include the current period advance.
Copyright 1997, Wells Fargo Bank MN, N.A. Page 13 of 17
C-13
<PAGE>
[WELLS FARGO LOGO]
WELLS FARGO BANK MINNESOTA, N.A.
CORPORATE TRUST SERVICES
11000 BROKEN LAND PARKWAY
COLUMBIA, MD 21044
For Additional Information, please contact
CTSLink Customer Service
(301) 815-6600
Reports Available on the World Wide Web
@ www.ctslink.com/cmbs
PAYMENT DATE: 11/15/2000
RECORD DATE: 10/31/2000
BEAR STEARNS COMMERCIAL MORTGAGE SECURITIES INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-WF2
SPECIALLY SERVICED LOAN DETAIL - PART 1
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
Offering Servicing Resolution
Loan Document Transfer Strategy Scheduled Property State Interest
Number Cross-Reference Date Code(1) Balance Type(2) Rate
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
Net Remaining
Loan Actual Operating DSCR DSCR Note Maturity Amortization
Number Balance Income Date Date Date Term
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Resolution Strategy Code
----------------------------
1 - Modification 6 - DPO 10 - Deed in Lieu Of
2 - Foreclosure 7 - REO Foreclosure
3 - Bankruptcy 8 - Resolved 11 - Full Payoff
4 - Extension 9 - Pending Return 12 - Reps and Warranties
5 - Note Sale to Master Servicer 13 - Other or TBD
(2) Property Type Code
----------------------
MF - Multi-Family OF - Office
RT - Retail MU - Mixed Use
HC - Health Care LO - Lodging
IN - Industrial SS - Self Storage
WH - Warehouse OT - Other
MH - Mobile Home Park
Copyright 1997, Wells Fargo Bank MN, N.A. Page 14 of 17
C-14
<PAGE>
[WELLS FARGO LOGO]
WELLS FARGO BANK MINNESOTA, N.A.
CORPORATE TRUST SERVICES
11000 BROKEN LAND PARKWAY
COLUMBIA, MD 21044
For Additional Information, please contact
CTSLink Customer Service
(301) 815-6600
Reports Available on the World Wide Web
@ www.ctslink.com/cmbs
PAYMENT DATE: 11/15/2000
RECORD DATE: 10/31/2000
BEAR STEARNS COMMERCIAL MORTGAGE SECURITIES INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-WF2
SPECIALLY SERVICED LOAN DETAIL - PART 2
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
Offering Resolution Site Other REO
Loan Document Strategy Inspection Phase 1 Appraisal Appraisal Property Comment
Number Cross-Reference Code(1) Date Date Date Value Revenue
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Resolution Strategy Code
----------------------------
1 - Modification 6 - DPO 10 - Deed in Lieu Of
2 - Foreclosure 7 - REO Foreclosure
3 - Bankruptcy 8 - Resolved 11 - Full Payoff
4 - Extension 9 - Pending Return 12 - Reps and Warranties
5 - Note Sale to Master Servicer 13 - Other or TBD
Copyright 1997, Wells Fargo Bank MN, N.A. Page 15 of 17
C-15
<PAGE>
[WELLS FARGO LOGO]
WELLS FARGO BANK MINNESOTA, N.A.
CORPORATE TRUST SERVICES
11000 BROKEN LAND PARKWAY
COLUMBIA, MD 21044
For Additional Information, please contact
CTSLink Customer Service
(301) 815-6600
Reports Available on the World Wide Web
@ www.ctslink.com/cmbs
PAYMENT DATE: 11/15/2000
RECORD DATE: 10/31/2000
BEAR STEARNS COMMERCIAL MORTGAGE SECURITIES INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-WF2
MODIFIED LOAN DETAIL
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
Offering
Loan Document Pre-Modification Modification Modification Description
Number Cross-Reference Balance Date
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------------------------
Totals
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Copyright 1997, Wells Fargo Bank MN, N.A. Page 16 of 17
C-16
<PAGE>
[WELLS FARGO LOGO]
WELLS FARGO BANK MINNESOTA, N.A.
CORPORATE TRUST SERVICES
11000 BROKEN LAND PARKWAY
COLUMBIA, MD 21044
For Additional Information, please contact
CTSLink Customer Service
(301) 815-6600
Reports Available on the World Wide Web
@ www.ctslink.com/cmbs
PAYMENT DATE: 11/15/2000
RECORD DATE: 10/31/2000
BEAR STEARNS COMMERCIAL MORTGAGE SECURITIES INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-WF2
LIQUIDATED LOAN DETAIL
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
Final Recovery Offering Gross Proceeds Aggregate
Loan Determination Document Appraisal Appraisal Actual Gross as a % of Liquidation
Number Date Cross-Reference Date Value Balance Proceeds Actual Balance Expenses*
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------------------
Current Total
--------------------------------------------------------------------------------------------------------------
Cumulative Total
--------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
Net Net Proceeds Repurchased
Loan Liquidation as a % of Realized by Seller
Number Proceeds Actual Balance Loss (Y/N)
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
-----------------------------------------------------------------------------
Current Total
-----------------------------------------------------------------------------
Cumulative Total
-----------------------------------------------------------------------------
</TABLE>
*Aggregate liquidation expenses also include outstanding P&I advances and
unpaid fees (servicing, trustee, etc.).
Copyright 1997, Wells Fargo Bank MN, N.A. Page 17 of 17
C-17
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL OPERATING STATEMENT ANALYSIS REPORT (inclds. Retail/Office/Ind/Whs/Mixed use)
------------------------------------------------------------------------------------------------------------------------------------
AS OF MM/DD/YY
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
PROPERTY OVERVIEW
----------------
PROSPECTUS ID
-------------------------------------
Current Scheduled Loan Balance/Paid to Date Current Allocated Loan Amount %
------------------------------------------------------------------------------------------------------------------------------------
Property Name
------------------------------------------------------------------------------------------------------------------------------------
Property Type
------------------------------------------------------------------------------------------------------------------------------------
Property Address, City, State
------------------------------------------------------------------------------------------------------------------------------------
Net Rentable SF/Units/Pads, Beds Use second box to specify sqft., units...
------------------------------------------------------------------------------------------------------------------------------------
Year Built/Year Renovated
------------------------------------------------------------------------------------------------------------------------------------
Cap Ex Reserve (annually)/per Unit.etc. (1) specify annual/per unit...
------------------------------------------------------------------------------------------------------------------------------------
Year of Operations UNDERWRITING MM/DD/YY MM/DD/YY MM/DD/YY MM/DD/YY
------------------------------------------------------------------------------------------------------------------------------------
Occupancy Rate (physical)
------------------------------------------------------------------------------------------------------------------------------------
Occupancy Date
------------------------------------------------------------------------------------------------------------------------------------
Average Rental Rate
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
(1) Total $ amount of Capital Reserves required annually by loan documents, excl.
Leasing Commission and TI's
====================================================================================================================================
------------------------------------------------------------------------------------------------------------------------------------
INCOME:
------------------------------------------------------------------------------------------------------------------------------------
(prcdng yr
(prcdng yr to 2nd
Number of Mos. Covered to base) prcdng)
------------------------------------------------------------------------------------------------------------------------------------
Period Ended 3RD 2ND PRECEDING TTM/YTD
UNDERWRITING PRECEDING PRECEDING YR. (2) YYYY-U/W YYYY-YYYY
-------------------------------------------------------------------
(fm NOI AS OF
Statement Classification(yr) BASE LINE Adj Sheet) / /98 VARIANCE VARIANCE
------------------------------------------------------------------------------------------------------------------------------------
Gross Potential Rent (3)
------------------------------------------------------------------------------------------------------------------------------------
Less: Vacancy/collection loss
------------------------------------------------------------------------------------------------------------------------------------
OR
------------------------------------------------------------------------------------------------------------------------------------
Base Rent (3)
------------------------------------------------------------------------------------------------------------------------------------
Expense Reimbursement
------------------------------------------------------------------------------------------------------------------------------------
Percentage Rent
------------------------------------------------------------------------------------------------------------------------------------
Other Income/Parking Income
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
*EFFECTIVE GROSS INCOME
------------------------------------------------------------------------------------------------------------------------------------
(2) Servicer will not be expected to "Normalize" these YTD/TTM numbers.
------------------------------------------------------------------------------------------------------------------------------------
(3) Use either Gross Potential (with Vacancy/Collection Loss) or Base Rents; use
negative $amt for Vacancy/Collection Loss
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES:
------------------------------------------------------------------------------------------------------------------------------------
Real Estate Taxes
------------------------------------------------------------------------------------------------------------------------------------
Property Insurance
------------------------------------------------------------------------------------------------------------------------------------
Utilities
------------------------------------------------------------------------------------------------------------------------------------
Repairs and Maintenance
------------------------------------------------------------------------------------------------------------------------------------
Janitorial
------------------------------------------------------------------------------------------------------------------------------------
Management Fees
------------------------------------------------------------------------------------------------------------------------------------
Payroll & Benefits
------------------------------------------------------------------------------------------------------------------------------------
Advertising & Marketing
------------------------------------------------------------------------------------------------------------------------------------
Professional Fees
------------------------------------------------------------------------------------------------------------------------------------
General and Administrative
------------------------------------------------------------------------------------------------------------------------------------
Other Expenses
------------------------------------------------------------------------------------------------------------------------------------
Ground Rent
------------------------------------------------------------------------------------------------------------------------------------
*TOTAL OPERATING EXPENSES
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSE RATIO
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
*NET OPERATING INCOME
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
Leasing Commissions
------------------------------------------------------------------------------------------------------------------------------------
Tenant Improvements
------------------------------------------------------------------------------------------------------------------------------------
Capital Expenditures
------------------------------------------------------------------------------------------------------------------------------------
Extraordinary Capital Expenditures
------------------------------------------------------------------------------------------------------------------------------------
TOTAL CAPITAL ITEMS
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
*NET CASH FLOW
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
DEBT SERVICE (PER SERVICER)
------------------------------------------------------------------------------------------------------------------------------------
*NET CASH FLOW AFTER DEBT SERVICE
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
*DSCR: (NOI/DEBT SERVICE)
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
*DSCR: (NCF/DEBT SERVICE)
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
SOURCE OF FINANCIAL DATA:
------------------------------------------------------------------------------------------------------------------------------------
(ie. operating statements, financial statements, tax return, other)
------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
NOTES AND ASSUMPTIONS: Years above will roll, always showing a 3yr sequential history. Comments from the most recent NOI Adjustment
Worksheet should be carried forward to Operating Statement Analysis Report.
------------------------------------------------------------------------------------------------------------------------------------
Year-over-year variances (either higher or lower) must be explained and noted for the following: 10% DSCR CHANGE, 15% EGI/TOTAL
OPERATING EXPENSES OR TOTAL CAPITAL ITEMS.
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
INCOME COMMENTS:
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
EXPENSE COMMENTS:
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
CAPITAL ITEMS COMMENTS:
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
*Used in the CSSA Comparative Financial Status Report/CSSA Property File/CSSA Loan Periodic Loan File. Note that information for
multiple property loans must be consolidated (if available) for reporting to the CSSA Loan Periodic file.
====================================================================================================================================
C-18
</TABLE>
<PAGE>
PROSPECTUS
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
(ISSUABLE IN SERIES)
BEAR STEARNS COMMERCIAL MORTGAGE SECURITIES INC.
(DEPOSITOR)
---------------------
Consider carefully the risk factors beginning on page 8 in this
prospectus.
The securities to be issued are mortgage backed certificates issued by a
trust. The securities represent interests only in the related trust fund and do
not represent interests in or obligations of Bear Stearns Commercial Mortgage
Securities Inc.
Unless otherwise specified in the applicable prospectus supplement,
neither the certificates nor the underlying assets are insured or guaranteed by
any governmental agency or other person.
This prospectus may be used to offer and sell any series of certificates
only if accompanied by the prospectus supplement for that series.
THE TRUST FUNDS--
(1) A new trust fund will be established to issue each series of
certificates.
(2) Each trust fund will consist primarily of loans secured by pledges of
commercial, multifamily residential or mixed use properties.
(3) A new trust fund may also include letters of credit, insurance
policies, guarantees, reserve funds or other types of credit support, and
interest rate exchange agreements, interest rate cap or floor agreements or
currency exchange agreements.
THE CERTIFICATES--
(1) Each series of certificates will be issued as part of a designated
series that may include one or more classes.
(2) Each series of certificates will represent the entire beneficial
ownership interest in the related trust fund and will be paid only from the
related trust fund assets.
---------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE CERTIFICATES OR DETERMINED THAT
THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
---------------------
The date of this prospectus is September 20, 2000.
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS AND THE APPLICABLE PROSPECTUS SUPPLEMENT
We provide information about the certificates in two separate documents
that progressively provide more detail. These documents are:
o this prospectus, which provides general information, some of which
may not apply to a particular series of certificates, including your
series; and
o the prospectus supplement for a series of certificates, which will
describe the specific terms of that series of certificates.
You should rely only on the information provided in this prospectus and
the applicable prospectus supplement, including the information incorporated by
reference. We have not authorized anyone to provide you with different
information. We are not offering the certificates in any state where the offer
is not permitted.
We have included cross-references to captions in these materials where you
can find related discussions that we believe will enhance your understanding of
the topic being discussed. The table of contents of this prospectus and the
table of contents included in the applicable prospectus supplement list the
pages on which these captions are located. You can also find references to key
topics in the table of contents on the preceding page.
You can find the definitions of capitalized terms that are used in this
prospectus beginning on page 115 of this prospectus under the caption
"Glossary."
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS AND THE APPLICABLE PROSPECTUS SUPPLEMENT ..................................... 2
SUMMARY OF PROSPECTUS .................................................................... 7
RISK FACTORS ............................................................................. 8
Risks Relating to the Certificates ...................................................... 8
Risks Relating to the Mortgage Loans .................................................... 12
DESCRIPTION OF THE TRUST FUNDS ........................................................... 21
General ................................................................................. 21
Mortgage Loans .......................................................................... 21
General ................................................................................ 21
Mortgage Loans Secured by Office Properties ........................................... 22
Mortgage Loans Secured by Retail Properties ........................................... 22
Mortgage Loans Secured by Multifamily Rental Properties ................................ 23
Mortgage Loans Secured by Cooperatively Owned Apartment Buildings ...................... 24
Mortgage Loans Secured by Industrial Properties ........................................ 25
Mortgage Loans Secured by Warehouse, Mini-Warehouse and Self-Storage Facilities ....... 25
Mortgage Loans Secured by Hotel and Motel Properties .................................. 25
Mortgage Loans Secured by Manufactured Housing Community Properties and Recreational
Vehicle Parks ........................................................................ 26
Default and Loss Considerations with Respect to the Mortgage Loans ..................... 27
Payment Provisions of the Mortgage Loans ............................................... 29
Mortgage Loan Information in Prospectus Supplements .................................... 29
MBS ..................................................................................... 30
Certificate Accounts .................................................................... 31
Credit Support .......................................................................... 31
Cash Flow Agreements .................................................................... 32
YIELD AND MATURITY CONSIDERATIONS ........................................................ 32
General ................................................................................. 32
Pass-Through Rate ....................................................................... 32
Payment Delays .......................................................................... 32
Shortfalls in Collections of Interest as a Result of Prepayments of Mortgage Loans ...... 32
Yield and Prepayment Considerations ..................................................... 33
Weighted Average Life and Maturity ...................................................... 35
Controlled Amortization Classes and Companion Classes ................................... 35
Other Factors Affecting Yield, Weighted Average Life and Maturity ....................... 36
Balloon Payments; Extensions of Maturity .............................................. 36
Negative Amortization ................................................................. 36
Foreclosures and Payment Plans ........................................................ 37
Losses and Shortfalls on the Mortgage Loans ........................................... 37
Additional Certificate Amortization ................................................... 38
Optional Early Termination ............................................................ 38
THE DEPOSITOR ............................................................................ 38
USE OF PROCEEDS .......................................................................... 38
DESCRIPTION OF THE CERTIFICATES .......................................................... 39
General ................................................................................. 39
Distributions ........................................................................... 39
Distributions of Interest on the Certificates ........................................... 40
Distributions of Principal on the Certificates .......................................... 40
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
Distributions on the Certificates in Respect of Prepayment Premiums or in Respect of
Equity Participations .................................................................. 41
Allocation of Losses and Shortfalls ..................................................... 41
Advances in Respect of Delinquencies .................................................... 41
Reports to Certificateholders ........................................................... 42
Voting Rights ........................................................................... 44
Termination ............................................................................. 44
Book-Entry Registration and Definitive Certificates ..................................... 45
DESCRIPTION OF THE POOLING AND SERVICING AGREEMENTS ...................................... 46
General ................................................................................. 46
Assignment of Mortgage Loans; Repurchases ............................................... 47
Representations and Warranties; Repurchases ............................................. 48
Collection and Other Servicing Procedures ............................................... 49
Sub-Servicers ........................................................................... 49
Special Servicers ....................................................................... 50
Certificate Account ..................................................................... 50
General ................................................................................ 50
Deposits ............................................................................... 50
Withdrawals ............................................................................ 51
Modifications, Waivers and Amendments of Mortgage Loans ................................. 53
Realization upon Defaulted Mortgage Loans ............................................... 53
Hazard Insurance Policies ............................................................... 56
Due-on-Sale and Due-on-Encumbrance Provisions ........................................... 57
Servicing Compensation and Payment of Expenses .......................................... 57
Evidence as to Compliance ............................................................... 58
Some Matters Regarding the Servicer and the Depositor ................................... 58
Events of Default ....................................................................... 60
Rights upon Event of Default ............................................................ 60
Amendment ............................................................................... 61
List of Certificateholders .............................................................. 61
The Trustee ............................................................................. 62
Duties of the Trustee ................................................................... 62
Regarding the Fees, Indemnities and Powers of the Trustee ............................... 62
Resignation and Removal of the Trustee .................................................. 63
DESCRIPTION OF CREDIT SUPPORT ............................................................ 63
General ................................................................................. 63
Subordinate Certificates ................................................................ 64
Cross-Support Provisions ................................................................ 64
Insurance or Guarantees with Respect to Mortgage Loans .................................. 64
Letter of Credit ........................................................................ 64
Certificate Insurance and Surety Bonds .................................................. 65
Reserve Funds ........................................................................... 65
Credit Support with Respect to MBS ...................................................... 65
LEGAL ASPECTS OF MORTGAGE LOANS .......................................................... 65
General ................................................................................. 66
Types of Mortgage Instruments ........................................................... 66
Leases and Rents ........................................................................ 66
Personal Property ....................................................................... 67
Foreclosure ............................................................................. 67
General ............................................................................... 67
Foreclosure Procedures Vary from State to State ....................................... 67
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
Judicial Foreclosure .................................................. 67
Equitable Limitations on Enforceability of Some Provisions ............ 67
Non-Judicial Foreclosure/Power of Sale ................................ 68
Public Sale ........................................................... 68
Rights of Redemption .................................................. 69
Anti-Deficiency Legislation ........................................... 69
Leasehold Risks ......................................................... 70
Cooperative Shares ...................................................... 71
Bankruptcy Laws ......................................................... 71
Environmental Risks ..................................................... 74
Due-on-Sale and Due-on-Encumbrance Provisions ........................... 75
Subordinate Financing ................................................... 76
Default Interest and Limitations on Prepayments ......................... 76
Adjustable Rate Loans ................................................... 76
Applicability of Usury Laws ............................................. 76
Soldiers' and Sailors' Civil Relief Act of 1940 ......................... 77
Type of Mortgaged Property .............................................. 77
Americans with Disabilities Act ......................................... 78
Forfeitures in Drug and RICO Proceedings ................................ 78
MATERIAL FEDERAL INCOME TAX CONSEQUENCES ................................. 78
Federal Income Tax Consequences for REMIC Certificates .................. 79
General ................................................................ 79
Characterization of Investments in REMIC Certificates .................. 79
Tiered REMIC Structures ................................................ 80
Qualification as a REMIC ............................................... 80
Taxation of Regular Certificates ........................................ 82
General ............................................................... 82
Original Issue Discount ............................................... 83
Acquisition Premium ................................................... 85
Variable Rate Regular Certificates .................................... 85
Deferred Interest ..................................................... 87
Market Discount ....................................................... 87
Premium ............................................................... 88
Election to Treat All Interest Under the Constant Yield Method ........ 88
Sale or Exchange of Regular Certificates .............................. 88
Treatment of Losses ................................................... 89
Taxation of Residual Certificates ....................................... 90
Taxation of REMIC Income ............................................... 90
Basis and Losses ...................................................... 91
Treatment of Some Items of REMIC Income and Expense ..................... 92
Original Issue Discount and Premium ................................... 92
Deferred Interest ..................................................... 92
Market Discount ....................................................... 92
Premium ............................................................... 92
Limitations on Offset or Exemption of REMIC Income ...................... 93
Tax-Related Restrictions on Transfer of Residual Certificates ........... 94
Disqualified Organizations ............................................ 94
Noneconomic Residual Interests ........................................ 95
Foreign Investors ..................................................... 95
Sale or Exchange of a Residual Certificate .............................. 96
Mark-to-Market Regulations .............................................. 96
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
Taxes That May Be Imposed on the REMIC Pool ............................................. 97
Prohibited Transactions ............................................................... 97
Contributions to the REMIC Pool After the Startup Day ................................. 97
Net Income from Foreclosure Property .................................................. 97
Liquidation of the REMIC Pool ......................................................... 98
Administrative Matters ................................................................ 98
Limitations on Deduction of Some Expenses ............................................. 98
Taxation of Some Foreign Investors ...................................................... 99
Backup Withholding .................................................................... 100
Reporting Requirements ................................................................ 100
Federal Income Tax Consequences for Certificates as to Which No REMIC Election Is Made .. 100
Standard Certificates ................................................................. 100
General ............................................................................ 100
Tax Status ......................................................................... 101
Premium and Discount ............................................................... 102
Premium ........................................................................... 102
Original Issue Discount ........................................................... 102
Market Discount ................................................................... 102
Recharacterization of Servicing Fees .............................................. 102
Sale or Exchange of Standard Certificates ......................................... 103
Stripped Certificates ................................................................. 103
General .............................................................................. 103
Status of Stripped Certificates ...................................................... 105
Taxation of Stripped Certificates .................................................... 105
Original Issue Discount ............................................................ 105
Sale or Exchange of Stripped Certificates .......................................... 106
Purchase of More than One Class of Stripped Certificates ........................... 106
Possible Alternative Characterizations ............................................. 106
Federal Income Tax Consequences for FASIT Certificates .................................. 106
Reporting Requirements and Backup Withholding ........................................... 107
Taxation of Some Foreign Investors ...................................................... 107
STATE AND OTHER TAX CONSIDERATIONS ....................................................... 107
ERISA CONSIDERATIONS ..................................................................... 108
General ................................................................................. 108
Plan Asset Regulations .................................................................. 108
Administrative Exemptions ............................................................... 109
Unrelated Business Taxable Income; Residual Certificates ................................ 109
LEGAL INVESTMENT ......................................................................... 109
METHOD OF DISTRIBUTION ................................................................... 112
WHERE YOU CAN FIND MORE INFORMATION ...................................................... 113
INCORPORATION OF SOME INFORMATION BY REFERENCE ........................................... 113
REPORTS .................................................................................. 114
FINANCIAL INFORMATION .................................................................... 114
LEGAL MATTERS ............................................................................ 114
RATINGS .................................................................................. 114
GLOSSARY ................................................................................. 115
</TABLE>
6
<PAGE>
SUMMARY OF PROSPECTUS
This summary includes selected information from this prospectus. It does
not contain all of the information you need to consider in deciding whether to
buy any class of the offered certificates. To understand the terms of the
offering of the offered certificates, you should read carefully this entire
prospectus and the applicable prospectus supplement.
TITLE OF CERTIFICATES....... Commercial/Multifamily Mortgage Pass-Through
Certificates, issuable in series.
DEPOSITOR................... Bear Stearns Commercial Mortgage Securities
Inc., a Delaware corporation. Our telephone
number is (212) 272-2000.
DESCRIPTION OF
CERTIFICATES; RATINGS....... The certificates of each series will be issued
pursuant to a pooling and servicing agreement and
may be issued in one or more classes. The
certificates of each series will represent in the
aggregate the entire beneficial ownership
interest in the property of the related trust
fund. Each trust fund will consist primarily of a
segregated pool of commercial or multifamily
mortgage loans, or mortgage-backed securities
that evidence interests in, or that are secured
by commercial or multifamily mortgage loans. Each
class or certificate will be rated not lower than
investment grade by one or more nationally
recognized statistical rating agencies at the
date of issuance.
The prospectus supplement for a series of certificates includes important
information on related trust fund, certificates, and risks, including
information on the following:
(1) the name of the servicer and special
servicer, the circumstances when a special
servicer will be appointed and their
respective obligations (if any) to make
advances to cover delinquent payments on
the assets of the trust fund, taxes,
assessments or insurance premiums;
(2) the assets in the trust fund, including a
description of the pool of mortgage loans
or mortgage-backed securities;
(3) the identity and attributes of each class
within a series of certificates, including
whether (and to what extent) any credit
enhancement benefits any class of a series
of certificates;
(4) the tax status of certificates; and
(5) whether the certificates will be eligible
to be purchased by investors subject to
ERISA or will be mortgage related
securities for purposes of SMMEA.
7
<PAGE>
RISK FACTORS
You should carefully consider, among other things, the following risk
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 mortgage-backed securities included in the trust fund. If
any of the following risks are realized, your investment could be materially
and adversely affected. In addition, other risks unknown to us or which we
currently consider immaterial may also impair your investment.
RISKS RELATING TO THE CERTIFICATES
LACK OF A SECONDARY MARKET FOR THE CERTIFICATES MAY MAKE IT DIFFICULT FOR
YOU TO RESELL YOUR CERTIFICATES AT ALL OR AT AN ATTRACTIVE PRICE. We cannot
assure you that a secondary market will develop for certificates. Even if a
secondary market develops, we cannot assure you that it will provide you with
liquidity of investment or will continue for as long as the offered
certificates remain outstanding. The absence of a secondary market for your
certificates means that you may not be able to find a buyer for your
certificates or, if you find a buyer, that the selling price may be less than
it would have been if a secondary market existed for the certificates. The
underwriter for a series of certificates will not be obligated to make a market
for that series of certificates even if it intends to do so. Even if a
secondary market for your certificates develops, it may provide less liquidity
than any comparable market for securities that evidence interests in
single-family mortgage loans.
Insofar as a secondary market does develop with respect to any series of
offered certificates or class of any series of offered certificates, other
factors may affect their market value. These include:
o the perceived liquidity of the offered certificates;
o their anticipated cash flow, which may vary widely depending upon the
prepayment and default assumptions applied in respect of the
underlying mortgage loans; and
o prevailing interest rates.
For example, small fluctuations in prevailing interest rates may affect at
any given time the price payable of some of the 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. In addition, 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 the
offered certificate in response to an equal but opposite movement in the rates.
Accordingly, you may only be able to sell your certificates at a discount from
the price that you paid for them even if a secondary market develops for the
certificates. We are not aware of any source through which holders of the
certificates may obtain price information about the offered certificates on an
ongoing basis.
You will have no right to redeem your certificates except to the extent
described in this prospectus and the related prospectus supplement. Offered
certificates are subject to early retirement only under some specified
circumstances described in this prospectus and in the related prospectus
supplicant.
You will be entitled to receive periodic reports pursuant to the related
pooling and servicing agreement regarding the status of the related mortgage
assets and any credit support for your certificates and any subordination of
your certificates to other classes of certificates. The periodic reports will
be the primary source of ongoing information regarding the offered certificates
of any series. The certificateholders may not receive any additional
information from any other source. The limited nature of the information may
adversely affect the liquidity of your certificates, even if a secondary market
does develop for them.
8
<PAGE>
SINCE THE MORTGAGE LOANS WILL NOT BE GUARANTEED, YOU MAY NOT RECEIVE FULL
PAYMENT ON YOUR CERTIFICATES TO THE EXTENT THERE IS A SHORTFALL IN PAYMENT ON
THE ASSETS OR THE RELATED TRUST FUND. The only sources of funds for payment on
a series of certificates will generally be the assets of the related trust fund
and, to the extent provided in the applicable prospectus supplement, any credit
enhancement. The certificates will not be guaranteed by us or any of our
affiliates, by any governmental agency or instrumentality or by any other
person or entity unless otherwise stated in the related prospectus supplement.
A portion of the amounts remaining in some funds or accounts constituting part
of a trust fund, including any certificate account and any accounts maintained
as credit support, may be withdrawn under conditions described in the
applicable prospectus supplement for purposes other than the payment of
principal or interest in the related series of certificates. A series of
certificates will have no claim against or security interest in the trust fund
for any other series. As a result, you may suffer a loss on your certificates
if the sources for payment are insufficient to pay all the principal of and
interest on the certificates of your series. If you are a holder of a
subordinate certificate, you may bear a portion of the amount of the losses or
shortfalls in collections on the mortgage assets before the holders of the
remaining classes of certificates in the priority and manner and subject to the
limitations specified in the applicable prospectus supplement.
THE RATE OF PRINCIPAL PREPAYMENTS ON THE MORTGAGE LOANS AND THE RATE OF
REPURCHASES OF THE MORTGAGE LOANS MAY ADVERSELY AFFECT THE YIELD ON YOUR
INVESTMENT. In deciding whether to purchase any offered certificates, you
should make an independent decision as to the appropriate prepayment
assumptions to be used. The pre-tax return on your investment will change from
time to time for a number of reasons, including the following:
o The amount of distributions of principal of the certificates and the
times when you receive those distributions depends on the amount and
the times at which borrowers make principal payments of the
underlying mortgage loans, and on whether we or the servicer
purchases the underlying mortgage loans.
o Prepayments of the mortgage loans in any trust fund by the related
borrowers generally will result in a faster rate of principal
payments on one or more classes of the related certificates than if
payment on those mortgage loans are made as scheduled. The prepayment
rate on mortgage loans may be influenced by a variety of economic,
tax, legal and social factors. While one prepayment rate may be used
for the purpose of pricing the certificates, there can be no
assurance that the actual prepayment rate will be faster or slower
than any assumed prepayment rate.
In addition, to the extent described in this prospectus and in the related
prospectus supplement, in order to maximize recoveries on defaulted mortgage
loans, the servicer or a special servicer will be permitted, within prescribed
limits, to extend and modify mortgage loans that are in default or as to which
a payment default is imminent. While the servicer or a special servicer
generally will be required to determine that any extension or modification is
reasonably likely to produce a greater recovery than liquidation, we can give
you no assurance that any extension or modification will increase the present
value of receipts from or proceeds of the affected mortgage loans.
We or the mortgage loan seller or sellers named in the applicable
prospectus supplement will be required to repurchase a mortgage loan from the
trust, or if so specified in the applicable prospectus supplement, substitute
another mortgage loan, if we or such seller or sellers breach the
representations and warranties made with respect to that mortgage loan. In
addition, the servicer may have the option to purchase the mortgage loans in
the trust fund and may be obligated to purchase mortgage loans from the trust
fund under the circumstances described in the prospectus supplement.
If you buy your certificates at a premium or discount your yield to
maturity will be sensitive to prepayments on the mortgage loans in the related
trust fund. If the amount of interest payable with respect to your class is
disproportionately large, as compared to the amount of principal, as with some
classes of stripped interest certificates, you might fail to recover your
original investment under some prepayment scenarios. The extent to which the
yield to maturity of your certificates may vary from the anticipated yield will
depend in part upon the degree to which you purchased them at a discount or
9
<PAGE>
premium and the amount and timing of distributions on those certificates. If
you purchase a certificate 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 the anticipated yield, and
if you purchase a certificate at a premium, you should consider the risk that a
faster than anticipated rate of principal payments could result in an actual
yield to you that is lower than the anticipated yield. For more detailed
information regarding these risks, you should refer to the section in this
prospectus titled "Yield and Maturity Considerations."
Average Life of Certificates. The terms of your certificates will
determine the extent to which prepayments on the mortgage loans in any trust
fund ultimately affect the average life of your certificates. For example, a
class of certificates, including a class of offered certificates, may provide
that on any distribution date you are entitled to a pro rata share of the
prepayments on the mortgage loans in the related trust fund that are
distributable on that date, to all or a disproportionately large share of the
prepayments, or to none or a disproportionately small share of the prepayments.
A class of certificates that entitles you to a disproportionately large share
of the prepayments on the mortgage loans in the related trust fund increases
the likelihood of early retirement of that class if the rate of prepayment is
relatively fast. A class of certificates that entitles you to a
disproportionately small share of the prepayments on the mortgage loans in the
related trust fund increases the likelihood of an extended average life of that
class if the rate of prepayment is relatively slow. 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 some events, e.g., the retirement of
one or more classes of certificates of the series, or subject to some
contingencies, e.g., prepayment and default rates with respect to the mortgage
loans.
Controlled Amortization Classes and Companion Classes. A series of
certificates may include one or more controlled amortization classes, which
will entitle you 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 of 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 the certificates.
However, prepayment risk will not disappear.
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, a
companion class may entitle you 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 you 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 companion class absorbs some, but
not all, of the 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.
RATINGS ON YOUR CERTIFICATES DO NOT GUARANTEE THAT YOU WILL RECEIVE
PAYMENT UNDER THE POOLING AND SERVICING AGREEMENT. Ratings assigned by a rating
agency to a class of certificates reflect the rating agency's assessment of the
likelihood that the holders of certificates of that class will receive all
payments to which they are entitled. The ratings are based on the structural,
legal and issuer-related aspects associated with these certificates, the nature
of the underlying mortgage loans and the extent and quality of any credit
enhancement. Ratings will not constitute an assessment of the following:
o the likelihood that principal prepayments on the related mortgage
loans will be made;
o the degree to which the rate of prepayments might differ from that
originally anticipated;
o the likelihood of early optional termination of the related trust
fund; or
o the possibility that prepayment of the related mortgage loans may be
made at any particular rate.
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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 the
series. Those criteria are sometimes based upon an actuarial analysis of the
behavior of mortgage loans in a larger group. However, we can not assure you
that the historical data supporting any related 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. These criteria may
also be based upon determinations of the values of the mortgaged properties
that provide security for the mortgage loans. However, we cannot assure you
that those values will not decline in the future. For more detailed information
regarding these risks, you should refer to the section in this prospectus
titled "Description of Credit Support" and "Ratings."
ERISA IMPOSES LIMITATIONS ON WHO CAN PURCHASE THE CERTIFICATES; FAILURE TO
COMPLY WITH ERISA MAY MATERIALLY AND ADVERSELY AFFECT THE TRUST FUND AND RESULT
IN REDUCED PAYMENTS ON YOUR CERTIFICATES. Generally, ERISA applies to
investments made by employee benefit plans and transactions involving the
assets of those plans. In addition, some other retirement plans and
arrangements, including individual retirement accounts and Keogh plans, are
subject to Section 4975 of the Internal Revenue Code. Due to the complexity of
regulations that govern the plans, if you are subject to ERISA or Section 4975
of the Internal Revenue Code you are urged to consult your own counsel
regarding the consequences under ERISA or the Internal Revenue Code of
acquisition, ownership and disposition of the offered certificates of any
series.
For more detailed information regarding ERISA restrictions, you should
review the section in this prospectus titled "ERISA Considerations."
IF YOU ACQUIRE RESIDUAL CERTIFICATES YOU MAY BE SUBJECT TO ADDITIONAL TAX
LIABILITIES. If you are a holder of residual certificates that represents a
residual interest in a real estate investment conduit you will be required to
report on your federal income tax returns as ordinary income your pro rata
share of the taxable income of the REMIC, regardless of the amount or timing of
your receipt of cash payments, if any. Accordingly, you may have taxable income
and tax liabilities arising from your investment during a taxable year in
excess of the economic income, if any, attributable to your certificate during
that period. While you will have a corresponding amount of the losses later in
the term of the REMIC, the present value of phantom income may significantly
exceed tax losses. Therefore, the after-tax yield on the residual certificate
that you receive may be significantly less than that of a corporate bond or
stripped instrument having similar cash flow characteristics. A residual
certificate may have negative value. The requirement that you report your pro
rata share of the taxable income and net loss of the REMIC will continue until
the certificate balances of all classes of certificates of the related series
have been reduced to zero, even though you, as a holder of residual
certificates, have received all payments to which you are entitled.
All or a portion of your share of the REMIC taxable income may be treated
under the Internal Revenue Code as "excess inclusion" income to you. You will
have to pay tax on the excess inclusions regardless of whether you have other
credits, deductions or losses. Excess inclusion income:
o generally will not be subject to offset by losses from other
activities;
o will be treated as unrelated business taxable income for a tax-exempt
holder; and
o will not qualify for exemption from withholding tax for a foreign
holder.
In addition, residual certificates are subject to numerous restrictions on
transfer.
YOU MAY BE ALLOCATED TAXABLE INCOME IN EXCESS OF DISTRIBUTIONS RECEIVED IF
YOU ACQUIRE CERTIFICATES WITH ORIGINAL ISSUE DISCOUNT. Accrual certificates
will be, and some of the other classes of certificates of a series may be,
issued with original issue discount for federal income tax purposes. This will
generally result in recognition of some taxable income to you in advance of the
receipt of cash attributable to the income.
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For more detailed information regarding original issue discount you should
review the section in this prospectus titled "Material Federal Income Tax
Consequences--Federal Income Tax Consequences for REMIC Certificates--Taxation
of Regular Certificates."
INDIVIDUALS AND SOME OTHER ENTITIES SHOULD NOT INVEST IN CERTIFICATES THAT
ARE RESIDUAL INTERESTS. The fees and non-interest expenses of a REMIC will be
allocated pro rata to certificates that are residual interests in the REMIC.
However, individuals will only be able to deduct these expenses as
miscellaneous itemized deductions, which are subject to numerous restrictions
and limitations under the Internal Revenue Code. Therefore, the certificates
that are residual interests generally are not appropriate investments for
o individuals;
o estates;
o trusts beneficially owned by any individual or estate; and
o pass-through entities having any individual, estate or trust as a
shareholder, member or partner.
IF YOUR CERTIFICATES ARE ISSUED IN BOOK-ENTRY FORM, YOU WILL ONLY BE ABLE
TO EXERCISE YOUR RIGHTS INDIRECTLY THROUGH DTC AND YOU MAY ALSO HAVE LIMITED
ACCESS TO INFORMATION REGARDING THOSE CERTIFICATES. One or more classes of the
offered certificates of any series may 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, you will be
able to exercise your rights only indirectly through DTC and its participating
organizations. In addition, your access to information regarding the book-entry
certificates may be limited. Conveyance of notices and other communications by
DTC to its participating organizations, and directly and indirectly through
these organizations to you, 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 in this prospectus, you may suffer
delays in the receipt of payments on the book-entry certificates. In addition,
your ability to pledge or otherwise take actions with respect to your interest
in the book-entry certificates may be limited due to the lack of a physical
certificate evidencing that interest.
