<PAGE>
Filed Pursuant to Rule 424(b)(5)
File Number 333-81595
<PAGE>
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED NOVEMBER 4, 1999)
[LOGO]
$704,388,241 (APPROXIMATE)
CHASE COMMERCIAL MORTGAGE SECURITIES CORP.
DEPOSITOR
GENERAL ELECTRIC CAPITAL CORPORATION AND THE CHASE MANHATTAN BANK
MORTGAGE LOAN SELLERS
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1999-2
------------------------
Chase Commercial Mortgage Securities Corp. is offering certain classes of
the Series 1999-2 Commercial Mortgage Pass-Through Certificates, which represent
the beneficial ownership interests in a trust. The trust's assets will primarily
be 92 mortgage loans secured by first liens on 118 commercial, multifamily and
manufactured housing community properties and are generally the sole source of
payments on the certificates. The Series 1999-2 Certificates are not obligations
of Chase Commercial Mortgage Securities Corp., the mortgage loan sellers or any
of their respective affiliates, and neither the certificates nor the underlying
mortgage loans are insured or guaranteed by any governmental agency or any other
person or entity.
------------------------
Certain characteristics of the offered certificates include:
<TABLE>
<CAPTION>
INITIAL CLASS
CERTIFICATE PASS-THROUGH EXPECTED
BALANCE OR PASS-THROUGH RATE ASSUMED FINAL RATINGS
NOTIONAL AMOUNT(1) RATE DESCRIPTION DISTRIBUTION DATE(5) (S&P/DCR)
------------------ ------------ ------------ -------------------- ---------
<S> <C> <C> <C> <C> <C>
Class A-1............. $105,920,000 7.032% Fixed October 15, 2008 AAA/AAA
Class A-2............. $469,330,397 7.198% Fixed November 15, 2009 AAA/AAA
Class X............... $782,653,601 (2) WAC/IO August 15, 2023 AAAr/AAA
Class B............... $ 41,089,314 7.343% Fixed November 15, 2009 AA/AA
Class C............... $ 37,176,046 7.519% Fixed November 15, 2009 A/A
Class D............... $ 11,739,804 7.734%(3) Fixed November 15, 2009 A-/A-
Class E............... $ 27,392,876 7.734%(3) Fixed November 15, 2009 BBB/BBB
Class F............... $ 11,739,804 7.734%(3) Fixed November 15, 2009 BBB-/BBB-
<CAPTION>
RATED FINAL
DISTRIBUTION DATE
-----------------
<S> <C>
Class A-1............. January 15, 2032
Class A-2............. January 15, 2032
Class X............... January 15, 2032
Class B............... January 15, 2032
Class C............... January 15, 2032
Class D............... January 15, 2032
Class E............... January 15, 2032
Class F............... January 15, 2032
</TABLE>
- ------------------
(Footnotes to table on page S-7)
The Securities and Exchange Commission and state securities regulators have
not approved or disapproved of the offered certificates or determined if this
prospectus supplement or the accompanying prospectus are truthful or complete.
Any representation to the contrary is a criminal offense.
------------------------
Chase Commercial Mortgage Securities Corp. will not list the offered
certificates on any securities exchange or on any automated quotation system of
any securities association such as NASDAQ.
------------------------
INVESTING IN THE OFFERED CERTIFICATES INVOLVES RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE S-27 IN THIS PROSPECTUS SUPPLEMENT AND PAGE 13 OF THE
PROSPECTUS.
------------------------
The underwriters, Chase Securities Inc. and Salomon Smith Barney Inc., will
purchase the offered certificates from Chase Commercial Mortgage Securities
Corp. and will offer them to the public at negotiated prices, plus accrued
interest, determined at the time of sale. Chase Securities Inc. is acting as
lead manager and bookrunner for the offering. The underwriters also expect to
deliver the offered certificates to purchasers in book-entry form only through
the facilities of The Depository Trust Company against payment in New York, New
York on or about November 23, 1999. We expect to receive from this offering
approximately 106.962% of the initial principal amount of the offered
certificates, plus accrued interest from November 1, 1999, before deducting
expenses payable by us.
CHASE SECURITIES INC. SALOMON SMITH BARNEY
Book Running Manager
NOVEMBER 17, 1999
<PAGE>
Chase Commercial Mortgage Securities Corp.
Commercial Mortgage Pass-Through Certificates, Series 1999-2
[GRAPHIC OMITTED. MAP OF UNITED STATES WITH STATES SHADED. SUCH SHADING
INDICATES THE PERCENTAGE OF THE MORTGAGE POOL LOCATED WITHIN EACH STATE, AS
LISTED BELOW.]
Wisconsin
1 property
$2,400,000
0.31% of total
Idaho
3 properties
$8,007,115
1.02% of total
Montana
1 property
$1,198,753
0.15% of total
Alabama
1 property
$4,090,000
0.52% of total
Illinois
1 property
$1,298,471
0.17% of total
Washington
2 properties
$15,997,085
2.04% of total
Massachusetts
1 property
$47,945,886
6.13% of total
Connecticut
13 properties
$29,638,529
3.79% of total
Alaska
1 property
$7,597,044
0.97% of total
Oklahoma
1 property
$3,450,000
0.44% of total
Florida
9 properties
$76,178,234
9.73% of total
Georgia
3 properties
$25,862,253
3.30% of total
South Carolina
2 properties
$4,958,869
0.63% of total
North Carolina
2 properties
$9,063,201
1.16% of total
Virginia
1 property
$40,953,778
5.23% of total
Maryland
1 property
$5,130,000
0.66% of total
Michigan
2 properties
$11,713,664
1.50% of total
Pennsylvania
3 properties
$37,904,121
4.84% of total
New York
4 properties
$37,632,956
4.81% of total
Nevada
4 properties
$18,722,440
2.39% of total
Colorado
3 properties
$24,198,151
3.09% of total
Utah
1 property
$6,600,000
0.84% of total
Arizona
4 properties
$13,713,313
1.75% of total
California
36 properties
$259,130,854
33.11% of total
Texas
18 properties
$89,268,882
11.41% of total
Greater than 10.0%
of Initial Pool Balance
5.0 - 9.9%
of Initial Pool Balance
1.0 - 4.9%
of Initial Pool Balance
(less than or equal to) 1.0%
of Initial Pool Balance
Geographic Overview of the Mortgage Pool
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
Information about the offered certificates is contained in two separate
documents that progressively provide more detail: (a) the accompanying
prospectus, which provides general information, some of which may not apply to
the offered certificates; and (b) this prospectus supplement, which describes
the specific terms of the offered certificates. If the terms of the offered
certificates vary between this prospectus supplement and the accompanying
prospectus, you should rely on the information in this prospectus supplement.
You should rely only on the information contained in this prospectus
supplement and the accompanying prospectus. We have not authorized anyone to
provide you with information that is different from that contained in this
prospectus supplement and the prospectus. The information in this prospectus
supplement is accurate only as of the date of this prospectus supplement.
This prospectus supplement begins with several introductory sections
describing the Series 1999-2 certificates and the trust in abbreviated form:
Summary of Certificates, commencing on page S-7 of this prospectus
supplement, which sets forth important statistical information relating to
the certificates;
Summary of Terms, commencing on page S-8 of this prospectus supplement,
which gives a brief introduction of the key features of the Series 1999-2
certificates and a description of the mortgage loans; and
Risk Factors, commencing on page S-27 of this prospectus supplement, which
describe risks that apply to the Series 1999-2 certificates which are in
addition to those described in the prospectus with respect to the securities
issued by the trust generally.
This prospectus supplement and the accompanying prospectus include cross
references to sections in these materials where you can find further related
discussions. The Tables of Contents in this prospectus supplement and the
prospectus identify the pages where these sections are located.
Certain capitalized terms are defined and used in this prospectus
supplement and the prospectus to assist you in understanding the terms of the
offered certificates and this offering. The capitalized terms used in this
prospectus supplement are defined on the pages indicated under the caption
"Index of Principal Definitions" beginning on page S-129 in this prospectus
supplement. The capitalized terms used in the prospectus are defined on the
pages indicated under the caption "Index of Principal Definitions" beginning on
page 114 in the prospectus.
In this prospectus supplement, the terms "Depositor," "we," "us" and "our"
refer to Chase Commercial Mortgage Securities Corp.
S-3
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
SUMMARY OF TERMS............................. S-8
RISK FACTORS................................. S-27
Geographic Concentration Entails Risks..... S-27
Risks Relating to Loan
Concentrations.......................... S-27
Risks Relating to Enforceability of
Cross-Collateralization................. S-29
Ability to Incur Other Borrowings Entails
Risk.................................... S-30
Borrower May Be Unable to Repay Remaining
Principal Balance on Maturity Date or
Anticipated Prepayment Date............. S-31
Commercial and Multifamily Lending Is
Dependent Upon Net Operating Income..... S-31
Tenant Concentration Entails Risk.......... S-32
Certain Additional Risks Relating to
Tenants................................. S-33
Mortgaged Properties Leased to Multiple
Tenants Also Have Risks................. S-33
Tenant Bankruptcy Entails Risks............ S-33
Mortgage Loans Are Nonrecourse and Are Not
Insured or Guaranteed................... S-33
Multifamily Properties Have Special
Risks................................... S-33
Risks Relating to Section 8 Multifamily
Properties.............................. S-34
Retail Properties Have Special
Risks................................... S-34
Office Properties Have Special
Risks................................... S-35
Industrial Properties Have Special Risks... S-35
Hotel Properties Have Special Risks........ S-36
Risks Relating to Affiliation with a
Franchise or Hotel Management Company... S-37
Manufactured Housing Community Properties
Have Special Risks...................... S-37
Lack of Skillful Property Management
Entails Risks........................... S-38
<CAPTION>
PAGE
-----
<S> <C>
Some Mortgaged Properties May Not Be
Readily Convertible to Alternative
Uses.................................... S-38
Limitations of Appraisals.................. S-38
Your Lack of Control Over Trust Fund Can
Create Risks............................ S-38
Potential Conflicts of Interest............ S-38
Directing Certificateholder May Direct
Special Servicer Actions................ S-39
Bankruptcy Proceedings Entail Certain
Risks................................... S-39
Risks Relating to Prepayments and
Repurchases............................. S-40
Risks Relating to Enforceability of Yield
Maintenance Charges..................... S-41
Risks Relating to Borrower Default......... S-41
Risks Relating to Certain Payments......... S-42
Risks of Limited Liquidity and Market
Value................................... S-42
Different Timing of Mortgage Loan
Amortization Poses Certain Risks........ S-42
Subordination of Subordinate Offered
Certificates............................ S-42
Environmental Risks Relating to the
Mortgaged Properties.................... S-43
Tax Considerations Relating to
Foreclosure............................. S-43
Risks Associated with One Action Rules..... S-43
Property Insurance......................... S-44
Zoning Compliance and Use Restrictions..... S-44
Risks Relating to Costs of Compliance with
Applicable Laws and Regulations......... S-44
No Reunderwriting of the Mortgage Loans.... S-45
Litigation................................. S-45
Book-Entry Registration.................... S-45
Risks Associated with Year 2000
Compliance.............................. S-45
Other Risks................................ S-46
</TABLE>
S-4
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
DESCRIPTION OF THE MORTGAGE POOL............. S-47
General.................................... S-47
Significant Borrower
Concentrations.......................... S-48
Simon Property Group, Inc. Borrower
Concentration...................... S-48
Orange County Industrial/Office
Portfolio Borrower Concentration... S-48
Center Trust, Inc. Borrower
Concentration...................... S-48
Significant Mortgage Loans................. S-49
Auburn Mall........................... S-49
Apple Blossom Mall.................... S-49
APD Loans.................................. S-50
Certain Terms and Conditions of the
Mortgage Loans.......................... S-50
Prepayment Provisions................. S-50
Defeasance; Collateral Substitution... S-53
"Due-on-Sale" and "Due-on-
Encumbrance" Provisions............ S-53
Additional Mortgage Loan
Information............................. S-54
Underwritten Net Cash Flow................. S-62
Revenue............................... S-62
Expenses.............................. S-63
Replacement Reserves.................. S-63
Assessments of Property Condition.......... S-63
Property Inspection................... S-63
Appraisals............................ S-63
Environmental Reports................. S-63
Building Condition Reports............ S-63
Earthquake Analyses................... S-64
The Mortgage Loan Sellers.................. S-64
Underwriting Standards..................... S-64
GECC's Underwriting Standards.............. S-64
General............................... S-64
Loan Analysis......................... S-64
Loan Approval......................... S-64
Debt Service Coverage Ratio and LTV
Ratio.............................. S-65
Escrow Requirements................... S-65
Chase's Underwriting Standards............. S-66
General............................... S-66
Loan Analysis......................... S-66
Loan Approval......................... S-66
Debt Service Coverage Ratio and LTV
Ratio.............................. S-66
Escrow Requirements................... S-67
Representations and Warranties; Repurchases
and Substitutions....................... S-67
Lock Box Accounts.......................... S-73
<CAPTION>
PAGE
-----
<S> <C>
DESCRIPTION OF THE CERTIFICATES.............. S-74
General.................................... S-74
Paying Agent, Certificate Registrar and
Authenticating Agent.................... S-75
Book-Entry Registration and Definitive
Certificates............................ S-75
General............................... S-75
Definitive Certificates............... S-77
Distributions.............................. S-77
Method, Timing and Amount............. S-77
Priority.............................. S-79
Pass-Through Rates.................... S-82
Interest Distribution Amount.......... S-84
Principal Distribution Amount......... S-84
Certain Calculations with Respect
to Individual Mortgage
Loans.............................. S-85
Excess Interest....................... S-85
Allocation of Yield Maintenance Charges.... S-85
Assumed Final Distribution Date; Rated
Final Distribution Date................. S-86
Subordination; Allocation of Collateral
Support Deficit......................... S-86
Advances................................... S-89
Calculation of LIBOR.................. S-90
Appraisal Reductions....................... S-91
Reports to Certificateholders; Certain
Available Information................... S-92
Voting Rights.............................. S-96
Termination; Retirement of
Certificates............................ S-96
The Trustee................................ S-97
SERVICING OF THE MORTGAGE
LOANS...................................... S-98
General.................................... S-98
The Master Servicer........................ S-100
The Primary Servicers...................... S-100
The Special Servicer....................... S-100
Replacement of the Special Servicer........ S-101
Servicing and Other Compensation and
Payment of Expenses..................... S-101
Maintenance of Insurance................... S-102
Modifications, Waiver and Amendments....... S-103
The Directing Certificateholder............ S-105
Limitation on Liability of Directing
Certificateholder....................... S-105
Realization Upon Defaulted Mortgage
Loans................................... S-106
Inspections; Collection of Operating
Information............................. S-108
</TABLE>
S-5
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Certain Matters Regarding the Master
Servicer, the Special Servicer and the
Depositor............................... S-108
Events of Default.......................... S-109
Rights Upon Event of Default............... S-110
Amendment.................................. S-111
YIELD AND MATURITY CONSIDERATIONS............ S-113
Yield Considerations....................... S-113
General............................... S-113
Pass-Through Rate..................... S-113
Rate and Timing of Principal
Payments........................... S-113
Losses and Shortfalls................. S-114
Certain Relevant Factors.............. S-114
Delay in Payment
of Distributions................... S-115
<CAPTION>
PAGE
-----
<S> <C>
Unpaid Distributable Certificate
Interest........................... S-115
Weighted Average Life...................... S-115
Yield Sensitivity of the Offered
Certificates............................ S-120
Yield Sensitivity of the Class X
Certificates............................ S-121
CERTAIN FEDERAL INCOME TAX CONSEQUENCES...... S-123
METHOD OF DISTRIBUTION....................... S-124
LEGAL MATTERS................................ S-125
RATINGS...................................... S-125
LEGAL INVESTMENT............................. S-126
ERISA CONSIDERATIONS......................... S-126
INDEX OF PRINCIPAL DEFINITIONS............... S-129
</TABLE>
S-6
<PAGE>
SUMMARY OF CERTIFICATES
<TABLE>
<CAPTION>
INITIAL CLASS INITIAL WEIGHTED
CERTIFICATE ASSUMED PASS- AVERAGE EXPECTED
BALANCE OR PASS-THROUGH FINAL THROUGH LIFE RATINGS
NOTIONAL APPROXIMATE RATE DISTRIBUTION RATE (APPROX.) (S&P/
CLASS AMOUNT (1) CREDIT SUPPORT DESCRIPTION DATE (4) (APPROX.) (5) CUSIP NO. DCR)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
A-1 $ 105,920,000 26.50% Fixed 10/15/08 7.032% 5.50 yrs 161505 DJ 8 AAA/AAA
A-2 $ 469,330,397 26.50% Fixed 11/15/09 7.198% 9.83 yrs 161505 DK 5 AAA/AAA
WAC
X $ 782,653,601 N/A (Interest- 8/15/23 0.9078% 9.47 yrs 161505 DL 3 AAAr/AAA
Only)(2)
B $ 41,089,314 21.25% Fixed 11/15/09 7.343% 9.98 yrs 161505 DM 1 AA/AA
C $ 37,176,046 16.50% Fixed 11/15/09 7.519% 9.98 yrs 161505 DN 9 A/A
D $ 11,739,804 15.00% Fixed(3) 11/15/09 7.734% 9.98 yrs 161505 DP 4 A-/A-
E $ 27,392,876 11.50% Fixed(3) 11/15/09 7.734% 9.98 yrs 161505 DQ 2 BBB/BBB
F $ 11,739,804 10.00% Fixed(3) 11/15/09 7.734% 9.98 yrs 161505 DR 0 BBB-/BBB-
G $ 27,392,876 N/A Fixed N/A 6.500% N/A N/A N/A
H $ 7,826,536 N/A Fixed N/A 6.500% N/A N/A N/A
I $ 6,848,219 N/A Fixed N/A 6.500% N/A N/A N/A
J $ 8,804,853 N/A Fixed N/A 6.500% N/A N/A N/A
K $ 6,848,219 N/A Fixed N/A 6.500% N/A N/A N/A
L $ 5,869,902 N/A Fixed N/A 6.500% N/A N/A N/A
M $ 14,674,755 N/A Fixed(3) N/A 6.500% N/A N/A N/A
<CAPTION>
PRINCIPAL OR
NOTIONAL
PRINCIPAL
CLASS WINDOW (5)
<S> <C>
A-1 12/99-10/08
A-2 10/08-11/09
X 12/99-8/23
B 11/09-11/09
C 11/09-11/09
D 11/09-11/09
E 11/09-11/09
F 11/09-11/09
G N/A
H N/A
I N/A
J N/A
K N/A
L N/A
M N/A
</TABLE>
(1) Approximate, subject to a permitted variance of plus or minus 10%.
(2) The pass-through rate on the Class X certificates will be equal to the
excess, if any, of (1) the weighted average of the net interest rates on
the mortgage loans (in each case adjusted if necessary to accrue on the
basis of a 360-day year consisting of twelve 30-day months), over (2) the
weighted average of the pass-through rates of the other certificates (other
than the residual certificates and the Class S certificate) as described in
this prospectus supplement.
(3) For any distribution date, if the weighted average of the net interest
rates on the mortgage loans (in each case adjusted if necessary to accrue
on the basis of a 360-day year consisting of twelve 30-day months) as of
the first day of the related due period is less than the rate specified for
the Class D, Class E, Class F and Class M certificates with respect to the
distribution date, then the pass-through rate for that class of
certificates on that distribution date will equal the weighted average net
mortgage rate.
(4) The assumed final distribution dates set forth in this prospectus
supplement have been determined on the basis of the assumptions described
in "Description of the Certificates--Assumed Final Distribution Date; Rated
Final Distribution Date" in this prospectus supplement. The rated final
distribution date for each class of certificates is January 15, 2032. See
"Description of the Certificates--Assumed Final Distribution Date; Rated
Final Distribution Date" in this prospectus supplement.
(5) The weighted average life and period during which distributions of
principal would be received set forth in the foregoing table with respect
to each class of certificates is based on the assumptions set forth under
"Yield and Maturity Considerations--Weighted Average Life" in this
prospectus supplement and on the assumptions that there are no prepayments
(other than on each anticipated prepayment date, if any), or losses on the
mortgage loans and no extensions of maturity dates of mortgage loans.
The Class S, Class R and Class LR certificates are not offered by this
prospectus supplement or represented in this table.
S-7
<PAGE>
SUMMARY OF TERMS
This summary highlights selected information from this prospectus
supplement. It does not contain all of the information you need to consider in
making your investment decision. To understand all of the terms of the offering
of the offered certificates, read this entire document and the accompanying
prospectus carefully.
RELEVANT PARTIES AND DATES
<TABLE>
<S> <C>
DEPOSITOR................................. Chase Commercial Mortgage Securities Corp., a New York corporation.
The depositor's address is 270 Park Avenue, New York, New York 10017,
and its telephone number is (212) 834-5723. See "The Depositor" in
the prospectus.
MASTER SERVICER........................... GE Capital Loan Services, Inc., a Delaware corporation. The master
servicer's principal address is 363 North Sam Houston Parkway East,
Suite 2000, Houston, Texas 77060 and its telephone number is
(281) 405-7000. See "Servicing of the Mortgage Loans--The Master
Servicer" in this prospectus supplement.
PRIMARY SERVICERS......................... The Chase Manhattan Bank will act as the primary servicer of the
mortgage loans sold to the depositor by The Chase Manhattan Bank
pursuant to a subservicing agreement between the master servicer and
The Chase Manhattan Bank. GE Capital Loan Services, Inc., as master
servicer, will act as primary servicer of the mortgage loans sold to
the depositor by General Electric Capital Corporation. See "Servicing
of the Mortgage Loans--The Primary Servicers" in this prospectus
supplement.
SPECIAL SERVICER.......................... ORIX Real Estate Capital Markets, LLC, a Delaware limited liability
company. The special servicer's address is 1717 Main Street, Dallas,
Texas 75201 and its telephone number is (214) 237-2000. See
"Servicing of the Mortgage Loans--The Special Servicer" in this
prospectus supplement.
TRUSTEE................................... Norwest Bank Minnesota, National Association, a national banking
association. The trustee's address is 11000 Broken Land Parkway,
Columbia, Maryland 21044-3562 and its telephone number is
(410) 884-2000. See "Description of the Certificates--The Trustee" in
this prospectus supplement.
PAYING AGENT.............................. The Chase Manhattan Bank, a New York banking corporation. The Chase
Manhattan Bank will also act as the certificate registrar and
authenticating agent. See "Description of the Certificates--Paying
Agent, Certificate Registrar and Authenticating Agent" in this
prospectus supplement.
MORTGAGE LOAN SELLERS..................... General Electric Capital Corporation, a New York corporation, which
is contributing 54.81% of the mortgage loans by aggregate principal
balance as of the cut-off date, and The Chase Manhattan Bank, a New
York banking corporation, which is contributing 45.19% of the
mortgage loans by aggregate principal balance as of the cut-off date.
General Electric Capital Corporation is an affiliate of the master
servicer. The Chase Manhattan Bank is also a primary servicer, the
paying agent, the parent of the depositor and an affiliate of Chase
Securities Inc., one of the underwriters. See
</TABLE>
S-8
<PAGE>
<TABLE>
<S> <C>
"Description of the Mortgage Pool--The Mortgage Loan Sellers" in this
prospectus supplement.
CUT-OFF DATE.............................. November 10, 1999.
CLOSING DATE.............................. On or about November 23, 1999.
DISTRIBUTION DATE......................... The 15th day of the month or, if that day is not a business day, the
next business day, beginning in December 1999, provided that the
distribution date will be no earlier than the fourth business day
following the related determination date.
INTEREST ACCRUAL PERIOD................... Interest will accrue on the offered certificates during the calendar
month prior to the related distribution date and will be calculated
assuming that each month has 30 days and each year has 360 days.
DUE PERIOD................................ The period commencing on the 2nd day of the month preceding the month
in which the related distribution date occurs and ending on the 1st
day of the month in which the related distribution date occurs, or,
with respect to 28 mortgage loans, representing approximately 45.19%
of the aggregate principal balance of the pool of mortgage loans as
of the cut-off date, the period commencing on the 11th day of the
month preceding the month in which the related distribution date
occurs and ending on the 10th day of the month in which the related
distribution date occurs.
DETERMINATION DATE........................ The 11th day of the month in which the related distribution date
occurs, or if the 11th day is not a business day, then the
immediately following business day.
OFFERED SECURITIES
GENERAL................................... We are offering the following eight classes of commercial mortgage
pass-through certificates as part of Series 1999-2:
o Class A-1
o Class A-2
o Class X
o Class B
o Class C
o Class D
o Class E
o Class F
Series 1999-2 will consist of a total of 18 classes, the following
ten of which are not being offered through this prospectus supplement
and the accompanying prospectus: Class G, Class H, Class I, Class J,
Class K, Class L, Class M, Class S, Class R and Class LR.
The Series 1999-2 certificates will collectively represent beneficial
ownership interests in a trust created by Chase Commercial Mortgage
Securities Corp. The trust's assets will primarily be 92 mortgage
loans secured by first liens on 118 commercial, multifamily and
manufactured housing community properties.
CERTIFICATE PRINCIPAL AMOUNTS
AND NOTIONAL AMOUNT..................... Your certificates will have the approximate aggregate initial
principal amount or notional amount set forth below, subject to a
variance of plus or minus 10%:
Class A-1...... $105,920,000 principal amount
</TABLE>
S-9
<PAGE>
<TABLE>
<S> <C> <C>
Class A-2...... $469,330,397 principal amount
Class X........ $782,653,601 notional amount
Class B........ $41,089,314 principal amount
Class C........ $37,176,046 principal amount
Class D........ $11,739,804 principal amount
Class E........ $27,392,876 principal amount
Class F........ $11,739,804 principal amount
</TABLE>
<TABLE>
<S> <C>
The notional amount of the Class X certificates will generally be
equal to the aggregate principal amount of the certificates having
principal balances as of the preceding distribution date after giving
effect to the distribution of principal on that distribution date or,
in the case of the first distribution date, the closing date.
See "Description of the Certificates--General" in this prospectus
supplement.
PASS-THROUGH RATES
A. OFFERED CERTIFICATES
(OTHER THAN CLASS X)................... Your certificates will accrue interest at an annual rate called a
pass-through rate which is set forth below for each class other than
the Class X certificates:
Class A-1 ........................................ 7.032%
Class A-2 ........................................ 7.198%
Class B .......................................... 7.343%
Class C .......................................... 7.519%
Class D ....................................... 7.734%(1)
Class E ....................................... 7.734%(1)
Class F ....................................... 7.734%(1)
------------------
(1) For any distribution date, if the weighted average of the net
interest rates on the mortgage loans (in each case adjusted if
necessary to accrue on the basis of a 360-day year consisting of
twelve 30-day months) as of the first day of the related due
period is less than the rate specified for the Class D, Class E
and Class F certificates with respect to the distribution date,
then the pass-through rate for that class of certificates on
that distribution date will equal the weighted average net
mortgage rate.
B. CLASS X
CERTIFICATES........................... If you invest in the Class X certificates, your pass-through rate
will be equal to the excess, if any, of (1) the weighted average
interest rate of the mortgage loans (after the payment of all
servicing and trustee fees) over (2) the weighted average of the
pass-through rates of the other certificates (other than the Class S,
Class R and Class LR certificates) as described in this prospectus
supplement. The weighting will be based upon the respective principal
amounts of those classes.
C. INTEREST RATE CALCULATION
CONVENTION............................. Interest on your certificates will be calculated based on a 360-day
year consisting of twelve 30-day months, or a 30/360 basis.
For purposes of calculating the Class D, Class E and Class F and
Class X pass-through rates, the mortgage loan interest rates will not
reflect any default interest rate, any rate increase occurring after
an anticipated prepayment date, any
</TABLE>
S-10
<PAGE>
<TABLE>
<S> <C>
loan term modifications agreed to by the special servicer or any
modifications resulting from a borrower's bankruptcy or insolvency.
In addition, all the mortgages loans except 1 mortgage loan,
representing approximately 2.42% of the aggregate principal balance
of the pool of mortgage loans as of the cut-off date, accrue interest
based on a 360-day year and the actual number of days elapsed. If a
mortgage loan does not accrue interest on a 30/360 basis, its
interest rate for any month will be recalculated so that the amount
of interest that would accrue at that rate in that month, calculated
on a 30/360 basis, will equal the amount of interest that is required
to be paid on that mortgage loan in that month, subject to certain
adjustments as described in "Description of the
Certificates--Distributions--Interest Distribution Amount" in this
prospectus supplement.
See "Description of the Certificates--Distributions--Pass-Through
Rates" and "Description of the Certificates--Distributions--Interest
Distribution Amount" in this prospectus supplement.
DISTRIBUTIONS
A. AMOUNT AND ORDER
OF DISTRIBUTIONS....................... On each distribution date, funds available for distribution from the
mortgage loans, net of specified trust expenses, will be distributed
in the following amounts and order of priority:
First/Class A-1, Class A-2 and Class X: To interest on Class A-1,
Class A-2 and Class X, pro rata, in accordance with their interest
entitlements.
Second/Class A-1 and Class A-2: To the extent of funds allocated to
principal, to principal on Class A-1 and Class A-2, in that order,
until reduced to zero. If each class of certificates other than Class
A-1 and Class A-2 has been reduced to zero, funds available for
principal will be distributed to Class A-1 and Class A-2, pro rata,
rather than sequentially.
Third/Class A-1 and Class A-2: After each class of certificates other
than Class A-1 and Class A-2 has been reduced to zero, to reimburse
Class A-1 and Class A-2, pro rata, for any previously unreimbursed
losses on the mortgage loans allocable to principal that were
previously borne by those classes, together with interest.
Fourth/Class B: To Class B as follows: (a) to interest on Class B in
the amount of its interest entitlement; (b) to the extent of funds
allocated to principal remaining after distributions in respect of
principal to each Class with a higher priority (in this case, Class
A-1 and Class A-2), to principal on Class B until reduced to zero;
and (c) to reimburse Class B for any previously unreimbursed losses
on the mortgage loans allocable to principal that were previously
borne by that class, together with interest.
Fifth/Class C: To Class C in a manner analogous to the Class B
allocations of priority Fourth above.
Sixth/Class D: To Class D in a manner analogous to the Class B
allocations of priority Fourth above.
</TABLE>
S-11
<PAGE>
<TABLE>
<S> <C>
Seventh/Class E: To Class E in a manner analogous to the Class B
allocations of priority Fourth above.
Eighth/Class F: To Class F in a manner analogous to the Class B
allocations of priority Fourth above.
Ninth/Non-offered Certificates: In the amounts and order of priority
described in "Description of the Certificates--
Distributions--Priority" in this prospectus supplement.
B. INTEREST AND PRINCIPAL
ENTITLEMENTS........................... A description of each class's interest entitlement can be found in
"Description of the Certificates--Distributions--Interest
Distribution Amount" in this prospectus supplement. As described in
that section, there are circumstances in which your interest
entitlement for a distribution date could be less than one full
month's interest at the pass-through rate on your certificate's
principal amount or notional amount.
A description of the amount of principal required to be distributed
to the classes entitled to principal on a particular distribution
date also can be found in "Description of the
Certificates--Distributions--Principal Distribution Amount" in this
prospectus supplement.
C. YIELD MAINTENANCE CHARGES.............. Yield maintenance charges with respect to the mortgage loans will be
allocated to the Class X certificates.
For an explanation of the calculation of yield maintenance charges,
see "Description of the Mortgage Pool--Certain Terms and Conditions
of the Mortgage Loans--Prepayment Provisions" in this prospectus
supplement.
See "Description of the Certificates--Allocation of Yield Maintenance
Charges" in this prospectus supplement.
SUBORDINATION
A. GENERAL................................ The chart below describes the manner in which the payment rights of
certain classes will be senior or subordinate, as the case may be, to
the payment rights of other classes. The chart shows the entitlement
to receive principal and interest (other than excess interest) on any
distribution date in descending order (beginning with the Class A-1,
Class A-2 and Class X certificates). It also shows the manner in
which mortgage loan losses are allocated in ascending order
(beginning with the other Series 1999-2 certificates that are not
being offered by this prospectus supplement). However, no principal
payments or loan losses will be allocated to Class X certificates,
although loan losses will reduce the notional amount of the Class X
certificates and, therefore, the amount of interest they accrue.
</TABLE>
S-12
<PAGE>
[Chart Appears Here]
---------------------------
Class A-1, Class A-2,
Class X*
---------------------------
|
--------------
Class B
--------------
|
--------------
Class C
--------------
|
--------------
Class D
--------------
|
--------------
Class E
--------------
|
--------------
Class F
--------------
|
--------------
private
certificates**
--------------
<TABLE>
<S> <C>
* The Class X certificates are interest-only certificates.
** Other than the Class S, Class R and Class LR certificates.
No other form of credit enhancement will be available for the benefit
of the holders of the offered certificates.
Any allocation of a loss to a class of certificates will reduce the
related principal amount of that class.
See "Description of the Certificates" in this prospectus supplement.
B. SHORTFALLS IN
AVAILABLE FUNDS........................ The following types of shortfalls in available funds will reduce
distributions to the classes of certificates with the lowest payment
priorities: shortfalls resulting from additional compensation, other
than the servicing fee, which the master servicer or the special
servicer is entitled to receive; shortfalls resulting from interest
on advances made by the master servicer, the special servicer or the
trustee (to the extent not covered by default interest paid by the
borrower); shortfalls resulting from extraordinary expenses of the
trust; shortfalls resulting from involuntary prepayments; and
shortfalls resulting from a reduction of a mortgage loan's interest
rate by a bankruptcy court or from other unanticipated or default-
related expenses of the trust.
See "Description of the Certificates--Distributions--Priority" in
this prospectus supplement.
ADVANCES
A. P&I ADVANCES........................... The master servicer is required to advance delinquent periodic
mortgage loan payments if it determines that the advance will be
recoverable. The master servicer will not be required to advance
balloon payments due at maturity in excess of the regular periodic
payment, interest in excess of a mortgage loan's regular interest
rate or yield maintenance charges. The master servicer also is not
required to advance amounts deemed non-recoverable. There may be
other circumstances in which the master servicer will not be required
to advance one
</TABLE>
S-13
<PAGE>
<TABLE>
<S> <C>
full month of principal and interest. If the master servicer fails to
make a required advance, the trustee will be required to make the
advance. See "Description of the Certificates--Advances" in this
prospectus supplement. If an interest advance is made, the master
servicer will not advance its servicing fee, but will advance the
trustee's fee.
B. PROPERTY PROTECTION ADVANCES........... The master servicer or, in some instances, the special servicer also
may be required to make advances to pay delinquent real estate taxes,
assessments and hazard insurance premiums and similar expenses
necessary to protect and maintain the mortgaged property, to maintain
the lien on the mortgaged property or enforce the related mortgage
loan documents. If the master servicer or special servicer fails to
make a required advance of this type, the trustee, or in the case of
the special servicer's failure, the master servicer, is required to
make this advance. None of the master servicer, the special servicer
or the trustee is required to advance amounts deemed non-
recoverable. See "Description of the Certificates--Advances" in this
prospectus supplement.
C. INTEREST ON ADVANCES................... The master servicer, the special servicer and the trustee, as
applicable, will be entitled to interest on these advances at a rate
equal to LIBOR plus 2.90%, compounded monthly. Interest accrued on
outstanding advances may result in reductions in amounts otherwise
payable on the certificates.
See "Description of the Certificates--Advances" and "--Subordination;
Allocation of Collateral Support Deficit" in this prospectus
supplement and "Description of the Certificates--Advances in Respect
of Delinquencies" and "Description of the Pooling
Agreements--Certificate Account" in the prospectus.
THE MORTGAGE LOANS
THE MORTGAGE POOL......................... The trust's primary assets will be 92 fixed rate mortgage loans, each
evidenced by one or more promissory notes secured by first mortgages,
deeds of trust or similar security instruments on 86 commercial
properties, 26 multifamily properties and 6 manufactured housing
community properties.
The following tables set forth certain anticipated characteristics of
the mortgage loans as of the cut-off date or, with respect to
1 mortgage loan, the origination date (unless otherwise indicated).
The sum in any column may not equal the indicated total due to
rounding. Unless otherwise indicated, all figures presented in this
summary section are calculated as described under "Description of the
Mortgage Pool--Additional Mortgage Loan Information" in this
prospectus supplement and all percentages represent the indicated
percentage of the aggregate principal balance of the pool of mortgage
loans as of the cut-off date or, with respect to 1 mortgage loan, the
origination date. The principal balance of each mortgage loan as of
the cut-off date or, with respect to 1 mortgage loan, the origination
date, assumes the timely receipt of principal scheduled to be paid in
November
</TABLE>
S-14
<PAGE>
<TABLE>
<S> <C>
on each mortgage loan and no defaults, delinquencies or prepayments
on any mortgage loan as of the cut-off date.
</TABLE>
<TABLE>
<S> <C> <C>
The mortgage loans will have the following
approximate characteristics as of the
cut-off date:
Aggregate principal balance(1)................ $782,653,601
Number of mortgage loans...................... 92
Number of mortgaged properties................ 118
Number of "balloon" mortgage loans(2)......... 87
Number of fully amortizing loans.............. 2
Number of mortgage loans with
anticipated prepayment dates.............. 3
Range of mortgage loan principal balances..... $1,198,753 to
$47,945,886
Average mortgage loan principal balance....... $8,507,104
Range of mortgage rates....................... 6.49% to 8.83%
Weighted average mortgage rate................ 8.13%
Range of remaining terms to maturity
date(3)..................................... 58 months to 285
months
Weighted average remaining term to maturity
date(3)..................................... 121 months
Weighted average original term to maturity
date(3)..................................... 123 months
Weighted average original amortization term... 349 months
Weighted average remaining amortization
term........................................ 348 months
Range of loan to value ratios................. 46.90% to 81.49%
Weighted average loan to value ratio.......... 71.98%
Weighted average loan to value ratio as of the
maturity date(3)............................ 62.58%
Weighted average occupancy rate(4)............ 94.17%
Range of debt service coverage ratios......... 1.14x to 2.08x
Weighted average debt service coverage
ratio....................................... 1.29x
------------------
(1) Subject to a permitted variance of plus or minus 10%.
(2) The balloon mortgage loan information shown above excludes
mortgage loans with an anticipated prepayment date.
(3) In the case of 3 mortgage loans, the anticipated prepayment
date.
(4) The weighted average occupancy rate information shown above
includes 7 hotel properties, representing approximately 7.49%
of the aggregate principal balance of the pool of mortgage
loans as of the cut-off date, which have occupancy rates that
generally range from 59% to 89%; if the mortgage loans secured
by hotel properties are excluded, the weighted average
occupancy rate of all other mortgaged properties is 95.12%.
</TABLE>
S-15
<PAGE>
ORIGINATORS OF THE MORTGAGE LOANS
NUMBER OF AGGREGATE
MORTGAGE PRINCIPAL BALANCE OF % OF INITIAL
ORIGINATOR LOANS THE MORTGAGE LOANS POOL BALANCE
- ---------------------------- --------- -------------------- ------------
General Electric Capital
Corporation............... 64 $428,986,892 54.81%
The Chase Manhattan Bank.... 28 353,666,709 45.19
--- ------------ ------
Total....................... 92 $782,653,601 100.00%
=== ============ ======
CURRENT USES OF THE MORTGAGED PROPERTIES (1)
NUMBER OF AGGREGATE
MORTGAGED PRINCIPAL BALANCE OF % OF INITIAL
CURRENT USE PROPERTIES THE MORTGAGE LOANS POOL BALANCE
- ---------------------------- ---------- -------------------- ------------
Multifamily................. 26 $218,775,349 27.95%
Anchored Retail............. 17 191,198,804 24.43
Office...................... 25 157,011,367 20.06
Industrial.................. 28 94,816,810 12.11
Hotel....................... 7 58,650,842 7.49
Manufactured Housing
Community................. 6 34,620,346 4.42
Unanchored Retail........... 5 14,453,910 1.85
Self Storage................ 4 13,126,173 1.68
--- ------------ ------
Total....................... 118 $782,653,601 100.00%
=== ============ ======
- --------------------------------------------------------------------------
(1) Because this table presents information relating to the mortgaged
properties and not the mortgage loans, the information for mortgage
loans secured by more than one mortgaged property is based on
allocated loan amounts (allocating the mortgage loan principal amount
to each of those properties either as set forth in the related
mortgage note or by the appraised values of the mortgaged properties).
PROPERTY TYPE
[GRAPHIC OMITTED. PIE CHART DEPICTING
PROPERTY TYPE BY PERCENTAGE OF MORTGAGE
POOL, AS LISTED BELOW.]
Property Type
- -------------
Multifamily 27.95%
Anchored Retail 24.43%
Office 20.06%
Industrial 12.11%
Hotel 7.49%
Manufactured Housing Community 4.42%
Unanchored Retail 1.85%
Self Storage 1.68%
S-16
<PAGE>
The mortgaged properties are located in 25 states. The following table
lists the states which have concentrations of mortgaged properties above
5%:
GEOGRAPHIC DISTRIBUTION
NUMBER OF AGGREGATE
MORTGAGED PRINCIPAL BALANCE OF % OF INITIAL
STATE PROPERTIES THE MORTGAGE LOANS POOL BALANCE
- ---------------------------- --------- -------------------- ------------
California.................. 36 $259,130,854 33.11%
Texas....................... 18 89,268,882 11.41
Florida..................... 9 76,178,234 9.73
Massachusetts............... 1 47,945,886 6.13
Virginia.................... 1 40,953,778 5.23
Other....................... 53 269,175,967 34.39
--- ------------ ------
Total....................... 118 $782,653,601 100.00%
=== ============ ======
RANGE OF MORTGAGE RATES
NUMBER OF AGGREGATE
MORTGAGE PRINCIPAL BALANCE OF % OF INITIAL
RANGE OF MORTGAGE RATES LOANS THE MORTGAGE LOANS POOL BALANCE
- ---------------------------- --- ------------ ------
6.490% to 7.499%............ 4 $ 17,205,663 2.20%
7.500% to 7.849%............ 11 99,324,948 12.69
7.850% to 7.999%............ 13 190,120,988 24.29
8.000% to 8.199%............ 20 144,931,213 18.52
8.200% to 8.399%............ 25 156,713,501 20.02
8.400% to 8.599%............ 14 102,434,287 13.09
8.600% to 8.830%............ 5 71,923,000 9.19
--- ------------ ------
Total....................... 92 $782,653,601 100.00%
=== ============ ======
RANGE OF PRINCIPAL BALANCES
NUMBER OF AGGREGATE
RANGE OF CUT-OFF MORTGAGE PRINCIPAL BALANCE OF % OF INITIAL
DATE BALANCES LOANS THE MORTGAGE LOANS POOL BALANCE
- ---------------------------- --------- -------------------- ------------
$1,198,753 to $2,500,000.... 14 $ 24,894,048 3.18%
$2,500,001 to $5,000,000.... 29 106,528,286 13.61
$5,000,001 to $10,000,000... 25 171,349,300 21.89
$10,000,001 to
$15,000,000............... 10 117,610,987 15.03
$15,000,001 to
$25,000,000............... 8 155,059,588 19.81
$25,000,001 to
$40,000,000............... 4 118,311,728 15.12
$40,000,001 to
$47,945,886............... 2 88,899,665 11.36
--- ------------ ------
Total....................... 92 $782,653,601 100.00%
=== ============ ======
RANGE OF DSCRS
NUMBER OF AGGREGATE
MORTGAGE PRINCIPAL BALANCE OF % OF INITIAL
RANGE OF DSCRS LOANS THE MORTGAGE LOANS POOL BALANCE
- ---------------------------- --------- -------------------- ------------
1.1430x to 1.1999x.......... 2 $ 20,625,000 2.64%
1.2000x to 1.2249x.......... 15 175,180,661 22.38
1.2250x to 1.2499x.......... 12 99,720,056 12.74
1.2500x to 1.2999x.......... 28 292,554,112 37.38
1.3000x to 1.4999x.......... 26 158,009,144 20.19
1.5000x to 1.9999x.......... 7 26,720,003 3.41
2.0000x to 2.0800x.......... 2 9,844,624 1.26
--- ------------ ------
Total....................... 92 $782,653,601 100.00%
=== ============ ======
S-17
<PAGE>
RANGE OF LTV RATIOS
NUMBER OF AGGREGATE
MORTGAGE PRINCIPAL BALANCE OF % OF INITIAL
RANGE OF LTV RATIOS LOANS THE MORTGAGE LOANS POOL BALANCE
- ---------------------------- --------- -------------------- ------------
46.90% to 59.99%............ 2 $ 9,844,624 1.26%
60.00% to 64.99%............ 5 23,596,539 3.01
65.00% to 68.99%............ 17 208,379,473 26.62
69.00% to 72.99%............ 20 216,411,152 27.65
73.00% to 76.99%............ 26 204,867,211 26.18
77.00% to 79.99%............ 18 92,422,725 11.81
80.00% to 81.49%............ 4 27,131,876 3.47
--- ------------ ------
Total....................... 92 $782,653,601 100.00%
=== ============ ======
RANGE OF REMAINING TERM TO MATURITY DATE OR
ANTICIPATED PREPAYMENT DATE
NUMBER OF AGGREGATE
RANGE OF REMAINING MORTGAGE PRINCIPAL BALANCE OF % OF INITIAL
TERMS (MOS.) LOANS THE MORTGAGE LOANS POOL BALANCE
- ---------------------------- --------- -------------------- ------------
58 to 84................... 2 $ 17,339,425 2.22%
85 to 108.................. 1 13,293,723 1.70
109 to 115.................. 3 12,263,624 1.57
116 to 119.................. 42 381,974,666 48.81
120 to 120.................. 39 327,176,500 41.80
121 to 240.................. 4 28,476,864 3.64
241 to 285.................. 1 2,128,799 0.27
--- ------------ ------
Total....................... 92 $782,653,601 100.00%
=== ============ ======
All of the mortgage loans bear interest at fixed rates.
The mortgage loans require the borrowers to make scheduled payments of
principal and/or interest on the following days of each month (in some
cases, subject to the indicated grace periods): 64 of the mortgage loans,
representing approximately 54.81% of the aggregate principal balance of
the pool of mortgage loans as of the cut-off date, provide for scheduled
payments of principal and/or interest due on the first day of each month,
and 28 mortgage loans, representing approximately 45.19% of the aggregate
principal balance of all the mortgage loans as of the cut-off date,
provide for scheduled payments of principal and interest due on the 10th
day of each month. All of the mortgage loans whose due date is the first
day of each month provide for a grace period of 5 days. No mortgage loan
whose due date is the 10th day of each month provides for a grace period.
See "Description of the Mortgage Pool--Certain Terms and Conditions of the
Mortgage Loans" in this prospectus supplement.
The mortgage loans accrue interest based on the following conventions:
NUMBER OF AGGREGATE
MORTGAGE PRINCIPAL BALANCE OF % OF INITIAL
ACCRUAL BASIS LOANS THE MORTGAGE LOANS POOL BALANCE
- ---------------------------- --------- -------------------- ------------
[S] [C] [C] [C]
Actual/360.................. 91 $763,708,601 97.58%
30/360...................... 1 18,945,000 2.42
--- ------------ ------
Total....................... 92 $782,653,601 100.00%
=== ============ ======
S-18
<PAGE>
See "Description of the Mortgage Pool--Certain Terms and Conditions of the
Mortgage Loans" in this prospectus supplement.
AMORTIZATION TYPES
------------------
AGGREGATE
NUMBER OF PRINCIPAL BALANCE OF
TYPE OF MORTGAGE THE MORTGAGE % OF INITIAL
AMORTIZATION LOANS LOANS POOL BALANCE
- ---------------------------- --------- -------------------- ------------
Balloon Loans............... 87 $752,047,938 96.09%
Fully Amortizing Loans...... 2 15,528,799 1.98
Loans with an Anticipated
Prepayment Date........... 3 15,076,864 1.93
--- ------------ ------
Total....................... 92 $782,653,601 100.00%
=== ============ ======
3 mortgage loans, representing approximately 1.93% of the aggregate
principal balance of the pool of mortgage loans as of the cut-off date,
provide for an increase in the related interest rate after a certain date,
the anticipated prepayment date. The interest accrued in excess of the
original rate, together with any related interest thereon, will be
deferred and will not be paid until the principal balance of the related
mortgage loan has been paid. On each distribution date, any amount
received in respect of that deferred interest during the related due
period will be distributed to the holder of the Class S certificate.
After the anticipated prepayment date, cash flow in excess of that
required for debt service and budgeted expenses with respect to the
related mortgaged properties will be applied towards the payment of
principal (without payment of a yield maintenance charge) of the related
mortgage loans until their principal balance has been reduced to zero. A
substantial principal payment would be required to pay off these mortgage
loans on their anticipated prepayment date. The amortization term of the
mortgage loans is generally the same as the remaining term to maturity if
these mortgage loans are not prepaid on their anticipated prepayment date.
See "Description of the Mortgage Pool--Additional Mortgage Loan
Information" and "Description of the Mortgage Pool--Certain Terms and
Conditions of the Mortgage Loans" in this prospectus supplement.
The following table contains general information regarding the prepayment
provisions of the mortgage loans:
OVERVIEW OF PREPAYMENT PROTECTION(1)
------------------------------------
NUMBER OF AGGREGATE
PREPAYMENT MORTGAGE PRINCIPAL BALANCE OF % OF INITIAL
PROVISION LOANS THE MORTGAGE LOANS POOL BALANCE
- ---------------------------- --------- -------------------- ------------
Lock-out period followed by
defeasance(2)............. 91 $780,524,802 99.73%
Lock-out period followed by
yield maintenance......... 1 2,128,799 0.27
--- ------------ ------
Total....................... 92 $782,653,601 100.00%
=== ============ ======
S-19
<PAGE>
- --------------------------------------------------------------------------
(1) The mortgage loans permit prepayment without penalty for a specified
period (generally 90 days) preceding the maturity date or anticipated
prepayment date.
(2) Defeasance involves the substitution of direct non-callable U.S.
Treasury obligations for the related mortgaged property as collateral
for the mortgage loans.
See "Description of the Mortgage Pool--Additional Mortgage Loan
Information," "Description of the Mortgage Pool--Certain Terms and
Conditions of the Mortgage Loans" and "--Defeasance; Collateral
Substitution" in this prospectus supplement.
SIGNIFICANT LOANS
TEN LARGEST MORTGAGE LOANS
<TABLE>
<CAPTION>
% OF STATED CUT-OFF
NUMBER OF CUT-OFF INITIAL REMAINING DATE
MORTGAGED DATE POOL PROPERTY MORTGAGE TERM UNDERWRITTEN LTV
PROPERTY NAME PROPERTIES BALANCE BALANCE TYPE RATE (MOS.) DSCR RATIO
- ------------------------ --------- ------------ ------- ------------------ -------- --------- ------------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Auburn Mall............. 1 $ 47,945,886 6.13% Anchored Retail 7.99% 118 1.26x 68.01%
Apple Blossom Mall...... 1 40,953,778 5.23 Anchored Retail 7.99% 118 1.25x 71.85%
Tuscan Inn at
Fisherman's
Wharf................. 1 34,000,000 4.34 Full-Service Hotel 8.83% 120 1.46x 66.80%
Torrance Promenade...... 1 30,000,000 3.83 Anchored Retail 8.30% 120 1.23x 71.43%
Windsor Apartments...... 1 27,487,296 3.51 Multifamily 7.92% 119 1.21x 76.35%
Orange County
Industrial/
Office Portfolio I.... 9 26,824,431 3.43 Industrial/Office 8.18% 117 1.30x 71.06%
Seven Penn Center....... 1 24,000,000 3.07 Office 8.43% 120 1.21x 66.67%
Orange County
Industrial/
Office Portfolio II... 8 22,229,344 2.84 Industrial/Office 8.17% 117 1.30x 69.58%
Winstanley Portfolio.... 9 21,479,500 2.74 Industrial/Office 8.44% 120 1.20x 74.04%
City National Bank
Building.............. 1 19,000,000 2.43 Office 8.70% 120 1.29x 67.86%
--- ------------ -------
Total/Weighted
Average............... 33 $293,920,236 37.55% 8.26% 119 1.27x 70.25%
=== ============ =======
<CAPTION>
LTV
RATIO
AT
PROPERTY NAME MATURITY
- ------------------------ --------
<S> <C>
Auburn Mall............. 60.69%
Apple Blossom Mall...... 64.41%
Tuscan Inn at
Fisherman's
Wharf................. 56.47%
Torrance Promenade...... 64.42%
Windsor Apartments...... 68.31%
Orange County
Industrial/
Office Portfolio I.... 64.02%
Seven Penn Center....... 60.30%
Orange County
Industrial/
Office Portfolio II... 62.67%
Winstanley Portfolio.... 61.94%
City National Bank
Building.............. 61.74%
Total/Weighted
Average............... 62.44%
</TABLE>
S-20
<PAGE>
<TABLE>
<S> <C>
Auburn Mall............................... The Auburn Mall loan is secured by a first lien on a one and
two-story enclosed regional mall located in Auburn, Massachusetts.
The mall contains a total of approximately 595,273 square feet of net
leasable area and is anchored by Sears and Filene's. The mortgaged
property contains a total of approximately 430,273 square feet of net
leasable area. Approximately 165,000 square feet is owned and
occupied by 1 anchor tenant, Filene's, which is not collateral for
the mortgage loan. The mortgaged property contains 87,500 square feet
of net leasable area which was previously occupied by Caldor. The
space is currently vacant and the related lease was assumed upon
Caldor's bankruptcy by a third party that continues to pay rent, but
does not occupy the space. The underwriting for the mortgage loan
assumed no revenue from such space. See "Risk Factors--Retail
Properties Have Special Risks" in this prospectus supplement. The
mall was constructed in 1971 and renovated in 1997. As of November
1999, the mall was approximately 82.4% occupied. The sponsor of the
borrower is Simon Property Group, Inc. As of August 1999, Simon
Property Group, Inc. had an ownership interest in 252 properties in
36 states.
Apple Blossom Mall........................ The Apple Blossom Mall loan is secured by a first lien on a
one-story, enclosed regional mall located in Winchester, Virginia.
The mall contains a total of approximately 439,353 square feet of net
leasable area and is anchored by J.C. Penney, Sears and Belk. The
mortgaged property contains a total of approximately 365,085 square
feet of net leasable area. Approximately 74,268 square feet is owned
and occupied by 1 anchor tenant, Belk, which is not collateral for
the mortgage loan. The mall was constructed in 1982 and as of
November 1999, the property was approximately 92.3% occupied. The
sponsor of the borrower is Simon Property Group, Inc. As of August
1999, Simon Property Group, Inc. had an ownership interest in 252
properties in 36 states.
Tuscan Inn at Fisherman's Wharf........... The Tuscan Inn at Fisherman's Wharf loan is secured by a first lien
on a four-story full-service hotel located in San Francisco,
California. The mortgaged property contains 221 rooms, meeting space
and a restaurant. Although not subject to a franchise agreement, the
Tuscan Inn has been a member of the Best Western reservation system
since 1994. The property was built in 1990 and renovated in 1997. As
of August 1999, the prior 12-months occupancy rate of the mortgaged
property was approximately 89.1%. As of October 1999, the sponsor of
the borrower is The Kimpton Hotel & Restaurant Group, Inc. which
manages 26 hotel properties.
Torrance Promenade........................ The Torrance Promenade loan is secured by a first lien on a retail
shopping center located in Torrance, California. The mortgaged
property contains a total of approximately 266,907 square feet of net
leasable area and is anchored by Sears Homelife, Linens-N-Things,
Marshalls, Ross Dress for Less, Loehmann's, Office Depot, Kids-R-Us,
Petco and Jennifer
</TABLE>
S-21
<PAGE>
<TABLE>
<S> <C>
Convertibles. One of the tenants, Loehmann's has declared Chapter 11
bankruptcy, but remains open. See "Risk Factors--Retail Properties
Have Special Risks" in this prospectus supplement. The shopping
center was constructed in 1973 and renovated in 1989. As of September
1999, the property was approximately 99.7% occupied. The sponsor of
the borrower is Center Trust, Inc. As of September 1999, Center
Trust, Inc. owned or controlled a portfolio of 47 community shopping
centers, 2 regional malls and 10 single tenant facilities in the
Western United States.
Windsor Apartments........................ The Windsor Apartments loan is secured by a first lien on a 388-unit,
apartment complex consisting of 12 3-story buildings located in
Hollywood, Florida. The property contains a total of 102 1-bedroom
units, 216 2-bedroom units, and 70 3-bedroom units. Amenities
available to residents include three swimming pools, a theatre,
business center, billiards room, two-lane bowling alley, one
racquetball court, fitness complex, a tennis court and a volleyball
court. The complex was constructed in 1997. As of September 1999 the
property was approximately 96.0% occupied. The sponsor of the
borrower is Wiener Family Partnership. As of November 1999, the
sponsor and its affiliates owned and operated over 10,000 multifamily
units throughout the country.
Orange County Industrial/
Office Portfolio I...................... The Orange County Industrial/Office Portfolio I loan is secured by
first liens on 6 industrial properties and 3 office properties
located throughout Orange County, California. The portfolio contains
a total of 457,671 square feet of net leasable area and as of
September 1999 (or in 1 case, October 1999), had a weighted average
occupancy of approximately 98.1%. The 6 industrial properties contain
approximately 403,194 square feet of net leasable area and as of
September 1999 (or in 1 case, October 1999), have a weighted average
occupancy rate of approximately 97.8%. The industrial properties are
located in Irvine, California, Costa Mesa, California and Tustin,
California. The 3 office properties comprise a total of approximately
54,477 square feet and as of September 1999, were 100% occupied. The
office properties are located in Irvine, California. The Orange
County Industrial/Office Portfolio I loan is cross-collateralized and
cross-defaulted with the Orange County Industrial/Office
Portfolio II loan. The sponsor of the borrower is Olen Commercial
Properties Corp. As of November 1999, the company's portfolio
included over 3.5 million square feet of commercial space and 6,400
multifamily units located throughout Southern California, Nevada and
Florida.
Seven Penn Center......................... The Seven Penn Center loan is secured by a first lien on a 19-story
class "A" office building located in Philadelphia, Pennsylvania. The
property contains a total of approximately 252,398 square feet of net
leasable office space and 32,842 square feet of net leasable retail
space. The property was constructed in 1966 and renovated between
1987 and 1989.
</TABLE>
S-22
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<TABLE>
<S> <C>
As of October 1999, the property was approximately 91.0% occupied.
The sponsors of the borrower are Craig A. Spencer and the Arden
Group.
Orange County Industrial/
Office Portfolio II..................... The Orange County Industrial/Office Portfolio II loan is secured by
first liens on 5 industrial properties and 3 office properties
located throughout Orange County, California. The portfolio contains
a total of 355,208 square feet of net leasable area and as of
September 1999 had a weighted average occupancy rate of approximately
99.0%. The 5 industrial properties contain a total of 281,311 square
feet of net leasable area and as of September 1999 had a weighted
averaged occupancy rate of approximately 99.4%. The industrial
properties are located in Irvine, California, Orange, California and
Yorba Linda, California. The 3 office properties comprise a total of
approximately 73,897 square feet of net leasable area and as of
September 1999, had a weighted average occupancy rate of 98.0%. The
office properties are located in Newport Beach, California, Santa
Ana, California and Irvine, California. The Orange County
Industrial/Office Portfolio II loan is cross-collateralized and
cross-defaulted with the Orange County Industrial/Office Portfolio I
loan. The sponsor of the borrower is Olen Commercial Properties Corp.
As of November 1999 the company's portfolio included over
3.5 million square feet of commercial space and 6,400 multifamily
units located throughout southern California, Nevada and Florida.
Winstanley Portfolio...................... The Winstanley Portfolio loan is secured by first liens on 8
single-story industrial and office properties located in Wallingford,
Connecticut and 1 industrial property located in Berlin, Connecticut.
The properties consist of 3 industrial, 3 office/industrial and 3
office properties containing a total of approximately 628,854 net
leasable square feet. As of July 1999, the properties had a weighted
average occupancy rate of approximately 97.7%. The sponsor of the
borrower is Winstanley Enterprises, LLC.
City National Bank........................ The City National Bank loan is secured by a first lien on a 24-story
class "A" office building located in Los Angeles, California. The
property contains a total of approximately 283,251 square feet of net
leasable office space. The property was constructed in 1967 and
renovated in 1997. As of September 1999, the property was
approximately 98.3% occupied. The sponsor of the borrower is Bram
Goldsmith.
</TABLE>
ADDITIONAL ASPECTS OF CERTIFICATES
<TABLE>
<S> <C>
Denominations............................. The offered certificates (other than the Class X certificates) will
be offered in minimum denominations of $10,000 initial principal
amount. The Class X certificates will be offered in minimum
denominations of $1,000,000 initial notional amount. Investments in
excess of the minimum denominations may be made in multiples of
$1,000.
</TABLE>
S-23
<PAGE>
<TABLE>
<S> <C>
Registration, Clearance and
Settlement.............................. Each class of offered certificates will be registered in the name of
Cede & Co., as nominee of The Depository Trust Company, or DTC.
You may hold your offered certificates through: (1) DTC in the United
States; or (2) Cedelbank or The Euroclear System in Europe. Transfers
within DTC, Cedelbank or Euroclear will be made in accordance with
the usual rules and operating procedures of those systems.
We may elect to terminate the book-entry system through DTC with
respect to all or any portion of any class of the offered
certificates.
See "Description of the Certificates--Book-Entry Registration and
Definitive Certificates" in this prospectus supplement and in the
prospectus.
Information Available to
Certificateholders...................... On each distribution date, the paying agent will prepare and make
available to each certificateholder of record, initially expected to
be Cede & Co., a statement as to the distributions being made on that
date. Additionally, under certain circumstances, certificateholders
of record may be entitled to certain other information regarding the
trust.
See "Description of the Certificates--Reports to Certificateholders;
Certain Available Information" in this prospectus supplement.
Deal Information/Analytics................ Certain information concerning the mortgage loans and the offered
certificates will be available to you through the following services:
o Bloomberg, L.P.
o the paying agent's website at www.chase.com/sfa
Optional Termination...................... On any distribution date on which the aggregate principal balance of
the pool of mortgage loans remaining in the trust is less than 1% of
the aggregate unpaid balance of the mortgage loans as of the cut-off
date, certain entities specified in this prospectus supplement will
have the option to purchase all of the remaining mortgage loans at
the price specified in this prospectus supplement (and all property
acquired through exercise of remedies in respect of any mortgage
loan). Exercise of this option will terminate the trust and retire
the then outstanding certificates.
See "Description of the Certificates--Termination; Retirement of
Certificates" in this prospectus supplement and "Description of the
Certificates--Termination" in the prospectus.
Tax Status................................ An election will be made to treat a portion of the trust (exclusive
of the excess interest and the related distribution account for this
portion) as two separate REMICs--a Lower-Tier REMIC and an Upper-Tier
REMIC--for federal income tax purposes. Each of certain individual
mortgage loans may
</TABLE>
S-24
<PAGE>
<TABLE>
<S> <C>
constitute the sole asset of a separate REMIC and the "regular
interest" of each of these REMICs will be an asset of the Lower-Tier
REMIC. The portion of the trust representing the excess interest will
be treated as a grantor trust for federal income tax purposes. In the
opinion of counsel, the portions of the trust referred to above will
qualify for this treatment.
Pertinent federal income tax consequences of an investment in the
offered certificates include:
o Each class of offered certificates (and the Class G, Class H, Class
I, Class J, Class K, Class L and Class M certificates) will
represent "regular interests" in the Upper-Tier REMIC.
o The regular interests will be treated as newly originated debt
instruments for federal income tax purposes.
o You will be required to report income on the regular interests
represented by your certificates using the accrual method of
accounting.
o The Class X certificates will, and one or more other classes of
offered certificates may, be issued with original issue discount.
o The Class S certificate will represent an interest in a grantor
trust with respect to interest that is deferred on loans after
their anticipated prepayment date, for the loans that have
anticipated prepayment dates.
See "Certain Federal Income Tax Consequences" in this prospectus
supplement and "Certain Federal Income Tax Consequences" in the
prospectus.
ERISA Considerations...................... Subject to important considerations described under "ERISA
Considerations" in this prospectus supplement and "Certain ERISA
Considerations" in the accompanying prospectus, the Class A-1, Class
A-2 and Class X certificates are eligible for purchase by persons
investing assets of employee benefit plans or individual retirement
accounts.
THE CLASS B, CLASS C, CLASS D, CLASS E AND CLASS F CERTIFICATES MAY
NOT BE PURCHASED BY, OR TRANSFERRED TO, A PLAN OR ANY PERSON
INVESTING THE ASSETS OF A PLAN. (THIS PROHIBITION DOES NOT APPLY TO
AN INSURANCE COMPANY INVESTING ASSETS OF ITS GENERAL ACCOUNT UNDER
CIRCUMSTANCES WHICH WOULD QUALIFY FOR AN EXEMPTION UNDER PROHIBITED
TRANSACTION CLASS EXEMPTION 95-60.)
Legal Investment.......................... The offered certificates will not constitute "mortgage related
securities" within the meaning of the Secondary Mortgage Market
Enhancement Act of 1984.
See "Legal Investment" in this prospectus supplement and in the
accompanying prospectus.
</TABLE>
S-25
<PAGE>
<TABLE>
<S> <C>
Ratings................................... The offered certificates will not be issued unless each of the
offered classes receives the following ratings from Standard &
Poor's Ratings Services and Duff & Phelps Credit Rating Co.:
</TABLE>
<TABLE>
<CAPTION>
S&P DCR
---- ----
<S> <C> <C>
Class A-1............................. AAA AAA
Class A-2............................. AAA AAA
Class X............................... AAAr AAA
Class B............................... AA AA
Class C............................... A A
Class D............................... A- A-
Class E............................... BBB BBB
Class F............................... BBB- BBB-
</TABLE>
<TABLE>
<S> <C>
A rating agency may downgrade, qualify or withdraw a security rating
at any time. A rating agency not requested to rate the offered
certificates may nonetheless issue a rating and, if one does, it may
be lower than those stated above. S&P assigns the additional rating
of "r" to highlight classes of securities that S&P believes may
experience high volatility or high variability in expected returns
due to non-credit risks. The security ratings do not address the
frequency of prepayments (whether voluntary or involuntary) of
mortgage loans, the degree to which prepayments might differ from
those originally anticipated, the likelihood of collection of excess
interest, default interest or yield maintenance charges, or the tax
treatment of the certificates. Even though the Class X certificates
will be rated "AAAr/AAA," it is still possible that you may fail to
recover your full initial investment due to a rapid rate of
prepayments, defaults or liquidations. See "Yield and Maturity
Considerations" in this prospectus supplement, "Risk Factors" and
"Ratings" in this prospectus supplement and in the prospectus, and
"Yield and Maturity Considerations" in the prospectus.
See "Ratings" in this prospectus supplement and the prospectus for a
discussion of the basis upon which ratings are given and the
conclusions that may not be drawn from a rating.
</TABLE>
S-26
<PAGE>
RISK FACTORS
You should carefully consider the following risks before making an
investment decision. In particular, distributions on your certificates will
depend on payments received on and other recoveries with respect to the mortgage
loans. Therefore, you should carefully consider the risk factors relating to the
mortgage loans and the mortgaged properties.
The risks and uncertainties described below are not the only ones relating
to your certificates. Additional risks and uncertainties not presently known to
us or that we currently deem immaterial may also impair your investment.
If any of the following risks actually occur, your investment could be
materially and adversely affected.
This prospectus supplement also contains forward-looking statements that
involve risks and uncertainties. Actual results could differ materially from
those anticipated in these forward-looking statements as a result of certain
factors, including the risks described below and elsewhere in this prospectus
supplement.
GEOGRAPHIC CONCENTRATION ENTAILS RISKS
Mortgaged properties located in California and Texas represent 33.11% and
11.41%, respectively, of the aggregate principal balance of the pool of mortgage
loans as of the cut-off date. With respect to the mortgaged properties located
in California, 30 of the mortgaged properties representing approximately 21.73%
of the aggregate principal balance of the pool of mortgage loans as of the cut-
off date are in southern California and 6 of the mortgaged properties
representing approximately 11.38% of the aggregate principal balance of the pool
of mortgage loans as of the cut-off date are in northern California.
Concentrations of mortgaged properties in geographic areas may increase the risk
that adverse economic or other developments or natural disaster affecting a
particular region of the country could increase the frequency and severity of
losses on mortgage loans secured by those properties. In recent periods, several
regions of the United States have experienced significant real estate downturns.
Regional economic declines or conditions in regional real estate markets could
adversely affect the income from, and market value of, the mortgaged properties.
Other regional factors--e.g., earthquakes, floods or hurricanes or changes in
governmental rules or fiscal policies--also may adversely affect the mortgaged
properties. For example, mortgaged properties located in California may be more
susceptible to certain hazards (such as earthquakes) than properties in other
parts of the country.
RISKS RELATING TO LOAN CONCENTRATIONS
The effect of mortgage pool loan losses will be more severe if the losses
relate to loans that account for a disproportionately large percentage of the
pool's aggregate principal balance. In this regard:
o The largest mortgage loan represents approximately 6.13% of the aggregate
principal balance of the pool of mortgage loans as of the cut-off date.
See "Description of the Mortgage Pool--Significant Mortgage Loans" in
this prospectus supplement.
o The 3 largest mortgage loans represent, in the aggregate, approximately
15.70% of the aggregate principal balance of the pool of mortgage loans
as of the cut-off date.
o The 10 largest mortgage loans represent, in the aggregate, approximately
37.55% of the aggregate principal balance of the pool of mortgage loans
as of the cut-off date.
Each of the other mortgage loans represents less than 3% of the aggregate
principal balance of the pool of mortgage loans as of the cut-off date.
A concentration of mortgaged property types or of mortgage loans with the
same borrower or related borrowers also can pose increased risks. In that
regard, the following table lists the property
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<PAGE>
type concentrations in excess of 5% of the aggregate principal balance of the
pool of mortgage loans as of the cut-off date:
SIGNIFICANT PROPERTY TYPE CONCENTRATIONS
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
AGGREGATE --------------------------------------------------------------
PRINCIPAL STATED
BALANCE OF PERCENTAGE REMAINING CUT-OFF
NUMBER OF THE OF INITIAL TERM TO DATE LTV
MORTGAGED MORTGAGE POOL MORTGAGE MATURITY(2) LTV RATIO AT
PROPERTY TYPE PROPERTIES LOANS(1) BALANCE(1) RATE (MOS.) OCCUPANCY DSCR RATIO MATURITY(2)
- ------------------------- --------- ------------ ---------- -------- ----------- --------- ---- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Multifamily.............. 26 $218,775,349 27.95% 7.80% 124 97% 1.27x 75.44% 65.30%
Retail(3)................ 22 $205,652,714 26.28% 8.09% 119 91% 1.27x 71.86% 64.53%
Office................... 25 $157,011,367 20.06% 8.41% 127 94% 1.27x 70.41% 58.46%
Industrial............... 28 $ 94,816,810 12.11% 8.27% 118 98% 1.28x 71.75% 63.36%
Hotel(4)................. 7 $ 58,650,842 7.49% 8.65% 118 82% 1.49x 67.24% 56.66%
</TABLE>
- ------------------
(1) By allocated loan amount.
(2) Calculated with respect to the anticipated prepayment date for the mortgage
loans with anticipated prepayment dates.
(3) 17 of such mortgage loans, representing approximately 24.43% of the
aggregate principal balance of the pool of mortgage loan as of the cut-off
date, is an "anchored" retail mortgaged property.
(4) 1 of such mortgage loans, representing approximately 4.34% of the aggregate
principal balance of the pool of mortgage loans as of the cut-off date, is a
full-service hotel mortaged property.
A concentration of mortgage loans secured by the same mortgaged property
types can increase the risk that a decline in a particular industry or business
would have a disproportionately large impact on the pool of mortgage loans.
The following table lists the borrower concentrations in excess of 5% of
the aggregate principal balance of the pool of mortgage loans as of the cut-off
date:
SIGNIFICANT BORROWER CONCENTRATIONS
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
AGGREGATE -------------------------------------------------------
PRINCIPAL STATED
BALANCE OF PERCENTAGE REMAINING CUT-OFF
NUMBER OF THE OF INITIAL TERM TO DATE LTV
LOANS/ MORTGAGE POOL MORTGAGE MATURITY LTV RATIO AT
SPONSOR NAME PROPERTIES LOANS BALANCE RATE (MOS.) DSCR RATIO MATURITY
- -------------------- ---------- ----------- ---------- -------- --------- ---- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Simon Property
Group, Inc........ 2/2 $88,899,665 11.36% 7.990% 118 1.26x 69.78% 62.55%
Olen Commercial
Properties
Corp.(1).......... 2/17 $49,053,776 6.27% 8.175% 117 1.30x 70.39% 63.40%
Center Trust, Inc... 3/3 $43,144,000 5.51% 8.300% 120 1.23x 69.92% 63.06%
</TABLE>
- ------------------
(1) The mortgage loans within this group are cross-collateralized and
cross-defaulted.
See "Description of the Mortgage Pool--Significant Borrower Concentration"
and "--Significant Mortgage Loans" in this prospectus supplement.
o 8 other groups of mortgage loans have borrowers related to each other,
none of these groups of mortgage loans represent more than 4% of the
aggregate principal balance of the pool of mortgage loans as of the
cut-off date.
o Other than as described above, no other group of mortgage loans is
cross-collateralized or cross-defaulted.
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<PAGE>
o 4 mortgage loans, representing approximately 10.05% of the aggregate
principal balance of the pool of mortgage loans as of the cut-off date,
are secured by more than one mortgaged property.
See "Description of the Mortgage Pool--Additional Mortgage Loan
Information" in this prospectus supplement.
Mortgaged properties owned by related borrowers are likely to:
o have common management, increasing the risk that financial or other
difficulties experienced by the property manager could have a greater
impact on the pool of mortgage loans; and
o have common general partners which would increase the risk that a
financial failure or bankruptcy filing would have a greater impact on the
pool of mortgage loans.
Except as described below, the terms of the mortgage loans generally
require that the borrowers covenant to be single-purpose entities, although in
many cases the borrowers are not required to observe all covenants and
conditions which typically are required in order for them to be viewed under
standard rating agency criteria as "special purpose entities." In addition, in
these cases, the borrowers' organizational documents or the terms of the
mortgage loans limit their activities to the ownership of only the related
mortgaged property or properties and limit the borrowers' ability to incur
additional indebtedness. These provisions are designed to mitigate the
possibility that the borrower's financial condition would be adversely impacted
by factors unrelated to the mortgaged property and the mortgage loan in the
pool. However, we cannot assure you that the related borrowers will comply with
these requirements. In addition, the terms of 4 mortgage loans, representing
approximately 4.75% of the aggregate principal balance of the pool of mortgage
loans as of the cut-off date, do not require the related borrowers to be
single-purpose entities. See "Certain Legal Aspects of Mortgage
Loans--Bankruptcy Laws" in the prospectus.
RISKS RELATING TO ENFORCEABILITY OF CROSS-COLLATERALIZATION
As described above, 1 group of 2 mortgage loans, representing approximately
6.27% of the aggregate principal balance of the pool of mortgage loans as of the
cut-off date, is cross-collateralized and cross-defaulted.
Cross-collateralization arrangements involving more than one borrower could be
challenged as fraudulent conveyances by creditors of the related borrower in an
action brought outside a bankruptcy case or, if the borrower were to become a
debtor in a bankruptcy case, by the borrower's representative.
A lien granted by the borrower entity could be avoided if a court were to
determine that:
o the borrower was insolvent when it granted the lien, was rendered
insolvent by the granting of the lien, was left with inadequate capital,
or was not able to pay its debts as they matured; and
o the borrower did not receive fair consideration or reasonably equivalent
value when it allowed its mortgaged property or properties to be
encumbered by a lien securing the entire indebtedness.
Among other things, a legal challenge to the granting of the liens may
focus on the benefits realized by that borrower from the respective mortgage
loan proceeds, as well as the overall cross-collateralization. If a court were
to conclude that the granting of the liens was an avoidable fraudulent
conveyance, that court could:
o subordinate all or part of the pertinent mortgage loan to existing or
future indebtedness of that borrower;
o recover payments made under that mortgage loan; or
o take other actions detrimental to the holders of the certificates,
including, under certain circumstances, invalidating the mortgage loan or
the mortgages securing the cross-collateralization.
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<PAGE>
ABILITY TO INCUR OTHER BORROWINGS ENTAILS RISK
The mortgage loans generally prohibit the borrower from incurring any
additional debt secured by the mortgaged property without the consent of the
lender. As of the cut-off date, the mortgage loan sellers have informed us that
they are aware of the following indebtedness with respect to the mortgage loans.
o With respect to 3 mortgage loans, representing approximately 4.11% of the
aggregate principal balance of the pool of mortgage loans as of the cut-off
date, the related borrower has unsecured debt payable to an affiliate of the
related borrower and/or an unrelated third party.
o The terms of 3 mortgage loans, representing approximately 5.93% of the
aggregate principal balance of the pool of mortgage loans as of the cut-off
date, do not restrict the borrower from incurring future debt which is not
secured by the mortgaged property, although in some instances the amount of such
debt is limited to a percentage of the outstanding principal balance of the
mortgage loan.
o Additionally, 1 of the mortgage loans, representing approximately 4.34%
of the aggregate principal balance of the mortgage loans as of the cut-off date,
permits the related borrower to incur indebtedness secured by the furniture,
fixtures and equipment which are considered to be part of the mortgaged property
in addition to the debt owed under the mortgage loan.
Substantially all of the mortgage loans permit the related borrower to
incur limited indebtedness in the ordinary course of business that is not
secured by the related mortgage property. Moreover, in general, any borrower
that does not meet single purpose entity criteria may not be restricted from
incurring unsecured debt.
The mortgage loan sellers have informed us that they are aware of 1
mortgage loan, representing approximately 0.17% of the aggregate principal
balance of the pool of mortgage loans as of the cut-off date, where the owners
of the related borrower have pledged their equity interests in the related
borrower to secure the mezzanine debt. This form of financing effectively
reduces the indirect equity interest of any owner in the related mortgaged
property. Also, upon default under the mezzanine debt, the mezzanine debt lender
may become the owner of the applicable borrower through foreclosure on its
security interest in the ownership interests of the applicable borrower. 1
additional mortgage loan, representing approximately 2.04% of the aggregate
principal balance of the pool of mortgage loans as of the cut-off date,
specifically permits the pledge of the equity interests in the related borrower
to secure future loans to the owners of the related borrower.
In addition, although the mortgage loans generally restrict the pledging of
general partnership and managing member equity interests in a borrower subject
to certain exceptions, the terms of the mortgage generally permit, subject to
certain limitations, the pledging of limited partnership or membership equity
interests in a borrower. Moreover, in general, any borrower that does not meet
single purpose entity criteria may not be restricted in any way from incurring
mezzanine debt.
When a mortgage loan borrower (or its constituent members) also has one or
more other outstanding loans (even if subordinated loans), the trust is
subjected to additional risk. The borrower may have difficulty servicing and
repaying multiple loans. The existence of another loan generally also will make
it more difficult for the borrower to obtain refinancing of the mortgage loan
and may thereby jeopardize repayment of the mortgage loan. Moreover, the need to
service additional debt may reduce the cash flow available to the borrower to
operate and maintain the mortgaged property.
Additionally, if the borrower (or its constituent members) defaults on the
mortgage loan and/or any other loan, actions taken by other lenders such as a
foreclosure by another lender or an involuntary petition for bankruptcy against
the borrower could impair the security available to the trust, including the
mortgaged property, or stay the trust's ability to foreclose during the course
of the bankruptcy case. The bankruptcy of another lender also may operate to
stay foreclosure by the trust. The trust may also be subject to the costs and
administrative burdens of involvement in foreclosure or bankruptcy proceedings
or related litigation.
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<PAGE>
Certain of the subordinate debt creditors have entered into subordination
and standstill agreements with the lender acknowledging that the subordinate
debt described above is non-foreclosable and non-defaultable, imposing limits on
the borrower's ability to incur any further subordinate debt and restricting the
lender's ability to file for involuntary bankruptcy of the related borrower.
Payments on the subordinate debt are required to be made solely out of excess
cash flow after periodic payments of principal and interest have been made and
any reserves required by the terms of the related mortgage loans have been
funded as required under the mortgage loan documents. See "Description of the
Mortgage Pool--General" in this prospectus supplement and "Certain Legal Aspects
of Mortgage Loans--Subordinate Financing" in the prospectus.
BORROWER MAY BE UNABLE TO REPAY REMAINING PRINCIPAL BALANCE ON MATURITY DATE OR
ANTICIPATED PREPAYMENT DATE
90 of the mortgage loans representing approximately 98.02% of the aggregate
principal balance of the pool of mortgage loans as of the cut-off date, are
expected to have substantial remaining principal balances as of their respective
anticipated prepayment dates or stated maturity dates. 87 of these mortgage
loans, representing approximately 96.09% of the aggregate principal balance of
the pool of mortgage loans as of the cut-off date, require balloon payments at
their stated maturity, and the remaining 3 mortgage loans, representing
approximately 1.93% of the aggregate principal balance of the pool of mortgage
loans as of the cut-off date, anticipate a substantial payment at their
anticipated prepayment date to prepay those mortgage loans. 84 of the mortgage
loans, representing approximately 92.18% of the aggregate principal balance of
the pool of mortgage loans as of the cut-off date, mature in the year 2009.
Mortgage loans with substantial remaining principal balances at their stated
maturity (i.e., "balloon loans") involve greater risk than fully amortizing
loans. In addition, fully amortizing mortgage loans which pay interest on an
"actual/360" basis but have fixed monthly payments will, in fact, have a small
balloon payment due at maturity.
A borrower's ability to repay a loan on its anticipated prepayment date or
stated maturity date typically will depend upon its ability either to refinance
the loan or to sell the mortgaged property at a price sufficient to permit
repayment. A borrower's ability to achieve either of these goals will be
affected by a number of factors, including:
o the availability of, and competition for, credit for commercial real
estate projects;
o the prevailing interest rates;
o the fair market value of the related properties;
o the borrower's equity in the related properties;
o the borrower's financial condition;
o the operating history and occupancy level of the property;
o the tax laws; and
o prevailing general and regional economic conditions.
The availability of funds in the credit markets fluctuates over time.
We cannot assure you that each borrower will have the ability to repay the
remaining principal balances on the pertinent date.
See "Description of the Mortgage Pool--Certain Terms and Conditions of the
Mortgage Loans" in this prospectus supplement and "Risk Factors--Borrowers May
Be Unable to Make Balloon Payments" in the prospectus.
COMMERCIAL AND MULTIFAMILY LENDING IS DEPENDENT UPON NET OPERATING INCOME
The mortgage loans are secured by various income-producing commercial
and/or multifamily properties. Commercial and multifamily lending are generally
thought to expose a lender to greater risk than residential one-to-four family
lending because it typically involves larger loans to a single borrower or
groups of related borrowers.
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The repayment of a commercial or multifamily loan is typically dependent
upon the ability of the applicable property to produce cash flow through the
collection of rents. Even the liquidation value of a commercial property is
determined, in substantial part, by the capitalization of the property's cash
flow. However, net operating income can be volatile and may be insufficient to
cover debt service on the loan at any given time.
The net operating incomes and property values of the mortgaged properties
may be adversely affected by a large number of factors. Some of these factors
relate to the properties themselves, such as:
o the age, design and construction quality of the properties;
o perceptions regarding the safety, convenience and attractiveness of the
properties;
o the proximity and attractiveness of competing properties;
o the adequacy of the property's management and maintenance;
o increases in operating expenses;
o an increase in the capital expenditures needed to maintain the properties
or make improvements;
o a decline in the financial condition of a major tenant;
o an increase in vacancy rates; and
o a decline in rental rates as leases are renewed or entered into with new
tenants.
Other factors are more general in nature, such as:
o national, regional or local economic conditions, including plant
closings, industry slowdowns and unemployment rates;
o local real estate conditions, such as an oversupply of retail space,
office space or multifamily housing;
o demographic factors;
o consumer confidence;
o consumer tastes and preferences; and
o retroactive changes in building codes.
The volatility of net operating income 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 in the case of rental properties, the rate at which new rentals occur;
and
o the property's "operating leverage" which is generally the percentage of
total property expenses in relation to revenue, the ratio of fixed
operating expenses to those that vary with revenues, and the level of
capital expenditures required to maintain the property and to retain or
replace tenants.
A decline in the real estate market or in the financial condition of a
major tenant will tend to have a more immediate effect on the net operating
income of properties with short-term revenue sources, such as short-term or
month to month leases, and may lead to higher rates of delinquency or defaults.
TENANT CONCENTRATION ENTAILS RISK
A deterioration in the financial condition of a tenant can be particularly
significant if a mortgaged property is leased to a single tenant or a small
number of tenants. Mortgaged properties leased to a single tenant or a small
number of tenants also are more susceptible to interruptions of cash flow if a
tenant fails to renew its lease. This is so because the financial effect of the
absence of rental income may be severe; more time may be required to re-lease
the space; and substantial capital costs may be
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incurred to make the space appropriate for replacement tenants. In this regard,
see "--Retail Properties Have Special Risks" below.
Retail and office properties also may be adversely affected if there is a
concentration of particular tenants among the mortgaged properties or of tenants
in a particular business or industry.
CERTAIN ADDITIONAL RISKS RELATING TO TENANTS
The income from, and market value of, the mortgaged properties leased to
various tenants would be adversely affected if:
o space in the mortgaged properties could not be leased or re-leased
o tenants were unable to meet their lease obligations;
o a significant tenant were to become a debtor in a bankruptcy case; or
o rental payments could not be collected for any other reason.
Repayment of the mortgage loans secured by retail and office 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.
Even if vacated space is successfully relet, the costs associated with
reletting, including tenant improvements and leasing commissions, could be
substantial and could reduce cash flow from the mortgaged properties. Moreover,
if a tenant defaults in its obligations to a borrower, the borrower may incur
substantial costs and experience significant delays associated with enforcing
its rights and protecting its investment, including costs incurred in renovating
and reletting the property.
MORTGAGED PROPERTIES LEASED TO MULTIPLE TENANTS ALSO HAVE RISKS
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.
Multi-tenanted mortgaged properties also may experience higher continuing
vacancy rates and greater volatility in rental income and expenses.
TENANT BANKRUPTCY ENTAILS RISKS
The bankruptcy or insolvency of a major tenant, or a number of smaller
tenants, in retail, office and industrial properties may adversely affect the
income produced by a mortgaged property. Under the federal bankruptcy code a
tenant has the option of assuming or rejecting any unexpired lease. If the
tenant rejects the lease, the landlord's claim for breach of the lease would be
a general unsecured claim against the tenant (absent collateral securing the
claim). The claim would be limited to the unpaid rent reserved under the lease
for the periods prior to the bankruptcy petition (or earlier surrender of the
leased premises) which are unrelated to the rejection, plus the greater of one
year's rent or 15% of the remaining reserved rent (but not more than three
years' rent).
MORTGAGE LOANS ARE NONRECOURSE AND ARE NOT INSURED OR GUARANTEED
The mortgage loans are not insured or guaranteed by any person or entity,
governmental or otherwise.
Each mortgage loan is a nonrecourse loan. If a default occurs, recourse
generally may be had only against the specific properties and other assets that
have been pledged to secure the loan. Payment prior to maturity is consequently
dependent primarily on the sufficiency of the net operating income of the
mortgaged property. Payment at maturity is primarily dependent upon the market
value of the mortgaged property or the borrower's ability to refinance the
property.
MULTIFAMILY PROPERTIES HAVE SPECIAL RISKS
Multifamily properties secure 26 of the mortgage loans, representing
approximately 27.95% of the aggregate principal balance of the pool of mortgage
loans as of the cut-off date. A large number of factors may adversely affect the
value and successful operation of a multifamily property, including:
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o the physical attributes of the apartment building such as its age,
appearance and construction quality;
o the location of the property, for example, a change in the neighborhood
over time;
o the ability of management to provide adequate maintenance and insurance;
o the types of services or amenities that the property provides;
o the property's reputation;
o the level of mortgage interest rates, which may encourage tenants to
purchase rather than lease housing;
o the presence of competing properties;
o adverse local or national economic conditions; and
o state and local regulations.
RISKS RELATING TO SECTION 8 MULTIFAMILY PROPERTIES
Some of the mortgaged properties are subject to land use restrictive
covenants or contractual covenants in favor of federal or state housing
agencies. These covenants generally require that a minimum number or percentage
of units be rented to tenants who have incomes that are substantially lower than
median incomes in the area or region. These covenants may limit the potential
rental rates that may govern rentals at a multifamily rental property, the
potential tenant base for the property or both.
4 of the mortgage loans, representing approximately 3.47% of the aggregate
principal balance of the pool of mortgage loans as of the cut-off date, are
secured by mortgaged properties that are eligible for low income rent subsidies
from the United States Department of Housing and Urban Development ("HUD") under
its "Section 8" program ("Section 8"). The payment of such rent subsidies to a
particular project owner is made pursuant to a Housing Assistance Payment
contract (a "HAP Contract") between HUD and the owner of the project or local
housing authority. Upon expiration of a HAP Contract, the rental subsidies
terminate, thereby eliminating a source of funds for the related borrower to
make payments under its mortgage loan. To the extent any of the Section 8
mortgage loans involve tenant voucher programs, tenants may choose to move out
of the mortgaged properties and utilize their vouchers elsewhere, and we cannot
assure you that such units will be re-rented. The HAP Contracts impose certain
management and maintenance obligations on the borrowers, and housing assistance
payments can be suspended, reduced, or terminated if HUD or the local housing
authority determines that the borrowers have breached the HAP Contracts. HUD may
in the future elect, or be required by Congress, to take actions with the effect
of limiting increases in rents subsidized under Section 8, or reducing rent
levels currently in effect. The ability of the respective borrowers to make
payments under these mortgage loans, and the value of their mortgaged properties
and consequent ability to refinance the mortgage loans which are subject to HAP
Contracts, could be adversely affected by some or all of the above mentioned
risks.
RETAIL PROPERTIES HAVE SPECIAL RISKS
Retail properties secure 22 of the mortgage loans, representing
approximately 26.28% of the aggregate principal balance of the pool of mortgage
loans as of the cut-off date.
The quality and success of a retail property's tenants significantly affect
the property's value. For example, if the sales revenue of retail tenants were
to decline, rents tied to a percentage of gross sales may decline and those
tenants may be unable to pay their rent or other occupancy costs.
The presence or absence of an "anchor tenant" in a shopping center also can
be important because anchors play a key role in generating customer traffic and
making a center desirable for other tenants. An "anchor tenant" is usually
proportionately larger in size and is vital in attracting customers to a retail
property, whether or not it is located on the related mortgaged property. 17 of
the mortgage loans, representing approximately 24.43% of the aggregate principal
balance of the pool of mortgage loans as of the cut-off date, are secured by
retail properties that are "anchored" and 5 of
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the mortgage loans, representing approximately 1.85% of the aggregate principal
balance of the pool of mortgage loans as of the cut-off date, are secured by
retail properties that are "unanchored".
If anchor stores in a mortgaged property were to close, the related
borrower may be unable to replace those anchors in a timely manner or without
suffering adverse economic consequences. Prior to the underwriting and
origination of 1 mortgage loan, representing approximately 6.13% of the
aggregate principal balance of the pool of mortgage loans of the cut-off date, 1
of 3 anchor stores, a Caldor, declared bankruptcy and closed. The space is
currently vacant and the related lease was assumed by a third party currently
upon Caldor's bankruptcy. The third party currently pays the rent due pursuant
to the Caldor lease, but does not plan on occupying the space. The mortgage loan
was underwritten assuming no cash flow in connection with this space. We cannot
assure you that such space will be occupied or that the related mortgaged
property will not suffer adverse economic consequences. Additionally,
1 mortgage loan representing approximately 3.83% of the aggregate principal
balance of the pool of mortgage loans as of the cut-off date is currently
occupied by a Loehmann's which has declared Chapter 11 bankruptcy. As of
November 1, 1999 the Loehmann's was still operating. Additionally, the
applicable mortgage loan seller required a reserve to be established at closing
in the amount of $880,000 to be utilized in connection with leasing the space if
Loehmann's closes. We cannot assure you that Loehmann's will continue to operate
or pay rent under the related lease or that such space will be relet.
Retail properties also face competition from sources outside a given real
estate market. For example, all of the following compete with more traditional
retail properties for consumer dollars: factory outlet centers; discount
shopping centers and clubs; catalogue retailers; home shopping networks;
Internet web sites; and telemarketing. Continued growth of these alternative
retail outlets (which often have lower operating costs) could adversely affect
the rents collectible at the retail properties included in the pool of mortgage
loans, as well as the income from, and market value of, the mortgaged
properties.
Moreover, additional competing retail properties may be built in the areas
where the retail properties are located.
OFFICE PROPERTIES HAVE SPECIAL RISKS
19 of the mortgaged loans, representing approximately 27.15% of the
aggregate principal balance of the pool of mortgage loans as of the cut-off date
(including 3 mortgage loans, representing approximately 9.01% of the aggregate
principal balance of the pool of mortgage loans as of the cut-off date, which
are secured by both office and industrial properties), are secured by office
properties.
A large number of factors may adversely affect the value of office
properties, including:
o the quality of an office building's tenants;
o the physical attributes of the building in relation to competing
buildings (e.g., age, condition, design, access to transportation and
ability to offer certain amenities, such as sophisticated building
systems);
o the desirability of the area as a business location; and
o the strength and nature of the local economy, including labor costs and
quality, tax environment and quality of life for employees.
Moreover, the cost of refitting office space for a new tenant is often
higher than the cost of refitting other types of property for new tenants. See
"--Risks Relating to Loan Concentrations" above.
INDUSTRIAL PROPERTIES HAVE SPECIAL RISKS
11 of the mortgage loans representing approximately 14.04% of the aggregate
principal balance of the pool of mortgage loans as of the cut-off date
(including 3 mortgage loans, representing approximately 9.01% of the aggregate
principal balance of the pool of mortgage loans as of the cut-off date, which
are secured by both office and industrial properties), are secured by industrial
properties. Significant factors determining the value of industrial properties
are:
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o the quality of tenants;
o building design and adaptability; and
o the location of the property.
Concerns about the quality of tenants, particularly major tenants, are
similar in both office properties and industrial properties, although industrial
properties are more frequently dependent on a single or few tenants.
Industrial properties may be adversely affected by reduced demand for
industrial space occasioned by a decline in a particular industry segment (for
example, a decline in defense spending), and a particular industrial or
warehouse property that suited the needs of its original tenant may be difficult
to relet to another tenant or may become functionally obsolete relative to newer
properties. In addition, lease terms with respect to industrial properties are
generally for shorter periods of time and may result in a substantial percentage
of leases expiring in the same year at any particular industrial property.
Aspects of building site design and adaptability affect the value of an
industrial property. Site characteristics which are valuable to a
warehouse/industrial property include high clear ceiling heights, wide column
spacing, a large number of bays (loading docks) and large bay depths,
divisibility, large minimum truck turning radii and overall functionality and
accessibility.
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.
HOTEL PROPERTIES HAVE SPECIAL RISKS
7 of the mortgage loans, representing approximately 7.49% of the aggregate
principal balance of the pool of mortgage loans as of the cut-off date, are
secured by hotel properties.
Various factors may adversely affect the economic performance of a hotel,
including:
o adverse economic and social conditions, either local, regional or
national (which may limit the amount that can be charged for a room and
reduce occupancy levels);
o the construction of competing hotels or resorts;
o continuing expenditures for modernizing, refurbishing and maintaining
existing facilities prior to the expiration of their anticipated useful
lives;
o a deterioration in the financial strength or managerial capabilities of
the owner and operator of a hotel; and
o changes in travel patterns caused by changes in access, energy prices,
strikes, relocation of highways, the construction of additional highways
or other factors.
Because hotel rooms generally are rented for short periods of time, the
financial performance of hotels tends to be affected by adverse economic
conditions and competition more quickly than other commercial properties.
Moreover, the hotel and lodging industry is generally seasonal in nature
and different seasons affect different hotels depending on type and location.
This seasonality can be expected to cause periodic fluctuations in a hotel
property's room and restaurant revenues, occupancy levels, room rates and
operating expenses.
The liquor licenses for most of the mortgaged properties are held by
affiliates of the mortgagors, unaffiliated managers and operating lessees. The
laws and regulations relating to liquor licenses generally prohibit the transfer
of such licenses to any person. In the event of a foreclosure of a hotel
property that holds a liquor license, the trustee or a purchaser in a
foreclosure sale would likely have to apply for a new license, which might not
be granted or might be granted only after a delay which could be significant.
There can be no assurance that a new license could be obtained promptly or at
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all. The lack of a liquor license in a full service hotel could have an adverse
impact on the revenue from the related mortgaged property or on the hotel's
occupancy rate.
RISKS RELATING TO AFFILIATION WITH A FRANCHISE OR HOTEL MANAGEMENT COMPANY
All of the mortgage loans secured by hotel properties are affiliated with a
franchise or hotel management company (either through a franchise agreement or
as a member of the company's reservation system). The performance of a hotel
property affiliated with a franchise or hotel management company depends in part
on:
o the continued existence and financial strength of the franchisor or hotel
management company;
o the public perception of the franchise or hotel chain service mark; and
o the duration of the franchise licensing or management agreements.
Any provision in a franchise agreement or management agreement providing
for termination because of a bankruptcy of a franchisor or manager generally
will not be enforceable. Replacement franchises may require significantly higher
fees.
The transferability of franchise license agreements is restricted. In the
event of a foreclosure, the lender or its agent would not have the right to use
the franchise license without the franchisor's consent. Conversely, in the case
of certain mortgage loans, the lender may be unable to remove a franchisor or a
hotel management company that it desires to replace following a foreclosure.
MANUFACTURED HOUSING COMMUNITY PROPERTIES HAVE SPECIAL RISKS
6 of the mortgage loans, representing approximately 4.42% of the aggregate
principal balance of the pool of mortgage loans as of the cut-off date, are
secured by manufactured housing community properties. The manufactured housing
community properties are operated as manufactured housing communities. Loans
secured by liens on properties of these types pose risks not associated with
loans secured by liens on other types of income-producing real estate.
The successful operation of a manufactured housing community property will
generally depend upon the number of competing manufactured housing communities
and other residential developments in the local market, such as:
o apartment buildings;
o other manufactured housing communities, and
o site-built single family homes.
Other factors may also include:
o the physical attributes of the community, including its age and
appearance;
o location of the manufactured housing community;
o the ability of management to provide adequate maintenance and insurance;
o the types of services or amenities it provides;
o the property's reputation; and
o state and local regulations, including rent control and rent
stabilization.
The manufactured housing community properties are "special purpose"
properties that could not be readily converted to general residential, retail or
office use. Thus, if the operation of any of the manufactured housing community
properties 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 that manufactured housing
community property may be substantially less, relative to the amount owing on
the related mortgage loan, than would be the case if the manufactured housing
community property were readily adaptable to other uses.
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LACK OF SKILLFUL PROPERTY MANAGEMENT ENTAILS RISKS
The successful operation of a real estate project depends upon the property
manager's performance and viability. The property manager is responsible for:
o responding to changes in the local market;
o planning and implementing the rental structure;
o operating the property and providing building services;
o managing operating expenses; and
o assuring that maintenance and capital improvements are carried out in a
timely fashion.
Properties deriving revenues primarily from short-term sources, such as
short-term or month-to-month leases, are generally more management intensive
than properties leased to creditworthy tenants under long-term leases.
We make no representation or warranty as to the skills of any present or
future managers. Additionally, we cannot assure you that the property managers
will be in a financial condition to fulfill their management responsibilities
throughout the terms of their respective management agreements.
SOME MORTGAGED PROPERTIES MAY NOT BE READILY CONVERTIBLE TO ALTERNATIVE USES
Some of the mortgaged properties may not be readily convertible to
alternative uses if those properties were to become unprofitable for any reason.
Converting commercial properties to alternate uses generally requires
substantial capital expenditures. The liquidation value of a mortgaged property
consequently may be substantially less than would be the case if the property
were readily adaptable to other uses.
Zoning or other restrictions also may prevent alternative use. See
"--Zoning Compliance and Use Restrictions" below.
LIMITATIONS OF APPRAISALS
Appraisals were obtained with respect to each of the mortgaged properties
in connection with the origination of the applicable mortgage loan. In general,
appraisals represent the analysis and opinion of qualified appraisers and are
not guarantees of present or future value. One appraiser may reach a different
conclusion than the conclusion that would be reached if a different appraiser
were appraising that property. Moreover, appraisals seek to establish the amount
a typically motivated buyer would pay a typically motivated seller and, in
certain cases, may have taken into consideration the purchase price paid by the
borrower. That amount could be significantly higher than the amount obtained
from the sale of a mortgaged property under a distress or liquidation sale. We
cannot assure you that the information set forth in this prospectus supplement
regarding appraised values or loan-to-value ratios accurately reflects past,
present or future market values of the mortgaged properties.
YOUR LACK OF CONTROL OVER TRUST FUND CAN CREATE RISKS
You and other certificateholders generally do not have a right to vote and
do not have the right to make decisions with respect to the administration of
the trust. See "Servicing of the Mortgage Loans--General" in this prospectus
supplement. Those decisions are generally made, subject to the express terms of
the pooling and servicing agreement, by the master servicer, the trustee or the
special servicer, as applicable. Any decision made by one of those parties in
respect of the trust, even if that decision is determined to be in your best
interests by that party, may be contrary to the decision that you or other
certificateholders would have made and may negatively affect your interests.
POTENTIAL CONFLICTS OF INTEREST
The master servicer or the special servicer or their respective affiliates
may purchase a portion of the series 1999-2 non-offered certificates. This could
cause a conflict between the master servicer's or special servicer's duties to
the trust under the pooling and servicing agreement and its interest as a holder
of a certificate. However, the pooling and servicing agreement provides that the
mortgage loans
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are required to be administered in accordance with the servicing standards
without regard to ownership of any certificate by the master servicer, the
special servicer or any of their affiliates. See "Servicing of the Mortgage
Loans--General" in this prospectus supplement.
In addition, either of those parties may, especially if it or an affiliate
holds series 1999-2 non-offered certificates, or has financial interests in or
other financial dealings with a borrower under any of the mortgage loan, have
interests when dealing with the mortgage loans that are in conflict with those
of holders of the offered certificates. For instance, a special servicer that
holds series 1999-2 non-offered certificates could seek to reduce the potential
for losses allocable to those certificates from a troubled mortgage loan by
deferring acceleration in hope of maximizing future proceeds. However, that
action could result in less proceeds to the trust than would be realized if
earlier action had been taken. In general, neither the master servicer nor the
special servicer is required to act in a manner more favorable to the offered
certificates or any particular class of offered certificates than to series
1999-2 non-offered certificates.