For more detailed information regarding book-entry registration, you
should review the section in this prospectus titled "Description of the
Certificates--Book-Entry Registration and Definitive Certificates."
RISKS RELATING TO THE MORTGAGE LOANS
MORTGAGE LOANS ARE SUSCEPTIBLE TO NUMEROUS RISKS THAT MAY RESULT IN LOSSES
TO YOU.
(1) Mortgage loans made on the security of multifamily or commercial
property may entail risks of delinquency and foreclosure that are greater than
similar risks associated with loans made on the security of an owner-occupied
single-family property. The ability of a borrower to repay a loan secured by an
income-producing property typically is dependent primarily upon the successful
operation of that 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 that 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 or a small
number of significant tenants. Accordingly, a decline in the financial
condition of the borrower or a significant tenant, as applicable, may have a
disproportionately greater effect on the net operating income from the
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 the following:
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o changes in general or local economic conditions and/or specific
industry segments;
o declines in real estate values;
o declines in rental or occupancy rates;
o increases in interest rates, real estate tax rates and other
operating expenses;
o changes in governmental rules, regulations and fiscal policies,
including environmental legislation; and
o acts of God and other factors beyond the control of the servicer.
In the case of mortgage loans that represent participation interests in a
mortgage loan, the trustee's or the servicer's enforcement rights may be
limited in the event of default by the related borrower.
(2) The type and use of a particular mortgaged property may present
additional risks. 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 that 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.
The ability of a borrower to repay a mortgage loan secured by shares allocable
to one or more cooperative dwelling units may be dependent upon the ability of
the dwelling units to generate sufficient rental income, which may be subject
to rent control or stabilization laws, to cover both debt service on the loan
as well as maintenance charges to the cooperative. Further, a mortgage loan
secured by cooperative shares is subordinate to the mortgage, if any, on the
cooperative apartment building.
(3) Other multifamily and commercial properties located in the areas of
the mortgaged properties and of the same types as the mortgaged properties
compete with the mortgaged properties to attract residents and customers. The
leasing of real estate is highly competitive. The principal means of
competition are price, location and the nature and condition of the facility to
be leased. A borrower under a mortgage loan competes with all lessors and
developers of comparable types of real estate in the area in which the
mortgaged property is located. The lessors or developers could have lower
rentals, lower operating costs, more favorable locations or better facilities.
While a borrower under a mortgaged property may renovate, refurbish or expand
the mortgaged property to maintain it and remain competitive, the renovation,
refurbishment or expansion may itself entail significant risk. Increased
competition could adversely affect income from and market value of the
mortgaged properties. In addition, the business conducted at each mortgaged
property may face competition from other industries and industry segments.
(4) 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 any related mortgage loan, 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, we can give you no assurance that
enforcement of the 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.
(5) 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. 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.
OFFICE PROPERTIES HAVE PARTICULAR RISKS. In addition to risks generally
associated with real estate, office properties are also affected significantly
by
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o adverse changes in population and employment growth, which generally
creates demand for office space,
o local competitive conditions, including the supply of office space or
the existence or construction of new competitive office buildings,
o the quality and management philosophy of management,
o the attractiveness of the properties to tenants and their customers
or clients,
o the attractiveness of the surrounding neighborhood, and
o the need to make major repairs or improvements to the property to
satisfy the needs of major tenants.
Office properties that are not equipped to accommodate the needs of modern
business may become functionally obsolete and thus non-competitive. In
addition, office properties may be adversely affected by an economic decline in
the businesses operated by their tenants. A decline of this sort may result in
one or more significant tenants ceasing operations at the related locations,
which may occur on account of
o a tenant's voluntary decision not to renew a lease,
o bankruptcy or insolvency of these tenants, or
o these tenant's general cessation of business activities or for other
reasons.
The risk of an economic decline as described above is greater if revenue
is dependent on a single tenant of if there is a significant concentration of
tenants in a particular business or industry.
MORTGAGE LENDERS SECURED BY RETAIL PROPERTIES MAY BE ADVERSELY AFFECTED BY
CHANGES IN CONSUMER SPENDING PATTERNS, ALTERNATIVE FORMS OF RETAILING AND
CHANGES IN TENANTS OCCUPYING THE RETAIL PROPERTIES. In addition to risks
generally associated with real estate, mortgage loans secured by retail
properties are also affected significantly by a number of factors, including:
o adverse changes in consumer spending patterns;
o local competitive conditions, including the supply of retail space or
the existence or construction of new competitive shopping centers or
shopping malls;
o alternative forms of retailing, including direct mail, television
shopping networks and Internet based sales, which reduce the need for
retail space by retail companies;
o the quality and management philosophy of management;
o the attractiveness of the properties and the surrounding neighborhood
to tenants and their customers;
o the public perception of the safety of customers, at shopping malls
and shopping centers, for example;
o the need to make major repairs or improvements to satisfy the needs
of major tenants; and
o if an anchor or other significant tenant ceases operations at the
locations, which may occur on account of a decision not to renew a
lease, bankruptcy or insolvency of the tenant, the tenant's general
cessation of business activities or for other reasons. Significant
tenants at a shopping center play an important part in generating
customer traffic and making the property a desirable location for
other tenants at the property. In addition, some tenants at retail
properties may be entitled to terminate their leases if an anchor
tenant ceases operations at the property.
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SOME RISKS THAT AFFECT OCCUPANCY AND RENT LEVELS OF MULTIFAMILY RENTAL
PROPERTIES SUCH AS ADVERSE ECONOMIC CONDITIONS, CONSTRUCTION OF ADDITIONAL
HOUSING, MILITARY BASE CLOSINGS, COMPANY RELOCATIONS AND RENT CONTROL LAWS MAY
AFFECT THE ABILITY OF THE BORROWER TO MEET ITS OBLIGATIONS UNDER THE MORTGAGE
LOAN. Adverse economic conditions, either local, regional or national, may
limit or reduce the following:
o the amount of rent that can be charged for rental units;
o tenants' ability to pay rent;
o timeliness of rent payments;
o occupancy levels without a corresponding decrease in
expenses--occupancy and rent levels may also be affected by
construction of additional housing units;
o local military base closings;
o construction of additional housing units;
o company relocations and closings; and
o national and local politics, including current or future rent
stabilization and rent control laws and agreements.
Multifamily apartment units are typically leased on a short-term basis,
and consequently, the occupancy rate of a multifamily rental property may be
subject to rapid decline. In addition, the level of mortgage interest rates may
encourage tenants in multifamily rental properties to purchase single-family
housing rather than continue to lease housing or the characteristics of a
neighborhood may change over time or in relation to newer developments.
Further, the cost of operating a multifamily rental property may increase,
including the cost of utilities and the costs of required capital expenditures.
Also, rent control laws could impact the future cash flows of multifamily
rental properties that are subject to rental control laws.
Some multifamily rental properties are eligible to receive low-income
housing tax credits pursuant to Section 42 of the Internal Revenue Code.
However, Section 42 properties are subject to some restrictions that may affect
a borrower's ability to meet its obligations under a mortgage loan. This
includes the following:
o rent limitations associated with those properties may adversely
affect the ability of the applicable borrowers to increase rents to
maintain those properties in proper condition during periods of rapid
inflation or declining market value of those properties;
o the income restrictions on tenants imposed by Section 42 of the
Internal Revenue Code may reduce the number of eligible tenants;
o some eligible tenants may not find any differences in rents between
the Section 42 properties and other multifamily rental properties in
the same area to be a sufficient economic incentive to reside at a
Section 42 property; and
o a Section 42 property may also have fewer amenities or otherwise be
less attractive as a residence making it less attractive to eligible
tenants.
All of the foregoing conditions and events may increase the possibility
that a borrower may be unable to meet its obligations under its mortgage loan.
MORTGAGE LENDERS SECURED BY COOPERATIVELY OWNED APARTMENT BUILDINGS ARE
SUBJECT TO THE RISK THAT TENANT-SHAREHOLDERS OF A COOPERATIVELY OWNED APARTMENT
BUILDING WILL BE UNABLE TO MAKE THE REQUIRED MAINTENANCE PAYMENTS. Generally,
a tenant-shareholder of a cooperative corporation must make a monthly
maintenance payment to the cooperative corporation that owns the apartment
building representing that tenant-shareholder's pro rata share of the
corporation's payments in respect of the mortgage loan secured by that
apartment building. The tenant-shareholder must also pay its pro rata share of
all real property taxes, maintenance expenses and other capital and ordinary
expenses with respect to that apartment building, less any other income that
the cooperative corporation may realize.
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Adverse economic conditions, either local, regional or national, may
adversely affect tenant-shareholders' ability to make required maintenance
payments, either because adverse economic conditions have impaired the
individual financial conditions of the tenant-shareholders or their ability to
sub-let the subject apartments. To the extent that a large number of
tenant-shareholders in a cooperatively owned apartment building rely on
sub-letting their apartments to make maintenance payments, the lender on any
mortgage loan secured by that building will be subject to all the risks that it
would have in connection with lending on the security of a multifamily rental
property. In addition, if in connection with any cooperative conversion of an
apartment building, the sponsor holds the shares allocated to a large number of
the apartment units, any lender secured by a mortgage on the building will be
subject to a risk associated with the sponsor's creditworthiness.
SELF-STORAGE PROPERTIES HAVE PARTICULAR RISKS. Warehouse, mini-warehouse
and self-storage properties ("Storage Properties") are considered vulnerable to
competition because both acquisition costs and break-even occupancy are
relatively low. The conversion of Storage Properties to alternative uses would
generally require substantial capital expenditures. Thus, if the operation of
any of the Storage Properties becomes unprofitable due to decreased demand,
competition, age of improvements or other factors, such that the borrower
becomes unable to meet its obligation on the related mortgage loan, the
liquidation value of that Storage Property may be substantially less, relative
to the amount owing on the mortgage loan, than would be the case if the Storage
Property were readily adaptable to other uses. Tenant privacy, anonymity and
efficient access are important to the success of a Storage Property, as are
building design and location.
HOTEL AND MOTEL PROPERTIES HAVE PARTICULAR RISKS. Hotel and motel
properties are subject to operating risks common to the lodging industry. These
risks include, among other things,
o a high level of continuing capital expenditures to keep necessary
furniture, fixtures and equipment updated,
o competition from other hotels and motels,
o increases in operating costs, which increases may not necessarily in
the future be offset by increased room rates and
o dependence on business and commercial travelers and tourism,
increases in energy costs and other expenses of travel and adverse
effects of general and local economic conditions.
These factors could adversely affect the related borrower's ability to
make payments on the related mortgage loans. Since limited service hotels and
motels are relatively quick and inexpensive to construct, an over-building of
hotels and motels could occur in any given region,which would likely adversely
affect occupancy and daily room rates. Further, because hotel and motel rooms
are generally rented for short periods of time, hotel and motel properties tend
to be more sensitive to adverse economic conditions and competition than many
other commercial properties. Furthermore, the financial strength and
capabilities of the owner and operator of a hotel may have a substantial impact
onthat hotel's quality of service and economic performances. Additionally, the
revenues of certain hotels and motels, particularly those located in regions
whose economies depend upon tourism, may be highly seasonal in nature.
A hotel or motel property may present additional risks as compared to
other commercial property types in that
o hotels and motels may be operated pursuant to franchise, management
and operating agreements that may be terminable by the franchisor,
the manager or the operator;
o the transferability of any operating, liquor and other licenses to
the entity acquiring the related hotel and motel, either through
purchase or foreclosure, is subject to local law requirements;
o it may be difficult to terminate an ineffective operator of a hotel
or motel property subsequent to a foreclosure of the related
property; and
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o future occupancy rates may be adversely affected by, among other
factors, any negative perception of a hotel or motel based upon its
historical reputation.
Hotel and motel properties may be operated pursuant to franchise
agreements. The continuation of franchise is typically subject to specified
operating standards and other terms and conditions. The franchisor periodically
inspects its licensed properties to confirm adherence to its operating
standards. The failure of the hotel or motel property to maintain these
standards or adhere to other terms and conditions could result in the loss or
cancellation of the franchise license. It is possible that the franchisor could
condition the continuation of a franchise license on the completion of capital
improvements or the making of certain capital expenditures that the related
borrower determines are too expensive or are otherwise unwarranted in light of
general economic conditions or the operating results or prospects of the
affected hotels or motels. In that event, the related borrower may elect to
allow the franchise license to lapse. In any case, if the franchise is
terminated, the related borrower may seek to obtain a suitable replacement
franchise or to operate the related hotel or motel property independently of a
franchise license. The loss of a franchise license could have a material
adverse effect upon the operations or the underlying value of the hotel or
motel covered by the franchise because of the loss of associated name
recognition, marketing support and centralized reservation systems provided by
the franchisor.
MANUFACTURED HOUSING COMMUNITY PROPERTIES AND RECREATIONAL VEHICLE PARKS
HAVE PARTICULAR RISKS. The successful operation of a manufactured housing
community or recreational vehicle park will generally depend upon the number of
competing manufactured housing communities or recreational vehicle parks in the
local market, as well as upon other factors, including its age, appearance,
reputation, management and the types of facilities and services it provides.
Manufactured housing communities also compete against alternative forms of
residential housing, including multifamily rental properties,
cooperatively-owned apartment buildings, condominium complexes and
single-family residential developments. Recreational vehicle parks also compete
against alternative forms of recreation and short-term lodging, for example,
staying at a hotel at the beach.
Manufactured housing community properties and recreational vehicle parks
are "special purpose" properties that cannot be readily converted to general
residential, retail or office use. Thus, if the operation of a manufactured
housing community or recreational vehicle park becomes unprofitable due to
competititon, age of the improvements or other factors such that the borrower
becomes unable to meet its obligations on the related mortgage loan, the
liquidation value of the mortgaged property may be substantially less, relative
to the amount owing on the related mortgage loan, than would be the case if the
mortgaged property were readily adaptable to other uses.
MORTGAGE LOANS WITH BALLOON PAYMENTS INVOLVE THE RISK THAT BORROWERS MAY
NOT BE ABLE TO REFINANCE THE LOAN OR SELL THE RELATED PROPERTY. Mortgage loans
may be non-amortizing or only partially amortizing over their terms to
maturity. Those mortgage loans 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:
o value of the related mortgaged property;
o the level of available mortgage rates at the time of sale or
refinancing;
o the borrower's equity in the related mortgaged property;
o the financial condition and operating history of the borrower and the
related mortgaged property;
o tax laws and rent control laws, with respect to some residential
properties;
o Medicaid and Medicare reimbursement rates, with respect to hospitals
and nursing homes; and
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o prevailing general economic conditions and the availability of credit
for loans secured by multifamily or commercial, as the case may be,
real properties generally.
Neither we nor any of our affiliates will be required to refinance any
mortgage loan.
CREDIT SUPPORT FOR A SERIES OF CERTIFICATES MAY COVER SOME OF YOUR LOSSES
OR RISKS BUT MAY NOT COVER ALL POTENTIAL RISKS TO YOU. The prospectus
supplement for a series of certificates will describe any credit support
provided for these certificates. Use of credit support will be subject to the
conditions and limitations described in this prospectus and in the related
prospectus supplement. Moreover, the available 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, in turn, include offered certificates. Subordination
is intended to reduce the risk to holders of each more senior class of
certificates of delinquent distributions or ultimate losses on the mortgage
assets. However, the amount of subordination will be limited and may decline.
Since the senior certificateholders are paid principal before subordinate
certificateholders, subordinate certificateholders may not be paid any
principal if the available credit support is exhausted. As a result, if you are
a holder of subordinate certificates, you will primarily experience the impact
of losses and shortfalls. Moreover, if the available credit support covers more
than one series of certificates, you will be subject to the risk that the
credit support will be exhausted by the claims of the holders of certificates
of one or more other series.
Rating agencies rating the certificates will determine the level of credit
support based on an assumed level of defaults, delinquencies and losses on the
underlying mortgage assets and some other factors. We cannot, however, assure
you that the loss experience on the related mortgage assets will not exceed the
assumed levels.
For more detail information regarding credit support of certificates you
should review the sections in this prospectus titled "--Risks Relating to the
Certificates--Ratings on your certificates do not guarantee that you will
receive payment under the pooling and servicing agreement," "Description of the
Certificates" and "Description of Credit Support."
IF THE MORTGAGED PROPERTY IS SUBJECT TO A LEASE, THE LENDER IS SUBJECT TO
THE RISK THAT IF THE BORROWER DEFAULTS, THE MORTGAGE LENDER MAY HAVE TO OBTAIN
A COURT ORDER APPOINTING A RECEIVER BEFORE BEING ABLE TO COLLECT RENTS. Each
mortgage loan secured by mortgaged property that is subject to leases typically
will be secured by an assignment of leases and rents. This means that 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 from it,
as further security for the related mortgage loan. The borrower may continue to
collect rents for so long as there is no default. If the borrower defaults, 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.
For more detailed information regarding leases and rents, you should
review the section in this prospectus titled "Legal Aspects of Mortgage
Loans--Leases and Rents."
OWNERS AND OPERATORS OF A MORTGAGED PROPERTY AND MORTGAGE LENDERS MAY
BECOME LIABLE FOR THE COSTS OF ENVIRONMENTAL CLEANUP. Under the laws of some
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 that property. In addition, under various
federal, state and local laws, ordinances and regulations, an owner or operator
of real estate may be liable for the costs of removal or remediation of
hazardous substances or toxic substances on, in or beneath that property. The
owner may become liable without regard to whether the owner knew of, or was
responsible for, the presence of hazardous or toxic substances on the property.
The cost of any required remediation and the owner or operator's liability as
to any property could exceed the value of the mortgaged property and the
aggregate assets of the owner or operator. In addition, owners or operators of
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mortgaged properties that generate hazardous substances that are disposed of at
off-site locations may be held strictly, jointly and severally liable if there
are releases or threatened releases of hazardous substances at the off-site
locations where the hazardous substances were disposed.
Lenders whose primary indicia of ownership in a particular property is the
holding of a security interest are exempted from the definition of owner under
the federal Comprehensive Environmental Response Compensation and Liability Act
of 1980. However, lenders may forfeit their secured creditor exemption, as a
result of their actions with respect to particular borrowers, and be deemed an
owner or operator of property so that they are liable for remediation costs. A
lender also risks liability for remediation costs on foreclosure of the
mortgage. Unless otherwise specified in the related prospectus supplement, if a
trust fund includes mortgage loans, then the related pooling and servicing
agreement will contain provisions generally to the effect that the servicer,
acting on behalf of the trust fund, may not acquire title to a mortgaged
property or assume control of its operation unless the servicer, based upon a
report prepared by a person who regularly conducts environmental audits, has
made the determination that it is appropriate to do so. We cannot assure you
that any requirements of a pooling and servicing agreement will effectively
insulate the related trust fund from potential liability for a materially
adverse environmental condition at a mortgaged property.
For more detailed information regarding environmental risks, you should
review the section in this prospectus titled "Legal Aspects of Mortgage
Loans--Environmental Risks."
HAZARD INSURANCE POLICIES ON MORTGAGED PROPERTIES MAY NOT FULLY COVER ALL
TYPES OF DAMAGE TO THE MORTGAGED PROPERTIES. Unless otherwise specified in a
prospectus supplement, the servicer will be required to cause the borrower on
each mortgage loan to maintain insurance coverage in respect of the related
mortgaged property, including hazard insurance. However, the servicer may be
able to satisfy its obligation to cause hazard insurance to be maintained
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. The insurance policies 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 insurance policies, however, 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 some
other kinds of risks. Unless the related mortgage specifically requires the
mortgagor to insure against physical damage arising from causes not typically
covered by an insurance policy, then, to the extent any consequent losses are
not covered by the available credit support, you may in part bear the resulting
losses.
For more detailed information regarding insurance policies, you should
review the section in this prospectus titled "Description of the Pooling and
Servicing Agreements--Hazard Insurance Policies."
THE YIELD ON YOUR CERTIFICATES MAY BE ADVERSELY AFFECTED TO THE EXTENT
THAT THE RELATED TRUST FUND MAY INCLUDE DELINQUENT MORTGAGE LOANS BECAUSE THE
AVAILABLE CREDIT SUPPORT MAY NOT COVER ALL LOSSES RELATED TO THE DELINQUENT
MORTGAGE LOANS. The trust fund for a particular series of certificates may
include mortgage loans that are past-due, i.e., beyond any applicable grace
period. However, delinquent mortgage loans may only constitute up to, but not
including, 20% (by principal balance) of the trust fund. A special servicer may
perform the servicing of delinquent mortgage loans. When a mortgage loan has a
loan-to-value ratio of 100% or more, the related borrower will have no equity
in the related mortgaged property. In the cases, the related borrower may not
have an incentive to continue to perform under that mortgage loan. In addition,
when the debt service coverage ratio of a mortgage loan is below 1.0x, the
revenue derived from the use and operation of the related mortgaged property is
insufficient to cover the operating expenses of the mortgaged property and to
pay debt service on that mortgage loan and all mortgage loans senior to that
mortgage loan. In those cases, the related borrower will be required to pay
from sources other than cash flow from the related mortgaged property. If the
related borrower ceases to use alternative cash sources at a time when
operating
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revenue from the related mortgaged property is still insufficient to cover all
expenses and debt service, deferred maintenance at the related mortgaged
property and/or a default under the subject mortgage loan may occur. Available
credit may not cover all losses related to delinquent mortgage loans. You
should therefore consider the risk that the inclusion of delinquent mortgage
loans in the trust fund may adversely affect the rate of defaults and
prepayments on the mortgage assets in the trust fund and the yield on the
offered certificates.
For more detailed information regarding delinquent mortgage loans, you
should review the section in this prospectus titled "Description of the Trust
Funds--Mortgage Loans--General."
A WORD ABOUT FORWARD LOOKING STATEMENTS. Whenever we use words like
"intends," "anticipates" or "expects" or similar words in this prospectus, we
are making a forward-looking statement, or a projection of what we think will
happen in the future. Forward-looking statements are inherently subject to a
variety of circumstances, many of which are beyond our control that could cause
actual results to differ materially from what we think they might be. Any
forward-looking statements in this prospectus speak only as of the date of this
prospectus. We do not assume any responsibility to update or review any
forward-looking statement or to reflect any change in events, conditions or
circumstances on which we have based any forward-looking statement.
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DESCRIPTION OF THE TRUST FUNDS
GENERAL
The primary assets of each trust fund will consist of the following:
o various types of multifamily or commercial mortgage loans or
participations in those mortgage loans;
o 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
o a combination of the foregoing, which we call mortgage assets.
We will establish each trust fund. We will select each mortgage asset for
inclusion in a trust fund from among those purchased, either directly or
indirectly, from a mortgage asset seller, which may or may not be the
originator of a mortgage loan or the issuer of a MBS and may be our affiliate.
Unless otherwise provided in the related prospectus supplement, neither we nor
any of our affiliates and no governmental agency or instrumentality or any
other person will guarantee or insure any of the mortgage assets included in a
trust fund. 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 or other
evidences of indebtedness called mortgage notes, secured by liens on fee or
leasehold estates in properties called mortgaged properties consisting of the
following:
o 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, called
multifamily properties, and manufactured housing community
properties;
o commercial properties consisting of office buildings, retail
facilities related to the sale of goods and products and facilities
related to providing entertainment, recreation or personal services,
hotels and motels, casinos, health care-related facilities,
recreational vehicle parks, warehouse facilities, mini-warehouse
facilities, self-storage facilities, industrial facilities, parking
lots, auto parks, golf courses, arenas and restaurants, or any
cooperatively owned units therein; and
o mixed use properties--that is, any combination of the foregoing--and
unimproved land, both called commercial properties.
The multifamily properties may include mixed commercial and residential
structures, and apartment buildings owned by a private cooperative housing
corporation, with shares of the cooperative allocable to one or more dwelling
units occupied by non-owner tenants or to vacant units. The liens may be
created by mortgages, deeds of trust and similar security instruments. Each
mortgage will create a first priority or junior 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 leasehold will exceed the
term of the mortgage note by at least two years. Unless otherwise specified in
the related prospectus supplement, each mortgage loan will have been originated
by a person other than us; however, the originator may be or may have been one
of our affiliates.
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, some of the mortgage loans
included in the trust fund for a particular series of certificates may be
delinquent or non-performing as of the date those certificates are issued. In
that case, the related prospectus supplement will set forth available
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information as to the period of the 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.
Mortgage Loans Secured by Office Properties. Significant factors affecting
the value of office properties include the quality of the tenants in the
building, the physical attributes of the building in relation to competing
buildings, the location of the building with respect to the central business
district or population centers, demographic trends within the metropolitan area
to move away from or towards the central business district, social trends
combined with space management trends, which may change towards options such as
telecommuting, tax incentives offered to businesses by cities or suburbs
adjacent to or near the city where the building is located and the strength and
stability of the market area as a desirable business location. Office
properties may be adversely affected by an economic decline in the businesses
operated by their tenants. The risk of an economic decline is increased if
revenue is dependent on a single tenant or if there is a significant
concentration of tenants in a particular business or industry.
Office properties are also subject to competition with other office
properties in the same market. Competition is affected by various factors
affecting a building, including
o its age;
o its condition;
o its design, including floor sizes and layout;
o its access to transportation; and
o the availability of parking and the owner's ability to offer certain
amenities to its tenants, including sophisticated building systems
such as
o fiberoptic cables,
o satellite communications or
o other base building technological features.
Office properties that are not equipped to accommodate the needs of modern
business may become functionally obsolete and thus non-competitive.
The success of an office property also depends on the local economy. A
company's decision to locate office headquarters in a given area, for example,
may be affected by an array of factors including
o labor cost and quality;
o tax environment; and
o quality of life matters, such as schools and cultural amenities.
A central business district may have a substantially different economy
from that of a suburb. The local economy will affect an office property's
ability to attract stable tenants on a consistent basis. In addition, the cost
of refitting office space for a new tenant is often higher than for other
property types.
Mortgage Loans Secured by Retail Properties. Retail properties generally
derive all or a substantial percentage of their income from lease payments from
commercial tenants. Income from and the market value of retail properties is
dependent on various factors including, but not limited, to the following:
o the ability to lease space in the properties;
o the ability of tenants to meet their lease obligations;
o the possibility of a significant tenant becoming bankrupt or
insolvent; and
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o fundamental aspects of real estate such as location and market
demographics.
The correlation between the success of tenant businesses and property
value is more direct with respect to retail properties than other types of
commercial property because a significant component of the total rent paid by
retail tenants is often tied to a percentage of gross sales. Declines in tenant
sales will cause a corresponding decline in percentage rents and may cause
these tenants to become unable to pay their rent or other occupancy costs. The
default by a tenant under its lease could result in delays and costs in
enforcing the lessor's rights. Repayment of the related mortgage loans will be
affected by the expiration of space leases and the ability of the respective
borrowers to renew or relet the space on comparable terms. Even if vacated
space is successfully relet, the costs associated with reletting, including
tenant improvements, leasing commissions and free rent, could be substantial
and could reduce cash flow from the retail properties. The correlation between
the success of tenant businesses and property value is increased when the
property is a single tenant property.
Whether a shopping center is anchored or unanchored is also an important
distinction. Anchor tenants in shopping centers traditionally have been a major
factor in the public's perception of a shopping center. The anchor tenants at a
shopping center play an important part in generating customer traffic and
making a center a desirable location for other tenants of the center. The
failure of an anchor tenant to renew its lease, the termination of an anchor
tenant's lease, the bankruptcy or economic decline of an anchor tenant, or the
cessation of the business of an anchor tenant--notwithstanding any continued
payment of rent--can have a material negative effect on the economic
performance of a shopping center. Furthermore, the correlation between the
success of tenant businesses and property value is increased when the property
is a single tenant property.
Unlike some other types of commercial properties, retail properties also
face competition from sources outside a given real estate market. Catalogue
retailers, home shopping networks, telemarketing, selling through the Internet,
and outlet centers all compete with more traditional retail properties for
consumer dollars. Continued growth of these alternative retail outlets, which
are often characterized by lower operating costs, could adversely affect the
retail properties.
Mortgage Loans Secured by Multifamily Rental Properties. Significant
factors determining the value and successful operation of a multifamily rental
property include the following:
o location of the property;
o the number of competing residential developments in the local market,
such as apartment buildings, manufactured housing communities and
site-built single family homes;
o the physical attributes of the multifamily building, such as its age
and appearance; and
o state and local regulations affecting the property.
In addition, the successful operation of an apartment building will depend
upon other factors such as its reputation, the ability of management to provide
adequate maintenance and insurance, and the types of services it provides.
Some states regulate the relationship of an owner and its tenants.
Commonly, these laws require a written lease, good cause for eviction,
disclosure of fees, and notification to residents of changed land use, while
prohibiting unreasonable rules, retaliatory evictions and restrictions on a
resident's choice of unit vendors. Apartment building owners have been the
subject of suits under state "Unfair and Deceptive Practices Acts" and other
general consumer protection statutes for coercive, abusive or unconscionable
leasing and sales practices. A few states offer more significant protection.
For example, there are provisions that limit the basis on which a landlord may
terminate a tenancy or increase its rent or prohibit a landlord from
terminating a tenancy solely by reason of the sale of the owner's building.
In addition to state regulation of the landlord-tenant relationship,
numerous counties and municipalities impose rent control on apartment
buildings. These ordinances may limit rent increases to fixed percentages, to
percentages of increases in the consumer price index, to increases set or
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approved by a governmental agency, or to increases determined through mediation
or binding arbitration. In many cases, the rent control laws do not provide for
decontrol of rental rates upon vacancy of individual units. Any limitations on
a borrower's ability to raise property rents may impair the borrower's ability
to repay its mortgage loan from its net operating income or the proceeds of a
sale or refinancing of the related mortgaged property.
Adverse economic conditions, either local, regional or national, may limit
the amount of rent that can be charged, may adversely affect tenants' ability
to pay rent and may result in a reduction in timely rent payments or a
reduction in occupancy levels. Occupancy and rent levels may also be affected
by construction of additional housing units, local military base closings,
company relocations and closings and national and local politics, including
current or future rent stabilization and rent control laws and agreements.
Multifamily apartment units are typically leased on a short-term basis,
and consequently, the occupancy rate of a multifamily rental property may be
subject to rapid decline, including for some of the foregoing reasons. In
addition, the level of mortgage interest rates may encourage tenants to
purchase single-family housing rather than continue to lease housing. The
location and construction quality of a particular building may affect the
occupancy level as well as the rents that may be charged for individual units.
The characteristics of a neighborhood may change over time or in relation to
newer developments.
Mortgage Loans Secured by Cooperatively Owned Apartment Buildings. A
cooperative apartment building and the land under the building are owned or
leased by a non-profit cooperative corporation. The cooperative corporation is
in turn owned by tenant-shareholders who, through ownership of stock, shares or
membership certificates in the corporation, receive proprietary leases or
occupancy agreements. The proprietary leases and occupancy agreements confer
exclusive rights to occupy specific apartments or units. Generally, a
tenant-shareholder of a cooperative corporation must make a monthly maintenance
payment to the corporation representing the tenant-shareholder's pro rata share
of the corporation's payments in respect of any mortgage loan secured by,
including all real property taxes, maintenance expenses and other capital and
ordinary expenses with respect to, the real property owned by the cooperative
corporation, less any other income that the cooperative corporation may
realize. Payments to the cooperative corporation are in addition to any
payments of principal and interest the tenant-shareholder must make on any
loans of the tenant-shareholder secured by its shares in the corporation.
A cooperative corporation is directly responsible for building management
and payment of real estate taxes and hazard and liability insurance premiums. A
cooperative corporation's ability to meet debt service obligations on a
mortgage loan secured by the real property owned by the cooperative
corporation, as well as all other operating expenses of the property, is
dependent primarily upon the receipt of maintenance payments from the
tenant-shareholders, together with any rental income from units or commercial
space that the cooperative corporation might control. Unanticipated
expenditures may in some cases have to be paid by special assessments on the
tenant-shareholders. A cooperative corporation's ability to pay the amount of
any balloon payment due at the maturity of a mortgage loan secured by the real
property owned by the cooperative corporation depends primarily on its ability
to refinance the mortgage loan. Neither we nor any other person will have any
obligation to provide refinancing for any of the mortgage loans.
In a typical cooperative conversion plan, the owner of a rental apartment
building contracts to sell the building to a newly formed cooperative
corporation. The owner or sponsor allocates shares to each apartment unit, and
the current tenants have a fixed period to subscribe at prices discounted from
the prices to be offered to the public after that period. As part of the
consideration for the sale, the owner or sponsor receives all the unsold shares
of the cooperative corporation. The sponsor usually also controls the
corporation's board of directors and management for a limited period of time.
Each purchaser of shares in the cooperative corporation generally enters
into a long-term proprietary lease which provides the shareholder with the
right to occupy a particular apartment unit. However, many cooperative
conversion plans are so-called "non-eviction" plans. Under a non-eviction
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plan, a tenant at the time of conversion who chooses not to purchase shares is
entitled to reside in the unit as a subtenant from the owner of the shares
allocated to that apartment unit. Any applicable rent control or rent
stabilization laws would continue to be applicable to that subtenancy. The
subtenant may be entitled to renew its lease for an indefinite number of times,
with continued protection from rent increases above those permitted by any
applicable rent control and rent stabilization laws. The shareholder is
responsible for the maintenance payments to the cooperative without regard to
its receipt or non-receipt of rent from the subtenant, which may be lower than
maintenance payments on the unit. Newly-formed cooperative corporations
typically have the greatest concentration of non-tenant shareholders.
Mortgage Loans Secured by Industrial Properties. Significant factors that
affect the value of industrial properties are
o the quality of tenants;
o building design and adaptability; and
o the location of the property.
Industrial properties may be adversely affected by reduced demand for
industrial space occasioned by a decline in a particular industry segment
and/or by a general slow-down in the economy, and an industrial property that
suited the particular needs of its original tenant may be difficult to relet to
another tenant or may become functionally obsolete relative to newer
properties. Furthermore, industrial properties may be adversely affected by the
availability of labor sources or a change in the proximity of supply sources.
Because industrial properties frequently have a single tenant, any related
property is heavily dependent on the success of the tenant's business.
Aspects of building site, design and adaptability affect the value of an
industrial property. Site characteristics which are valuable to an industrial
property include ceiling heights, column spacing, number of bays and bay
depths, divisibility, floor loading capacities, truck turning radius and
overall functionality and accessibility. Nevertheless, site characteristics of
an industrial property suitable for one tenant may not be appropriate for other
potential tenants, which may make it difficult to relet the property.
Location is also important because an industrial property requires the
availability of labor sources, proximity to supply sources and customers and
accessibility to rail lines, major roadways and other distribution channels.
Further, industrial properties may be adversely affected by economic declines
in the industry segment of their tenants.
Mortgage Loans Secured by Warehouse, Mini-Warehouse and Self-Storage
Facilities. Because of relatively low acquisition costs and break-even
occupancy rates, warehouse, mini-warehouse and self-storage properties
("Storage Properties") are considered vulnerable to competition. Despite their
relatively low acquisition costs, and because of their particular building
characteristics, Storage Properties would require substantial capital
investments in order to adapt them to alternative uses. Limited adaptability to
other uses may substantially reduce the liquidation value of a Storage
Property. In addition to competition, factors that affect the success of a
Storage Property include the location and visibility of the facility, its
proximity to apartment complexes or commercial users, trends of apartment
tenants in the area moving to single-family homes, services provided, including
security and accessibility, age of improvements, the appearance of the
improvements and the quality of management.
Mortgage Loans Secured by Hotel and Motel Properties. Hotel and motel
properties may include full service hotels, resort hotels with many amenities,
limited service hotels, hotels and motels associated with national franchise
chains, hotels and motels associated with regional franchise chains and hotels
that are not affiliated with any franchise chain but may have their own brand
identity. Various factors, including location, quality and franchise
affiliation affect the economic performance of a hotel or motel. Adverse
economic conditions, either local, regional or national, may limit the amount
that can be charged for a room and may result in a reduction in occupancy
levels. The
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construction of competing hotels and motels can have similar effects. To meet
competition in the industry and to maintain economic values, continuing
expenditures must be made for modernizing, refurbishing, and maintaining
existing facilities prior to the expiration of their anticipated useful lives.
Because hotel and motel rooms generally are rented for short periods of time,
hotels and motels tend to respond more quickly to adverse economic conditions
and competition than do other commercial properties. Furthermore, the financial
strength and capabilities of the owner and operator of a hotel or motel may
have an impact on quality of service and economic performance. Additionally,
the lodging industry, in certain locations, is seasonal in nature and this
seasonality can be expected to cause periodic fluctuations in room and other
revenues, occupancy levels, room rates and operating expenses. The demand for
particular accommodations may also be affected by changes in travel patterns
caused by changes in energy prices, strikes, relocation of highways, the
construction of additional highways and other factors.
The viability of any hotel or motel property that is part of a national or
regional hotel or motel chain depends in part on the continued existence and
financial strength of the franchisor, the public perception of the franchise
service mark and the duration of the franchise licensing agreement. The
transferability of franchise license agreements may be restricted and, in the
event of a foreclosure on any related hotel or motel property, the consent of
the franchisor for the continued use of the franchise license by the hotel or
motel property would be required. Conversely, a lender may be unable to remove
a franchisor that it desires to replace following a foreclosure. Further, in
the event of a foreclosure on a hotel or motel property, it is unlikely that
the purchaser of the related hotel or motel property would be entitled to the
rights under any associated liquor license, and the purchaser would be required
to apply in its own right for that license. There can be no assurance that a
new license could be obtained or that it could be obtained promptly.
Mortgage Loans Secured by Manufatured Housing Community Properties and
Recreational Vehicle Parks. Manufactured housing community properties consist
of land that is divided into "spaces" or "homesites" that are primarily leased
to manufactured housing community unit owners. Accordingly, the related
mortgage loans will be secured by mortgage liens on the real estate, or a
leasehold interest therein, upon which the manufactured housing community units
are situated, but not the units themselves. The manufactured housing community
unit owner often invests in site-specific improvements, including carports,
steps, fencing, skirts around the base of the unit, and landscaping. The park
owner typically provides private roads within the park, common facilities and,
in many cases, utilities. Park amenities may include
o driveways;
o visitor parking;
o recreational vehicle and pleasure boat storage;
o laundry facilities;
o community rooms;
o swimming pools;
o tennis courts;
o security systems; and
o healthclubs.
Due to relocation costs and, in some cases, demand for manufactured
housing community unit spaces, the value of a unit in place in a park is
generally higher, and can be significantly higher, than the value of the same
unit not placed in a park. As a result, a well-operated manufactured housing
community that has achieved stabilized occupancy is typically able to maintain
occupancy at or near that level. For the same reason, a lender that provided
financing for the unit of a tenant who defaulted in his or her space rent
generally has an incentive to keep rental payments current until the mobile
home can be resold in place, rather than to allow the unit to be removed from
the park.
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Recreational vehicle parks lease spaces primarily or exclusively for motor
homes, travel trailers and portable truck campers primarily designed for
recreational, camping or travel use. In general, parks that lease recreational
vehicle spaces can be viewed as having a less stable tenant population than
parks occupied predominantly by mobile homes. However, it is not unusual for
the owner of a recreational vehicle to leave the vehicle at the park on a
year-round basis or to use the vehicle as low cost housing and reside in the
park indefinitely.
Mortgage loans secured by liens on manufactured housing community
properties and recreational vehicle parks are affected by factors not
associated with loans secured by liens on other types of income-producing real
estate. The successful operation of these types of properties will generally
depend upon the number of competing parks, as well as upon other factors,
including its age, appearance, reputation, the ability of management to provide
adequate maintenance and insurance, and the types of facilities and services it
provides. Manufactured housing community properties also compete against
alternative forms of residential housing, including
o multifamily rental properties;
o cooperatively-owned apartment buildings;
o condominium complexes; and
o single-family residential developments.
Recreational vehicle parks also compete against alternative forms of
recreation and short-term lodging, for example, staying at a hotel at the
beach. Manufactured housing community properties and recreational vehicle parks
are "special purpose" properties that cannot be readily converted to general
residential, retail or office use. Thus, if the operation of a manufactured
housing community or recreational vehicle park becomes unprofitable due to
competition, age of the improvements or other factors such that the borrower
becomes unable to meet its obligations on the related mortgage loan, the
liquidation value of the manufactured housing community may be substantially
less, relative to the amount owing on the mortgage loan, than would be the case
if the manufactured housing community or recreational vehicle park were readily
adaptable to other uses.
Certain states regulate the relationship of a manufactured housing
community owner and its tenants. Commonly, these laws require a written lease,
good cause for eviction, disclosure of fees, and notification to residents of
changed land use, while prohibiting unreasonable rules, retaliatory evictions,
and restrictions on a resident's choice of unit vendors. Manufactured housing
community owners have been the subject of suits under state "Unfair and
Deceptive Practices Acts" and other general consumer protection statutes for
coercive, abusive or unconscionable leasing and sales practices. A few states
offer more significant protection. For example, there are provisions that limit
the basis on which a landlord may terminate a unit owner's tenancy or increase
its rent or prohibit a landlord from terminating a tenancy solely by reason of
the sale of the owner's unit. Certain states also regulate changes in
manufactured housing community use and require that the landlord give written
notice to its tenants a substantial period of time prior to the projected
change.
In addition to state regulation of the landlord-tenant relationship,
numerous counties and municipalities impose rent control on manufactured
housing communities. These ordinances 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
either do not provide for decontrol of rental rates upon vacancy of individual
units or permit decontrol only in the relatively rare event that the unit is
removed from the unitsite. Any limitations on a borrower's ability to raise
property rents may impair the related borrower's ability to repay its mortgage
loan from its net operating income or the proceeds of a sale or refinancing of
the related mortgaged property.
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
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income-producing property is typically dependent upon the successful operation
of that 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. Absent special facts, recourse in the case of default of
non-recourse loans will be limited to the mortgaged property and the other
assets, if any, that were pledged to secure repayment of the mortgage loan.
Lenders typically look to the Debt Service Coverage Ratio of a loan
secured by income-producing property as an important factor in evaluating the
risk of default on such a loan. 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, with respect to a mortgage loan secured by a
cooperative apartment building, maintenance payments from tenant-stockholders
of a cooperative--may be affected by the condition of the applicable real
estate market and/or the economy of the area in which the mortgaged property is
located or the industry that it services. In addition, properties typically
leased, occupied or used on a short-term basis, such as some healthcare-related
facilities, hotels and motels, and mini-warehouse and self-storage facilities,
tend to be affected more rapidly by changes in market or business conditions
than do properties typically leased for longer periods, such as warehouses,
retail stores, office buildings and industrial plants. Commercial properties
may be owner-occupied or leased to a small number of tenants. Thus, the Net
Operating Income of such a mortgaged property may depend substantially on the
financial condition of the borrower or a tenant, and mortgage loans secured by
liens on those 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. However,
the existence of 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
factor in evaluating risk of loss if a property must be liquidated following a
default. The lower the Loan-to-Value Ratio, the greater the percentage of the
borrower's equity in a mortgaged property. This in turn has the following
effects:
o it increases the incentive of the borrower to perform under the terms
of the related mortgage loan, in order to protect the equity; and
o it increases 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, the real estate market and other factors
described in this prospectus. Moreover, even when current, an appraisal is not
necessarily a reliable estimate of value. Appraised values of income-producing
properties are generally based on:
o the market comparison method, i.e., recent resale value of comparable
properties at the date of the appraisal;
o the cost replacement method, i.e., the cost of replacing the property
at the date;
o the income capitalization method, i.e., a projection of value based
upon the property's projected net cash flow; or
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o upon a selection from or interpolation of the values derived from the
foregoing 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 and discount 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 we believe 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 can be no assurance that all of
the foregoing 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. For additional information regarding risks
associated with mortgage loans, you should review the sections in this
prospectus titled "Risk Factors--Risks Relating to the Mortgage Loans--Mortgage
Loans are susceptible to numerous risks that may result in losses to you" and
"--Mortgage loans with balloon payments involve the risk that borrowers may not
be able to refinance the loan or sell the related property."
Payment Provisions of the Mortgage Loans. Unless otherwise specified in
the related prospectus supplement, all of the mortgage loans will have the
following characteristics:
o have had individual principal balances at origination of not less
than $25,000;
o have had original terms to maturity of not more than 40 years; and
o provide for scheduled payments of principal, interest or both, to be
made on specified dates, known as due dates, that occur monthly,
quarterly, semi-annually or annually.
A mortgage loan may also have the following characteristics:
o provide for no accrual of interest or for accrual of interest thereon
at an interest rate, known as 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;
o 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 some events, and may permit negative
amortization;
o be fully amortizing or partially amortizing or non-amortizing, with a
balloon payment due on its stated maturity date; and
o prohibit over its term or for a certain period prepayments (the
period of the prohibition is known as a lock-out period and its date
of expiration is known as a lock-out date) and/or require payment of
a premium or a yield maintenance penalty, more commonly known as a
prepayment premium) in connection with some prepayments, 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 appreciation of the related mortgaged property, or profits realized
from the operation or disposition of the related mortgaged property or the
benefit, if any, resulting from the refinancing of the mortgage loan 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 payments of interest on
and/or principal of the offered certificates, the related prospectus supplement
will describe the equity participation and the method or methods by which
distributions relating to the equity participation will be made to the holders.
Mortgage Loan Information in Prospectus Supplements. Each prospectus
supplement will contain information pertaining to the mortgage loans in the
related trust fund, which will generally be current as of a date specified in
the related prospectus supplement. To the extent then applicable and
specifically known to us, the prospectus supplement will include the following:
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1. the aggregate outstanding principal balance and the largest, smallest
and average outstanding principal balance of the mortgage loans;
2. the type or types of property that provide security for repayment of
the mortgage loans;
3. the earliest and latest origination date and maturity date of the
mortgage loans;
4. the original and remaining terms to maturity of the mortgage loans, or
the respective ranges those terms to maturity, and the weighted average
original and remaining terms to maturity of the mortgage loans;
5. the original Loan-to-Value Ratios of the mortgage loans, or the range
of those Loan-to-Value Ratios, and the weighted average original
Loan-to-Value Ratio of the mortgage loans;
6. the mortgage rates borne by the mortgage loans, or range of those
mortgage rates, and the weighted average mortgage rate borne by the
mortgage loans;
7. with respect to mortgage loans with adjustable mortgage rates ("ARM
Loans"), the index or indices upon which the 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;
8. information regarding the payment characteristics of the mortgage
loans, including, without limitation, balloon payment and other
amortization provisions, lock-out periods and prepayment premiums;
9. the Debt Service Coverage Ratios of the mortgage loans, either at
origination or as of a more recent date, or the range of those Debt
Service Coverage Ratios, and the weighted average of the Debt Service
Coverage Ratios; and
10. the geographic distribution of the mortgaged properties on a
state-by-state basis.
In appropriate cases, the related prospectus supplement will also contain
some information available to us that pertains to the provisions of leases and
the nature of tenants of the mortgaged properties. If we are 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 their initial issuance and will be filed as
part of a Current Report on Form 8-K with the SEC within fifteen days following
their issuance.
MBS
Mortgage-backed securities included in a trust fund may include:
o mortgage pass-through certificates or other mortgage-backed
securities that are not guaranteed or insured by the United States or
any of its agencies or instrumentalities; or
o certificates insured or guaranteed by FHLMC, FNMA, GNMA or FAMC
provided that, unless otherwise specified in the related prospectus
supplement, 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 in this prospectus.
Any MBS will have been issued pursuant to a participation and servicing
agreement, a pooling and servicing agreement, an indenture or similar
agreement. The issuer of the MBS and/or the servicer of the underlying mortgage
loans will have entered into the MBS agreement, generally with a 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 in this prospectus.
Distributions in respect of the MBS will be made by the MBS issuer, the MBS
servicer or the MBS trustee on the dates specified in the related prospectus
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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" in this
prospectus may have been provided with respect to the MBS. The type,
characteristics and amount of credit support, if any, will be a function of the
characteristics of the underlying mortgage loans and other factors 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, the following:
1. the aggregate approximate initial and outstanding principal amount and
type of the MBS to be included in the trust fund;
2. the original and remaining term to stated maturity of the MBS, if
applicable;
3. the pass-through or bond rate of the MBS or the formula for determining
those rates;
4. the payment characteristics of the MBS;
5. the MBS issuer, MBS servicer and MBS trustee, as applicable;
6. a description of the credit support, if any;
7. the circumstances under which the related underlying mortgage loans, or
the MBS themselves, may be purchased prior to their maturity;
8. the terms on which mortgage loans may be substituted for those
originally underlying the MBS;
9. the type of mortgage loans underlying the MBS and, to the extent
available to us and appropriate under the circumstances, any other
information in respect of the underlying mortgage loans described under
"--Mortgage Loans--Mortgage Loan Information in Prospectus Supplements";
and
10. the characteristics of any cash flow agreements that relate to the MBS.
CERTIFICATE ACCOUNTS
Each trust fund will include one or more accounts established and
maintained on behalf of the certificateholders into which the person or persons
designated in the related prospectus supplement will, to the extent described
in this prospectus and in the 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 a
certificate account may be held as cash or invested in some 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 prospectus supplement for a series of certificates,
partial or full protection against some defaults and losses on the mortgage
assets in the related trust fund may be provided to one or more classes of
certificates of that series in the form of subordination of one or more other
classes of certificates of the series or by one or more other types of credit
support arrangements. Other types of credit support arrangements may include
letters of credit, insurance policies, guarantees, surety bonds or reserve
funds, among others, or a combination. The amount and types of credit support,
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
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series of certificates. For additional information regarding credit support,
you should review the sections in this prospectus titled " Risk Factors--Risks
Relating to the Mortgage Loans--Credit support for a series of certificates may
cover some of your losses or risks but may not cover all potential risks to
you."
CASH FLOW AGREEMENTS
If so provided in the prospectus supplement for a series of certificates,
the related trust fund may include guaranteed investment contracts pursuant to
which moneys held in the funds and accounts established for that series will be
invested at a specified rate. The trust fund may also include interest rate
exchange agreements, interest rate cap or floor agreements, or currency
exchange agreements, which agreements are designed to reduce the effects of
interest rate or currency exchange rate fluctuations on the mortgage assets on
one or more classes of certificates. The principal terms of any guaranteed
investment contract or other agreement, and the identity of an obligor or
counterparty under the agreement, will be described in the prospectus
supplement for a series of 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. The following discussion
contemplates a trust fund that consists solely of mortgage loans. While the
characteristics and behavior of mortgage loans underlying an 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 of the related series.
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 certificates will specify
the pass-through rate for each class of offered certificates of the series or,
in the case of a class of offered certificates with a variable or adjustable
pass-through rate the prospectus supplement will specify, the method of
determining the pass-through rate. The prospectus supplement will also discuss
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
guaranteed investment contract or other 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 the payments are passed through
to certificateholders. That delay will effectively reduce the yield that would
otherwise be produced if payments on those mortgage loans were distributed to
certificateholders on or near the date they were due.
SHORTFALLS IN COLLECTIONS OF INTEREST AS A RESULT OF PREPAYMENTS OF MORTGAGE
LOANS
When a principal prepayment in full or in part is made on a mortgage loan,
the borrower is generally charged interest on the amount of the prepayment only
through the date of the prepayment, instead of through the due date for the
next succeeding scheduled payment. However, interest accrued
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on any series of certificates and distributable on any distribution date will
generally correspond to interest accrued on the mortgage loans to their
respective due dates during the related Due Period. Consequently, if a
prepayment on any mortgage loan is distributable to certificateholders on a
particular distribution date, but the prepayment is not accompanied by interest
to the due date for the mortgage loan in the related Due Period, then the
interest charged to the borrower, net of servicing and administrative fees, may
be less than the corresponding amount of interest accrued and otherwise payable
on the certificates of the related series. If and to the extent that any
shortfall is allocated to a class of offered certificates, the yield on those
certificates will be adversely affected. The prospectus supplement for each
series of certificates will describe the manner in which any prepayment
interest shortfalls will be allocated among the classes of certificates. If so
specified in the prospectus supplement for a series of certificates, the
servicer for that series will be required to apply some or all of its servicing
compensation for the corresponding period to offset the amount of any
prepayment interest shortfalls. The related prospectus supplement will also
describe any other amounts available to offset shortfalls.
For additional information regarding prepayment interest shortfalls, you
should review the section in this prospectus titled "Description of the Pooling
and Servicing 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 of those payments to reduce the principal balance--or notional
amount, if applicable--of that certificate. The rate of principal payments on
the mortgage loans in any trust fund will in turn be affected by their
amortization schedules, the dates on which any balloon payments are due, and
the rate of voluntary and/or involuntary principal prepayments. You should note
that the amortization schedule of an ARM Loan may change periodically to
accommodate adjustments to the mortgage rate thereon and that these changes may
affect the rate of principal payments on an ARM loan. 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 the rate at which any one will prepay.
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 the certificates of that series or, in
the case of a class of stripped interest certificates, result in the reduction
of its notional amount. You 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 you 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 the mortgage loans
could result in an actual yield to you that is lower than the anticipated
yield. In addition, if you purchase an offered certificate at a discount, or a
premium, and principal payments are made in reduction of the principal balance
or notional amount of your offered certificates at a rate slower, or faster,
than the rate anticipated by you during any particular period, the consequent
adverse effects on your yield would not be fully offset by a subsequent like
increase, or decrease, in the rate of principal payments.
A class of certificates, including a class of offered certificates, may
provide that on any distribution date the holders of those certificates are
entitled to a pro rata share of the prepayments on the mortgage loans in the
related trust fund that are distributable on the date, to a disproportionately
large share-- which, in some cases, may be all--of the prepayments, or to a
disproportionately small share--which, in some cases, may be none--of the
prepayments. As and to the extent described in the related prospectus
supplement, the respective entitlements of the various classes of certificates
of any series to receive distributions in respect of payments and, in
particular,
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prepayments of principal of the mortgage loans in the related trust fund may
vary based on the occurrence of some events, e.g., the retirement of one or
more classes of certificates of the series, or subject to some contingencies,
e.g., prepayment and default rates with respect to the mortgage loans.
In general, the notional amount of a class of stripped interest
certificates will either:
o be based on the principal balances of some or all of the mortgage
assets in the related trust fund; or
o equal the certificate balances of one or more of the other classes of
certificates of the same series.
Accordingly, the yield on stripped interest certificates will be inversely
related to the rate at which payments and other collections of principal are
received on mortgage assets or distributions are made in reduction of the
certificate balances of the 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 the mortgage loans will negatively affect the yield to
investors in stripped interest certificates. If the offered certificates of a
series include any of those certificates, the related prospectus supplement
will include a table showing the effect of various assumed levels of prepayment
on yields on those certificates. The tables will be intended to illustrate the
sensitivity of yields to various assumed prepayment rates and will not be
intended to predict, or to provide information that will enable you to predict,
yields or prepayment rates.
We are not aware of any relevant publicly available or authoritative
statistics with respect to the historical prepayment experience of a group of
multifamily or commercial mortgage loans. However, the extent of prepayments of
principal of the mortgage loans in any trust fund may be affected by a number
of factors, including, without limitation, the availability of mortgage credit,
the relative economic vitality of the area in which the mortgaged properties
are located, the quality of management of the mortgaged properties, the
servicing of the mortgage loans, possible changes in tax laws and other
opportunities for investment. In addition, the rate of principal payments on
the mortgage loans in any trust fund may be affected by the existence of
lock-out periods and requirements that principal prepayments be accompanied by
prepayment premiums, and by the extent to which the 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 the ARM Loans
decline in a manner consistent therewith, the related borrowers may have an
increased incentive to refinance for purposes of either:
o converting to a fixed rate loan and thereby locking in the rate; or
o taking advantage of a different index, margin or rate cap or floor 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. We
will make no representation as to the particular factors that will affect the
prepayment of the mortgage loans in any trust fund, as to their relative
importance, as to the percentage of the principal balance of mortgage loans
that will be paid as of any date or as to the overall rate of prepayment on
those mortgage loans.
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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 the 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 the 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 that 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 the related
mortgage 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 the 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 the series. The prospectus
supplement will also contain the percentage of the initial certificate balance
or notional amount of each class of offered certificates that would be
outstanding on specified distribution dates based on the assumptions stated in
that prospectus supplement, including assumptions that prepayments on the
related mortgage loans are made at rates corresponding to various percentages
of CPR or SPA, or at other rates specified in the prospectus supplement. The
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, which will entitle the holders of those certificates to receive
principal distributions according to a specified principal payment schedule.
The principal payment schedule is supported by creating priorities, as and to
the extent described in the related prospectus supplement, to receive 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 or a targeted amortization
class. In general, a planned amortization class has a prepayment collar--that
is, a range of prepayment rates that can be sustained without disruption--that
determines the principal cash flow of the certificates. A prepayment collar is
not static, and may expand or contract after the issuance of the planned
amortization class depending on the actual prepayment experience for the
underlying mortgage loans. Distributions of principal on a planned amortization
class 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
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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 planned amortization
class. A targeted amortization class is structured so that principal
distributions generally will be payable in accordance with its specified
principal payments schedule so long as the rate of prepayments on the related
mortgage assets remains relatively constant at the particular rate used in
establishing the schedule. A targeted amortization class will generally afford
the holders 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 those 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 of certificates in that class 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 those holders 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 to a disproportionately large share of
the prepayments on the mortgage loans in the related trust fund enhances the
risk of early retirement of that class, known as call risk, if the rate of
prepayment is relatively fast; while a class of certificates that entitles its
holders 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 that class, known as 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 servicer or a special servicer, to the extent and under the circumstances
set forth in this prospectus and in the related prospectus supplement, may be
authorized to modify mortgage loans 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
the certificates and, if the 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 provides for the payment of
interest calculated at a rate lower than the rate at which interest accrues on
those mortgage loan 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. A slower rate of mortgage loan
amortization would correspondingly be reflected in a slower rate of
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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. Negative amortization allocated to a class of certificates may result
in a deferral of some or all of the interest payable on those certificates,
which deferred interest may be added to the certificate balance of those
certificates. Accordingly, the weighted average lives of mortgage loans that
permit negative amortization, and that of the classes of certificates to which
any related negative amortization would be allocated or that would bear the
effects of a slower rate of amortization on the mortgage loans, may increase as
a result of this feature.
Negative amortization also may occur in respect of an ARM Loan that limits
the amount by which its scheduled payment may adjust in response to a change in
its mortgage rate, provides that its scheduled payment will adjust less
frequently than its mortgage rate or provides for constant scheduled payments
notwithstanding adjustments to its mortgage rate. Conversely, during a period
of declining interest rates, the scheduled payment on a mortgage loan may
exceed the amount necessary to amortize the loan fully over its remaining
amortization schedule thereby resulting in the accelerated amortization of the
mortgage loan. Any related acceleration in amortization of its principal
balance will shorten the weighted average life of a mortgage loan and,
correspondingly, the weighted average lives of those classes of certificates
entitled to a portion of the principal payments on the 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:
o whether the offered certificate was purchased at a premium or a
discount; and
o the extent to which the payment characteristics of those mortgage loans
delay or accelerate the distributions of principal on the certificate, or,
in the case of a stripped interest certificate, delay or accelerate the
amortization of its notional amount.
For additional information on the effects of negative amortization on the
yield of certificates, you should review the section titled "--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 Loans. The yield to holders of the
offered certificates of any series will directly depend on the extent to which
the 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 the losses and shortfalls. In general, the earlier that
any loss or shortfall occurs, the greater will be the negative effect on yield
for any class of certificates that is required to bear its effects.
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, allocations of
losses and shortfalls may be effected by a reduction in the entitlements to
interest and/or certificate balances of one or more classes of certificates, or
by establishing a priority of payments among those 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
to a specified portion-- which may during specified periods 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 the series, may provide for
distributions of principal. Distributions may be provided from:
o amounts attributable to interest accrued but not currently distributable
on one or more classes of accrual certificates;
o Excess Funds; or
o any other amounts described in the related prospectus supplement.
The amortization of any class of certificates out of the sources described
in the preceding paragraph would shorten the weighted average life of the
certificates and, if those certificates were purchased at a premium, reduce the
yield on those certificates. 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 any of the foregoing sources
would have any material effect on the rate at which the 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 under the circumstances and in the manner set forth in the prospectus
supplement. 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 the
mortgage assets to retire the class or classes, under the circumstances and in
the manner set forth in the related prospectus supplement. In the absence of
other factors, any early retirement of a class of offered certificates would
shorten the weighted average life of the certificates and, if the certificates
were purchased at premium, reduce the yield on those certificates.
THE DEPOSITOR
We are Bear Stearns Commercial Mortgage Securities Inc., a Delaware
corporation organized on April 20, 1987, and we function as the depositor. Our
primary business is to acquire mortgage loans, mortgage-backed securities and
related assets and sell interests therein or bonds secured thereby. We are an
affiliate of Bear, Stearns & Co. Inc. We maintain our principal office at 245
Park Avenue, New York, New York 10167. Our telephone number is (212) 272-2000.
We do not have, nor do we expect in the future to have, any significant assets.
USE OF PROCEEDS
The net proceeds to be received from the sale of the certificates of any
series will be applied by us to the purchase of trust assets or will be used by
us for general corporate purposes. We expect 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 us,
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 and
servicing agreement. As described in the related prospectus supplement, the
certificates of each series, including the offered certificates of any series,
may consist of one or more classes of certificates that, among other things:
o provide for the accrual of interest thereon at a fixed, variable or
adjustable rate;
o are senior or subordinate to one or more other classes of
certificates in entitlement to distributions on the certificates;
o are stripped principal certificates;
o are stripped interest certificates;
o provide for distributions of interest or principal that commence only
after the occurrence of some events, such as the retirement of one or
more other classes of certificates of the series;
o provide for distributions of principal 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;
o provide for distributions of principal to be made, subject to
available funds, based on a specified principal payment schedule or
other methodology; or
o provide for distributions based on collections on the mortgage assets
in the related trust fund attributable to prepayment premiums and
equity participations.
Each class of offered certificates of a series will be issued in minimum
denominations corresponding to the principal balances or, in case of some
classes of stripped interest certificates or 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 or may be offered in book-entry format through the
facilities of 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 with the transfer. Interests in a class of book-entry certificates
will be transferred on the book-entry records of DTC and its participating
organizations.
DISTRIBUTIONS
Distributions on the certificates of each series will be made by or on
behalf of the related trustee or servicer on each distribution date as
specified in the related prospectus supplement from the Available Distribution
Amount for the series and the distribution 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 certificate, will be made to the persons in
whose names the certificates are registered at the close of business on the
last business day of the month preceding the month in which the applicable
distribution date occurs. The amount of each distribution will be determined as
of the close of business on the 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 that class. Payments will be made either by wire transfer in
immediately available funds to the account of a
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certificateholder at a bank or other entity having appropriate facilities
therefor or by check mailed to the address of the certificateholder as it
appears in the certificate register. Payment will be made by wire transfer if
the certificateholder has provided the person required to make 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, the certificateholder holds certificates in the
requisite amount or denomination specified therein. If the certificateholder
does not provide any wiring instructions, payments will be made by check mailed
to the address of the certificateholder as it appears on the certificate
register. 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 the certificates at the location specified
in the notice to certificateholders of the final distribution.
DISTRIBUTIONS OF INTEREST ON THE CERTIFICATES
Each class of certificates of each series, other than some classes of
stripped principal certificates and some classes of 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 some classes of accrual certificates, and other than any class of stripped
principal certificates or 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 the class and the distribution date, subject
to the sufficiency of the portion of the Available Distribution Amount
allocable to that class on the distribution date. Prior to the time interest is
distributable on any class of accrual certificates, the amount of Accrued
Certificate Interest otherwise distributable on that class will be added to the
certificate balance of that class on each distribution date. Reference to a
notional amount with respect to a class of stripped interest certificates is
solely for convenience in making appropriate 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 those
certificates--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--Shortfalls in Collections of Interest
as a Result of Prepayments of Mortgage Loans," exceed the amount of any
sums--including, if and to the extent specified in the related prospectus
supplement, all or a portion of the servicer's or special servicer's servicing
compensation--that are applied to offset the amount of the shortfalls. The
particular manner in which 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 the 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 that class.
DISTRIBUTIONS OF PRINCIPAL ON THE CERTIFICATES
Each class of certificates of each series, other than some classes of
stripped interest certificates and some classes of residual certificates, will
have a certificate balance which, at any time, will equal
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the then maximum amount that the holders of certificates of the 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 from time to time and, if so provided in the
related prospectus supplement, will be further reduced by any losses incurred
in respect of the related mortgage assets allocated to these certificates 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 to them 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,
reduced as described above. Unless otherwise provided in the related prospectus
supplement, the initial aggregate certificate balance of all classes of a
series of certificates will not be greater than the aggregate outstanding
principal balance of the related mortgage assets as of the applicable cut-off
date, after application of scheduled payments due on or before the 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 the series who are entitled to receive those distributions
until the certificate balances of the 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 one or more specified 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 is known as 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 is known as 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 offered certificates
will be made on a pro rata basis among all of the certificates of that 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 who are entitled in accordance with the provisions described in the
prospectus supplement.
ALLOCATION OF LOSSES AND SHORTFALLS
The amount of any losses or shortfalls in collections on the mortgage
assets in any trust fund, to the extent not covered or offset by draws on any
reserve fund or under any instrument of credit support, will be allocated among
the respective classes of certificates of the related series in the priority
and manner, and subject to the limitations, specified in the related prospectus
supplement. As described in the related prospectus supplement, allocations of
losses or shortfalls may be effected by a reduction in the entitlements to
interest and/or certificate balances of one or more classes of certificates, or
by establishing a priority of payments among 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 servicer, a special servicer, the
trustee, any provider of credit support and/or any
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other specified person may be obligated to advance, or have the option of
advancing, on or before each distribution date, the amount may be advanced 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 the distribution date.
Advances are intended to maintain a regular flow of scheduled interest and
principal payments to holders of the class or classes of certificates who are
entitled, 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 the advances were made--as to
any mortgage loan, more commonly known as related proceeds. Advances may also
be reimbursed from 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 those subordinate certificates. No advance will be
required to be made by the servicer, a special servicer or the trustee if, in
the good faith judgment of the servicer, a special servicer or the trustee, as
the case may be, the advance would not be recoverable from related proceeds or
another specifically identified source--any such advance is known as a
nonrecoverable advance. If an advance was previously made by the servicer, a
special servicer or the trustee, a nonrecoverable advance will be reimbursable
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 the servicer, special servicer, trustee or
other entity from excess funds in a certificate account, the servicer, special
servicer, trustee or other entity, as the case may be, will be required to
replace the funds in the certificate account on any future distribution date to
the extent that funds in the certificate account on the distribution date are
less than payments required to be made to the related series of
certificateholders on that date. If so specified in the related prospectus
supplement, the obligation of the 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 related 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 will be entitled to receive interest on the advances
made by that entity. Interest will be payable for the period that the advances
are outstanding at the rate specified in the related prospectus supplement, and
the entity making advances will be entitled to payment of 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 and servicing agreement and 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 and servicing 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, the servicer, the
trustee, or such other party as may be specified in the related prospectus
supplement, will forward or make available to each holder 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:
1. the amount of distribution to holders of the class of offered
certificates that was applied to reduce the certificate balance of those
certificates;
2. the amount of distribution to holders of the class of offered
certificates that is allocable to Accrued Certificate Interest;
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3. the amount, if any, of distribution to holders of that class of offered
certificates that is allocable to both prepayment premiums and payments
on account of equity participations;
4. the amount, if any, by which the distribution is less than the amounts
to which holders of a class of offered certificates are entitled;
5. if the related trust fund includes mortgage loans, the aggregate amount
of advances included in the distribution;
6. if the related trust fund includes mortgage loans, the amount of
servicing compensation received by the related servicer, and, if payable
directly out of the related trust fund, by any special servicer and any
sub-servicer, and other customary information as the reporting party
deems necessary or desirable, or that a certificateholder reasonably
requests, to enable certificateholders to prepare their tax returns;
7. information regarding the aggregate principal balance of the related
mortgage assets on or about the distribution date;
8. if the related trust fund includes mortgage loans, information
regarding the number and aggregate principal balance of those mortgage
loans that are delinquent in varying degrees, including specific
identification of mortgage loans that are more than 60 days delinquent
or in foreclosure;
9. if the related trust fund includes mortgage loans, information
regarding the aggregate amount of losses incurred and principal
prepayments made with respect to those mortgage loans during the related
period. The related period is generally equal in length to the time
period between distribution dates, during which prepayments and other
unscheduled collections on the mortgage loans in the related trust fund
must be received in order to be distributed on a particular distribution
date;
10. 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 a distribution date, separately
identifying any reduction in the certificate balance or notional amount
due to the allocation of any losses in respect of the related mortgage
assets, any increase in the 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 the balance;
11. if a class of offered certificates has a variable pass-through rate or
an adjustable pass-through rate, the applicable pass-through rate for
the distribution date and, if determinable, for the next succeeding
distribution date;
12. the amount deposited in or withdrawn from any reserve fund on the
distribution date, and the amount remaining on deposit in the reserve
fund as of the close of business on the distribution date;
13. 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 instrument as of the close of
business on the distribution date; and
14. to the extent not otherwise reflected through the information furnished
pursuant to subclauses 10 and 13 above, the amount of credit support
being afforded by any classes of subordinate certificates.
In the case of information furnished pursuant to subclauses 1-3 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 the
minimum denomination. The prospectus supplement for each series of certificates
may describe additional information to be included in reports to the holders of
the offered certificates of a series.
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Within a reasonable period of time after the end of each calendar year,
the servicer or trustee for a series of certificates, as the case may be, will
be required to furnish or make available to you at any time during the calendar
year you were a holder of an offered certificate of a series a statement
containing the information set forth in subclauses 1-3 above. The information
will be aggregated for that calendar year or the applicable portion of that
calendar year during which the person was a certificateholder. The obligation
to furnish information to a certificateholder will be deemed to have been
satisfied to the extent that substantially comparable information is provided
pursuant to any requirements of the Internal Revenue Code as are from time to
time in force.
For other information regarding information provided to a
certificateholder, you should review the section in the prospectus titled
"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 servicer, the trustee or such other party as may be specified in
the applicable prospectus supplement, as the case may be, to include in any
distribution date statement information regarding the mortgage loans underlying
the MBS will depend on the reports received with respect to the MBS. In those
cases, the related prospectus supplement will describe the loan-specific
information to be included in the distribution date Statements that will be
forwarded or made available 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 will be
allocated among the respective classes of that series in the manner described
in the related prospectus supplement.
You will generally not have a right to vote, except with respect to
required consents to some amendments to the related pooling and servicing
agreement and as otherwise specified in the related prospectus supplement. For
additional information, you should review the section in this prospectus titled
"Description of the Pooling and Servicing 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
some events which if continuing would constitute an event of default on the
part of the related servicer. For further information, you should also review
the section in this prospectus titled "Description of the Pooling and Servicing
Agreements--Events of Default," "--Rights upon Event of Default" and
"--Resignation and Removal of the Trustee."
TERMINATION
The obligations created by the pooling and servicing agreement for each
series of certificates will terminate following:
o the final payment or other liquidation of the last mortgage asset or the
disposition of all property acquired upon foreclosure of any mortgage
loan; and
o the payment to the certificateholders of that series of all amounts
required to be paid to them pursuant to that pooling and servicing
agreement.
Written notice of termination of a pooling and servicing 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 that 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 under the
circumstances and in the manner set forth in that prospectus supplement. 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 designated in that prospectus
supplement 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 the mortgage assets to retire the related class or classes.
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BOOK-ENTRY REGISTRATION AND DEFINITIVE CERTIFICATES
If so provided in the prospectus supplement for a series of certificates,
one or more classes of the offered certificates of that series will be offered
in book-entry format through the facilities of DTC, and each 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 Internal Revenue 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 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 some 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 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. The
rules applicable to DTC and its participants are on file with SEC.
Purchases of book-entry certificates under DTC system must be made by or
through direct participants, which will receive a credit for the book-entry
certificates on DTC's records. Your ownership interest of a book-entry
certificate is in turn to be recorded on the direct and indirect participants'
records. You will not receive written confirmation from DTC of your purchases,
but you are expected to receive written confirmations providing details of the
transactions, as well as periodic statements of their holdings, from the direct
or indirect participant through which you 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 your behalf. 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.
To facilitate subsequent transfer, all offered certificates deposited by
participants with DTC are registered in the name of DTC's partnership nominee,
Cede & Co. The deposit of offered certificates with DTC and their registration
with Cede & Co. effect no change in beneficial ownership. 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 the
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 that date.
Disbursement of the distributions by participants to you 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 participant--and not of DTC, us as the
depositor, any trustee or servicer--subject to any statutory or regulatory
requirements as may be in effect from time to time. Under a book-entry system,
you may receive payments after the related distribution date.
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Unless otherwise provided in the related prospectus supplement, the only
certificateholder, as the term is used in the related pooling and servicing
agreement, will be the nominee of DTC, and you will not be recognized as
certificateholders under the pooling and servicing agreement. You will be
permitted to exercise your rights under the related pooling and servicing
agreement only indirectly through the participants who in turn will exercise
their rights through DTC. We will be informed that DTC will take action
permitted to be taken by a certificateholder under a pooling and servicing
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 some of you, your ability to pledge your
interest in book-entry certificates to persons or entities that do not
participate in 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 the interest.
Unless otherwise specified in the related prospectus supplement,
certificates initially issued in book-entry form will be issued as definitive
certificates to you or your nominees, rather than to DTC or its nominee, only
if:
o we advise the trustee in writing that DTC is no longer willing or
able to discharge properly its responsibilities as depository with
respect to those certificates and we are unable to locate a qualified
successor; or
o we, at our option, elect to terminate the book-entry system through
DTC with respect to those 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 for the related series
or other designated party will be required to issue to the certificate owners
identified in our instructions the definitive certificates to which they are
entitled, and thereafter the holders of those definitive certificates will be
recognized as certificateholders under the related pooling and servicing
agreement.
DESCRIPTION OF THE POOLING AND SERVICING 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 general, the parties to a pooling and servicing agreement will
include us, the trustee, the servicer and, in some cases, a special servicer
appointed as of the date of the pooling and servicing agreement. However, a
pooling and servicing agreement may include a mortgage asset seller as a party,
and a pooling and servicing agreement that relates to a trust fund that
consists solely of MBS may not include the servicer or other servicer as a
party. All parties to each pooling and servicing 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,
our affiliate, or the mortgage asset seller or its affiliate, may perform the
functions of servicer or special servicer. Any party to a pooling and servicing
agreement may own certificates issued under that pooling and servicing
agreement. However, except with respect to required consents to some amendments
to a pooling and servicing agreement, certificates that are held by the
servicer or a special servicer for the related series will not be allocated
voting rights.
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 and servicing 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 some provisions that may
appear in a pooling and servicing 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
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related pooling and servicing agreement that materially differs from the
description contained in this prospectus. If the related trust fund includes
MBS, it will summarize all of the material provisions of the related pooling
and servicing agreement. The summaries in this prospectus do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, all of the provisions of the pooling and servicing agreement for each
series of certificates and the description of the provisions in the related
prospectus supplement. As used in this prospectus 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. We will provide a copy of the pooling and servicing
agreement, without exhibits, that relates to any series of certificates without
charge upon written request of a holder of a certificate of that series
addressed to Bear Stearns Commercial Mortgage Securities Inc., 245 Park Avenue,
New York, New York 10167, Attention: J. Christopher Hoeffel.
ASSIGNMENT OF MORTGAGE LOANS; REPURCHASES
At the time of issuance of any series of certificates, we will assign, or
cause to be assigned, to the designated trustee the mortgage loans to be
included in the related trust fund. Unless otherwise specified in the related
prospectus supplement, we will assign, or cause to be assigned, all principal
and interest to be received on or with respect to those 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 the assignment, deliver the
certificates to or at our direction in exchange for the mortgage loans and the
other assets to be included in the trust fund for the series. Each mortgage
loan will be identified in a schedule appearing as an exhibit to the related
pooling and servicing agreement. The schedule generally will include detailed
information that pertains to each mortgage loan included in the related trust
fund. The information will typically include the address of the related
mortgaged property and type of the 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.
We will deliver, or cause to be delivered, to the related trustee, or to a
custodian appointed by the trustee, some loan documents with respect to each
mortgage loan to be included in a trust fund. Unless otherwise specified in the
related prospectus supplement, the loan documents will include the following:
o the original mortgage note endorsed, without recourse, to the order
of the trustee; and
o the original mortgage, or a certified copy, with evidence of
recording and an assignment of the mortgage to the trustee in
recordable form. Unless otherwise provided in the prospectus
supplement for a series of certificates, the related pooling and
servicing agreement will require that we or another party to the
pooling and servicing agreement promptly cause each assignment of
mortgage to be recorded in the appropriate public office for real
property records.