In addition, the master servicer and the special servicer each services and
will, in the future, service, in the ordinary course of its business, existing
and new loans for third parties, including portfolios of loans similar to the
loans that will be included in the trust. The real properties securing these
other loans may be in the same markets as, and compete with, certain of the real
properties securing the loans that will be included in the trust. Consequently,
personnel of the master servicer and special servicer may perform services, on
behalf of the trust, with respect to the mortgage loans at the same time as they
are performing services, on behalf of other persons, with respect to other
mortgage loans secured by properties that compete with the real properties
securing the mortgage loans. This may pose inherent conflicts for the master
servicer or special servicer.
Certain of the mortgage loans included in the trust may have been
refinancings of debt previously held by an affiliate of one of the mortgage loan
sellers.
The managers of the mortgaged properties and the borrowers may experience
conflicts of interest in the management and/or ownership of the mortgaged
properties because:
o a substantial number of the mortgaged properties are managed by property
managers affiliated with the respective borrowers;
o these property managers also may manage and/or franchise additional
properties, including properties that may compete with the mortgaged
properties; and
o affiliates of the managers and/or the borrowers, or the managers and/or
the borrowers themselves, also may own other properties, including
competing properties.
DIRECTING CERTIFICATEHOLDER MAY DIRECT SPECIAL SERVICER ACTIONS
In connection with the servicing of the specially serviced mortgage loans,
the special servicer may, at the direction of the directing certificateholder,
take actions with respect to the specially serviced mortgage loans that could
adversely affect the holders of some or all of the classes of offered
certificates. The directing certificateholder will be controlled by the
controlling class certificateholders, which may have interests in conflict with
those of the certificateholders of the classes of offered certificates. As a
result, it is possible that the directing certificateholder may direct the
special servicer to take actions which conflict with the interests of certain
classes of the offered certificates. However, the special servicer is not
permitted to take actions which are prohibited by law or violate the servicing
standards. See "Servicing of the Mortgage Loans--General" in this prospectus
supplement.
BANKRUPTCY PROCEEDINGS ENTAIL CERTAIN RISKS
Under federal bankruptcy law, the filing of a petition in bankruptcy by or
against a borrower will stay the sale of the mortgaged property owned by that
borrower, as well as 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
prevent a lender from foreclosing on the mortgaged property (subject to certain
protections available to the lender). As part of a restructuring plan, a court
also may reduce the amount of secured indebtedness
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to the then-current value of the mortgaged property, which 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: (1) grant a debtor a reasonable time to cure a payment default on a
mortgage loan; (2) reduce periodic payments due under a mortgage loan;
(3) change the rate of interest due on a mortgage loan; or (4) otherwise alter
the mortgage loan's repayment schedule.
Moreover, the filing of a petition in bankruptcy by, or on behalf of, a
junior lienholder may stay the senior lienholder from taking action to foreclose
on the junior lien. Additionally, the borrower's trustee or the borrower, as
debtor-in-possession, has certain special powers to avoid, subordinate or
disallow debts. In certain circumstances, the claims of the trustee may be
subordinated to financing obtained by a debtor-in-possession subsequent to its
bankruptcy.
Under federal bankruptcy law, the lender will be stayed from enforcing a
borrower's assignment of rents and leases. Federal bankruptcy law also may
interfere with the master servicer's or special servicer's ability to enforce
lockbox requirements. The legal proceedings necessary to resolve these issues
can be time consuming and costly and may significantly delay or diminish the
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.
RISKS RELATING TO PREPAYMENTS AND REPURCHASES
The yield to maturity on your certificates 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, such as prepayments resulting from
casualty or condemnation, defaults and liquidations or repurchases upon breaches
of representations and warranties. BECAUSE THE NOTIONAL AMOUNT OF THE CLASS X
CERTIFICATES IS BASED UPON THE OUTSTANDING PRINCIPAL BALANCE OF ALL OTHER
CLASSES OF CERTIFICATES (OTHER THAN THE CLASS S CERTIFICATE AND THE RESIDUAL
CERTIFICATES), THE YIELD TO MATURITY ON THE CLASS X CERTIFICATES WILL BE
EXTREMELY SENSITIVE TO THE RATE AND TIMING OF PREPAYMENTS OF PRINCIPAL.
The yield on the Class X, Class D, Class E and Class F Certificates could
also be adversely affected if mortgage loans with higher interest rates pay
faster than the mortgage loans with lower interest rates, since those classes
bear interest at a rate limited by the weighted average net mortgage rate of the
mortgage loans. The pass-through rates on those classes of certificates may be
limited by the weighted average of the net interest rates on the mortgage loans
even if principal prepayments do not occur.
The investment performance of your certificates may vary materially and
adversely from your expectations if the actual rate of prepayment on the
mortgage loans is higher or lower than you anticipate.
Any changes in the weighted average lives of your certificates may
adversely affect your yield. Prepayments resulting in a shortening of weighted
averages of your certificates may be made at a time of low interest rates when
you may be unable to reinvest the resulting payment of principal on your
certificates at a rate comparable to the effective yield anticipated by you in
making your investment in the certificates, while delays and extensions
resulting in a lengthening of those weighted average lives may occur at a time
of high interest rates when you may have been able to reinvest principal
payments that would otherwise have been received by you at higher rates.
Voluntary prepayments, if permitted, generally require the payment of a
yield maintenance charge unless the loan is 90 days or less from the stated
maturity date or anticipated prepayment date or after the anticipated prepayment
date, as the case may be, except with respect to 5 mortgage loans representing
approximately 6.57% of the aggregate principal balance of the pool of mortgage
loans as of the cut-off date, which permit voluntary prepayment without payment
of a yield maintenance charge
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at any time after a date ranging from 120 to 180 days prior to the stated
maturity date and 1 mortgage loan, representing approximately 0.55% of the
aggregate principal balance of the pool of mortgage loans as of the cut-off
date, which permits voluntary prepayment without payment of the yield
maintenance charge at any time after the date 270 days prior to the stated
maturity date. "Description of the Mortgage Pool--Certain Terms and Conditions
of the Mortgage Loans--Prepayment Provisions" in this prospectus supplement. In
any case, we cannot assure you that the related borrowers will refrain from
prepaying their mortgage loans due to the existence of yield maintenance
charges. Also, we cannot assure you that involuntary prepayments will not occur.
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 the applicable yield maintenance charges;
o the master servicer's or special servicer's ability to enforce those
charges or premiums;
o the occurrence of casualties or natural disasters; and
o economic, demographic, tax, legal or other factors.
No yield maintenance charge will be required for prepayments in connection
with a casualty or condemnation unless, in the case of most of the mortgage
loans, an event of default has occurred and is continuing. Certain shortfalls in
interest as a result of involuntary prepayments may reduce the available
distribution amount. In addition, if a mortgage loan seller repurchases any
mortgage from the trust due to breaches of representations or warranties, 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 part or in
full, except that no yield maintenance charge would be payable. A repurchase may
adversely affect the yield to maturity on your certificates.
RISKS RELATING TO ENFORCEABILITY OF YIELD MAINTENANCE CHARGES
Provisions requiring yield maintenance charges may not be enforceable in
some states and under federal bankruptcy law. Those provisions also may be
interpreted as constituting the collection of interest for usury purposes.
Accordingly, we cannot assure you that the obligation to pay a yield maintenance
charge will be enforceable. Also, we cannot assure you that foreclosure proceeds
will be sufficient to pay an enforceable yield maintenance charge.
Additionally, although the collateral substitution provisions related to
defeasance do not have the same effect on the certificateholders as prepayment,
we cannot assure you that a court would not interpret those provisions as
requiring a yield maintenance charge. In certain jurisdictions, those collateral
substitution provisions might be deemed unenforceable under applicable law or
usurious.
RISKS RELATING TO BORROWER DEFAULT
The rate and timing of delinquencies or defaults on the mortgage loans will
affect:
o the aggregate amount of distributions on the offered certificates;
o their yield to maturity;
o the rate of principal payments; and
o their weighted average life.
If losses on the mortgage loans exceed the aggregate principal amount of
the classes of certificates subordinated to a particular class, that class will
suffer a loss equal to the full amount of the excess (up to the outstanding
principal amount of that class).
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If you calculate your anticipated yield based on assumed rates of defaults
and losses that are lower than the default rate and losses actually experienced
and those losses are allocated to your certificates, your actual yield to
maturity will be lower than the assumed yield. Under certain extreme scenarios,
that yield could be negative. In general, the earlier a loss borne by you on
your certificates occurs, the greater the effect on your yield to maturity.
Even if losses on the mortgage loans are not borne by your certificates,
those losses may affect the weighted average life and yield to maturity of your
certificates. This may be so, because those losses lead to your certificates
having a higher percentage ownership interest in the trust and related
distributions of principal payments on the mortgage loans than would otherwise
have been the case. The effect on the weighted average life and yield to
maturity of your certificates will depend upon the characteristics of the
remaining mortgage loans.
Additionally, delinquencies and defaults on the mortgage loans may
significantly delay the receipt of distributions by you on your certificates,
unless advances are made to cover delinquent payments or the subordination of
another class of certificates fully offsets the effects of any delinquency or
default.
RISKS RELATING TO CERTAIN PAYMENTS
To the extent described in this prospectus supplement, the master servicer,
the special servicer or the trustee, as applicable, will be entitled to receive
interest on unreimbursed advances at a rate equal to LIBOR plus 2.90%,
compounded monthly. This interest will generally accrue from the date on which
the related advance is made or the related expense is incurred through the date
of reimbursement. In addition, under certain circumstances, including
delinquencies in the payment of principal and interest, a mortgage loan will be
specially serviced and the special servicer is entitled to compensation for
special servicing activities. The right to receive interest on advances or
special servicing compensation is senior to the rights of certificateholders to
receive distributions on the offered certificates. The payment of interest on
advances and the payment of compensation to the special servicer may lead to
shortfalls in amounts otherwise distributable on your certificates.
RISKS OF LIMITED LIQUIDITY AND MARKET VALUE
Your certificates will not be listed on any national securities exchange or
traded on any automated quotation systems of any registered securities
association such as NASDAQ, and there is currently no secondary market for your
certificates. While the underwriters currently intend to make a secondary market
in the offered certificates, they are not 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.
DIFFERENT TIMING OF MORTGAGE LOAN AMORTIZATION POSES CERTAIN RISKS
As principal payments or prepayments are made on a mortgage loan that is
part of a pool of mortgage loans, the pool will be subject to more concentrated
risks with respect to the diversity of mortgaged properties, types of mortgaged
properties and number of borrowers, as described above. Classes that have a
later sequential designation or a lower payment priority are more likely to be
exposed to this concentration risk than are classes with an earlier sequential
designation or a higher priority. This is so because principal on the offered
certificates is generally payable in sequential order, and no class entitled to
distribution of principal generally receives principal until the principal
amount of the preceding class or classes entitled to receive principal have been
reduced to zero.
SUBORDINATION OF SUBORDINATE OFFERED CERTIFICATES
As described in this prospectus supplement, unless your certificates are
Class A-1, Class A-2 or Class X certificates, your rights to receive
distributions of amounts collected or advanced on or in respect of the mortgage
loans will be subordinated to those of the holders of the offered certificates
with an earlier alphabetical designation.
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See "Description of the Certificates--Distributions--Priority" and
"Description of the Certificates--Subordination; Allocation of Collateral
Support Deficit" in this prospectus supplement.
ENVIRONMENTAL RISKS RELATING TO THE MORTGAGED PROPERTIES
The trust could become liable for a material adverse environmental
condition at an underlying real property. Any such potential liability could
reduce or delay payments on the offered certificates.
All of the mortgaged properties were subject to environmental site
assessments in connection with origination, including Phase I site assessments
or updates of previously performed Phase I site assessments. In some cases,
Phase II site assessments also have been performed. Although those assessments
involved site visits and other types of review, we cannot assure you that all
environmental conditions and risks were identified.
Except as described below, none of the environmental assessments revealed
any material adverse environmental condition or circumstance at any mortgaged
property except for those which will be remediated by the cut-off date, for
which an escrow for the remediation was established or for which the consultant
recommended an operations and maintenance plan or periodic monitoring of nearby
properties, which recommendations are consistent with industrywide practices. In
certain cases, the identified condition related to the presence of
asbestos-containing materials, lead-based paint and/or radon. Where these
substances were present, the environmental consultant generally recommended, and
the related loan documents required, the establishment of an operation and
maintenance plan to address the issue or, in the case of asbestos-containing
materials and lead-based paint, an abatement or removal program. Other
identified conditions could, for example, include leaks from storage tanks and
on-site spills. Corrective action, as required by the regulatory agencies, has
been or is currently being undertaken and, in some cases, the related borrowers
have made deposits into environmental reserve accounts. However, we cannot
assure you that the reserve amounts will be sufficient to remediate the
environmental conditions or that all environmental conditions have been
identified or that operation and maintenance plans will be put in place and/or
followed.
1 mortgage loan, representing approximately 0.52% of the aggregate
principal balance of the pool of mortgage loans as of the cut-off date, formerly
contained a dry cleaning facility and certain substances at levels exceeding
permitted standards have been detected in groundwater and are being monitored
under supervision of the state environmental agency. An escrow has been
established to cover monitoring costs for this property and a secured creditor
impaired property policy has been obtained in an amount in excess of the
estimated remediation costs.
See "Servicing of the Mortgage Loans--Realization Upon Defaulted Mortgage
Loans" in this prospectus supplement and "Risk Factors--Environmental Risks" and
"Certain Legal Aspects of Mortgage Loans--Environmental Risks" in the
prospectus.
TAX CONSIDERATIONS RELATING TO FORECLOSURE
If the trust acquires a mortgaged property pursuant to a foreclosure or
deed in lieu of foreclosure, the special servicer must retain an independent
contractor to operate the property. Any net income from the operation of the
property (other than qualifying "rents from real property"), or any rental
income based on the net profits of a tenant or sub-tenant or allocable to a
non-customary service, will subject the Lower-Tier REMIC to federal tax (and
possibly state or local tax) on that income at the highest marginal corporate
tax rate (currently 35%). In that event, the net proceeds available for
distribution to certificateholders will be reduced. The special servicer may
permit the Lower-Tier REMIC to earn "net income from foreclosure property" that
is subject to tax if it determines that the net after-tax benefit to
certificateholders is greater than under another method of operating or net
leasing the mortgaged property.
RISKS ASSOCIATED WITH ONE ACTION RULES
Several states (including California) have laws that prohibit more than one
"judicial action" to enforce a mortgage obligation, and some courts have
construed the term "judicial action" broadly. Accordingly, the special servicer
is required to obtain advice of counsel prior to enforcing any of the
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trust fund's rights under any of the mortgage loans that include mortgaged
properties where the rule could be applicable. In the case of either a
cross-collateralized and cross-defaulted mortgage loan or a multi-property
mortgage loan which is secured by mortgaged properties located in multiple
states, the special servicer may be required to foreclose first on properties
located in states where "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. See
"Certain Legal Aspects of Mortgage Loans--Foreclosure" in the prospectus.
PROPERTY INSURANCE
All of the mortgage loans require the related borrower to maintain property
insurance. However, the mortgaged properties may suffer casualty losses due to
risks which were not covered by insurance or for which insurance coverage is
inadequate. In addition, approximately 54.25% of the mortgaged properties, by
aggregate principal balance of the pool of mortgage loans as of the cut-off
date, are located in California, Texas and Florida, states that have
historically been at greater risk regarding acts of nature (such as earthquakes,
floods and hurricanes) than other states. We cannot assure you that borrowers
will be able to maintain adequate insurance. Moreover, if reconstruction or any
major repairs are required, changes in laws may materially affect the borrower's
ability to effect any reconstruction or major repairs or may materially increase
the costs of the reconstruction or repairs.
As a result of any of the foregoing, the amount available to make
distributions on your certificates could be reduced.
ZONING COMPLIANCE AND USE RESTRICTIONS
Due to changes in zoning requirements after certain of the mortgaged
properties were constructed or requested variances or special permits, those
mortgaged properties may not comply with current zoning laws, including density,
use, parking and set back requirements. The operation of these properties is
considered to be a "legal non-conforming use" and/or the improvements are
considered to be "legal non-conforming structures". This means that the borrower
is not required to alter its structure to comply with the existing or new law;
however, the borrower may not be able to rebuild the premises "as is" in the
event of a substantial casualty loss. This may adversely affect the cash flow of
the property following the loss. If a substantial casualty were to occur, we
cannot assure you that insurance proceeds would be available to pay the mortgage
loan in full. In addition, if the property were repaired or restored in
conformity with the current law, the value of the property or the revenue-
producing potential of the property may not be equal to that before the
casualty.
In addition, certain of the mortgaged properties which are non-conforming
may not be "legal non-conforming uses" or "legal non-conforming structures". The
failure of a mortgaged property to comply with zoning laws or to be a "legal
non-conforming use" or "legal non-conforming structure" may adversely affect
market value of the mortgaged property or the borrower's ability to continue to
use it in the manner it is currently being used.
In addition, certain of the mortgaged properties are subject to certain use
restrictions imposed pursuant to reciprocal easement agreements or operating
agreements. Such use restrictions include, for example, limitations on the
character of the improvements or the properties, limitations affecting noise and
parking requirements, among other things, and limitations on the borrowers'
right to operate certain types of facilities within a prescribed radius. These
limitations could adversely affect the ability of the related borrower to lease
the mortgaged property on favorable terms, thus adversely affecting the
borrower's ability to fulfill its obligations under the related mortgage loan.
RISKS RELATING TO COSTS OF COMPLIANCE WITH APPLICABLE LAWS AND REGULATIONS
A borrower may be required to incur costs to comply with various existing
and future federal, state or local laws and regulations applicable to the
related mortgaged property, for example, zoning laws and the Americans with
Disabilities Act of 1990, as amended, which requires all public accommodations
to meet certain federal requirements related to access and use by disabled
persons. See "Certain Legal Aspects of Mortgage Loans--Americans with
Disabilities Act" in the prospectus. The
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expenditure of these costs or the imposition of injunctive relief, penalties or
fines in connection with the borrower's noncompliance could negatively impact
the borrower's cash flow and, consequently, its ability to pay its mortgage
loan.
NO REUNDERWRITING OF THE MORTGAGE LOANS
We have not reunderwritten the mortgage loans. Instead, we have relied on
the representations and warranties made by the mortgage loan sellers, and the
applicable mortgage loan seller's obligation to repurchase, subsitute or cure a
mortgage loan in the event that a representation or warranty was not true when
made. These representations and warranties do not cover all of the matters that
we would review in underwriting a mortgage loan and you should not view them as
a substitute for reunderwriting the mortgage loans. If we had reunderwritten the
mortgage loans, it is possible that the reunderwriting process may have revealed
problems with a mortgage loan not covered by a representation or warranty. In
addition, we can give no assurance that the applicable mortgage loan seller will
be able to repurchase a mortgage loan if a representation or warranty has been
breached. See "Description of the Mortgage Pool--Representations and Warranties;
Repurchases and Substitutions" in this prospectus supplement.
LITIGATION
There may be pending or threatened legal proceedings against the borrowers
and managers of the mortgaged properties and their respective affiliates arising
out of the ordinary business of the borrowers, managers and affiliates. We
cannot assure you that litigation will not have a material adverse effect on
your investment.
BOOK-ENTRY REGISTRATION
Your certificates will be initially represented by one or more certificates
registered in the name of Cede & Co., as the nominee for DTC, and will not be
registered in your name. As a result, you will not be recognized as a
certificateholder, or holder of record of your certificates. See "Risk
Factors--Book-Entry System for Certain Classes May Decrease Liquidity and Delay
Payment" in the prospectus for a discussion of important considerations relating
to not being a certificateholder of record.
RISKS ASSOCIATED WITH YEAR 2000 COMPLIANCE
We are aware of the issues associated with the programming code in existing
computer systems as the millennium (year 2000) approaches. The "year 2000
problem" is pervasive and complex; virtually every computer operation will be
affected in some way by the rollover of the two digit year value to 00. The
issue is whether computer systems will properly recognize date-sensitive
information when the year changes to 2000. Systems that do not properly
recognize this information could generate erroneous data or cause a system to
fail. You could be adversely affected if the computer systems of the master
servicer or any special servicer are not fully year 2000 compliant and that non-
compliance disrupts the collection or distribution of receipts on the related
mortgage loans.
We have been advised by each of the master servicer, the special servicer,
the trustee and the paying agent that they are committed either to (1)
implement, or cause to be implemented, modifications to their respective
existing mission-critical systems to the extent required to cause them to be
year 2000 compliant or (2) acquire mission-critical computer systems that are
year 2000 compliant in each case prior to December 31, 1999. However, we have
not made any independent investigation of the computer systems of the master
servicer, the special servicer, the trustee or the paying agent. In the event
that computer problems arise out of a failure of those efforts to be completed
on time, or in the event that the computer systems of the master servicer, the
special servicer, the trustee or the paying agent are not fully year 2000
compliant, the resulting disruptions in the collection or distribution of
receipts or the mortgage loans could materially and adversely affect your
investment.
With respect to the year 2000 problem, DTC has informed members of the
financial community that it has developed and is implementing a program so that
its systems, as they relate to the timely
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payment of distributions, including principal and interest payments, to holders
of certificates, book-entry deliveries, and settlement of trades within DTC,
continue to function appropriately on and after January 1, 2000. This program
includes a technical assessment and a remediation plan, each of which is
complete. Additionally, DTC's plan includes a testing phase, which is expected
to be completed within appropriate time frames.
However, DTC's ability to perform properly its services is also dependent
upon other parties, including but not limited to, its participating
organizations, through which you will hold your certificates, as well as the
computer systems of third party service providers. DTC has informed the
financial community that it is contacting and will continue to contact third
party vendors from whom DTC acquires services to:
o impress upon them the importance of those services being year 2000
compliant; and
o determine the extent of their efforts for year 2000 remediation, and, as
appropriate, testing, of their services.
In addition, DTC has stated that it is in the process of developing those
contingency plans as it deems appropriate.
If problems associated with the year 2000 problem were to occur with
respect to DTC and the services described above, you could experience delays or
shortfalls in the payments due on your certificates.
OTHER RISKS
See "Risk Factors" in the prospectus for a description of certain other
risks and special considerations that may be applicable to your certificates.
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DESCRIPTION OF THE MORTGAGE POOL
GENERAL
All percentages of the mortgage loans and mortgaged properties, or of any
specified group of mortgage loans and mortgaged properties, referred to in this
prospectus supplement without further description are approximate percentages by
Initial Pool Balance. The trust will consist primarily of 92 mortgage loans
secured by 86 commercial, 26 multifamily and 6 manufactured housing community
mortgaged properties with an aggregate principal balance of approximately
$782,653,601 (the "Initial Pool Balance") as of the cut-off date. The "Cut-off
Date Balance" of any mortgage loan will be the unpaid principal balance of that
mortgage loan as of the cut-off date, after application of all payments due on
or before that date, whether or not received. Each mortgage loan is evidenced by
a promissory note (a "Mortgage Note") and secured by a mortgage, deed of trust
or other similar security instrument (a "Mortgage") that creates a first
mortgage lien:
(1) on a fee simple estate in one or more commercial, multifamily or
manufactured housing community properties; or
(2) with respect to 2 mortgage loans, representing approximately 1.33%
of the Initial Pool Balance, the fee simple estate and a leasehold estate
in all of the commercial, multifamily or manufactured housing community
property (each of clauses (1) and (2), a "Mortgaged Property").
On or about November 23, 1999 (the "Closing Date"), Chase Commercial
Mortgage Securities Corp. (the "Depositor") will acquire the mortgage loans from
General Electric Capital Corporation, and The Chase Manhattan Bank
(collectively, the "Mortgage Loan Sellers") pursuant to 2 mortgage loan purchase
agreements, each dated as of the cut-off date (the "Purchase Agreements"),
between the Depositor and the applicable Mortgage Loan Seller, and will then
assign its interests in the mortgage loans, without recourse, to Norwest Bank
Minnesota, National Association, as trustee (the "Trustee") for the benefit of
the holders of the certificates (the "Certificateholders"). See "The Mortgage
Loan Sellers" below and "Description of the Pooling Agreements--Assignment of
Mortgage Loans; Repurchases" in the prospectus. For purposes of the prospectus,
each of the Mortgage Loan Sellers constitutes a Mortgage Asset Seller.
The mortgage loans were originated in the period between July 1998 and
November 1999.
The mortgage loans are not insured or guaranteed by the Mortgage Loan
Sellers or any other person or entity. You should consider all of the mortgage
loans to be nonrecourse loans as to which recourse in the case of default will
be limited to the specific property and other assets, if any, pledged to secure
a mortgage loan.
As of the cut-off date, the related Mortgage Loan Sellers have informed us
that they are aware of the following indebtedness with respect to the mortgage
loans. With respect to 3 mortgage loans, representing approximately 4.11% of the
Initial Pool Balance, the related borrower has unsecured debt payable to an
affiliate of the related borrower and/or an unrelated third party. The terms of
3 mortgage loans, representing approximately 5.93% of the Initial Pool Balance,
do not restrict the borrower from incurring future debt which is not secured by
the Mortgaged Property although in some instances the amount of such debt that
may be incurred is limited to a percentage of the outstanding principal balance
of the mortgage loan. Additionally, 1 of the mortgage loans, representing
approximately 4.34% of the Initial Pool Balance, permits the related borrower to
increase indebtedness secured by the furniture, fixtures and equipment which are
considered to be part of the Mortgaged Property. In addition, substantially all
of the mortgage loans permit the related borrower to incur limited indebtedness
in the ordinary course of business that is not secured by the related mortgaged
property.
With respect to 1 mortgage loan, representing approximately 0.17% of the
Initial Pool Balance, the applicable Mortgage Loan Seller has informed us that
it is aware that the owners of the related borrower have pledged their equity
interests in the related borrower to secure the mezzanine debt. 1 additional
mortgage loan, representing approximately 2.04% of the Initial Pool Balance,
specifically
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permits the pledge of the equity interests in the related borrower to secure
future loans to the owners of the related borrower.
In addition, although the mortgage loans generally restrict the pledging of
general partnership and managing member equity interests in a borrower, subject
to certain exceptions, the terms of the mortgage generally permit, subject to
certain limitations, the pledging of limited partnership or membership equity
interests in a borrower. Moreover, in general, any borrower that does not meet
single purpose entity criteria may not be restricted in any way from incurring
mezzanine debt.
Certain risks relating to additional debt are described in "Risk
Factors--Ability to Incur Other Borrowings Entails Risk" in this prospectus
supplement and "Certain Legal Aspects of Mortgage Loans--Subordinate Financing"
in the prospectus.
4 of the mortgage loans (the "HAP Loans"), representing approximately 3.47%
of the Initial Pool Balance, are secured by Mortgaged Properties that had been
subject to mortgage loans insured by HUD under Section 236 or 221(d)3 of the
National Housing Act. For information regarding specific concerns relating to
HAP Loans, see "Risk Factors--Risks Relating to Section 8 Multifamily
Properties" in this prospectus supplement.
SIGNIFICANT BORROWER CONCENTRATION
Set forth below is a description of each borrower concentration with an
outstanding principal balance as of the cut-off date which exceeds 5% of the
Initial Pool Balance.
Simon Property Group, Inc. Borrower Concentration. The Simon Property
Group, Inc. borrower concentration (Loan Numbers 16 and 12 on Annex A to this
prospectus supplement) consists of 2 mortgage loans (the "Simon Loans"),
representing approximately 11.36% of the Initial Pool Balance, with an aggregate
Cut-off Date Balance of approximately $88,899,665. The related Mortgaged
Properties, Auburn Mall and Apple Blossom Mall, are managed by the Simon
Property Group, Inc., an affiliate of each borrower, and are located in
Massachusetts and Virginia, respectively. The Simon Loans are not
cross-collateralized or cross defaulted. See "--Significant Mortgage Loans"
below for a description of each Simon Loan.
Orange County Industrial/Office Portfolio Borrower Concentration. The
Orange County Industrial/Office portfolio borrower concentration (Loan Numbers
60 and 61 on Annex A to this prospectus supplement) consists of 2
cross-collateralized and cross-defaulted mortgage loans (the "Orange County
Loans"), representing approximately 6.27% of the Initial Pool Balance, with an
aggregate Cut-off Date Balance of approximately $49,053,776. The related
Mortgaged Properties are managed by Realty Services Corporation, an affiliate of
each borrower, and are secured by 11 industrial and 6 office properties located
in Orange County, California.
The interest rate on the Orange County Industrial/Office Portfolio I loan
is 8.180% per annum and the interest rate on the Orange County Industrial/Office
Portfolio II loan is 8.170% per annum. As of the cut-off date, the weighted
average interest rate of the Orange County Loans is approximately 8.175% per
annum. The term to maturity for each Orange County Loan is 10 years and each
Orange County Loan has a 30-year amortization term.
The Orange County Loans prohibit voluntary prepayment until 90 days prior
to their related maturity dates at which time they may be freely prepaid. The
Orange County Loans may be defeased at any time after two years after the
Closing Date. See "Certain Terms and Conditions of the Mortgage
Loans--Defeasance; Collateral Substitution" in this prospectus supplement.
Center Trust, Inc. Borrower Concentration. The Center Trust, Inc. borrower
concentration (Loan Numbers 79, 47 and 84 on Annex A to this prospectus
supplement) consists of 3 mortgage loans (the "Center Trust Loans"),
representing approximately 5.51% of the Initial Pool Balance, with an aggregate
Cut-Off Date Balance of approximately $43,144,000. 2 of the related Mortgaged
Properties, Torrance Promenade and Vineyards Marketplace, are managed by Center
Trust, Inc., an affiliate of each borrower, and are located in California. The
third Mortgaged Property, Kyrene Village, is managed by
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an unrelated third party and is located in Arizona. The Center Trust Loans are
not cross-collateralized or cross defaulted.
The interest rate on each Center Trust Loan is 8.30% per annum. The term to
maturity for each Center Trust Loan is 10 years and each Center Trust Loan has a
30-year amortization term.
The Center Trust Loans prohibit voluntary prepayment until 90 days prior to
their related maturity dates at which time they may be freely prepaid. The
Center Trust Loans may be defeased at any time after two years after the Closing
Date. See "Certain Terms and Conditions of the Mortgage Loans--Defeasance;
Collateral Substitution" in this prospectus supplement.
See "Risks Relating to Loan Concentrations" and "Risks Relating to
Enforceability of Cross-Collateralization" in this prospectus supplement.
SIGNIFICANT MORTGAGE LOANS
Set forth below is a description of the 2 mortgage loans with an
outstanding principal balance as of the cut-off date which exceeds 5% of the
Initial Pool Balance.
Auburn Mall. The mortgage loan identified as Loan Number 16 on Annex A
hereto (the "Auburn Mall Loan") had a Cut-off Date Balance of $47,945,886,
representing approximately 6.13% of the Initial Pool Balance. The Auburn Mall
Loan is secured by a first lien on a fee simple estate known as Auburn Mall
(excluding the space which is owned and occupied by 1 anchor, Filene's), a
retail property situated on approximately 39.6 acres of land in Auburn,
Massachusetts. Prior to the underwriting and origination of the Auburn Mall
Loan, 1 of 3 anchor stores, Caldor, declared bankruptcy and closed. The space is
currently vacant and the related lease was assumed upon Caldor's bankruptcy by a
third party that continues to pay rent, but does not occupy the space. The other
anchor is Sears. See "Risk Factors--Retail Properties have Special Risks" in
this prospectus supplement. The Auburn Mall loan contains a one and two-story
building constructed in 1971 and renovated in 1997, with approximately
595,273 square feet of net leasable area. As of the cut-off date, the Auburn
Mall Loan had an LTV ratio of approximately 68.0% and a DSCR of approximately
1.26x. As of November 1999, the Auburn Mall Loan had an occupancy rate of
approximately 82.4%.
The interest rate on the Auburn Mall Loan is 7.99% per annum, calculated on
the basis of the actual numbers of days in a month and a 360-day year. The term
to maturity for the Auburn Mall Loan is 10 years with a 30-year amortization
term.
Voluntary prepayment of the Auburn Mall Loan is prohibited until 90 days
prior to its related maturity date, at which time it may be freely prepaid. The
Auburn Mall Loan may be defeased at any time after two years after the Closing
Date. See "Certain Terms and Conditions of the Mortgage Loans--Defeasance;
Collateral Substitution" in this prospectus supplement.
Apple Blossom Mall. The mortgage loan identified as Loan Number 12 on
Annex A hereto (the "Apple Blossom Loan") had a Cut-Off Date Balance of
$40,953,778, representing approximately 5.23% of the Initial Pool Balance. The
Apple Blossom Loan is secured by a first lien on the fee simple estate known as
Apple Blossom Mall (excluding the space which is owned and occupied by the
anchor store Belk), a retail property situated on approximately 53.6 acres of
land in Winchester, Virginia. The other anchors are J.C. Penney and Sears. The
Apple Blossom Mall is a one-story building constructed in 1982, with
approximately 438,133 square feet of net leasable area. As of the cut-off date,
the Apple Blossom Loan had an LTV Ratio of approximately 71.8% and a DSCR of
approximately 1.26x. As of November 1999, the Apple Blossom Mall had an
occupancy rate of approximately 92.3%.
The interest rate on the Apple Blossom Loan is 7.990% per annum, calculated
on the basis of the actual numbers of days in a month and a 360-day year. The
term to maturity for the Apple Blossom Loan is 10 years with a 30-year
amortization term.
Voluntary prepayment of the Apple Blossom Loan is prohibited until 90 days
prior to its related maturity date, at which time it may be freely prepaid. The
Apple Blossom Loan may be defeased at any
S-49
<PAGE>
time after two years after the Closing Date. See "Certain Terms and Conditions
of the Mortgage Loans--Defeasance; Collateral Substitution" in this prospectus
supplement.
APD LOANS
3 of the mortgage loans (the "APD Loans"), representing approximately 1.93%
of the Initial Pool Balance, provide that, if after a certain date (each, an
"Anticipated Prepayment Date"), the related borrower has not prepaid the APD
Loan in full, any principal outstanding on that date will accrue interest at an
increased interest rate (the "Revised Rate") rather than the stated Mortgage
Rate (the "Initial Rate"). Each Anticipated Prepayment Date is not more than
240 months after the first due date for the related APD Loan. The Revised Rate
for any APD Loan will generally be equal to the greater of (x) the Initial Rate
plus 2% per annum or (y) the then current treasury rate plus 2% per annum. After
the Anticipated Prepayment Date, each APD Loan further requires that all cash
flow available from the related Mortgaged Property after payment of the constant
periodic payment required under the terms of the related loan documents and all
escrows and property expenses required under the related loan documents will be
used to accelerate amortization of principal on the related APD Loan. While
interest at the Initial Rate continues to accrue and be payable on a current
basis on an APD Loan after the Anticipated Prepayment Date, the payment of
interest at the excess of the Revised Rate over the Initial Rate for the related
APD Loan will be deferred and will be required to be paid, with interest, only
after the outstanding principal balance of the APD Loan has been paid in full.
Additionally, the terms of the APD Loans provide that an account be established
on the Anticipated Payment Date into which the related property manager and/or
tenants directly deposits rents or other revenues from the mortgaged properties.
See "--Lock Box Accounts" below. The foregoing features, to the extent
applicable, are designed to increase the likelihood that the APD Loan will be
prepaid by the borrower on or about the applicable Anticipated Prepayment Date.
CERTAIN TERMS AND CONDITIONS OF THE MORTGAGE LOANS
64 of the mortgage loans, representing approximately 54.81% of the Initial
Pool Balance, have due dates that occur on the first day of each month, and 28
mortgage loans, representing approximately 45.19% of the Initial Pool Balance,
have due dates that occur on the tenth day of each month. All of the mortgage
loans whose due dates are the first day of each month provide for grace periods
of 5 days. None of the mortgage loans whose due date is the tenth day of each
month provide for grace periods. All of the mortgage loans bear interest at
fixed rates. 91 mortgage loans, representing approximately 97.58% of the Initial
Pool Balance, accrue interest on the basis of the actual number of days in a
month, assuming a 360-day year ("Actual/360 Basis"). The remaining 1 mortgage
loan, representing approximately 2.42% of the Initial Pool Balance, accrues
interest on the basis of twelve 30-day months, assuming a 360-day year. 87
mortgage loans, representing approximately 96.09% of the Initial Pool Balance
provide for monthly payments of principal based on amortization schedules
significantly longer than the remaining terms of the related mortgage loans.
Thus, those mortgage loans will have balloon payments due at their stated
maturity dates, unless earlier prepaid. In addition, the 3 APD Loans provide for
monthly payments of principal that will result in a substantial principal
payment at the Anticipated Prepayment Date if the related borrower prepays the
mortgage loan on that date.
Prepayment Provisions. Each mortgage loan prohibits any prepayments
(including defeasance) for a specified period of time after its date of
origination (a "Lockout Period"). In addition, each mortgage loan restricts
voluntary prepayments in one of the following ways:
(1) 91 of the mortgage loans, representing approximately 99.73% of the
Initial Pool Balance, permit only defeasance after the expiration of the
Lockout Period; and
(2) 1 of the mortgage loans, representing approximately 0.27% of the
Initial Pool Balance, requires that any principal prepayment made during a
specified period of time after the Lockout Period (a "Yield Maintenance
Period"), be accompanied by a Yield Maintenance Charge (as defined below).
S-50
<PAGE>
All of the mortgage loans specify a period of time (generally 90 days)
immediately prior to the maturity date or Anticipated Prepayment Date, as
applicable, of the related mortgage loan during which there are no restrictions
on voluntary prepayments, except with respect to 5 mortgage loans representing
approximately 6.57% of the Initial Pool Balance, which have no restrictions on
voluntary prepayment after a date that ranges between 120 and 180 days (or, in
the case of 1 mortgage loan, representing approximately 0.55% of the Initial
Pool Balance, 270 days) prior to the stated maturity date.
The "Yield Maintenance Charge" will be the sum of the present value on the
date of prepayment of the monthly interest shortfall for the remaining term of
the mortgage loan discounted at a rate equal to the monthly compounded Yield
Rate. The monthly interest shortfall is calculated for each monthly payment date
and is the product of (A) the prepaid principal balance of the mortgage loan
divided by 12, and (B) the positive result, if any, from (1) the yield derived
from compounding semi-annually the mortgage rate minus (2) the Yield Rate.
The "Yield Rate" is a rate equal to a per annum rate calculated by the
linear interpolation of the semi-annual yields, as reported in "Federal Reserve
Statistical Release H.15 Selected Interest Rates" under the heading U.S.
Government Securities/Treasury constant maturities for the week ending prior to
the date of prepayment, of the U.S. Treasury constant maturities with terms most
nearly approximating the remaining weighted average life of the mortgage loan
being prepaid (or such other comparable calculation based on the United States
Treasury Security set forth in such other publication), such rate converted to a
monthly equivalent.
Yield Maintenance Charges are distributable as described in this prospectus
supplement under "Description of the Certificates--Allocation of Yield
Maintenance Charges."
Unless a mortgage loan is relatively near 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
or otherwise), the Yield Maintenance Charge may 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 the mortgage loan voluntarily and, accordingly, the related borrower
may elect not to prepay the mortgage loan. However, we cannot assure you that
the imposition of a Yield Maintenance Charge will provide a sufficient
disincentive to prevent a voluntary principal prepayment.
Certain 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. None of the mortgage loans require the payment of Yield Maintenance
Charges in connection with a prepayment of the related mortgage loan as a result
of a total casualty or condemnation. Furthermore, the enforceability, under the
laws of a number of states, of provisions providing for payments comparable to
the Yield Maintenance Charges upon an involuntary prepayment is unclear. We
cannot assure you that, at the time a Yield Maintenance Charge is required to be
made on a mortgage loan in connection with an involuntary prepayment, the
obligation to pay the Yield Maintenance Charge will be enforceable under
applicable state law. See "Certain Legal Aspects of Mortgage Loans--Default
Interest and Limitations on Prepayments" in the prospectus.
The following table sets forth for each month indicated in the table, (1)
the aggregate unpaid principal balance and the percentage of the Initial Pool
Balance expected to be outstanding and (2) the percentage of the amounts subject
to a Lockout Period (including any period where only defeasance is permitted) or
Yield Maintenance Charge, in each case assuming no prepayments, defaults or
extensions and based also upon the assumptions set forth preceding the tables
appearing under "Yield and Maturity Considerations--Weighted Average Life" in
this prospectus supplement.
S-51
<PAGE>
PERCENTAGE OF REMAINING POOL BALANCE SUBJECT TO PREPAYMENT RESTRICTIONS
(DOLLAR AMOUNTS EXPRESSED IN MILLIONS)
<TABLE>
<CAPTION>
PREPAYMENT RESTRICTIONS APPLICABLE TO UPB
OUTSTANDING
ON EACH ANNIVERSARY OF THE CUT-OFF DATE
----------------------------------------------
CUMULATIVE ENDING % OF
INITIAL SEQUENTIAL POOL INITIAL LOCKOUT YIELD MAINTENANCE CHARGES
POOL PRINCIPAL BALANCE POOL ---------------- -------------------------
DATE BALANCE PAYMENTS AMOUNT BALANCE AMOUNT % UPB AMOUNT
- -------- ------- ---------- ------- ------- ------ ----- -------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
11/10/99 $782.7 $ 0.0 $782.7 100% $782.7 100% $ 0.0
11/10/00 $782.7 $ 6.1 $776.6 99% $776.6 100% $ 0.0
11/10/01 $782.7 $ 12.9 $769.8 98% $769.8 100% $ 0.0
11/10/02 $782.7 $ 20.3 $762.4 97% $762.4 100% $ 0.0
11/10/03 $782.7 $ 28.3 $754.4 96% $754.4 100% $ 0.0
11/10/04 $782.7 $ 41.4 $741.2 95% $741.2 100% $ 0.0
11/10/05 $782.7 $ 50.8 $731.8 94% $731.8 100% $ 0.0
11/10/06 $782.7 $ 72.7 $710.0 91% $710.0 100% $ 0.0
11/10/07 $782.7 $ 95.8 $686.8 88% $686.8 100% $ 0.0
11/10/08 $782.7 $107.3 $675.3 86% $675.3 100% $ 0.0
11/10/09 $782.7 $750.5 $ 32.2 4% $24.1 75% $ 0.0
11/10/10 $782.7 $759.6 $ 23.1 3% $23.1 100% $ 0.0
11/10/11 $782.7 $764.7 $ 17.9 2% $17.9 100% $ 0.0
11/10/12 $782.7 $765.7 $ 16.9 2% $16.9 100% $ 0.0
11/10/13 $782.7 $766.9 $ 15.8 2% $14.4 91% $ 1.4
11/10/14 $782.7 $768.1 $ 14.5 2% $13.3 91% $ 1.3
11/10/15 $782.7 $769.5 $ 13.2 2% $12.0 91% $ 1.2
11/10/16 $782.7 $770.9 $ 11.7 1% $10.7 91% $ 1.1
11/10/17 $782.7 $772.5 $ 10.1 1% $ 9.2 91% $ 1.0
11/10/18 $782.7 $780.5 $ 2.2 0% $ 1.4 62% $ 0.8
11/10/19 $782.7 $781.9 $ 0.7 0% $ 0.0 0% $ 0.7
11/10/20 $782.7 $782.1 $ 0.6 0% $ 0.0 0% $ 0.6
11/10/21 $782.7 $782.2 $ 0.4 0% $ 0.0 0% $ 0.4
11/10/22 $782.7 $782.4 $ 0.3 0% $ 0.0 0% $ 0.3
11/10/23 $782.7 $ 0.0 $ 0.0 0% $ 0.0 0% $ 0.0
<CAPTION>
PREPAYABLE
WITHOUT
PREMIUM OR
CHARGE
----------------
DATE % UPB AMOUNT % UPB
- -------- ------------------------- ------ -----
<S> <C> <C> <C>
11/10/99 0% $0.0 0%
11/10/00 0% $0.0 0%
11/10/01 0% $0.0 0%
11/10/02 0% $0.0 0%
11/10/03 0% $0.0 0%
11/10/04 0% $0.0 0%
11/10/05 0% $0.0 0%
11/10/06 0% $0.0 0%
11/10/07 0% $0.0 0%
11/10/08 0% $0.0 0%
11/10/09 0% $8.1 25%
11/10/10 0% $0.0 0%
11/10/11 0% $0.0 0%
11/10/12 0% $0.0 0%
11/10/13 9% $0.0 0%
11/10/14 9% $0.0 0%
11/10/15 9% $0.0 0%
11/10/16 9% $0.0 0%
11/10/17 9% $0.0 0%
11/10/18 38% $0.0 0%
11/10/19 100% $0.0 0%
11/10/20 100% $0.0 0%
11/10/21 100% $0.0 0%
11/10/22 100% $0.0 0%
11/10/23 0% $0.0 0%
</TABLE>
- ------------------
As used above, "UPB" means aggregate unpaid principal balance of all mortgage
loans as of the indicated date.
S-52
<PAGE>
Defeasance; Collateral Substitution. The terms of 91 of the mortgage
loans, representing approximately 99.73% of the Initial Pool Balance (the
"Defeasance Loans"), permit the applicable borrower at any time after a
specified period (the "Defeasance Lock-out Period") to obtain a release of a
Mortgaged Property from the lien of the related Mortgage (a "Defeasance
Option"). The Defeasance Lockout Period is generally two years from the Closing
Date, provided no event of default exists. The release is subject to certain
conditions, including, among other conditions, that the borrower:
(a) pays or delivers to the Master Servicer on any due date (the
"Release Date") (1) all interest accrued and unpaid on the principal
balance of the Mortgage Note to and including the Release Date, (2) all
other sums due under the mortgage loan and all other loan documents
executed in connection with the related mortgage loan, (3) direct
non-callable obligations of the United States of America providing payments
(x) on or prior to, but as close as possible to, all successive scheduled
payment dates from the Release Date to the related maturity date (or the
date the related balloon payment is due), assuming, in the case of each APD
Loan, that the loan prepays on the related Anticipated Prepayment Date and
(y) in amounts equal to the scheduled payments due on those dates under the
mortgage loan or the related defeased amount of the mortgage loan in the
case of a partial defeasance (including any balloon payment), and (4) any
costs and expenses incurred in connection with the purchase of the U.S.
government obligations; and
(b) delivers a security agreement granting the trust fund a first
priority lien on the U.S. government obligations purchased as substitute
collateral and an opinion of counsel to that effect.
The Defeasance Loans secured by more than one Mortgaged Property generally
require that (1) prior to the release of a related Mortgaged Property, a
specified percentage (generally 125%) of the allocated loan amount for the
Mortgaged Property be defeased and (2) that certain DSCR and LTV Ratio tests (if
applicable) be satisfied with respect to the remaining Mortgaged Properties
after the defeasance.
The related borrower or, if the borrower is not required to do so under the
mortgage loan documents, the Master Servicer, will be responsible for purchasing
the U.S. government obligations on behalf of the borrower at the borrower's
expense. Any amount in excess of the amount necessary to purchase the U.S.
government obligations will be returned to the borrower. Simultaneously with
these actions, the related Mortgaged Property will be released from the lien of
the mortgage loan and the pledged U.S. government obligations (together with any
Mortgaged Property not released, in the case of a partial defeasance) will be
substituted as the collateral securing the mortgage loan.
In general, a successor borrower established or designated by the related
borrower (or, if the borrower is not required to do so under the mortgage loan
documents, the Master Servicer) will assume all of the defeased obligations of a
borrower exercising a Defeasance Option under a mortgage loan and the borrower
will be relieved of all of the defeased obligations under the mortgage loan. If
a mortgage loan is partially defeased, the related Mortgage Note will be split
and only the defeased portion of the borrower's obligations will be transferred
to the successor borrower.
Although the collateral substitution provisions related to defeasance are
not intended to be, and do not have the same effect on the Certificateholders
as, a prepayment of the related mortgage loan, a court could interpret these
provisions as being equivalent to an unenforceable yield maintenance charge or
prepayment premium. We make no representation as to the enforceability of the
defeasance provisions of any mortgage loan.
"Due-on-Sale" and "Due-on-Encumbrance" Provisions. The mortgage loans
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, under the terms of certain of the
mortgage loans, this consent must be granted if certain conditions are met.
Certain of the Mortgaged Properties have been, or may become, subject to
additional financing. See "--General" above. The Special Servicer or, in certain
S-53
<PAGE>
cases, the Master Servicer, will be required to exercise (or waive its right to
exercise, provided that a confirmation has been obtained from S&P and DCR with
respect to certain mortgage loans) any right it may have with respect to a
mortgage loan containing a "due-on-sale" clause (1) to accelerate the payments
on those mortgage loans, or (2) to withhold its consent to any sale or transfer,
consistent with the Servicing Standards. With respect to a mortgage loan with a
"due-on-encumbrance" clause, the Special Servicer (or in certain cases, the
Master Servicer with respect to non-specially serviced mortgage loans) will be
required to exercise (or waive its right to exercise, provided that a
confirmation has been obtained from S&P and DCR) any right it may have with
respect to a mortgage loan containing a "due-on-encumbrance" clause (1) to
accelerate the payments thereon, or (2) to withhold its consent to the creation
of any additional lien or other encumbrance, consistent with the Servicing
Standards.
Notwithstanding the foregoing, the existence of any additional indebtedness
may increase the difficulty of refinancing the related mortgage loan at maturity
and the possibility that reduced cash flow could result in deferred maintenance.
Also, if the holder of the additional debt has filed for bankruptcy or been
placed in involuntary receivership, foreclosure of the related mortgage loan
could be delayed. See "Certain Legal Aspects of Mortgage Loans--Due-on-Sale and
Due-on-Encumbrance" and "--Subordinate Financing" in the prospectus.
ADDITIONAL MORTGAGE LOAN INFORMATION
The following tables set forth certain anticipated characteristics of the
mortgage loans. The sum in any column may not equal the indicated total due to
rounding. The descriptions in this prospectus supplement of the mortgage loans
and the Mortgaged Properties are based upon the pool of mortgage loans as it is
expected to be constituted as of the close of business on the Closing Date,
assuming that (1) all scheduled principal and interest payments due on or before
the cut-off date will be made, and (2) there will be no principal prepayments on
or before the cut-off date. Prior to the issuance of the Certificates, mortgage
loans may be removed from the pool of mortgage loans as a result of prepayments,
delinquencies, incomplete documentation or otherwise, if the Depositor or a
Mortgage Loan Seller deems the removal necessary, appropriate or desirable. A
limited number of other mortgage loans may be included in the pool of mortgage
loans prior to the issuance of the Certificates, unless including those mortgage
loans would materially alter the characteristics of the pool of mortgage loans
as described in this prospectus supplement. The Depositor believes that the
information set forth in this prospectus supplement will be representative of
the characteristics of the pool of mortgage loans as it will be constituted at
the time the Certificates are issued, although the range of mortgage rates and
maturities as well as other characteristics of the mortgage loans described in
this prospectus supplement may vary.
With respect to mortgage loans secured by more than one mortgaged property,
the information presented herein with respect to DSCRs and LTV Ratio assumes
that the DSCR and LTV Ratio with respect to each mortgaged property is the DSCR
or LTV Ratio of the mortgage loan in the aggregate.
A Current Report on Form 8-K (the "Form 8-K") will be available to
purchasers of the offered certificates on or shortly after the Closing Date and
will be filed, together with the Pooling and Servicing Agreement, with the
Securities and Exchange Commission within fifteen days after the initial
issuance of the Offered Certificates. If mortgage loans are removed from or
added to the pool of mortgage loans as set forth in the preceding paragraph, the
removal or addition will be noted in the Form 8-K.