The trustee, or a custodian appointed by the trustee, for a series of
certificates will be required to review the mortgage loan documents delivered
to it within a specified period of days after receipt. The trustee, or the
custodian, will hold the mortgage loan documents in trust for the benefit of
the certificateholders of that series. Unless otherwise specified in the
related prospectus supplement, if any document is found to be missing or
defective, and that omission or defect, as the case may be, materially and
adversely affects the interests of the certificateholders of the related
series, the trustee, or custodian, will be required to notify the servicer and
us, and one of us 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
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 the occurrence of
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conditions, and/or within a specified period, specified in the pooling and
servicing agreement, after initial issuance of the series of certificates, to
replace that 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. Neither we nor, unless it is the
mortgage asset seller, the servicer 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 that
document has been submitted for recording, and neither that document nor a
certified copy, in either case with evidence of recording, can be obtained
because of delays on the part of the applicable recording office, then, unless
otherwise specified in the related prospectus supplement, the mortgage asset
seller will not be required to repurchase or replace the affected mortgage loan
on the basis of that missing document so long as it continues in good faith to
attempt to obtain that document or a certified copy of that document.
REPRESENTATIONS AND WARRANTIES; REPURCHASES
Unless otherwise provided in the prospectus supplement for a series of
certificates, we will, with respect to each mortgage loan in the related trust
fund, make or assign, or cause to be made or assigned, some representations and
warranties covering, by way of example:
o the accuracy of the information set forth for the mortgage loan on
the schedule of mortgage loans appearing as an exhibit to the related
pooling and servicing agreement;
o the enforceability of the related mortgage note and mortgage and the
existence of title insurance insuring the lien priority of the
related mortgage;
o the warranting party's title to the mortgage loan and the authority
of the warranting party to sell the mortgage loan; and
o the payment status of the mortgage loan.
It is expected that in most cases the warranting party will be the
mortgage asset seller. However, the warranting party may also be an affiliate
of the mortgage asset seller, the servicer, a special servicer or another
person acceptable to us, or us or our affiliate. 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 and servicing agreement will provide that the 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 your interests. If a warranting party cannot
cure the breach within a specified period following the date on which it was
notified of that breach, then, unless otherwise provided in the related
prospectus supplement, it 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 warranting party, in lieu of repurchasing a mortgage loan as
to which a breach has occurred, will have the option, exercisable upon some
conditions and/or within a specified period after initial issuance of a series
of certificates, to replace the related mortgage loan with one or more other
mortgage loans. Unless otherwise specified in the related prospectus
supplement, this repurchase or substitution obligation will constitute the sole
remedy available to you or to the related trustee on your behalf for a breach
of representation and warranty by a warranting party. Neither we nor the
servicer, in either case unless we or the servicer 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. Consequently, those representations
and warranties may not address events that may occur following the date as of
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which they were made. However, we will not include any mortgage loan in the
trust fund for any series of certificates if anything has come to our attention
that would cause it to believe that the representations and warranties made in
respect of a 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 servicer for any trust fund, directly or through sub-servicers, will
be required to make reasonable efforts to collect all scheduled payments under
the mortgage loans in a trust fund. The servicer will be required to follow
collection procedures as it would follow with respect to mortgage loans that
are comparable to the mortgage loans in the trust fund and held for its own
account, provided the procedures are consistent with:
o the terms of the related pooling and servicing agreement and any
related instrument of credit support included in the trust fund;
o applicable law; and
o the servicing standard specified in the related pooling and servicing
agreement and prospectus supplement.
The servicer for any trust fund, directly or through sub-servicers, will
also be required to perform as to the mortgage loans in the trust fund various
other customary functions of a servicer of comparable loans. These obligations
include the following:
o maintaining escrow or impound accounts, if required under the related
pooling and servicing agreement, for payment of taxes, insurance
premiums, ground rents and similar items, or otherwise monitoring the
timely payment of those items;
o attempting to collect delinquent payments; supervising foreclosures;
negotiating modifications; conducting property inspections on a
periodic or other basis;
o managing, or overseeing the management of, mortgaged properties
acquired on behalf of the trust fund through foreclosure,
deed-in-lieu of foreclosure or otherwise, each of which is called an
REO property; and
o maintaining servicing records relating to the mortgage loans.
Unless otherwise specified in the related prospectus supplement, the servicer
will be responsible for filing and settling claims in respect of particular
mortgage loans under any applicable instrument of credit support.
For additional information regarding credit support, you should review the
section in this prospectus titled "Description of Credit Support."
SUB-SERVICERS
The servicer may delegate its servicing obligations in respect of the
mortgage loans serviced thereby to one or more third-party servicers. However,
unless otherwise specified in the related prospectus supplement, the servicer
will remain obligated under the related pooling and servicing agreement. A
sub-servicer for any series of certificates may be our affiliate or an
affiliate of the servicer. Unless otherwise provided in the related prospectus
supplement, each sub-servicing agreement between the servicer and a
sub-servicer will provide that, if for any reason the servicer is no longer
acting in that capacity, the trustee or any successor servicer may assume the
servicer's rights and obligations under the sub-servicing agreement. The
servicer will be required to monitor the performance of sub-servicers retained
by it and will have the right to remove a sub-servicer retained by it at any
time it considers the removal of the sub-servicer to be in your best interest.
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Unless otherwise provided in the related prospectus supplement, the
servicer will be solely liable for all fees owed by it to any sub-servicer,
irrespective of whether the servicer's compensation pursuant to the related
pooling and servicing agreement is sufficient to pay the sub-servicer's fees.
Each sub-servicer will be reimbursed by the servicer that retained it for some
expenditures which it makes, generally to the same extent the servicer would be
reimbursed under a pooling and servicing agreement.
For additional information regarding payment of fees and expenses to a
sub-servicer, you should review the sections in this prospectus titled
"--Certificate Account" and "--Servicing Compensation and Payment of Expenses."
SPECIAL SERVICERS
To the extent so specified in the related prospectus supplement, one or
more special servicers may be a party to the related pooling and servicing
agreement or may be appointed by the servicer or another specified party. A
special servicer for any series of certificates may be our affiliate or an
affiliate of the servicer. A special servicer may be entitled to any of the
rights, and subject to any of the obligations, described in this prospectus in
respect of the servicer including the ability to appoint subservicers to the
extent specified in the related prospectus supplement. The related prospectus
supplement will describe the rights, obligations and compensation of any
special servicer for a particular series of certificates. The servicer will be
liable for the performance of a special servicer only if, and to the extent,
set forth in the related prospectus supplement.
CERTIFICATE ACCOUNT
General. The servicer, the trustee and/or a special servicer 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 the mortgage loans. Those
certificate accounts 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. The funds held in a
certificate account may be invested pending each succeeding distribution date
in United States government securities and other obligations that are
acceptable to each rating agency that has rated any one or more classes of
certificates of the related series. 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 servicer, trustee or special
servicer, if any, as additional compensation. A certificate account may be
maintained with the related servicer, special servicer or mortgage asset seller
or with a depository institution that is our affiliate or an affiliate of any
of the foregoing. Any entity that maintains a certificate account must comply
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 servicer or special servicer,
if any, or serviced by either on behalf of others.
Deposits. Unless otherwise provided in the related pooling and servicing
agreement and described in the related prospectus supplement, the servicer,
trustee or special servicer will be required to deposit or cause to be
deposited in the certificate account for each trust fund that includes mortgage
loans, within a certain period following receipt, in the case of collections on
or in respect of the mortgage loans, or otherwise as provided in the related
pooling and servicing agreement, the following payments and collections
received or made by the servicer, the trustee or any special servicer
subsequent to the cut-off date, other than payments due on or before the
cut-off date:
1. all payments on account of principal, including principal prepayments,
on the mortgage loans;
2. all payments on account of interest on the mortgage loans, including any
default interest collected, in each case net of any portion retained by
the servicer or any special servicer as its servicing compensation or as
compensation to the trustee;
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3. 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 or in connection with the full or partial
condemnation of a 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 servicer, or, if
applicable, a special servicer, and/or the terms and conditions of the
related Mortgage (collectively, insurance and condemnation proceeds) and
all other amounts received and retained in connection with the
liquidation of defaulted mortgage loans or property acquired with respect
to the liquidation, by foreclosure or otherwise (collectively,
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;
4. 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";
5. any advances made as described under "Description of the
Certificates--Advances in Respect of Delinquencies";
6. any amounts paid under any cash flow agreement, as described under
"Description of the Trust Funds--MBS--Cash Flow Agreements";
7. all proceeds of the purchase of any mortgage loan, or property acquired
with respect to the liquidation, by us, 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);
8. any amounts paid by the servicer to cover prepayment interest shortfalls
arising out of the prepayment of mortgage loans as described under
"--Servicing Compensation and Payment of Expenses";
9. to the extent that any related item does not constitute additional
servicing compensation to the servicer or a special servicer, any
payments on account of modification or assumption fees, late payment
charges, prepayment premiums or equity participations with respect to the
mortgage loans;
10. 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";
11. any amount required to be deposited by the servicer or the trustee in
connection with losses realized on investments for the benefit of the
servicer or the trustee, as the case may be, of funds held in the
certificate account; and
12. any other amounts required to be deposited in the certificate account
as provided in the related pooling and servicing agreement and described
in the related prospectus supplement.
Withdrawals. Unless otherwise provided in the related pooling and
servicing agreement and described in the related prospectus supplement, the
servicer, trustee or special servicer may make withdrawals from the certificate
account for each trust fund that includes mortgage loans for any of the
following purposes:
1. to make distributions to you on each distribution date;
2. to pay the servicer, the trustee or a special servicer any servicing
fees not previously retained thereby, the payment to be made out of
payments on the particular mortgage loans as to which the fees were
earned;
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3. to reimburse the servicer, a 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", the reimbursement to be made out of amounts received that
were identified and applied by the servicer or a 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 instrument of credit support with respect
to those mortgage loans;
4. to reimburse the servicer, the trustee or a special servicer for unpaid
servicing fees earned by it and unreimbursed servicing expenses incurred
by it with respect to mortgage loans in the trust fund and properties
acquired in respect thereof, the reimbursement to be made out of amounts
that represent liquidation proceeds and insurance and condemnation
proceeds collected on the particular mortgage loans and properties, and
net income collected on the particular properties, with respect to which
their fees were earned or their expenses were incurred or out of amounts
drawn under any instrument of credit support with respect to the mortgage
loans and properties;
5. to reimburse the servicer, a special servicer, the trustee or other
specified person for any advances described in clause (3) above made by
it and/or any servicing expenses referred to in clause (4) above incurred
by it that, in the good faith judgment of the servicer, special servicer,
trustee or other specified person, as applicable, will not be recoverable
from the amounts described in clauses (3) and (4), respectively, the
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 and servicing agreement and described in the related
prospectus supplement, only from that portion of amounts collected on the
other mortgage loans that is otherwise distributable on one or more
classes of subordinate certificates of the related series;
6. if and to the extent described in the related prospectus supplement, to
pay the servicer, a special servicer, the trustee or any other specified
person interest accrued on the advances described in clause (3) above
made by it and the servicing expenses described in clause (4) above
incurred by it while the advances remain outstanding and unreimbursed;
7. 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 the mortgaged properties, as described under
"--Realization Upon Defaulted Mortgage Loans";
8. to reimburse the servicer, the special servicer, the depositor, or any
of their respective directors, officers, employees and agents, as the
case may be, for some expenses, costs and liabilities incurred thereby,
as and to the extent described under "--Some Matters Regarding the
Servicer and the Depositor";
9. if and to the extent described in the related prospectus supplement, to
pay the fees of trustee;
10. to reimburse the trustee or any of its directors, officers, employees
and agents, as the case may be, for some expenses, costs and liabilities
incurred thereby, as and to the extent described under "--Regarding the
Fees, Indemnities and Powers of the Trustee";
11. if and to the extent described in the related prospectus supplement, to
pay the fees of any provider of credit support;
12. if and to the extent described in the related prospectus supplement, to
reimburse prior draws on any instrument of credit support;
13. to pay the servicer, a special servicer or the trustee, as appropriate,
interest and investment income earned in respect of amounts held in the
certificate account as additional compensation;
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14. 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;
15. if one or more elections have been made to treat the trust fund or its
designated portions 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--Federal
Income Tax Consequences for REMIC Certificates--Taxes That May Be Imposed
on the REMIC Pool";
16. 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 with respect to a defaulted mortgage
loan in connection with the liquidation of the mortgage loan or property;
17. to pay for the cost of various opinions of counsel obtained pursuant to
the related pooling and servicing agreement for the benefit of
certificateholders;
18. to make any other withdrawals permitted by the related pooling and
servicing agreement and described in the related prospectus supplement;
and
19. to clear and terminate the certificate account upon the termination of
the trust fund.
MODIFICATIONS, WAIVERS AND AMENDMENTS OF MORTGAGE LOANS
The 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 set forth in the related pooling and servicing agreement. However,
unless otherwise set forth in the related prospectus supplement, the
modification, waiver or amendment will not do the following:
o affect the amount or timing of any scheduled payments of principal or
interest on the mortgage loan;
o in the judgment of the servicer, materially impair the security for
the mortgage loan or reduce the likelihood of timely payment of
amounts due on that mortgage loan; and
o adversely affect the coverage under any applicable instrument of
credit support.
Unless otherwise provided in the related prospectus supplement, the
servicer also may agree to any other modification, waiver or amendment if, in
its judgment,
o a material default on the mortgage loan has occurred or a payment
default is imminent;
o the modification, waiver or amendment is reasonably likely to produce
a greater recovery with respect to the mortgage loan, taking into
account the time value of money, than would liquidation; and
o the modification, waiver or amendment will not adversely affect the
coverage under any applicable instrument of credit support.
REALIZATION UPON DEFAULTED MORTGAGE LOANS
A borrower's failure to make required mortgage loan payments may mean that
operating income is insufficient to service the mortgage debt, or may reflect
the diversion of that income from the servicing of the mortgage debt. In
addition, a borrower that is unable to make mortgage loan payments may also be
unable to make timely payment of taxes and insurance premiums and to otherwise
maintain the related mortgaged property. In general, the special servicer for a
series of certificates will be required to monitor any mortgage loan in the
related trust fund that is in default, contact the borrower concerning the
default, 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
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the related mortgaged property and take the other actions as are consistent
with the servicing standard set forth in the pooling and servicing agreement. A
significant period of time may elapse before the special servicer is able to
assess the success of any related 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
your behalf 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 the mortgage loan may be restructured in the
resulting bankruptcy proceedings. For additional information regarding the
restructuring of a mortgage loan, you should review the Section in this
prospectus titled "Legal Aspects of Mortgage Loans".
A pooling and servicing agreement may grant to the servicer, a special
servicer, a provider of credit support and/or the holder or holders of one or
more classes of the related series of certificates a right of first refusal to
purchase from the trust fund, at a predetermined purchase price any mortgage
loan as to which a specified number of scheduled payments are delinquent. If
the predetermined purchase price is insufficient to fully fund the entitlements
of certificateholders to principal and interest, it will be so specified in the
related prospectus supplement. 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, taking into account the time value of money, than would
liquidation of the related mortgaged property. Unless otherwise provided in the
related prospectus supplement, the related pooling and servicing agreement will
require that the special servicer accept the highest cash bid received from any
person, including itself, us or any affiliate of either of us or any
certificateholder, that constitutes a fair price for the defaulted mortgage
loan. In the absence of any bid determined in accordance with the related
pooling and servicing 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 do the following so long as it is consistent with the
servicing standard:
o institute foreclosure proceedings;
o exercise any power of sale contained in the related Mortgage;
o obtain a deed in lieu of foreclosure; or
o otherwise acquire title to the related mortgaged property.
Unless otherwise specified in the related prospectus supplement, the
special servicer may not, however, 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 mortgaged 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 the mortgaged
property within the meaning of some federal environmental laws. The special
servicer may do so only if 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:
o either the mortgaged property is in compliance with applicable
environmental laws and regulations or, if not, that taking the actions as
are necessary to bring the mortgaged property into compliance therewith
is reasonably likely to produce a greater recovery, taking into account
the time value of money, than not taking the actions; and
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o 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
the circumstances or conditions are present for which any related action
could be required, taking the actions with respect to the mortgaged
property is reasonably likely to produce a greater recovery, taking into
account the time value of money, than not taking the actions.
For additional information regarding environmental risks associated with
mortgage loans, you should review the section in this prospectus titled "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 one or more
REMIC elections have been made, the special servicer, on behalf of the trust
fund, will be required to sell the mortgaged property within three years of
acquisition, unless one of the following events occurs:
o the Internal Revenue Service grants an extension of time to sell the
property or
o the trustee receives an opinion of independent counsel to the effect
that the holding of the property by the trust fund for more than
three years after its acquisition will not result in the imposition
of a tax on the trust fund or cause the trust fund or any of its
designated portions to fail to qualify as a REMIC under the Internal
Revenue Code at any time that any certificate is outstanding.
Subject to the foregoing, the special servicer will generally be required
to solicit bids for any mortgaged property so acquired in such a manner as will
be reasonably likely to realize a fair price for the property. The special
servicer will be required to assure that the mortgaged property is administered
so that it constitutes "foreclosure property" within the meaning of Section
860G(a)(8) of the Internal Revenue Code at all times. 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 that
property. The retention of an independent contractor, however, will not relieve
the special servicer of its obligation to manage that mortgaged property in a
manner consistent with the servicing standard set forth in the related pooling
and servicing agreement.
In general, the special servicer will be obligated to operate and manage
any mortgaged property acquired as REO property in a manner consistent with the
servicing standard. After the special servicer reviews the operation of that
property and consults with the trustee to determine the trustee's federal
income tax reporting position with respect to the income it is anticipated that
the trust fund would derive from that property, the special servicer could
determine, particularly in the case of REO properties that are hotels, that it
would not be consistent with the servicing standard, to manage and operate such
property in a manner that would avoid the imposition of a tax on "net income
from foreclosure property" within the meaning of Section 857(b)(4)(B) of the
Internal Revenue Code or a tax on "prohibited transactions" under Section 860F
of the Internal Revenue Code (either such tax an "REO Tax"). To the extent that
income the trust fund receives from an REO property is subject to a tax on:
o "net income from foreclosure property," such income would be subject
to federal tax at the highest marginal corporate tax rate, which is
currently 35%; or
o "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
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to federal tax at the highest marginal corporate tax rate or, although it
appears unlikely, at the 100% rate applicable to "prohibited transactions." Any
REO Tax imposed on the trust fund's income from an REO property would reduce
the amount available for distribution to certificateholders. Certificateholders
are advised to consult their tax advisors regarding the possible imposition of
REO Taxes in connection with the operation of commercial REO Properties by
REMICs. For additional information you should review the section in this
prospectus titled "Material Federal Income Tax Consequences."
The limitations imposed by the related pooling and servicing agreement
and, if applicable, the REMIC provisions of the Internal Revenue Code on the
operations and ownership of any mortgaged property acquired on behalf of the
trust fund may result in the recovery of an amount less than the amount that
would otherwise be recovered. For additional information you should review the
section in this prospectus titled "Legal Aspects of Mortgage
Loans--Foreclosure."
If recovery on a defaulted mortgage loan under any related instrument of
credit support is not available, the special servicer nevertheless will be
obligated to follow or cause to be followed such normal practices and
procedures as it deems necessary or advisable to realize upon the defaulted
mortgage loan.
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 on that mortgage loan and the aggregate amount of
reimbursable expenses incurred by the special servicer in connection with that
mortgage loan, the trust fund will realize a loss in the amount of the
shortfall. The special servicer will be entitled to reimbursement out of the
liquidation proceeds recovered on any defaulted mortgage loan, prior to the
distribution of liquidation proceeds to you. The reimbursement amount will
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 restore fully the
damaged property, the special servicer will not be required to expend its own
funds to effect the restoration unless, and to the extent not otherwise
provided in the related prospectus supplement, it determines:
o that the restoration will increase the proceeds to certificateholders
on liquidation of the mortgage loan after reimbursement of the
special servicer for its expenses; and
o that the expenses will be recoverable by it from related insurance
and condemnation proceeds or liquidation proceeds.
HAZARD INSURANCE POLICIES
Unless otherwise specified in the related prospectus supplement, each
pooling and servicing agreement will require the servicer to cause each
mortgage loan borrower to maintain a hazard insurance policy that provides for
the coverage as is required under the related mortgage. Alternatively, if the
mortgage permits the holder to dictate to the borrower the insurance coverage
to be maintained on the related mortgaged property, the hazard insurance policy
coverage should be consistent with the requirements of the servicing standard.
Unless otherwise specified in the related prospectus supplement, the hazard
insurance policy coverage generally will be in an amount equal to the lesser of
the principal balance owing on the mortgage loan and the replacement cost of
the related mortgaged property. The ability of the servicer to assure that
hazard insurance proceeds are appropriately applied may depend 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 the servicer under any policy will be deposited in the related
certificate account. Amounts to be applied to the restoration or repair of the
mortgaged property or released to the borrower in accordance with the
servicer's normal servicing procedures and/or to the terms and conditions of
the related mortgage and mortgage note will be otherwise distributed. The
pooling and servicing agreement may provide that
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the servicer may satisfy its obligation to cause each borrower to maintain a
hazard insurance policy by maintaining a blanket policy insuring against hazard
losses on all of the mortgage loans in a trust fund. If a blanket policy
contains a deductible clause, the servicer will be required, in the event of a
casualty covered by that blanket policy, to deposit in the related certificate
account all sums that would have been deposited in that certificate account but
for the 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.
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. Nevertheless, most of the 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 some
other kinds of risks. Accordingly, a mortgaged property may not be insured for
losses arising from any such cause unless the related mortgage specifically
requires, or permits its holder to require, that type of 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, the clauses generally provide that the
insurer's liability in the event of partial loss does not exceed the lesser of:
o the replacement cost of the improvements less physical depreciation;
and
o the proportion of the loss as the amount of insurance carried bears
to the specified percentage of the full replacement cost of the
improvements.
DUE-ON-SALE AND DUE-ON-ENCUMBRANCE PROVISIONS
Some 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.
Some 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 servicer will
determine whether to exercise any right the trustee may have under any related
provision in a manner consistent with the servicing standard set forth in the
related pooling and servicing agreement. Unless otherwise specified in the
related prospectus supplement, the servicer will be entitled to retain as
additional servicing compensation any fee collected in connection with the
permitted transfer of a mortgaged property.
For additional information regarding due-on-sale and due-on-encumbrance
clauses relating to mortgage loans, you should review the section in this
prospectus titled "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, the
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. Any
special servicer's compensation with respect to a series of certificates will
come from payments or other collections on or with respect to specially
serviced mortgage loans and REO properties. Because compensation is generally
based on a percentage of the principal balance of each mortgage loan
outstanding from time to time, it will decrease in accordance with the
amortization of the mortgage loans. The prospectus supplement with respect to a
series of certificates may provide that, as
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additional compensation, the servicer may 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 certificate account. Any sub-servicer will receive a portion
of the servicer's compensation as its sub-servicing compensation.
In addition to amounts payable to any sub-servicer, the servicer may be
required, to the extent provided in the related prospectus supplement, to pay
from amounts that represent its servicing compensation some expenses incurred
in connection with the administration of the related trust fund. Those expenses
may include, without limitation, payment of the fees and disbursements of
independent accountants and payment of expenses incurred in connection with
distributions and reports to certificateholders. Some other expenses, including
some expenses related to mortgage loan defaults and liquidations and, to the
extent so provided in the related prospectus supplement, interest on those
expenses at the rate specified in the related prospectus supplement, and the
fees of any special servicer, may be required to be borne by the trust fund.
If and to the extent provided in the related prospectus supplement, the
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. For further information regarding prepayment interest shortfalls,
you should review the section in the prospectus titled "Yield and Maturity
Considerations--Shortfalls in Collections of Interest as a Result of
Prepayments of Mortgage Loans".
EVIDENCE AS TO COMPLIANCE
Unless otherwise provided in the related prospectus supplement, each
pooling and servicing agreement will require, on or before a specified date in
each year, the servicer to cause a firm of independent public accountants to
furnish to the trustee a statement. The statement should provide that, on the
basis of the examination by that firm conducted substantially in compliance
with either the Uniform Single Audit Program for Mortgage Bankers or the Audit
Program for Mortgages serviced for FHLMC, the servicing by or on behalf of the
servicer of mortgage loans under pooling and servicing agreements substantially
similar to each other, which may include the pooling and servicing agreement,
was conducted through the preceding calendar year or other specified
twelve-month period in compliance with the terms of those agreements except for
any significant exceptions or errors in records that, in the opinion of the
firm, neither the Audit Program for Mortgages serviced for FHLMC, nor paragraph
4 of the Uniform Single Audit Program for Mortgage Bankers, requires it to
report.
Each pooling and servicing agreement will also require, on or before a
specified date in each year, the servicer to furnish to the trustee a statement
signed by one or more officers of the servicer to the effect that the servicer
has fulfilled its material obligations under the applicable pooling and
servicing agreement throughout the preceding calendar year or other specified
twelve-month period.
SOME MATTERS REGARDING THE SERVICER AND THE DEPOSITOR
The entity serving as servicer under a pooling and servicing agreement may
be our affiliate and may have other normal business relationships with us or
our affiliates. Unless otherwise specified in the prospectus supplement for a
series of certificates, the related pooling and servicing agreement will permit
the servicer to resign from its obligations only upon the following conditions:
o the appointment of, and the acceptance of the appointment by, a
successor to it and receipt by the trustee of written confirmation
from each applicable rating agency that the resignation and
appointment will not have an adverse effect on the rating assigned by
the rating agency to any class of certificates of the series; or
o a determination that the servicer's 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 resignation by the servicer will become effective until the trustee or
a successor servicer has assumed the servicer's obligations and duties under
the pooling and servicing agreement. Unless
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otherwise specified in the related prospectus supplement, the 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 some limitations as to amount of
coverage, deductible amounts, conditions, exclusions and exceptions permitted
by the related pooling and servicing agreement.
Unless otherwise specified in the related prospectus supplement, each
pooling and servicing agreement will further provide that none of the servicer,
any special servicer, the depositor 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 and servicing agreement or for errors in judgment. However, none
of the servicer, us or any other person will be protected against any of the
following:
o breach of a representation, warranty or covenant made in the pooling
and servicing agreement;
o any expense or liability that that person is specifically required to
bear pursuant to the terms of the pooling and servicing agreement;
and
o any liability that would otherwise be imposed by reason of willful
misfeasance, bad faith or gross negligence in the performance of
obligations or duties or by reason of reckless disregard of the
obligations and duties.
Unless otherwise specified in the related prospectus supplement, each
pooling and servicing agreement will further provide that the servicer, the
depositor and any director, officer, employee or agent of either 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 the pooling and servicing agreement or the related series of certificates.
However, indemnification will not extend to any loss, liability or expense:
o that the person is specifically required to bear pursuant to the
terms of the agreement, or is incidental to the performance of
obligations and duties thereunder and is not otherwise reimbursable
pursuant to the pooling and servicing agreement;
o those that are incurred in connection with any breach of a
representation, warranty or covenant made in the pooling and
servicing agreement;
o that are incurred by reason of misfeasance, bad faith or gross
negligence in the performance of obligations or duties under the
pooling and servicing agreement, or by reason of reckless disregard
of the obligations or duties; or
o that are incurred in connection with any violation of any state or
federal securities law.
In addition, each pooling and servicing agreement will provide that
neither the servicer nor the depositor will be under any obligation to appear
in, prosecute or defend any legal action that is not incidental to its
respective responsibilities under the pooling and servicing agreement and that
in its opinion may involve it in any expense or liability. However, each of the
servicer and the depositor will be permitted, in the exercise of its
discretion, to undertake any 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 and servicing agreement and the interests of the
related series of certificateholders. In that event, the legal expenses and
costs of the action, and any liability resulting therefrom, will be expenses,
costs and liabilities of the related series of certificateholders, and the
servicer or the depositor, as the case may be, will be entitled to charge the
related certificate account for those expenses, costs and liabilities.
Any person into which the servicer or the depositor may be merged or
consolidated, or any person resulting from any merger or consolidation to which
the servicer or the depositor is a party, or any person succeeding to the
business of the servicer or the depositor, will be the successor of the
servicer or the depositor, as the case may be, under the related pooling and
servicing agreement.
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EVENTS OF DEFAULT
Unless otherwise provided in the prospectus supplement for a series of
certificates, events of default under the related pooling and servicing
agreement will include the following:
o any failure by the servicer to distribute or cause to be distributed
to the certificateholders of that series, or to remit to the trustee
for distribution to those certificateholders, any amount required to
be so distributed or remitted, which failure continues unremedied for
five days after written notice has been given to the servicer by the
trustee or the depositor, or to the servicer, the depositor and the
trustee by certificateholders entitled to not less than 25%, or the
other percentage specified in the related prospectus supplement, of
the voting rights for that series;
o any failure by the servicer duly to observe or perform in any
material respect any of its other covenants or obligations under the
related pooling and servicing agreement, which failure continues
unremedied for sixty days after written notice of the failure has
been given to the servicer by the trustee or the depositor, or to the
servicer, the depositor and the trustee by certificateholders
entitled to not less than 25%, or the other percentage specified in
the related prospectus supplement, of the voting rights for that
series; and
o some events of insolvency, readjustment of debt, marshalling of
assets and liabilities, or similar proceedings in respect of or
relating to the servicer and some actions by or on behalf of the
servicer indicating its insolvency or inability to pay its
obligations.
Material variations to the foregoing events of default, other than to add
to it or shorten cure periods or eliminate notice requirements, will be
specified in the related prospectus supplement.
RIGHTS UPON EVENT OF DEFAULT
If an Event of Default occurs with respect to the servicer under a pooling
and servicing agreement and remains unremedied, the depositor or the trustee
will be authorized, and at the direction of certificateholders of the related
series entitled to not less than 51%, or the other percentage specified in the
related prospectus supplement, of the voting rights for the series, the trustee
will be required, to terminate all of the rights and obligations of the
servicer under the pooling and servicing agreement. Upon termination of the
servicer's rights and obligations, the trustee will succeed to all of the
responsibilities, duties and liabilities of the servicer under the pooling and
servicing agreement and will be entitled to similar compensation arrangements.
However, if the servicer is required to make advances under the pooling and
servicing agreement regarding delinquent mortgage loans, but the trustee is
prohibited by law from obligating itself to do so, or if the related prospectus
supplement so specifies, the trustee will not be obligated to make the
advances. 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 the other percentage specified in the related prospectus supplement, of
the voting rights for the series, it will be required to, appoint, or petition
a court of competent jurisdiction to appoint, a loan servicing institution
that, unless otherwise provided in the related prospectus supplement, is
acceptable to each applicable rating agency to act as successor to the servicer
under the pooling and servicing agreement. Pending appointment of a successor,
the trustee will be obligated to continue to act in that capacity.
You will not have the right under any pooling and servicing agreement to
institute any proceeding with respect to the pooling and servicing agreement.
You may do so only if the following conditions have been met:
o you previously have given to the trustee written notice of default
and other certificateholders of the same series entitled to not less
than 25%, or the other percentage specified in the related prospectus
supplement, of the voting rights for the series shall have made
written request upon the trustee to institute the proceeding in its
own name as trustee;
o you shall have offered to the trustee reasonable indemnity; and
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o the trustee for sixty days, or the other period specified in the
related prospectus supplement, shall have neglected or refused to
institute any related proceeding.
The trustee, however, will be under no obligation to exercise any of the
trusts or powers vested in it by the related pooling and servicing agreement or
to make any investigation of matters arising thereunder or to institute,
conduct or defend any litigation thereunder or in relation to it at the
request, order or direction of any of the holders of certificates of the
related series, unless the 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 and servicing agreement may be amended by the respective
parties to it, without your consent, to do the following:
o to cure any ambiguity;
o to correct a defective provision therein or to correct, modify or
supplement any provision in the pooling and servicing agreement that
may be inconsistent with any other provision in the pooling and
servicing agreement;
o to add any other provisions with respect to matters or questions
arising under the pooling and servicing agreement that are not
inconsistent with its provisions;
o to comply with any requirements imposed by the Internal Revenue Code;
or
o for any other purpose; provided that the amendment, other than an
amendment for the specific purpose referred to in clause 4 above, may
not, as evidenced by an opinion of counsel to the effect satisfactory
to the trustee, adversely affect in any material respect your
interests; and provided further that the amendment, other than an
amendment for one of the specific purposes referred to in clauses 1
through 4 above, must be acceptable to each applicable rating agency.
Unless otherwise specified in the related prospectus supplement, each
pooling and servicing agreement may also be amended by the respective parties
to the pooling and servicing agreement, with the consent of the holders of the
related series of certificates entitled to not less than 51%, or another
percentage specified in the related prospectus supplement, of the voting rights
for that series allocated to the affected classes, for any purpose. However,
unless otherwise specified in the related prospectus supplement, no amendment
may:
o 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 that certificate;
o adversely affect in any material respect the interests of the holders
of any class of certificates, in a manner other than as described in the
immediately preceding clause, without the consent of the holders of all
certificates of that class; or
o modify the provisions of the pooling and servicing 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
and servicing agreement pursuant to which one or more REMIC elections are to be
or have been made unless the trustee shall first have received an opinion of
counsel to the effect that the amendment will not result in the imposition of a
tax on the related trust fund or cause the related trust fund, or any of its
designated portions, 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
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certificates of the same series with respect to their rights under the related
pooling and servicing agreement, the trustee or other specified person will
afford the certificateholders access during normal business hours to the most
recent list of certificateholders of that series held by the person. If the
list is of a date more than 90 days prior to the date of receipt of the
certificateholders' request, then the person, if not the registrar for that
series of certificates, will be required to request from the registrar a
current list and to afford the requesting certificateholders access to it
promptly upon receipt.
THE TRUSTEE
The trustee under each pooling and servicing 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 us or our affiliates and with any
servicer or special servicer and its affiliates. If and to the extent specified
under the related pooling and servicing agreement, some functions of the
trustee may be performed by a fiscal agent under some circumstances.
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 and servicing agreement,
the certificates or any underlying mortgage loan or related document. The
trustee will not be accountable for the use or application by or on behalf of
the servicer for that series of any funds paid to the servicer or any special
servicer in respect of the certificates or the underlying mortgage loans, or
any funds deposited into or withdrawn from the certificate account or any other
account for that series by or on behalf of the servicer or any 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 and servicing 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 and
servicing agreement, a trustee will be required to examine those documents and
to determine whether they conform to the requirements of the pooling and
servicing agreement.
REGARDING THE FEES, INDEMNITIES AND POWERS OF 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
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 that series. The trustee may
be indemnified 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 and servicing agreement. However, the indemnification will
not extend to any loss, liability or expense that:
o constitutes a specific liability imposed on the trustee pursuant to the
related pooling and servicing agreement,
o constitutes 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 or by reason of its
reckless disregard of its obligations or duties; or
o may arise from a breach of any representation, warranty or covenant of
the trustee made in the pooling and servicing agreement.
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 and servicing agreement or perform
any of its duties either directly or by or through agents or attorneys. The
trustee will not be responsible for any willful misconduct or gross negligence
on the part of any other agent or attorney appointed by it with due care.
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RESIGNATION AND REMOVAL OF THE TRUSTEE
A trustee will be permitted at any time to resign from its obligations and
duties under the related pooling and servicing agreement by giving written
notice to us. Upon receiving a notice of resignation, we, or any other person
as may be specified in the related prospectus supplement, will be required to
use our 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 the 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 the under
the related pooling and servicing agreement, or if at any time the trustee
becomes incapable of acting, or if some events of, or proceedings in respect
of, bankruptcy or insolvency occur with respect to the trustee, we 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 51%, or the
other percentage specified in the related prospectus supplement, of the voting
rights for the series may at any time, with cause, or if so specified in the
related prospectus supplement, without cause, remove the trustee under the
related pooling and servicing agreement and appoint a successor trustee.
Any resignation or removal of a trustee and appointment of a successor
trustee will not become effective until acceptance of appointment by the
successor trustee.
DESCRIPTION OF CREDIT SUPPORT
GENERAL
Credit support may be provided with respect to one or more classes of the
certificates of any series, or with respect to the related mortgage loans or
mortgage backed securities backing the certificates. Credit support may be in
the form of letters of credit, overcollateralization, the subordination of one
or more classes of certificates, insurance policies, surety bonds, guarantees
or reserve funds, or any combination of the foregoing. If so provided in the
related prospectus supplement, any instrument of credit support may provide
credit enhancement for more than one series of certificates to the extent
described in that instrument.
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 you of all amounts to which
you are entitled under the related pooling and servicing agreement. If losses
or shortfalls occur that exceed the amount covered by the related credit
support or that are not covered by the credit support, you will bear the share
of deficiencies allocable to your certificates. Moreover, if an instrument of
credit support covers more than one series of certificates, holders of
certificates of one series will be subject to the risk that that credit support
will be exhausted by the claims of the holders of certificates of one or more
other series before they receive their intended share of the credit support
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 loans or
mortgage backed securities backing the certificates, the related prospectus
supplement will include a description of the following:
o the nature and amount of coverage under the credit support;
o any conditions to payment thereunder not otherwise described in this
prospectus;
o the conditions, if any, under which the amount of coverage under the
credit support may be reduced and under which the credit support may
be terminated or replaced; and
o the material provisions relating to the credit support.
Additionally, the related prospectus supplement will set forth some
information with respect to the obligor under any instrument of credit support,
including the following:
o a brief description of its principal business activities;
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o its principal place of business, place of incorporation and the
jurisdiction under which it is chartered or licensed to do business;
o if applicable, the identity of regulatory agencies that exercise
primary jurisdiction over the conduct of its business; and
o its total assets, and its stockholders' equity or policyholders'
surplus, if applicable, as of a date that will be specified in the
prospectus supplement.
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, some types of losses or shortfalls. The related prospectus
supplement will set forth information concerning the method and amount of
subordination provided by a class or classes of subordinate certificates in a
series and the circumstances under which the subordination will be available.
CROSS-SUPPORT PROVISIONS
If the mortgage loans or mortgage backed securities 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 loans or mortgage
backed securities prior to distributions on subordinate certificates evidencing
interests in a different group of mortgage loans or mortgage backed securities
within the trust fund. The prospectus supplement for a series that includes a
cross-support provision will describe the manner and conditions for applying
the 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 some
default risks by insurance policies or guarantees. To the extent deemed by us
to be material, a copy of each instrument will accompany the Current Report on
Form 8-K to be filed with the SEC within 15 days of issuance of the
certificates of the related series.
LETTER OF CREDIT
If so provided in the prospectus supplement for a series of certificates,
deficiencies in amounts otherwise payable on those certificates or some classes
of those certificates will be covered by one or more letters of credit, issued
by a bank or financial institution specified in the prospectus supplement.