For a detailed presentation of certain characteristics of the mortgage
loans and the Mortgaged Properties on an individual basis see Annex A.
S-54
<PAGE>
TYPE OF MORTGAGED PROPERTIES(1)
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
---------------------
CUT-OFF DATE STATED
NUMBER OF AGGREGATE NUMBER OF BALANCE PER REMAINING
MORTGAGED CUT-OFF DATE % OF INITIAL UNITS OR NUMBER OF MORTGAGE TERMS
PROPERTY TYPE PROPERTIES BALANCE POOL BALANCE NRA(2) UNITS OR NRA RATE (MOS.)(3)
- ---------------------------- ---------- ------------- ------------ ---------- ------------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Multifamily................. 26 $ 218,775,349 27.95% 4,927 $44,403 7.80% 124
Anchored Retail............. 17 191,198,804 24.43 2,265,512 $ 84 8.08% 119
Office...................... 25 157,011,367 20.06 1,920,437 $ 82 8.41% 127
Industrial.................. 28 94,816,810 12.11 2,202,100 $ 43 8.27% 118
Hotel....................... 7 58,650,842 7.49 808 $72,588 8.65% 118
Manufactured Housing........ 6 34,620,346 4.42 2,068 $16,741 8.10% 111
Unanchored Retail........... 5 14,453,910 1.85 131,477 $ 110 8.14% 119
Self Storage................ 4 13,126,173 1.68 359,288 $ 37 8.00% 119
---- ------------- ------
Total/Weighted Average...... 118 $ 782,653,601 100.00% 8.13% 121
---- ------------- ------
---- ------------- ------
<CAPTION>
LTV
CUT-OFF DATE RATIO AT
PROPERTY TYPE OCCUPANCY(4) DSCR LTV RATIO MATURITY(3)
- ---------------------------- ------------- ---- ------------ ------------
<S> <C> <C> <C> <C>
Multifamily................. 97% 1.27x 75.44% 65.30%
Anchored Retail............. 92% 1.26x 71.51% 64.21%
Office...................... 94% 1.27x 70.29% 58.36%
Industrial.................. 98% 1.28x 71.54% 63.17%
Hotel....................... 82% 1.49x 67.24% 56.66%
Manufactured Housing........ 97% 1.24x 74.55% 67.52%
Unanchored Retail........... 98% 1.29x 76.55% 68.84%
Self Storage................ 90% 1.89x 53.73% 46.49%
Total/Weighted Average...... 94% 1.29x 71.98% 62.58%
</TABLE>
- ------------------
(1) Because this table is presented at the Mortgaged Property level, weighted
averages are based on allocated loan amounts (allocated by either the amount
allocated in the related Mortgage Note or the appraised value for the
Mortgaged Property) for mortgage loans secured by more than one Mortgaged
Property and may therefore deviate slightly from weighted averages presented
at the mortgage loan level in other tables in this prospectus supplement.
(2) "NRA" means net rentable area and is applicable with respect to retail,
office and industrial properties.
(3) Calculated with respect to the Anticipated Prepayment Date for the APD
Loans.
(4) The weighted average occupancy rate information shown above includes 7 hotel
properties, representing approximately 7.49% of the Initial Pool Balance,
which have occupancy rate that generally range from 59% to 89%; if the
mortgage loans secured by hotel properties are excluded, the weighted
average occupancy rates of all other Mortgaged Properties is 95.12%.
S-55
<PAGE>
RANGE OF MORTGAGE RATES AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
-----------------------------------------------------
STATED
NUMBER OF AGGREGATE % OF REMAINING CUT-OFF
RANGE OF LOANS/ CUT-OFF DATE INITIAL POOL MORTGAGE TERM DATE LTV LTV RATIO AT
MORTGAGE RATES PROPERTIES BALANCE BALANCE RATE (MOS.)(1) DSCR RATIO MATURITY(1)
- ---------------------------- --------- ------------ ------------ -------- --------- ---- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
6.490% to 7.499% 4/4 $ 17,205,663 2.20% 6.95% 209 1.37x 76.52% 46.72%
7.500% to 7.849% 11/11 99,324,948 12.69 7.72% 118 1.33x 72.57% 64.42%
7.850% to 7.999% 13/13 190,120,988 24.29 7.95% 117 1.26x 72.99% 65.47%
8.000% to 8.199% 20/35 144,931,213 18.52 8.09% 116 1.30x 73.25% 65.21%
8.200% to 8.399% 25/25 156,713,501 20.02 8.28% 117 1.28x 71.85% 64.43%
8.400% to 8.599% 14/25 102,434,287 13.09 8.48% 119 1.29x 70.36% 62.03%
8.600% to 8.830% 5/5 71,923,000 9.19 8.76% 142 1.34x 67.43% 47.68%
------- ------------ ------
Total/Weighted Average 92/118 $782,653,601 100.00% 8.13% 121 1.29x 71.98% 62.58%
------- ------------ ------
------- ------------ ------
</TABLE>
- ------------------
(1) Calculated with respect to the Anticipated Prepayment Date for the APD
Loans.
MORTGAGE LOANS BY STATE
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
-----------------------------------------------------
STATED
NUMBER OF AGGREGATE % OF REMAINING CUT-OFF
LOANS/ CUT-OFF DATE INITIAL POOL MORTGAGE TERM DATE LTV LTV RATIO AT
STATE PROPERTIES BALANCE BALANCE RATE (MOS.)(1) DSCR RATIO MATURITY(1)
- ---------------------------- --------- ------------ ------------ -------- --------- ---- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
California 21/36 $259,130,854 33.11% 8.25% 124 1.32x 69.47% 58.35%
Texas 18/18 89,268,882 11.41 8.01% 118 1.32x 73.76% 65.41%
Florida 9/9 76,178,234 9.73 7.99% 120 1.23x 76.56% 67.27%
Massachusetts 1/1 47,945,886 6.13 7.99% 118 1.26x 68.01% 60.96%
Virginia 1/1 40,953,778 5.23 7.99% 118 1.25x 71.85% 64.41%
Pennsylvania 3/3 37,904,121 4.84 8.40% 120 1.23x 71.25% 64.39%
New York 4/4 37,632,956 4.81 8.15% 107 1.30x 71.48% 65.17%
Connecticut 2/13 29,638,529 3.79 8.47% 119 1.25x 73.45% 62.88%
Georgia 3/3 25,862,253 3.30 7.86% 117 1.24x 80.02% 71.17%
Colorado 3/3 24,198,151 3.09 8.18% 119 1.29x 75.88% 68.29%
Nevada 4/4 18,722,440 2.39 8.03% 120 1.35x 75.57% 67.37%
Washington 2/2 15,997,085 2.04 8.10% 117 1.33x 69.90% 61.78%
Arizona 4/4 13,713,313 1.75 8.28% 120 1.25x 71.26% 63.73%
Michigan 2/2 11,713,664 1.50 6.90% 191 1.33x 77.60% 54.56%
North Carolina 2/2 9,063,201 1.16 7.55% 159 1.40x 72.24% 57.05%
Idaho 3/3 8,007,115 1.02 8.27% 119 1.24x 77.36% 69.75%
Alaska 1/1 7,597,044 0.97 8.58% 116 1.51x 65.49% 55.22%
Utah 1/1 6,600,000 0.84 8.50% 120 1.25x 67.69% 61.32%
Maryland 1/1 5,130,000 0.66 8.31% 120 1.21x 73.29% 66.11%
South Carolina 2/2 4,958,869 0.63 8.30% 116 1.62x 69.18% 57.85%
Alabama 1/1 4,090,000 0.52 8.75% 120 1.21x 64.92% 59.14%
Oklahoma 1/1 3,450,000 0.44 8.24% 120 1.31x 76.67% 69.04%
Wisconsin 1/1 2,400,000 0.31 8.49% 120 1.31x 68.57% 62.11%
Illinois 1/1 1,298,471 0.17 7.83% 118 1.21x 79.91% 71.36%
Montana 1/1 1,198,753 0.15 8.29% 118 1.40x 71.78% 64.79%
------- ------------ ------
Total/Weighted Average 92/118 $782,653,601 100.00% 8.13% 121 1.29x 71.98% 62.58%
------- ------------ ------
------- ------------ ------
</TABLE>
- ------------------
(1) Calculated with respect to the Anticipated Prepayment Date for the APD
Loans.
S-56
<PAGE>
RANGE OF REMAINING TERMS TO MATURITY DATE OR ANTICIPATED PREPAYMENT DATE IN
MONTHS
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
---------------------------------------------------------
% OF STATED CUT-OFF
NUMBER OF AGGREGATE INITIAL REMAINING DATE LTV RATIO
RANGE OF REMAINING LOANS/ CUT- OFF POOL MORTGAGE TERM LTV AT
TERMS (MOS.)(1) PROPERTIES DATE BALANCE BALANCE RATE (MOS.)(1) DSCR RATIO MATURITY(1)
- ------------------- --------- ------------ ------- -------- --------- ---- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
58 to 84 2/2 $ 17,339,425 2.22% 8.18% 75 1.22x 68.11% 64.42%
85 to 108 1/1 13,293,723 1.70 7.86% 95 1.20x 75.96% 70.05%
109 to 115 3/3 12,263,624 1.57 8.34% 115 1.52x 65.54% 57.28%
116 to 119 42/60 381,974,666 48.81 8.00% 118 1.31x 72.67% 64.77%
120 to 120 39/47 327,176,500 41.80 8.34% 120 1.28x 71.36% 63.20%
121 to 240 4/4 28,476,864 3.64 7.73% 218 1.27x 72.98% 28.14%
241 to 285 1/1 2,128,799 0.27 7.23% 285 1.22x 74.69% 4.96%
------- ------------ -------
Total/Weighted
Average 92/118 $782,653,601 100.00% 8.13% 121 1.29x 71.98% 62.58%
------- ------------ -------
------- ------------ -------
</TABLE>
- ------------------
(1) Calculated with respect to the Anticipated Prepayment Date for the APD
Loans.
YEARS OF MATURITY
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
---------------------------------------------------
% OF STATED CUT-OFF
NUMBER OF AGGREGATE INITIAL REMAINING DATE LTV RATIO
YEARS OF LOANS/ CUT-OFF DATE POOL MORTGAGE TERM LTV AT
MATURITY(1) PROPERTIES BALANCE BALANCE RATE (MOS.)(1) DSCR RATIO MATURITY(1)
- ----------------- --------- ------------ ------- -------- --------- ---- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
2004 1/1 $ 4,852,740 0.62% 8.14% 58 1.20x 66.84% 64.23%
2006 1/1 12,486,685 1.60 8.20% 82 1.22x 68.61% 64.50%
2007 1/1 13,293,723 1.70 7.86% 95 1.20x 75.96% 70.05%
2009 84/110 721,414,790 92.18 8.16% 119 1.30x 71.95% 63.93%
2011 1/1 5,018,883 0.64 6.49% 143 1.38x 76.04% 61.42%
2018 2/2 10,057,982 1.29 7.12% 227 1.39x 77.14% 48.22%
2019 1/1 13,400,000 1.71 8.66% 240 1.14x 68.72% 0.60%
2023 1/1 2,128,799 0.27 7.23% 285 1.23x 74.69% 4.96%
------- ------------ -------
Total/Weighted
Average 92/118 $782,653,601 100.00% 8.13% 121 1.29x 71.98% 62.58%
------- ------------ -------
------- ------------ -------
</TABLE>
- ------------------
(1) Calculated with respect to the Anticipated Prepayment Date for the APD
Loans.
S-57
<PAGE>
RANGE OF YEARS BUILT/RENOVATED(1)(2)
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
---------------------------------------------------
% OF STATED CUT-OFF
NUMBER OF AGGREGATE INITIAL REMAINING DATE LTV RATIO
RANGE OF YEARS MORTGAGED CUT-OFF DATE POOL MORTGAGE TERM LTV AT
BUILT/RENOVATED PROPERTIES BALANCE BALANCE RATE (MOS.)(3) DSCR RATIO MATURITY(3)
- ------------------------- --------- ------------ ------- -------- --------- ---- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1954 to 1970 2 $ 6,051,493 0.77% 8.17% 70 1.24x 67.82% 64.34%
1971 to 1975 5 46,858,968 5.99 7.90% 119 1.28x 71.35% 63.19%
1976 to 1980 11 22,068,459 2.82 8.35% 118 1.27x 72.89% 65.90%
1981 to 1985 12 74,428,617 9.51 8.02% 123 1.29x 72.51% 63.77%
1986 to 1990 17 163,647,489 20.91 8.16% 116 1.27x 71.71% 64.04%
1991 to 1995 17 78,286,946 10.00 7.96% 120 1.30x 72.97% 63.46%
1996 to 1999 54 391,311,629 50.00 8.20% 125 1.31x 71.88% 61.29%
--- ------------ -------
Total/Weighted
Average 118 $782,653,601 100.00% 8.13% 121 1.29x 71.98% 62.58%
--- ------------ -------
--- ------------ -------
</TABLE>
- ------------------
(1) This table references the later of the year built or the year of the most
recent renovations with respect to each Mortgaged Property.
(2) Because this table is presented at the Mortgaged Property level, weighted
averages are based on allocated loan amounts (allocated by either the
amount allocated in the related Mortgage Note or the appraised value for
the Mortgaged Property) for mortgage loans secured by more than one
Mortgaged Property and may therefore deviate slightly from weighted
averages presented at the mortgage loan level in other tables in this
prospectus supplement.
(3) Calculated with respect to the Anticipated Prepayment Date for the APD
Loans.
TEN LARGEST MORTGAGE LOANS
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
-------------------------------------------
PERCENTAGE STATED CUT-OFF
NUMBER OF CUT-OFF OF INITIAL REMAINING DATE
MORTGAGED DATE POOL PROPERTY MORTGAGE TERM UNDERWRITTEN LTV
PROPERTY NAME PROPERTIES BALANCE BALANCE TYPE RATE (MOS.) DSCR RATIO
- ------------------------------- ------------ ---------- ------------------ -------- --------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Auburn Mall 1 $ 47,945,886 6.13% Anchored Retail 7.99% 118 1.26x 68.01%
Apple Blossom Mall 1 40,953,778 5.23 Anchored Retail 7.99% 118 1.25x 71.85%
Tuscan Inn at 1 34,000,000 4.34 Full-Service Hotel 8.83% 120 1.46x 66.80%
Fisherman's Wharf
Torrance Promenade 1 30,000,000 3.83 Anchored Retail 8.30% 120 1.23x 71.43%
Windsor Apartments 1 27,487,296 3.51 Multi-family 7.92% 119 1.21x 76.35%
Orange County
Industrial/Office
Portfolio I 9 26,824,431 3.43 Industrial/Office 8.18% 117 1.30x 71.06%
Seven Penn Center 1 24,000,000 3.07 Office 8.43% 120 1.21x 66.67%
Orange County
Industrial/Office
Portfolio II 8 22,229,344 2.84 Industrial/Office 8.17% 117 1.30x 69.58%
Winstanley Portfolio 9 21,479,500 2.74 Industrial/Office 8.44% 120 1.20x 74.04%
City National Bank 1 19,000,000 2.43 Office 8.70% 120 1.29x 67.86%
Building
--- ------------ ------
Total/Weighted 33 $293,920,235 37.55% 8.26% 119 1.27x 70.25%
Average..............
--- ------------ ------
--- ------------ ------
<CAPTION>
LTV RATIO
AT
PROPERTY NAME MATURITY
- ---------------------- ---------
<S> <C>
Auburn Mall 60.96%
Apple Blossom Mall 64.41%
Tuscan Inn at 56.47%
Fisherman's Wharf
Torrance Promenade 64.42%
Windsor Apartments 68.31%
Orange County
Industrial/Office
Portfolio I 64.02%
Seven Penn Center 60.30%
Orange County
Industrial/Office
Portfolio II 62.67%
Winstanley Portfolio 61.94%
City National Bank 61.74%
Building
Total/Weighted 62.44%
Average..............
</TABLE>
The following table sets forth a range of Debt Service Coverage Ratios for
the mortgage loans as of the cut-off date. The "Debt Service Coverage Ratio" or
"DSCR" for any mortgage loan is the ratio of (1) Underwritten Net Cash Flow
produced by the related Mortgaged Property or Mortgaged Properties to (2) the
aggregate amount of the scheduled payments of principal and/or interest (the
"Periodic Payments") due for the 12-month period immediately following the
cut-off date.
See "Description of the Mortgage Pool--Certain Terms and Conditions of the
Mortgage Loans" in this prospectus supplement.
S-58
<PAGE>
RANGE OF DEBT SERVICE COVERAGE RATIOS AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
-----------------------------------------------------
PERCENTAGE STATED CUT-OFF
NUMBER OF AGGREGATE OF INITIAL REMAINING DATE LTV RATIO
RANGE OF DEBT SERVICE LOANS/ CUT-OFF DATE POOL MORTGAGE TERM LTV AT
COVERAGE RATIOS PROPERTIES BALANCE BALANCE RATE (MOS.)(1) DSCR RATIO MATURITY(1)
- ----------------------- --------- ------------ ---------- -------- --------- ---- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1.14x to 1.19x 2/2 $ 20,625,000 2.64% 8.62% 198 1.15x 71.79% 25.01%
1.20x to 1.22x 15/23 175,180,661 22.38 8.08% 113 1.21x 72.50% 64.80%
1.22x to 1.24x 12/12 99,720,056 12.74 8.10% 122 1.23x 74.79% 65.80%
1.25x to 1.29x 28/43 292,554,112 37.38 8.11% 121 1.27x 72.08% 64.08%
1.30x to 1.49x 26/29 158,009,144 20.19 8.20% 120 1.40x 71.56% 62.64%
1.50x to 1.99x 7/7 26,720,003 3.41 8.18% 130 1.57x 68.58% 55.94%
2.00x to 2.08x 2/2 9,844,624 1.26 7.85% 119 2.08x 47.60% 41.86%
------- ------------ ------
Total/Weighted
Average.............. 92/118 $782,653,601 100.00% 8.13% 121 1.29x 71.98% 62.58%
------- ------------ ------
------- ------------ ------
</TABLE>
- ------------------
(1) Calculated with respect to the Anticipated Prepayment Date for the APD
Loans.
RANGE OF CURRENT OCCUPANCY RATES(1)
<TABLE>
<CAPTION>
WEIGHTED AVERAGES(2)(3)
------------------------------------------------------
STATED
NUMBER OF AGGREGATE REMAINING CUT-OFF LTV RATIO
RANGE OF CURRENT MORTGAGED CUT-OFF DATE % OF INITIAL MORTGAGE TERM DATE LTV AT
OCCUPANCY RATES PROPERTIES BALANCE POOL BALANCE RATE (MOS.)(4) DSCR RATIO MATURITY(4)
- --------------------------- --------- ------------ ------------ --------- --------- ----- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
59.00% to 69.99%.......... 3 $ 9,230,036 1.18% 8.37% 118 1.45x 72.53% 60.68%
70.00% to 79.99%.......... 4 16,568,453 2.12 8.44% 116 1.56x 65.68% 55.17%
80.00% to 89.99%.......... 12 120,341,033 15.38 8.33% 115 1.33x 68.59% 60.76%
90.00% to 94.99%.......... 20 154,222,162 19.71 8.15% 117 1.30x 70.51% 63.48%
95.00% to 97.99%.......... 24 177,354,170 22.66 7.93% 120 1.27x 75.07% 66.27%
98.00% to 99.99%.......... 12 136,453,766 17.43 8.14% 125 1.27x 71.57% 62.14%
100.00% to 100.00%......... 43 168,483,982 21.53 8.15% 129 1.27x 73.40% 60.38%
--- ------------ ------
Total/Weighted Average..... 118 $782,653,601 100.00% 8.13% 121 1.29x 71.98% 62.58%
--- ------------ ------
--- ------------ ------
</TABLE>
- ------------------
(1) Current occupancy rates have been calculated in this table based upon rent
rolls made available to the Mortgage Loan Sellers by the related borrowers
as of the dates set forth on Annex A to this prospectus supplement.
(2) The weighted average occupancy rate information shown above includes 7
hotel properties, representing approximately 7.49% of the Initial Pool
Balance, which have occupancy rates that generally range from 59% to 89%;
if the mortgage loans secured by hotel properties are excluded, the
weighted average occupancy rate of all other mortgaged properties is
95.12%.
(3) Because this table is presented at the Mortgaged Property level, weighted
averages are based on allocated loan amounts (allocated by either the amount
allocated in the related Mortgage Note or the appraised value for the
Mortgaged Property) for mortgage loans secured by more than one Mortgaged
Property and may therefore deviate slightly from weighted averages presented
at the mortgage loan level in other tables in this prospectus supplement.
(4) Calculated with respect to the Anticipated Prepayment Date for the APD
Loans.
S-59
<PAGE>
RANGE OF CUT-OFF DATE BALANCES
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
-------------------------------------------------
% OF STATED
RANGE OF NUMBER OF AGGREGATE INITIAL REMAINING CUT-OFF LTV RATIO
CUT-OFF DATE LOANS/ CUT-OFF DATE POOL MORTGAGE TERM DATE LTV AT
BALANCES PROPERTIES BALANCE BALANCE RATE (MOS.)(1) DSCR RATIO MATURITY(1)
- --------------------------------- ---------- ------------ ------------ -------- --------- ---- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 1,198,753 to $ 2,500,000....... 14/14 $ 24,894,048 3.18% 8.12% 133 1.36x 73.14% 59.28%
$ 2,500,001 to $ 5,000,000....... 29/29 106,528,286 13.61 8.18% 120 1.34x 72.71% 63.92%
$ 5,000,001 to $10,000,000....... 25/28 171,349,300 21.89 8.10% 124 1.35x 71.93% 63.33%
$10,000,001 to $15,000,000....... 10/10 117,610,987 15.03 8.01% 126 1.24x 74.02% 59.25%
$15,000,001 to $25,000,000....... 8/23 155,059,588 19.81 8.17% 119 1.24x 71.69% 63.65%
$25,000,001 to $40,000,000....... 4/12 118,311,728 15.12 8.34% 119 1.30x 71.16% 62.95%
$40,000,001 to $47,945,886....... 2/2 88,899,665 11.36 7.99% 118 1.26x 69.78% 62.55%
------ ------------ ------
Total/Weighted Average........... 92/118 $782,653,601 100.00% 8.13% 121 1.29x 71.98% 62.58%
------ ------------ ------
------ ------------ ------
</TABLE>
- ------------------
(1) Calculated with respect to the Anticipated Prepayment Date for the APD
Loans.
The following two tables set forth the range of LTV Ratios of the mortgage
loans as of the cut-off date and the maturity dates or Anticipated Prepayment
Date of the mortgage loans. An "LTV Ratio" for any mortgage loan, as of any date
of determination, is a fraction, expressed as a percentage, the numerator of
which is the scheduled principal balance of the mortgage loan as of that date
(assuming no defaults or prepayments on the 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 of the property
obtained in connection with the origination of the mortgage loan. The LTV Ratio
as of the mortgage loan maturity dates or Anticipated Prepayment Date, as the
case may be, described below was calculated based on the principal balance of
the related mortgage loan on the maturity date or Anticipated Prepayment Date,
as the case may be, assuming all principal payments required to be made on or
prior to the mortgage loan's maturity date or Anticipated Prepayment Date, as
the case may be (not including the balloon payment), are made. 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 borrower's current equity in each Mortgaged
Property. 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 current actual loan-to-value ratio of a mortgage loan may be higher than
its LTV Ratio at origination even after taking into account amortization since
origination.
S-60
<PAGE>
RANGE OF LTV RATIOS AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
----------------------------------------------------
% OF STATED
RANGE OF NUMBER OF AGGREGATE INITIAL REMAINING CUT-OFF LTV RATIO
CUT-OFF DATE LOANS/ CUT-OFF DATE POOL MORTGAGE TERM DATE LTV AT
LTV RATIOS PROPERTIES BALANCE BALANCE RATE (MOS.)(1) DSCR RATIO MATURITY(1)
- ------------------------------ ---------- ------------ ------------ -------- --------- ---- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
46.90% to 59.99%.............. 2/2 $ 9,844,624 1.26% 7.85% 119 2.08x 47.60% 41.86%
60.00% to 64.99%.............. 5/5 23,596,539 3.01 8.29% 119 1.38x 63.62% 55.38%
65.00% to 68.99%.............. 17/17 208,379,473 26.62 8.40% 123 1.31x 67.52% 56.16%
69.00% to 72.99%.............. 20/38 216,411,152 27.65 8.07% 118 1.27x 71.16% 63.60%
73.00% to 76.99%.............. 26/34 204,867,211 26.18 8.01% 122 1.27x 75.19% 65.52%
77.00% to 79.99%.............. 18/18 92,422,725 11.81 8.00% 127 1.27x 78.88% 69.25%
80.00% to 81.49%.............. 4/4 27,131,876 3.47 7.94% 118 1.27x 81.12% 72.63%
------ ------------ ------
Total/Weighted Average........ 92/118 $782,653,601 100.00% 8.13% 121 1.29x 71.98% 62.58%
------ ------------ ------
------ ------------ ------
</TABLE>
- ------------------
(1) Calculated with respect to the Anticipated Prepayment Date for the APD
Loans.
RANGE OF LTV RATIOS AS OF MORTGAGE LOAN MATURITY DATES(1)
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
----------------------------------------------------
% OF STATED
NUMBER OF AGGREGATE INITIAL REMAINING CUT-OFF LTV RATIO
RANGE OF MATURITY DATE LOANS/ CUT-OFF DATE POOL MORTGAGE TERM DATE LTV AT
LTV RATIOS PROPERTIES BALANCE BALANCE RATE (MOS.) DSCR RATIO MATURITY
- ------------------------------ ---------- ------------ ------------ -------- --------- ---- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0.00% to 44.99%.............. 4/4 $ 25,373,423 3.24% 8.23% 197 1.51x 61.03% 16.97%
45.00% to 57.49%.............. 9/9 74,747,418 9.55 8.39% 134 1.45x 67.24% 54.23%
57.50% to 62.49%.............. 21/29 207,322,841 26.49 8.20% 120 1.28x 69.22% 61.02%
62.50% to 64.99%.............. 13/28 180,102,628 23.01 8.10% 114 1.26x 70.96% 63.96%
65.00% to 69.99%.............. 25/28 177,663,096 22.70 8.06% 119 1.27x 75.03% 67.33%
70.00% to 71.99%.............. 16/16 90,312,319 11.54 8.03% 115 1.25x 78.59% 70.81%
72.00% to 72.75%.............. 4/4 27,131,876 3.47 7.94% 118 1.27x 81.12% 72.63%
------ ------------ ------
Total/Weighted Average........ 92/118 $782,653,601 100.00% 8.13% 121 1.29x 71.98% 62.58%
------ ------------ ------
------ ------------ ------
</TABLE>
- ------------------
(1) Calculated with respect to the Anticipated Prepayment Date for the APD
Loans.
S-61
<PAGE>
PREPAYMENT PROTECTION AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
-----------------------------------------
% OF REMAINING STATED
AGGREGATE INITIAL LOCKOUT REMAINING REMAINING
NUMBER OF CUT-OFF DATE POOL TERM LOCKOUT PLUS YM TERM
PREPAYMENT PROVISION MORTGAGE LOANS BALANCE BALANCE (MOS.) PERIOD (MOS.)(1)
- -------------------------- -------------- ------------ ------- --------- --------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Lockout Period Followed by
Defeasance.............. 91 $780,524,802 99.73% 118 118 121
Lockout Period Followed by
Yield Maintenance....... 1 2,128,799 0.27 165 282 285
-- ------------ -------
Total..................... 92 $782,653,601 100.00%
-- ------------ -------
-- ------------ -------
</TABLE>
- ------------------
(1) Calculated with respect to the Anticipated Prepayment Date for the APD
Loans.
The foregoing characteristics, along with certain additional
characteristics of the mortgage loans presented on a loan-by-loan basis, are set
forth in Annex A to this prospectus supplement. Certain additional information
regarding the mortgage loans is set forth in this prospectus supplement below
under "--Underwriting Standards" and "--Representations and Warranties;
Repurchases and Substitutions" and in the prospectus under "Description of the
Trust Funds--Mortgage Loans" and "Certain Legal Aspects of Mortgage Loans."
UNDERWRITTEN NET CASH FLOW
The "Underwritten Net Cash Flow" for a Mortgaged Property is the estimated
annual revenue derived from the use and operation of the Mortgaged Property less
estimated annual expenses, including operating expenses (such as utilities,
administrative expenses, repairs and maintenance, tenant improvement costs,
leasing commissions, management fees and advertising), fixed expenses (such as
insurance, real estate taxes and, if applicable, ground lease payments) and
replacement reserves and an allowance for vacancies and credit losses. In
calculating Underwritten Net Cash Flow, certain non-operating items such as
depreciation, amortization, partnership distributions, financing fees and
capital expenditures other than applicable reserves, are not included as
expenses.
Underwritten Cash Flow reflects the calculations and adjustments used by
the Mortgage Loan Sellers for their underwriting process and may or may not
reflect the amounts calculated and adjusted by S&P and DCR for their own
analysis. In addition, Underwritten Cash Flow and the DSCRs derived therefrom
are not a substitute for cash flow as determined in accordance with generally
accepted accounting principles as a measure of the results of the property's
operation or a substitute for cash flows from operating activities determined in
accordance with generally accepted accounting principles as a measure of
liquidity.
Revenue. In determining potential gross revenue for each Mortgaged
Property, the Mortgage Loan Sellers generally relied on the most recent rent
roll supplied as of the date of such determination and, where the actual vacancy
shown on the rent roll and the market vacancy was less than 5.0%, assumed a 5.0%
vacancy in determining revenue from rents, except that in the case of certain
Mortgaged Properties which are not secured by multifamily properties, space
occupied by the anchor or single tenants or other large creditworthy tenants may
have been disregarded in performing the vacancy adjustment due to the length of
the related leases or creditworthiness of the tenants, in accordance with the
respective Mortgage Loan Seller's underwriting standards. Where the actual or
market vacancy was not less than 5.0%, the Mortgage Loan Sellers determined
revenue from rents by generally relying on the most recent rent roll supplied as
of the date of such determination and the greater of (a) actual vacancy at the
related Mortgaged Property, (b) vacancy at comparable properties in the same
market as the related Mortgaged Property, and (c) 5.0%. In determining rental
revenue for multifamily, self storage and manufactured housing community
properties, the Mortgage Loan Sellers generally either reviewed rental revenue
shown on the certified rolling 12-month operating statements or annualized
S-62
<PAGE>
the rental revenue and reimbursement of expenses shown on rent rolls or
operating statements with respect to the prior one to twelve month periods. For
the other rental properties, the Mortgage Loan Sellers generally annualized
rental revenue shown on the most recent certified rent roll (as applicable),
after applying the vacancy factor, without further regard to the terms
(including expiration dates) of the leases shown on the rent roll. In the case
of hotel properties, gross receipts were generally determined based upon the
average occupancy not to exceed 80.0% and daily rates achieved during the prior
two to three year annual reporting period. In general, any non-recurring items
and non-property related revenue were eliminated from the calculation.
Expenses. In determining expenses for each Mortgaged Property, the
Mortgage Loan Seller generally relied on rolling 12-month operating statements
and/or full-year or year-to-date financial statements supplied by the borrower.
Except that (a) if tax or insurance expense information more current than that
reflected in the financial statements was available, the newer information was
used, (b) property management fees were generally assumed to be 3.0% to 5.0% of
effective gross revenue, (except with respect to single tenant properties, where
a minimum of 1.5% to 3.0% of gross receipts was generally assumed, with respect
to full service hotel properties, where a minimum of 3.5% of gross receipts was
generally assumed and with respect to limited service hotel properties, where a
minimum of 4.0% of gross receipts was generally assumed), (c) assumptions were
made with respect to reserves for leasing commissions, tenant improvement
expenses and capital expenditures and (d) expenses were assumed to include
annual replacement reserves.
Replacement Reserves. Replacement reserves, if any, were funded reserves
escrowed for ongoing items such as repairs and replacements, including, in the
case of hospitality properties, reserves for furniture, fixtures and equipment.
In certain cases, however, the subject reserve will be subject to a maximum
amount, and once that maximum amount is reached the subject reserve will not be
funded except, in some cases, to the extent it is drawn upon.
ASSESSMENTS OF PROPERTY CONDITION
Property Inspection. All of the Mortgaged Properties were inspected in
connection with the origination or acquisition of the related mortgage loan to
assess their general condition. No inspection revealed any patent structural
deficiency or any deferred maintenance considered material and adverse to the
interest of the holders of the offered certificates or for which adequate
reserves have not been established.
Appraisals. All of the Mortgaged Properties were appraised in connection
with the origination of the related mortgage loans. All of these appraisals were
performed in compliance with the Code of Professional Ethics and Standards of
Professional Conduct of the Appraisal Institute and the Uniform Standards of
Professional Appraisal Practice as adopted by the Appraisal Standards Board of
the Appraisal Foundation and accepted and incorporated into the Financial
Institutions Reform, Recovery and Enforcement Act of 1989, as amended
("FIRREA").
The purpose of each appraisal was to provide an opinion as to the market
value of the related Mortgaged Property. We cannot assure you that another
appraiser would have arrived at the same opinion of market value.
Environmental Reports. A "Phase I" environmental site assessment was
performed with respect to each Mortgaged Property and, in some cases, a "Phase
II" environmental site assessment or other additional testing was performed. See
"--Representations and Warranties; Repurchases and Substitutions" below.
Building Condition Reports. In connection with the origination of all
mortgage loans, a licensed engineer or consultant inspected each related
Mortgaged Property to assess the condition of the structure, exterior walls,
roofing, interior structure, mechanical and electrical systems and site
improvements. The resulting reports indicated deferred maintenance items on
certain Mortgaged Properties and recommended certain capital improvements for
which escrows were generally established at origination and the reports were
used in determining underwritten net cash flow and capital reserves, if any.
Generally, with respect to the majority of the Mortgaged Properties, the related
borrowers were required to deposit with the lender an amount equal to at least
125% of the licensed
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engineer's estimated cost of the recommended repairs, corrections or
replacements to assure their completion. In addition, the building condition
reports provided a projection of necessary replacements and repair of structural
and mechanical systems over the life of the related mortgage loans.
Earthquake Analyses. An architectural and engineering consultant performed
an analysis on 40 Mortgaged Properties, securing mortgage loans representing
approximately 36.01% of the Initial Pool Balance, located primarily in the State
of California in order to evaluate the structural and seismic condition of the
property and to assess, based primarily on statistical information, the maximum
probable loss for the property in an earthquake scenario. 6 of the 40 Mortgaged
Properties described above, representing approximately 10.16% of the Initial
Pool Balance, are covered by earthquake insurance in an amount at least equal to
the lesser of the replacement cost of the improvements on such Mortgaged
Property and the outstanding principal balance of the related mortgage loan.
THE MORTGAGE LOAN SELLERS
The Mortgage Loan Sellers are General Electric Capital Corporation ("GECC")
and The Chase Manhattan Bank ("Chase"). GECC is an affiliate of GE Capital Loan
Services Inc., the master servicer. Chase is a primary servicer, the parent
corporation of the Depositor and an affiliate of Chase Securities Inc., one of
the Underwriters. See "The Depositor" in the prospectus. All of the mortgage
loans were originated by the Mortgage Loan Sellers, in each case, generally in
accordance with the underwriting criteria described below.
The information set forth in this prospectus supplement concerning the
Mortgage Loan Sellers and their underwriting standards have been provided by the
Mortgage Loan Sellers, and neither the Depositor nor the Underwriters make any
representation or warranty as to the accuracy or completeness of that
information.
UNDERWRITING STANDARDS
GECC's Underwriting Standards
General. Through its GE Capital Real Estate division, GECC has been
lending and investing in the commercial real estate industry for over 25 years
and has a portfolio of approximately $17 billion of assets. GE Capital Real
Estate originates commercial mortgage loans through approximately 20 offices
located throughout North America. The risk-management (loan underwriting) group
is separate from the origination group.
Loan Analysis. All GECC credit underwriting is performed by GECC employees
and no credit underwriting is contracted to third parties. GECC performs both a
credit analysis and a collateral analysis with respect to each loan. The credit
analysis of the borrower includes a review of historical financial statements,
including operating statements and rent rolls (generally unaudited), historical
tax returns, third party credit reports, judgment, lien, bankruptcy and pending
litigation searches and, if applicable, the loan payment history of the
borrower. Historical cashflow verification is performed in most cases by a "big
five" accounting firm and reviewed by GECC underwriting staff. GECC also
performs a qualitative analysis which generally incorporates independent credit
checks, periodical searches, industry research and published debt and equity
information with respect to certain principals of the borrower as well as the
borrower itself. Generally, borrowers are required to be single-purpose
entities. The collateral analysis includes an analysis of the historical
property operating statements, rent rolls and a projection of future performance
and a review of tenant leases. A member of the loan underwriting team also
conducts a site inspection to confirm the occupancy rate of the Mortgaged
Property, analyze the market and assess the utility of the Mortgaged Property
within the market. GECC requires third party appraisals, as well as
environmental reports, building condition reports and seismic reports, if
applicable. Each report is reviewed for acceptability by a GECC staff member for
compliance with program standards and the staff member approves or rejects the
report. The results of these reviews are incorporated into the underwriting
report.
Loan Approval. Prior to commitment, all mortgage loans must be approved by
GE Capital Real Estate's credit committee (the make-up of which varies by loan
size) in accordance with its credit
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policies. The credit committee may approve a mortgage loan as recommended,
modify the loan terms or decline a loan transaction.
Debt Service Coverage Ratio and LTV Ratio. GECC's underwriting standards
generally require the following minimum debt service coverage ratios for each of
the indicated property types:
<TABLE>
<CAPTION>
PROPERTY TYPE DSCR GUIDELINE LTV RATIO GUIDELINE
- -------------------------------------------------------------------- -------------- -------------------
<S> <C> <C>
Multifamily......................................................... 1.20x 80%
Anchored Retail..................................................... 1.25x 75-80%
Unanchored Retail................................................... 1.30x 75%
Office.............................................................. 1.25x 75%
Industrial/Warehouse................................................ 1.25x 75%
Hotel............................................................... 1.40x 70%
Self-Storage........................................................ 1.30x 75%
Manufactured Housing Community...................................... 1.20x 80%
</TABLE>
The debt service coverage ratio guidelines listed above are calculated
based on Underwritten Net Cash Flow at the time of origination. In addition,
GECC's underwriting guidelines generally permit a maximum amortization period of
30 years. However, notwithstanding the foregoing, in certain circumstances the
actual debt service coverage ratios and loan-to-value ratios for the mortgage
loans originated by GECC may vary from these guidelines. See "Description of the
Mortgage Pool" in this prospectus supplement and Annex A to this prospectus
supplement.
Escrow Requirements. Except with respect to certain low leverage loans,
GECC generally requires substantially all borrowers to fund various escrows for
taxes and insurance, capital expenses and replacement reserves. Generally, the
required escrows for mortgage loans originated by GECC are as follows:
o Taxes--Typically an initial deposit and monthly escrow deposits
equal to 1/12th of the annual property taxes (based on the most
recent property assessment and the current mileage rate) are
required to provide GECC with sufficient funds to satisfy all taxes
and assessments at least one month prior to their respective due
dates.
o Insurance--If the property is insured under an individual policy
(i.e., the property is not covered by a blanket policy), typically
an initial deposit and monthly escrow deposits equal to 1/12th of
the annual property insurance premium are required to provide GECC
with sufficient funds to pay all insurance premiums at least one
month prior to their respective due dates. If the property is
covered by a blanket policy of insurance, GECC generally reserves
the right in the mortgage to require a separate insurance policy and
insurance escrows.
o Replacement Reserves--Replacement reserves are calculated in
accordance with the expected useful life of the components of the
property during the term of the mortgage loan.
Notwithstanding the actual level of escrowed reserves, the following
minimum reserve levels were generally assumed by GECC in determining
Underwritten Net Cash Flow:
<TABLE>
<S> <C>
Multifamily................................... $250 per unit
Retail........................................ $0.15 per square foot
Office........................................ $0.20 per square foot
Industrial/Warehouse.......................... $0.10-0.15 per square foot
Self-Storage.................................. $0.15 per square foot
Manufactured Housing Community................ $50-100 per pad
Hotel......................................... 4-5% of total income
</TABLE>
o Completion Repair/Environmental Remediation--Typically, a completion
repair or remediation reserve is required. An initial deposit, upon
funding of the mortgage loan generally in an amount equal to at least
125% of the estimated costs of repairs or replacements to be completed
within the first year of the mortgage loan pursuant to the building
condition report is required.
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o Re-tenanting/Debt Service Coverage--In most cases, major tenants and a
significant number of smaller tenants have lease expirations within the
mortgage loan term. To mitigate this risk, special reserves are (in most
cases) required to be funded either at closing of the mortgage loan
and/or during the mortgage loan term to cover certain anticipated leasing
commissions or tenant improvement costs which might be associated with
releasing the space occupied by the tenants.
Chase's Underwriting Standards
General. Chase's commercial mortgage banking group has the authority to
originate fixed-rate, first lien mortgage loans for securitization. The Chase
commercial mortgage banking operation is a vertically integrated entity, staffed
by real estate professionals, many of whom have completed the credit training
programs of Chase or its predecessors. The loan underwriting group is an
integral component of the commercial mortgage banking group which also includes
distinct groups responsible for loan origination, closing and servicing mortgage
loans.
Loan Analysis. All Chase credit underwriting is performed by Chase
employees and no credit underwriting is contracted to third parties. Upon
receipt of a loan package, Chase's loan underwriters commence an extensive
review of the borrower's financial condition and creditworthiness and the real
estate which will secure the loan. Generally, Chase performs both a credit
analysis and collateral analysis with respect to a loan applicant. The credit
analysis of the borrower performed by Chase includes a review of historical
financial statements, including operating statements and rent rolls (generally
unaudited), historical tax returns, third party credit reports and, if
applicable, the loan payment history of the borrower. Chase also performs a
qualitative analysis which incorporates independent credit checks, periodical
searches, industry research and published debt and equity information with
respect to certain principals of the borrower as well as the borrower itself.
Generally, borrowers are required to be single-purpose entities. The collateral
analysis includes an analysis of the historical property operating statements,
rent rolls and a projection of future performance. A member of the loan
underwriting team also conducts a site inspection or causes that inspection to
be performed, to confirm the occupancy rate of the mortgaged property, analyzes
the market and assesses the utility of the mortgaged property within the market.
Chase requires third party appraisals, as well as environmental and building
condition reports. Each report is reviewed for acceptability by a staff member
of Chase's Technical Services Unit for compliance with program standards and
that staff member approves or rejects the report. The results of these reviews
are incorporated into the underwriting report.
Loan Approval. Prior to commitment, all mortgage loans must be approved by
Chase's credit committee in accordance with its credit policies. The credit
committee may approve a mortgage loan as recommended, modify the loan terms or
decline a loan transaction.
Debt Service Coverage Ratio and LTV Ratio. Chase's underwriting standards
generally require the following minimum debt service coverage ratios for each of
the indicated property types:
<TABLE>
<CAPTION>
PROPERTY TYPE DSCR GUIDELINE LTV RATIO GUIDELINE
- --------------------------------------------------------- -------------- -------------------
<S> <C> <C>
Anchored Retail.......................................... 1.25x 75%
Multifamily.............................................. 1.20x 80%
Unanchored Retail........................................ 1.25x 75%
Office................................................... 1.25x 75%
Industrial............................................... 1.25x 75%
Hotel.................................................... 1.35x 70%
</TABLE>
The debt service coverage ratio guidelines listed above are calculated
based on Underwritten Net Cash Flow at the time of origination. In addition,
Chase's underwriting guidelines generally require a maximum amortization period
of 30 years. However, notwithstanding the foregoing, in certain circumstances
the actual debt service coverage ratios, loan-to-value ratios and amortization
periods for the mortgage loans originated by Chase may vary from these
guidelines. See "Description of the Mortgage Pool" in this prospectus supplement
and Annex A to this prospectus supplement.
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Escrow Requirements. Chase requires substantially all borrowers to fund
various escrows for taxes and insurance, capital expenses and replacement
reserves. Generally, the required escrows for mortgage loans originated by Chase
are as follows:
o Taxes--Typically an initial deposit and monthly escrow deposits
equal to 1/12th of the annual property taxes (based on the most
recent property assessment and the current millage rate) are
required.
o Insurance--If the property is insured under an individual policy
(i.e., the property is not covered by a blanket policy), typically
an initial deposit and monthly escrow deposits equal to 1/12th of
the annual property insurance premium are required. If the property
is covered by a blanket policy of insurance, Chase generally
reserves the right in the mortgage to require a separate insurance
policy and insurance escrows.
o Replacement Reserves--Replacement reserves are calculated in
accordance with the expected useful life of the components of the
property during the term of the mortgage loan, as estimated in the
engineering report.
Notwithstanding the actual level of escrowed reserves, the following
minimum reserve levels were assumed by Chase in determining Underwritten Net
Cash Flow:
<TABLE>
<S> <C>
Retail......................................... $0.15 per square foot
Multifamily.................................... $250 per unit
Office......................................... $0.20 per square foot
Industrial..................................... $0.10 per square foot
Hotel.......................................... 5% of gross revenue
</TABLE>
o Completion Repair/Environmental Remediation--Typically, a completion
repair or remediation reserve is required. An initial deposit, upon
funding of the mortgage loan, in an amount equal to at least 125% of the
estimated costs of repairs or replacements to be completed within the
first year of the mortgage loan pursuant to the building condition report
is required.
o Re-tenanting/Debt Service Coverage--In some cases, major tenants have
lease expirations within the mortgage loan term. To mitigate this risk,
special reserves are established to be funded either at closing of the
mortgage loan and/or during the mortgage loan term to cover certain
anticipated leasing commissions or tenant improvement costs which might
be associated with releasing the space occupied by those tenants.
REPRESENTATIONS AND WARRANTIES; REPURCHASES AND SUBSTITUTIONS
In each Purchase Agreement, the applicable Mortgage Loan Seller will
represent and warrant with respect to each mortgage loan (subject to certain
exceptions specified in the related Purchase Agreement) sold by the Mortgage
Loan Seller, as of the Closing Date, or as of another date specifically provided
in the representation and warranty, among other things, that:
(a) the information set forth in the schedule of mortgage loans
attached to the applicable Purchase Agreement (which contains certain of
the information set forth in Annex A) is true and correct in all material
respects as of the cut-off date;
(b) as of the date of its origination, the mortgage loan complied in
all material respects with, or was exempt from, all requirements of
federal, state or local law relating to the origination and servicing of
the mortgage loan;
(c) immediately prior to the sale, transfer and assignment to the
Depositor, the applicable Mortgage Loan Seller had good title to, and was
the sole owner of, each mortgage loan, and is transferring the mortgage
loan free and clear of any and all liens, pledges, charges or security
interests of any nature encumbering the mortgage loan;
(d) the proceeds of the mortgage loan have been fully disbursed and
there is no requirement for future advances thereunder;
(e) each of the related Mortgage Note, related Mortgage, related
assignment of leases, if any, and other agreements executed in connection
with the mortgage loan are the legal, valid and binding obligations of the
related mortgagor (subject to any nonrecourse provisions therein and
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any state anti-deficiency legislation), enforceable in accordance with
their terms, except with respect to provisions relating to default
interest, yield maintenance charges or prepayment premiums and except as
the enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors'
rights generally, and by general principles of equity (regardless of
whether the enforcement is considered in a proceeding in equity or at law);
(f) as of the date of its origination, there was no valid offset,
defense, counterclaim or right to rescission with respect to any of the
related Mortgage Note, Mortgage(s) or other agreements executed in
connection therewith, and, as of the cut-off date, to the best knowledge of
the applicable Mortgage Loan Seller there is no valid offset, defense,
counterclaim or right to rescission with respect to the Mortgage Note,
Mortgage(s) or other agreements;
(g) the assignment of the related Mortgage and assignment of leases in
favor of the Trustee constitutes the legal, valid and binding assignment of
the Mortgage to the Trustee (subject to customary limitations). Each
related Mortgage and assignment of leases is freely assignable upon notice
to the mortgagor;
(h) the related Mortgage is a legal valid and enforceable first lien
on the related Mortgaged Property subject only to the following title
exceptions (each exception, a "Title Exception") (A) liens for current real
property taxes, ground rents, water charges, sewer rents and assessments
not yet due and payable, (B) covenants, conditions and restrictions, rights
of way, easements and other matters of public record, none of which,
individually or in the aggregate, materially interferes with the current
use of the Mortgaged Property or the security intended to be provided by
the Mortgage or with the borrower's ability to pay its obligations when
they become due or materially and adversely affects the value of the
Mortgaged Property and (C) the exceptions (general and specific) set forth
in the related title insurance policy or appearing of record, none of
which, individually or in the aggregate, materially interferes with the
current use of the Mortgaged Property or the security intended to be
provided by the Mortgage or with the borrower's ability to pay its
obligations when they become due or materially and adversely affects the
value of the Mortgaged Property and the Mortgaged Property is free and
clear of any mechanics' and materialmen's liens which are prior to or equal
with the lien of the related Mortgage, except those which are insured
against by a lender's title insurance policy as described above;
(i) all taxes and governmental assessments that prior to the cut-off
date became due and owing in respect of the related Mortgaged Property have
been paid, or an escrow of funds in an amount sufficient to cover the
payments has been established;
(j) to the applicable Mortgage Loan Seller's knowledge as of the
cut-off date, after conducting due diligence consistent with the practice
of institutional lenders generally for properties of the same type as the
related Mortgaged Property, each related Mortgaged Property was free and
clear of any material damage (other than deferred maintenance for which
escrows were established at origination) that would affect materially and
adversely the value of the Mortgaged Property as security for the mortgage
loan and there was no proceeding pending for the total or partial
condemnation of the Mortgaged Property;
(k) as of the date of its origination, all insurance coverage required
under each related Mortgage, which insurance covered those risks as were
customarily acceptable to prudent commercial and multifamily mortgage
lending institutions lending on the security of property comparable to the
related Mortgaged Property in the jurisdiction in which the Mortgaged
Property is located, and with respect to a fire and extended perils
insurance policy, was in an amount (subject to a customary deductible) at
least equal to the replacement cost of improvements located on the
Mortgaged Property, with no deduction for depreciation or an amount at
least equal to the initial principal balance of the mortgage loan; and with
respect to business interruption or rental loss insurance, in an amount at
least equal to 12 months of operations of the related Mortgaged Property,
was in full force and effect with respect to each related Mortgaged
Property; and, as of the cut-off date, to the best knowledge of the
Mortgage Loan Seller, all insurance coverage required under each Mortgage,
which insurance covers such risks and is in such
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amounts as are customarily acceptable to prudent commercial and multifamily
mortgage lending institutions lending on the security of property
comparable to the related Mortgaged Property in the jurisdiction in which
such Mortgaged Property is located, is in full force and effect with
respect to each related Mortgaged Property; and no notice of termination or
cancellation with respect to any such insurance policy has been received by
the Mortgage Loan Seller; and except for certain amounts not greater than
amounts which would be considered prudent by an institutional commercial
Mortgage lender with respect to a similar Mortgage Loan and which are set
forth in the related Mortgage, any insurance proceeds in respect of a
casualty loss, will be applied either to the repair or restoration of the
related Mortgaged Property with mortgagee or a third party custodian
acceptable to mortgagee having the right to hold and disburse the proceeds
as the repair or restoration progresses, other than with respect to amounts
that are customarily acceptable to commercial and multifamily mortgage
lending institution or the reduction of the outstanding principal balance
of the Mortgage Loan. The insurer with respect to each policy is qualified
to do business in the relevant jurisdiction to the extent required, and,
with respect to 2 mortgage loans, Loan No. 12 and Loan No. 16, such
insurer, taking into account any cut-through endorsement, has a claims
paying abilities rating from at least two nationally recognized statistical
rating agencies of not less than "A" or a general policy rating of "A+" and
financial class of "X" by A.M. Best Company. The insurance policies contain
a standard mortgagee clause naming mortgagee, its successors and assigns as
additional insureds and provide that they are not terminable and may not be
reduced below replacement cost without 30 days prior written notice to the
mortgagee (or, with respect to non-payment, 10 days prior written notice to
the mortgagee) or such lesser period as prescribed by applicable law. Each
Mortgage requires that the mortgagor maintain insurance as described above
or permits the mortgagee to require insurance as described above;
(l) as of the cut-off date, the mortgage loan is not, and in the prior
12 months (or since the date of origination if the mortgage loan has been
originated within the past 12 months), has not been, 30 days or more past
due in respect of any scheduled payment;
(m) one or more Phase I environmental site assessments were performed
by an environmental consulting firm independent of the applicable Mortgage
Loan Seller and that Mortgage Loan Seller's affiliates with respect to each
related Mortgaged Property during the 12-month period preceding the Closing
Date (except with respect to 4 mortgage loans, representing approximately
2.20% of the Initial Pool Balance, which were inspected more than
12 months prior to the Closing Date), and the applicable Mortgage Loan
Seller, having made no independent inquiry other than to review the
report(s) prepared in connection with the assessment(s) referenced herein,
has no knowledge and has received no notice of any material and adverse
environmental condition or circumstance affecting the Mortgaged Property
that was not disclosed in those report(s). With respect to any material and
adverse environmental matters disclosed in the Phase I environmental site
report, either (i) the same have been remediated in all material respects
prior to the Closing Date, (ii) sufficient funds have been escrowed for
purposes of effecting such remediation, (iii) the related mortgagor or
other responsible party is currently taking or required to take such
actions, if any, with respect to such matters as have been recommended by
the report or required by the applicable governmental authority, (iv) an
operations and maintenance plan has been or will be implemented, or
(v) environmental insurance has been obtained with respect to such matters.