Under a letter of credit, the issuing bank will be obligated to honor draws in
an aggregate fixed dollar amount, net of unreimbursed payments, 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 some 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
issuing 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 related letter
of credit will accompany the Current Report on Form 8-K to be filed with the
SEC within 15 days of issuance of the certificates of the related series.
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CERTIFICATE INSURANCE AND SURETY BONDS
If so provided in the prospectus supplement for a series of certificates,
deficiencies in amounts otherwise payable on those certificates or some classes
of those certificates will be covered by insurance policies and/or surety bonds
provided by one or more insurance companies or sureties. The 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 insurance policies and/or surety bonds. A copy of any
insurance policy or surety bond will accompany the Current Report on Form 8-K
to be filed with the SEC 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 the certificates or some classes
of those certificates will be covered, to the extent of available funds, by one
or more reserve funds. Cash, a letter of credit, permitted investments, a
demand note or a combination of the following will be deposited into the
reserve funds, in the amounts specified in the 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 some 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 the investments will be credited to the related reserve fund
for the series, and any loss resulting from the investments will be charged to
that reserve fund. However, any reinvestment income or gain from investments
may be payable to any related 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 in this prospectus. The related prospectus supplement will specify,
as to each credit support instrument, the information indicated above, to the
extent the information is material and available.
LEGAL ASPECTS OF MORTGAGE LOANS
The following discussion contains general summaries of some legal aspects
of loans secured by commercial and multifamily residential properties. Because
the 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.
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For additional information regarding legal aspects of mortgage loans, you
should review the section in this prospectus titled "Description of the Trust
Funds--Mortgage Loans". For purposes of the following discussion, the term
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 grantor, the borrower, conveys title to the real property to
the grantee, the lender, generally with a power of sale, until the 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 related note. The mortgagee's authority
under a mortgage, the trustee'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, some federal laws, including, without limitation, the
Soldiers' and Sailors' Civil Relief Act of 1940, as amended, and, in some deed
of trust transactions, 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 revenues are considered accounts
receivable under the UCC; in cases where hotels or motels constitute loan
security, the revenues are generally pledged by the borrower as additional
security for the loan. In general, the lender must file financing statements in
order to perfect its security interest in the revenues and must file
continuation statements, generally every five years, to maintain perfection of
its security interest. Even if the lender's security interest in room revenues
is perfected under the UCC, it may be required to commence a foreclosure action
or otherwise take possession of the property in order to collect the room
revenues following a default.
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For additional information regarding foreclosure action with respect to
revenue from income-producing properties, you should also review the section in
the prospectus titled "--Bankruptcy Laws".
PERSONAL PROPERTY
In the case of some 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.
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. Moreover, as discussed below,
even a non-collusive, regularly conducted foreclosure sale may be challenged as
a fraudulent conveyance, regardless of the parties' intent, if a court
determines that the sale was for less than fair consideration and the sale
occurred while the borrower was insolvent and within a specified period prior
to the borrower's filing for bankruptcy protection.
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 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. Public sales of mortgaged property are
made in accordance with procedures that vary from state to state.
Equitable Limitations on Enforceability of Some Provisions. 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 the 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
that of the lenders and have required that lenders reinstate loans or recast
payment schedules in order to accommodate borrowers who are suffering from a
temporary financial disability. In other cases, courts have limited the right
of the lender to foreclose in the case of a non-monetary default, such as a
failure to adequately maintain the mortgaged property or an impermissible
further encumbrance of the mortgaged property. Finally, some courts have
addressed the issue of whether federal or state constitutional provisions
reflecting
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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.
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 the 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 value of
that property at the time of sale, due to, among other things, redemption
rights which may exist and the possibility of physical deterioration of the
property during the foreclosure proceedings. Potential buyers may be reluctant
to purchase property at a foreclosure sale as a result of the 1980 decision of
the United States Court of Appeals for the Fifth Circuit in Durrett v.
Washington National Insurance Company and other decisions that have followed
its reasoning. The court in Durrett held that even a non-collusive, regularly
conducted foreclosure sale was a fraudulent transfer under the federal
Bankruptcy Code and, therefore, could be rescinded in favor of the bankrupt's
estate, if:
o the foreclosure sale was held while the debtor was insolvent; and
o the price paid for the foreclosed property did not represent
(reasonably equivalent value).
Although the reasoning and result of Durrett in respect of the Bankruptcy Code
was rejected by the United States Supreme Court in 1994, the case could
nonetheless be persuasive to a court applying a state fraudulent conveyance law
which has provisions similar to those construed in Durrett. For these reasons,
it is common for the lender to purchase the mortgaged property for an amount
equal to the lesser of fair market value and the underlying debt and accrued
and unpaid interest plus the expenses of foreclosure.
Generally, state law controls the amount of foreclosure costs and expenses
which may be recovered by a lender. Thereafter, subject to the mortgagor's
right in some states to remain in possession during a redemption period, if
applicable, the lender will become the owner of the property and have both the
benefits and burdens of ownership of the mortgaged property. For example, the
lender will have the obligation to pay debt service on any senior mortgages, to
pay taxes, obtain casualty insurance and to make any repairs at its own expense
as are necessary to render the property suitable for sale. Frequently, the
lender employs a third party management company to manage and operate the
property. 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 costs of management and operation of those
mortgaged properties which are hotels, motels or nursing or convalescent homes
or hospitals may be particularly significant because of the
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expertise, knowledge and, with respect to nursing or convalescent homes or
hospitals, regulatory compliance, required to run the operations and the effect
which foreclosure and a change in ownership may have on the public's and the
industry's, including franchisors', perception of the quality of the
operations. The lender will commonly obtain the services of a real estate
broker and pay the broker's commission in connection with the sale of the
property. Depending upon market conditions, the ultimate proceeds of the sale
of the property may not equal the amount of the mortgage against the property.
Moreover, a lender commonly incurs substantial legal fees and court costs in
acquiring a mortgaged property through contested foreclosure and/or bankruptcy
proceedings. Furthermore, a few states require that any environmental
contamination at some types of properties be cleaned up before a property may
be resold. In addition, a lender may be responsible under federal or state law
for the cost of cleaning up a mortgaged property that is environmentally
contaminated. Generally state law controls the amount of foreclosure expenses
and costs, including attorneys' fees, that may be recovered by a lender.
For additional information regarding environmental costs associated with a
mortgaged property, you should review the section in this prospectus titled
"--Environmental Risks".
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.
The proceeds received by the referee or trustee from a foreclosure sale
are generally applied first to the costs, fees and expenses of sale and then in
satisfaction of the indebtedness secured by the mortgage under which the sale
was conducted. Any proceeds remaining after satisfaction of senior mortgage
debt are generally payable to the holders of junior mortgages and other liens
and claims in order of their priority, whether or not the borrower is in
default. Any additional proceeds are generally payable to the borrower. The
payment of the proceeds to the holders of junior mortgages may occur in the
foreclosure action of the senior mortgage or a subsequent ancillary proceeding
or may require the institution of separate legal proceedings by the holders.
Rights of Redemption. The purposes of a foreclosure action are to enable
the lender to realize upon its security and to bar the borrower, and all
persons who have interests in the property that are subordinate to that of the
foreclosing lender, from exercise of their equity of redemption. The doctrine
of equity of redemption provides that, until the property encumbered by a
mortgage has been sold in accordance with a properly conducted foreclosure and
foreclosure sale, those having interests that are subordinate to that of the
foreclosing lender have an equity of redemption and may redeem the property by
paying the entire debt with interest. Those having an equity of redemption must
generally be made parties and joined in the foreclosure proceeding in order for
their equity of redemption to be terminated.
The equity of redemption is a common-law (non-statutory) right which
should be distinguished from post-sale statutory rights of redemption. In some
states, after sale pursuant to a deed of trust or foreclosure of a mortgage,
the borrower and foreclosed junior lienors are given a statutory period in
which to redeem the property. In some states, statutory redemption may occur
only upon payment of the foreclosure sale price. In other states, redemption
may be permitted if the former borrower pays only a portion of the sums due.
The effect of a statutory right of redemption is to diminish the ability of the
lender to sell the foreclosed property because the exercise of a right of
redemption would defeat the title of any purchaser through a foreclosure.
Consequently, the practical effect of the redemption right is to force the
lender to maintain the property and pay the expenses of ownership until the
redemption period has expired. In some states, a post-sale statutory right of
redemption may exist following a judicial foreclosure, but not following a
trustee's sale under a deed of trust.
Anti-Deficiency Legislation. Some or all of the mortgage loans may be
nonrecourse loans, as to which recourse in the case of default will be limited
to the mortgaged property and any other assets
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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 some other states, the lender has the
option of bringing a personal action against the borrower on the debt without
first exhausting that security. However, in some of those states, the lender,
following judgment on the 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 mortgage on the borrower's leasehold
interest in a ground lease. Leasehold mortgage loans are subject to some 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 upon a lease default, the leasehold mortgagee
would lose its security. This risk may be lessened under some circumstances
such as the following:
o if the ground lease requires the lessor to give the leasehold
mortgagee notices of lessee defaults and an opportunity to cure them;
o if the ground lease permits the leasehold estate to be assigned to
and by the leasehold mortgagee or the purchaser at a foreclosure
sale; and
o if the ground lease contains some other protective provisions
typically included in a mortgageable ground lease.
The ground leases that secure the mortgage loans at issue may not contain
some of these protective provisions, and the related mortgages may not contain
the other protections discussed in the next paragraph. Protective ground lease
provisions include the following:
o the right of the leasehold mortgagee to receive notices from the
ground lessor of any defaults by the borrower under the ground lease;
o the right of the leasehold mortgagee to cure the defaults, with
adequate cure periods;
o if a default is not susceptible of cure by the leasehold mortgagee,
the right to acquire the leasehold estate through foreclosure or
otherwise;
o the ability of the ground lease to be assigned to and by the
leasehold mortgagee or purchaser at a foreclosure sale and for the
concomitant release of the ground lessee's liabilities thereunder;
and
o the right of the leasehold mortgagee to enter into a new ground lease
with the ground lessor on the same terms and conditions as the old
ground lease in the event of a termination of the ground lease.
In addition to the foregoing protections, a leasehold mortgagee may
prohibit the ground lessee from treating the ground lease as terminated in the
event of the ground lessor's bankruptcy and rejection of the ground lease in
the lessor's bankruptcy case, although this provision may not be enforceable.
As further protection, a leasehold mortgage may provide for the assignment of
the debtor-ground lessee's right to reject the lease in a ground lessee
bankruptcy case, such a provision may not be enforceable. Without the
protections described in this and the foregoing paragraph, a
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leasehold mortgagee may be more likely to lose the collateral securing its
leasehold mortgage. In addition, the terms and conditions of a leasehold
mortgage are subject to the terms and conditions of the ground lease. Although
some rights given to a ground lessee can be limited by the terms of a leasehold
mortgage, the rights of a ground lessee or a leasehold mortgagee with respect
to, among other things, insurance, casualty and condemnation proceeds will
ordinarily be governed by the provisions of the ground lease, unless otherwise
agreed to by the ground lessee and leasehold mortgagee.
COOPERATIVE SHARES
Mortgage loans may be secured by a security interest on the borrower's
ownership interest in shares, and the proprietary leases appurtenant to those
shares, allocable to cooperative dwelling units that may be vacant or occupied
by non-owner tenants. The loans are subject to some risks not associated with
mortgage loans secured by a lien on the fee estate of a borrower in real
property. Such a loan typically is subordinate to the mortgage, if any, on the
cooperative's building which, if foreclosed, could extinguish the equity in the
building and the proprietary leases of the dwelling units derived from
ownership of the shares of the cooperative. Further, transfer of shares in a
cooperative are subject to various regulations as well as to restrictions under
the governing documents of the cooperative, and the shares may be cancelled in
the event that associated maintenance charges due under the related proprietary
leases are not paid. Typically, a recognition agreement between the lender and
the cooperative provides, among other things, the lender with an opportunity to
cure a default under a proprietary lease.
Under the laws applicable in many states, foreclosure on cooperative
shares is accomplished by a sale in accordance with the provisions of Article 9
of the UCC and the security agreement relating to the shares. Article 9 of the
UCC requires that a sale be conducted in a "commercially reasonable" manner,
which may be dependent upon, among other things, the notice given the debtor
and the method, manner, time, place and terms of the sale. Article 9 of the UCC
provides that the proceeds of the sale will be applied first to pay the costs
and expenses of the sale and then to satisfy the indebtedness secured by the
lender's security interest. A recognition agreement, however, generally
provides that the lender's right to reimbursement is subject to the right of
the cooperative to receive sums due under the proprietary leases. If, following
payment to the lender, there are proceeds remaining, the lender must account to
the tenant-stockholder for the surplus. Conversely, if a portion of the
indebtedness remains unpaid, the tenant-stockholder may be responsible for the
deficiency.
For additional information regarding payment of deficiencies, you should
review the sections in this prospectus titled "--Anti-Deficiency Legislation."
BANKRUPTCY LAWS
Operation of the Bankruptcy Code and related state laws may interfere with
or affect the ability of a secured lender to realize upon collateral and/or to
enforce a deficiency judgment. For example, under the Bankruptcy Code,
virtually all actions, including foreclosure actions and deficiency judgment
proceedings, to collect a debt are automatically stayed upon the filing of the
bankruptcy petition and, often, no interest or principal payments are made
during the course of the bankruptcy case. The delay and the consequences caused
by an 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 the junior lien.
Under the Bankruptcy Code, provided some 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. For example,
the outstanding amount of the secured loan may be reduced to the then-current
value of the property, thus leaving the lender a general unsecured creditor for
the difference between the value and the outstanding balance of the loan. Other
modifications may include the reduction in the amount of each scheduled
payment, a reduction in the rate of interest and/or an alteration of the
repayment schedule and an extension (or shortening) of the term to
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maturity. The lien of the lender may be transferred to other collateral or
collateral may be released from the lien of the lender. The priority of a
mortgage loan may also be subordinated to bankruptcy court-approved financing.
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 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.
The bankruptcy court can also reinstate accelerated indebtedness and also,
in effect, invalidate due-on-sale clauses. A trustee for a lessor, or a lessor
as debtor-in-possession, may, despite the provisions of the related mortgage
loan to the contrary, sell the mortgaged property free and clear of all liens,
which liens would then attach to the proceeds of the sale.
The Bankruptcy Code provides that a lender's perfected pre-petition
security interest in leases, rents and hotel revenues continues in the
post-petition rents and hotel revenues, unless a bankruptcy court orders to the
contrary based on the equities of the case. Thus, if the borrower has executed
an assignment of leases, 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 is adequately
protected. It should be noted, however, that the court may find that the lender
has no security interest in either pre-petition or post-petition revenues if
the court finds that the loan documents do not contain language covering
accounts, room rents, or other forms of personality necessary for a security
interest to attach to hotel revenues.
Bankruptcies of tenants of the mortgaged properties could have an adverse
impact on the borrowers' ability to meet their obligations. For example, rights
and obligations under an unexpired lease may not be terminated or modified at
any time after the commencement of a case under the Bankruptcy Code solely
because of a provision in the lease conditioned upon the commencement of a case
under the Bankruptcy Code or some other similar events. In addition, there is
an automatic stay of, among other things, any act to obtain possession of
property of or from a debtor's estate, which may delay the borrower's exercise
of the remedies in the event that a lessee becomes the subject of a proceeding
under the Bankruptcy Code.
A trustee or a debtor-in-possession in a case under the Bankruptcy Code
has the power to assume or to reject an executory contract or an unexpired
lease of the debtor, in each case subject to the approval of the bankruptcy
court administering the case. If the trustee or debtor-in-possession rejects an
executory contract or an unexpired lease, the rejection generally constitutes a
breach of the executory contract or unexpired lease immediately before the date
of the filing of the petition. As a consequence, the other party or parties to
the executory contract or unexpired lease, such as the lessor or borrower, as
lessor under a lease, would have only an unsecured claim against the debtor for
damages resulting from the breach, which could adversely affect the security
for the related mortgage loan. Moreover, the claim of a lessor for the damages
from the termination of a lease of real property will be limited to the sum of:
1. the rent reserved by the lease, without acceleration, for the greater
of one year or 15 percent, not to exceed three years, of the
remaining term of the lease, following the earlier of the date of the
filing of the petition and the date on which the leased property was
surrendered; and
2. any unpaid rent due under that lease, without acceleration, on the
earlier of those dates.
If a trustee or debtor-in-possession assumes an executory contract or an
unexpired lease of the debtor, the trustee or debtor-in-possession generally
may assign the executory contract or unexpired lease, notwithstanding any
provision in that executory contract or unexpired lease or in applicable law
that prohibits, restricts or conditions the assignment, provided that the
trustee or debtor-in-possession provides adequate assurance of future
performance by the assignee. The Bankruptcy Code specifically provides,
however, that adequate assurance of future performance for purposes of a lease
of real property in a shopping center includes the following:
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o adequate assurance of the source of rent due under the lease, and in
the case of an assignment, that the financial condition and operating
performance of the proposed assignee and its guarantors, if any,
shall be similar to the financial condition and operating performance
of the debtor and its guarantors, if any, as of the time the debtor
became the lessee under the lease,
o that any percentage rent due under the lease will not decline
substantially;
o that the assumption and assignment of the lease is subject to all the
provisions in that lease, including, but not limited to, provisions
such as a radius, location, use or exclusivity provision, and will
not breach any provision contained in any other lease, financing
agreement, or master agreement relating to that shopping center; and
o that the assumption or assignment of the lease will not disrupt the
tenant mix or balance in that shopping center.
Thus, an undetermined third party may assume the obligations of the lessee
under a lease in the event of commencement of a proceeding under the Bankruptcy
Code with respect to the lessee.
If a trustee for a lessor as a debtor-in-possession, rejects an unexpired
lease of real property, the lessee may treat that lease as terminated by that
rejection or, in the alternative, may remain in possession of the leasehold for
the balance of the term of the lease and for any renewal or extension of that
term that is enforceable by the lessee under applicable nonbankruptcy law. The
Bankruptcy Code provides that if a lessee elects to remain in possession after
a rejection of a lease, the lessee may offset against rents reserved under the
lease, for the balance of the term after the date of rejection of the lease and
any renewal or extension thereof, the value of any damages occurring after the
date of rejection caused by the nonperformance of any obligation of the lessor
after that date.
In a bankruptcy or similar proceeding, action may be taken seeking the
recovery as a preferential transfer of any payments made by the mortgagor under
the related mortgage loan to the related trust fund. Payments may be protected
from recovery as preferences if they are payments in the ordinary course of
business made on debts incurred in the ordinary course of business. Whether any
particular payment would be protected depends upon the facts specific to a
particular transaction. In addition, some court decisions suggest that even a
non-collusive, regularly conducted foreclosure sale could be challenged in a
bankruptcy case as a fraudulent conveyance, regardless of the parties' intent,
if a bankruptcy court determines that the mortgaged property has been sold for
less than fair consideration while the mortgagor was insolvent or otherwise
meets the statutory criteria for fraudulent transfer.
A trustee in bankruptcy, in some cases, may be entitled to collect its
costs and expenses in preserving or selling the mortgaged property ahead of
payment to the lender. In some circumstances, a debtor in bankruptcy may have
the power to grant liens senior to the lien of a mortgage, and analogous state
statutes and general principles of equity may also provide a mortgagor with
means to halt a foreclosure proceeding or sale and to force a restructuring of
a mortgage loan on terms a lender would not otherwise accept. Moreover, the
laws of some states also give priority to some tax liens over the lien of a
mortgage or deed of trust. Under the Bankruptcy Code, if the court finds that
actions of the mortgagee have been unreasonable, the lien of the related
mortgage may be subordinated to the claims of unsecured creditors.
Pursuant to the doctrines of substantive consolidation or piercing the
corporate veil, a bankruptcy court, in the exercise of its equitable powers,
also has the authority to order that the assets and liabilities of a related
entity be consolidated with those of an entity before it. Thus, property that
is ostensibly the property of one entity may be determined to be the property
of a different entity in bankruptcy, the automatic stay applicable to the
second entity may be extended to the first and the rights of creditors of the
first entity may be impaired in the fashion set forth above in the discussion
of bankruptcy principles. The application of any of these doctrines to one or
more of the mortgagors in the context of the bankruptcy of one or more of their
affiliates could result in material impairment of the rights of the
certificateholders.
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For each mortgagor that is described as a special purpose entity, single
purpose entity or bankruptcy-remote entity in the prospectus supplement, the
activities that may be conducted by the mortgagor and its ability to incur debt
are restricted by the applicable Mortgage or the organizational documents of
that mortgagor. The activities of the mortgagor are restricted in a manner as
is intended to make the likelihood of a bankruptcy proceeding being commenced
by or against that mortgagor remote, and that mortgagor has been organized and
is designed to operate in a manner that makes it reasonably likely that its
separate existence will be respected notwithstanding a bankruptcy proceeding in
respect of one or more affiliated entities of that mortgagor. However, we make
no representation as to the likelihood of the institution of a bankruptcy
proceeding by or in respect of any mortgagor or the likelihood that the
separate existence of any mortgagor would be respected if there were to be a
bankruptcy proceeding in respect of any affiliated entity of a mortgagor.
ENVIRONMENTAL RISKS
A lender may be subject to unforeseen environmental risks with respect to
loans secured by real or personal property, such as the mortgage loans. The
environmental risks may give rise to:
o a diminution in value of property securing a mortgage loan or the
inability to foreclose against the property; or
o in some circumstances as more fully described below, liability for
clean-up costs or other remedial actions, which liability could
exceed the value of the property or the principal balance of the
related mortgage loan.
Under the laws of many states, contamination on a property may give rise
to a lien on the property for cleanup costs. In several states, such a lien has
priority over all existing liens, including those of existing mortgages. In
these states, the lien of the mortgage for any mortgage loan may lose its
priority to that type of lien.
Under the federal Comprehensive Response Compensation and Liability Act, a
lender may be liable either to the government or to private parties for cleanup
costs on a property securing a loan, even if the lender does not cause or
contribute to the contamination. CERCLA imposes strict, as well as joint and
several, liability on several classes of potentially responsible parties, or
PRPs, including current owners and operators of the property who did not cause
or contribute to the contamination. Many states have laws similar to CERCLA.
Lenders may be held liable under CERCLA as owners or operators unless they
qualify for the secured creditor exemption to CERCLA. A 1990 decision of the
United States Court of Appeals for the Eleventh Circuit, United States v. Fleet
Factors Corp., 901 F.2d 1550 (11th Cir. 1990), narrowly construed the security
interest exemption under CERCLA to hold lenders liable if they had the capacity
to influence their borrower's management of hazardous waste. In response to the
Fleet Factors case, the Environmental Protection Agency promulgated a rule in
1992 intended to reduce interpretive uncertainties that surrounded the scope of
the secured lender exemption to liability under CERCLA. The rule, which the EPA
stated would be entitled to deference in CERCLA cost recovery actions brought
against lenders by private parties, clarified the scope of the secured creditor
exemption and identified specific types of actions that, if taken by a lender,
would preclude application of the exemption. In the decision of Kelley v. EPA,
15 F.3d 1100 (D.C. Cir. 1994), the Court of Appeals for the District of
Columbia vacated the EPA's lender liability rule. On September 30, 1996,
President Clinton signed into law the "Asset Conservation, Lender Liability and
Deposit Insurance Protection Act of 1996," which substantially protects lenders
and fiduciaries from liability for the environmental obligations of borrowers
and beneficiaries. The Asset Conservation Act includes amendments to CERCLA and
to the underground storage tank provisions of the Resource Conservation and
Recovery Act and applies to any claim that was not finally adjudicated as of
September 30, 1996. The Act offers substantial protection to lenders by
defining the activities in which a lender can engage and still have the benefit
of a secured creditor exemption. However, the secured creditor exemption is not
available to a lender that participates in management of mortgaged property
prior to a foreclosure. In order for a lender to be deemed to have participated
in the management of
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a mortgaged property, the lender must actually participate in the operational
affairs of the property of the borrower. The Act provides that merely having
the capacity to influence, or unexercised right to control operations does not
constitute participation in management. A lender will be deemed to have
participated in management and 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 all operational functions of the
mortgaged property. The Act also provides that a lender will continue to have
the benefit of the secured creditor exemption even if it forecloses on a
mortgaged property, purchases it at a foreclosure sale or accepts a
deed-in-lieu of foreclosure provided that the lender seeks to sell the
mortgaged property at the earliest practicable commercially reasonable time on
commercially reasonable terms.
Environment clean-up costs may be substantial. It is possible that
environmental clean-up costs could become a liability of the related trust fund
and occasion a loss to certificateholders if remedial costs were incurred.
In a few states, transfers of some types of properties are conditioned
upon cleanup of contamination prior to transfer. It is possible that a property
securing a mortgage loan could be subject to transfer restrictions. In such a
case, if the lender becomes the owner upon foreclosure, it may be required to
clean up the contamination before selling the property.
The cost of remediating hazardous substance contamination at a property
can be substantial. If a lender is or becomes liable, it can bring an action
for contribution against the owner or operator that created the environmental
hazard, but that person or entity may be without substantial assets.
Accordingly, it is possible that the costs of remediating hazardous substance
contamination at a property 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 and servicing agreement
will provide that the servicer, acting on behalf of the related trust fund, may
not acquire title to a mortgaged property or take over its operation unless the
servicer, based on 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 and
Servicing Agreements--Realization Upon Defaulted Mortgage Loans." There can be
no assurance that any environmental site assessment obtained by the servicer
will detect all possible environmental contamination or conditions or that the
other requirements of the related pooling and servicing agreement, even if
fully observed by the servicer, will in fact insulate the related trust fund
from liability with respect to environmental matters.
Even when a lender is not directly liable for cleanup costs on property
securing loans, if a property securing a loan is contaminated, the value of the
security is likely to be affected. In addition, a lender bears the risk that
unanticipated cleanup costs may jeopardize the borrower's repayment. Neither of
these two issues is likely to pose risks exceeding the amount of unpaid
principal and interest of a particular loan secured by a contaminated property,
particularly if the lender declines to foreclose on a mortgage secured by the
property.
If a lender forecloses on a mortgage secured by a property the operations
of which are subject to environmental laws and regulations, the lender will be
required to operate the property in accordance with those laws and regulations.
Compliance may entail some expense.
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.
The disclosure may decrease the amount that prospective buyers are willing to
pay for the affected property and thereby lessen the ability of the lender to
recover its investment in a loan upon foreclosure.
DUE-ON-SALE AND DUE-ON-ENCUMBRANCE PROVISIONS
Some 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
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encumbers the related mortgaged property. In recent years, court decisions and
legislative actions placed substantial restrictions on the right of lenders to
enforce the clauses in many states. By virtue, however, of the Garn-St Germain
Depository Institutions Act of 1982, 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 some loans made
after the effective date of the Garn Act are enforceable, within some
limitations, as set forth in the Garn Act and the regulations promulgated
thereunder, the 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 servicer's ability to
demonstrate that a sale threatens its legitimate security interest.
SUBORDINATE FINANCING
Some of the mortgage loans may not restrict the ability of the borrower to
use the mortgaged property as security for one or more additional loans. Where
a borrower encumbers a mortgaged property with one or more junior liens, the
senior lender is subjected to additional risk. First, the borrower may have
difficulty servicing and repaying multiple loans. Moreover, if the subordinate
financing permits recourse to the borrower, as is frequently the case, and the
senior loan does not, a borrower may have more incentive to repay sums due on
the subordinate loan. Second, acts of the senior lender that prejudice the
junior lender or impair the junior lender's security may create a superior
equity in favor of the junior lender. For example, if the borrower and the
senior lender agree to an increase in the principal amount of or the interest
rate payable on the senior loan, the senior lender may lose its priority to the
extent any existing junior lender is harmed or the borrower is additionally
burdened. Third, if the borrower defaults on the senior loan and/or any junior
loan or loans, the existence of junior loans and actions taken by junior
lenders can impair the security available to the senior lender and can
interfere with or delay the taking of action by the senior lender. Moreover,
the bankruptcy of a junior lender may operate to stay foreclosure or similar
proceedings by the senior lender.
DEFAULT INTEREST AND LIMITATIONS ON PREPAYMENTS
Notes and mortgages may contain provisions that obligate the borrower to
pay a late charge or additional interest if payments are not timely made, and
in some circumstances, may prohibit prepayments for a specified period and/or
condition prepayments upon the borrower's payment of prepayment fees or yield
maintenance penalties. In some states, there are or may be specific limitations
upon the late charges which a lender may collect from a borrower for delinquent
payments. Some 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.
ADJUSTABLE RATE LOANS
The laws of some states may provide that mortgage notes relating to
adjustable rate loans are not negotiable instruments under the UCC. In that
event, the related trust fund will not be deemed to be a holder in due course
within the meaning of the UCC and may take a mortgage note subject to
restrictions on the ability to foreclose and to contractual defenses available
to a mortgagor.
APPLICABILITY OF USURY LAWS
Title V of the Depository Institutions Deregulation and Monetary Control
Act of 1980, as amended, provides that state usury limitations shall not apply
to some types of residential (including multifamily) first mortgage loans
originated by some 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
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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. Some
states have taken action to reimpose interest rate limits and/or to limit
discount points or other charges.
No mortgage loan originated in any state in which application of Title V
has been expressly rejected or a provision limiting discount points or other
charges has been adopted, will, if originated after that rejection or adoption,
be eligible for inclusion in a trust fund unless:
o the mortgage loan provides for an interest rate, discount points and
charges as are permitted under the laws of the state; or
o the mortgage loan provides that the terms of that mortgage loan are
to be construed in accordance with the laws of another state under
which its interest rate, discount points and charges would not be
usurious and the borrower's counsel has rendered an opinion that the
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, a borrower who enters military service after the origination of the
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 the 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, we cannot give you any
information 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 any servicer to
collect full amounts of interest on some 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. The shortfalls would not be covered by advances
or, unless otherwise specified in the related prospectus supplement, any
instrument of credit support provided in connection with the certificates. In
addition, the Relief Act imposes limitations that would impair the ability of
the servicer to foreclose on an affected mortgage loan during the borrower's
period of active duty status, and, under some circumstances, during an
additional three-month period thereafter. Thus, in the event a mortgage loan
goes into default, there may be delays and losses occasioned by the inability
to realize upon the mortgaged property in a timely fashion.
TYPE OF MORTGAGED PROPERTY
The lender may be subject to additional risk depending upon the type and
use of the mortgaged property in question. For instance, mortgaged properties
which are hospitals, nursing homes or convalescent homes may present special
risks to lenders in large part due to significant governmental regulation of
the operation, maintenance, control and financing of health care institutions.
Mortgages on mortgaged properties which are owned by the borrower under a
condominium form of ownership are subject to the declaration, by-laws and other
rules and regulation of the condominium association. Mortgaged properties which
are hotels or motels may present additional risk to the lender in that:
o hotels and motels are typically operated pursuant to franchise,
management and operating agreements which may be terminable by the
operator; and
o the transferability of the hotel's operating, liquor and other
licenses to the entity acquiring the hotel either through purchase or
foreclosure is subject to the vagaries of local law requirements.
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In addition, mortgaged properties which are multifamily properties or
cooperatively owned multifamily properties may be subject to rent control laws,
which could impact the future cash flows of the properties.
AMERICANS WITH DISABILITIES ACT
Under Title III of the Americans with Disabilities Act of 1990 and rules
promulgated thereunder, in order to protect individuals with disabilities,
public accommodations (such as hotels, shopping centers, hospitals, schools and
social service center establishments) must remove architectural and
communication barriers which are structural in nature from existing places of
public accommodation to the extent "readily achievable" within the meaning of
the ADA. 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, each altered portion is 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. In addition to imposing a possible
financial burden on the borrower in its capacity as owner or landlord, the ADA
may also impose the requirements on a foreclosing lender who succeeds to the
interest of the borrower as owner or landlord. Furthermore, 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 statute can be seized by the government if the property
was used in, or purchased with the proceeds of, the 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
established that:
o its mortgage was executed and recorded before commission of the crime
upon which the forfeiture is based; or
o 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 of, activities proscribed by the Racketeer
Influenced and Corrupt Organizations statute.
In addition, there may be other state or municipal laws providing for
forfeiture of mortgaged properties.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of the anticipated material federal
income tax consequences of the purchase, ownership and disposition of
certificates. The discussion below does not purport to address all federal
income tax consequences that may be applicable to particular categories of
investors, some of which may be subject to special rules. The authorities on
which this discussion is based are subject to change or differing
interpretations, and any related change or interpretation could apply
retroactively. This discussion reflects the applicable provisions of the
Internal Revenue Code of 1986, as amended, as well as the REMIC regulations
promulgated by the U.S. Department of Treasury. Investors should consult their
own tax advisors in determining the federal, state, local and other tax
consequences to them of the purchase, ownership and disposition of
certificates.
For purposes of this discussion, references to the mortgage loans include
references to the mortgage loans underlying MBS included in the mortgage
assets, and, where the applicable prospectus
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supplement provides for a retained yield (the "Retained Interest") with respect
to the mortgage loans underlying a series of certificates, references to the
mortgage loans will be deemed to refer to that portion of the mortgage loans
held by the trust fund which does not include the Retained Interest. References
to a holder or certificateholder in this discussion generally mean the
beneficial owner of a certificate.
FEDERAL INCOME TAX CONSEQUENCES FOR REMIC CERTIFICATES
General. With respect to a particular series of certificates, an election
may be made to treat the trust fund or one or more segregated pools of assets
therein as one or more REMICs within the meaning of Internal Revenue Code
Section 860D. A trust fund or any of its portions as to which a REMIC election
will be made will be referred to as a REMIC pool. For purposes of this
discussion, certificates of a series as to which one or more REMIC elections
are made are referred to as REMIC certificates and will consist of one or more
classes of regular certificates and one class of residual certificates in the
case of each REMIC pool. Qualification as a REMIC requires ongoing compliance
with some conditions. With respect to each series of REMIC certificates,
Shearman & Sterling, our counsel, has advised us that in the firm's opinion,
assuming:
o the making of such an election;
o compliance with the pooling and servicing agreement; and
o compliance with any changes in the law, including any amendments to
the Internal Revenue Code or applicable Treasury regulations
thereunder,
each REMIC pool will qualify as a REMIC. The regular certificates will be
considered to be "regular interests" in the REMIC pool within the meaning of
Internal Revenue Code Section 860D and generally will be treated for federal
income tax purposes as if they were newly originated debt instruments, and the
residual certificates will be considered to be "residual interests" in the
REMIC pool within the meaning of Internal Revenue Code Section 860D. The
prospectus supplement for each series of certificates will indicate whether one
or more REMIC elections will be made with respect to the related trust fund, in
which event references to REMIC or REMIC pool herein shall be deemed to refer
to each such REMIC pool. If so specified in the applicable prospectus
supplement, the portion of a trust fund as to which a REMIC election is not
made may be treated as either as a financial asset securitization investment
trust, or FASIT, or as a grantor trust for federal income tax purposes.
For additional information regarding federal income tax consequences on
the certificates, you should also review the sections in this prospectus titled
"--Federal Income Tax Consequences for FASIT Certificates" and "--Federal
Income Tax Consequences for Certificates as to Which No REMIC Election Is
Made."
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
Internal Revenue Code and assets described in Section 7701(a)(19)(C) of the
Internal Revenue 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
other prescribed purposes, the REMIC certificates will not be treated as assets
qualifying under Section 7701(a)(19)(C) of the Internal Revenue Code. 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 regular certificates and
income allocated to the residual certificates will be interest described in
Section 856(c)(3)(B) of the Internal Revenue Code to the extent that such
certificates are treated as "real estate assets" within the meaning of Section
856(c)(5)(B) of the Internal Revenue Code. In addition, the regular
certificates will be "qualified mortgages" within the meaning of Section
860G(a)(3) of the Internal Revenue Code and "permitted assets" under Section
860L(c)(1)(G) of the Internal Revenue Code. The determination as to the
percentage of the REMIC's assets that constitute assets described in the
foregoing sections of the Internal Revenue Code will be made with respect to
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each calendar quarter based on the average adjusted basis of each category of
the assets held by the REMIC during such calendar quarter. The special
servicer, servicer, or the trustee, as required under the pooling and servicing
agreement will report those determinations to certificateholders in the manner
and at the times required by 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 the mortgage loans that may not be so treated. The
REMIC regulations do provide, however, that payments on mortgage loans held
pending distribution are considered part of the mortgage loans for purposes of
Section 856(c)(5)(B) of the Internal Revenue Code. Furthermore, foreclosure
property will qualify as "real estate assets" under Section 856(c)(5)(B) of the
Internal Revenue Code.
Tiered REMIC Structures. For some series of REMIC certificates, two or
more separate elections may be made to treat designated portions of the related
trust fund as REMICs ("Tiered REMICs") for federal income tax purposes. The
Tiered REMICs will each qualify as a REMIC and the REMIC certificates issued by
the Tiered REMICs, will be considered to evidence ownership of regular
certificates or residual certificates in the related 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 Internal
Revenue Code and, "loans secured by an interest in real property" under Section
7701(a)(19)(C) of the Internal Revenue Code, and whether the income on such
certificates is interest described in Section 856(c)(3)(B) of the Internal
Revenue Code, the Tiered REMICs will be treated as one REMIC.
Qualification as a REMIC. In order for the REMIC pool to qualify as a
REMIC, there must be ongoing compliance on the part of the REMIC pool with the
requirements set forth in the Internal Revenue Code. The REMIC pool must
fulfill an asset test, which requires that no more than a de minimis portion of
the assets of the REMIC pool, as of the close of the third calendar month
beginning after the startup day, which for purposes of this discussion is the
date of issuance of the REMIC certificates, and at all times thereafter, may
consist of assets other than qualified mortgages and permitted investments. The
REMIC regulations provide a safe harbor pursuant to which the de minimis
requirement is met if at all times the aggregate adjusted basis of the
nonqualified assets is less than 1% of the aggregate adjusted basis of all the
REMIC pool's assets. An entity that fails to meet the safe harbor may
nevertheless demonstrate that it holds no more than a de minimis amount of
nonqualified assets. A REMIC also must provide reasonable arrangements to
prevent its residual interest from being held by Disqualified Organizations and
must furnish applicable tax information to transferors or agents that violate
this requirement. The pooling and servicing agreement for each Series will
contain a provision designed to meet this requirement.
For further information, you should review the section in this prospectus
titled "--Taxation of Residual Certificates--Tax-Related Restrictions on
Transfer of Residual Certificates--Disqualified Organizations."