Each mortgage loan required the related mortgagor to comply, with all
applicable federal, state and local environmental laws and regulations.
(n) the lien of each related Mortgage as a first priority lien in the
original principal amount of the mortgage loan (as set forth on the
mortgage loan schedule) is insured by an ALTA lender's title insurance
policy (or a binding commitment therefor), or its equivalent as adopted in
the applicable jurisdiction, insuring the Mortgage Loan Seller, its
successors and assigns, subject only to the Title Exceptions; the Mortgage
Loan Seller or its successors or assigns is the sole named insured of that
policy; the policy is assignable without the consent of the insurer and
will inure to the benefit of the Trustee as mortgagee of record; and is in
full force and effect upon the consummation of the transactions
contemplated by the applicable Purchase Agreement; no claims
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have been made under the policy, no prior holder of the related Mortgage
nor the Mortgage Loan Seller has done anything, by act or omission, and the
Mortgage Loan Seller has no knowledge of any matter, which would impair or
diminish the coverage of that policy; the insurer issuing such policy is
qualified to do business in the jurisdiction in which the related Mortgaged
Property is located to the extent required; such policy contains no
exclusions or affirmatively insures, (other than in jurisdictions in which
affirmative insurance is unavailable) (a) access to public roads, (b) that
there are no encroachments of any part of the building thereon over
easements and (c) that the area shown on the survey is the same as the
property described in the Mortgage.
(o) except with respect to APD Loans, which provide that the rate at
which interest accrues on the APD Loans increases after the Anticipated
Prepayment Date, the Mortgage Rate (exclusive of any default interest, late
charges or prepayment premiums) of the mortgage loan is a fixed rate;
(p) other than payments due but not yet 30 days or more delinquent,
there is, to the Mortgage Loan Seller's knowledge, (A) no material default,
breach, violation or event of acceleration existing under the related
Mortgage Note or each related Mortgage, and (B) no event which, with the
passage of time or with notice and the expiration of any grace or cure
period, would constitute a material default, breach, violation or event of
acceleration under any of the documents; the Mortgage Loan Seller has not
waived any other material default, breach, violation or event of
acceleration under any of those documents; and under the terms of each
mortgage loan, each related Mortgage Note, each related Mortgage and the
other loan documents in the related mortgage file, no person or party other
than the mortgagee may declare an event of default or accelerate the
related indebtedness under that mortgage loan, Mortgage Note or Mortgage;
(q) each mortgage loan is directly secured by a Mortgage on a
commercial or multifamily property, and either (1) substantially all of the
proceeds of the mortgage loan were used to acquire, improve or protect the
portion of the commercial or multifamily residential property that consists
of an interest in real property (within the meaning of Treasury Regulations
Sections 1.856-3(c) and 1.856-3(d)) and the interest in real property was
the only security for the mortgage loan as of the Testing Date (as defined
below), or (2) the fair market value of the interest in real property which
secures the mortgage loan was at least equal to 80% of the principal amount
of the mortgage loan (a) as of the Testing Date, or (b) as of the closing
date. For purposes of the previous sentence, (1) the fair market value of
the referenced interest in real property shall first be reduced by (a) the
amount of any lien on the interest in real property that is senior to the
mortgage loan, and (b) a proportionate amount of any lien on the interest
in real property that is on a parity with the mortgage loan, and (2) the
"Testing Date" shall be the date on which the referenced mortgage loan was
originated unless (a) the mortgage loan was modified after the date of its
origination in a manner that would cause "significant modification" of the
mortgage loan within the meaning of Treasury Regulations Section 1.1001-3,
and (b) the "significant modification" did not occur at a time when the
mortgage loan was in default or when default with respect to the mortgage
loan was reasonably foreseeable;
(r) each mortgage loan is a whole loan, contains no equity
participation by the lender or shared appreciation feature and does not
provide for any contingent or additional interest in the form of
participation in the cash flow of the related Mortgaged Property or provide
for negative amortization (other than the APD Loans);
(s) subject to certain exceptions, which are customarily acceptable to
commercial and multifamily mortgage lending institutions lending on the
security of property comparable to the related Mortgaged Property, each
Mortgage or loan agreement contains provisions for the acceleration of the
payment of the unpaid principal balance of the mortgage loan if, without
complying with the requirements of the Mortgage or loan agreement, the
related Mortgaged Property, or any controlling interest therein, is
directly transferred or sold (except with respect to 1 mortgage loan,
representing approximately 1.04% of the Initial Pool Balance, whose
mortgagor is a public company and therefore its stock is freely
transferable), or encumbered in connection with subordinate financing by a
lien or security interest against the related Mortgaged Property (other
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than with respect to 1 mortgage loan representing approximately 4.34% of
the Initial Pool Balance, which permits secured financing of certain items
of personal property), other than any permitted additional debt;
(t) each Mortgaged Property was inspected by or on behalf of the
related originator during the 12-month period prior to the Closing Date;
(u) since origination, no material portion of the related Mortgaged
Property has been released from the lien of the related Mortgage, in each
case, in any manner which materially and adversely affects the value of the
mortgage loan or materially interferes with the security intended to be
provided by the Mortgage, and, except with respect to the mortgage loans
which permit defeasance by means of substituting for the Mortgaged Property
(or, in the case of a mortgage loan secured by multiple Mortgaged
Properties, one or more of the Mortgaged Properties) U.S. Treasury
obligations sufficient to pay the mortgage loans in accordance with their
terms, and with respect to mortgage loans which permit the related
mortgagor to substitute a replacement property, the terms of the related
Mortgage do not provide for release of any material portion of the
Mortgaged Property from the lien of the Mortgage except (a) in
consideration of payment therefor equal to 125% of the allocated loan
amount of such Mortgaged Property or (b) payment in full of such mortgage
loan;
(v) to the Mortgage Loan Seller's knowledge, as of the date of
origination of the mortgage loan, based on due diligence customary in the
industry, and, to the Mortgage Loan Seller's knowledge, as of the cut-off
date, there are no violations of any applicable zoning ordinances, building
codes and land laws applicable to the Mortgaged Property or the use and
occupancy thereof which would have a material adverse effect on the value,
operation or net operating income of the Mortgaged Property (except with
respect to 1 mortgage loan, representing approximately 0.66% of the Initial
Pool Balance for which the related mortgagor has not delivered certificates
of occupancy);
(w) all escrow deposits and payments required pursuant to the mortgage
loan are in the possession, or under the control, of the applicable
Mortgage Loan Seller or its agent and there are no deficiencies in
connection therewith and all such escrows and deposits will be conveyed by
the applicable Mortgage Loan Seller to the depositor and identified as such
with appropriate detail on the Closing Date.
If a Mortgage Loan Seller has been notified of a material breach of any of
the foregoing representations and warranties and if the respective Mortgage Loan
Seller cannot cure the breach within a period of 90 days following the earlier
of its receipt of that notice or its discovery of the breach, then the
respective Mortgage Loan Seller will be obligated pursuant to the respective
Purchase Agreement (the relevant rights under which will be assigned, together
with its interests in the mortgage loans, to the Trustee) to (a) repurchase the
affected mortgage loan within the 90-day period at a price (the "Purchase
Price") equal to the sum of (1) the outstanding principal balance of the
mortgage loan as of the date of purchase, (2) all accrued and unpaid interest on
the mortgage loan at the related mortgage rate, in effect from time to time, to
but not including the due date in the Due Period of purchase, (3) all related
unreimbursed Servicing Advances plus accrued and unpaid interest on related
Advances at the Reimbursement Rate, and unpaid Special Servicing Fees allocable
to the mortgage loan and (4) all reasonable out-of-pocket expenses reasonably
incurred or to be incurred by the Special Servicer, the Depositor and the
Trustee in respect of the breach giving rise to the repurchase obligation,
including any expenses arising out of the enforcement of the repurchase
obligation or (b) substitute a Qualified Substitute Mortgage Loan and pay any
shortfall amount equal to the difference between the Purchase Price of the
mortgage loan calculated as of the date of substitution and the stated principal
balance of the Qualified Substitute Mortgage Loan as of the date of
substitution; provided, that the applicable Mortgage Loan Seller generally has
an additional 90-day period to cure the breach if it is diligently proceeding
with that cure, and has delivered to S&P, DCR and the Trustee an officer's
certificate that describes the reasons that a cure was not effected within the
first 90-day cure period and the actions it proposes to take to effect the cure
and which states that it anticipates the cure will be effected within the
additional 90-day period.
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A "Qualified Substitute Mortgage Loan" is a mortgage loan which must, on
the date of substitution: (a) have an outstanding principal balance, after
application of all scheduled payments of principal and interest due during or
prior to the month of substitution, not in excess of the outstanding principal
balance of the deleted mortgage loan as of the due date in the calendar month
during which the substitution occurs; (b) have a Mortgage Rate not less than the
Mortgage Rate of the deleted mortgage loan; (c) have the same due date as the
deleted mortgage loan; (d) accrue interest on the same basis as the deleted
mortgage loan (for example, on the basis of a 360-day year consisting of twelve
30-day months); (e) have a remaining term to stated maturity not greater than,
and not more than two years less than, the remaining term to stated maturity of
the deleted mortgage loan; (f) have an original loan-to-value ratio not higher
than that of the deleted mortgage loan and a current loan-to-value ratio not
higher than the then-current loan-to-value ratio of the deleted mortgage loan;
(g) comply as of the date of substitution with all of the representations and
warranties set forth in the applicable Purchase Agreement; (h) have an
environmental report with respect to the related Mortgaged Property which will
be delivered as a part of the related mortgage file; (i) have an original debt
service coverage ratio not less than the original debt service coverage ratio of
the deleted mortgage loan; (j) be determined by an opinion of counsel to be a
"qualified replacement mortgage" within the meaning of Section 860G(a)(4) of the
Code; (k) not have a maturity date after the date two years prior to the Rated
Final Distribution Date; (l) not be substituted for a deleted mortgage loan
unless the Trustee has received prior confirmation in writing by each of S&P and
DCR that the substitution will not result in the withdrawal, downgrade, or
qualification of the then current rating assigned by the either of S&P or DCR to
any Class of Certificates then rated by the S&P or DCR, respectively, (the cost,
if any, of obtaining the confirmation to be paid by the applicable Mortgage Loan
Seller); (m) have a date of origination that is not more than 12 months prior to
the date of substitution; (n) has been approved by the Directing
Certificateholder; provided, that the Directing Certificateholder will cease to
have the right to approve the substitution of a Qualified Substitute Mortgage
Loan for a deleted mortgage loan after the aggregate of the outstanding
principal balance of all Qualified Substitute Mortgage Loans which were
previously substituted for deleted mortgage loans exceeds 10% of the aggregate
outstanding principal balance of all the mortgage loans as of the cut-off date;
and (o) not be substituted for a deleted mortgage loan if it would result in the
termination of the REMIC status of either REMIC or the imposition of tax on
either REMIC other than a tax on income expressly permitted or contemplated to
be received by the terms of the Pooling and Servicing Agreement. In the event
that one or more mortgage loans are substituted for one or more deleted mortgage
loans simultaneously, then the amounts described in clause (a) are required to
be determined on the basis of aggregate principal balances and the rates
described in clause (b) above and the remaining term to stated maturity referred
to in clause (e) above are required to be determined on a weighted average
basis. When a Qualified Substitute Mortgage Loan is substituted for a deleted
mortgage loan, the applicable Mortgage Loan Seller will be required to certify
that the mortgage loan meets all of the requirements of the above definition and
send the certification to the Trustee.
The foregoing repurchase or substitution obligation will constitute the
sole remedy available to the Certificateholders and the Trustee for any breach
of any Mortgage Loan Seller's representations and warranties regarding the
mortgage loans. The respective Mortgage Loan Seller will be the sole warranting
party in respect of the mortgage loans sold by that Mortgage Loan Seller to the
Depositor, and none of the Depositor, the Master Servicer, the Special Servicer,
the Trustee, the Underwriters or any of their affiliates (other than the
respective Mortgage Loan Seller) will be obligated to repurchase any affected
mortgage loan in connection with a breach of the Mortgage Loan Seller's
representations and warranties if the Mortgage Loan Seller defaults on its
obligation to do so. However, the Depositor will not include any mortgage loan
in the pool of mortgage loans if anything has come to the Depositor's attention
prior to the Closing Date that causes it to believe that the representations and
warranties made by a Mortgage Loan Seller regarding the mortgage loan will not
be correct in all material respects when made. See "Description of the Pooling
Agreements--Representations and Warranties; Repurchases" in the prospectus.
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LOCK BOX ACCOUNTS
With respect to 9 mortgage loans (the "Lock Box Loans"), representing
approximately 23.14% of the Initial Pool Balance, one or more accounts
(collectively, the "Lock Box Accounts") have been or may be established into
which the related property manager and/or tenants directly deposits rents or
other revenues from the Mortgaged Property. Pursuant to the terms of 5 Lock Box
Loans, representing approximately 16.87% of the Initial Pool Balance, the
related Lock Box Accounts were required to be established on the origination
dates of the related mortgage loans. The terms of 4 Lock Box Loans, representing
approximately 6.27% 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 occurrence of an event of default under the related
mortgage loan documents or the occurrence of an Anticipated Prepayment Date.
Except as set forth above, the agreements which govern the Lock Box Accounts
provide that the borrower has no withdrawal or transfer rights with respect
thereto. The Lock Box Accounts will not be assets of either REMIC.
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DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates will be issued pursuant to a pooling and servicing
agreement, among the Depositor, the Master Servicer, the Special Servicer and
the Trustee (the "Pooling and Servicing Agreement") and will represent in the
aggregate the entire beneficial ownership interest in the trust fund consisting
of: (1) 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); (2) any REO Property; (3) those
funds or assets as from time to time are deposited in the Certificate Account,
the Distribution Accounts, the Interest Reserve Account, the Excess Interest
Distribution Account, and the REO Account, if established; (4) the rights of the
mortgagee under all insurance policies with respect to the mortgage loans; and
(5) certain rights of the Depositor under the Purchase Agreements relating to
mortgage loan document delivery requirements and the representations and
warranties of each Mortgage Loan Seller regarding the mortgage loans.
The Depositor's Commercial Mortgage Pass-Through Certificates, Series
1999-2 (the "Certificates") will consist of the following eighteen classes
(each, a "Class"): the Class A-1 and Class A-2 Certificates (collectively, the
"Class A Certificates"), the 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 S, Class
R and Class LR Certificates. The Class A Certificates and the Class X
Certificates are referred to collectively in this prospectus supplement as the
"Senior Certificates." The 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
are referred to collectively in this prospectus supplement as the "Subordinate
Certificates." The Class B, Class C, Class D, Class E and Class F Certificates
are referred to collectively in this prospectus supplement as the "Subordinate
Offered Certificates." The Class R and Class LR Certificates are referred to
collectively in this prospectus supplement as the "Residual Certificates."
Only the Class A, Class X, Class B, Class C, Class D, Class E and Class F
Certificates are offered hereby (collectively, the "Offered Certificates"). The
Class G, Class H, Class I, Class J, Class K, Class L, Class M, Class S, Class R
and Class LR Certificates (collectively, the "Non-Offered Certificates") have
not been registered under the Securities Act of 1933 and are not offered hereby.
The "Certificate Balance" of any Class of Certificates (other than the
Class X, Class S and Residual Certificates) outstanding at any time represents
the maximum amount which its holders are entitled to receive as distributions
allocable to principal from the cash flow on the mortgage loans and the other
assets in the trust fund. On each distribution date, the Certificate Balance of
each Class of Certificates will be reduced by any distributions of principal
actually made on, and any Collateral Support Deficit actually allocated to, that
Class of Certificates on that distribution date. The initial Certificate Balance
of each Class of Offered Certificates (other than the Class X Certificates) is
expected to be the balance set forth on the cover of this prospectus supplement.
The Class X, Class S and Residual Certificates will not have Certificate
Balances or entitle their holders to distributions of principal.
The Class X Certificates will, however, represent the right to receive
distributions of interest accrued as described in this prospectus supplement on
a notional amount (the "Notional Amount"). The Notional Amount of the Class X
Certificates will be equal to the aggregate of the Certificate Balances of the
other Certificates as of the prior distribution date (after giving effect to the
distribution of principal on that distribution date) or, prior to the first
distribution date, the cut-off date. The Notional Amount of the Class X
Certificates is used solely for purposes of describing the amounts of interest
payable on the Class X Certificates and does not represent an interest in
principal payments on the mortgage loans. The Class G, Class H, Class I, Class
J, Class K, Class L and Class M Certificates will have an aggregate initial
Certificate Balance of approximately $78,265,360.
The Offered Certificates will be maintained and transferred in book-entry
form and issued in denominations of $10,000 initial Certificate Balance, or in
the case of the Class X Certificates, $1,000,000 initial Notional Amount, and
integral multiples of $1,000 in excess of that amount. The "Percentage Interest"
evidenced by any Certificate (other than the Class S and Residual Certificates)
is
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equal to its initial denomination as of the Closing Date, divided by the initial
Certificate Balance or Notional Amount of the Class to which it belongs.
The Offered Certificates will initially be represented by one or more
global Certificates registered in the name of the nominee of The Depository
Trust Company ("DTC"). The Depositor has been informed by DTC that DTC's nominee
will be Cede & Co. No person acquiring an interest in the Offered Certificates
(this person, a "Certificate Owner") will be entitled to receive an Offered
Certificate in fully registered, certificated form, a definitive certificate,
representing its interest in that Class, except as set forth under "--Book-Entry
Registration and Definitive Certificates" below. Unless and until definitive
certificates are issued, all references to actions by holders of the Offered
Certificates will refer to actions taken by DTC upon instructions received from
Certificate Owners through its participating organizations (together with
Cedelbank ("Cedelbank") and the Euroclear System ("Euroclear") participating
organizations, the "Participants"), and all references in this prospectus
supplement to payments, notices, reports and statements to holders of the
Offered Certificates will refer to payments, notices, reports and statements to
DTC or Cede & Co., as the registered holder of the Offered Certificates, for
distribution to Certificate Owners through its Participants in accordance with
DTC procedures. See "Description of the Certificates--Book-Entry Registration
and Definitive Certificates" in the prospectus.
Until definitive certificates are issued, interests in any Class of Offered
Certificates will be transferred on the book-entry records of DTC and its
Participants.
PAYING AGENT, CERTIFICATE REGISTRAR AND AUTHENTICATING AGENT
The Chase Manhattan Bank, 450 West 33rd Street, Capital Markets Fiduciary
Services (CMBS), 14th Floor, New York, New York 10001 will serve as paying agent
(in that capacity, the "Paying Agent"). In addition, The Chase Manhattan Bank
will initially serve as registrar (in that capacity, the "Certificate
Registrar") for the 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 (in that capacity, the "Authenticating Agent").
BOOK-ENTRY REGISTRATION AND DEFINITIVE CERTIFICATES
General. Certificate Owners may hold their Certificates through DTC (in the
United States) or Cedelbank or Euroclear (in Europe) if they are Participants of
that system, or indirectly through organizations that are Participants in those
systems. Cedelbank and Euroclear will hold omnibus positions on behalf of the
Cedelbank Participants and the Euroclear Participants, respectively, through
customers' securities accounts in Cedelbank's and Euroclear's names on the books
of their respective depositories (collectively, the "Depositories") which in
turn will hold those positions in customers' securities accounts in the
Depositories' names on the books of DTC. DTC is a limited purpose trust company
organized under the New York Banking Law, a "banking organization" within the
meaning of the New York Banking Law, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of the New York Uniform Commercial
Code and a "clearing agency" registered pursuant to Section 17A of the
Securities Exchange Act of 1934, as amended. DTC was created to hold securities
for its Participants and to facilitate the clearance and settlement of
securities transactions between Participants through electronic computerized
book-entries, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers, banks, trust
companies and clearing corporations ("Direct Participants"). Indirect access to
the DTC system also is available to others such as banks, brokers, dealers and
trust companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly ("Indirect Participants").
Transfers between DTC Participants will occur in accordance with DTC rules.
Transfers between Cedelbank Participants and Euroclear Participants will occur
in accordance with their applicable rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly through Cedelbank Participants or
Euroclear Participants, on the other, will be
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effected in DTC in accordance with DTC rules on behalf of the relevant European
international clearing system by its Depository; however, these cross-market
transactions will require delivery of instructions to the relevant European
international clearing system by the counterparty in that system in accordance
with its rules and procedures. If the transaction complies with all relevant
requirements, Euroclear or Cedelbank, as the case may be, will then deliver
instructions to the Depository to take action to effect final settlement on its
behalf.
Because of time-zone differences, credits of securities in Cedelbank or
Euroclear as a result of a transaction with a DTC Participant will be made
during the subsequent securities settlement processing, dated the business day
following the DTC settlement date, and those credits or any transactions in
those securities settled during those processing will be reported to the
relevant Cedelbank Participant or Euroclear Participant on that business day.
Cash received in Cedelbank or Euroclear as a result of sales of securities by or
through a Cedelbank Participant 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 Cedelbank or Euroclear cash account only as of the business day
following settlement in DTC.
Certificate Owners that are not Direct or Indirect Participants but desire
to purchase, sell or otherwise transfer ownership of, or other interests in, the
Offered Certificates may do so only through Direct and Indirect Participants. In
addition, Certificate Owners will receive all distributions of principal of and
interest on the Offered Certificates from the Paying Agent through DTC and its
Direct and Indirect Participants. Accordingly, Certificate Owners may experience
delays in their receipt of payments, since those payments will be forwarded by
the Paying Agent to Cede & Co., as nominee of DTC. DTC will forward those
payments to its Participants, which thereafter will forward them to Indirect
Participants or beneficial owners of Offered Certificates. Except as otherwise
provided under "--Reports to Certificateholders; Certain Available Information"
below, Certificate Owners will not be recognized by the Paying Agent, the
Certificate Registrar, the Trustee, the Special Servicer or the Master Servicer
as holders of record of Certificates and Certificate Owners will be permitted to
receive information furnished to Certificateholders and to exercise the rights
of Certificateholders only indirectly through DTC and its Direct and Indirect
Participants.
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "Rules"), DTC is required to make book-entry transfers of
the Offered Certificates among Participants and to receive and transmit
distributions of principal of, and interest on, the Offered Certificates. Direct
and Indirect Participants with which Certificate Owners have accounts with
respect to the Offered Certificates similarly are required to make book-entry
transfers and receive and transmit the distributions on behalf of their
respective Certificate Owners. Accordingly, although Certificate Owners will not
possess physical certificates evidencing their interests in the Offered
Certificates, the Rules provide a mechanism by which Certificate Owners, through
their Direct and Indirect Participants, will receive distributions and will be
able to transfer their interests in the Offered Certificates.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of
Certificateholders to pledge the Certificates to persons or entities that do not
participate in the DTC system, or to otherwise act with respect to the
Certificates, may be limited due to the lack of a physical certificate for the
Certificates.
DTC has advised the Depositor that it will take any action permitted to be
taken by a holder of an Offered Certificate under the Pooling and Servicing
Agreement only at the direction of one or more Participants to whose accounts
with DTC the Offered Certificates are credited. DTC may take conflicting actions
with respect to other undivided interests to the extent that those actions are
taken on behalf of Participants whose holdings include the undivided interests.
Securities clearance accounts and cash accounts with the Euroclear operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related operating procedures of the Euroclear System and applicable Belgian law
(collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within the Euroclear system, withdrawal of
securities
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and cash from the Euroclear system, and receipts of payments with respect to
securities in the Euroclear system.
Although DTC, Euroclear and Cedelbank have implemented the foregoing
procedures in order to facilitate transfers of interests in global Certificates
among Participants of DTC, Euroclear and Cedelbank, they are under no obligation
to perform or to continue to comply with the foregoing procedures, and the
foregoing procedures may be discontinued at any time.
None of the Depositor, the Master Servicer, the Paying Agent, the
Certificate Registrar, the Underwriters, the Special Servicer or the Trustee
will have any liability for any actions taken by DTC, Euroclear or Cedelbank,
their respective Direct or Indirect Participants or their nominees, including,
without limitation, actions for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Offered
Certificates held by Cede & Co., as nominee for DTC, or for maintaining,
supervising or reviewing any records relating to that beneficial ownership
interest. The information in this prospectus supplement concerning DTC,
Cedelbank and Euroclear and their book-entry systems has been obtained from
sources believed to be reliable, but the Depositor takes no responsibility for
the accuracy or completeness of the information.
Definitive Certificates. Definitive certificates will be issued to
Certificate Owners or their nominees, respectively, rather than to DTC or its
nominee, only under the limited conditions set forth in the prospectus under
"Description of the Certificates--Book-Entry Registration and Definitive
Certificates."
Upon the occurrence of an event described in the prospectus in the last
paragraph under "Description of the Certificates--Book-Entry Registration and
Definitive Certificates," the Paying Agent is required to notify, through DTC,
Direct Participants who have ownership of Offered Certificates as indicated on
the records of DTC of the availability of definitive certificates. Upon
surrender by DTC of the definitive certificates representing the Offered
Certificates and upon receipt of instructions from DTC for re-registration, the
Certificate Registrar and the Authenticating Agent will reissue the Offered
Certificates as definitive certificates issued in the respective Certificate
Balances or Notional Amounts, as applicable, owned by individual Certificate
Owners, and thereafter the Paying Agent, the Certificate Registrar, the Trustee,
the Special Servicer and the Master Servicer will recognize the holders of those
definitive certificates as Certificateholders under the Pooling and Servicing
Agreement.
For additional information regarding DTC and Certificates maintained on the
book-entry records of DTC, see "Description of the Certificates--Book-Entry
Registration and Definitive Certificates" in the prospectus.
DISTRIBUTIONS
Method, Timing and Amount. Distributions on the Certificates are required
to be made by the Paying Agent, to the extent of available funds, on the 15th
day of each month or, if the 15th day is not a business day, then on the next
succeeding business day (but in no event earlier than the fourth business day
following the related Determination Date), commencing in December 1999 (each, a
"Distribution Date"). All distributions (other than the final distribution on
any Certificate) are required to be made to the Certificateholders in whose
names the Certificates are registered at the close of business on each Record
Date. With respect to any Distribution Date, the "Record Date" will be the last
business day of the month preceding the month in which that Distribution Date
occurs. These distributions are required to 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 the
Certificateholder has provided the Paying Agent with written wiring instructions
no less than five business days prior to the related Record Date (which wiring
instructions may be in the form of a standing order applicable to all subsequent
distributions) and is the registered owner of Certificates with an aggregate
initial Certificate Balance or Notional Amount, as the case may be, of at least
$5,000,000, or otherwise by check mailed to the Certificateholder. The final
distribution on any Certificate is required to be made in like manner, but only
upon presentation and surrender of the Certificate at the location that will be
specified in a notice of the pendency of the final distribution. All
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distributions made with respect to a Class of Certificates will be allocated pro
rata among the outstanding Certificates of the related Class based on their
respective Percentage Interests.
The Master Servicer is required to establish and maintain, or cause to be
established and maintained, one or more accounts (collectively, the "Certificate
Account") as described in the Pooling and Servicing Agreement. The Master
Servicer is required to deposit in the Certificate Account on a daily basis (and
in no event later than the business day following receipt in available funds)
all payments and collections due after the cut-off date and other amounts
received or advanced with respect to the mortgage loans (including, without
limitation, 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 (the "Insurance and Condemnation Proceeds") and other
amounts received and retained in connection with the liquidation of defaulted
mortgage loans or property acquired by foreclosure or otherwise (the
"Liquidation Proceeds")), and will be permitted to make withdrawals therefrom as
set forth in the Pooling and Servicing Agreement.
The Paying Agent is required to establish and maintain an account (the
"Lower-Tier Distribution Account"), and a second account (the "Upper-Tier
Distribution Account" and, together with the Lower-Tier Distribution Account,
the "Distribution Accounts") in the name of the Trustee and for the benefit of
the Certificateholders. On each Distribution Date, the Paying Agent is required
to apply amounts on deposit in the Upper-Tier Distribution Account (which will
include all funds that were remitted by the Master Servicer from the Certificate
Account plus, among other things, any P&I Advances less amounts, if any,
distributable to the Class LR Certificates as set forth in the Pooling and
Servicing Agreement) generally to make distributions of interest and principal
from the Available Distribution Amount to the Certificateholders as described in
this prospectus supplement. Each of the Certificate Account and the Distribution
Accounts will conform to certain eligibility requirements set forth in the
Pooling and Servicing Agreement.
The Paying Agent is required to establish and maintain an "Interest Reserve
Account" in the name of the Trustee for the benefit of the holders of the
Certificates. On each Servicer Remittance Date occurring in February and on any
Servicer Remittance Date occurring in any January which occurs in a year that is
not a leap year, the Paying Agent will be required to deposit into the Interest
Reserve Account during the related interest period, in respect of the mortgage
loans that accrue interest on an Actual/360 Basis (collectively, the "Withheld
Loans"), an amount equal to one day's interest at the Mortgage Rate for each
Withheld Loan on its Stated Principal Balance as of the Distribution Date in the
month preceding the month in which the related Servicer Remittance Date occurs,
to the extent a Periodic Payment or P&I Advance is made in respect of the
mortgage loans (all amounts so deposited in any consecutive January (if
applicable) and February, "Withheld Amounts"). On each Servicer Remittance Date
occurring in March, the Paying Agent will be required to withdraw from the
Interest Reserve Account an amount equal to the Withheld Amounts from the
preceding January (if applicable) and February, if any, and deposit that amount
into the Lower-Tier Distribution Account.
The Master Servicer is authorized but not required to direct the investment
of funds held in the Certificate Account in U.S. government securities and other
obligations that are acceptable to each of S&P and DCR ("Permitted
Investments"), and the Master Servicer will be entitled to retain any interest
or other income earned on the funds. The Master Servicer will be required to
bear any losses resulting from the investment of the funds, other than losses
which result from the insolvency of any financial institution which was an
eligible institution under the terms of the Pooling and Servicing Agreement.
The Paying Agent is required to establish and maintain an "Excess Interest
Distribution Account" in the name of the Trustee for the benefit of the
Certificateholders. Prior to the applicable Distribution Date, the Master
Servicer is required to remit to the Paying Agent for deposit into the Excess
Interest Distribution Account an amount equal to the Excess Interest received
during the related Due Period.
The aggregate amount available for distribution to Certificateholders on
each Distribution Date (the "Available Distribution Amount") will, in general,
equal the sum of the following amounts:
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(a) the total amount of all cash received on the mortgage loans and
any REO Properties that is on deposit in the Certificate Account and the
Lower-Tier Distribution Account as of the business day preceding the
related Servicer Remittance Date, exclusive of (without duplication):
(1) all Periodic Payments and balloon payments collected but due on
a due date subsequent to the related Due Period;
(2) all principal prepayments, Liquidation Proceeds, Insurance and
Condemnation Proceeds and other unscheduled recoveries received
subsequent to the related Due Period;
(3) all amounts in the Certificate Account and Lower-Tier
Distribution Account that are due or reimbursable to any person other
than the Certificateholders;
(4) all Yield Maintenance Charges;
(5) with respect to each Withheld Loan and any Distribution Date
occurring in each February and in any January occurring in a year that
is not a leap year, the related Withheld Amount to the extent those
funds are on deposit in the Certificate Account or the Lower-Tier
Distribution Account;
(6) Excess Interest; and
(7) all amounts deposited in the Certificate Account and Lower-Tier
Distribution Account in error;
(b) all P&I Advances made by the Master Servicer or the Trustee, as
applicable, with respect to the Distribution Date (net of certain amounts
that are due or reimbursable to persons other than the Certificateholders).
See "Description of the Pooling Agreements--Certificate Account" in the
prospectus; and
(c) for the Distribution Date occurring in each March, the related
Withheld Amounts required to be deposited in the Lower-Tier Distribution
Account pursuant to the Pooling and Servicing Agreement.
The "Due Period" for each Distribution Date will be the period commencing
on the second day of the month preceding the month in which that Distribution
Date occurs and ending on the first day of the month in which that Distribution
Date occurs (or, with respect to 28 mortgage loans, representing approximately
45.19% of the Initial Pool Balance, the period commencing on the eleventh day of
the month preceding the month in which that Distribution Date occurs and ending
on the tenth day of the month in which that Distribution Date occurs).
Notwithstanding the foregoing, in the event that the last day of a Due Period
(or applicable grace period) is not a business day, any payments received with
respect to the mortgage loans relating to the related Due Period on the business
day immediately following that day will be deemed to have been received during
that Due Period and not during any other Due Period.
Priority. On each Distribution Date, for so long as the Certificate
Balances of the Certificates have not been reduced to zero, the Paying Agent is
required to apply amounts on deposit in the Upper-Tier Distribution Account, to
the extent of the Available Distribution Amount, in the following order of
priority:
first, to the Class A-1, Class A-2 and Class X Certificates, pro rata
(based upon their respective entitlements to interest for that Distribution
Date), in respect of interest, up to an amount equal to the aggregate Interest
Distribution Amount for those Classes;
second, (1) to the Class A-1 Certificates, in reduction of its Certificate
Balance, an amount equal to the Principal Distribution Amount until the
Certificate Balance of that Class is reduced to zero and (2) following reduction
of the Certificate Balance of the Class A-1 Certificates to zero, to the Class
A-2 Certificates, in reduction of its Certificate Balance, an amount equal to
the Principal Distribution Amount (or the portion of it remaining after
distributions on the Class A-1 Certificates on that Distribution Date) until the
Certificate Balance of that Class is reduced to zero;
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third, to the Class A-1 and Class A-2 Certificates, pro rata (based upon
the aggregate unreimbursed Collateral Support Deficit allocated to that Class),
until all amounts of Collateral Support Deficit previously allocated to those
Classes, but not previously reimbursed, have been reimbursed in full;
fourth, to the Class B Certificates, in respect of interest, up to an
amount equal to the Interest Distribution Amount for that Class;
fifth, following reduction of the Certificate Balances of the Class A
Certificates to zero, to the Class B Certificates, in reduction of its
Certificate Balance, an amount equal to the Principal Distribution Amount (or
the portion of it remaining after distributions on the Class A Certificates on
that Distribution Date), until the Certificate Balance of that Class is reduced
to zero;
sixth, to the Class B Certificates, until all amounts of Collateral Support
Deficit previously allocated to the Class B Certificates, but not previously
reimbursed, have been reimbursed in full;
seventh, to the Class C Certificates, in respect of interest, up to an
amount equal to the Interest Distribution Amount for that Class;
eighth, following reduction of the Certificate Balances of the Class A and
Class B Certificates to zero, to the Class C Certificates, in reduction of its
Certificate Balance, an amount equal to the Principal Distribution Amount (or
the portion of it remaining after distributions on the Class A and Class B
Certificates on that Distribution Date), until the Certificate Balance of that
Class is reduced to zero;
ninth, to the Class C Certificates, until all amounts of Collateral Support
Deficit previously allocated to the Class C Certificates, but not previously
reimbursed, have been reimbursed in full;
tenth, to the Class D Certificates, in respect of interest, up to an amount
equal to the Interest Distribution Amount for that Class;
eleventh, following reduction of the Certificate Balances of the Class A,
Class B and Class C Certificates to zero, to the Class D Certificates, in
reduction of its Certificate Balance, an amount equal to the Principal
Distribution Amount (or the portion of it remaining after distributions on the
Class A, Class B and Class C Certificates on that Distribution Date), until the
Certificate Balance of that Class is reduced to zero;
twelfth, to the Class D Certificates, until all amounts of Collateral
Support Deficit previously allocated to the Class D Certificates, but not
previously reimbursed, have been reimbursed in full;
thirteenth, to the Class E Certificates, in respect of interest, up to an
amount equal to the Interest Distribution Amount for that Class;
fourteenth, following reduction of the Certificate Balances of the
Class A, Class B, Class C and Class D Certificates to zero, to the Class E
Certificates, in reduction of its Certificate Balance, an amount equal to the
Principal Distribution Amount (or the portion of it remaining after
distributions on the Class A, Class B, Class C and Class D Certificates on that
Distribution Date), until the Certificate Balance of that Class is reduced to
zero;
fifteenth, to the Class E Certificates, until all amounts of Collateral
Support Deficit previously allocated to the Class E Certificates, but not
previously reimbursed, have been reimbursed in full;
sixteenth, to the Class F Certificates, in respect of interest, up to an
amount equal to the Interest Distribution Amount for that Class;
seventeenth, following reduction of the Certificate Balances of the Class
A, Class B, Class C, Class D and Class E Certificates to zero, to the Class F
Certificates, in reduction of its Certificate Balance, an amount equal to the
Principal Distribution Amount (or the portion of it remaining after
distributions on the Class A, Class B, Class C, Class D and Class E Certificates
on that Distribution Date), until the Certificate Balance of that Class is
reduced to zero;
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eighteenth, to the Class F Certificates, until all amounts of Collateral
Support Deficit previously allocated to the Class F Certificates, but not
previously reimbursed, have been reimbursed in full;
nineteenth, to the Class G Certificates, in respect of interest, up to an
amount equal to the Interest Distribution Amount for that Class;
twentieth, following reduction of the Certificate Balances of the Class A,
Class B, Class C, Class D, Class E and Class F Certificates to zero, to the
Class G Certificates, in reduction its Certificate Balance, an amount equal to
the Principal Distribution Amount (or the portion of it remaining after
distributions on the Class A, Class B, Class C, Class D, Class E and Class F
Certificates on that Distribution Date), until the Certificate Balance of that
Class is reduced to zero;
twenty-first, to the Class G Certificates, until all amounts of Collateral
Support Deficit previously allocated to the Class G Certificates, but not
previously reimbursed, have been reimbursed in full;
twenty-second, to the Class H Certificates, in respect of interest, up to
an amount equal to the Interest Distribution Amount for that Class;
twenty-third, following reduction of the Certificate Balances of the Class
A, Class B, Class C, Class D, Class E, Class F and Class G Certificates to zero,
to the Class H Certificates, in reduction of its Certificate Balance, an amount
equal to the Principal Distribution Amount (or the portion of it remaining after
distributions on the Class A, Class B, Class C, Class D, Class E, Class F and
Class G Certificates on that Distribution Date), until the Certificate Balance
of that Class is reduced to zero;
twenty-fourth, to the Class H Certificates, until all amounts of Collateral
Support Deficit previously allocated to the Class H Certificates, but not
previously reimbursed, have been reimbursed in full;
twenty-fifth, to the Class I Certificates, in respect of interest, up to an
amount equal to the Interest Distribution Amount for that Class;
twenty-sixth, following reduction of the Certificate Balances of the Class
A, Class B, Class C, Class D, Class E, Class F, Class G and Class H Certificates
to zero, to the Class I Certificates, in reduction of its Certificate Balance,
an amount equal to the Principal Distribution Amount (or the portion of it
remaining after distributions on the Class A, Class B, Class C, Class D, Class
E, Class F, Class G and Class H Certificates on that Distribution Date), until
the Certificate Balance of that Class is reduced to zero;
twenty-seventh, to the Class I Certificates, until all amounts of
Collateral Support Deficit previously allocated to the Class I Certificates, but
not previously reimbursed, have been reimbursed in full;
twenty-eighth, to the Class J Certificates, in respect of interest, up to
an amount equal to the Interest Distribution Amount for that Class;
twenty-ninth, following reduction of the Certificate Balances of the Class
A, Class B, Class C, Class D, Class E, Class F, Class G, Class H and Class I
Certificates to zero, to the Class J Certificates, in reduction of its
Certificate Balance, an amount equal to the Principal Distribution Amount (or
the portion of it remaining after distributions on the Class A, Class B, Class
C, Class D, Class E, Class F, Class G, Class H and Class I Certificates on that
Distribution Date), until the Certificate Balance of that Class is reduced to
zero;
thirtieth, to the Class J Certificates, until all amounts of Collateral
Support Deficit previously allocated to the Class J Certificates, but not
previously reimbursed, have been reimbursed in full;
thirty-first, to the Class K Certificates, in respect of interest, up to an
amount equal to the Interest Distribution Amount for that Class;
thirty-second, following reduction of the Certificate Balances of the Class
A, Class B, Class C, Class D, Class E, Class F, Class G, Class H, Class I and
Class J Certificates to zero, to the Class K Certificates, in reduction of its
Certificate Balance, an amount equal to the Principal Distribution Amount (or
the portion of it remaining after distributions on the Class A, Class B, Class
C, Class D,
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Class E, Class F, Class G, Class H, Class I and Class J Certificates on that
Distribution Date), until the Certificate Balance of that Class is reduced to
zero;
thirty-third, to the Class K Certificates, until all amounts of Collateral
Support Deficit previously allocated to the Class K Certificates, but not
previously reimbursed, have been reimbursed in full;
thirty-fourth, to the Class L Certificates, in respect of interest, up to
an amount equal to the Interest Distribution Amount for that Class;
thirty-fifth, following reduction of the Certificate Balances of the Class
A, Class B, Class C, Class D, Class E, Class F, Class G, Class H, Class I, Class
J and Class K Certificates to zero, to the Class L Certificates, in reduction of
its Certificate Balance, an amount equal to the Principal Distribution Amount
(or the portion of it remaining after distributions on the Class A, Class B,
Class C, Class D, Class E, Class F, Class G, Class H, Class I, Class J and Class
K Certificates on that Distribution Date), until the Certificate Balance of that
Class is reduced to zero;
thirty-sixth, to the Class L Certificates, until all amounts of Collateral
Support Deficit previously allocated to the Class L Certificates, but not
previously reimbursed, have been reimbursed in full;
thirty-seventh, to the Class M Certificates, in respect of interest, up to
an amount equal to the Interest Distribution Amount for that Class;
thirty-eighth, following reduction of the Certificate Balances of the Class
A, Class B, Class C, Class D, Class E, Class F, Class G, Class H, Class I, Class
J, Class K and Class L Certificates to zero, to the Class M Certificates, in
reduction of its Certificate Balance, an amount equal to the Principal
Distribution Amount (or the portion of it remaining after distributions on the
Class A, Class B, Class C, Class D, Class E, Class F, Class G, Class H,
Class I, Class J, Class K and Class L Certificates on that Distribution Date),
until the Certificate Balance of that Class is reduced to zero;
thirty-ninth, to the Class M Certificates, until all amounts of Collateral
Support Deficit previously allocated to the Class M Certificates, but not
previously reimbursed, have been reimbursed in full; and
fortieth, to the Class R and Class LR Certificates, the amount, if any, of
the Available Distribution Amount remaining in the Upper-Tier Distribution
Account and the Lower-Tier Distribution Account, respectively, with respect to
that Distribution Date.
Reimbursement of previously allocated Collateral Support Deficit will not
constitute distributions of principal for any purpose and will not result in an
additional reduction in the Certificate Balance of the Class of Certificates in
respect of which a reimbursement is made.
Notwithstanding the distribution priority second set forth above, on and
after the Distribution Date on which the Certificate Balances of the Subordinate
Certificates have all been reduced to zero (that date, the "Cross-Over Date"),
the Principal Distribution Amount will be distributed, pro rata (based upon
their respective Certificate Balances), among the Classes of Class A
Certificates without regard to the priorities set forth above.
Pass-Through Rates. The interest rate (the "Pass-Through Rate") applicable
to each Class of Certificates (other than the Class S and Residual Certificates)
for any Distribution Date will equal the rates set forth below.
The Pass-Through Rate on the Class A-1 Certificates is a per annum rate
equal to 7.032%.
The Pass-Through Rate on the Class A-2 Certificates is a per annum rate
equal to 7.198%.
The Pass-Through Rate on the Class B Certificates is a per annum rate equal
to 7.343%.
The Pass-Through Rate on the Class C Certificates is a per annum rate equal
to 7.519%.
The Pass-Through Rate on the Class D Certificates is a per annum rate equal
to 7.734%, subject to a cap equal to the WAC Rate.
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The Pass-Through Rate on the Class E Certificates is a per annum rate equal
to 7.734%, subject to a cap equal to the WAC Rate.
The Pass-Through Rate on the Class F Certificates is a per annum rate equal
to 7.734%, subject to a cap equal to the WAC Rate.
The Pass-Through Rate on the Class G Certificates is a per annum rate equal
to 6.500%.
The Pass-Through Rate on the Class H Certificates is a per annum rate equal
to 6.500%.
The Pass-Through Rate on the Class I Certificates is a per annum rate equal
to 6.500%.
The Pass-Through Rate on the Class J Certificates is a per annum rate equal
to 6.500%.
The Pass-Through Rate on the Class K Certificates is a per annum rate equal
to 6.500%.
The Pass-Through Rate on the Class L Certificates is a per annum rate equal
to 6.500%.
The Pass-Through Rate on the Class M Certificates is a per annum rate equal
to 6.500%, subject to a cap equal to the WAC Rate.
The Pass-Through Rate for the Class X Certificates for any Distribution
Date will equal the excess, if any, of (a) the WAC Rate for the related
Distribution Date, over (b) the weighted average of the Pass-Through Rates on
all of the other Certificates (other than the Class S and Residual Certificates)
weighted on the basis of their respective Certificate Balances immediately prior
to that Distribution Date.
The Class S Certificate will not have a Pass-Through Rate or be entitled to
distributions in respect of interest.
The Pass-Through Rate on each Class of Offered Certificates for the first
Distribution Date is expected to be as set forth on page S-7 of this prospectus
supplement.
The "WAC Rate" with respect to any Distribution Date is equal to the
weighted average of the applicable Net Mortgage Rates for the mortgage loans
weighted on the basis of their respective Stated Principal Balances as of the
preceding Distribution Date (after giving effect to the distribution of
principal on the related Distribution Date) or, in the case of the first
Distribution Date, the cut-off date.
The "Net Mortgage Rate" for each mortgage loan is equal to the related
Mortgage Rate in effect from time to time less the related Administrative Cost
Rate; provided however, that for purposes of calculating Pass-Through Rates, the
Net Mortgage Rate for any mortgage loan will be determined without regard to any
modification, waiver or amendment of the terms of the mortgage loan, whether
agreed to by the Master Servicer or resulting from a bankruptcy, insolvency or
similar proceeding involving the related borrower.
"Administrative Cost Rate" as of any date of determination will be equal to
the sum of the Servicing Fee Rate and the Trustee Fee Rate.
The "Mortgage Rate" with respect to any mortgage loan is the per annum rate
at which interest accrues on the mortgage loan as stated in the related Mortgage
Note in each case without giving effect to any default rate or an increased
interest rate. Notwithstanding the foregoing, for mortgage loans that do not
accrue interest on the basis of a 360-day year consisting of twelve 30 day
months, then, solely for purposes of calculating the Pass-Through Rate on the
Certificates, the Mortgage Rate of the mortgage loan for any one-month period
preceding a related due date will be the annualized rate at which interest would
have to accrue in respect of the mortgage loan on the basis of a 360-day year
consisting of twelve 30-day months in order to produce the aggregate amount of
interest actually required to be paid in respect of the mortgage loan during the
one-month period at the related Mortgage Rate; provided, however, that with
respect to each Withheld Loan, the Mortgage Rate for the one month period
(1) prior to the due dates in January and February in any year which is not a
leap year or in February in any year which is a leap year, and (2) prior to the
due date in March, will be the per annum rate stated in the related Mortgage
Note.
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"Excess Interest" with respect to any APD Loan is the interest accrued at
an increased interest rate in respect of that APD Loan in excess of the interest
accrued at the related initial interest rate, plus any related interest, to the
extent permitted by applicable law.
Interest Distribution Amount. Interest will accrue for each Class of
Certificates (other than the Class S and Residual Certificates) during the
related Interest Accrual Period. The "Interest Distribution Amount" of any Class
of Certificates (other than the Class S and Residual Certificates) for any
Distribution Date is an amount equal to all Distributable Certificate Interest
in respect of that Class for that Distribution Date and, to the extent not
previously paid, for all prior Distribution Dates.
The "Distributable Certificate Interest" in respect of each Class of
Certificates (other than Class S and the Residual Certificates) for each
Distribution Date is equal to one month's interest at the Pass-Through Rate
applicable to that Class of Certificates for that Distribution Date accrued for
the related Interest Accrual Period on the related Certificate Balance or
Notional Amount, as the case may be, outstanding immediately prior to that
Distribution Date.
Principal Distribution Amount. The "Principal Distribution Amount" for any
Distribution Date is an amount equal to the sum of (a) the Principal Shortfall
for that Distribution Date, (b) the Scheduled Principal Distribution Amount for
that Distribution Date and (c) the Unscheduled Principal Distribution Amount for
that Distribution Date.
The "Scheduled Principal Distribution Amount" for each Distribution Date
will equal the aggregate of the principal portions of (a) all Periodic Payments
(excluding balloon payments and Excess Interest) due during or, if and to the
extent not previously received or advanced and distributed to Certificateholders
on a preceding Distribution Date, prior to the related Due Period and all
Assumed Scheduled Payments for the related Due Period, in each case to the
extent paid by the related borrower as of the business day preceding the related
Servicer Remittance Date or advanced by the Master Servicer or the Trustee, as
applicable, and (b) all balloon payments to the extent received during the
related Due Period or any applicable grace period, and to the extent not
included in clause (a) above. The Scheduled Principal Distribution Amount from
time to time will include all late payments of principal made by a borrower,
including late payments in respect of a delinquent balloon payment, regardless
of the timing of those late payments, except to the extent those late payments
are otherwise reimbursable to the Master Servicer, the Special Servicer or the
Trustee, as the case may be, for prior Advances.
The "Unscheduled Principal Distribution Amount" for each Distribution Date
will equal the aggregate of: (a) all voluntary prepayments of principal received
on the mortgage loans during the related Due Period; and (b) any other
collections (exclusive of payments by borrowers) received on the mortgage loans
and any REO Properties during the related Due Period, whether in the form of
Liquidation Proceeds, Insurance and Condemnation Proceeds, net income, rents,
and profits from REO Property or otherwise, that were identified and applied by
the Master Servicer as recoveries of previously unadvanced principal of the
related mortgage loan.
The "Assumed Scheduled Payment" for any Due Period and with respect to any
mortgage loan that is delinquent in respect of its balloon payment (including
any REO Loan as to which the balloon payment would have been past due), is an
amount equal to the sum of (a) the principal portion of the Periodic Payment
that would have been due on that mortgage loan on the related due date based on
the constant payment required by the related Mortgage Note or the original
amortization schedule of the mortgage loan (as calculated with interest at the
related Mortgage Rate), if applicable, assuming the related balloon payment has
not become due, after giving effect to any modification, and (b) interest on the
Stated Principal Balance of that mortgage loan at its Mortgage Rate (net of the
applicable rate at which the Servicing Fee is calculated).
For purposes of the foregoing definitions of Principal Distribution Amount,
the term "Principal Shortfall" for any Distribution Date means the amount, if
any, by which (1) the Principal Distribution Amount for the prior Distribution
Date, exceeds (2) the aggregate amount distributed in respect of principal on
the Class A, Class B, Class C, Class D, Class E, Class F, Class G, Class H,
Class I, Class J,
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Class K, Class L and Class M Certificates on the preceding Distribution Date.
There will be no Principal Shortfall on the first Distribution Date.
Certain Calculations with Respect to Individual Mortgage Loans. The Stated
Principal Balance of each mortgage loan outstanding at any time represents the
principal balance of the mortgage loan ultimately due and payable to the
Certificateholders. The "Stated Principal Balance" of each mortgage loan will
initially equal its Cut-Off Date Balance and, on each Distribution Date, will be
reduced by the portion of the Principal Distribution Amount for that date that
is attributable to that mortgage loan. The Stated Principal Balance of a
mortgage loan may also be reduced in connection with any forced reduction of its
actual unpaid principal balance imposed by a court presiding over a bankruptcy
proceeding in which the related borrower is the debtor. See "Certain Legal
Aspects of Mortgage Loans--Bankruptcy Laws" in the prospectus. If any mortgage
loan is paid in full or the mortgage loan (or any Mortgaged Property acquired in
respect of the mortgage loan) is otherwise liquidated, then, as of the first
Distribution Date that follows the end of the Due Period in which that payment
in full or liquidation occurred and notwithstanding that a loss may have
occurred in connection with any liquidation, the Stated Principal Balance of the
mortgage loan will be zero.
For purposes of calculating distributions on, and allocations of Collateral
Support Deficit to, the Certificates, as well as for purposes of calculating the
Servicing Fee and Trustee Fee payable each month, each REO Property will be
treated as if there exists with respect thereto an outstanding mortgage loan (an
"REO Loan"), and all references to mortgage loan, mortgage loans and pool of
mortgage loans in this prospectus supplement and in the prospectus, when used in
that context, will be deemed to also be references to or to also include, as the
case may be, any REO Loans. Each REO Loan will generally be deemed to have the
same characteristics as its actual predecessor mortgage loan, including the same
fixed Mortgage Rate (and, accordingly, the same Net Mortgage Rate) and the same
unpaid principal balance and Stated Principal Balance. Amounts due on the
predecessor mortgage loan, including any portion of it payable or reimbursable
to the Master Servicer, will continue to be "due" in respect of the REO Loan;
and amounts received in respect of the related REO Property, net of payments to
be made, or reimbursement to the Master Servicer or the Special Servicer for
payments previously advanced, in connection with the operation and management of
that property, generally will be applied by the Master Servicer as if received
on the predecessor mortgage loan.
Excess Interest. On each Distribution Date, the Paying Agent is required to
distribute any Excess Interest received with respect to mortgage loans during
the related Due Period to the Class S Certificate.
ALLOCATION OF YIELD MAINTENANCE CHARGES
On any Distribution Date, Yield Maintenance Charges collected during the
related Due Period will be required to be distributed by the Paying Agent to the
holders of the Class X Certificates. No Yield Maintenance Charges will be
distributed to holders of any other Class of Certificates.
For a description of Yield Maintenance Charges, see "Description of the
Mortgage Pool--Certain Terms and Conditions of the Mortgage Loans--Prepayment
Provisions" in this prospectus supplement. See also "Certain Legal Aspects of
the Mortgage Loans--Default Interest and Limitations on Prepayments" in the
prospectus regarding the enforceability of Yield Maintenance Charges.
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ASSUMED FINAL DISTRIBUTION DATE; RATED FINAL DISTRIBUTION DATE
The "Assumed Final Distribution Date" with respect to any Class of Offered
Certificates is the Distribution Date on which the aggregate Certificate Balance
or Notional Amount, as the case may be, of that Class of Certificates would be
reduced to zero based on the assumptions set forth below. The Assumed Final
Distribution Date will in each case be as follows:
<TABLE>
<CAPTION>
ASSUMED FINAL
CLASS DESIGNATION DISTRIBUTION DATE
- --------------------------------------------------------------------- ------------------
<S> <C>
Class A-1............................................................ October 25, 2008
Class A-2............................................................ November 15, 2009
Class X.............................................................. August 15, 2023
Class B.............................................................. November 15, 2009
Class C.............................................................. November 15, 2009
Class D.............................................................. November 15, 2009
Class E.............................................................. November 15, 2009
Class F.............................................................. November 15, 2009
</TABLE>
THE ASSUMED FINAL DISTRIBUTION DATES SET FORTH ABOVE WERE CALCULATED
WITHOUT REGARD TO ANY DELAYS IN THE COLLECTION OF BALLOON PAYMENTS AND WITHOUT
REGARD TO A REASONABLE LIQUIDATION TIME WITH RESPECT TO ANY MORTGAGE LOANS THAT
MAY BECOME DELINQUENT. ACCORDINGLY, IN THE EVENT OF DEFAULTS ON THE MORTGAGE
LOANS, THE ACTUAL FINAL DISTRIBUTION DATE FOR ONE OR MORE CLASSES OF THE OFFERED
CERTIFICATES MAY BE LATER, AND COULD BE SUBSTANTIALLY LATER, THAN THE RELATED
ASSUMED FINAL DISTRIBUTION DATE(S).
In addition, the Assumed Final Distribution Dates set forth above were
calculated on the basis of a 0% CPR and assuming the APD Loans are prepaid in
full on their Anticipated Prepayment Dates. Since the rate of payment (including
prepayments) of the mortgage loans may exceed the scheduled rate of payments,
and could exceed the scheduled rate by a substantial amount, the actual final
Distribution Date for one or more Classes of the Offered Certificates may be
earlier, and could be substantially earlier, than the related Assumed Final
Distribution Date(s). The rate of payments (including prepayments) on the
mortgage loans will depend on the characteristics of the mortgage loans, as well
as on the prevailing level of interest rates and other economic factors, and we
cannot assure you as to actual payment experience. Finally, the Assumed Final
Distribution Dates were calculated assuming that there would not be an early
termination of the trust fund.
The "Rated Final Distribution Date" for each Class of Offered Certificates
will be January 15, 2032 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, will have the longest remaining amortization term.
SUBORDINATION; ALLOCATION OF COLLATERAL SUPPORT DEFICIT
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 extent described in this prospectus supplement, to the
rights of holders of the Senior Certificates. Moreover, to the extent described
in this prospectus supplement:
o the rights of the holders of the Class M Certificates will be
subordinated to the rights of the holders of the Class L Certificates,
o the rights of the holders of the Class L and Class M Certificates will be
subordinated to the rights of the holders of the Class K Certificates,
o the rights of the holders of the Class K, Class L and Class M
Certificates will be subordinated to the rights of the holders of the
Class J Certificates,
o the rights of the holders of the Class J, Class K, Class L and Class M
Certificates will be subordinated to the rights of the holders of the
Class I Certificates,
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<PAGE>
o the rights of the holders of the Class I, Class J, Class K, Class L and
Class M Certificates will be subordinated to the rights of the holders of
the Class H Certificates,
o the rights of the holders of the Class H, Class I, Class J, Class K,
Class L and Class M Certificates will be subordinated to the rights of
the holders of the Class G Certificates,
o the rights of the holders of the Class G, Class H, Class I, Class J,
Class K, Class L and Class M Certificates will be subordinated to the
rights of the holders of the Class F Certificates,
o the rights of the holders of the Class F, Class G, Class H, Class I,
Class J, Class K, Class L and Class M Certificates will be subordinated
to the rights of the holders of the Class E Certificates,
o the rights of the holders of the Class E, Class F, Class G, Class H,
Class I, Class J, Class K, Class L and Class M Certificates will be
subordinated to the rights of the holders of the Class D Certificates,
o the rights of the holders of the Class D, Class E, Class F, Class G,
Class H, Class I, Class J, Class K, Class L and Class M Certificates will
be subordinated to the rights of the holders of the Class C Certificates,
o the rights of the holders of the 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 be subordinated to the rights of the holders of the
Class B Certificates, and
o the rights of the holders of the 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 be subordinated to the rights of the holders of the
Senior Certificates.
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 the Class A Certificates of principal in an
amount equal to, in each case, the entire Certificate Balance of the Class A
Certificates. Similarly, but to decreasing degrees, this subordination is also
intended to enhance the likelihood of timely receipt by the holders of the Class
B Certificates, the holders of the Class C Certificates, the holders of the
Class D Certificates, the holders of the Class E Certificates and the holders of
the Class F Certificates of the full amount of interest payable in respect of
those Classes of Certificates on each Distribution Date, and the ultimate
receipt by the holders of the Class B Certificates, the holders of the Class C
Certificates, the holders of the Class D Certificates, the holders of the Class
E Certificates and the holders of Class F Certificates, of principal equal to,
in each case, the entire Certificate Balance of each of those Classes of
Certificates.
The protection afforded to the holders of the Class F Certificates by means
of the subordination of the Non-Offered Certificates that are Subordinate
Certificates (the "Non-Offered Subordinate Certificates"), to the holders of the
Class E Certificates by the subordination of the Class F Certificates and the
Non-Offered Subordinate Certificates, to the holders of the Class D Certificates
by means of the subordination of the Class E and Class F Certificates and the
Non-Offered Subordinate Certificates, to the holders of the Class C Certificates
by means of the subordination of the Class D, Class E and Class F Certificates
and the Non-Offered Subordinate Certificates, to the holders of the Class B
Certificates by the subordination of the Class C, Class D, Class E and Class F
Certificates and the Non-Offered Subordinate Certificates and to the holders of
the Senior Certificates by means of the subordination of the Subordinate
Certificates, will be accomplished by the application of the Available
Distribution Amount on each Distribution Date in accordance with the order of
priority described under "--Distributions" above and by the allocation of
Collateral Support Deficits in the manner described below. No other form of
credit support will be available for the benefit of the holders of the Offered
Certificates.
Allocation to the Class A Certificates (unless the Cross-Over Date has
occurred, first to the Class A-1 Certificates until the Certificate Balance has
been reduced to zero and then to the Class A-2 Certificates until the
Certificate Balance has been reduced to zero), for so long as they are
outstanding,
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of the entire Principal Distribution Amount for each Distribution Date will have
the effect of reducing the aggregate Certificate Balance of the Class A
Certificates at a proportionately faster rate than the rate at which the
aggregate Stated Principal Balance of the pool of mortgage loans will reduce.
Thus, as principal is distributed to the holders of the Class A Certificates,
the percentage interest in the trust fund evidenced by the Class A 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 successive allocation
on each Distribution Date of the remaining Principal Distribution Amount to the
Class B Certificates, the Class C Certificates, the Class D Certificates, the
Class E Certificates and the Class F Certificates, in that order, in each case
for so long as they are outstanding, will provide a similar benefit to each of
those Classes of Certificates as to the relative amount of subordination
afforded by the outstanding Classes of Certificates (other than the Class X,
Class S and the Residual Certificates) with later alphabetical Class
designations.
On each Distribution Date, immediately following the distributions to be
made to the Certificateholders on that date, the Paying Agent is required to
calculate the amount, if any, by which (1) the aggregate Stated Principal
Balance of the mortgage loans expected to be outstanding immediately following
that Distribution Date is less than (2) the aggregate Certificate Balance of the
Certificates after giving effect to distributions of principal on that
Distribution Date (any deficit, "Collateral Support Deficit"). The Paying Agent
will be required to allocate any Collateral Support Deficit among the respective
Classes of Certificates as follows: to the 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 in respect of and until the
remaining Certificate Balance of that Class has been reduced to zero. Following
the reduction of the Certificate Balances of all Classes of Subordinate
Certificates to zero, the Paying Agent will be required to allocate the
Collateral Support Deficit among the Classes of Class A Certificates, pro rata
(based upon their respective Certificate Balances), until the remaining
Certificate Balances of the Class A Certificates have been reduced to zero. Any
Collateral Support Deficit allocated to a Class of Certificates will be
allocated among respective Certificates of the Class in proportion to the
Percentage Interests evidenced by those Certificates.
In general, Collateral Support Deficits could result from the occurrence
of: (1) losses and other shortfalls on or in respect of the mortgage loans,
including as a result of defaults and delinquencies on the mortgage loans,
Nonrecoverable Advances made in respect of the mortgage loans, the payment to
the Special Servicer of any compensation as described in "Servicing of the
Mortgage Loans--Servicing and Other Compensation and Payment of Expenses" in
this prospectus supplement, and the payment of interest on Advances and certain
servicing expenses; and (2) certain unanticipated, non-mortgage loan specific
expenses of the trust fund, including certain reimbursements to the Trustee as
described under "Description of the Pooling Agreements--Certain Matters
Regarding the Trustee" in the prospectus, certain reimbursements to the Master
Servicer and the Depositor as described under "Description of the Pooling
Agreements--Certain Matters Regarding the Master Servicer and the Depositor" in
the prospectus, and certain federal, state and local taxes, and certain
tax-related expenses, payable out of the trust fund as described under "Certain
Federal Income Tax Consequences--Federal Income Tax Consequences for REMIC
Certificates" and "Certain Federal Income Tax Consequences--Taxes That May Be
Imposed on the REMIC Pool" in the prospectus. Accordingly, the allocation of
Collateral Support Deficit as described above will constitute an allocation of
losses and other shortfalls experienced by the trust fund.
A Class of Offered Certificates will be considered outstanding until its
Certificate Balance or Notional Amount, as the case may be, is reduced to zero.
However, reimbursement of any previously allocated Collateral Support Deficit is
required thereafter to be made to that Class in accordance with the payment
priorities set forth in "Distributions--Priority" above.
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ADVANCES
On the business day immediately preceding each Distribution Date (the
"Servicer Remittance Date"), the Master Servicer will be obligated, subject to
the recoverability determination described below, to make advances (each, a "P&I
Advance") out of its own funds or, subject to the replacement of those funds as
provided in the Pooling and Servicing Agreement, certain funds held in the
Certificate Account that are not required to be part of the Available
Distribution Amount for that Distribution Date, in an amount equal to (but
subject to reduction as described in the following paragraph) the aggregate of:
(1) all Periodic Payments (net of any applicable Servicing Fees), other than
balloon payments, which were due on the mortgage loans during the related Due
Period and delinquent (or not advanced by any sub-servicer) as of the business
day preceding the related Servicer Remittance Date; and (2) in the case of each
mortgage loan delinquent in respect of its balloon payment as of the end of the
related Due Period (including any applicable grace period and including any REO
Loan as to which the balloon payment would have been past due), an amount equal
to its Assumed Scheduled Payment. The Master Servicer's obligations to make P&I
Advances in respect of any mortgage loan or REO Property will continue through
liquidation of the mortgage loan or disposition of the REO Property, as the case
may be. To the extent that the Master Servicer fails to make a P&I Advance that
it is required to make under the Pooling and Servicing Agreement, the Trustee
will make the required P&I Advance in accordance with the terms of the Pooling
and Servicing Agreement.
The amount required to be advanced in respect of delinquent Periodic
Payments or Assumed Scheduled Payments on a mortgage loan with respect to any
Distribution Date that has been subject to an Appraisal Reduction Event will
equal the amount that would be required to be advanced by the Master Servicer
without giving effect to the Appraisal Reduction less any Appraisal Reduction
Amount with respect to the mortgage loan for that Distribution Date. Neither the
Master Servicer nor the Trustee will be required to make a P&I Advance for
default interest, Yield Maintenance Charges or Excess Interest.
In addition to P&I Advances, the Master Servicer and, in some instances,
the Special Servicer will also be obligated (subject to the limitations
described in this prospectus supplement) to make advances ("Servicing Advances"
and, collectively with P&I Advances, "Advances") in connection with the
servicing and administration of any mortgage loan in respect of which a default,
delinquency or other unanticipated event has occurred or is reasonably
foreseeable or in connection with the servicing and administration of any
Mortgaged Property or REO Property, to pay delinquent real estate taxes,
assessments and hazard insurance premiums and to cover other similar costs and
expenses necessary to preserve the priority of or enforce the related mortgage
loan documents or to protect, lease, manage and maintain the related Mortgaged
Property. To the extent that the Master Servicer or Special Servicer fails to
make a Servicing Advance that it is required to make under the Pooling and
Servicing Agreement and the Trustee has notice of this failure, the Trustee (or
the Master Servicer in the event the Special Servicer fails to make a required
Servicing Advance) will make the required Servicing Advance in accordance with
the terms of the Pooling and Servicing Agreement.
The Master Servicer, the Special Servicer or the Trustee, as applicable,
will be entitled to recover (after payment of any outstanding Special Servicing
Fees due) any Advance made out of its own funds from any amounts collected in
respect of the mortgage loan as to which that Advance was made, whether in the
form of late payments, Insurance and Condemnation Proceeds, Liquidation Proceeds
or otherwise from the mortgage loan ("Related Proceeds"). Notwithstanding the
foregoing, none of the Master Servicer, the Special Servicer or the Trustee will
be obligated to make any Advance that it determines in its reasonable good faith
judgment would, if made, not be recoverable (including interest on the Advance)
out of Related Proceeds (a "Nonrecoverable Advance"), and the Master Servicer,
the Special Servicer or the Trustee will be entitled to recover any Advance that
it so determines to be a Nonrecoverable Advance out of general funds on deposit
in the Certificate Account. The Trustee will be entitled to rely conclusively on
any non-recoverability determination of the Master Servicer. Nonrecoverable
Advances will represent a portion of the losses to be borne by the
Certificateholders.
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See "Description of the Certificates--Advances in Respect of Delinquencies" and
"Description of the Pooling Agreements--Certificate Account" in the prospectus.
In connection with its recovery of any Advance, each of the Master
Servicer, the Special Servicer and the Trustee will be entitled to be paid, out
of any amounts then on deposit in the Certificate Account, interest at a rate
equal to LIBOR plus 2.90% (the "Reimbursement Rate"), compounded monthly,
accrued on the amount of the Advance from the date made to but not including the
date of reimbursement.
Calculation of LIBOR. On each date of determination, LIBOR will be
established by the Paying Agent. As of any date of determination relating to the
Advances, "LIBOR" will equal the rate for United States dollar deposits for one
month that appears on the Telerate Screen Page 3750 as of 11:00 a.m., London,
England time, on that date, provided that if that date is not a LIBOR Business
Day, on the immediately preceding LIBOR Business Day. If LIBOR does not appear
on that page or another page as may replace that page on that service or another
service for displaying LIBOR or comparable rates as may be reasonably selected
by the Paying Agent after consultation with the Master Servicer on that date,
the rate will be the Reference Bank Rate. If no quotations can be obtained and
no Reference Bank Rate is available, LIBOR will be equal to the "Prime Rate" as
set forth in the Wall Street Journal, New York edition less 2.90%.
The establishment of LIBOR as to any date of determination by the Paying
Agent and the Paying Agent's calculation of the rate of interest applicable to
any Advances will, in the absence of manifest error, be final and binding.
"Reference Bank Rate" will be, with respect to any date of determination,
the arithmetic mean of the offered rates for United States dollar deposits for
one month which are offered by four major banks specified in the Pooling and
Servicing Agreement to prime banks in the London interbank market for a period
of one month in amounts approximately equal to the amount of the related
Advance. The Reference Bank Rate will be rounded upwards, if necessary, to the
nearest one-sixteenth of one percent. The Reference Bank Rate will be determined
as of 11:00 a.m., London, England time, on that date, provided that if that date
is not a LIBOR Business Day, on the immediately preceding LIBOR business day.
If fewer than two offered rates appear, the Reference Bank Rate will be the
arithmetic mean of the rates quoted by one or more major banks in New York City,
selected by the Paying Agent, as of 11:00 a.m., New York time, on the date for
loans in U.S. Dollars to leading European banks for a period of one month in
amounts approximately equal to the outstanding Advance.
"LIBOR Business Day" means any day other than:
(1) a Saturday or a Sunday or
(2) a day on which banking institutions in the city of London, England
are required or authorized by law to be closed.
Each Statement to Certificateholders furnished or made available by the
Paying Agent to the Certificateholders will contain information relating to the
amounts of Advances made with respect to the related Distribution Date. See
"Description of the Certificates--Reports to Certificateholders; Certain
Available Information" in this prospectus supplement and "Description of the
Certificates--Reports to Certificateholders" in the prospectus.
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APPRAISAL REDUCTIONS
After an Appraisal Reduction Event has occurred, an Appraisal Reduction is
required to be calculated. An "Appraisal Reduction Event" will occur on the
earliest of:
(1) the third anniversary of the date on which an extension of the
maturity date of a mortgage loan becomes effective as a result of a
modification of the related mortgage loan by the Special Servicer,
which extension does not change the amount of Periodic Payments on the
mortgage loan;
(2) 120 days after an uncured delinquency (without regard to the
application of any grace period) occurs in respect of a mortgage loan;
(3) the date on which a reduction in the amount of Periodic Payments on a
mortgage loan, or a change in any other material economic term of the
mortgage loan (other than an extension of its maturity), becomes
effective as a result of a modification of the related mortgage loan
by the Special Servicer;
(4) the date on which a receiver has been appointed;
(5) 60 days after a borrower declares bankruptcy;
(6) the date on which an involuntary petition of bankruptcy is filed with
respect to the borrower;
(7) 30 days after an uncured delinquency occurs in respect of a balloon
payment for a mortgage loan; and
(8) immediately after a mortgage loan becomes an REO Loan.
No Appraisal Reduction Event may occur at any time when the aggregate
Certificate Balances of all Classes of Certificates (other than the Class A
Certificates) has been reduced to zero.
The "Appraisal Reduction" for any Distribution Date and for any mortgage
loan as to which any Appraisal Reduction Event has occurred will be an amount
equal to the excess of (a) the outstanding Stated Principal Balance of that
mortgage loan over (b) the excess of (1) the sum of (a) 90% of the appraised
value of the related Mortgaged Property as determined (A) by one or more
independent Appraisal Institute ("MAI") appraisals with respect to any mortgage
loan with an outstanding principal balance equal to or in excess of the lesser
of (x) $2,000,000 or (y) 2% of the Stated Principal Balance of the mortgage
loans (the costs of which will be paid by the Master Servicer as an Advance), or
(B) by an internal valuation performed by the Special Servicer with respect to
any mortgage loan with an outstanding principal balance less than the lesser of
(x) $2,000,000 or (y) 2% of the Stated Principal Balance of the mortgage loans,
and (b) all escrows and reserves in respect of such mortgage loan over (2) the
sum as of the due date occurring in the month of that Distribution Date of
(A) to the extent not previously advanced by the Master Servicer or the Trustee,
all unpaid interest on that mortgage loan at a per annum rate equal to the
Mortgage Rate, (B) all unreimbursed Advances and interest on those Advances at
the Reimbursement Rate in respect of that mortgage loan and (C) all currently
due and unpaid real estate taxes and assessments, insurance premiums and ground
rents and all other amounts due and unpaid under the mortgage loan (which tax,
premiums, ground rents and other amounts have not been the subject of an Advance
by the Master Servicer, Special Servicer or Trustee, as applicable).
Within 60 days after the Appraisal Reduction Event, the Special Servicer
will be required to receive an appraisal or valuation; provided, however, that
with respect to an Appraisal Reduction Event described in clause (2), the
Special Servicer will be required to receive an appraisal or valuation within
the 120-day period set forth in clause (2). On the first Determination Date
occurring on or after the delivery of the MAI appraisal, the Special Servicer
will be required to calculate and report to the Master Servicer and the Master
Servicer will be required to report to the Paying Agent, the Appraisal Reduction
to take into account the appraisal. In the event that the Special Servicer has
not received the MAI appraisal within the timeframe described above (or, in the
case of an appraisal in connection with an Appraisal Reduction Amount described
in clause (2), within the 120-day period set forth in
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clause (2)), the amount of the Appraisal Reduction will be deemed to be an
amount equal to 25% of the current Stated Principal Balance of the related
mortgage loan until the MAI appraisal is received. The "Determination Date" for
each Distribution Date is the 11th day of the month in which the Distribution
Date occurs or, if the 11th day is not a business day, then the immediately
succeeding business day.
As a result of calculating one or more Appraisal Reductions, the amount of
any required P&I Advance will be reduced by an amount equal to the Appraisal
Reduction Amount, which will have the effect of reducing the amount of interest
available to the most subordinate Class of Certificates then outstanding (i.e.,
first to the Class M Certificates, then to the Class L Certificates, then to the
Class K Certificates, then to the Class J Certificates, then to the Class I
Certificates, then to the Class H Certificates, then to the Class G
Certificates, then to the Class F Certificates, then to the Class E
Certificates, then to the Class D Certificates, then to the Class C Certificates
and then to the Class B Certificates). See "--Advances" above. The "Appraisal
Reduction Amount" for any Distribution Date will equal the product of (1) the
applicable per annum Pass-Through Rate (i.e., for any month, one twelfth of the
Pass-Through Rate) on the Class of Certificates to which the Appraisal Reduction
is allocated, and (2) the sum of all Appraisal Reductions with respect to the
related Distribution Date. See "Servicing of the Mortgage Loans--General" in
this prospectus supplement.
With respect to each mortgage loan as to which an Appraisal Reduction has
occurred (unless the mortgage loan has remained current for twelve consecutive
Periodic Payments, and with respect to which no other Appraisal Reduction Event
has occurred with respect thereto during the preceding twelve months), the
Special Servicer is required, within 30 days of each anniversary of the related
Appraisal Reduction Event, to order an appraisal (which may be an update of a
prior appraisal), the cost of which will be a Servicing Advance. Based upon the
appraisal, the Special Servicer is required to redetermine and report to the
Paying Agent the amount of the Appraisal Reduction with respect to the mortgage
loan. Notwithstanding the foregoing, the Special Servicer will not be required
to obtain an appraisal with respect to a mortgage loan which is the subject of
an Appraisal Reduction Event to the extent the Special Servicer has obtained an
appraisal with respect to the related Mortgaged Property within the 12-month
period prior to the occurrence of the Appraisal Reduction Event. Instead, the
Special Servicer may use the prior appraisal in calculating any Appraisal
Reduction with respect to the mortgage loan, provided that the Special Servicer
is not aware of any material change to the Mortgaged Property that has occurred
that would affect the validity of the appraisal.
With respect to each mortgage loan as to which an Appraisal Reduction has
occurred and which has become current and has remained current for twelve
consecutive Periodic Payments, and with respect to which no other Appraisal
Reduction Event has occurred and is continuing, the Special Servicer may within
30 days of the date of the twelfth Periodic Payment, order an appraisal (which
may be an update of a prior appraisal), the cost of which will be a Servicing
Advance. Based upon the appraisal, the Special Servicer is required to
redetermine and report to the Master Servicer and the Paying Agent the amount of
the Appraisal Reduction with respect to the mortgage loan.
REPORTS TO CERTIFICATEHOLDERS; CERTAIN AVAILABLE INFORMATION
On each Distribution Date, the Paying Agent will be required to furnish or
make available to each holder of a Certificate, the Trustee, the Master
Servicer, the Underwriters, the Special Servicer and a financial market
publisher (which is anticipated to initially be Bloomberg, L.P.), if any, a
statement (a "Statement to Certificateholders") based upon information provided
by the Master Servicer in accordance with Commercial Mortgage Securization
Association guidelines setting forth, among other things:
(1) the amount of the distribution on the Distribution Date to the
holders of the Class of Certificates in reduction of the Certificate
Balance of the Certificates;
(2) the amount of the distribution on the Distribution Date to the
holders of the Class of Certificates allocable to Distributable Certificate
Interest,
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(3) the aggregate amount of Advances made in respect of the
Distribution Date;
(4) the aggregate amount of compensation paid to the Trustee and
servicing compensation paid to the Master Servicer and the Special Servicer
during the Due Period for the Distribution Date;
(5) the aggregate Stated Principal Balance of the mortgage loans and
any REO Loans outstanding immediately before and immediately after the
Distribution Date;
(6) the number, aggregate principal balance, weighted average
remaining term to maturity and weighted average mortgage rate of the
mortgage loans as of the end of the related Due Period for the Distribution
Date;
(7) the number and aggregate principal balance of mortgage loans (A)
delinquent 30-59 days, (B) delinquent 60-89 days, (C) delinquent 90 days or
more and (D) current but specially serviced or in foreclosure but not an
REO Property;
(8) the value of any REO Property included in the trust fund as of
the end of the related Due Period for the Distribution Date, on a
loan-by-loan basis, based on the most recent appraisal or valuation;
(9) the Available Distribution Amount for the Distribution Date;
(10) the amount of the distribution on the Distribution Date to the
holders of the Class X Certificates allocable to Yield Maintenance Charges;
(11) the Pass-Through Rate for the Class of Certificates for the
Distribution Date and the next succeeding Distribution Date;
(12) the Scheduled Principal Distribution Amount and the Unscheduled
Principal Distribution Amount for the Distribution Date;
(13) the Certificate Balance or Notional Amount, as the case may be,
of each Class of Certificates immediately before and immediately after the
Distribution Date, separately identifying any reduction in these amounts as
a result of the allocation of any Collateral Support Deficit on the
Distribution Date;
(14) the fraction, expressed as a decimal carried to eight places, the
numerator of which is the then related Certificate Balance, and the
denominator of which is the related initial aggregate Certificate Balance,
for each Class of Certificates (other than the Class S and Residual
Certificates) immediately following the Distribution Date;
(15) the amount of any Appraisal Reductions effected in connection
with the Distribution Date on a loan-by-loan basis, the total Appraisal
Reduction effected in connection with the Distribution Date and the total
Appraisal Reduction Amounts as of that Distribution Date;
(16) the number and related principal balances of any mortgage loans
extended or modified during the related Due Period on a loan-by-loan basis;
(17) the amount of any remaining unpaid interest shortfalls for the
Class as of the Distribution Date;
(18) a loan-by-loan listing of each mortgage loan which was the
subject of a principal prepayment during the related Due Period and the
amount and the type of principal prepayment occurring;
(19) a loan-by-loan listing of any mortgage loan which was defeased
during the related Due Period;
(20) all deposits into, withdrawals from, and the balance of the
Interest Reserve Account on the related Servicer Remittance Dates;
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(21) the amount of the distribution on the Distribution Date to the
holders of each Class of Certificates in reimbursement of Collateral
Support Deficit;
(22) the aggregate unpaid principal balance of the pool of mortgage
loans outstanding as of the close of business on the related Determination
Date;
(23) with respect to any mortgage loan as to which a liquidation
occurred during the related due period (other than a payment in full),
(A) the loan number thereof, (B) the aggregate of all Liquidation Proceeds
which are included in the available distribution amount and other amounts
received in connection with the liquidation (separately identifying the
portion thereof allocable to distributions on the Certificates), and
(C) the amount of any realized loss in connection with the liquidation;
(24) with respect to any REO Property included in the trust as to
which the Special Servicer determined, in accordance with accepted
servicing standards, that all payments or recoveries with respect to the
Mortgaged Property have been ultimately recovered during the related Due
Period, (A) the loan number of the related mortgage loan, (B) the aggregate
of all Liquidation Proceeds and other amounts received in connection with
that determination (separately identifying the portion thereof allocable to
distributions on the Certificates), and (C) the amount of any realized loss
in respect of the related REO Loan in connection with that determination;
(25) the aggregate amount of interest on P&I Advances paid to the
Master Servicer and the Trustee during the related Due Period;
(26) the aggregate amount of interest on Servicing Advances paid to
the Master Servicer, the Trustee and the Special Servicer during the
related Due Period;
(27) the original and then current credit support levels for each
Class of Certificates;
(28) the original and then current ratings for each Class of
Certificates;
(29) the aggregate amount of Yield Maintenance Charges collected
during the related Due Period; and
(30) the amount of the distribution on the Distribution Date to the
holders of the Class S and Residual Certificates.
The Paying Agent will make available the Statements to Certificateholders
through its corporate trust home page on the internet, which is located at
"www.chase.com/sfa". In addition, the Paying Agent may make certain other
information and reports related to the mortgage loans available through its home
page.
In the case of information furnished pursuant to clauses (1), (2),
(17) and (21) above, the amounts will be expressed as a dollar amount in the
aggregate for all Certificates of each applicable Class and per definitive
certificate.
In addition, within a reasonable period of time after the end of each
calendar year, the Paying Agent is required to furnish to each person or entity
who at any time during the calendar year was a holder of a Certificate and, upon
request, to the Trustee, a statement containing the information set forth in
clauses (1), (2) and (10) above as to the applicable Class, aggregated for the
related calendar year or applicable partial year during which that person was a
Certificateholder, together with any other information as the Paying Agent deems
necessary or desirable, or that a Certificateholder or Certificate Owner
reasonably requests, to enable Certificateholders to prepare their tax returns
for that calendar year. This obligation of the Paying Agent will be deemed to
have been satisfied to the extent that substantially comparable information will
be provided by the Paying Agent pursuant to any requirements of the Code as from
time to time are in force.
The Paying Agent will be required to provide a financial market publisher,
which is anticipated to initially be Bloomberg, L.P., quarterly with certain
current information with respect to the Mortgaged Properties, including current
and original net operating income, debt service coverage ratios based
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upon borrowers' annual operating statements and occupancy rates, to the extent
it has received the information from the borrowers pursuant to the related loan
documents.
The Pooling and Servicing Agreement requires that the Paying Agent (or the
Trustee with respect to clause (6) only) make available at its offices primarily
responsible for administration of the trust fund, during normal business hours
upon prior written request, for review by any holder of an Offered Certificate,
the Mortgage Loan Sellers, the Depositor, the Special Servicer, the Master
Servicer, S&P, DCR or any other person to whom the Paying Agent (or the Trustee,
if applicable) believes the disclosure is appropriate, originals or copies of,
among other things, the following items:
(1) the Pooling and Servicing Agreement and any amendments to that
agreement;
(2) all Statements to Certificateholders made available to holders of
the relevant Class of Offered Certificates since the Closing Date;
(3) all officer's certificates delivered to the Paying Agent since the
Closing Date as described under "Description of the Pooling
Agreements--Evidence as to Compliance" in the prospectus;
(4) all accountants' reports delivered to the Paying Agent since the
Closing Date as described under "Description of the Pooling
Agreements--Evidence as to Compliance" in the prospectus;
(5) the most recent property inspection report prepared by or on
behalf of the Master Servicer or the Special Servicer and delivered to the
Paying Agent in respect of each Mortgaged Property;
(6) copies of the mortgage loan documents;
(7) any and all modifications, waivers and amendments of the terms of
a mortgage loan entered into by the Master Servicer or the Special Servicer
and delivered to the Paying Agent; and
(8) any and all statements and reports delivered to, or collected by,
the Master Servicer or the Special Servicer, from the borrowers, including
the most recent annual property operating statements, rent rolls and
borrower financial statements, but only to the extent the statements and
reports have been delivered to the Paying Agent.
Copies of any and all of the foregoing items will be available to
Certificateholders from the Paying Agent (or the Trustee with respect to clause
(6) only) upon request; however, the Paying Agent (or the Trustee, as
applicable) will be permitted to require payment of a sum sufficient to cover
the reasonable costs and expenses of providing the copies. Pursuant to the
Pooling and Servicing Agreement, the Master Servicer will be responsible for
enforcing all provisions of the mortgage loan documents relating to the
submission of financial and property information.
The Pooling and Servicing Agreement will require the Master Servicer and
the Paying Agent, subject to certain restrictions set forth in the Pooling and
Servicing Agreement, to provide certain of the reports or, in the case of the
Master Servicer, access to the reports available to Certificateholders set forth
above, as well as certain other information received by the Master Servicer or
the Paying Agent, as the case may be, to any Certificateholder, the
Underwriters, the Mortgage Loan Sellers, any Certificate Owner or any
prospective investor so identified by a Certificate Owner or an Underwriter,
that requests reports or information; provided that the Paying Agent and the
Master Servicer will be permitted to require payment of a sum sufficient to
cover the reasonable costs and expenses of providing copies of these reports or
information. Except as otherwise set forth in this paragraph, until the time
definitive certificates are issued, notices and statements required to be mailed
to holders of Certificates will be available to Certificate Owners of Offered
Certificates only to the extent they are forwarded by or otherwise available
through DTC and its Participants. Conveyance of notices and other communications
by DTC to Participants, and by Participants to Certificate Owners, will be
governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time. Except as otherwise set
forth in this paragraph, the Master Servicer, the Special Servicer, the Trustee,
the Depositor, the Paying Agent and the Certificate Registrar are required to
recognize as Certificateholders only those persons in whose names the
Certificates are registered on
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the books and records of the Certificate Registrar. The initial registered
holder of the Offered Certificates will be Cede & Co., as nominee for DTC.
VOTING RIGHTS
At all times during the term of the Pooling and Servicing Agreement, the
voting rights for the Certificates (the "Voting Rights") will be allocated among
the respective Classes of Certificateholders as follows: (1) 4% in the case of
the Class X Certificates, and (2) in the case of any other Class of Certificates
(other than the Class S and Residual Certificates), a percentage equal to the
product of 96% and a fraction, the numerator of which is equal to the aggregate
Certificate Balance of the Class, in each case, determined as of the prior
Distribution Date, and the denominator of which is equal to the aggregate
Certificate Balance of all Classes of Certificates, each determined as of the
prior Distribution Date. None of the Class S, the Class R nor the Class LR
Certificates will be entitled to any Voting Rights. For purposes of determining
Voting Rights, the Certificate Balance of each Class will not be reduced by the
amount allocated to that Class of any Appraisal Reductions related to mortgage
loans as to which Liquidation Proceeds or other final payment has not yet been
received. Voting Rights allocated to a Class of Certificateholders will be
allocated among the Certificateholders in proportion to the Percentage Interests
evidenced by their respective Certificates. Solely for purposes of giving any
consent, approval or waiver pursuant to the Pooling and Servicing Agreement,
neither the Master Servicer, the Special Servicer nor the Depositor will be
entitled to exercise any Voting Rights with respect to any Certificates
registered in its name, if the consent, approval or waiver would in any way
increase its compensation or limit its obligations in that capacity under the
Pooling and Servicing Agreement; provided, however, that the restrictions will
not apply to the exercise of the Special Servicer's rights, if any, as a member
of the Controlling Class.
TERMINATION; RETIREMENT OF CERTIFICATES
The obligations created by the Pooling and Servicing Agreement will
terminate upon payment (or provision for payment) to all Certificateholders of
all amounts held by or on behalf of the Trustee and required to be paid
following the earlier of (1) the final payment (or related advance) or other
liquidation of the last mortgage loan or REO Property subject thereto or
(2) the purchase of all of the assets of the trust fund by the holders of the
Controlling Class, the Special Servicer, the Master Servicer or the holders of
the Class LR Certificates. Written notice of termination of the Pooling and
Servicing Agreement will be given to each Certificateholder, and the final
distribution will be made only upon surrender and cancellation of the
Certificates at the office of the Certificate Registrar or other location
specified in the notice of termination.
The holders of the Controlling Class, the Special Servicer, the Master
Servicer and the holders of the Class LR Certificates (in that order) will have
the right to purchase all of the assets of the trust fund. This purchase of all
the mortgage loans and other assets in the trust fund is required to be made at
a price equal to the sum of (1) the aggregate Purchase Price of all the mortgage
loans (exclusive of REO Loans) then included in the trust fund and (2) the
aggregate fair market value of all REO Properties then included in the trust
fund (which fair market value for any REO Property may be less than the Purchase
Price for the corresponding REO Loan), as determined by an appraiser selected
and mutually agreed upon by the Master Servicer and the Trustee, and approved by
more than 50% of the Voting Rights of the Classes of Certificates then
outstanding, other than the Controlling Class, unless the Controlling Class is
the only Class of Certificates outstanding, plus the reasonable out-of-pocket
expenses of the Master Servicer related to such purchase, unless the Master
Servicer is the purchaser. This purchase will effect early retirement of the
then outstanding Offered Certificates, but the rights of the holders of the
Controlling Class, the Special Servicer, the Master Servicer or the holders of
the Class LR Certificates to effect the termination is subject to the
requirement that the then aggregate Stated Principal Balance of the pool of
mortgage loans be less than 1% of the Initial Pool Balance.
On the final Distribution Date, the aggregate amount paid by the holders of
the Controlling Class, the Special Servicer, the Master Servicer or the holders
of the Class LR Certificates, as the case may
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be, for the mortgage loans and other assets in the trust fund (if the trust fund
is to be terminated as a result of the purchase described in the preceding
paragraph), together with all other amounts on deposit in the Certificate
Account and not otherwise payable to a person other than the Certificateholders
(see "Description of the Pooling Agreements--Certificate Account" in the
prospectus), will be applied generally as described under
"--Distributions--Priority" above.
Any optional termination by the holders of the Controlling Class, the
Special Servicer, the Master Servicer, the Depositor or the holders of the Class
LR Certificates would result in prepayment in full of the Certificates and would
have an adverse effect on the yield of the Class X Certificates because a
termination would have an effect similar to a principal prepayment in full of
the mortgage loans (without, however, the payment of any Yield Maintenance
Charges) and, as a result, investors in the Class X Certificates and any other
Certificates purchased at premium might not fully recoup their initial
investment. See "Yield and Maturity Considerations" in this prospectus
supplement.
THE TRUSTEE
Norwest Bank Minnesota, National Association will act as Trustee of the
trust fund. The corporate trust office of the Trustee responsible for
administration of the Trust is located at 11000 Broken Land Parkway, Columbia,
Maryland 21044-3562, Attention: (CMBS), Ref. Chase Commercial Mortgage
Securities Corp., Series 1999-2. Norwest Bank Minnesota, National Association is
a subsidiary of Wells Fargo & Company which, as of December 31, 1998, had
reported total assets in excess of $100,000,000. As compensation for the
performance of its routine duties, the Trustee will be paid a fee (the "Trustee
Fee"). The Trustee Fee will be payable monthly from amounts received in respect
of the mortgage loans and will accrue at a rate (the "Trustee Fee Rate"),
calculated on the basis of a 360-day year consisting of twelve 30-day months
(other than in respect of mortgage loans that are the subject of principal
prepayments applied on a date other than a date on which the mortgage loans are
due) equal to 0.0016% per annum, and will be computed on the basis of the Stated
Principal Balance of the related mortgage loan as of the preceding Distribution
Date. In addition, the Trustee will be entitled to recover from the trust fund
all reasonable unanticipated expenses and disbursements incurred or made by the
Trustee in accordance with any of the provisions of the Pooling and Servicing
Agreement, but not including routine expenses incurred in the ordinary course of
performing its duties as Trustee under the Pooling and Servicing Agreement, and
not including any expense, disbursement or advance as may arise from its willful
misconduct, negligence or bad faith. See "Description of the Pooling
Agreements--The Trustee," "--Duties of the Trustee," "--Certain Matters
Regarding the Trustee" and "--Resignation and Removal of the Trustee" in the
prospectus.
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SERVICING OF THE MORTGAGE LOANS
GENERAL
The servicing of the mortgage loans and any REO Properties will be governed
by the Pooling and Servicing Agreement. The following summaries describe certain
provisions of the Pooling and Servicing Agreement relating to the servicing and
administration of the mortgage loans and any REO Properties. The summaries do
not purport to be complete and are subject, and qualified in their entirety by
reference, to the provisions of the Pooling and Servicing Agreement. Reference
is made to the prospectus for additional information regarding the terms of the
Pooling and Servicing Agreement relating to the servicing and administration of
the mortgage loans and any REO Properties, provided that the information in this
prospectus supplement supersedes any contrary information set forth in the
prospectus. See "Description of the Pooling Agreements" in the prospectus.
Each of the Master Servicer (directly or through one or more sub-servicers)
and the Special Servicer will be required to service and administer the mortgage
loans for which it is responsible. The Master Servicer will appoint The Chase
Manhattan Bank as sub-servicer with respect to the mortgage loans sold by Chase
to the Depositor. In addition to the sub-servicing by Chase of the mortgage
loans, the Master Servicer may delegate and/or assign some or all of its
servicing obligations and duties with respect to some or all of the mortgage
loans to one or more affiliates so long as delegation and/or assignment, in and
of itself, does not cause the qualification, withdrawal or downgrading of the
then-current ratings assigned to any Class of Certificates as confirmed in
writing by each of S&P and DCR. Except in certain limited circumstances set
forth in the Pooling and Servicing Agreement, the Special Servicer will not be
permitted to appoint sub-servicers with respect to any of its servicing
obligations and duties.
The Master Servicer and the Special Servicer will be required to service
and administer the mortgage loans for which each is responsible in the best
interests of and for the benefit of the Certificateholders (as determined by the
Master Servicer or the Special Servicer in the exercise of its good faith and
reasonable judgment) in accordance with applicable law, the terms of the Pooling
and Servicing Agreement and the mortgage loans and, to the extent consistent
with the foregoing, in accordance with the higher of the following standards of
care: (1) the same manner in which, and with the same care, skill, prudence and
diligence with which the Master Servicer or the Special Servicer, as the case
may be, services and administers similar mortgage loans for other third-party
portfolios, giving due consideration to the customary and usual standards of
practice of prudent institutional commercial and multifamily mortgage lenders
servicing their own mortgage loans and (2) the same care, skill, prudence and
diligence with which the Master Servicer or the Special Servicer, as the case
may be, services and administers commercial and multifamily mortgage loans owned
by the Master Servicer or the Special Servicer, as the case may be, with a view
to the maximization of timely recovery of principal and interest on the mortgage
loans or Specially Serviced Mortgage Loans, as applicable, and the best
interests of the Trust and the Certificateholders, as determined by the Master
Servicer or the Special Servicer, as the case may be, in its reasonable
judgment, but without regard to: (A) any relationship that the Master Servicer
or the Special Servicer, as the case may be, or any affiliate of either, may
have with the related borrower, any Mortgage Loan Seller or any other party to
the Pooling and Servicing Agreement; (B) the ownership of any Certificate by the
Master Servicer or the Special Servicer, as the case may be, or any affiliate of
either; (C) the Master Servicer's or Special Servicer's, as applicable,
obligation to make Advances, whether in respect of delinquent payments of
principal and/or interest in the case of the Master Servicer or to cover certain
servicing expenses; and (D) the Master Servicer's or the Special Servicer's, as
the case may be, right to receive compensation for its services under the
Pooling and Servicing Agreement or with respect to any particular transaction
(the foregoing, collectively referred to as the "Servicing Standards").
Except as otherwise described under "--Inspections; Collection of Operating
Information" below, the Master Servicer initially will be responsible for the
servicing and administration of the entire pool of mortgage loans. With respect
to any mortgage loan (1) as to which a payment default has occurred at its
original maturity date, or, if the original maturity date has been extended, at
its extended
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maturity date or, in the case of a balloon payment, such payment is more than
60 days delinquent and the borrower has not delivered to the Master Servicer a
written refinancing commitment reasonably satisfactory in form and substance to
the Master Servicer which provides that such refinancing will occur within
60 days, provided that if such refinancing does not occur, at such time the
related mortgage loan will become a Specially Serviced Mortgage Loan),(2) as to
which any Periodic Payment (other than a balloon payment) is more than 60 days
delinquent, (3) as to which the borrower has entered into or consented to
bankruptcy, appointment of a receiver or conservator or a similar insolvency
proceeding, or the borrower has become the subject of a decree or order for that
proceeding (provided that if the appointment, decree or order is stayed or
discharged, or the case dismissed within 60 days that mortgage loan will not be
considered a Specially Serviced Mortgage Loan during that period), or the
related borrower has admitted in writing its inability to pay its debts
generally as they become due, (4) as to which the Master Servicer will have
received notice of the foreclosure or proposed foreclosure of any other lien on
the Mortgaged Property, (5) as to which, in the judgment of the Master Servicer,
a payment default has occurred or is reasonably foreseeable and is not likely to
be cured by the borrower within 60 days, and prior to acceleration of amounts
due under the related Mortgage Note or commencement of any foreclosure or
similar proceedings or (6) as to which a default of which the Master Servicer
has notice (other than a failure by the related borrower to pay principal or
interest) and which materially and adversely affects the interests of the
Certificateholders has occurred and remains unremediated for the applicable
grace period specified in the mortgage loan (or if no grace period is specified,
60 days), the Master Servicer will be required to transfer its servicing
responsibilities to the Special Servicer, but will be required to continue to
receive payments on the mortgage loan (including amounts collected by the
Special Servicer), to make certain calculations with respect to the mortgage
loan and to make remittances and prepare certain reports to the
Certificateholders with respect to the mortgage loan. If the related Mortgaged
Property is acquired in respect of any mortgage loan (upon acquisition, an "REO
Property") whether through foreclosure, deed-in-lieu of foreclosure or
otherwise, the Special Servicer will continue to be responsible for its
operation and management. The mortgage loans serviced by the Special Servicer
and any mortgage loans that have become REO Properties are referred to in this
prospectus supplement as the "Specially Serviced Mortgage Loans". The Master
Servicer will have no responsibility for the performance by the Special Servicer
of its duties under the Pooling and Servicing Agreement.
If any Specially Serviced Mortgage Loan, in accordance with its original
terms or as modified in accordance with the Pooling and Servicing Agreement,
becomes a performing mortgage loan for at least 90 days (provided no additional
event of default is foreseeable in the reasonable judgment of the Special
Servicer), the Special Servicer will be required to return servicing of that
mortgage loan (a "Corrected Mortgage Loan") to the Master Servicer.
The Special Servicer will be required to prepare a report (an "Asset Status
Report") for each mortgage loan which becomes a Specially Serviced Mortgage Loan
not later than 30 days after the servicing of the mortgage loan is transferred
to the Special Servicer. Each Asset Status Report will be delivered to the
Directing Certificateholder (as defined below), the Mortgage Loan Sellers, S&P
and DCR, provided however, the Special Servicer will not be required to deliver
an Asset Status Report to the Directing Certificateholder if they are the same
entity. If the Directing Certificateholder does not disapprove an Asset Status
Report within 10 business days, the Special Servicer will be required to
implement the recommended action as outlined in the Asset Status Report. The
Directing Certificateholder may object to any Asset Status Report within 10
business days of receipt; provided, however, that the Special Servicer will be
required to implement the recommended action as outlined in the Asset Status
Report if it makes a determination in accordance with the Servicing Standards
that the objection is not in the best interest of all the Certificateholders. If
the Directing Certificateholder disapproves the Asset Status Report and the
Special Servicer has not made the affirmative determination described above, the
Special Servicer will be required to revise the Asset Status Report as soon as
practicable thereafter, but in no event later than 30 days after the
disapproval. The Special Servicer will be required to revise the Asset Status
Report until the Directing Certificateholder fails to disapprove the revised
Asset Status Report as described above or until the Special Servicer makes a
determination that the objection is not in the best interests of the
Certificateholders; provided,
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however, in the event that the Directing Certificateholder and the Special
Servicer have not agreed upon an Asset Status Report with respect to a Specially
Serviced Mortgage Loan within 90 days of the Directing Certificateholder's
receipt of the initial Asset Status Report with respect to such Specially
Serviced Mortgage Loan, the Special Servicer will implement the actions
described in the most recent Asset Status Report submitted to the Directing
Certificateholder by the Special Servicer.