A qualified mortgage is any obligation that is principally secured by an
interest in real property and that is either transferred to the REMIC pool on
the startup day in exchange for regular certificates or residual certificates
or is purchased by the REMIC pool within a three-month period thereafter
pursuant to a fixed price contract in effect on the startup day.
Qualified mortgages include the following:
o whole mortgage loans, such as the mortgage loans;
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o certificates of beneficial interest in a grantor trust that holds
mortgage loans, including some of the MBS;
o regular interests in another REMIC, such as MBS issued by a trust as
to which a REMIC election has been made, or in a FASIT holding at
least 95% of its assets as qualified mortgages;
o loans secured by timeshare interests; and
o loans secured by shares held by a tenant stockholder in a cooperative
housing corporation.
However, in general:
o the fair market value of the real property securing the mortgage
(including any buildings and structural components) must be at least
80% of the principal balance of the related mortgage loan or of the
mortgage loan underlying any related MBS either at origination of the
relevant loan or as of the startup day; or
o substantially all the proceeds of the mortgage loan or the underlying
mortgage loan must have been used to acquire, improve or protect an
interest in real property that, at the origination date, was the only
security for the mortgage loan or underlying mortgage loan.
If the mortgage loan has been substantially modified other than in connection
with a default or reasonably foreseeable default, it must meet the real
property value test described in the preceding sentence as of the date of the
last modification or as of the REMIC startup day. A qualified mortgage includes
a qualified replacement mortgage, which is any mortgage loan that would have
been treated as a qualified mortgage if it were transferred to the REMIC pool
on the startup day and that is received either:
o in exchange for any qualified mortgage within a three-month period
thereafter; or
o in exchange for a mortgage loan that is a defective obligation, as
defined immediately below, within a two-year period thereafter.
A defective obligation includes the following:
1. a mortgage in default or as to which default is reasonably
foreseeable;
2. a mortgage as to which a customary representation or warranty made at
the time of transfer to the REMIC pool has been breached;
3. a mortgage that was fraudulently procured by the mortgagor; and
4. a mortgage that was not in fact principally secured by real property
(but only if the mortgage is disposed of within 90 days of
discovery).
A mortgage loan that is defective as described in clause 4 in the
immediately preceding sentence that is not sold or, if within two years of the
startup day, exchanged, within 90 days of discovery, ceases to be a qualified
mortgage after that 90-day period. A qualified mortgage includes any asset
described above that is transferred to the REMIC pool on the startup day in
exchange for regular certificates or residual certificates, or that is
purchased by the REMIC pool within three months after the startup day pursuant
to a fixed price contract in effect on the startup day.
Permitted investments include cash flow investments, qualified reserve
assets, and foreclosure property. A cash flow investment is an investment,
earning a return in the nature of interest, of amounts received on or with
respect to qualified mortgages for a temporary period, not exceeding 13 months,
until distributed to holders of interests in the REMIC pool. A qualified
reserve asset is any intangible property (other than a REMIC residual interest)
held for investment that is part of any reasonably required reserve maintained
by the REMIC pool to provide for payments of expenses of the REMIC pool or
amounts due on the regular or residual interests in the event of defaults
(including delinquencies) on the qualified mortgages, lower than expected
reinvestment returns, prepayment interest shortfalls and some other
contingencies. The reserve fund will be disqualified if
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more than 30% of the gross income from the assets in the fund for the year is
derived from the sale or other disposition of property held for less than three
months, unless required to prevent a default on the regular interests caused by
a default on one or more qualified mortgages. A reserve fund must be reduced
promptly and appropriately as payments on the mortgage loans are received.
Foreclosure property is real property acquired by the REMIC pool in connection
with the default or imminent default of a qualified mortgage. They are
generally held beyond the close of the third calendar year following the
acquisition of the property by a REMIC pool for not more than two years, with
possible extensions granted by the Internal Revenue Service of up to an
additional four years.
In addition to the foregoing requirements, the various interests in a
REMIC pool also must meet some requirements. All of the interests in a REMIC
pool must be either of the following:
o one or more classes of regular interests; or
o a single class of residual interests on which distributions, if any,
are made pro rata.
A regular interest is an interest in a REMIC pool that is issued on the
startup day with fixed terms, is designated as a regular interest, and
unconditionally entitles the holder to receive a specified principal amount, or
other similar amount, and provides that interest payments, or other similar
amounts, if any, at or before maturity either are payable based on a fixed rate
or a qualified variable rate, or consist of a specified, nonvarying portion of
the interest payments on qualified mortgages. The specified portion may consist
of a fixed number of basis points, a fixed percentage of the total interest, or
a fixed or qualified variable or inverse variable rate on some or all of the
qualified mortgages minus a different fixed or qualified variable rate. The
specified principal amount of a regular interest that provides for interest
payments consisting of a specified, nonvarying portion of interest payments on
qualified mortgages may be zero. A regular interest in a REMIC pool may have
payments of principal that are subordinated to payments on other regular
interests or the residual interest in the REMIC pool, and that are dependent on
the absence of defaults or delinquencies on qualified mortgages or permitted
investments, lower than reasonably expected returns on permitted investments,
unanticipated expenses incurred by the REMIC pool or prepayment interest
shortfalls. A REMIC pool may issue multiple classes of regular interests.
A residual interest is an interest in a REMIC pool other than a regular
interest that is issued on the startup day and that is designated as a residual
interest. A REMIC may issue only one class of residual interests on which
distributions, if any, are made pro rata.
If an entity, such as the REMIC pool, fails to comply with one or more of
the ongoing requirements of the Internal Revenue Code for REMIC status during
any taxable year, the Internal Revenue Code provides that the entity will not
be treated as a REMIC for that year and thereafter. In this event, an entity
with multiple classes of ownership interests may be treated as a separate
association taxable as a corporation under Treasury regulations, and the
regular certificates may be treated as equity interests therein. The Internal
Revenue Code, however, authorizes the Treasury Department to issue regulations
that address situations where failure to meet one or more of the requirements
for REMIC status occurs inadvertently and in good faith, and disqualification
of the REMIC pool would occur absent regulatory relief. You should be aware,
however, that the Conference Committee Report to the Tax Reform Act of 1986
(the "1986 Act") indicates that the relief may be accompanied by sanctions,
such as the imposition of a corporate tax on all or a portion of the REMIC
pool's income for the period of time in which the requirements for REMIC status
are not satisfied.
TAXATION OF REGULAR CERTIFICATES
General. In general, interest and original issue discount on a regular
certificate will be treated as ordinary income to a holder of the regular
certificate as they accrue, and principal payments on a regular certificate in
excess of accrued market discount will be treated as a return of capital to the
extent of the regular certificateholder's basis in the regular certificate.
Regular certificateholders must use the accrual method of accounting with
regard to regular certificates, regardless of the method of accounting
otherwise used by the regular certificateholders.
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Original Issue Discount. Accrual certificates, interest only, and
principal-only certificates will be, and other Classes of regular certificates
may be, issued with original issue discount within the meaning of Internal
Revenue Code Section 1273(a). Holders of any Class of regular certificates
having original issue discount generally must include original issue discount
in ordinary income for federal income tax purposes as it accrues, in accordance
with the constant yield method that takes into account the compounding of
interest, in advance of receipt of the cash attributable to the income. The
following discussion is based in part on Treasury regulations under Internal
Revenue Code Sections 1271 through 1273 and 1275 and in part on the provisions
of the 1986 Act, referred to in this document as OID regulations. Regular
certificateholders should be aware, however, that the OID regulations do not
adequately address some issues relevant to prepayable securities, such as the
regular certificates. To the extent the issues are not addressed in the
regulations, we intend to apply the methodology described in the Conference
Committee Report to the 1986 Act. No assurance can be provided that the Service
will not take a different position as to those matters not currently addressed
by the OID regulations. Moreover, the OID regulations include an anti-abuse
rule allowing the Service to apply or depart from the OID regulations where
necessary or appropriate to ensure a reasonable tax result in light of the
applicable statutory provisions. A tax result will not be considered
unreasonable under the anti-abuse rule in the absence of a substantial effect
on the present value of a taxpayer's tax liability. You are advised to consult
your own tax advisors as to the discussion in this prospectus and the
appropriate method for reporting interest and original issue discount with
respect to the regular certificates.
Each regular certificate will be treated as a single installment
obligation for purposes of determining the original issue discount includible
in a regular certificateholder's income. The total amount of original issue
discount on a regular certificate is the excess of the stated redemption price
at maturity of the regular certificate over its issue price. The issue price of
a Class of regular certificates offered pursuant to this prospectus generally
is the first price at which a substantial amount of regular certificates of
that class is sold to the public, excluding bond houses, brokers and
underwriters. Although unclear under the OID regulations, we intend to treat
the issue price of a class as to which there is no substantial sale as of the
issue date or that is retained by us as the fair market value of that Class as
of the issue date. The issue price of a regular certificate also includes the
amount paid by an initial regular certificateholder for accrued interest that
relates to a period prior to the issue date of the regular certificate, unless
the regular certificateholder elects on its federal income tax return to
exclude that amount from the issue price and to recover it on the first
distribution date. The stated redemption price at maturity of a regular
certificate always includes the original principal amount of the regular
certificate, but generally will not include distributions of stated interest if
the interest distributions constitute qualified stated interest. Under the OID
regulations, qualified stated interest generally means interest payable at a
single fixed rate or a qualified variable rate, as described below, provided
that the interest payments are unconditionally payable at intervals of one year
or less during the entire term of the regular certificate. Because there is no
penalty or default remedy in the case of nonpayment of interest with respect to
a regular certificate, it is possible that no interest on any Class of regular
certificates will be treated as qualified stated interest. However, except as
provided in the following three sentences or in the applicable prospectus
supplement, because the underlying mortgage loans provide for remedies in the
event of default, we intend to treat interest with respect to the regular
certificates as qualified stated interest. Distributions of interest on an
accrual certificate, or on other regular certificates with respect to which
deferred interest will accrue, will not constitute qualified stated interest,
in which case the stated redemption price at maturity of the regular
certificates includes all distributions of interest as well as principal
thereon. Likewise, we intend to treat an interest only class, or a class on
which interest is substantially disproportionate to its principal amount as
having no qualified stated interest. Where the interval between the issue date
and the first distribution date on a regular certificate is shorter than the
interval between subsequent distribution dates, the interest attributable to
the additional days will be included in the stated redemption price at
maturity.
Under a de minimis rule, original issue discount on a regular certificate
will be considered to be zero if the original issue discount is less than 0.25%
of the stated redemption price at maturity of the
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regular certificate multiplied by the weighted average maturity of the regular
certificate. For this purpose, the weighted average maturity of the regular
certificate is computed as the sum of the amounts determined by multiplying the
number of full years (i.e., rounding down partial years) from the issue date
until all distributions in reduction of are scheduled to be made, presumably
taking into account the prepayment assumption, by a fraction, the numerator of
which is the amount of each distribution included in the stated redemption
price at maturity of the regular certificate and the denominator of which is
the stated redemption price at maturity of the regular certificate. The
Conference Committee Report to the 1986 Act provides that the schedule of the
distributions should be determined in accordance with the assumed rate of
prepayment of the mortgage loans and the anticipated reinvestment rate, if any,
relating to the regular certificates. The prepayment assumption with respect to
a series of regular certificates will be set forth in the related prospectus
supplement. Holders generally must report de minimis original issue discount
pro rata as principal payments are received, and the income will be capital
gain if the regular certificate is held as a capital asset. However, under the
OID regulations, regular certificateholders may elect to accrue all de minimis
original issue discount as well as market discount and market premium under the
constant yield method.
For additional information regarding an election to treat interest under
the constant yield method, you should review the section in this prospectus
titled "--Election to Treat All Interest Under the Constant Yield Method."
A regular certificateholder generally must include in gross income for any
taxable year the sum of the daily portions, as defined below, of the original
issue discount on the regular certificate accrued during an accrual period for
each day on which it holds the regular certificate, including the date of
purchase but excluding the date of disposition. We will treat the monthly
period ending on the day before each distribution date as the accrual period.
With respect to each regular certificate, a calculation will be made of the
original issue discount that accrues during each successive full accrual
period, or shorter period from the date of original issue, that ends on the day
before the related distribution date on the regular certificate. The Conference
Committee Report to the 1986 Act states that the rate of accrual of original
issue discount is intended to be based on the prepayment assumption. Other than
as discussed below with respect to a random lot certificate, the original issue
discount accruing in a full accrual period would be the excess, if any, of:
(a) the sum of:
o the present value of all of the remaining distributions to be made
on the regular certificate as of the end of that accrual period that
are included in the regular certificate's stated redemption price at
maturity; and
o the distributions made on the regular certificate during the accrual
period that are included in the regular certificate's stated
redemption price at maturity;
over:
(b) the adjusted issue price of the regular certificate at the beginning
of the accrual period.
The present value of the remaining distributions referred to in the
preceding sentence is calculated based on:
o the yield to maturity of the regular certificate at the issue date;
o events, including actual prepayments, that have occurred prior to the
end of the accrual period; and
o the prepayment assumption.
For these purposes, the adjusted issue price of a regular certificate at
the beginning of any accrual period equals the issue price of the regular
certificate, increased by the aggregate amount of original issue discount with
respect to the regular certificate that accrued in all prior accrual periods
and reduced by the amount of distributions included in the regular
certificate's stated redemption price at
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maturity that were made on the regular certificate in those prior periods. The
original issue discount accruing during any accrual period (as determined in
this paragraph) will then be divided by the number of days in the period to
determine the daily portion of original issue discount for each day in the
period. With respect to an initial accrual period shorter than a full accrual
period, the daily portions of original issue discount must be determined
according to an appropriate allocation under any reasonable method.
Under the method described above, the daily portions of original issue
discount required to be included in income by a regular certificateholder
generally will increase to take into account prepayments on the regular
certificates as a result of prepayments on the mortgage loans that exceed the
prepayment assumption. The daily portions generally will decrease, but not
below zero for any period, if the prepayments are slower than the prepayment
assumption. An increase in prepayments on the mortgage loans with respect to a
series of regular certificates can result in both a change in the priority of
principal payments with respect to some classes of regular certificates and
either an increase or decrease in the daily portions of original issue discount
with respect to the regular certificates.
Acquisition Premium. A purchaser of a regular certificate at a price
greater than its adjusted issue price but less than its stated redemption price
at maturity will be required to include in gross income the daily portions of
the original issue discount on the regular certificate reduced pro rata by a
fraction, the numerator of which is the excess of its purchase price over the
adjusted issue price and the denominator of which is the excess of the
remaining stated redemption price at maturity over the adjusted issue price.
Alternatively, a subsequent purchaser may elect to treat all acquisition
premium under the constant yield method, as described below under the heading
"--Election to Treat All Interest Under the Constant Yield Method."
Variable Rate Regular Certificates. Regular certificates may provide for
interest based on a variable rate. Under the OID regulations, interest is
treated as payable at a variable rate if, generally:
o the issue price does not exceed the original principal balance by
more than a specified de minimis amount; and
o the interest compounds or is payable at least annually at current
values of:
o one or more qualified floating rates;
o a single fixed rate and one or more qualified floating rates;
o a single objective rate; or
o a single fixed rate and a single objective rate that is a
qualified inverse floating rate.
A floating rate is a qualified floating rate if variations in the rate can
reasonably be expected to measure contemporaneous variations in the cost of
newly borrowed funds, or where the rate is subject to a fixed multiple that is
greater than 0.65, but not more than 1.35. The rate may also be increased or
decreased by a fixed spread or subject to a fixed cap or floor, or a cap or
floor that is not reasonably expected as of the issue date to affect the yield
of the instrument significantly. Two or more qualified floating rates will be
treated as a single qualified floating rate if all the qualified floating rates
can reasonably be expected to have approximately the same values throughout the
terms of the instrument. This requirement will be conclusively presumed to be
satisfied if the values of all the qualified floating rates are within 0.25% of
each other on the issue date. An objective rate (other than a qualified
floating rate) is a rate that is determined using a single fixed formula and
that is based on objective financial or economic information, provided that the
information is not within the control of the issuer or a related party or
unique to the circumstances of the issuer or a related party. A qualified
inverse floating rate is an objective rate that is equal to a fixed rate minus
a qualified floating rate that inversely reflects contemporaneous variations in
the cost of newly borrowed funds. An inverse floating rate that is not a
qualified floating rate may nevertheless be an objective rate. A class of
regular certificates may be issued under this Prospectus that does not have a
variable rate under the OID regulations. For example, a class may be issued
that bears different rates at different times during the
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period it is outstanding such that it is considered significantly front-loaded
or back-loaded within the meaning of the OID regulations. It is possible that
the class may be considered to bear contingent interest within the meaning of
the OID regulations. The OID regulations, as they relate to the treatment of
contingent interest, are by their terms not applicable to regular certificates.
However, if final regulations dealing with contingent interest with respect to
regular certificates apply the same principles as the OID regulations, the
final regulations may lead to different timing of income inclusion than would
be the case under the OID regulations. Furthermore, application of those
principles could lead to the characterization of gain on the sale of contingent
interest regular certificates as ordinary income. You should consult your tax
advisors regarding the appropriate treatment of any regular certificate that
does not pay interest at a fixed rate or variable rate as described in this
paragraph.
Under the REMIC regulations, a regular floating-rate certificate qualifies
as a regular interest in a REMIC if:
o it bears a rate that qualifies as a variable rate under the OID
regulations:
o that is tied to current values of a variable rate (or the
highest, lowest or average of two or more variable rates),
including a rate based on the average cost of funds of one or
more financial institutions, or a positive or negative multiple
of the rate (plus or minus a specified number of basis points);
or
o that represents a weighted average of rates on some or all of
the mortgage loans which bear interest at a fixed rate or at a
qualifying variable rate under the REMIC regulations, including
the rate that is subject to one or more caps or floors;
or:
o it bears one or more variable rates for one or more periods or one or
more fixed rates for one or more periods, and a different variable
rate or fixed rate for other periods.
Accordingly, unless otherwise indicated in the applicable prospectus
supplement, we intend to treat regular certificates that qualify as regular
interests under this rule in the same manner as obligations bearing a variable
rate for original issue discount reporting purposes.
The amount of original issue discount with respect to a regular
certificate bearing a variable rate of interest will accrue in the manner
described above under "--Original Issue Discount" with the yield to maturity
and future payments on that regular certificate generally to be determined by
assuming that interest will be payable for the life of the regular certificate
based on the initial rate, or, if different, the value of the applicable
variable rate as of the pricing date, for the relevant Class. Unless otherwise
specified in the applicable prospectus supplement, we intend to treat variable
interest as qualified stated interest, other than variable interest on an
interest-only or super-premium Class, which will be treated as non-qualified
stated interest includible in the stated redemption price at maturity. Ordinary
income reportable for any period will be adjusted based on subsequent changes
in the applicable interest rate index.
Although unclear under the OID regulations, unless required otherwise by
applicable final regulations, we intend to treat regular certificates bearing
an interest rate that is a weighted average of the net interest rates on
mortgage loans or mortgage certificates having fixed or adjustable rates, as
having qualified stated interest. The yield on the regular certificates for
purposes of accruing original issue discount will be a hypothetical fixed rate
based on the fixed rates, in the case of fixed rate mortgage loans, and initial
indexed rates, in the case of adjustable rate mortgage loans. In the case of
adjustable rate mortgage loans, the applicable index used to compute interest
on the mortgage loans in effect on the pricing date, or possibly the issue
date, will be deemed to be in effect beginning with the period in which the
first weighted average adjustment date occurring after the issue date occurs.
Adjustments will be made in each accrual period either increasing or decreasing
the amount of ordinary income reportable to reflect the actual pass-through
rate on the regular certificates.
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Deferred Interest. Under the OID regulations, all interest on a regular
certificate as to which there may be Deferred Interest is includible in the
stated redemption price at maturity. Accordingly, any Deferred Interest that
accrues with respect to a class of regular certificates will constitute income
to the holders of those regular certificates prior to the time distributions of
cash with respect to the Deferred Interest are made.
Market Discount. A purchaser of a regular certificate also may be subject
to the market discount rules of Internal Revenue Code Sections 1276 through
1278. Under these Internal Revenue Code sections and the principles applied by
the OID regulations in the context of original issue discount, market discount
is the amount by which the purchaser's original basis in the regular
certificate:
o is exceeded by the then-current principal amount of the regular
certificate; or
o in the case of a regular certificate having original issue discount,
is exceeded by the adjusted issue price of the regular certificate at
the time of purchase.
The purchaser generally will be required to recognize ordinary income to the
extent of accrued market discount on the regular certificate as distributions
includible in its stated redemption price at maturity are received, in an
amount not exceeding any related distribution. The market discount would accrue
in a manner to be provided in Treasury regulations and should take into account
the prepayment assumption.
The Conference Committee Report to the 1986 Act provides that until the
Treasury regulations are issued, market discount would accrue either:
o on the basis of a constant interest rate or
o in the ratio of stated interest allocable to the relevant period to
the sum of the interest for that period plus the remaining interest
as of the end of the period, or in the case of a regular certificate
issued with original issue discount, in the ratio of original issue
discount accrued for the relevant period to the sum of the original
issue discount accrued for that period plus the remaining original
issue discount as of the end of that period.
The purchaser also generally will be required to treat a portion of any
gain on a sale or exchange of the regular 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 as partial distributions in reduction of the stated redemption
price at maturity were received. The purchaser will be required to defer
deduction of a portion of the excess of the interest paid or accrued on
indebtedness incurred to purchase or carry a regular certificate over the
interest distributable on that certificate. The deferred portion of the
interest expense in any taxable year generally will not exceed the accrued
market discount on the regular certificate for that year. Any deferred interest
expense is, in general, allowed as a deduction not later than the year in which
the related market discount income is recognized or the regular certificate is
disposed of. As an alternative to the inclusion of market discount in income on
the foregoing basis, the regular certificateholder may elect to include market
discount in income currently as it accrues on all market discount instruments
acquired by that regular certificateholder in that taxable year or thereafter,
in which case the interest deferral rule will not apply.
For additional information, you should also review the section in this
prospectus titled "--Election to Treat All Interest Under the Constant Yield
Method" below regarding an alternative manner in which the election may be
deemed to be made.
Market discount with respect to a regular certificate will be considered
to be de minimus if the market discount is less than 0.25% of the remaining
stated redemption price at maturity of that regular certificate multiplied by
the weighted average maturity of the regular certificate (determined as
described above in the third paragraph under "--Original Issue Discount")
remaining after the date of purchase, presumably taking into account prepayment
assumptions. It appears that de minimis market discount should be reported in a
manner similar to de minimis original issue discount. See "--Original Issue
Discount" above. Treasury regulations implementing the market discount rules
have not yet
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been issued, and therefore investors should consult their own tax advisors
regarding the application of these rules. You should also consult Revenue
Procedure 92-67 concerning the elections to include market discount in income
currently and to accrue market discount on the basis of the constant yield
method.
Premium. A 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 at maturity generally is considered to be
purchased at a premium. If the regular certificateholder holds the regular
certificate as a capital asset within the meaning of Internal Revenue Code
Section 1221, the regular certificateholder may elect under Internal Revenue
Code Section 171 to amortize the premium under the constant yield method. If
made, such an election will apply to all debt instruments having amortizable
bond premium that the holder owns or subsequently acquires. The OID regulations
also permit certificateholders to elect to include all interest, discount and
premium in income based on a constant yield method, further treating the
certificateholder as having made the election to amortize premium generally.
The 1986 Act indicates a Congressional intent that the same rules that will
apply to the accrual of market discount on installment obligations will also
apply to amortizing bond premium under Internal Revenue Code Section 171 on
installment obligations such as the regular certificates, although it is
unclear whether the alternatives to the constant yield method described above
under "--Market Discount" are available. Amortizable bond premium will be
treated as an offset to interest income on a regular certificate rather than as
a separate deduction item.
For additional information, you should also review the section in this
prospectus titled "--Election to Treat All Interest Under the Constant Yield
Method" below regarding an alternative manner in which the Internal Revenue
Code Section 171 election may be deemed to be made.
Election to Treat All Interest Under the Constant Yield Method. A holder
of a debt instrument such as a regular certificate may elect to treat all
interest that accrues on the instrument using the constant yield method, with
none of the interest being treated as qualified stated interest. For purposes
of applying the constant yield method to a debt instrument subject to such an
election:
o interest includes stated interest, original issue discount, de
minimis original issue discount, market discount and de minimis
market discount, as adjusted by any amortizable bond premium or
acquisition premium; and
o the debt instrument is treated as if the instrument were issued on
the holder's acquisition date in the amount of the holder's adjusted
basis immediately after acquisition.
It is unclear whether, for this purpose, the initial prepayment assumption
would continue to apply or if a new prepayment assumption as of the date of the
holder's acquisition would apply. A holder generally may make an election on an
instrument by instrument basis or for a class or group of debt instruments.
However, if the holder makes such an election with respect to a debt instrument
with amortizable bond premium or with market discount, the holder is deemed to
have made elections to amortize bond premium or to report market discount
income currently as it accrues under the constant yield method, respectively,
for all debt instruments acquired by the holder in the same taxable year or
thereafter. The election is made on the holder's federal income tax return for
the year in which the debt instrument is acquired and is irrevocable except
with the approval of the Service. You should consult your own tax advisors
regarding the advisability of making such an election.
Sale or Exchange of Regular Certificates. If a regular certificateholder
sells or exchanges a regular certificate, the regular certificateholder will
recognize gain or loss equal to the difference, if any, between the amount
realized and its adjusted basis in the regular certificate. The adjusted basis
of a regular certificate generally will equal the cost of the regular
certificate to the seller, increased by any original issue discount or market
discount previously included in the seller's gross income with respect to the
regular certificate and reduced by amounts included in the stated redemption
price at maturity of the regular certificate that were previously received by
the seller, by any amortized premium and by previously recognized losses.
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Except as described above with respect to market discount, and except as
provided in this paragraph, any gain or loss on the sale or exchange of a
regular certificate realized by an investor who holds the regular certificate
as a capital asset will be capital gain or loss and will be long-term or
short-term depending on whether the regular certificate has been held for the
long-term capital gain holding period, currently more than one year. The gain
will be treated as ordinary income in the following instances:
o if a regular certificate is held as part of a conversion transaction
as defined in Internal Revenue Code Section 1258(c), up to the amount
of interest that would have accrued on the regular
certificateholder's net investment in the conversion transaction at
120% of the appropriate applicable Federal rate under Internal
Revenue Code Section 1274(d) in effect at the time the taxpayer
entered into the transaction minus any amount previously treated as
ordinary income with respect to any prior distribution of property
that was held as a part of the transaction;
o in the case of a non-corporate taxpayer, to the extent the taxpayer
has made an election under Internal Revenue Code Section 163(d)(4) to
have net capital gains taxed as investment income at ordinary rates;
or
o to the extent that the gain does not exceed the excess, if any, of:
o the amount that would have been includible in the gross income
of the holder if its yield on the regular certificate were 110%
of the applicable Federal rate as of the date of purchase; over
o the amount of income actually includible in the gross income of
the holder with respect to the regular certificate.
In addition, gain or loss recognized from the sale of a regular
certificate by some banks or thrift institutions will be treated as ordinary
income or loss pursuant to Internal Revenue Code Section 582(c). Capital gains
of some non-corporate taxpayers are subject to a lower maximum tax rate than is
the ordinary income of those taxpayers. The maximum tax rate for corporations
is the same with respect to both ordinary income and capital gains.
Treatment of Losses. Holders of regular certificates will be required to
report income with respect to regular certificates on the accrual method of
accounting, without giving effect to delays or reductions in distributions
attributable to defaults or delinquencies on the mortgage loans allocable to a
particular class of regular certificates, except to the extent it can be
established that the losses are uncollectible. Accordingly, the holder of a
regular certificate may have income, or may incur a diminution in cash flow as
a result of a default or delinquency, but may not be able to take a deduction
(subject to the discussion below) for the corresponding loss until a subsequent
taxable year. In this regard, you are cautioned that while you may generally
cease to accrue interest income if it reasonably appears that the interest will
be uncollectible, the Service may take the position that original issue
discount must continue to be accrued in spite of its uncollectibility until the
debt instrument is disposed of in a taxable transaction or becomes worthless in
accordance with the rules of Internal Revenue Code Section 166. To the extent
the rules of Internal Revenue Code Section 166 regarding bad debts are
applicable, it appears that holders of regular certificates that are
corporations or that otherwise hold the regular certificates in connection with
a trade or business should in general be allowed to deduct as an ordinary loss
any loss sustained during the taxable year on account of any regular
certificates becoming wholly or partially worthless. In general, holders of
regular certificates that are not corporations and do not hold the regular
certificates in connection with a trade or business will be allowed to deduct
as a short-term capital loss any loss with respect to principal sustained
during the taxable year on account of a portion of any class or subclass of the
regular certificates becoming wholly worthless. Although the matter is not free
from doubt, non-corporate holders of regular certificates should be allowed a
bad debt deduction at the time as the principal balance of any class or
subclass of the regular certificates is reduced to reflect losses resulting
from any liquidated mortgage loans. The Service, however, could take the
position that non-corporate
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holders will be allowed a bad debt deduction to reflect those losses only after
all mortgage loans remaining in the trust fund have been liquidated or the
class of regular certificates has been otherwise retired. The Service could
also assert that losses on the regular certificates are deductible based on
some other method that may defer the deductions for all holders, such as
reducing future cash flow for purposes of computing original issue discount.
This may have the effect of creating negative original issue discount which
would be deductible only against future positive original issue discount or
otherwise upon termination of the class. Holders of regular certificates are
urged to consult their own tax advisors regarding the appropriate timing,
amount and character of any loss sustained with respect to the regular
certificates. While losses attributable to interest previously reported as
income should be deductible as ordinary losses by both corporate and
non-corporate holders, the Service may take the position that losses
attributable to accrued original issue discount may only be deducted as
short-term capital losses by non-corporate holders not engaged in a trade or
business. Special loss rules are applicable to banks and thrift institutions,
including rules regarding reserves for bad debts. You are advised to consult
your tax advisors regarding the treatment of losses on regular certificates.
TAXATION OF RESIDUAL CERTIFICATES
Taxation of REMIC Income. Generally, the daily portions of REMIC taxable
income or net loss will be includible as ordinary income or loss in determining
the federal taxable income of holders of residual certificates, and will not be
taxed separately to the REMIC pool. The daily portions of REMIC taxable income
or net loss of a residual certificateholder are determined by allocating the
REMIC pool's taxable income or net loss for each calendar quarter ratably to
each day in the quarter and by allocating the daily portion among the residual
certificateholders in proportion to their respective holdings of residual
certificates in the REMIC pool on the day. REMIC taxable income is generally
determined in the same manner as the taxable income of an individual using the
accrual method of accounting, except for the following:
o the limitations on deductibility of investment interest expense and
expenses for the production of income do not apply;
o all bad loans will be deductible as business bad debts; and
o the limitation on the deductibility of interest and expenses related
to tax-exempt income will apply.
The REMIC pool's gross income includes interest, original issue discount
income and market discount income, if any, on the mortgage loans, reduced by
amortization of any premium on the mortgage loans, plus income from
amortization of issue premium, if any, on the regular certificates, plus income
on reinvestment of cash flows and reserve assets, plus any cancellation of
indebtedness income upon allocation of realized losses to the regular
certificates. The REMIC pool's deductions include interest and original issue
discount expense on the regular certificates, servicing fees on the mortgage
loans, other administrative expenses of the REMIC pool and realized losses on
the mortgage loans. The requirement that residual certificateholders report
their pro rata share of taxable income or net loss of the REMIC pool will
continue until there are no certificates of any class of the related series
outstanding.
The taxable income recognized by a residual certificateholder in any
taxable year will be affected by, among other factors, the relationship between
the timing of recognition of interest and original issue discount or market
discount income or amortization of premium with respect to the mortgage loans,
on the one hand, and the timing of deductions for interest (including original
issue discount) on the regular certificates or income from amortization of
issue premium on the regular certificates, on the other hand. In the event that
an interest in the mortgage loans is acquired by the REMIC pool at a discount,
and one or more of the mortgage loans is prepaid, the residual
certificateholder may recognize taxable income without being entitled to
receive a corresponding amount of cash because the prepayment may be used in
whole or in part to make distributions in reduction of principal on the regular
certificates and the discount on the mortgage loans which is includible in
income may exceed the deduction allowed upon the distributions on those regular
certificates on account of any unaccrued
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original issue discount relating to those regular certificates. When there is
more than one class of regular certificates that distribute principal
sequentially, this mismatching of income and deductions is particularly likely
to occur in the early years following issuance of the regular certificates when
distributions in reduction of principal are being made in respect of earlier
classes of regular certificates to the extent that those classes are not issued
with substantial discount. If taxable income attributable to the mismatching is
realized, in general, losses would be allowed in later years as distributions
on the later classes of regular certificates are made. Taxable income may also
be greater in earlier years than in later years as a result of the fact that
interest expense deductions, expressed as a percentage of the outstanding
principal amount of the series of regular certificates, may increase over time
as distributions in reduction of principal are made on the lower yielding
classes of regular certificates, whereas to the extent that the REMIC pool
includes fixed rate mortgage loans, interest income with respect to any given
mortgage loan will remain constant over time as a percentage of the outstanding
principal amount of that loan. Consequently, residual certificateholders must
have sufficient other sources of cash to pay any federal, state or local income
taxes due as a result of the mismatching. In general, unrelated deductions will
not be available to offset some or all of such "phantom" income, as discussed
below under "--Limitations on Offset or Exemption of REMIC Income." The timing
of the mismatching of income and deductions described in this paragraph, if
present with respect to a series of certificates, may have a significant
adverse effect upon the residual certificateholder's after-tax rate of return.
In addition, a residual certificateholder's taxable income during some periods
may exceed the income reflected by the residual certificateholder for the
periods in accordance with generally accepted accounting principles. You should
consult your own accountants concerning the accounting treatment of your
investment in residual certificates.
Basis and Losses. The amount of any net loss of the REMIC pool that may be
taken into account by the residual certificateholder is limited to the adjusted
basis of the residual certificate as of the close of the quarter (or time of
disposition of the residual certificate if earlier), determined without taking
into account the net loss for the quarter. The initial adjusted basis of a
purchaser of a residual certificate is the amount paid for that residual
certificate. The adjusted basis will be increased by the amount of taxable
income of the REMIC pool reportable by the residual certificateholder and will
be decreased, but not below zero, first, by a cash distribution from the REMIC
pool and, second, by the amount of loss of the REMIC pool reportable by the
residual certificateholder. Any loss that is disallowed on account of this
limitation may be carried over indefinitely with respect to the residual
certificateholder as to whom the loss was disallowed and may be used by the
residual certificateholder only to offset any income generated by the same
REMIC pool.
A residual certificateholder will not be permitted to amortize directly
the cost of its residual certificate as an offset to its share of the taxable
income of the related REMIC pool. However, that taxable income will not include
cash received by the REMIC pool that represents a recovery of the REMIC pool's
basis in its assets. The recovery of basis by the REMIC pool will have the
effect of amortization of the issue price of the residual certificates over
their life. However, in view of the possible acceleration of the income of
residual certificateholders described above under "Taxation of REMIC Income",
the period of time over which the issue price is effectively amortized may be
longer than the economic life of the residual certificates.
A residual certificate may have a negative value if the net present value
of anticipated tax liabilities exceeds the present value of anticipated cash
flows. The REMIC regulations appear to treat the issue price of a residual
interest as zero rather than the negative amount for purposes of determining
the REMIC pool's basis in its assets. The preamble to the REMIC regulations
states that the Service may provide future guidance on the proper tax treatment
of payments made by a transferor of the residual interest to induce the
transferee to acquire the interest. Residual certificateholders should assume
such payments are included in income as ordinary income upon receipt and should
consult their own tax advisors to consider other possible treatments.
Further, to the extent that the initial adjusted basis of a residual
certificateholder (other than an original holder) in the residual certificate
is greater that the corresponding portion of the REMIC
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pool's basis in the mortgage loans, the residual certificateholder will not
recover a portion of the basis until termination of the REMIC pool unless
future Treasury regulations provide for periodic adjustments to the REMIC
income otherwise reportable by the holder. The REMIC regulations currently in
effect do not so provide.
You should review the sections titled "--Treatment of Some Items of REMIC
Income and Expense--Market Discount" below regarding the basis of mortgage
loans to the REMIC pool and "--Sale or Exchange of a Residual Certificate"
below regarding possible treatment of a loss upon termination of the REMIC pool
as a capital loss.
TREATMENT OF SOME ITEMS OF REMIC INCOME AND EXPENSE
Although we intend to compute REMIC income and expense in accordance with
the Internal Revenue Code and applicable regulations, the authorities regarding
the determination of specific items of income and expense are subject to
differing interpretations. We make no representation as to the specific method
that we will use for reporting income with respect to the mortgage loans and
expenses with respect to the regular certificates, and different methods could
result in different timing of reporting of taxable income or net loss to
residual certificateholders or differences in capital gain versus ordinary
income.
Original Issue Discount and Premium. Generally, the REMIC pool's
deductions for original issue discount and income from amortization of issue
premium will be determined in the same manner as original issue discount income
on regular certificates as described above under "Taxation of Regular
Certificates--Original Issue Discount" and "--Variable Rate Regular
Certificates," without regard to the de minimis rule described therein, and
"--Premium."
Deferred Interest. Any Deferred Interest that accrues with respect to any
adjustable rate mortgage loans held by the REMIC pool will constitute income to
the REMIC pool and will be treated in a manner similar to the Deferred Interest
that accrues with respect to regular certificates as described above under
"Taxation of Regular Certificates--Deferred Interest."
Market Discount. The REMIC pool will have market discount income in
respect of mortgage loans if, in general, the basis of the REMIC pool allocable
to the mortgage loans is exceeded by their unpaid principal balances. The REMIC
pool's basis in the mortgage loans is generally the fair market value of the
mortgage loans immediately after its transfer to the REMIC pool. The REMIC
regulations provide that the basis is equal in the aggregate to the issue
prices of all regular and residual interests in the REMIC pool, or its fair
market value at the Closing Date, in the case of a retained class. In respect
of mortgage loans that have market discount to which Internal Revenue Code
Section 1276 applies, the accrued portion of the market discount would be
recognized currently as an item of ordinary income in a manner similar to
original issue discount, regardless of whether any payments of amounts included
in the stated redemption price are received. The computation of accrued market
discount income generally should be made in the manner described above under
"Taxation of Regular Certificates--Market Discount."
Premium. Generally, if the basis of the REMIC pool in the mortgage loans
exceeds its unpaid principal balances, the REMIC pool will be considered to
have acquired the mortgage loans at a premium equal to the amount of the
excess. As stated above, the REMIC pool's basis in mortgage loans is the fair
market value of the mortgage loans, based on the aggregate of the issue prices,
or the fair market value of retained Classes, of the regular and residual
interests in the REMIC pool immediately after its transfer to the REMIC pool.