The "Directing Certificateholder" will be the Controlling Class
Certificateholder selected by more than 50% of the Controlling Class
Certificateholders, by Certificate Balance, as certified by the Certificate
Registrar from time to time; provided, however, that (1) absent that selection,
or (2) until a Directing Certificateholder is so selected or (3) upon receipt of
a notice from a majority of the Controlling Class Certificateholders, by
Certificate Balance, that a Directing Certificateholder is no longer designated,
the Controlling Class Certificateholder that owns the largest aggregate
Certificate Balance of the Controlling Class will be the Directing
Certificateholder.
A "Controlling Class Certificateholder" is each holder (or Certificate
Owner, if applicable) of a Certificate of the Controlling Class as certified to
the Certificate Registrar from time to time by the holder (or Certificate
Owner).
The "Controlling Class" will be as of any time of determination the most
subordinate Class of Certificates then outstanding that has a Certificate
Balance at least equal to 25% of the initial Certificate Balance of that Class.
For purposes of determining identity of the Controlling Class, the Certificate
Balance of each Class will not be reduced by the amount allocated to that Class
of any Appraisal Reductions. The Controlling Class as of the Closing Date will
be the Class M Certificates.
The Special Servicer will not be required to take or refrain from taking
any action pursuant to instructions from the Directing Certificateholder that
would cause it to violate applicable law, the Pooling and Servicing Agreement,
including the Servicing Standards, or the REMIC Provisions.
THE MASTER SERVICER
GE Capital Loan Services, Inc. will act as servicer (in that capacity, the
"Master Servicer") and in that capacity will be responsible for servicing the
mortgage loans. The principal offices of the Master Servicer are located at 363
North Sam Houston Parkway East, Suite 200, Houston, Texas 77060. As of September
30, 1999, the Master Servicer had a total commercial and multifamily mortgage
loan servicing portfolio of approximately $22,400,000,000. The Master Servicer
will appoint The Chase Manhattan Bank as sub-servicer with respect to the
mortgage loans sold by The Chase Manhattan Bank to the Depositor.
THE PRIMARY SERVICERS
The Chase Manhattan Bank ("Chase") will act as servicer of the mortgage
loans sold by Chase to the Depositor pursuant to a subservicing agreement, dated
as of the cut-off date, between Chase and the Master Servicer. In such capacity,
Chase will be responsible for servicing the mortgage loans sold to the Depositor
by Chase and performing the duties of the Master Servicer in accordance with the
terms of the subservicing agreement which incorporates the servicing terms of
the Pooling and Servicing Agreement. Chase's principal offices are located at
270 Park Avenue, New York, New York 10017. As of September 30, 1999, Chase was
the servicer of a portfolio of multifamily and commercial mortgage loans,
secured by properties located throughout the United States and totaling
approximately $7,300,000,000 in aggregate outstanding principal amounts. The
Master Servicer will act as the primary servicer of the mortgage loans sold to
the Depositor by General Electric Capital Corporation.
THE SPECIAL SERVICER
ORIX Real Estate Capital Markets, LLC will act as the special servicer (in
such capacity, the "Special Servicer") and will be responsible for servicing the
Specially Serviced Mortgage Loans. The principal offices of the Special Servicer
are located at 1717 Main Street, Suite 1200, Dallas, Texas 75201. As of
June 30, 1999, the Special Servicer served as the named special servicer on 63
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securitized transactions encompassing 18,039 loans, with an aggregate principal
balance of approximately $46,100,000,000.
The information set forth in this prospectus supplement concerning the
Special Servicer has been provided by the Special Servicer, and neither the
Depositor nor the Underwriters make any representation or warranty as to the
accuracy or completeness of that information.
REPLACEMENT OF THE SPECIAL SERVICER
The Special Servicer may be removed, and a successor Special Servicer
appointed, at any time by the holders of Certificates representing more than 50%
of the aggregate Certificate Balance of the Controlling Class, provided that
each of S&P and DCR confirms in writing that the replacement of the Special
Servicer, in and of itself, will not cause a qualification, withdrawal or
downgrading of the then-current ratings assigned to any Class of Certificates.
SERVICING AND OTHER COMPENSATION AND PAYMENT OF EXPENSES
The fee of the Master Servicer (the "Servicing Fee") will be payable
monthly from amounts received in respect of the mortgage loans, and will accrue
at a rate (the "Servicing Fee Rate"), calculated on a basis of a 360-day year
consisting of twelve 30-day months equal to a per annum rate ranging from 0.050%
to 0.085%. As of the cut-off date the weighted average Servicing Fee Rate will
be 0.062% per annum. In addition to the Servicing Fee, the Master Servicer will
be entitled to retain, as additional servicing compensation, (1) 50% of all
assumption and modification fees paid by the borrowers on mortgage loans that
are not Specially Serviced Mortgage Loans (or, with respect to certain
non-material modifications permitted to be performed by the Master Servicer
under the Pooling and Servicing Agreement with respect to non-Specially Serviced
Mortgage, 100% of all modification fees) and 100% of all application and similar
charges in connection therewith, and (2) late payment charges and default
interest paid by the borrowers (other than on Specially Serviced Mortgage
Loans), but only to the extent the amounts are not needed to pay interest on
Advances or certain additional trust fund expenses incurred during the preceding
twelve months with respect to the Trust as a whole. The Master Servicer also is
authorized but not required to invest or direct the investment of funds held in
the Certificate Account in Permitted Investments, and the Master Servicer will
be entitled to retain any interest or other income earned on those funds and
will bear any losses resulting from the investment of these funds, except as set
forth in the Pooling and Servicing Agreement. The Master Servicer also is
entitled to retain any interest earned on any servicing escrow account to the
extent the interest is not required to be paid to the related borrowers.
The principal compensation to be paid to the Special Servicer in respect of
its special servicing activities will be the Special Servicing Fee, the Workout
Fee and the Liquidation Fee.
The "Special Servicing Fee" will accrue with respect to each Specially
Serviced Mortgage Loan at a rate equal to 0.25% per annum (the "Special
Servicing Fee Rate") calculated on the basis of the Stated Principal Balance of
the related Specially Serviced Mortgage Loans and on the basis of a 360-day year
consisting of twelve 30-day months, and will be payable monthly from the trust
fund.
The "Workout Fee" will generally be payable with respect to each Corrected
Mortgage Loan and will be calculated by application of a "Workout Fee Rate" of
1% to each collection of interest and principal (including scheduled payments,
prepayments, balloon payments, and payments at maturity) received on the
respective mortgage loan for so long as it remains a Corrected Mortgage Loan.
The Workout Fee with respect to any Corrected Mortgage Loan will cease to be
payable if the Corrected Mortgage Loan again becomes a Specially Serviced
Mortgage Loan but will become payable again if and when the mortgage loan again
becomes a Corrected Mortgage Loan.
If the Special Servicer is terminated (other than for cause) or resigns, it
shall retain the right to receive any and all Workout Fees payable in respect to
mortgage loans that became Corrected Mortgage Loans during the period that it
acted as special servicer and remained Corrected Mortgage Loans at the time of
that termination or resignation but such fee will cease to be payable if the
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Corrected Mortgage Loan again becomes a Specially Serviced Mortgage Loan. The
successor special servicer will not be entitled to any portion of those Workout
Fees.
A "Liquidation Fee" will be payable with respect to each Specially Serviced
Mortgage Loan as to which the Special Servicer obtains a full or discounted
payoff (or unscheduled partial payment to the extent such prepayment is required
by the Special Servicer as a condition to a workout) from the related borrower
and, except as otherwise described below, with respect to any Specially Serviced
Mortgage Loan or REO Property as to which the Special Servicer receives any
Liquidation Proceeds. The Liquidation Fee for each Specially Serviced Mortgage
Loan will be payable from, and will be calculated by application of a
"Liquidation Fee Rate" of 1% to the related payment or proceeds. Notwithstanding
anything to the contrary described above, no Liquidation Fee will be payable
based on, or out of, Liquidation Proceeds received in connection with the
repurchase of any mortgage loan by a Mortgage Loan Seller for a breach of
representation or warranty or for defective or deficient mortgage loan
documentation, the purchase of any Specially Serviced Mortgage Loan by the
majority holder of the Controlling Class, the Special Servicer or the Master
Servicer, or the purchase of all of the mortgage loans and REO Properties in
connection with an optional termination of the trust fund. If, however,
Liquidation Proceeds are received with respect to any Corrected Mortgage Loan
and the Special Servicer is properly entitled to a Workout Fee, the Workout Fee
will be payable based on and out of the portion of the Liquidation Proceeds that
constitutes principal and/or interest.
The Special Servicer will also be entitled to additional servicing
compensation in the form of all assumption application fees, assumption fees,
extension fees and modification fees received on or with respect to Specially
Serviced Mortgage Loans and 50% of all assumption and modification fees with
respect to all non-Specially Serviced Mortgage Loans, except for modification
fees that the Master Servicer is entitled to receive, as described above. The
Special Servicer will also be entitled to late payment charges and default
interest paid by the borrowers on Specially Serviced Mortgage Loans, but only to
the extent those amounts are not needed to pay interest on Advances or certain
additional trust fund expenses incurred during the preceding twelve months with
respect to the Trust as a whole. The Special Servicer will not be entitled to
retain any portion of Excess Interest paid on the APD Loans.
Although the Master Servicer and the Special Servicer are each required to
service and administer the pool of mortgage loans in accordance with the
Servicing Standards above and, accordingly, without regard to its right to
receive compensation under the Pooling and Servicing Agreement, additional
servicing compensation in the nature of assumption and modification fees may
under certain circumstances provide the Master Servicer or the Special Servicer,
as the case may be, with an economic disincentive to comply with this standard.
As and to the extent described in this prospectus supplement under
"Description of the Certificates--Advances," the Master Servicer and the Special
Servicer, as applicable, will be entitled to receive interest on Advances, which
will be paid contemporaneously with the reimbursement of the related Advance.
Each of the Master Servicer and the Special Servicer generally will be
required to pay all expenses incurred by it in connection with its servicing
activities under the Pooling and Servicing Agreement and will not be entitled to
reimbursement for any expense of this type except as expressly provided in the
Pooling and Servicing Agreement. The Master Servicer will be responsible for all
fees of any sub-servicers. See "Description of the
Certificates--Distributions--Method, Timing and Amount" in this prospectus
supplement and "Description of the Pooling Agreements--Certificate Account" and
"--Servicing Compensation and Payment of Expenses" in the prospectus.
MAINTENANCE OF INSURANCE
To the extent permitted by the related mortgage loan and required by the
Servicing Standards, the Master Servicer will be required to use its reasonable
best efforts to (1) cause each borrower to maintain, and if the borrower does
not maintain, will be required to (2) itself maintain to the extent available at
commercially reasonable rates (as determined by the Master Servicer in
accordance with the Servicing Standards), a fire and hazard insurance policy
with extended coverage covering the
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related Mortgaged Property. The coverage of that kind of policy will be in an
amount that is not less than the lesser of the full replacement cost of the
improvements securing that mortgage loan or the outstanding principal balance
owing on that mortgage loan, but in any event, in an amount sufficient to avoid
the application of any co-insurance clause unless otherwise noted in the related
mortgage loan documents. After the Master Servicer determines that a Mortgaged
Property is located in an area identified as a federally designated special
flood hazard area (and flood insurance has been made available), the Master
Servicer will be required to use its reasonable best efforts to (1) cause each
borrower to maintain (to the extent required by the related mortgage loan), and
if the borrower does not so maintain, will be required to (2) itself maintain to
the extent available at commercially reasonable rates (as determined by the
Master Servicer in accordance with the Servicing Standards) a flood insurance
policy in an amount representing coverage not less than the lesser of (1) the
outstanding principal balance of the related mortgage loan and (2) the maximum
amount of insurance which is available under the Flood Disaster Protection Act
of 1973, as amended, but only to the extent that the related mortgage loan
permits the lender to require the coverage and maintaining coverage is
consistent with the Servicing Standards.
The Special Servicer will be required to maintain (or cause to be
maintained), fire and hazard insurance on each REO Property, to the extent
obtainable, in an amount which is at least equal to the lesser of (1) an amount
necessary to avoid the application of any co-insurance clause and (2) the full
replacement cost of the improvements on the REO Property. In addition, while the
REO Property is located in an area identified as a federally designated special
flood hazard area, the Special Servicer will be required to cause to be
maintained, to the extent available at commercially reasonable rates (as
determined by the Special Servicer in accordance with the Servicing Standards),
a flood insurance policy meeting the requirements of the current guidelines of
the Federal Insurance Administration in an amount representing coverage not less
than the maximum amount of insurance which is available under the Flood Disaster
Protection Act of 1973, as amended.
The Pooling and Servicing Agreement provides that the Master Servicer and
the Special Servicer may satisfy their respective obligations to cause each
borrower to maintain a hazard insurance policy by maintaining a blanket or
master single interest policy insuring against hazard losses on the mortgage
loans and REO Properties. Any losses incurred with respect to mortgage loans or
REO Properties due to uninsured risks (including earthquakes, mudflows and
floods) or insufficient hazard insurance proceeds may adversely affect payments
to Certificateholders. Any cost incurred by the Master Servicer or Special
Servicer in maintaining that kind of insurance policy if the borrower defaults
on its obligation to do so will be advanced by the Master Servicer or the
Special Servicer as a Servicing Advance and will be charged to the related
borrower. Generally, no borrower is required by the mortgage loan documents to
maintain earthquake insurance on any Mortgaged Property and the Special Servicer
will not be required to maintain earthquake insurance on any REO Properties. Any
cost of maintaining that kind of required insurance or other earthquake
insurance obtained by the Special Servicer will be paid out of a segregated
custodial account created and maintained by the Special Servicer on behalf of
the Trustee in trust for the Certificateholders (the "REO Account") or advanced
by the Master Servicer or the Special Servicer as a Servicing Advance.
The costs of the insurance may be recovered by the Master Servicer or
Special Servicer from reimbursements received from the borrower or, if the
borrower does not pay those amounts, as a Servicing Advance as set forth in the
Pooling and Servicing Agreement.
No pool insurance policy, special hazard insurance policy, bankruptcy bond,
repurchase bond or certificate guarantee insurance will be maintained with
respect to the mortgage loans, nor will any mortgage loan be subject to FHA
insurance.
MODIFICATIONS, WAIVER AND AMENDMENTS
The Special Servicer may agree to extend the maturity date of a mortgage
loan that is not a Specially Serviced Mortgage Loan; except that any extension
entered into by the Special Servicer will not extend the maturity date beyond
the earlier of (1) two years prior to the Rated Final Distribution
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Date and (2) in the case of a mortgage loan secured by a leasehold estate and
not the related fee interest, the date twenty years prior to the expiration of
the leasehold estate; provided that, if the extension would extend the maturity
date of a mortgage loan for more than twelve months from and after the original
maturity date of the mortgage loan, the Special Servicer must obtain the opinion
of counsel described in the next sentence. Except as otherwise set forth in this
paragraph, the Special Servicer (or in certain circumstances upon the consent of
the Special Servicer, the Master Servicer other than with respect to
non-material modifications, waivers and amendments (for which no consent of the
Special Servicer will be required)) may not waive, modify or amend (or consent
to waive, modify or amend) any provision of a mortgage loan which is not in
default or as to which default is not reasonably foreseeable except for (1) the
waiver of any due-on-sale clause or due-on-encumbrance clause to the extent
permitted in the Pooling and Servicing Agreement, and (2) any waiver,
modification or amendment that would not be a "significant modification" of the
mortgage loan within the meaning of Treasury Regulations
Section 1.860G-2(b) and as to which the Special Servicer has provided the
Trustee with an opinion of counsel that the waiver, modification or amendment
will not constitute a "significant modification."
If, but only if, the Special Servicer determines that a modification,
waiver or amendment (including the forgiveness or deferral of interest or
principal or the substitution or release of collateral or the pledge of
additional collateral) of the terms of a Specially Serviced Mortgage Loan with
respect to which a payment default or other material default has occurred or a
payment default or other material default is, in the Special Servicer's
judgment, reasonably foreseeable, is reasonably likely to produce a greater
recovery on a net present value basis (the relevant discounting to be performed
at the related Mortgage Rate) than liquidation of the Specially Serviced
Mortgage Loan, then the Special Servicer may, but is not required to, agree to a
modification, waiver or amendment of the Specially Serviced Mortgage Loan,
subject to the restrictions and limitations described below. The Special
Servicer will use its best efforts to the extent possible to fully amortize a
modified mortgage loan prior to the Rated Final Distribution Date.
The Special Servicer may not agree to a modification, waiver or amendment
of any term of any Specially Serviced Mortgage Loan if that modification, waiver
or amendment would:
(1) extend the maturity date of the Specially Serviced Mortgage Loan
to a date occurring later than the earlier of (A) two years prior to the
Rated Final Distribution Date and (B) if the Specially Serviced Mortgage
Loan is secured by a leasehold estate and not the related fee interest, the
date twenty years prior to the expiration of the leasehold;
(2) reduce the related Net Mortgage Rate to less than the lesser of
(A) the original Net Mortgage Rate and (B) the highest Pass-Through Rate on
any Class of Certificates (other than the Class X Certificates); or
(3) provide for the deferral of interest unless (A) interest accrues
on the mortgage loan, generally, at the related Mortgage Rate and (B) the
aggregate amount of deferred interest does not exceed 10% of the unpaid
principal balance of the Specially Serviced Mortgage Loan.
In the event of a modification which creates a deferral of interest, the
Pooling and Servicing Agreement will provide that the amount of deferred
interest will be allocated to reduce the Distributable Certificate Interest of
the Class or Classes (other than the Class X Certificates) with the latest
alphabetical designation then outstanding, and to the extent so allocated, will
be added to the Certificate Balance of the Class or Classes.
The Special Servicer or the Master Servicer, as the case may be, will be
required to notify each other, the Mortgage Loan Sellers, S&P, DCR, and the
Trustee of any modification, waiver or amendment of any term of any mortgage
loan and will be required to deliver to the Trustee for deposit in the related
mortgage file, an original counterpart of the agreement related to the
modification, waiver or amendment, promptly following the execution. Copies of
each agreement whereby the modification, waiver or amendment of any term of any
mortgage loan is effected are required to be available for
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review during normal business hours at the offices of the Trustee. See
"Description of the Certificates--Reports to Certificateholders; Certain
Available Information" in this prospectus supplement.
THE DIRECTING CERTIFICATEHOLDER
The Directing Certificateholder will be entitled to advise the Special
Servicer with respect to the following actions of the Special Servicer, and
except as otherwise described below, the Special Servicer will not be permitted
to take any of the following actions as to which the Directing Certificateholder
has objected in writing within 10 business days of having been notified thereof
(provided that if such written notice has not been received by the Special
Servicer within the 10 day period, the Directing Certificateholder will be
deemed to have waived its right to object):
(i) any foreclosure upon or comparable conversion (which may include
acquisitions of an REO Property) of the ownership of properties
securing such of the Specially Serviced Mortgage Loans as come
into and continue in default;
(ii) any modification, amendment or waiver of a monetary term
(including the timing of payments) or any material non-monetary
term of a mortgage loan;
(iii) any proposed sale of a defaulted mortgage loan or REO Property
(other than in connection with the termination of the trust as
described under "Description of Certificates--Termination;
Retirement of Certificates" in this prospectus supplement) for
less than the applicable Purchase Price;
(iv) any acceptance of a discounted payoff;
(v) any determination to bring an REO Property into compliance with
applicable environmental laws or to otherwise address hazardous
material located at an REO Property;
(vi) any material release of collateral for a mortgage loan (other
than in accordance with the terms of, or upon satisfaction of,
that mortgage loan);
(vii) any acceptance of substitute or additional collateral for a
mortgage loan (other than in accordance with the terms of that
mortgage loan);
(viii) any waiver of a "due-on-sale" or "due-on-encumbrance" clause;
and
(ix) any acceptance of an assumption agreement releasing a borrower
from liability under a mortgage loan;
provided that, in the event that the Special Servicer determines that immediate
action is necessary to protect the interests of the Certificateholders (as a
collective whole), the Special Servicer may take any such action without waiting
for the Directing Certicateholder's response.
Any costs and expenses incurred by the Special Servicer in obtaining such
consent will be borne by the Directing Certicateholder. In the event the Special
Servicer determines that a refusal to consent by the Directing Certificateholder
or any advice from the Directing Certificateholder would cause the Special
Servicer to violate the terms of the Pooling and Servicing Agreement, including
without limitation, the Servicing Standards, the Special Servicer will be
required to disregard such refusal to consent or advice and notify the Directing
Certificateholder, the Trustee, S&P and DCR.
LIMITATION ON LIABILITY OF DIRECTING CERTIFICATEHOLDER
The Directing Certificateholder will not be liable to the trust fund or the
Certificateholders for any action taken, or for refraining from the taking of
any action, in good faith pursuant to the Pooling and Servicing Agreement, or
for errors in judgment; provided, however, that the Directing Certificateholder
will not be protected against any liability which would otherwise be imposed by
reason of willful misfeasance, bad faith or gross negligence in the performance
of duties or by reason of reckless disregard of obligations or duties. Each
Certificateholder acknowledges and agrees, by its acceptance of its
Certificates, that the Directing Certificateholder may have special
relationships and interests that
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conflict with those of holders of one or more classes of certificates, that the
Directing Certificateholder may act solely in the interests of the holders of
the Controlling Class, that the Directing Certicateholder does not have any
duties to the holders of any class of certificates other than the Controlling
Class, that the Directing Certificateholder may take actions that favor the
interests of the holders of the Controlling Class over the interests of the
holders of one or more other classes of certificates, that the Directing
Certificateholder, absent willful misfeasance, bad faith or gross negligence,
will not be deemed to have been grossly negligent or reckless, or to have acted
in bad faith or engaged in willful misconduct, by reason of its having acted
solely in the interests of the Controlling Class, and that the Directing
Certificateholder will have no liability whatsoever for having so acted.
REALIZATION UPON DEFAULTED MORTGAGE LOANS
Pursuant to the Pooling and Servicing Agreement, if a default on a mortgage
loan has occurred or, in the Special Servicer's judgment, a payment default is
imminent, the Special Servicer, on behalf of the Trustee, may at any time
institute foreclosure proceedings, exercise any power of sale contained in the
related Mortgage, obtain a deed in lieu of foreclosure or otherwise acquire
title to the related Mortgaged Property, by operation of law or otherwise. The
Special Servicer is not permitted, however, to acquire title 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 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 certain federal environmental laws,
unless the Special Servicer has previously received a report prepared by a
person who regularly conducts environmental audits (which report will be paid
for by the Master Servicer as a Servicing Advance) and either:
(1) the report indicates that (a) the Mortgaged Property is in
compliance with applicable environmental laws and regulations and
(b) 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
(2) the Special Servicer, based solely (as to environmental matters
and related costs) on the information set forth in the report, determines
that taking those actions as are necessary to bring the Mortgaged Property
into compliance with applicable environmental laws and regulations and/or
taking the actions contemplated by clause (1)(b) above, is reasonably
likely to produce a greater recovery, taking into account the time value of
money, than not taking those actions. See "Certain Legal Aspects of
Mortgage Loans--Environmental Risks" in the prospectus.
The Pooling and Servicing Agreement grants to the majority holder of the
Controlling Class, the Special Servicer and the Master Servicer, in that order,
a right of first refusal to purchase from the trust fund, at the Purchase Price,
any mortgage loan as to which a specified number of scheduled payments are
delinquent. In addition, the Special Servicer may offer to sell any defaulted
mortgage loan if and when the Special Servicer determines, consistent with the
Servicing Standards, that the sale would produce a greater recovery, taking into
account the time value of money, than would liquidation of the related Mortgaged
Property. In the absence of the sale, the Special Servicer will generally be
required to proceed against the related Mortgaged Property, subject to the
discussion above.
If title to any Mortgaged Property is acquired by the trust fund, the
Special Servicer, on behalf of the trust fund, will be required to sell the
Mortgaged Property prior to the close of the third calendar year beginning after
the year of acquisition, unless (1) the Internal Revenue Service (the "IRS")
grants an extension of time to sell the property or (2) the Trustee receives an
opinion of independent counsel to the effect that the holding of the property by
the trust fund longer than the above-referenced three year period will not
result in the imposition of a tax on either the Upper-Tier REMIC or the
Lower-Tier REMIC or cause the trust fund (or either the Upper-Tier REMIC or the
Lower-Tier REMIC) to fail to qualify as a REMIC under the Code at any time that
any Certificate is outstanding. Subject to the foregoing
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and any other tax-related limitations, pursuant to the Pooling and Servicing
Agreement, the Special Servicer will generally be required to attempt to sell
any Mortgaged Property so acquired on the same terms and conditions it would if
it were the owner. The Special Servicer will also be required to ensure that any
Mortgaged Property acquired by the trust fund is administered so that it
constitutes "foreclosure property" within the meaning of Code
Section 860G(a)(8) at all times, that the sale of the property does not result
in the receipt by the trust fund of any income from nonpermitted assets as
described in Code Section 860F(a)(2)(B). If the trust fund acquires title to any
Mortgaged Property, the Special Servicer, on behalf of the trust fund, will
retain, at the expense of the trust fund, an independent contractor to manage
and operate the property. The independent contractor generally will be permitted
to perform construction (including renovation) on a foreclosed property only if
the construction was at least 10% completed at the time default on the related
mortgage loan became imminent. The retention of an independent contractor,
however, will not relieve the Special Servicer of its obligation to manage the
Mortgaged Property as required under the Pooling and Servicing Agreement.
Generally, neither the Upper-Tier REMIC nor the Lower-Tier REMIC will be
taxable on income received with respect to a Mortgaged Property acquired by the
trust fund to the extent that it constitutes "rents from real property," within
the meaning of Code Section 856(c)(3)(A) and Treasury regulations under the
Code. "Rents from real property" include fixed rents and rents based on the
receipts or sales of a tenant but do not include the portion of any rental based
on the net income or profit of any tenant or sub-tenant. No determination has
been made whether rent on any of the Mortgaged Properties meets this
requirement. "Rents from real property" include charges for services customarily
furnished or rendered in connection with the rental of real property, whether or
not the charges are separately stated. Services furnished to the tenants of a
particular building will be considered as customary if, in the geographic market
in which the building is located, tenants in buildings which are of similar
class are customarily provided with the service. No determination has been made
whether the services furnished to the tenants of the Mortgaged Properties are
"customary" within the meaning of applicable regulations. It is therefore
possible that a portion of the rental income with respect to a Mortgaged
Property owned by the trust fund, presumably allocated based on the value of any
non-qualifying services, would not constitute "rents from real property." "Rents
from real property" also do not include income from the operation of a trade or
business on the Mortgaged Property, such as a hotel. Any of the foregoing types
of income may instead constitute "net income from foreclosure property," which
would be taxable to the Lower-Tier REMIC at the highest marginal federal
corporate rate (currently 35%) and may also be subject to state or local taxes.
The Pooling and Servicing Agreement provides that the Special Servicer will be
permitted to cause the Lower-Tier REMIC to earn "net income from foreclosure
property" that is subject to tax if it determines that the net after-tax benefit
to Certificateholders is greater than another method of operating or net leasing
the Mortgaged Property. Because these sources of income, if they exist, are
already in place with respect to the Mortgaged Properties, it is generally
viewed as beneficial to Certificateholders to permit the trust fund to continue
to earn them if it acquires a Mortgaged Property, even at the cost of this tax.
These taxes would be chargeable against the related income for purposes of
determining the proceeds available for distribution to holders of Certificates.
See "Certain Federal Income Tax Consequences--Federal Income Tax Consequences
for REMIC Certificates--Taxes That May Be Imposed on the REMIC Pool" in the
prospectus.
To the extent that Liquidation Proceeds collected with respect to any
mortgage loan are less than the sum of: (1) the outstanding principal balance of
the mortgage loan, (2) interest accrued on the mortgage loan and (3) the
aggregate amount of outstanding reimbursable expenses (including any
unreimbursed Servicing Advances and unpaid and accrued interest on those
Servicing Advances) incurred with respect to the mortgage loan, then the trust
fund will realize a loss in the amount of the shortfall. The Trustee, the Master
Servicer and/or the Special Servicer will be entitled to reimbursement out of
the Liquidation Proceeds recovered on any mortgage loan, prior to the
distribution of those Liquidation Proceeds to Certificateholders, of any and all
amounts that represent unpaid servicing compensation in respect of the related
mortgage loan, certain unreimbursed expenses incurred with respect to the
mortgage loan and any unreimbursed Advances made with respect to the mortgage
loan.
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In addition, amounts otherwise distributable on the Certificates will be further
reduced by interest payable to the Master Servicer, the Special Servicer or
Trustee on these Advances.
If any Mortgaged Property suffers damage and the proceeds, if any, of the
related hazard insurance policy are insufficient to restore fully the damaged
property, the Master Servicer will not be required to advance the funds to
effect the restoration unless (1) the Special Servicer determines that the
restoration will increase the proceeds to Certificateholders on liquidation of
the mortgage loan after reimbursement of the Special Servicer or the Master
Servicer, as the case may be, for its expenses and (2) the Master Servicer
determines that the expenses will be recoverable by it from related Insurance
and Condemnation Proceeds and Liquidation Proceeds.
INSPECTIONS; COLLECTION OF OPERATING INFORMATION
The Master Servicer will be required to perform or cause to be performed
(at its own expense), physical inspections of each Mortgaged Property securing a
Mortgage Note with a Stated Principal Balance of (A) $2,000,000 or more at least
once every 12 months and (B) less than $2,000,000 at least once every
24 months, in each case commencing in calendar year 2000; provided, however,
that if any scheduled payment becomes more than 60 days delinquent on the
related mortgage loan, the Special Servicer is required to inspect the related
Mortgaged Property as soon as practicable after the mortgage loan becomes a
Specially Serviced Mortgage Loan and annually thereafter for so long as the
mortgage loan remains a Specially Serviced Mortgage Loan (the cost of which
inspection will be a Servicing Advance). The Special Servicer or the Master
Servicer, as applicable, will be required to prepare a written report of the
inspection describing, among other things, the condition of and any damage to
the Mortgaged Property and specifying the existence of any material vacancies in
the Mortgaged Property of which it has knowledge, of any sale, transfer or
abandonment of the Mortgaged Property, of any material change in the condition
of the Mortgaged Property, or of any waste committed on the Mortgaged Property.
With respect to each mortgage loan that requires the borrower to deliver
those statements, the Special Servicer or the Master Servicer, as applicable, is
also required to collect and review the annual operating statements of the
related Mortgaged Property. Most of the Mortgages obligate the related borrower
to deliver annual property operating statements. However, we cannot assure you
that any operating statements required to be delivered will in fact be
delivered, nor is the Special Servicer or the Master Servicer likely to have any
practical means of compelling the delivery in the case of an otherwise
performing mortgage loan.
Copies of the inspection reports and operating statements referred to above
are to be available for review by Certificateholders during normal business
hours at the offices of the Paying Agent. See "Description of the
Certificates--Reports to Certificateholders; Certain Available Information" in
this prospectus supplement.
CERTAIN MATTERS REGARDING THE MASTER SERVICER, THE SPECIAL SERVICER AND THE
DEPOSITOR
The Pooling and Servicing Agreement permits the Master Servicer and the
Special Servicer to resign from their respective obligations only upon (a) in
the case of the Master Servicer only, the appointment of, and the acceptance of
the appointment by, a successor and receipt by the Trustee of written
confirmation from each of S&P and DCR that the resignation and appointment will,
in and of itself, not cause a downgrade, withdrawal or qualification of the
rating assigned by S&P or DCR to any class of certificates; provided that with
respect to the resignation of the Master Servicer, The Chase Manhattan Bank will
have been offered the opportunity to accept the appointment and The Chase
Manhattan Bank and the Master Servicer have been unable to agree upon terms or
The Chase Manhattan Bank has declined or otherwise been unable to accept that
appointment, or (b) a determination that their respective obligations are no
longer permissible with respect to the Master Servicer or the Special Servicer,
as the case may be, under applicable law. No resignation will become effective
until the Trustee or other successor has assumed the obligations and duties of
the resigning Master Servicer or Special Servicer, as the case may be, under the
Pooling and Servicing Agreement.
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The Pooling and Servicing Agreement will provide that none of the Master
Servicer, the Special Servicer (or the Special Servicer's members and managers),
the Depositor or any member, manager, director, officer, employee or agent of
any of them will be under any liability to the trust fund or the
Certificateholders for any action taken, or not taken, in good faith pursuant to
the Pooling and Servicing Agreement or for errors in judgment; provided,
however, that none of the Master Servicer, the Special Servicer, the Depositor
or similar person will be protected against any liability that would otherwise
be imposed by reason of willful misfeasance, bad faith or negligence in the
performance of obligations or duties under the Pooling and Servicing Agreement
or by reason of negligent disregard of the obligations and duties. The Pooling
and Servicing Agreement will also provide that the Master Servicer, the Special
Servicer (or the Special Servicer's members and managers), the Depositor and any
director, officer, employee or agent of any of them will be entitled to
indemnification by the trust fund against any loss, liability or expense
incurred in connection with any legal action or claim that relates to the
Pooling and Servicing Agreement or the Certificates; provided, however, that the
indemnification will not extend to any loss, liability or expense incurred by
reason of willful misfeasance, bad faith or negligence in the performance of
obligations or duties under the Pooling and Servicing Agreement, by reason of
negligent disregard of the obligations or duties, or in the case of the
Depositor and any of its directors, officers, members, managers, employees and
agents, any violation by any of them of any state or federal securities law.
In addition, the Pooling and Servicing Agreement will provide that none of
the Master Servicer, the Special Servicer or 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 or that in its opinion may involve it in any expense or liability.
However, each of the Master Servicer, the Special 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 Certificateholders under the Pooling and
Servicing Agreement. In that event, the legal expenses and costs of the action,
and any liability resulting therefrom, will be expenses, costs and liabilities
of the Certificateholders, and the Master Servicer, the Special Servicer or the
Depositor, as the case may be, will be entitled to charge the Certificate
Account for the expenses.
Pursuant to the Pooling and Servicing Agreement, the Master Servicer and
Special Servicer will each be required to maintain a fidelity bond and errors
and omissions policy or their equivalent that provides coverage against losses
that may be sustained as a result of an officer's or employee's misappropriation
of funds or errors and omissions, subject to certain limitations as to amount of
coverage, deductible amounts, conditions, exclusions and exceptions permitted by
the Pooling and Servicing Agreement. Notwithstanding the foregoing, the Master
Servicer will be allowed to self-insure with respect to an errors and omission
policy and a fidelity bond so long as certain conditions set forth in the
Pooling and Servicing Agreement are met.
Any person into which the Master Servicer, the Special Servicer or the
Depositor may be merged or consolidated, or any person resulting from any merger
or consolidation to which the Master Servicer, the Special Servicer or the
Depositor is a party, or any person succeeding to the business of the Master
Servicer, the Special Servicer or the Depositor, will be the successor of the
Master Servicer, the Special Servicer or the Depositor, as the case may be,
under the Pooling and Servicing Agreement. The Master Servicer and the Special
Servicer may have other normal business relationships with the Depositor or the
Depositor's affiliates.
EVENTS OF DEFAULT
"Events of Default" under the Pooling and Servicing Agreement with respect
to the Master Servicer or the Special Servicer, as the case may be, will
include, without limitation:
(a) (A) any failure by the Master Servicer to make a required deposit
to the Certificate Account on the day such deposit was first required to be
made, which failure is not remedied within 1 business day, or (B) any
failure by the Master Servicer to deposit into, or remit to the
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Paying Agent for deposit into, the Distribution Account any amount required
to be so deposited or remitted, which failure is not remedied by
10:00 a.m. (New York City time) on the relevant Distribution Date;
(b) any failure by the Special Servicer to deposit into the REO
Account within one business day after the day such deposit is required to
be made, or to remit to the Master Servicer for deposit in the Certificate
Account any such remittance required to be made by the Special Servicer on
the day such remittance is required to be made under the Pooling and
Servicing Agreement;
(c) any failure by the Master Servicer or the Special Servicer duly to
observe or perform in any material respect any of its other covenants or
obligations under the Pooling and Servicing Agreement, which failure
continues unremedied for thirty days (10 days in the case of a failure to
make a Servicing Advance or 15 days in the case of a failure to pay the
premium for any insurance policy required to be maintained under the
Pooling and Servicing Agreement) after written notice of the failure has
been given to the Master Servicer or the Special Servicer, as the case may
be, by any other party to the Pooling and Servicing Agreement, or to the
Master Servicer or the Special Servicer, as the case may be, with a copy to
each other party to the related Pooling and Servicing Agreement, by
Certificateholders of any Class, evidencing, as to that Class, percentage
interests aggregating not less than 25%; provided, however, if that failure
is capable of being cured and the Master Servicer or Special Servicer, as
applicable, is diligently pursuing that cure, that 30-day period will be
extended an additional 30 days;
(d) any breach on the part of the Master Servicer or the Special
Servicer of any representation or warranty in the Pooling and Servicing
Agreement which materially and adversely affects the interests of any Class
of Certificateholders and which continues unremedied for a period of
30 days after the date on which notice of that breach, requiring the same
to be remedied, will have been given to the Master Servicer or the Special
Servicer, as the case may be, by the Depositor or the Trustee, or to the
Master Servicer, the Special Servicer, the Depositor and the Trustee by the
holders of Certificates of any Class evidencing, as to that Class,
percentage interests aggregating not less than 25%; provided, however, if
that breach is capable of being cured and the Master Servicer or Special
Servicer, as applicable, is diligently pursuing that cure, that 30-day
period will be extended an additional 30 days;
(e) certain events of insolvency, readjustment of debt, marshaling of
assets and liabilities or similar proceedings in respect of or relating to
the Master Servicer or the Special Servicer, and certain actions by or on
behalf of the Master Servicer or the Special Servicer indicating its
insolvency or inability to pay its obligations;
(f) the Trustee has received written notice from DCR that the
continuation of the Master Servicer or the Special Servicer in that
capacity would result, or has resulted, in a downgrade or withdrawal of any
rating then assigned by DCR to any Class of Certificates; and
(g) the Master Servicer or the Special Servicer is removed from S&P's
approved master servicer list or approved special servicer list, as
applicable, and the removal coincides with the downgrade, qualification
(including, without limitation, "negative credit watch") or withdrawal of
the ratings of any of the Certificates by S&P.
RIGHTS UPON EVENT OF DEFAULT
If an Event of Default occurs with respect to the Master Servicer or the
Special Servicer under the Pooling and Servicing Agreement, then, so long as the
Event of Default remains unremedied, the Depositor or the Trustee will be
authorized, and at the direction of Certificateholders entitled to not less than
51% of the Voting Rights, the Trustee will be required, to terminate all of the
rights and obligations of the defaulting party as Master Servicer or Special
Servicer, as applicable, under the Pooling and Servicing Agreement. If the
Master Servicer is terminated due to certain Events of Default, subject to the
rights of Chase, as described below, the Trustee will solicit bids for such
servicing rights and deliver the net proceeds of any resulting sale to the
Master Servicer. If the Master Servicer is
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terminated, Chase will be offered the opportunity to accept the appointment. If
Chase and the Master Servicer have been unable to agree upon terms or Chase has
declined or otherwise been unable to accept that appointment, then the Trustee
will succeed to all of the responsibilities, duties and liabilities of the
Master Servicer as described below. The Trustee, or the Master Servicer with
respect to a termination of the Special Servicer, then will succeed to all of
the responsibilities, duties and liabilities of the defaulting party as Master
Servicer or Special Servicer, as applicable, under the Pooling and Servicing
Agreement and will be entitled to similar compensation arrangements. If the
Trustee is unwilling or unable so to act, it may (or, at the written request of
Certificateholders entitled to not less than 51% of the Voting Rights, it will
be required to) appoint, or petition a court of competent jurisdiction to
appoint, a loan servicing institution or other entity that would not result in
the downgrading, qualification or withdrawal of the ratings assigned to any
Class of Certificates by either of S&P or DCR to act as successor to the Master
Servicer or Special Servicer, as the case may be, under the Pooling and
Servicing Agreement.
No Certificateholder will have any right under the Pooling and Servicing
Agreement to institute any proceeding with respect to the Certificates or the
Pooling and Servicing Agreement unless the holder previously has given to the
Trustee written notice of default and the continuance of the default and unless
the holders of Certificates of any Class evidencing not less than 25% of the
aggregate Percentage Interests constituting the Class have made written request
upon the Trustee to institute a proceeding in its own name (as Trustee) and have
offered to the Trustee reasonable indemnity, and the Trustee for 60 days after
receipt of the request and indemnity has neglected or refused to institute the
proceeding. However, the Trustee will be under no obligation to exercise any of
the trusts or powers vested in it by the Pooling and Servicing Agreement or to
institute, conduct or defend any related litigation at the request, order or
direction of any of the Certificateholders, unless the Certificateholders have
offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which may be incurred as a result.
AMENDMENT
The Pooling and Servicing Agreement may be amended by the parties thereto,
without the consent of any of the holders of Certificates:
(a) to cure any ambiguity;
(b) to correct or supplement any of its provisions which may be
inconsistent with any other provisions or to correct any error;
(c) to change the timing and/or nature of deposits in the Certificate
Account, the Distribution Accounts or the REO Account, provided that
(A) the Servicer Remittance Date shall in no event be later than the
related Distribution Date, (B) the change would not adversely affect in any
material respect the interests of any Certificateholder, as evidenced by an
opinion of counsel (at the expense of the party requesting the amendment)
and (C) the change would not result in the downgrading, qualification or
withdrawal of the ratings assigned to any Class of Certificates by either
of S&P or DCR, as evidenced by a letter from each of S&P and DCR;
(d) to modify, eliminate or add to any of its provisions (A) to the
extent as will be necessary to maintain the qualification of either the
Upper-Tier REMIC or Lower-Tier REMIC as a REMIC, to maintain the grantor
trust portion of the trust fund as a grantor trust or to avoid or minimize
the risk of imposition of any tax on the trust fund, provided that the
Trustee has received an opinion of counsel (at the expense of the party
requesting the amendment) to the effect that (1) the action is necessary or
desirable to maintain qualification or to avoid or minimize the risk and
(2) the action will not adversely affect in any material respect the
interests of any holder of the Certificates or (B) to restrict the transfer
of the Residual Certificates, provided that the Depositor has determined
that the amendment will not give rise to any tax with respect to the
transfer of the Residual Certificates to a non-permitted transferee (see
"Certain Federal Income Tax Consequences--Federal Income Tax Consequences
for REMIC Certificates--Taxation of Residual Certificates--Tax-Related
Restrictions on Transfer of Residual Certificates" in the prospectus);
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<PAGE>
(e) to make any other provisions with respect to matters or questions
arising under the Pooling and Servicing Agreement or any other change,
provided that the required action will not adversely affect in any material
respect the interests of any Certificateholder, as evidenced by an opinion
of counsel and written confirmation that the change would not result in the
downgrading, qualification or withdrawal of the ratings assigned to any
Class of Certificates by either of S&P or DCR; or
(f) to amend or supplement any provision of the Pooling and Servicing
Agreement to the extent necessary to maintain the ratings assigned to each
Class of Certificates by each of S&P and DCR as evidenced by written
confirmation that the change would not result in the downgrading,
qualification or withdrawal of the ratings assigned to any Class of
Certificates by either of S&P or DCR.
The Pooling and Servicing Agreement may also be amended by the parties
thereto with the consent of the holders of Certificates of each Class affected
thereby evidencing, in each case, not less than 66 2/3% of the aggregate
Percentage Interests constituting the Class for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
the Pooling and Servicing Agreement or of modifying in any manner the rights of
the holders of the Certificates, except that the amendment may not (1) reduce in
any manner the amount of, or delay the timing of, payments received on the
mortgage loans which are required to be distributed on a Certificate of any
Class without the consent of the holder of that Certificate, (2) reduce the
aforesaid percentage of Certificates of any Class the holders of which are
required to consent to the amendment without the consent of the holders of all
Certificates of that Class then outstanding, (3) adversely affect the Voting
Rights of any Class of Certificates or (4) amend the Servicing Standard without
the consent of the holders of all Certificates of the Classes then outstanding.
Notwithstanding the foregoing, the Trustee will not be required to consent
to any amendment to the Pooling and Servicing Agreement without having first
received an opinion of counsel (at the trust fund's expense) to the effect that
the amendment is permitted under the Pooling and Servicing Agreement and that
the amendment or the exercise of any power granted to the Master Servicer, the
Special Servicer, the Depositor, the Trustee or any other specified person in
accordance with the amendment, will not result in the imposition of a tax on any
portion of the trust fund or cause either the Upper-Tier REMIC or Lower-Tier
REMIC to fail to qualify as a REMIC or cause the grantor trust portion of the
trust fund to fail to qualify as a grantor trust.
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YIELD AND MATURITY CONSIDERATIONS
YIELD CONSIDERATIONS
General. The yield on any Offered Certificate will depend on: (1) the
Pass-Through Rate for the Certificate; (2) the price paid for the Certificate
and, if the price was other than par, the rate and timing of payments of
principal on the Certificate; (3) the aggregate amount of distributions on the
Certificate; and (4) the aggregate amount of Collateral Support Deficit amounts
allocated to a Class of Offered Certificates.
Pass-Through Rate. The Pass-Through Rate applicable to each Class of
Offered Certificates for any Distribution Date will equal the rate set forth on
the cover of this prospectus supplement. See "Description of the Certificates"
in this prospectus supplement.
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). The rate and timing of principal
payments on the mortgage loans will in turn be affected by their amortization
schedules, the dates on which balloon payments are due, any extensions of
maturity dates by the Master Servicer or the Special Servicer and the rate and
timing of principal prepayments and other unscheduled collections on the
mortgage loans (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 borrowers under an APD Loan may have
certain incentives to prepay APD Loans on their Anticipated Prepayment Dates, we
cannot assure you that the related borrowers will be able to prepay the APD
Loans on their Anticipated Prepayment Date. The failure of a borrower to prepay
the APD Loans on their Anticipated Prepayment Dates will not be an event of
default under the terms of the APD Loans, and pursuant to the terms of the
Pooling and Servicing Agreement, neither the Master Servicer nor the Special
Servicer will be permitted to take any enforcement action with respect to a
borrower's failure to pay Excess Interest, other than requests for collection,
until the scheduled maturity of the APD Loans; provided, that the Master
Servicer or the Special Servicer, as the case may be, may take action to enforce
the trust fund's right to apply excess cash flow to principal in accordance with
the terms of the APD Loans documents. See "Risk Factors--Borrower May Be Unable
to Repay Remaining Principal Balance on Maturity Date or Anticipated Prepayment
Date" in this prospectus supplement.
Prepayments and, assuming the respective stated maturity dates for the
mortgage loans 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 "Certain Legal Aspects of
Mortgage Loans--Foreclosure" in the prospectus. In general, the Class X
Certificates will be extremely sensitive to the rate of principal prepayments,
principal losses and interest rate reductions due to modifications on the
mortgage loans. Because the rate of principal payments on the mortgage loans
will depend on future events and a variety of factors (as described below), we
cannot assure you as to the 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.
The extent to which the yield to maturity of any Class of Offered
Certificates may vary from the anticipated yield will depend upon the degree to
which the 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 the Certificates. An investor should consider, in the case of any Offered
Certificate
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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 the
investor that is lower than the anticipated yield and, in the case of any
Offered Certificate purchased at a premium, particularly the Class X
Certificates, the risk that a faster than anticipated rate of principal payments
on the mortgage loans will result in an actual yield to the investor 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 an investor's yield to maturity. As a result, the
effect on an investor's yield of principal payments distributed on an investor's
Offered Certificates occurring at a rate higher (or lower) than the rate
anticipated by the investor during any particular period would not be fully
offset by a subsequent like reduction (or increase) in the rate of principal
payments.
Principal payments (whether resulting from differences in amortization
terms, prepayments following expirations of the respective prepayment lockout
periods or otherwise) on the mortgage loans will affect the Pass-Through Rate of
the Class X Certificates and, to the extent the weighted average Net Mortgage
Rate would be reduced below the fixed Pass-Through Rate on those Classes, the
Class D, Class E and Class F Certificates, for one or more future periods and
therefore will also affect the yield on those Classes.
The yield on the Class X, Class D, Class E and Class F Certificates could
be adversely affected if mortgage loans with higher interest rates pay faster
than the mortgage loans with lower interest rates, since those classes bear
interest at a rate limited by the weighted average net mortgage rate of the
mortgage loans. The pass-through rates on those classes of certificates may be
limited by the weighted average of the net interest rates on the mortgage loans
even if principal prepayments do not occur.
Losses and Shortfalls. The yield to holders of the Offered Certificates
will also depend on the extent to which the holders are required to bear the
effects of any losses or shortfalls on the mortgage loans. Losses and other
shortfalls on the mortgage loans will generally be borne by the holders of the
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 the Class of
Certificates. In the event of the reduction of the Certificate Balances of all
those Classes of Certificates to zero, the resulting 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).
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, prevailing interest rates, the
terms of the mortgage loans (for example, due-on-sale clauses, Lockout Periods
or Yield Maintenance Charges and amortization terms that require balloon
payments), the demographics and relative economic vitality of the areas in which
the Mortgaged Properties are located and the general supply and demand for
rental properties in those areas, the quality of management of the Mortgaged
Properties, the servicing of the mortgage loans, possible changes in tax laws
and other opportunities for investment. See "Risk Factors" 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 pool of mortgage loans 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, under all of the mortgage
loans, voluntary prepayments are subject to Lockout Periods and/or Yield
Maintenance Periods. See "Description of the Mortgage Pool--Certain Terms and
Conditions of the Mortgage Loans--Prepayment 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 in the Mortgaged Property,
to meet cash flow needs or to make other investments. In addition, some
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borrowers may be motivated by federal and state tax laws (which are subject to
change) to sell Mortgaged Properties prior to the exhaustion of tax depreciation
benefits.
The Depositor makes 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 fifteen 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 (assuming the
prices did not account for the delay).
Unpaid Distributable Certificate Interest. As described under "Description
of the Certificates--Distributions--Priority" 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. The shortfall
will not bear interest, however, so it will negatively affect the yield to
maturity of the Class of Certificates for so long as it is outstanding.
WEIGHTED AVERAGE LIFE
The weighted average life of an Offered Certificate (other than the Class X
Certificates) refers to the average amount of time that will elapse from the
date of its issuance until each dollar allocable to principal of the Certificate
is distributed to the investor. The weighted average life of an Offered
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, Insurance and
Condemnation 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 annual 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 maturity or the Anticipated Prepayment Date, as
the case may be. 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. We cannot assure you, 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 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 Class of Certificates.