In a manner analogous to the discussion above under "Taxation of Regular
Certificates--Premium," a REMIC pool that holds a mortgage loan as a capital
asset under Internal Revenue Code Section 1221 may elect under Internal Revenue
Code Section 171 to amortize premium on whole mortgage loans or mortgage loans
underlying MBS that were originated after September 27, 1985 or MBS that are
REMIC regular interests under the constant yield method. Amortizable bond
premium will be treated as an offset to interest income on the mortgage loans,
rather than as a separate deduction item. To the extent that the mortgagors
with respect to the mortgage loans are individuals, Internal Revenue Code
Section 171 will not be available
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for premium on mortgage loans (including underlying mortgage loans) originated
on or prior to September 27, 1985. Premium with respect to the mortgage loans
may be deductible in accordance with a reasonable method regularly employed by
its holder. The allocation of the premium pro rata among principal payments
should be considered a reasonable method; however, the Service may argue that
the premium should be allocated in a different manner, such as allocating the
premium entirely to the final payment of principal.
LIMITATIONS ON OFFSET OR EXEMPTION OF REMIC INCOME
A portion, and often all, of the REMIC taxable income includible in
determining the federal income tax liability of a residual certificateholder
will be subject to special treatment. That portion, referred to as the excess
inclusion, is equal to the excess of REMIC taxable income for the calendar
quarter allocable to a residual certificate over the daily accruals for the
quarterly period of:
o 120% of the long-term applicable Federal rate that would have applied
to the residual certificate, if it were a debt instrument, on the
startup day under Internal Revenue Code Section 1274(d); multiplied
by
o the adjusted issue price of the residual certificate at the beginning
of the quarterly period.
For this purpose, the adjusted issue price of a residual certificate at the
beginning of a quarter is the issue price of the residual certificate, plus the
amount of the daily accruals of REMIC income described in this paragraph for
all prior quarters, decreased by any distributions made with respect to that
residual certificate prior to the beginning of the quarterly period.
Accordingly, the portion of the REMIC pool's taxable income that will be
treated as excess inclusions will be a larger portion of the income as the
adjusted issue price of the residual certificates diminishes and all such
taxable income will be so treated if the adjusted issue price of the residual
certificates is zero.
The portion of a residual certificateholder's REMIC taxable income
consisting of the excess inclusions generally may not be offset by other
deductions, including net operating loss carryforwards, on the residual
certificateholder's return. However, net operating loss carryforwards are
determined without regard to excess inclusion income. Further, if the residual
certificateholder is an organization subject to the tax on unrelated business
income imposed by Internal Revenue Code Section 511, the residual
certificateholder's excess inclusions will be treated as unrelated business
taxable income of that residual certificateholder for purposes of Internal
Revenue Code Section 511. In addition, REMIC taxable income is subject to 30%
withholding tax with respect to some persons who are not U.S. Persons, as
defined below under "--Tax-Related Restrictions on Transfer of Residual
Certificates--Foreign Investors", and its portion attributable to excess
inclusions is not eligible for any reduction in the rate of withholding tax, by
treaty or otherwise. See "--Taxation of Some Foreign Investors--Residual
Certificates" below. Finally, if a real estate investment trust or a regulated
investment company owns a residual certificate, a portion (allocated under
Treasury regulations yet to be issued) of dividends paid by the real estate
investment trust or a regulated investment company could not be offset by net
operating losses of its shareholders, would constitute unrelated business
taxable income for tax-exempt shareholders, and would be ineligible for
reduction of withholding to some persons who are not U.S. Persons.
In addition, three rules determine the effect of excess inclusions on the
alternative minimum taxable income of a residual certificateholder. First,
alternative minimum taxable income for a residual certificateholder is
determined without regard to the special rule, discussed above, that taxable
income cannot be less than excess inclusions. Second, a residual
certificateholder's alternative minimum taxable income for a taxable year
cannot be less than the excess inclusions for the year. Third, the amount of
any alternative minimum tax net operating loss deduction must be computed
without regard to any excess inclusions. These rules have the effect of
preventing non-refundable tax credits reducing a taxpayer's income tax to an
amount less than the alternative minimum tax on excess inclusions.
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TAX-RELATED RESTRICTIONS ON TRANSFER OF RESIDUAL CERTIFICATES
Disqualified Organizations. If any legal or beneficial interest in a
residual certificate is transferred to a Disqualified Organization, a tax would
be imposed in an amount equal to the product of:
o the present value of the total anticipated excess inclusions with
respect to the residual certificate for periods after the transfer;
and
o the highest marginal federal income tax rate applicable to
corporations.
The REMIC regulations provide that the anticipated excess inclusions are based
on actual prepayment experience to the date of the transfer and projected
payments based on the prepayment assumption. The present value rate equals the
applicable Federal rate under Internal Revenue Code Section 1274(d) as of the
date of the transfer for a term ending with the last calendar quarter in which
excess inclusions are expected to accrue. The tax generally would be imposed on
the transferor of the residual certificate, except that where the transfer is
through an agent (including a broker, nominee or other middleman) for a
Disqualified Organization, the tax would instead be imposed on the agent.
However, a transferor of a residual certificate would in no event be liable for
the 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 the affidavit is false. The tax also may be waived by the
Treasury Department if the Disqualified Organization promptly disposes of the
residual interest and the transferor pays income tax at the highest corporate
rate on the excess inclusions for the period the residual certificate is
actually held by the Disqualified Organization.
In addition, if a Pass-Through Entity has excess inclusion income with
respect to a residual certificate during a taxable year and a Disqualified
Organization is the record holder of an equity interest in the entity, then a
tax is imposed on the entity equal to the product of the amount of excess
inclusions on the residual certificate that are allocable to the interest in
the Pass-Through Entity during the period the interest is held by the
Disqualified Organization, and the highest marginal federal corporate income
tax rate. The tax would be deductible from the ordinary gross income of the
Pass-Through Entity for the taxable year. The Pass-Through Entity would not be
liable for the tax if it has received an affidavit from the record holder that
it is not a Disqualified Organization or stating the holder's taxpayer
identification number and, during the period the person is the record holder of
the residual certificate, the Pass-Through Entity does not have actual
knowledge that the affidavit is false.
The pooling and servicing agreement with respect to a series of
certificates will provide that no legal or beneficial interest in a residual
certificate may be transferred unless the following occurs:
o the proposed transferee provides to the transferor and the trustee an
affidavit providing its taxpayer identification number and stating
that the transferee is the beneficial owner of the residual
certificate, is not a Disqualified Organization and is not purchasing
the residual certificates on behalf of a Disqualified Organization
(i.e., as a broker, nominee or middleman on its behalf); and
o the transferor provides a statement in writing to us and the trustee
that it has no actual knowledge that the affidavit is false.
Moreover, the pooling and servicing agreement will provide that any
attempted or purported transfer in violation of these transfer restrictions
will be null and void and will vest no rights in any purported transferee. Each
residual certificate with respect to a series will bear a legend referring to
the restrictions on transfer, and each residual certificateholder will be
deemed to have agreed, as a condition of ownership, to any amendments to the
related pooling and servicing agreement required under the Internal Revenue
Code or applicable Treasury regulations to effectuate the foregoing
restrictions. Information necessary to compute an applicable excise tax must be
furnished to the Service and to the requesting party within 60 days of the
request, and we or the trustee may charge a fee for computing and providing the
information.
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Noneconomic Residual Interests. The REMIC regulations would disregard some
transfers of residual certificates, in which case the transferor would continue
to be treated as the owner of the residual certificates and thus would continue
to be subject to tax on its allocable portion of the net income of the REMIC
pool. Under the REMIC regulations, a transfer of a noneconomic residual
interest, as defined below, to a residual certificateholder, other than a
residual certificateholder who is not a U.S. Person, is disregarded for all
federal income tax purposes if a significant purpose of the transferor is to
impede the assessment or collection of tax. A residual interest in a REMIC,
including a residual interest with a positive value at issuance, is a
noneconomic residual interest unless, at the time of the transfer:
o the present value of the expected future distributions on the
residual interest at least equals the product of the present value of
the anticipated excess inclusions and the highest corporate income
tax rate in effect for the year in which the transfer occurs; and
o the transferor reasonably expects that the transferee will receive
distributions from the REMIC at or after the time at which taxes
accrue on the anticipated excess inclusions in an amount sufficient
to satisfy the accrued taxes.
The anticipated excess inclusions and the present value rate are determined in
the same manner as set forth above under "--Disqualified Organizations." The
REMIC regulations explain that a significant purpose to impede the assessment
or collection of tax exists if the transferor, at the time of the transfer,
either knew or should have known that the transferee would be unwilling or
unable to pay taxes due on its share of the taxable income of the REMIC. A safe
harbor is provided if:
o the transferor conducted, at the time of the transfer, a reasonable
investigation of the financial condition of the transferee and found
that the transferee historically had paid its debts as they came due
and found no significant evidence to indicate that the transferee
would not continue to pay its debts as they came due in the future;
o the transferee represents to the transferor that it understands that,
as the holder of the noneconomic residual interest, the transferee
may incur tax liabilities in excess of cash flows generated by the
interest and that the transferee intends to pay taxes associated with
holding the residual interest as they become due.
The pooling and servicing agreement with respect to each series of certificates
will require the transferee of a residual certificate to certify to the matters
in the preceding sentence as part of the affidavit described above under the
heading "--Disqualified Organizations." The transferor must have no actual
knowledge or reason to know that the statements are false.
The Treasury recently proposed regulations that would modify the safe
harbor relating to transfers of noneconomic residuals. In order to comply with
the safe harbor, the proposed regulations would impose an additional
requirement that the present value of the anticipated tax liabilities
associated with holding the residual interest not exceed the sum of (a) the
present value of any consideration given to the transferee to acquire the
residual interest, (b) the present value of the expected future distributions
on the residual interest and (c) the present value of the anticipated tax
savings associated with holding the interest as the REMIC generates losses. The
regulations are proposed to be effective for transfers of noneconomic residuals
on or after February 4, 2000.
Foreign Investors. The REMIC regulations provide that the transfer of a
residual certificate that has tax avoidance potential to a foreign person will
be disregarded for all federal tax purposes. This rule appears intended to
apply to a transferee who is not a U.S. Person, unless the transferee's income
is effectively connected with the conduct of a trade or business within the
United States or not otherwise subject to a withholding tax. A residual
certificate is deemed to have tax avoidance potential unless, at the time of
the transfer:
o the future value of expected distributions equals at least 30% of the
anticipated excess inclusions after the transfer; and
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o the transferor reasonably expects that the transferee will receive
sufficient distributions from the REMIC pool at or after the time at
which the excess inclusions accrue and prior to the end of the next
succeeding taxable year for the accumulated withholding tax liability
to be paid.
If the non-U.S. Person transfers the residual certificate back to a U.S.
Person, the transfer will be disregarded and the foreign transferor will
continue to be treated as the owner unless arrangements are made so that the
transfer does not have the effect of allowing the transferor to avoid tax on
accrued excess inclusions.
The prospectus supplement relating to a series of certificates may provide
that a residual certificate may not be purchased by or transferred to any
person that is not a U.S. Person or may describe the circumstances and
restrictions pursuant to which the transfer may be made.
SALE OR EXCHANGE OF A RESIDUAL CERTIFICATE
Upon the sale or exchange of a residual certificate, the residual
certificateholder will recognize gain or loss equal to the excess, if any, of
the amount realized over the adjusted basis, as described above under "Taxation
of Residual Certificates--Basis and Losses," of the residual certificateholder
in the residual certificate at the time of the sale or exchange. In addition to
reporting the taxable income of the REMIC pool, a residual certificateholder
will have taxable income to the extent that any cash distribution to it from
the REMIC pool exceeds the adjusted basis on that distribution date. The income
will be treated as gain from the sale or exchange of the residual certificate.
It is possible that the termination of the REMIC pool may be treated as a sale
or exchange of a residual certificateholder's residual certificate, in which
case, if the residual certificateholder has an adjusted basis in the residual
certificateholder's residual certificate remaining when its interest in the
REMIC pool terminates, and if the residual certificateholder holds the residual
certificate as a capital asset under Internal Revenue Code Section 1221, then
the residual certificateholder will recognize a capital loss at that time in
the amount of the remaining adjusted basis.
Any gain on the sale of a residual certificate will be treated as ordinary
income if one or both of the following conditions are met:
o if a residual certificate is held as part of a conversion transaction
as defined in Internal Revenue Code Section 1258(c), up to the amount
of interest that would have accrued on the residual
certificateholder's net investment in the conversion transaction at
120% of the appropriate applicable Federal rate in effect at the time
the taxpayer entered into the transaction minus any amount previously
treated as ordinary income with respect to any prior disposition of
property that was held as a part of the transaction; or
o in the case of a non-corporate taxpayer, to the extent the taxpayer
has made an election under Internal Revenue Code Section 163(d)(4) to
have net capital gains taxed as investment income at ordinary income
rates.
In addition, gain or loss recognized from the sale of a residual certificate by
some banks or thrift institutions will be treated as ordinary income or loss
pursuant to Internal Revenue Code Section 582(c).
The Conference Committee Report to the 1986 Act provides that, except as
provided in Treasury regulations yet to be issued, the wash sale rules of
Internal Revenue Code Section 1091 will apply to dispositions of residual
certificates where the seller of the residual certificate, during the period
beginning six months before the sale or disposition of the residual certificate
and ending six months after the sale or disposition, acquires (or enters into
any other transaction that results in the application of Section 1091) any
residual interest in any REMIC or any interest in a taxable mortgage pool (such
as a non-REMIC owner trust) that is economically comparable to a residual
certificate.
MARK-TO-MARKET REGULATIONS
The Service has issued Mark-to-Market Regulations under Internal Revenue
Code Section 475 relating to the requirement that a securities dealer
mark-to-market securities held for sale to
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customers. This mark-to-market requirement applies to all securities of 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,
for purposes of this mark-to-market requirement, a residual certificate is not
treated as a security and thus may not be marked-to-market. The Mark-to-Market
Regulations apply to all residual certificates acquired on or after January 4,
1995.
TAXES THAT MAY BE IMPOSED ON THE REMIC POOL
Prohibited Transactions. Income from some transactions by the REMIC pool,
called prohibited transactions, will not be part of the calculation of income
or loss includible in the federal income tax returns of residual
certificateholders, but rather will be taxed directly to the REMIC pool at a
100% rate. Prohibited transactions generally include:
1. the disposition of a qualified mortgage other than pursuant to:
o a substitution within two years of the startup day for a
defective (including a defaulted) obligation (or repurchase in
lieu of substitution of a defective (including a defaulted)
obligation at any time) or for any qualified mortgage within
three months of the startup day;
o foreclosure, default or imminent default of a qualified
mortgage;
o bankruptcy or insolvency of the REMIC pool; or
o qualified (complete) liquidation;
2. the receipt of income from assets that are not the type of mortgages
or investments that the REMIC pool is permitted to hold;
3. the receipt of compensation for services; or
4. the receipt of gain from disposition of cash flow investments other
than pursuant to a qualified liquidation.
Notwithstanding (1) and (4), it is not a prohibited transaction to sell
REMIC pool property to prevent a default on regular certificates as a result of
a default on qualified mortgages or to facilitate a clean-up call (generally,
an optional termination to save administrative costs when no more than a small
percentage of the certificates is outstanding). The REMIC regulations indicate
that the modification of a mortgage loan generally will not be treated as a
disposition if it is occasioned by a default or reasonably foreseeable default,
an assumption of the mortgage loan, the waiver of a due-on-sale or
due-on-encumbrance clause or the conversion of an interest rate by a mortgagor
pursuant to the terms of a convertible adjustable rate mortgage loan.
Contributions to the REMIC Pool After the Startup Day. In general, the
REMIC pool will be subject to a tax at a 100% rate on the value of any property
contributed to the REMIC pool after the startup day. Exceptions are provided
for cash contributions to the REMIC pool made under the following
circumstances:
o during the three months following the startup day;
o if made to a qualified reserve fund by a residual certificateholder;
o if in the nature of a guarantee;
o if made to facilitate a qualified liquidation or clean-up call; and
o if as otherwise permitted in Treasury regulations yet to be issued.
Net Income from Foreclosure Property. The REMIC pool will be subject to
federal income tax at the highest corporate rate on net income from foreclosure
property, determined by reference to the rules applicable to real estate
investment trusts. Generally, property acquired by deed in lieu of foreclosure
would be treated as foreclosure property for a period of three years, with
possible extensions of up to an additional three years. Net income from
foreclosure property generally means
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gain from the sale of a foreclosure property that is inventory property and
gross income from foreclosure property other than qualifying rents and other
qualifying income for a real estate investment trust.
It is not anticipated that the REMIC pool will receive income or gain
subject to prohibited transactions taxes or contributions subject to tax. As
described in "Description of the Pooling and Servicing Agreements --
Realization upon Defaulted Mortgage Loans" with respect to net income from
foreclosure property from a property that secured a mortgage loan, in some
circumstances income from such a property may be subject to taxation when it is
held by the REMIC pool. In addition, unless otherwise disclosed in the
applicable prospectus supplement, it is not anticipated that any material state
income or franchise tax will be imposed on a REMIC pool.
Liquidation of the REMIC Pool. If a REMIC pool adopts a plan of complete
liquidation, within the meaning of Internal Revenue Code Section
860F(a)(4)(A)(i), which may be accomplished by designating in the REMIC pool's
final tax return a date on which the adoption is deemed to occur, and sells all
of its assets, other than cash, within a 90-day period beginning on the date of
the adoption of the plan of liquidation, the REMIC pool will not be subject to
the prohibited transaction rules on the sale of its assets, provided that the
REMIC pool credits or distributes in liquidation all of the sale proceeds plus
its cash, other than amounts retained to meet claims, to holders of regular
certificates and residual certificateholders within the 90-day period.
Administrative Matters. The REMIC pool will be required to maintain its
books on a calendar year basis and to file federal income tax returns for
federal income tax purposes in a manner similar to a partnership. The form for
the income tax return is Form 1066, U.S. Real Estate Mortgage Investment
Conduit Income Tax Return. The trustee will be required to sign the REMIC
pool's returns. Treasury regulations provide that, except where there is a
single residual certificateholder for an entire taxable year, the REMIC pool
will be subject to the procedural and administrative rules of the Internal
Revenue Code applicable to partnerships, including the determination by the
Service of any adjustments to, among other things, items of REMIC income, gain,
loss, deduction or credit in a unified administrative proceeding. The residual
certificateholder owning the largest percentage interest in the residual
certificates will be obligated to act as tax matters person, as defined in the
applicable Treasury regulations, with respect to the REMIC pool. Each residual
certificateholder will be deemed, by acceptance of the residual certificates,
to have agreed to:
o the appointment of the tax matters person as provided in the
preceding sentence; and
o the irrevocable designation of the servicer as agent for performing
the functions of the tax matters person.
Limitations on Deduction of Some Expenses. An investor who is an
individual, estate or trust will be subject to limitation with respect to some
itemized deductions described in Internal Revenue Code Section 67, to the
extent that the itemized deductions, in the aggregate, do not exceed 2% of the
investor's adjusted gross income. In addition, Internal Revenue Code Section 68
provides that itemized deductions otherwise allowable for a taxable year of an
individual taxpayer will be reduced by the lesser of the following:
o 3% of the excess, if any, of adjusted gross income over $124,500 for
the taxable year beginning in 1998 ($62,250 in the case of a married
individual filing a separate return) (subject to adjustments for
inflation in subsequent years); or
o 80% of the amount of itemized deductions otherwise allowable for the
year.
In the case of a REMIC pool, the deductions may include deductions under
Internal Revenue Code Section 212 for the servicing fee and all administrative
and other expenses relating to the REMIC pool, or any similar expenses
allocated to the REMIC pool with respect to a regular interest it holds in
another REMIC. Investors who hold REMIC certificates either directly or
indirectly through some pass-through entities may have their pro rata share of
the expenses allocated to them as additional gross income, but may be subject
to the limitation on deductions. In addition, those
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expenses are not deductible at all for purposes of computing the alternative
minimum tax, and may cause investors to be subject to significant additional
tax liability. Temporary Treasury regulations provide that the additional gross
income and corresponding amount of expenses generally are to be allocated
entirely to the holders of residual certificates in the case of a REMIC pool
that would not qualify as a fixed investment trust in the absence of a REMIC
election. However, the additional gross income and limitation on deductions
will apply to the allocable portion of the expenses to holders of regular
certificates, as well as holders of residual certificates, where regular
certificates are issued in a manner that is similar to pass-through
certificates in a fixed investment trust. In general, the allocable portion
will be determined based on the ratio that a REMIC certificateholder's income,
determined on a daily basis, bears to the income of all holders of regular
certificates and residual certificates with respect to a REMIC pool. As a
result, individuals, estates or trusts holding REMIC certificates, either
directly or indirectly through a grantor trust, partnership, S corporation,
REMIC, or some other pass-through entities described in the foregoing temporary
Treasury regulations, may have taxable income in excess of the interest income
at the pass-through rate on regular certificates that are issued in a single
Class or otherwise consistently with fixed investment trust status or in excess
of cash distributions for the related period on residual certificates. Unless
otherwise indicated in the applicable prospectus supplement, all the expenses
will be allocable to the residual certificates.
TAXATION OF SOME FOREIGN INVESTORS
A 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 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 regular certificate, provided
that the holder complies to the extent necessary with 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 of the United States, 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 regular certificate held by a residual
certificateholder that owns directly or indirectly a 10% or greater interest in
the remic residual certificates. If the holder does not qualify for exemption,
distributions of interest, including distributions in respect of accrued
original issue discount, to such holder may be subject to a tax rate of 30%,
subject to reduction under any applicable tax treaty.
In addition, the foregoing rules will not apply to exempt a United States
shareholder of a controlled foreign corporation from taxation on such United
States shareholder's allocable portion of the interest income received by such
controlled foreign corporation. It is possible, under regulations promulgated
under Section 881 of the Internal Revenue 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% or more
of one or more underlying mortgagors or, if the holder is a controlled foreign
corporation, it related to one or more underlying mortgagors.
Further, it appears that a regular certificate would not be included in
the estate of a non-resident alien individual and would not be subject to
United States estate taxes. However, certificateholders who are non-resident
alien individuals should consult their tax advisors concerning this question.
In addition, the Treasury Department issued new regulations (the "New
Regulations") which make modifications to the withholding, backup withholding
and information reporting rules described above. The New Regulations, as
modified, will generally be effective for distributions made after December 31,
2000, subject to various transition rules. Prospective investors are urged to
consult their own tax advisors regarding the New Regulations.
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Unless otherwise stated in the related prospectus supplement, transfers of
residual certificates to investors that:
o are not United States Persons; or
o are United States Persons and classified as partnerships under the
Internal Revenue Code, if any of their beneficial owners are not
United States Persons,
will be prohibited under the related pooling and servicing agreement.
Backup Withholding. Distributions made on the regular certificates, and
proceeds from the sale of the regular certificates to or through some brokers,
may be subject to a backup withholding tax under Internal Revenue Code Section
3406 of 31% on reportable payments (including interest distributions, original
issue discount, and, under some circumstances, principal distributions) unless
the regular certificateholder complies with some reporting and/or certification
procedures, including the provision of its taxpayer identification number to
the trustee, its agent or the broker who effected the sale of the regular
certificate, or the certificateholder is otherwise an exempt recipient under
applicable provisions of the Internal Revenue Code. Any amounts to be withheld
from distribution on the regular certificates would be refunded by the Service
or allowed as a credit against the regular certificateholder's federal income
tax liability.
Reporting Requirements. Reports of accrued interest, original issue
discount and information necessary to compute the accrual of any market
discount on the regular certificates will be made annually to the Service and
to individuals, estates, non-exempt and non-charitable trusts, and partnerships
who are either holders of record of regular certificates or beneficial owners
who own regular certificates through a broker or middleman as nominee. All
brokers, nominees and all other non-exempt holders of record of regular
certificates (including corporations, non-calendar year taxpayers, securities
or commodities dealers, real estate investment trusts, investment companies,
common trust funds, thrift institutions and charitable trusts) may request the
information for any calendar quarter by telephone or in writing by contacting
the person designated in Service Publication 938 with respect to a particular
series of regular certificates. Holders through nominees must request
information from the nominee.
The Service's Form 1066 has an accompanying Schedule Q, Quarterly Notice
to Residual Interest Holders of REMIC Taxable Income or Net Loss Allocation.
Treasury regulations require that Schedule Q be furnished by the REMIC pool to
each residual certificateholder by the end of the month following the close of
each calendar quarter, 41 days after the end of a quarter under proposed
Treasury regulations, in which the REMIC pool is in existence.
Treasury regulations require that, in addition to the foregoing
requirements, information must be furnished quarterly to residual
certificateholders, furnished annually, if applicable, to holders of regular
certificates, and filed annually with the Service concerning Internal Revenue
Code Section 67 expenses (see "Limitations on Deduction of Some Expenses"
above) allocable to the holders. Furthermore, under the regulations,
information must be furnished quarterly to residual certificateholders,
furnished annually to holders of regular certificates, and filed annually with
the Service concerning the percentage of the REMIC pool's assets meeting the
qualified asset tests described above under "Status of REMIC Certificates."
FEDERAL INCOME TAX CONSEQUENCES FOR CERTIFICATES AS TO WHICH NO REMIC ELECTION
IS MADE
STANDARD CERTIFICATES
General. In the event that no election is made to treat a trust fund or a
segregated pool of assets therein with respect to a series of certificates that
are not designated as stripped certificates, or as a REMIC, the trust fund will
be classified as a grantor trust under subpart E, Part 1 of subchapter J of the
Internal Revenue Code and not as a partnership, an association taxable as a
corporation or a taxable mortgage pool within the meaning of Internal Revenue
Code Section 7701(i). Where there is no fixed retained yield with respect to
the mortgage loans underlying the standard certificates, the holder of each
standard certificate in the series will be treated as the owner of a pro rata
undivided
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interest in the ordinary income and corpus portions of the trust fund
represented by its standard certificate and will be considered the beneficial
owner of a pro rata undivided interest in each of the mortgage loans, subject
to the discussion below under "--Premium and Discount--Recharacterization of
Servicing Fees." Accordingly, the holder of a standard certificate of a
particular series will be required to report on its federal income tax return
its pro rata share of the entire income from the mortgage loans represented by
its standard certificate, including interest at the coupon rate on the mortgage
loans, original issue discount, if any, prepayment fees, assumption fees, and
late payment charges received by the servicer, in accordance with the standard
certificateholder's method of accounting. A standard certificateholder
generally will be able to deduct its share of the servicing fee and all
administrative and other expenses of the trust fund in accordance with its
method of accounting, provided that the amounts are reasonable compensation for
services rendered to that trust fund. However, investors who are individuals,
estates or trusts who own standard certificates, either directly or indirectly
through some pass-through entities, will be subject to limitation with respect
to some itemized deductions described in Internal Revenue Code Section 67,
including deductions under Internal Revenue Code Section 212 for the servicing
fee and all the administrative and other expenses of the trust fund, to the
extent that the deductions, in the aggregate, do not exceed two percent of an
investor's adjusted gross income. In addition, Internal Revenue Code Section 68
provides that itemized deductions otherwise allowable for a taxable year of an
individual taxpayer will be reduced by the lesser of:
o 3% of the excess, if any, of adjusted gross income over $124,500 for
the taxable year beginning in 1998 ($62,250 in the case of a married
individual filing a separate return), subject to adjustments for
inflation in subsequent years; or
o 80% of the amount of itemized deductions otherwise allowable for the
year.
As a result, investors holding standard certificates, directly or indirectly
through a pass-through entity, may have aggregate taxable income in excess of
the aggregate amount of cash received on the standard certificates with respect
to interest at the pass-through rate on the standard certificates. In addition,
the expenses are not deductible at all for purposes of computing the
alternative minimum tax, and may cause the investors to be subject to
significant additional tax liability. Moreover, where there is fixed retained
yield with respect to the mortgage loans underlying a series of standard
certificates or where the servicing fee is in excess of reasonable servicing
compensation, the transaction will be subject to the application of the
stripped bond and stripped coupon rules of the Internal Revenue Code, as
described below under "Stripped Certificates" and "--Premium and
Discount--Recharacterization of Servicing Fees," respectively.
Tax Status.
Standard certificates will have the following status for federal income
tax purposes:
1. A standard certificate owned by a domestic building and loan
association within the meaning of Internal Revenue Code Section
7701(a)(19) will be considered to represent "loans . . . secured by
an interest in real property which is . . . residential real
property" within the meaning of Internal Revenue Code Section
7701(a)(19)(C)(v), provided that the real property securing the
mortgage loans represented by that standard certificate is of the
type described in the section of the Internal Revenue Code.
2. A standard certificate owned by a real estate investment trust will
be considered to represent real estate assets within the meaning of
Internal Revenue Code Section 856(c)(4)(A) to the extent that the
assets of the related trust fund consist of qualified assets, and
interest income on the assets will be considered interest on
obligations secured by mortgages on real property to the extent
within the meaning of Internal Revenue Code Section 856(c)(3)(B).
3. A standard certificate owned by a REMIC will be considered to
represent an "obligation . . . which is principally secured by an
interest in real property" within the meaning of Internal Revenue
Code Section 860G(a)(3)(A) to the extent that the assets of the
related trust fund consist of qualified mortgages within the meaning
of Internal Revenue Code Section 860G(a)(3).
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Premium and Discount
Standard certificateholders are advised to consult with their tax advisors
as to the federal income tax treatment of premium and discount arising either
upon initial acquisition of standard certificates or thereafter.
Premium. The treatment of premium incurred upon the purchase of a standard
certificate will be determined generally as described above under "--Federal
Income Tax Consequences for REMIC Certificates--Taxation of Residual
Certificates--Treatment of Some Items of REMIC Income and Expense--Premium."
Original Issue Discount. The original issue discount rules will be
applicable to a standard certificateholder's interest in those mortgage loans
as to which the conditions for the application of those sections are met. Rules
regarding periodic inclusion of original issue discount income are applicable
to mortgages of corporations originated after May 27, 1969, mortgages of
noncorporate mortgagors, other than individuals, originated after July 1, 1982,
and mortgages of individuals originated after March 2, 1984. Under the OID
regulations, the original issue discount could arise by the charging of points
by the originator of the mortgages in an amount greater than a statutory de
minimis exception, including a payment of points currently deductible by the
borrower under applicable Internal Revenue Code provisions or, under some
circumstances, by the presence of teaser rates on the mortgage loans.
Original issue discount must generally be reported as ordinary gross
income as it accrues under a constant interest method that takes into account
the compounding of interest, in advance of the cash attributable to the income.
Unless indicated otherwise in the applicable prospectus supplement, no
prepayment assumption will be assumed for purposes of the accrual. However,
Internal Revenue Code Section 1272 provides for a reduction in the amount of
original issue discount includible in the income of a holder of an obligation
that acquires the obligation after its initial issuance at a price greater than
the sum of the original issue price and the previously accrued original issue
discount, less prior payments of principal. Accordingly, if the mortgage loans
acquired by a standard certificateholder are purchased at a price equal to the
then unpaid principal amount of the mortgage loans, no original issue discount
attributable to the difference between the issue price and the original
principal amount of the mortgage loans (i.e., points) will be includible by the
holder.
Market Discount. Standard certificateholders also will be subject to the
market discount rules to the extent that the conditions for application of
those sections are met. Market discount on the mortgage loans will be
determined and will be reported as ordinary income generally in the manner
described above under "--Federal Income Tax Consequences for REMIC
Certificates--Taxation of Regular Certificates--Market Discount," except that
the ratable accrual methods described therein will not apply and it is unclear
whether a prepayment assumption would apply. Rather, the holder will accrue
market discount pro rata over the life of the mortgage loans, unless the
constant yield method is elected. Unless indicated otherwise in the applicable
prospectus supplement, no prepayment assumption will be assumed for purposes of
the accrual.
Recharacterization of Servicing Fees. If the servicing fee paid to the
servicer were deemed to exceed reasonable servicing compensation, the amount of
the excess would represent neither income nor a deduction to
certificateholders. In this regard, there are no authoritative guidelines for
federal income tax purposes as to either the maximum amount of servicing
compensation that may be considered reasonable in the context of this or
similar transactions or whether, in the case of the standard certificate, the
reasonableness of servicing compensation should be determined on a weighted
average or loan-by-loan basis. If a loan-by-loan basis is appropriate, the
likelihood that the amount would exceed reasonable servicing compensation as to
some of the mortgage loans would be increased. Service guidance indicates that
a servicing fee in excess of reasonable compensation, known as excess
servicing, will cause the mortgage loans to be treated under the stripped bond
rules. The guidance provides safe harbors for servicing deemed to be reasonable
and requires taxpayers to demonstrate that the value of servicing fees in
excess of the amounts is not greater than the value of the services provided.
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Accordingly, if the Service's approach is upheld, a servicer who receives
a servicing fee in excess of the amounts would be viewed as retaining an
ownership interest in a portion of the interest payments on the mortgage loans.
Under the rules of Internal Revenue Code Section 1286, the separation of
ownership of the right to receive some or all of the interest payments on an
obligation from the right to receive some or all of the principal payments on
the obligation would result in treatment of the mortgage loans as stripped
coupons and stripped bonds. Subject to the de minimis rule discussed below
under "--Stripped Certificates," each stripped bond or stripped coupon could be
considered for this purpose as a non-interest bearing obligation issued on the
date of issue of the standard certificates, and the original issue discount
rules of the Internal Revenue Code would apply to its holder. While standard
certificateholders would still be treated as owners of beneficial interests in
a grantor trust for federal income tax purposes, the corpus of the trust could
be viewed as excluding the portion of the mortgage loans the ownership of which
is attributed to the servicer, or as including the portion as a second class of
equitable interest. Applicable Treasury regulations treat such an arrangement
as a fixed investment trust, since the multiple classes of trust interests
should be treated as merely facilitating direct investments in the trust assets
and the existence of multiple classes of ownership interests is incidental to
that purpose. In general, the recharacterization should not have any
significant effect upon the timing or amount of income reported by a standard
certificateholder, except that the income reported by a cash method holder may
be slightly accelerated.
You should also review "--Stripped Certificates" below for a further
description of the federal income tax treatment of stripped bonds and stripped
coupons.
Sale or Exchange of Standard Certificates. Upon sale or exchange of a
standard certificate, a standard certificateholder will recognize gain or loss
equal to the difference between the amount realized on the sale and its
aggregate adjusted basis in the mortgage loans and the other assets represented
by the standard certificate. In general, the aggregate adjusted basis will
equal the standard certificateholder's cost for the standard certificate,
increased by the amount of any income previously reported with respect to the
standard certificate and decreased by the amount of any losses previously
reported with respect to the standard certificate and the amount of any
distributions received thereon. Except as provided above with respect to market
discount on any mortgage loans, and except for some financial institutions
subject to the provisions of Internal Revenue Code Section 582(c), any related
gain or loss would be capital gain or loss if the standard certificate was held
as a capital asset. However, gain on the sale of a standard certificate will be
treated as ordinary income:
o if a standard certificate is held as part of a conversion transaction
as defined in Internal Revenue Code Section 1258(c), up to the amount
of interest that would have accrued on the standard
certificateholder's net investment in the conversion transaction at
120% of the appropriate applicable federal rate in effect at the time
the taxpayer entered into the transaction minus any amount previously
treated as ordinary income with respect to any prior disposition of
property that was held as a part of the transaction; or
o in the case of a non-corporate taxpayer, to the extent the taxpayer
has made an election under Internal Revenue Code Section 163(d)(4) to
have net capital gains taxed as investment income at ordinary income
rates. Capital gains of some non-corporate taxpayers are subject to a
lower maximum tax rate (28%) than ordinary income of the taxpayers
(39.6%) for property held for more than one year but not more than 18
months, and a still lower maximum rate (20%) for property held for
more than 18 months. The maximum tax rate for corporations is the
same with respect to both ordinary income and capital gains.
STRIPPED CERTIFICATES
General. Pursuant to Internal Revenue Code Section 1286, the separation of
ownership of the right to receive some or all of the principal payments on an
obligation from ownership of the right to receive some or all of the interest
payments results in the creation of stripped bonds with respect to principal
payments and stripped coupons with respect to interest payments. For purposes
of this discussion, certificates that are subject to those rules will be
referred to as stripped certificates. Stripped certificates include stripped
interest certificates and stripped principal certificates as to which no REMIC
election is made.
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The certificates will be subject to those rules if the following occur:
o we or any of our affiliates retains, for its own account or for
purposes of resale, in the form of fixed retained yield or otherwise,
an ownership interest in a portion of the payments on the mortgage
loans;
o the servicer is treated as having an ownership interest in the
mortgage loans to the extent it is paid, or retains, servicing
compensation in an amount greater than reasonable consideration for
servicing the mortgage loans (see "--Standard
Certificates--Recharacterization of Servicing Fees" above); and
o certificates are issued in two or more classes or subclasses
representing the right to non-pro rata percentages of the interest
and principal payments on the mortgage loans.
In general, a holder of a stripped certificate will be considered to own
stripped bonds with respect to its pro rata share of all or a portion of the
principal payments on each mortgage loan and/or stripped coupons with respect
to its pro rata share of all or a portion of the interest payments on each
mortgage loan, including the stripped certificate's allocable share of the
servicing fees paid to the servicer, to the extent that the fees represent
reasonable compensation for services rendered. See discussion above under
"--Standard Certificates--Recharacterization of Servicing Fees." Although not
free from doubt, for purposes of reporting to stripped certificateholders, the
servicing fees will be allocated to the stripped certificates in proportion to
the respective entitlements to distributions of each class or subclass of
stripped certificates for the related period or periods. The holder of a
stripped certificate generally will be entitled to a deduction each year in
respect of the servicing fees, as described above under "--Standard
Certificates--General," subject to the limitation described therein.
Internal Revenue Code Section 1286 treats a stripped bond or a stripped
coupon as an obligation issued at an original issue discount on the date that
the stripped interest is purchased. Although the treatment of stripped
certificates for federal income tax purposes is not clear in some respects at
this time, particularly where the stripped certificates are issued with respect
to a mortgage pool containing variable-rate mortgage loans, we have been
advised by counsel that:
o the trust fund will be treated as a grantor trust under subpart E,
Part 1 of subchapter J of the Internal Revenue Code and not as an
association taxable as a corporation or a taxable mortgage pool
within the meaning of Internal Revenue Code Section 7701(i); and
o each stripped certificate should be treated as a single installment
obligation for purposes of calculating original issue discount and
gain or loss on disposition. This treatment is based on the
interrelationship of Internal Revenue Code Section 1286, Internal
Revenue Code Sections 1272 through 1275, and the OID regulations.
While under Internal Revenue Code Section 1286 computations with
respect to stripped certificates arguably should be made in one of
the ways described below under "--Taxation of Stripped
Certificates--Possible Alternative Characterizations," the OID
regulations state, in general, that two or more debt instruments
issued by a single issuer to a single investor in a single
transaction should be treated as a single debt instrument for
original issue discount purposes. The pooling and servicing agreement
requires that the trustee make and report all computations described
below using this aggregate approach, unless substantial legal
authority requires otherwise.
Furthermore, Treasury regulations issued December 28, 1992 assume that a
stripped certificate will be treated as a single debt instrument issued on the
date it is purchased for purposes of calculating any original issue discount
and that the interest component of the stripped certificate would be treated as
qualified stated interest under the OID regulations. Further pursuant to these
final regulations the purchaser of the stripped certificate will be required to
account for any discount as market discount rather than original issue discount
unless either:
o the initial discount with respect to the stripped certificate was
treated as zero under the de minimis rule of Internal Revenue Code
Section 1273(a)(3); or
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o no more than 100 basis points in excess of reasonable servicing is
stripped off the related mortgage loans. Any related market discount
would be reportable as described under "--Federal Income Tax
Consequences for REMIC Certificates--Taxation of Regular
Certificates--Market Discount," without regard to the de minimis rule
therein, assuming that a prepayment assumption is employed in the
computation.
Status of Stripped Certificates. No specific legal authority exists as to
whether the character of the stripped certificates, for federal income tax
purposes, will be the same as that of the mortgage loans. Although the issue is
not free from doubt, our counsel has advised us that stripped certificates
owned by applicable holders should be considered to represent real estate
assets within the meaning of Internal Revenue Code Section 856(c)(4)(A),
"obligation[s] principally secured by an interest in real property" within the
meaning of Internal Revenue Code Section 860G(a)(3)(A), and "loans . . .
secured by an interest in real property which is . . . residential real
property" within the meaning of Internal Revenue Code Section
7701(a)(19)(C)(v), and interest (including original issue discount) income
attributable to stripped certificates should be considered to represent
interest on obligations secured by mortgages on real property within the
meaning of Internal Revenue Code Section 856(c)(3)(B), provided that in each
case the mortgage loans and interest on the mortgage loans qualify for the
treatment.
Taxation of Stripped Certificates
Original Issue Discount. Except as described above under "--General," each
stripped certificate will be considered to have been issued at an original
issue discount for federal income tax purposes. Original issue discount with
respect to a stripped certificate must be included in ordinary income as it
accrues, in accordance with a constant interest method that takes into account
the compounding of interest, which may be prior to the receipt of the cash
attributable to the income. Based in part on the OID regulations and the
amendments to the original issue discount sections of the Internal Revenue Code
made by the 1986 Act, the amount of original issue discount required to be
included in the income of a holder of a stripped certificate, referred to in
this discussion as a stripped certificateholder, in any taxable year likely
will be computed generally as described above under "--Federal Income Tax
Consequences for REMIC Certificates--Taxation of Regular Certificates--Original
Issue Discount" and "--Variable Rate Regular Certificates." However, with the
apparent exception of a stripped certificate qualifying as a market discount
obligation, as described above under "--General," the issue price of a stripped
certificate will be the purchase price paid by each holder of a stripped
certificate, and the stated redemption price at maturity will include the
aggregate amount of the payments, other than qualified stated interest to be
made on the stripped certificate to the stripped certificateholder, presumably
under the prepayment assumption.
If the mortgage loans prepay at a rate either faster or slower than that
under the prepayment assumption, a stripped certificateholder's recognition of
original issue discount will be either accelerated or decelerated and the
amount of the original issue discount will be either increased or decreased
depending on the relative interests in principal and interest on each mortgage
loan represented by the stripped certificateholder's stripped certificate.
While the matter is not free from doubt, the holder of a stripped certificate
should be entitled in the year that it becomes certain, assuming no further
prepayments, that the holder will not recover a portion of its adjusted basis
in the stripped certificate to recognize an ordinary loss equal to the portion
of unrecoverable basis.
As an alternative to the method described above, the fact that some or all
of the interest payments with respect to the stripped certificates will not be
made if the mortgage loans are prepaid could lead to the interpretation that
the interest payments are contingent within the meaning of the OID regulations.
The OID regulations, as they relate to the treatment of contingent interest,
are by their terms not applicable to prepayable securities such as the stripped
certificates. However, if final regulations dealing with contingent interest
with respect to the stripped certificates apply the same principles as the OID
regulations, the regulations may lead to different timing of income inclusion
that would be the case under the OID regulations. Furthermore, application of
the principles could lead to the characterization of gain on the sale of
contingent interest stripped certificates as ordinary income. You should
consult your tax advisors regarding the appropriate tax treatment of stripped
certificates.
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Sale or Exchange of Stripped Certificates. Sale or exchange of a stripped
certificate prior to its maturity will result in gain or loss equal to the
difference, if any, between the amount received and the stripped
certificateholder's adjusted basis in the stripped certificate, as described
above under "--Federal Income Tax Consequences for REMIC Certificates--Taxation
of Regular Certificates--Sale or Exchange of Regular Certificates." To the
extent that a subsequent purchaser's purchase price is exceeded by the
remaining payments on the stripped certificates, the subsequent purchaser will
be required for federal income tax purposes to accrue and report the excess as
if it were original issue discount in the manner described above. It is not
clear for this purpose whether the assumed prepayment rate that is to be used
in the case of a stripped certificateholder other than an original stripped
certificateholder should be the prepayment assumption or a new rate based on
the circumstances at the date of subsequent purchase.
Purchase of More than One Class of Stripped Certificates. Where an
investor purchases more than one class of stripped certificates, it is
currently unclear whether for federal income tax purposes the classes of
stripped certificates should be treated separately or aggregated for purposes
of the rules described above.
Possible Alternative Characterizations. The characterizations of the
stripped certificates discussed above are not the only possible interpretations
of the applicable Internal Revenue Code provisions. For example, the stripped
certificateholder may be treated as the owner of any of the following:
o one installment obligation consisting of the Stripped Certificate's
pro rata share of the payments attributable to principal on each
mortgage loan and a second installment obligation consisting of the
Stripped Certificate's pro rata share of the payments attributable to
interest on each mortgage loan;
o as many stripped bonds or stripped coupons as there are scheduled
payments of principal and/or interest on each mortgage loan; or
o a separate installment obligation for each mortgage loan,
representing the Stripped Certificate's pro rata share of payments of
principal and/or interest to be made with respect to it.
Alternatively, the holder of one or more classes of stripped certificates
may be treated as the owner of a pro rata fractional undivided interest in each
mortgage loan to the extent that the Stripped Certificate, or classes of
stripped certificates in the aggregate, represent the same pro rata portion of
principal and interest on each mortgage loan, and a stripped bond or stripped
coupon, as the case may be, treated as an installment obligation or contingent
payment obligation, as to the remainder. Final regulations issued on December
28, 1992 regarding original issue discount on stripped obligations make the
foregoing interpretations less likely to be applicable. The preamble to those
regulations states that they are premised on the assumption that an aggregation
approach is appropriate for determining whether original issue discount on a
stripped bond or stripped coupon is de minimis, and solicits comments on
appropriate rules for aggregating stripped bonds and stripped coupons under
Internal Revenue Code Section 1286.
Because of these possible varying characterizations of stripped
certificates and the resultant differing treatment of income recognition,
stripped certificateholders are urged to consult their own tax advisors
regarding the proper treatment of stripped certificates for federal income tax
purposes.
FEDERAL INCOME TAX CONSEQUENCES FOR FASIT CERTIFICATES
If and to the extent set forth in the prospectus supplement relating to a
particular series of certificates, an election may be made to treat the related
trust fund or one or more segregated pools of assets therein as one or more
financial asset securitization investment trusts, or FASITs, within the meaning
of Internal Revenue Code Section 860L(a). Qualification as a FASIT requires
ongoing compliance with some conditions. With respect to each series of FASIT
Certificates, Shearman & Sterling, our counsel, will advise us that in the
firm's opinion, assuming the making of such an election, compliance with the
pooling and servicing agreement and compliance with any changes in the
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law, including any amendments to the Internal Revenue Code or applicable
Treasury Regulations thereunder, each FASIT Pool will qualify as a FASIT. In
that case, the regular certificates will be considered to be regular interests
in the FASIT and will be treated for federal income tax purposes as if they
were newly originated debt instruments, and the residual certificate will be
considered the ownership interest in the FASIT Pool. The prospectus supplement
for each series of certificates will indicate whether one or more FASIT
elections will be made with respect to the related trust fund.
FASIT treatment has become available pursuant to recently enacted
legislation, and no Treasury regulations have as yet been issued detailing the
circumstances under which a FASIT election may be made or the consequences of
such an election. If a FASIT election is made with respect to any trust fund or
as to any segregated pool of assets therein, the related prospectus supplement
will describe the federal income tax consequences of the election.
REPORTING REQUIREMENTS AND BACKUP WITHHOLDING
The trustee will furnish, within a reasonable time after the end of each
calendar year, to each standard certificateholder or stripped certificateholder
at any time during the year, the information, prepared on the basis described
above, as the trustee deems to be necessary or desirable to enable the
certificateholders to prepare their federal income tax returns. The information
will include the amount of original issue discount accrued on certificates held
by persons other than certificateholders exempted from the reporting
requirements. The amounts required to be reported by the trustee may not be
equal to the proper amount of original issue discount required to be reported
as taxable income by a certificateholder, other than an original
certificateholder that purchased at the issue price. In particular, in the case
of stripped certificates, unless provided otherwise in the applicable
prospectus supplement, the reporting will be based upon a representative
initial offering price of each class of stripped certificates. The trustee will
also file the original issue discount information with the Service. If a
certificateholder fails to supply an accurate taxpayer identification number or
if the Secretary of the Treasury determines that a certificateholder has not
reported all interest and dividend income required to be shown on his federal
income tax return, 31% backup withholding may be required in respect of any
reportable payments, as described above under "--Federal Income Tax
Consequences for REMIC Certificates--Backup Withholding."
TAXATION OF SOME FOREIGN INVESTORS
To the extent that a Certificate evidences ownership in mortgage loans
that are issued on or before July 18, 1984, interest or original issue discount
paid by the person required to withhold tax under Internal Revenue Code Section
1441 or 1442 to nonresident aliens, foreign corporations, or other Non-U.S.
Persons generally will be subject to 30% United States withholding tax, or the
lower rate as may be provided for interest by an applicable tax treaty. Accrued
original issue discount recognized by the standard certificateholder or
stripped certificateholder on original issue discount recognized by the
standard certificateholder or stripped certificateholders on the sale or
exchange of the Certificate also will be subject to federal income tax at the
same rate.
Treasury regulations provide that interest or original issue discount paid
by the trustee or other withholding agent to a Non-U.S. Person evidencing
ownership interest in mortgage loans issued after July 18, 1984 will be
portfolio interest and will be treated in the manner, and the persons will be
subject to the same certification requirements, described above under
"--Federal Income Tax Consequences for REMIC Certificates--Taxation of Some
Foreign Investors--Regular Certificates."
STATE AND OTHER TAX CONSIDERATIONS
In addition to the federal income tax consequences described in "Material
Federal Income Tax Consequences," you 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, you should
consult your own tax advisors with respect to the various tax consequences of
investments in the offered certificates.
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ERISA CONSIDERATIONS
GENERAL
The Employee Retirement Income Security Act of 1974, as amended, and
Section 4975 of the Internal Revenue Code impose some requirements on employee
benefit plans, and on some other retirement plans and arrangements, including
individual retirement accounts and annuities, Keogh plans, collective
investment funds, insurance company separate accounts and some insurance
company general accounts in which the plans, accounts or arrangements are
invested, and on persons who are fiduciaries with respect to plans in
connection with the investment of plan assets.
ERISA generally imposes on Plan fiduciaries some 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 Section 4975 of the
Internal Revenue Code prohibit a broad range of transactions involving assets
of a Plan and parties in interest who have some specified relationships to the
Plan, unless a statutory or administrative exemption is available. Parties in
interest that participate in a prohibited transaction may be subject to an
excise tax imposed pursuant to Section 4975 of the Internal Revenue Code,
unless a statutory or administrative exemption is available. These prohibited
transactions generally are set forth in Section 406 of ERISA and Section 4975
of the Internal Revenue Code. Special caution should be exercised before the
assets of a Plan are used to purchase a Certificate if, with respect to the
assets, we, the servicer, a special servicer or any sub-servicer or the trustee
or an affiliate thereof, either:
o has discretionary authority or control with respect to the investment
of the assets of the Plan; or
o has authority or responsibility to give, or regularly gives,
investment advice with respect to the assets of the Plan for a fee
and pursuant to an agreement or understanding that the advice will
serve as a primary basis for investment decisions with respect to the
assets and that the advice will be based on the particular investment
needs of the Plan.
Before purchasing any offered certificates, a Plan fiduciary should
consult with its counsel and determine whether there exists any prohibition to
the purchase under the requirements of ERISA, whether any prohibited
transaction class exemption or any individual prohibited transaction exemption,
as described below, applies, including whether the appropriate conditions set
forth therein would be met, or whether any statutory prohibited transaction
exemption is applicable, and further should consult the applicable prospectus
supplement relating to the series of certificates.
Some employee benefit plans, such as governmental plans, as defined in
Section 3(32) of ERISA, and, if no election has been made under Section 410(d)
of the Internal Revenue Code, church plans, as defined in Section 3(33) of
ERISA, are not subject to ERISA requirements. Accordingly, assets of
governmental and church 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 governmental or church plan
which is qualified and exempt from taxation under Sections 401(a) and 501(a) of
the Internal Revenue Code, however, is subject to the prohibited transaction
rules set forth in Section 503 of the Internal Revenue Code.
PLAN ASSET REGULATIONS
A Plan's investment in offered certificates may cause the trust assets to
be deemed plan assets. Section 2510.3-101 of the regulations of the Department
of Labor provides that, when a Plan acquires an equity interest in an entity,
the Plan's assets include both the equity interest and an undivided interest in
each of the underlying assets of the entity, unless some exceptions not
applicable to this discussion apply, or unless the equity participation in the
entity by benefit plan investors, i.e., Plans, employee benefit plans not
subject to ERISA, and entities whose underlying assets include plan assets, is
not significant. For this purpose, the plan asset regulations provide, in
general, that participation in an entity, such as a trust fund, is significant
if, immediately after the most recent acquisition of any
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equity interest, 25% or more of any class of equity interests, such as
certificates, is held by benefit plan investors. Unless restrictions on
ownership of and transfer to plans apply with respect to a series of
certificates, we cannot assure you that benefit plan investors will not own at
least 25% of a class of certificates.
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 the 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 servicer, a special servicer or any sub-servicer, may be deemed to be a Plan
fiduciary with respect to the investing Plan, and thus subject to the fiduciary
responsibility provisions and prohibited transaction provisions of ERISA and
Section 4975 of the Internal Revenue Code. In addition, if the trust assets
constitute plan assets, the purchase of certificates by a Plan, as well as the
operation of the trust fund, may constitute or involve one or more prohibited
transactions under ERISA and Section 4975 of the Internal Revenue Code.
ADMINISTRATIVE EXEMPTIONS
Several underwriters of morgage-backed securities have applied for and
obtained from the Department of Labor individual prohibited transaction
exemptions that apply to the purchase and holding of mortgage-backed securities
which, among other conditions, are sold in an offering with respect to which
that underwriter serves as the sole or a managing underwriter or as a selling
or placement agent. If such an exemption may be applicable to a series of
certificates, the related prospectus supplement will refer to the possibility,
as well as provide a summary of the conditions to the exemption's
applicability.
UNRELATED BUSINESS TAXABLE INCOME; RESIDUAL CERTIFICATES
The purchase of a residual certificate by any employee benefit plan
qualified under Section 401(a) of the Internal Revenue Code and exempt from
taxation under Section 501(a) of the Internal Revenue Code Section, including
most varieties of ERISA subject plans, may give rise to unrelated business
taxable income as described in Sections 511-515 and 860E of the Internal
Revenue Code. Further, prior to the purchase of residual certificates, a
prospective transferee may be required to provide an affidavit to a transferor
that it is not, nor is it purchasing a residual certificate on behalf of, a
Disqualified Organization, which term as defined above includes some tax-exempt
entities not subject to Section 511 of the Internal Revenue Code including some
governmental plans, as discussed above under the caption "Material Federal
Income Tax Consequences--Federal Income Tax Consequences for REMIC
Certificates--Taxation of Residual Certificates--Tax-Related Restrictions on
Transfer of Residual Certificates--Disqualified Organizations."
Due to the complexity of these rules and the penalties that may be imposed
upon persons involved in prohibited transactions, it is particularly important
that potential investors who are Plan fiduciaries consult with their counsel
regarding the consequences under ERISA of their acquisition and ownership of
certificates.
LEGAL INVESTMENT
The offered certificates will constitute mortgage related securities for
purposes of the Secondary Mortgage Market Enhancement Act of 1984, as amended,
only if so specified in the related prospectus supplement. The appropriate
characterization of those certificates not qualifying as mortgage related
securities, called non-SMMEA eligible certificates, under various legal
investment restrictions, and thus the ability of investors subject to these
restrictions to purchase the certificates, may be subject to significant
interpretive uncertainties. Accordingly, investors whose investment authority
is subject to legal restrictions should consult their own legal advisors to
determine whether and to what extent the non-SMMEA eligible certificates
constitute legal investments for them.
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Generally, only classes of offered certificates that meet the following
criteria will be mortgage related securities for purposes of SMMEA:
o are rated in one of the two highest rating categories by one or more
rating agencies;
o are part of a series evidencing interests in a trust fund consisting
of loans originated by some types of originators as specified in
SMMEA; and
o are part of a series evidencing interests in a trust fund consisting
of mortgage loans each of which is secured by a first lien on either
a single parcel of real estate on which is located a residential
and/or mixed residential and commercial structure or one or more
parcels of real estate upon which are located one or more commercial
structures.
As mortgage related securities, the classes will constitute legal
investments, for persons, trusts, corporations, partnerships, associations,
business trusts and business entities, including depository institutions,
insurance companies, trustees and pension funds, created pursuant to or
existing under the laws of the United States or of any state, including the
District of Columbia and Puerto Rico, whose authorized investments are subject
to state regulation, to the same extent that obligations issued by or
guaranteed as to principal and interest by the United States or any of its
agencies or instrumentalities constitute legal investments for the entities
under applicable law. Under SMMEA, a number of states enacted legislation on or
prior to the October 3, 1991 cut-off for the enactments limiting to various
extents the ability of some entities (in particular, insurance companies) to
invest in mortgage related securities, secured by liens on residential or mixed
residential and commercial properties, in most cases by requiring the affected
investors to rely solely upon existing state law, and not SMMEA. Pursuant to
Section 347 of the Riegle Community Development and Regulatory Improvement Act
of 1994, states are authorized to enact legislation, on or before September 23,
2001, prohibiting or restricting the purchase, holding or investment by state
regulated entities in certificates satisfying the rating and qualified
originator requirements for mortgage-related securities, but evidencing
interests in a trust fund consisting, in whole or in part, of first liens on
one or more parcels of real estate upon which are located one or more
commercial structures. Accordingly, the investors affected by the legislation
will be authorized to invest in offered certificates qualifying as mortgage
related securities only to the extent provided in the legislation.
SMMEA also amended the legal investment authority of federally chartered
depository institutions as follows:
o federal savings and loan associations and federal savings banks may
invest in, sell or otherwise deal in mortgage related securities
without limitation as to the percentage of their assets represented
thereby;
o federal credit unions may invest in the securities; and
o national banks may purchase the securities for their own account
without regard to the limitations generally applicable to investment
securities set forth in 12 U.S.C. Section 24 (Seventh), subject in
each case to the regulations as the applicable federal regulatory
authority may prescribe.
In this connection, effective December 31, 1996, the Office of the
Comptroller of the Currency, called the OCC, has 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 some general standards in 12 C.F.R. Section 1.5 concerning
"safety and soundness" and retention of credit information), some "Type IV
securities," defined in 12 C.F.R. Section 1.2(1) to include some "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
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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 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 Section 703.5(f)-(k), which
prohibit federal credit unions from investing in some mortgage related
securities (including securities such as some classes of the offered
certificates), except under limited circumstances. Effective January 1, 1998,
the NCUA has amended its rules governing investments by federal credit unions
at 12 C.F.R. Part 703; the revised rules will permit investments in "mortgage
related securities" under some limited circumstances, but will prohibit
investments in stripped mortgage related securities, residual interests in
mortgage related securities, and commercial mortgage related securities, unless
the credit union has obtained written approval from the NCUA to participate in
the investment pilot program described in 12 C.F.R. Section 703.140.
All depository institutions considering an investment in the offered
certificates should review the "Supervisory Policy Statement on Securities
Activities" dated January 28, 1992, as revised April 15, 1994, of the Federal
Financial Institutions Examination Council, or FFIEC. The policy statement,
which has been adopted by the Board of Governors of the Federal Reserve System,
the OCC, the Federal Depository Insurance Company and the Office of Thrift
Supervision, and by the NCUA (with some modifications), prohibits depository
institutions from investing in some high-risk mortgage securities (including
securities such as some classes of the offered certificates), except under
limited circumstances, and sets forth some investment practices deemed to be
unsuitable for regulated institutions. On September 29, 1997, the FFEIC
released for public comment a proposed "Supervisory Policy Statement on
Investment Securities and End-User Derivatives Activities," which would replace
the policy statement. As proposed, the 1997 Statement would delete the specific
"high-risk mortgage securities" tests, and substitute general guidelines which
depository institutions should follow in managing risks, including market,
credit, liquidity, operational (transactional), and legal risks, applicable to
all securities, including mortgage pass-through securities and
mortgage-derivative products, used for investment purposes.
Institutions whose investment activities are subject to regulation by
federal or state authorities should review rules, policies and guidelines
adopted from time to time by the authorities before purchasing any class of the
offered certificates, as some classes may be deemed unsuitable investments, or
may otherwise be restricted, under the rules, policies or guidelines, in some
instances irrespective of SMMEA.
The foregoing does not take into consideration the applicability of
statutes, rules, regulations, orders, guidelines or agreements generally
governing investments made by a particular investor, including, but not limited
to, "prudent investor" provisions, percentage-of-assets limits, provisions
which may restrict or prohibit investment in securities which are not interest
bearing or income paying, and, with regard to any class of the offered
certificates issued in book-entry form, provisions which may restrict or
prohibit investments in securities which are issued in book-entry form.
Except as to the status of some classes of offered certificates as
mortgage related securities, no representations are made as to the proper
characterization of any class of offered certificates for legal investment
purposes, financial institution regulatory purposes, 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, 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 of any class constitute
legal investments or are subject to investment, capital or other restrictions.
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METHOD OF DISTRIBUTION
The certificates offered hereby and by related prospectus supplements 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 us
from that sale.
We intend that 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 offered
certificates may be made through a combination of two or more of these methods.
The methods are as follows:
o by negotiated firm commitment underwriting and public offering by one
or more underwriters specified in the related prospectus supplement;
o by placements through one or more placement agents specified in the
related prospectus supplement primarily with institutional investors
and dealers; and
o through direct offerings by us.
If specified in the prospectus supplement relating to a series of offered
certificates, we or any of our affiliates or any other person or persons
specified in the prospectus supplement (including originators of mortgage
loans) may purchase some or all of one or more classes of offered certificates
of that series from the underwriter or underwriters or any other person or
persons specified in the prospectus supplement. Pursuant to this prospectus and
the related prospectus supplement, a purchaser may thereafter from time to time
offer and sell some or all of the certificates directly, or through one or more
underwriters to be designated at the time of the offering of the certificates,
or through dealers (whether acting as agent or as principal) or in any other
manner that may be specified in the related prospectus supplement. The offering
may be restricted in the manner specified in the related prospectus supplement.
The transactions may be effected at market prices prevailing at the time of
sale, at negotiated prices or at fixed prices.
If underwriters are used in a sale of any offered certificates, other than
in connection with an underwriting on a best efforts basis, the certificates
will be acquired by the underwriters for their own account and may be resold
from time to time in one or more transactions, including negotiated
transactions, at fixed public offering prices or at varying prices to be
determined at the time of sale or at the time of commitment therefor. The
underwriters may be broker-dealers affiliated with us whose identities and
relationships to us will be as set forth in the related prospectus supplement.
The managing underwriter or underwriters with respect to the offer and sale of
a particular series of offered certificates will be set forth in the cover of
the prospectus supplement relating to that series and the members of the
underwriting syndicate, if any, will be named in the prospectus supplement.
In connection with the sale of the offered certificates, underwriters may
receive compensation from us or from purchasers of the offered certificates in
the form of discounts, concessions or commissions. Underwriters and dealers
participating in the distribution of the certificates may be deemed to be
underwriters in connection with those certificates, and any discounts or
commissions received by them from us and any profit on the resale of
certificates by them may be deemed to be underwriting discounts and commissions
under the Securities Act of 1933, as amended.
It is anticipated that the underwriting agreement pertaining to the sale
of any series of certificates will provide that the obligations of the
underwriters will be subject to some conditions precedent, including the
following:
o that the underwriters will be obligated to purchase all certificates
if any are purchased, other than in connection with an underwriting
on a best efforts basis; and
o that we will indemnify the several underwriters, and each person, if
any, who controls any related underwriters within the meaning of
Section 15 of the Securities Act, against some civil liabilities,
including liabilities under the Securities Act, or will contribute to
payments required to be made in respect of the Securities Act.
112
<PAGE>
The prospectus supplement with respect to any series offered by placements
through dealers will contain information regarding the nature of the offering
and any agreements to be entered into between us and purchasers of certificates
of those series.
We anticipate that the certificates offered hereby will be sold primarily
to institutional investors. Purchasers of offered certificates, including
dealers, may, depending on the facts and circumstances of their purchases, be
deemed to be underwriters within the meaning of the Securities Act in
connection with reoffers and sales by them of offered certificates.
Certificateholders should consult with their legal advisors in this regard
prior to any related reoffer or sale.
As to each series of certificates, only those classes rated in an
investment grade rating category by any rating agency will be offered hereby.
Any unrated class may be initially retained by us, and may be sold by us at any
time to one or more institutional investors.
If and to the extent required by applicable law or regulation, this
prospectus will be used by Bear, Stearns & Co. Inc., our affiliate, in
connection with offers and sales related to market-making transactions in the
offered certificates previously offered hereunder in transactions in which
Bear, Stearns & Co. Inc. acts as principal. Bear, Stearns & Co. Inc. may also
act as agent in those transactions. Sales may be made at negotiated prices
determined at the time of sale.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement, including this
prospectus and a form of the prospectus supplement, under the Securities Act of
1933, as amended, with respect to the offered certificates. This prospectus and
the applicable prospectus supplement relating to each series of offered
certificates contain summaries of the material terms of the documents referred
to, but do not contain all of the information contained in the registration
statement. For further information regarding the documents referred to in this
prospectus and the applicable prospectus supplement, you should refer to the
registration statement and the exhibits to the registration statement. The
registration statement and the exhibits can be inspected and copied at the
Public Reference Room of the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549 and the SEC's regional offices at Seven World Trade Center, 13th Floor,
New York, New York 10048, and Citicorp Center, 500 West Madison Street, Suite
1500, Chicago, Illinois 60661. Copies of these materials can be obtained at
prescribed rates from the Public Reference Section of the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549. In addition, the SEC maintains a public
access site on the Internet through the World Wide Web at which provides
on-line access to reports, proxy and information statements and other
information regarding registrants that file electronically with the SEC at the
address http://www.sec.gov.
INCORPORATION OF SOME INFORMATION BY REFERENCE
The SEC allows us to incorporate by reference information that we file
with the SEC, which allows us to disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus and the applicable prospectus
supplement. Information that we file later with the SEC will automatically
update the information in this prospectus and the applicable prospectus
supplement. In all cases, you should rely on the later information over
different information included in this prospectus or the applicable prospectus
supplement. As a recipient of this prospectus, you may request a copy of any
document we incorporate by reference, except exhibits to the documents (unless
the exhibits are specifically incorporated by reference), at no cost, by
writing or calling: Bear Stearns Commercial Mortgage Securities Inc., 245 Park
Avenue, New York, New York 10167, Attention: J. Christopher Hoeffel (212)
272-2000. We have determined that our financial statements will not be material
to the offering of any offered certificates.
113
<PAGE>
REPORTS
We have not authorized anybody to give you any information or to make any
representation not contained in this prospectus and any related prospectus
supplement and you should not rely on any related information or representation
that is not contained in this document. 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 certificates being offered
pursuant to the related prospectus supplement. They also do not constitute an
offer of the offered certificates to any person in any state or other
jurisdiction in which the offer would be unlawful. The delivery of this
prospectus to you at any time does not imply that information contained in this
document is correct as of any time subsequent to the date of this document;
however, if any material change occurs while this prospectus is required by law
to be delivered, we will amend or supplement this prospectus accordingly.
The servicer or trustee for each series will be required to mail to
holders of the certificates of each series periodic unaudited reports
concerning the related trust fund. If holders of beneficial interests in a
class of offered certificates are holding and transferring in book-entry form
through the facilities of DTC, then unless otherwise provided in the related
prospectus supplement, the 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 the 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. We will file or
cause to be filed with the SEC the periodic reports with respect to each trust
fund as are required under the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the SEC thereunder.
FINANCIAL INFORMATION
A new trust fund will be formed with respect to each series of
certificates. 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.
LEGAL MATTERS
The validity of the certificates of each series will be passed upon for us
by Shearman & Sterling, New York, New York, or other counsel identified in the
prospectus supplement for that series.
RATINGS
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 you of all collections on the underlying mortgage assets to which
you are entitled. Ratings address the structural, legal and issuer-related
aspects associated with those certificates, the nature of the underlying
mortgage loans 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
prepayments might differ from those originally anticipated. As a result, you
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.
114
<PAGE>
GLOSSARY
Accrued Certificate Interest -- With respect to each class of certificates
(other than some classes of stripped interest certificates and some classes of
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 the class of
certificates immediately prior to the 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 notional amount that is
either based on the principal balances of some or all of the mortgage assets in
the related trust fund or equal to the certificate balances of one or more
other classes of certificates of the same series.
ARM Loans -- mortgage loans with adjustable mortgage rates.
Available Distribution Amount -- 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 holders of certificates of the
series on the date.
Debt Service Coverage Ratio -- 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 the Net Operating Income derived from the
related mortgaged property for a twelve-month period to the annualized
scheduled payments on the mortgage loan and any other loans senior to it that
are secured by the related mortgaged property.
Disqualified Organization -- any of the following:
o the United States, any of its state or political subdivisions;
o any foreign government;
o any international organization;
o any agency or instrumentality of any of the foregoing, provided that
the term does not include an instrumentality if all of its activities
are subject to tax and, except in the case of the Federal Home Loan
Mortgage Corporation, a majority of its board of directors is not
selected by any related governmental entity;
o any cooperative organization furnishing electric energy or providing
telephone service to persons in rural areas as described in Internal
Revenue Code Section 1381(a)(2)(C); and
o any organization, other than a farmers' cooperative described in
Internal Revenue Code Section 521, that is exempt from taxation under
the Internal Revenue Code unless the organization is subject to the
tax on unrelated business income imposed by Internal Revenue Code
Section 511.
Due Period -- Unless otherwise specified in the prospectus supplement for
a series of certificates, 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 the related trust fund that are due
during a given Due Period will, to the extent received by a specified date,
called the determination date, or otherwise advanced by the related servicer or
other specified person, be distributed to the holders of the certificates of
the series on the next succeeding distribution date.
Excess Funds -- 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 interest received or advanced on the mortgage
assets in the related trust fund that is in excess of the interest currently
accrued on the certificates or 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 or principal.
115
<PAGE>
Loan-to-Value Ratio -- 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 the then outstanding principal balance
of the mortgage loan and any other loans senior to it that are secured by the
related mortgaged property to the Value of the related mortgaged property.
MBS -- pass-through certificates or other mortgage-backed securities that
evidence interests in, or that are secured by pledges of, one or more of
various types of multifamily or commercial mortgage loans.
Net Operating Income -- 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 the period, minus
the total operating expenses incurred in respect of the mortgaged property
during the period other than non-cash items such as depreciation and
amortization, capital expenditures, and debt service on the related mortgage
loan or on any other loans that are secured by the mortgaged property.
Non-U.S. Person -- The term "Non-U.S. Person" means any person who is not
a U.S. Person.
Pass-Through Entity -- "Pass-Through Entity" means any regulated
investment company, real estate investment trust, common trust fund,
partnership, trust or estate and some corporations operating on a cooperative
basis. Except as may be provided in Treasury regulations, any person holding an
interest in a Pass-Through Entity as a nominee for another will, with respect
to the interest, be treated as a Pass-Through Entity.
SMMEA -- The Secondary Market Mortgage Enhancement Act.
U.S. Person -- The term "U.S. 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 State, an estate that is
subject to United States federal income tax regardless of the source of its
income or a trust if:
o for taxable years beginning after December 31, 1996 (or for taxable
years ending after August 20, 1996, if the trustee has made an
applicable election), 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; or
o for all other taxable years, the trust is subject to United States
federal income tax regardless of the source of its income (or, to the
extent provided in applicable Treasury Regulations, some trusts in
existence on August 20, 1996 which are eligible to elect to be
treated as U.S. Persons).
Value -- The "Value" of a mortgaged property is generally its fair market
value determined in an appraisal obtained by the originator at the origination
of the loan.
116
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<PAGE>
This diskette contains one spreadsheet file that can be put on a
user-specified hard drive or network drive. The spreadsheet file "BS00WF2" is a
Microsoft Excel,1 Version 5.0 spreadsheet. The spreadsheet file provides, in
electronic format, all of the information shown in Annex A to this prospectus
supplement. The information contained in this diskette appears elsewhere in
paper form in this prospectus supplement and must be considered as part of, and
together with, the information contained elsewhere in this prospectus
supplement and the accompanying prospectus. Defined terms used in this diskette
but not otherwise defined therein shall have the respective meanings assigned
to them in the paper portion of this prospectus supplement. All of the
information contained in this diskette is subject to the same limitations and
qualifications contained elsewhere in this prospectus supplement and the
accompanying prospectus. Prospective investors are strongly urged to read the
paper portion of this prospectus supplement and the accompanying prospectus in
its entirety prior to accessing this diskette. If this diskette was not
received in a sealed package, there can be no assurances that it remains in its
original format and should not be relied upon for any purpose. Prospective
investors may contact Bear, Stearns & Co. Inc. at (212) 272-4192 to receive an
original copy of the diskette. As a precautionary measure, scan this diskette
for computer viruses before opening.
Open the file as you would normally open any spreadsheet file in Microsoft
Excel. After the spreadsheet file is opened, a legend will be displayed. READ
THE LEGEND CAREFULLY. The data in the spreadsheet file that corresponds to the
information shown in Annex A is in the worksheet labeled "ANNEX A."
----------
1 Microsoft Excel is a registered trademark of Microsoft Corporation.
<PAGE>
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YOU SHOULD RELY ON THE INFORMATION CONTAINED IN OR INCORPORATED BY
REFERENCE INTO THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO GIVE YOU DIFFERENT INFORMATION. WE DO NOT CLAIM
THAT THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IS
ACCURATE AS OF ANY DATE OTHER THAN THE DATE STATED ON THE COVER PAGE OF THIS
PROSPECTUS SUPPLEMENT. WE ARE NOT OFFERING THE OFFERED CERTIFICATES IN ANY
STATE WHERE THAT IS NOT PERMITTED.
UNTIL JANUARY , 2001, ALL DEALERS THAT COMPLETE 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.
-----------------------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Important Notice About Information Presented in this
Prospectus Supplement and the Accompanying Prospectus..... S-3
Summary of Prospectus Supplement ........................... S-7
Risk Factors ............................................... S-31
Forward Looking Statements ................................. S-55
Description of the Mortgage Pool ........................... S-56
Description of the Certificates ............................ S-84
Yield and Maturity Considerations .......................... S-104
Servicing of the Mortgage Loans ............................ S-113
Material Federal Income Tax Consequences ................... S-123
Method of Distribution ..................................... S-124
Legal Matters .............................................. S-125
Ratings .................................................... S-125
Legal Investment Considerations ............................ S-126
ERISA Considerations ....................................... S-126
Glossary ................................................... S-131
Annex A--Characteristics of the Mortgage Loans and the
Mortgaged Properties ............................ A-1
Annex B--Summary of Ten Largest Loans ...................... B-1
Annex C--Form of Distribution Date Statement and
Operating Statement Analysis Report ............. C-1
PROSPECTUS
Important Notice about the Information Presented in this
Prospectus and the Applicable Prospectus Supplement ...... 2
Summary of Prospectus ...................................... 7
Risk Factors ............................................... 8
Description of the Trust Funds ............................. 21
Yield and Maturity Considerations .......................... 32
The Depositor .............................................. 38
Use of Proceeds ............................................ 38
Description of the Certificates ............................ 39
Description of the Pooling and Servicing Agreements 46
Description of Credit Support .............................. 63
Legal Aspects of Mortgage Loans ............................ 65
Material Federal Income Tax Consequences ................... 78
State and Other Tax Consequences ........................... 107
ERISA Considerations ....................................... 108
Legal Investment ........................................... 109
Method of Distribution ..................................... 112
Where You Can Find More Information ........................ 113
Incorporation of Some Information by Reference ............. 113
Reports .................................................... 114
Financial Information ...................................... 114
Legal Matters .............................................. 114
Ratings .................................................... 114
Glossary ................................................... 115
</TABLE>
APPROXIMATELY
$793,450,000
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2000-WF2,
CLASSES A-1, A-2, X, B, C, D, E AND F
BEAR STEARNS COMMERCIAL
MORTGAGE SECURITIES INC.
DEPOSITOR
SERIES 2000-WF2
TRUST FUND
ISSUER
WELLS FARGO BANK,
NATIONAL ASSOCIATION
SERVICER AND SELLER
BEAR, STEARNS FUNDING, INC.
SELLER
MORGAN STANLEY DEAN WITTER
MORTGAGE CAPITAL INC.
SELLER
--------------------------------------------
PROSPECTUS SUPPLEMENT
--------------------------------------------
BEAR, STEARNS & CO. INC.
MORGAN STANLEY DEAN WITTER
WELLS FARGO BROKERAGE SERVICES, L.L.C.
SEPTEMBER , 2000
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