The tables have been prepared on the basis of the following assumptions, among
others:
(a) scheduled periodic payments of principal and/or interest on the
mortgage loans will be received on a timely basis and will be distributed
on each Distribution Date, beginning in December 1999;
(b) the Mortgage Rate in effect for each mortgage loan as of the
cut-off date will remain in effect to maturity or the Anticipated
Prepayment Date, as the case may be, and will be adjusted as required
pursuant to the definition of Mortgage Rate;
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(c) the periodic principal and/or interest payment 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 maturity or the Anticipated
Prepayment Date, as the case may be;
(d) any principal prepayments on the mortgage loans will be received
on their respective due dates after the expiration of any applicable
Lockout Period at the respective levels of CPR set forth in the tables;
(e) No Mortgage Loan Seller will be required to repurchase any
mortgage loan, and none of the Master Servicer, the Special Servicer, the
holders of the Controlling Class or the holders of the Class LR
Certificates will exercise its option to purchase all the mortgage loans
and thereby cause an early termination of the trust fund;
(f) no Yield Maintenance Charges are included in any allocations or
calculations;
(g) any principal prepayments received on the mortgage loans are
prepayments in full and are received on a Due Date;
(h) the Closing Date is November 23, 1999;
(i) the APD Loans prepay on their Anticipated Prepayment Date; and
(j) the Pass-Through Rates and initial Certificate Balances of the
respective Classes of Certificates are as described in this Prospectus
Supplement.
To the extent that the mortgage loans have characteristics that differ from
those assumed in preparing the tables set forth below, a Class of Offered
Certificates (other than the Class X Certificates) may mature earlier or later
than indicated by the tables. 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. These variations may occur even if the
average prepayment experience of the mortgage loans were to equal any of the
specified CPR percentages. Investors are urged to conduct their 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
the Class of the Offered Certificate that would be outstanding after each of the
dates shown at the indicated CPRs.
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<PAGE>
PERCENT OF THE INITIAL CERTIFICATE BALANCE
OF THE CLASS A-1 CERTIFICATES AT THE RESPECTIVE CPRS
SET FORTH BELOW:
<TABLE>
<CAPTION>
DATE 0% CPR 3% CPR 6% CPR 9% CPR 12% CPR
- ---------------------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Initial Percent............................... 100 100 100 100 100
November 15, 2000............................. 94 94 94 94 94
November 15, 2001............................. 88 88 88 88 88
November 15, 2002............................. 81 81 81 81 81
November 15, 2003............................. 73 73 73 73 73
November 15, 2004............................. 61 61 61 61 61
November 15, 2005............................. 52 52 52 52 52
November 15, 2006............................. 31 31 31 31 31
November 15, 2007............................. 10 10 10 10 10
November 15, 2008............................. 0 0 0 0 0
Weighted Average Life (Years)(1).............. 5.50 5.50 5.50 5.50 5.50
Estimated Month of First Principal............ 12/15/99 12/15/99 12/15/99 12/15/99 12/15/99
Estimated Month of Maturity................... 10/15/08 10/15/08 10/15/08 10/15/08 10/15/08
</TABLE>
- ------------------
(1) The weighted average life of the Class A-1 Certificates is determined by
(a) multiplying the amount of each principal distribution on it by the
number of years from the date of issuance of the Class A-1 Certificates to
the related Distribution Date, (b) summing the results and (c) dividing the
sum by the aggregate amount of the reductions in the principal balance of
the Class A-1 Certificates.
PERCENT OF THE INITIAL CERTIFICATE BALANCE
OF THE CLASS A-2 CERTIFICATES AT THE RESPECTIVE CPRS
SET FORTH BELOW:
<TABLE>
<CAPTION>
DATE 0% CPR 3% CPR 6% CPR 9% CPR 12% CPR
- ---------------------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Initial Percent............................... 100 100 100 100 100
November 15, 2000............................. 100 100 100 100 100
November 15, 2001............................. 100 100 100 100 100
November 15, 2002............................. 100 100 100 100 100
November 15, 2003............................. 100 100 100 100 100
November 15, 2004............................. 100 100 100 100 100
November 15, 2005............................. 100 100 100 100 100
November 15, 2006............................. 100 100 100 100 100
November 15, 2007............................. 100 100 100 100 100
November 15, 2008............................. 100 100 100 100 100
November 15, 2009............................. 0 0 0 0 0
Weighted Average Life (Years)(1).............. 9.83 9.82 9.82 9.82 9.82
Estimated Month of First Principal............ 10/15/08 10/15/08 10/15/08 10/15/08 10/15/08
Estimated Month of Maturity................... 11/15/09 11/15/09 11/15/09 11/15/09 11/15/09
</TABLE>
- ------------------
(1) The weighted average life of the Class A-2 Certificates is determined by
(a) multiplying the amount of each principal distribution on it by the
number of years from the date of issuance of the Class A-2 Certificates to
the related Distribution Date, (b) summing the results and (c) dividing the
sum by the aggregate amount of the reductions in the principal balance of
the Class A-2 Certificates.
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<PAGE>
PERCENT OF THE INITIAL CERTIFICATE BALANCE
OF THE CLASS B CERTIFICATES AT THE RESPECTIVE CPRS
SET FORTH BELOW:
<TABLE>
<CAPTION>
DATE 0% CPR 3% CPR 6% CPR 9% CPR 12% CPR
- ---------------------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Initial Percent............................... 100 100 100 100 100
November 15, 2000............................. 100 100 100 100 100
November 15, 2001............................. 100 100 100 100 100
November 15, 2002............................. 100 100 100 100 100
November 15, 2003............................. 100 100 100 100 100
November 15, 2004............................. 100 100 100 100 100
November 15, 2005............................. 100 100 100 100 100
November 15, 2006............................. 100 100 100 100 100
November 15, 2007............................. 100 100 100 100 100
November 15, 2008............................. 100 100 100 100 100
November 15, 2009............................. 0 0 0 0 0
Weighted Average Life (Years)(1).............. 9.98 9.98 9.98 9.98 9.98
Estimated Month of First Principal............ 11/15/09 11/15/09 11/15/09 11/15/09 11/15/09
Estimated Month of Maturity................... 11/15/09 11/15/09 11/15/09 11/15/09 11/15/09
</TABLE>
- ------------------
(1) The weighted average life of the Class B Certificates is determined by (a)
multiplying the amount of each principal distribution on it by the number of
years from the date of issuance of the Class B Certificates to the related
Distribution Date, (b) summing the results and (c) dividing the sum by the
aggregate amount of the reductions in the principal balance of the Class B
Certificates.
PERCENT OF THE INITIAL CERTIFICATE BALANCE
OF THE CLASS C CERTIFICATES AT THE RESPECTIVE CPRS
SET FORTH BELOW:
<TABLE>
<CAPTION>
DATE 0% CPR 3% CPR 6% CPR 9% CPR 12% CPR
- ---------------------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Initial Percent............................... 100 100 100 100 100
November 15, 2000............................. 100 100 100 100 100
November 15, 2001............................. 100 100 100 100 100
November 15, 2002............................. 100 100 100 100 100
November 15, 2003............................. 100 100 100 100 100
November 15, 2004............................. 100 100 100 100 100
November 15, 2005............................. 100 100 100 100 100
November 15, 2006............................. 100 100 100 100 100
November 15, 2007............................. 100 100 100 100 100
November 15, 2008............................. 100 100 100 100 100
November 15, 2009............................. 0 0 0 0 0
Weighted Average Life (Years)(1).............. 9.98 9.98 9.98 9.98 9.98
Estimated Month of First Principal............ 11/15/09 11/15/09 11/15/09 11/15/09 11/15/09
Estimated Month of Maturity................... 11/15/09 11/15/09 11/15/09 11/15/09 11/15/09
</TABLE>
- ------------------
(1) The weighted average life of the Class C Certificates is determined by (a)
multiplying the amount of each principal distribution on it by the number of
years from the date of issuance of the Class C Certificates to the related
Distribution Date, (b) summing the results and (c) dividing the sum by the
aggregate amount of the reductions in the principal balance of the Class C
Certificates.
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<PAGE>
PERCENT OF THE INITIAL CERTIFICATE BALANCE
OF THE CLASS D CERTIFICATES AT THE RESPECTIVE CPRS
SET FORTH BELOW:
<TABLE>
<CAPTION>
DATE 0% CPR 3% CPR 6% CPR 9% CPR 12% CPR
- ---------------------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Initial Percent............................... 100 100 100 100 100
November 15, 2000............................. 100 100 100 100 100
November 15, 2001............................. 100 100 100 100 100
November 15, 2002............................. 100 100 100 100 100
November 15, 2003............................. 100 100 100 100 100
November 15, 2004............................. 100 100 100 100 100
November 15, 2005............................. 100 100 100 100 100
November 15, 2006............................. 100 100 100 100 100
November 15, 2007............................. 100 100 100 100 100
November 15, 2008............................. 100 100 100 100 100
November 15, 2009............................. 0 0 0 0 0
Weighted Average Life (Years)(1).............. 9.98 9.98 9.98 9.98 9.98
Estimated Month of First Principal............ 11/15/09 11/15/09 11/15/09 11/15/09 11/15/09
Estimated Month of Maturity................... 11/15/09 11/15/09 11/15/09 11/15/09 11/15/09
</TABLE>
- ------------------
(1) The weighted average life of the Class D Certificates is determined by
(a) multiplying the amount of each principal distribution on it by the
number of years from the date of issuance of the Class D Certificates to the
related Distribution Date, (b) summing the results and (c) dividing the sum
by the aggregate amount of the reductions in the principal balance of the
Class D Certificates.
PERCENT OF THE INITIAL CERTIFICATE BALANCE
OF THE CLASS E CERTIFICATES AT THE RESPECTIVE CPRS
SET FORTH BELOW:
<TABLE>
<CAPTION>
DATE 0% CPR 3% CPR 6% CPR 9% CPR 12% CPR
- ---------------------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Initial Percent............................... 100 100 100 100 100
November 15, 2000............................. 100 100 100 100 100
November 15, 2001............................. 100 100 100 100 100
November 15, 2002............................. 100 100 100 100 100
November 15, 2003............................. 100 100 100 100 100
November 15, 2004............................. 100 100 100 100 100
November 15, 2005............................. 100 100 100 100 100
November 15, 2006............................. 100 100 100 100 100
November 15, 2007............................. 100 100 100 100 100
November 15, 2008............................. 100 100 100 100 100
November 15, 2009............................. 0 0 0 0 0
Weighted Average Life (Years)(1).............. 9.98 9.98 9.98 9.98 9.98
Estimated Month of First Principal............ 11/15/09 11/15/09 11/15/09 11/15/09 11/15/09
Estimated Month of Maturity................... 11/15/09 11/15/09 11/15/09 11/15/09 11/15/09
</TABLE>
- ------------------
(1) The weighted average life of the Class E Certificates is determined by (a)
multiplying the amount of each principal distribution on it by the number of
years from the date of issuance of the Class E Certificates to the related
Distribution Date, (b) summing the results and (c) dividing the sum by the
aggregate amount of the reductions in the principal balance of the Class E
Certificates.
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<PAGE>
PERCENT OF THE INITIAL CERTIFICATE BALANCE
OF THE CLASS F CERTIFICATES AT THE RESPECTIVE CPRS
SET FORTH BELOW:
<TABLE>
<S> <C> <C> <C> <C> <C>
DATE 0% CPR 3% CPR 6% CPR 9% CPR 12% CPR
- ---------------------------------------------- -------- -------- -------- -------- --------
Initial Percent............................... 100 100 100 100 100
November 15, 2000............................. 100 100 100 100 100
November 15, 2001............................. 100 100 100 100 100
November 15, 2002............................. 100 100 100 100 100
November 15, 2003............................. 100 100 100 100 100
November 15, 2004............................. 100 100 100 100 100
November 15, 2005............................. 100 100 100 100 100
November 15, 2006............................. 100 100 100 100 100
November 15, 2007............................. 100 100 100 100 100
November 15, 2008............................. 100 100 100 100 100
November 15, 2009............................. 0 0 0 0 0
Weighted Average Life (Years)(1).............. 9.98 9.98 9.98 9.98 9.98
Estimated Month of First Principal............ 11/15/09 11/15/09 11/15/09 11/15/09 11/15/09
Estimated Month of Maturity................... 11/15/09 11/15/09 11/15/09 11/15/09 11/15/09
</TABLE>
- ------------------
(1) The weighted average life of the Class F Certificates is determined by (a)
multiplying the amount of each principal distribution on it by the number of
years from the date of issuance of the Class F Certificates to the related
Distribution Date, (b) summing the results and (c) dividing the sum by the
aggregate amount of the reductions in the principal balance of the Class F
Certificates.
YIELD SENSITIVITY OF THE OFFERED CERTIFICATES
The tables beginning on page C-1 hereto (the "Yield Tables") indicate the
sensitivity of the pre-tax corporate bond equivalent yields to maturity of the
Class A-1, Class A-2, Class B, Class C, Class D, Class E and Class F
Certificates at various prices and constant prepayment rates. The allocations
and calculations do not take account of any Yield Maintenance Charges. The Yield
Tables have been prepared based on the assumption that distributions are made in
accordance with "Description of the Certificates" in this prospectus supplement,
the assumptions described in clauses (a) through (j) on pages S-115 and S-116
and, where applicable, the specified assumed purchase prices (which prices do
not include accrued interest). Assumed purchase prices are expressed in 32nds
(i.e., 100/04 means 100 4/32%) as a percentage of the initial Certificate
Balance of each Class of Offered Certificates.
The yields set forth in the Yield Tables were calculated by determining the
monthly discount rates which, when applied to the assumed stream of cash flows
to be paid on each Class of Offered Certificates, would cause the discounted
present value of the assumed stream of cash flows to equal the assumed purchase
prices, plus accrued interest from and including November 1, 1999 to, but
excluding November 23, 1999, and by converting the monthly rates to semi-annual
corporate bond equivalent rates. This calculation does not take into account
variations that may occur in the interest rates at which investors may be able
to reinvest funds received by them as distributions on the Offered Certificates
and consequently does not purport to reflect the return on any investment in the
Classes of Offered Certificates when the reinvestment rates are considered. For
purposes of the Yield Tables (except in the case of the Class X Certificates),
"modified duration" has been calculated using the modified Macaulay Duration as
specified in the "PSA Standard Formulas". The Macaulay Duration is calculated as
the present value weighted average time to receive future payments of principal
and interest, and the PSA Standard Formula modified duration is calculated by
dividing the Macaulay Duration by the appropriate semi-annual compounding
factor. The duration of a security may be calculated according to various
methodologies; accordingly, no representation is made by the Depositor or any
other person that the "modified duration" approach used in this prospectus
supplement is appropriate. Duration, like yield, will be affected by the
prepayment rate of the mortgage loans and extensions in respect of balloon
payments that actually occur during the life of the
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<PAGE>
Class A-1, Class A-2, Class B, Class C, Class D, Class E and Class F
Certificates and by the actual performance of the mortgage loans, all of which
may differ, and may differ significantly, from the assumptions used in preparing
the Yield Tables.
The characteristics of the mortgage loans differ in certain respects from
those assumed in preparing the Yield Tables, and the Yield Tables are presented
for illustrative purposes only. In particular, none of the mortgage loans permit
voluntary partial prepayments. Thus neither the pool of mortgage loans nor any
mortgage loan will prepay at any constant rate, and it is unlikely that the
mortgage loans will prepay in a manner consistent with the designated Scenario
for the Yield Tables. 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, that the actual pre-tax yields
on, or any other payment characteristics of, any Class of Offered Certificates
will correspond to any of the information shown in the Yield Tables, or that the
aggregate purchase prices of the Offered Certificates will be as assumed.
Accordingly, investors must make their own decisions as to the appropriate
assumptions (including prepayment assumptions) to be used in deciding whether to
purchase the Offered Certificates.
YIELD SENSITIVITY OF THE CLASS X CERTIFICATES
The yield to maturity on the Class X Certificates will be extremely
sensitive to the rate and timing of principal payments (including prepayments),
principal losses and interest rate reductions due to modifications on the
mortgage loans and to other factors set forth above. Investors should fully
consider the associated risks, including the risk that a rapid rate of principal
payments or principal losses on the pool of mortgage loans could result in the
failure by investors in the Class X Certificates to fully recoup their initial
investments.
ANY OPTIONAL TERMINATION BY THE SPECIAL SERVICER, THE MASTER SERVICER, THE
HOLDERS OF THE CONTROLLING CLASS, THE DEPOSITOR OR THE HOLDERS OF THE CLASS LR
CERTIFICATES WOULD RESULT IN PREPAYMENT IN FULL OF THE CERTIFICATES AND WOULD
HAVE AN ADVERSE EFFECT ON THE YIELD OF THE CLASS X CERTIFICATES BECAUSE A
TERMINATION WOULD HAVE AN EFFECT SIMILAR TO A PRINCIPAL PREPAYMENT IN FULL OF
THE MORTGAGE LOANS (WITHOUT, HOWEVER, THE PAYMENT OF ANY YIELD MAINTENANCE
CHARGES) AND, AS A RESULT, INVESTORS IN THE CLASS X CERTIFICATES AND ANY OTHER
CERTIFICATES PURCHASED AT PREMIUM MIGHT NOT FULLY RECOUP THEIR INITIAL
INVESTMENT. SEE "DESCRIPTION OF THE CERTIFICATES--TERMINATION; RETIREMENT OF
CERTIFICATES" IN THIS PROSPECTUS SUPPLEMENT.
The table below indicates the sensitivity of the pre-tax corporate bond
equivalent yields to maturity of the Class X Certificates at various prices and
constant prepayment rates. The allocations and calculations do not take account
of any Yield Maintenance Charges. 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 the assumed stream of cash flows to equal the
assumed purchase prices plus accrued interest of the respective Class of
Certificates and converting the monthly rates to corporate bond equivalent
rates. These calculations do not take into account variations that may occur in
the interest rates at which investors may be able to reinvest funds received by
them as distributions on the Class X Certificates and consequently do not
purport to reflect the return on any investment in the Class of Certificates
when the reinvestment rates are considered.
The table below has been prepared based on the assumption that
distributions are made in accordance with "Description of the Certificates" in
this prospectus supplement and on the assumptions described in clauses (a)
through (j) on pages S-115 and S-116 and with the assumed respective purchase
prices (as a percentage of the initial Notional Amount of the Class X
Certificates) of the Class X Certificates set forth in the table, plus accrued
interest thereon from November 1, 1999 to the Closing Date.
S-121
<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>
6.00%........................................................... 10.57% 10.57% 10.57% 10.56% 10.56%
6.25%........................................................... 9.55% 9.54% 9.54% 9.54% 9.54%
6.50%........................................................... 8.58% 8.58% 8.58% 8.58% 8.57%
</TABLE>
We cannot assure you 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 aggregate 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 the actual yield to maturity
to investors, even if the average rate of principal prepayments is consistent
with the expectations of investors. Investors must make their own decisions as
to the appropriate prepayment assumption to be used in deciding whether to
purchase the Class X Certificates.
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<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Upon the issuance of the Certificates, Cadwalader, Wickersham & Taft,
special counsel to the Depositor, will deliver its opinion that, assuming
(1) the making of appropriate elections, (2) compliance with the provisions of
the Pooling and Servicing Agreement and (3) compliance with applicable changes
in the Internal Revenue Code of 1986, as amended (the "Code"), including the
REMIC Provisions, for federal income tax purposes, the trust fund, exclusive of
the Excess Interest and the Excess Interest Distribution Account, will qualify
as two separate real estate mortgage investment conduits (the "Upper-Tier REMIC"
and the "Lower-Tier REMIC," respectively, and each a "REMIC") within the meaning
of Sections 860A through 860G (the "REMIC Provisions") of the Code, and (1) 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 the "regular interests" in the Upper-Tier REMIC and (2) the
Class R and Class LR Certificates will be the sole classes of "residual
interests" in the Upper-Tier REMIC and Lower-Tier REMIC, respectively, within
the meaning of the REMIC Provisions in effect on the date of this prospectus
supplement. Each of certain individual mortgage loans may constitute the sole
asset of a separate REMIC and the "regular interest" in each Loan REMIC (instead
of the related mortgage loan) will be an asset of the Lower-Tier REMIC. The
Offered Certificates are "Regular Certificates" as defined in the prospectus. In
addition, in the opinion of Cadwalader, Wickersham & Taft, the portion of the
trust fund consisting of the Excess Interest and the Excess Interest
Distribution Account will be treated as a grantor trust for federal income tax
purposes under subpart E, Part I of subchapter J of the Code.
Because they represent regular interests, each Class of Offered
Certificates generally will be treated as newly originated debt instruments for
federal income tax purposes. Holders of the Classes of Offered Certificates will
be required to include in income all interest on the regular interests
represented by their Certificates in accordance with the accrual method of
accounting, regardless of a Certificateholder's usual method of accounting. It
is anticipated that the regular interests represented by the Class E and
Class F Certificates will be issued with original issue discount ("OID") for
federal income tax purposes in an amount equal to the excess of the initial
Certificate Balances of those Certificates (plus 8 days of interest at the
Pass-Through Rates thereon) over their respective issue prices (including
accrued interest). It is also anticipated that the Class A-1, Class A-2,
Class B, Class C and Class D Certificates will be issued at a premium for
federal income tax purposes. The prepayment assumption that will be used in
determining the rate of accrual of OID or whether the OID is de minimis 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, that it is
assumed that the APD Loans prepay on their Anticipated Prepayment Dates (the
"Prepayment Assumption"). No representation is made that the mortgage loans will
prepay at that rate or at any other rate. See "Certain Federal Income Tax
Consequences--Federal Income Tax Consequences for REMIC Certificates--Taxation
of Regular Certificates" in the prospectus.
Although unclear for federal income tax purposes, it is anticipated that
the regular interests represented by the Class X Certificates will be considered
to be issued with OID in an amount equal to the excess of all distributions of
interest expected to be received on it (assuming the weighted average of the
Pass-Through Rates changes in accordance with the Prepayment Assumption) over
their issue price (including accrued interest). Any "negative" amounts of OID on
the Class X Certificates attributable to rapid prepayments with respect to the
mortgage loans will not be deductible currently, but may be offset against
future positive accruals of OID, if any. Finally, a holder of a Class X
Certificate may be entitled to a loss deduction to the extent it becomes certain
that the holder will not recover a portion of its basis in its Certificate,
assuming no further prepayments. In the alternative, it is possible that rules
similar to the "noncontingent bond method" of the contingent interest rules in
the OID Regulations, as amended on June 12, 1996, may be promulgated with
respect to the Class X Certificates. See "Certain Federal Income Tax
Consequences--Federal Income Tax Consequences for REMIC Certificates--Taxation
of Regular Certificates--Original Issue Discount" in the prospectus.
S-123
<PAGE>
Yield Maintenance Charges actually collected will be distributed among the
holders of the respective Classes of Certificates as described under
"Description of the Certificates--Allocation of Yield Maintenance Charges" in
this prospectus supplement. It is not entirely clear under the Code when the
amount of Yield Maintenance Charges so allocated should be taxed to the holder
of an Offered Certificate, but it is not expected, for federal income tax
reporting purposes, that Yield Maintenance Charges will be treated as giving
rise to any income to the holder of an Offered Certificate prior to the Master
Servicer's actual receipt of a Yield Maintenance Charge. Yield Maintenance
Charges, if any, may be treated as ordinary income, although authority exists
for treating such amounts as capital gain if they are treated as paid upon the
retirement or partial retirement of a Certificate. Certificateholders should
consult their own tax advisers concerning the treatment of Yield Maintenance
Charges.
The Offered Certificates will be treated as "real estate assets" within the
meaning of Section 856(c)(4)(A) of the Code, and interest (including OID, if
any) on the Offered Certificates will be interest described in
Section 856(c)(3)(B) of the Code. Moreover, the Offered Certificates will be
"qualified mortgages" for another REMIC within the meaning of
Section 860G(a)(3) of the Code and "permitted assets" for a "financial asset
securitization investment trust" within the meaning of Section 860L(c) of the
Code. The Offered Certificates will be treated as "loans . . . secured by an
interest in real property which is . . . residential real property" to the
extent the loans are secured by multifamily properties and manufactured housing
community properties. As of the cut-off date, 26, and 6 mortgage loans
representing approximately 27.95% and 4.42%, respectively, of the Initial Pool
Balance are secured by multifamily properties and manufactured housing community
properties, respectively. See "Certain Federal Income Tax Consequences--Federal
Income Tax Consequences for REMIC Certificates--Status of REMIC Certificates" in
the prospectus.
For further information regarding the federal income tax consequences of
investing in the Offered Certificates, see "Certain Federal Income Tax
Consequences--Federal Income Tax Consequences for REMIC Certificates--Taxation
of Regular Certificates" in the prospectus.
METHOD OF DISTRIBUTION
Subject to the terms and conditions set forth in the underwriting
agreement, dated as of the date of this prospectus supplement (the "Underwriting
Agreement"), among Chase Securities Inc. and Salomon Smith Barney Inc. (the
"Underwriters") and the Depositor, the Depositor has agreed to sell to the
Underwriters, and the Underwriters have severally but not jointly agreed to
purchase from the Depositor all the Offered Certificates. Salomon Smith Barney
Inc. has agreed to purchase $75,000,000 (subject to a variance of 10%) of the
Class A-2 Certificates and Chase Securities Inc. has agreed to purchase the
remainder of the Offered Certificates.
In the Underwriting Agreement, the Underwriters have severally but not
jointly agreed, subject to the terms and conditions set forth in the
Underwriting Agreement, to purchase all of the Offered Certificates if any
Offered Certificates are purchased. In the event of a default by any
Underwriter, the Underwriting Agreement provides that, in certain circumstances,
purchase commitments of the non-defaulting Underwriter may be increased or the
Underwriting Agreement may be terminated. Further, the Depositor has agreed to
indemnify the Underwriters, and the Mortgage Loan Sellers and the Underwriters
have agreed to indemnify the Depositor, against certain liabilities, including
liabilities under the Securities Act of 1933, as amended.
The Depositor has been advised by the Underwriters that they propose to
offer the Offered Certificates to the public from time to time in one or more
negotiated transactions, or otherwise, at varying prices to be determined at the
time of sale. Proceeds to the Depositor from the sale of Offered Certificates
before deducting expenses payable by the Depositor estimated to be approximately
$2,900,000, will be 106.962% of the initial aggregate Certificate Balance of the
Offered Certificates, plus accrued interest on the Offered Certificates from
November 1, 1999. The Underwriters may effect the transactions by selling the
Offered Certificates to or through dealers, and the dealers may receive
compensation in the form of underwriting discounts, concessions or commissions
from the Underwriters. In connection with the purchase and sale of the Offered
Certificates offered hereby, the
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<PAGE>
Underwriters may be deemed to have received compensation from the Depositor in
the form of underwriting discounts.
Chase Securities Inc. is an affiliate of the Depositor and Chase, one of
the Mortgage Loan Sellers and a primary servicer.
We cannot assure you 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 investors
concerning the Offered Certificates will be the monthly 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 and the status of the applicable
form of credit enhancement. Except as described in this prospectus supplement
under "Description of the Certificates--Reports to Certificateholders; Certain
Available Information," we cannot assure you 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 that 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 Chase Securities Inc.
in connection with offers and sales related to market-making transactions in the
Offered Certificates with respect to which Chase Securities Inc. acts as
principal. Chase Securities Inc. may also act as agent in those transactions.
Sales may be made at negotiated prices determined at the time of sale.
LEGAL MATTERS
The validity of the Certificates will be passed upon for the Depositor by
Cadwalader, Wickersham & Taft, New York, New York, and for the Underwriters by
Winston & Strawn, Chicago, Illinois. In addition, certain federal income tax
matters will be passed upon for the Depositor by Cadwalader, Wickersham & Taft.
RATINGS
It is a condition to issuance that the Offered Certificates be rated not
lower than the following ratings by Standard & Poor's Rating Services ("S&P")
and Duff & Phelps Credit Rating Co. ("DCR"):
<TABLE>
<CAPTION>
CLASS S&P DCR
- --------------------------------------------------------------- ---- ----
<S> <C> <C>
A-1............................................................ AAA AAA
A-2............................................................ AAA AAA
X.............................................................. AAAr 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 receipt by their holders of interest and the ultimate
repayment of principal to which they are entitled by the Rated Final
Distribution Date. The rating takes into consideration the credit quality of the
pool of mortgage loans, structural and legal aspects associated with the
certificates, and the extent to which the payment stream from the pool of
mortgage loans is adequate to make payments required under the certificates. S&P
assigns the additional rating of "r" to highlight classes of securities that S&P
believes may experience high volatility or high variability in expected returns
due to non-credit risks. The ratings on the Offered Certificates do not,
however, constitute a statement regarding the likelihood, timing or frequency of
prepayments (whether voluntary or involuntary) on the mortgage loans or the
degree to which the payments might differ from those originally contemplated. In
S-125
<PAGE>
addition, a rating does not address the likelihood or frequency of voluntary or
mandatory prepayments of mortgage loans, payment of Excess Interest or net
default interest or whether and to what extent payments of Yield Maintenance
Charges will be received or the corresponding effect on yield to investors. 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 Class X Certificateholders
receive only a single month's interest and thus suffer a nearly complete loss of
their investment, all amounts "due" to those holders will nevertheless have been
paid, and the result is consistent with the rating received on the Class X
Certificates. Accordingly, the ratings of the Class X Certificates should be
evaluated independently from similar ratings on other types of securities.
We cannot assure you as to whether any rating agency not requested to rate
the Offered Certificates will nonetheless issue a rating to any Class of Offered
Certificates and, if so, what the rating would be. A rating assigned to any
Class of Offered Certificates by a rating agency that has not been requested by
the Depositor to do so may be lower than the rating assigned thereto by DCR or
S&P.
The ratings on the Offered Certificates should be evaluated independently
from similar ratings on other types of securities. A security rating is not a
recommendation to buy, sell or hold securities and may be subject to revision or
withdrawal at any time by the assigning rating agency.
LEGAL INVESTMENT
The Certificates will not constitute "mortgage related securities" for
purposes of the Secondary Mortgage Market Enhancement Act of 1984, as amended.
No representations are made as to the proper characterization of the
Offered Certificates for legal investment purposes, financial institution
regulatory purposes, or other purposes, or as to the ability of particular
investors to purchase the Offered Certificates under applicable legal investment
restrictions. These uncertainties may adversely affect the liquidity of the
Offered Certificates. Accordingly, 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 a legal investment or are subject to investment, capital
or other restrictions. See "Legal Investment" in the prospectus.
ERISA CONSIDERATIONS
A fiduciary of any retirement plan or other employee benefit plan or
arrangement, including individual retirement accounts and annuities, Keogh plans
and collective investment funds and separate accounts in which those plans,
annuities, accounts or arrangements are invested, including insurance company
general accounts, that is subject to the fiduciary responsibility rules of
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
Section 4975 of the Code (an "ERISA Plan") or which is a governmental plan, as
defined in Section 3(32) of ERISA, subject to any federal, state or local law
("Similar Law") which is, to a material extent, similar to the foregoing
provisions of ERISA or the Code (collectively, with an ERISA Plan, a "Plan")
should review with its legal advisors whether the purchase or holding of Offered
Certificates could give rise to a transaction that is prohibited or is not
otherwise permitted either under ERISA, the Code or Similar Law or whether there
exists any statutory or administrative exemption applicable thereto. 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 to Chase Securities Inc. an
individual prohibited transaction exemption, PTE 90-33, 55 Fed. Reg. 23, 151
(June 6, 1990) (the "Exemption") as subsequently amended. The Exemption
generally exempts from the application of the prohibited transaction provisions
of Sections 406 and 407 of ERISA, and the excise taxes imposed on the prohibited
transactions pursuant to Sections 4975(a) and (b) of the Code, certain
transactions, among others, relating to the servicing and operation of the pools
of mortgage loans, such as the pool of
S-126
<PAGE>
mortgage loans, and the purchase, sale and holding of mortgage pass-through
certificates, such as the Senior Certificates, underwritten by the respective
Underwriter, provided that certain conditions set forth in the Exemption are
satisfied.
The Exemption sets forth six general conditions which must be satisfied for
a transaction involving the purchase, sale and holding of the Senior
Certificates to be eligible for exemptive relief. First, the acquisition of the
Senior 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. Second, the rights and interests evidenced by the Senior Certificates
must not be subordinated to the rights and interests evidenced by the other
certificates of the same trust. Third, the Senior Certificates at the time of
acquisition by the Plan must be rated in one of the three highest generic rating
categories by Standard & Poor's Rating Services ("S&P"), Moody's Investors
Service, Inc. ("Moody's"), Duff & Phelps Credit Rating Co. ("DCR") or Fitch
IBCA, Inc. ("Fitch"). Fourth, the Trustee cannot be an affiliate of any other
member of the "Restricted Group" which consists of any Underwriter, the
Depositor, the Trustee, the Master Servicer, the Special Servicer, any
sub-servicer, any entity that provides insurance or other credit support to the
trust fund and 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, and any affiliate of
any of the foregoing entities. Fifth, the sum of all payments made to and
retained by the Underwriters must represent not more than reasonable
compensation for underwriting the Senior Certificates, the sum of all payments
made to and retained by the Depositor pursuant to the assignment of the mortgage
loans to the trust fund must represent not more than the fair market value of
obligations and the sum of all payments made to and retained by the Master
Servicer, the Special Servicer and any sub-servicer must represent not more than
reasonable compensation for that person's services under the Pooling and
Servicing Agreement and reimbursement of the person's reasonable expenses in
connection therewith. Sixth, the investing Plan must be an accredited investor
as defined in Rule 501(a)(1) of Regulation D of the Securities and Exchange
Commission 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. It is a condition of the issuance
of the Class A Certificates that they be rated not lower than "AAA" by S&P and
DCR, and it is a condition of the issuance of the Class X Certificates that they
be rated no lower than "AAAr" by S&P and "AAA" by DCR. As of the Closing Date,
the fourth general condition set forth above will be satisfied with respect to
the Senior Certificates. A fiduciary of a Plan contemplating purchasing a
Class A or Class X Certificate in the secondary market must make its own
determination that, at the time of purchase, that the Class A or Class X
Certificates continue to satisfy the third and fourth general conditions set
forth above. A fiduciary of a Plan contemplating purchasing a Senior
Certificate, whether in the initial issuance of the related 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 the
related Senior Certificate.
The Exemption also requires that the trust fund meet the following
requirements: (1) the trust fund must consist solely of assets of the type that
have been included in other investment pools; (2) certificates in those other
investment pools must have been rated in one of the three highest categories of
S&P's, Moody's, Fitch or DCR for at least one year prior to the Plan's
acquisition of Senior Certificates; and (3) certificates in those other
investment pools must have been purchased by investors other than Plans for at
least one year prior to any Plan's acquisition of Senior Certificates.
If the general conditions of the Exemption are satisfied, the Exemption may
provide an exemption from the restrictions imposed by Sections 406(a) and
407(a) of ERISA (as well as the excise taxes imposed by Sections 4975(a) and (b)
of the Code by reason of Sections 4975(c)(1)(A) through (D) of the Code) in
connection with (1) the direct or indirect sale, exchange or transfer of Senior
Certificates in the initial issuance of Certificates between the Depositor or
the Underwriters and a Plan when the Depositor, either of the Underwriters, the
Trustee, the Master Servicer, the Special Servicer, a sub-servicer or a borrower
is a Party in Interest with respect to the investing Plan, (2) the direct or
indirect acquisition or disposition in the secondary market of the Senior
Certificates by a Plan and (3) the
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<PAGE>
holding of Senior Certificates by a Plan. However, no exemption is provided from
the restrictions of Sections 406(a)(1)(E), 406(a)(2) and 407 of ERISA for the
acquisition or holding of a Senior Certificate on behalf of an "Excluded Plan"
or any person who has discretionary authority or renders investment advice with
respect to the assets of the Excluded Plan. For purposes of this prospectus
supplement, an "Excluded Plan" is a Plan sponsored by any member of the
Restricted Group.
If certain specific conditions of the Exemption are also satisfied, the
Exemption may provide an exemption from the restrictions imposed by Sections
406(b)(1) and (b)(2) of ERISA and the taxes imposed by
Section 4975(c)(1)(E) of the Code in connection with (1) the direct or indirect
sale, exchange or transfer of Senior Certificates in the initial issuance of
Certificates between the Depositor or the Underwriters and a Plan when the
person who has discretionary authority or renders investment advice with respect
to the investment of Plan assets in those Certificates is (a) a borrower with
respect to 5% or less of the fair market value of the mortgage loans or (b) an
affiliate of that person, (2) the direct or indirect acquisition or disposition
in the secondary market of Senior Certificates by a Plan and (3) the holding of
Senior Certificates by a Plan.
Further, if certain specific conditions of the Exemption are satisfied, the
Exemption may provide an exemption from the restrictions imposed by
Sections 406(a), 406(b) and 407(a) of ERISA, and the taxes imposed by Sections
4975(a) and (b) of the Code by reason of Section 4975(c) of the Code for
transactions in connection with the servicing, management and operation of the
pool of mortgage loans.
Before purchasing a Senior Certificate, a fiduciary of a Plan should itself
confirm that (1) the Senior Certificates constitute "certificates" for purposes
of the Exemption and (2) the specific and general conditions and the other
requirements set forth in the Exemption would be satisfied. In addition to
making its own determination as to the availability of the exemptive relief
provided in the Exemption, the Plan fiduciary should consider the availability
of any other prohibited transaction exemptions, including with respect to
governmental plans, any exemptive relief afforded under Similar Laws. See
"Certain ERISA Considerations" in the prospectus. A purchaser of a Senior
Certificate should be aware, however, that even if the conditions specified in
one or more exemptions are satisfied, the scope of relief provided by an
exemption may not cover all acts which might be construed as prohibited
transactions.
Because the characteristics of the Subordinate Offered Certificates do not
meet the requirements of the Exemption, the purchase or holding of those
Certificates by a Plan may result in prohibited transactions or the imposition
of excise taxes or civil penalties. In no event may any transfer of a
Subordinate Offered Certificate or any interest in it be made to a Plan or to
any person who is directly or indirectly purchasing the Certificate or interest
in it on behalf of, as named fiduciary of, as trustee of, or with assets of a
Plan, unless the purchase and holding of the Certificate or interest in it is
exempt from the prohibited transaction provisions of Section 406 of ERISA and
the related excise tax provisions of Section 4975 of the Code under Prohibited
Transaction Class Exemption 95-60, which provides an exemption from the
prohibited transaction rules for certain transactions involving an insurance
company general account. The Plan or person to whom a transfer of the
Certificate or interest in it is made will be deemed to have represented to the
Depositor, the Master Servicer, the Special Servicer, the Trustee, each of the
Underwriters, any sub-servicer and any borrower with respect to the mortgage
loans that the purchase and holding of the Certificate or interest in it is so
exempt on the basis of Prohibited Transaction Class Exemption 95-60. See
"Certain ERISA Considerations" in the prospectus. Any Plan fiduciary considering
whether to purchase an Offered Certificate on behalf of a Plan should consult
with its counsel regarding the applicability of the fiduciary responsibility and
prohibited transaction provisions of ERISA and the Code to the investment.
The sale of Certificates to a Plan is in no respect a representation by the
Depositor or either of the Underwriters that this investment meets all relevant
legal requirements with respect to investments by Plans generally or any
particular Plan, or that this investment is appropriate for Plans generally or
any particular Plan.
S-128
<PAGE>
INDEX OF PRINCIPAL DEFINITIONS
<TABLE>
<S> <C>
Administrative Cost Rate ........................ S-83
Advances ........................................ S-89
Anticipated Prepayment Date ..................... S-50
APD Loans ....................................... S-50
Apple Blossom Loan .............................. S-49
Appraisal Reduction ............................. S-91
Appraisal Reduction Amount ...................... S-92
Appraisal Reduction Event ....................... S-91
Asset Status Report ............................. S-99
Assumed Final Distribution Date ................. S-86
Assumed Scheduled Payment ....................... S-84
Auburn Mall Loan ................................ S-49
Authenticating Agent ............................ S-75
Available Distribution Amount ................... S-78
Cedelbank ....................................... S-75
Center Trust Loans .............................. S-48
Certificate Account ............................. S-78
Certificate Balance ............................. S-74
Certificate Owner ............................... S-75
Certificate Registrar ........................... S-75
Certificateholders .............................. S-47
Certificates .................................... S-74
Chase .................................... S-64, S-100
Class ........................................... S-74
Class A Certificates ............................ S-74
Closing Date .................................... S-47
Code ........................................... S-123
Collateral Support Deficit ...................... S-88
Constant Prepayment Rate ....................... S-115
Controlling Class .............................. S-100
Controlling Class Certificateholder ........... S-100
Corrected Mortgage Loan ......................... S-99
CPR ............................................ S-115
Cross-Over Date ................................. S-82
Cut-Off Date Balance ............................ S-47
DCR ..................................... S-125, S-127
Debt Service Coverage Ratio ..................... S-58
Defeasance Loans ................................ S-53
Defeasance Lock-out Period ...................... S-53
Defeasance Option ............................... S-53
Depositor ....................................... S-47
Depositories .................................... S-75
Determination Date .............................. S-92
Direct Participants ............................. S-75
Directing Certificateholder .................... S-100
Distributable Certificate Interest .............. S-84
Distribution Accounts ........................... S-78
Distribution Date ............................... S-77
DSCR ............................................ S-58
DTC ............................................. S-75
Due Period ...................................... S-79
ERISA .......................................... S-126
ERISA Plan ..................................... S-126
Euroclear ....................................... S-75
Events of Default .............................. S-109
Excess Interest ................................. S-84
Excess Interest Distribution Account ............ S-78
Excluded Plan .................................. S-128
Exemption ...................................... S-126
FIRREA .......................................... S-63
Fitch .......................................... S-127
Form 8-K ....................................... S-54
GECC ............................................ S-64
HAP Contract .................................... S-34
HAP Loans ....................................... S-48
HUD ............................................. S-34
Indirect Participants ........................... S-75
Initial Pool Balance ............................ S-47
Initial Rate .................................... S-50
Insurance and Condemnation Proceeds ............. S-78
Interest Distribution Amount .................... S-84
Interest Reserve Account ........................ S-78
IRS ............................................ S-106
LIBOR ........................................... S-90
LIBOR Business Day .............................. S-90
Liquidation Fee ................................ S-102
Liquidation Fee Rate ........................... S-102
Liquidation Proceeds ............................ S-78
Lock Box Accounts ............................... S-73
Lock Box Loans .................................. S-73
Lockout Period .................................. S-50
Lower-Tier Distribution Account ................. S-78
Lower-Tier REMIC ............................... S-123
LTV Ratio ....................................... S-60
MAI ............................................. S-91
Master Servicer ................................ S-100
Moody's ........................................ S-127
Mortgage ........................................ S-47
</TABLE>
S-129
<PAGE>
<TABLE>
<S> <C>
Mortgage Loan Sellers ........................... S-47
Mortgage Note ................................... S-47
Mortgage Rate ................................... S-83
Mortgaged Property .............................. S-47
Net Mortgage Rate ............................... S-83
Non-Offered Certificates ........................ S-74
Non-Offered Subordinate Certificates ............ S-87
Nonrecoverable Advance .......................... S-89
Notional Amount ................................. S-74
Offered Certificates ............................ S-74
OID ............................................ S-123
Orange County Loans ............................. S-48
P&I Advance ..................................... S-89
Participants .................................... S-75
Pass-Through Rate ............................... S-82
Paying Agent .................................... S-75
Percentage Interest ............................. S-74
Periodic Payments ............................... S-58
Permitted Investments ........................... S-78
Plan ........................................... S-126
Pooling and Servicing Agreement ................. S-74
Prepayment Assumption .......................... S-123
Principal Distribution Amount ................... S-84
Principal Shortfall ............................. S-84
Purchase Agreements ............................. S-47
Purchase Price .................................. S-71
Qualified Substitute Mortgage Loan .............. S-72
Rated Final Distribution Date ................... S-86
Record Date ..................................... S-77
Reference Bank Rate ............................. S-90
Regular Certificates ........................... S-123
Reimbursement Rate .............................. S-90
Related Proceeds ................................ S-89
Release Date .................................... S-53
REMIC .......................................... S-123
REMIC Provisions ............................... S-123
REO Account .................................... S-103
REO Loan ........................................ S-85
REO Property .................................... S-99
Residual Certificates ........................... S-74
Restricted Group ............................... S-127
Revised Rate .................................... S-50
Rules ........................................... S-76
S&P ..................................... S-125, S-127
Scheduled Principal Distribution Amount ......... S-84
Section 8 ....................................... S-34
Senior Certificates ............................. S-74
Servicer Remittance Date ........................ S-89
Servicing Advances .............................. S-89
Servicing Fee .................................. S-101
Servicing Fee Rate ............................. S-101
Servicing Standards ............................. S-98
Similar Law .................................... S-126
Simon Loans ..................................... S-48
Special Servicer ............................... S-100
Special Servicing Fee .......................... S-101
Special Servicing Fee Rate ..................... S-101
Specially Serviced Mortgage Loans ............... S-99
Stated Principal Balance ........................ S-85
Statement to Certificateholders ................. S-92
Subordinate Certificates ........................ S-74
Subordinate Offered Certificates ................ S-74
Terms and Conditions ............................ S-76
Testing Date .................................... S-70
Title Exception ................................. S-68
Trustee ......................................... S-47
Trustee Fee ..................................... S-97
Trustee Fee Rate ................................ S-97
Underwriters ................................... S-124
Underwriting Agreement ......................... S-124
Underwritten Net Cash Flow ...................... S-62
Unscheduled Principal Distribution Amount....... S-84
Upper-Tier Distribution Account ................. S-78
Upper-Tier REMIC ............................... S-123
Voting Rights ................................... S-96
WAC Rate ........................................ S-83
Withheld Amounts ................................ S-78
Withheld Loans .................................. S-78
Workout Fee .................................... S-101
Workout Fee Rate ............................... S-101
Yield Maintenance Charge ........................ S-51
Yield Maintenance Period ........................ S-50
Yield Rate ...................................... S-51
Yield Tables ................................... S-120
</TABLE>
S-130
<PAGE>
CHASE COMMERCIAL MORTGAGE SECURITIES CORP., SERIES 1999-2
ANNEX A - CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS AND MORTGAGED PROPERTIES
<TABLE>
<CAPTION>
% of Initial Pool Mortgage Loan Original Cut-Off Date
ID Property Name Balance # of Properties Seller (1) Balance Balance
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 1123 Broadway 1.15% 1 CMB 9,000,000 9,000,000
2 17120 Dallas Parkway 0.54% 1 GECC 4,200,000 4,193,348
3 3501 Soncy Medical Office Buildings 0.83% 1 GECC 6,500,000 6,484,264
4 6333 Denton Drive 0.47% 1 GECC 3,699,000 3,693,803
5 6502 McCarran Blvd 0.17% 1 CMB 1,324,000 1,324,000
- ---------------------------------------------------------------------------------------------------------------------------------
6 68-60 Austin Street 0.76% 1 GECC 5,951,000 5,951,000
7 750 University Avenue 1.71% 1 CMB 13,400,000 13,400,000
8 Aliso Creek Market Center 0.34% 1 GECC 2,627,000 2,627,000
9 All American Self Storage 1.02% 1 GECC 8,000,000 7,996,184
10 Alpine Chalet Apartments 0.34% 1 CMB 2,640,000 2,640,000
- ---------------------------------------------------------------------------------------------------------------------------------
11 Anna Plaza Shopping Center 0.82% 1 GECC 6,400,000 6,392,766
12 Apple Blossom Mall 5.23% 1 CMB 41,000,000 40,953,778
13 Artesia Industrial Park 0.42% 1 CMB 3,300,000 3,300,000
14 Ashley Place Apartments 0.27% 1 GECC 2,166,000 2,128,799
15 Atrium Court 0.59% 1 CMB 4,625,000 4,623,111
- ---------------------------------------------------------------------------------------------------------------------------------
16 Auburn Mall 6.13% 1 CMB 48,000,000 47,945,886
17 Black Mountain Court 0.36% 1 CMB 2,850,000 2,850,000
18 Bravo Estates Mobile Home Park 0.84% 1 GECC 6,608,000 6,604,881
19 Breezy Hill Mobile Home & R.V. Community 1.25% 1 GECC 9,762,000 9,762,000
- ---------------------------------------------------------------------------------------------------------------------------------
20 City Center Business Park 0.24% 1 GECC 1,840,000 1,840,000
21 City National Bank Building 2.43% 1 CMB 19,000,000 19,000,000
22 Clarion Suites Hotel 0.97% 1 GECC 7,621,000 7,597,044
23 Comfort Suites - Dallas 0.55% 1 GECC 4,300,000 4,288,989
24 Country Club - Terrace Apartments 0.89% 1 GECC 7,000,000 7,000,000
- ---------------------------------------------------------------------------------------------------------------------------------
25 Country Club - Villas Apartments 1.66% 1 GECC 13,000,000 13,000,000
26 Country Inn & Suites - Rock Hill 0.23% 1 GECC 1,775,000 1,766,820
27 Crossroads Center Phase II 0.15% 1 GECC 1,200,000 1,199,465
28 Cypress Shores 1.70% 1 CMB 13,300,000 13,293,723
29 Days Inn - Bellevue 0.51% 1 GECC 4,030,000 4,012,539
- ---------------------------------------------------------------------------------------------------------------------------------
30 Dix McBride Apartments 1.30% 1 GECC 10,200,000 10,195,271
31 Driftwood Plaza 0.52% 1 GECC 4,075,000 4,070,467
32 Emerald Coast Emporium 0.42% 1 GECC 3,296,000 3,294,532
33 Enterprise Plaza Office Building 0.40% 1 GECC 3,150,000 3,150,000
34 Fulton Landing - Office Buildings 1.60% 1 CMB 12,500,000 12,486,685
- ---------------------------------------------------------------------------------------------------------------------------------
35 Green Valley Self Storage 0.24% 1 GECC 1,850,000 1,848,440
36 Happy Homes Apartments 0.51% 1 GECC 4,013,000 4,013,000
37 Harwood Crossing 0.45% 1 CMB 3,500,000 3,498,625
38 Heather Ridge Apartments 0.73% 1 GECC 5,700,000 5,700,000
39 Heatherstone Apartments 1.29% 1 GECC 10,110,000 10,097,313
- ---------------------------------------------------------------------------------------------------------------------------------
40 Hemingway House Apartments 0.29% 1 GECC 2,280,000 2,277,436
41 Hidden Valley Mobile Home Park 0.15% 1 GECC 1,200,000 1,198,753
42 Holiday Inn Express - Simi Valley 0.48% 1 GECC 3,800,000 3,793,400
<CAPTION>
General Detailed Interest Accrual
ID Property Name Property Type Property Type Mortgage Rate Basis
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 1123 Broadway Office Office 8.250% ACT/360
2 17120 Dallas Parkway Office 7.990% ACT/360
3 3501 Soncy Medical Office Buildings Office 8.410% ACT/360
4 6333 Denton Drive Industrial Office/Warehouse 8.300% ACT/360
5 6502 McCarran Blvd Office Office 8.450% ACT/360
- -----------------------------------------------------------------------------------------------------------------------------
6 68-60 Austin Street Office 8.320% ACT/360
7 750 University Avenue Office Office 8.660% ACT/360
8 Aliso Creek Market Center Retail Anchored 8.210% ACT/360
9 All American Self Storage Self Storage 7.830% ACT/360
10 Alpine Chalet Apartments Multifamily Conventional 8.350% ACT/360
- -----------------------------------------------------------------------------------------------------------------------------
11 Anna Plaza Shopping Center Retail Anchored 7.980% ACT/360
12 Apple Blossom Mall Retail Anchored 7.990% ACT/360
13 Artesia Industrial Park Industrial Industrial 8.250% ACT/360
14 Ashley Place Apartments Multifamily Conventional 7.230% ACT/360
15 Atrium Court Office Office 8.250% ACT/360
- -----------------------------------------------------------------------------------------------------------------------------
16 Auburn Mall Retail Anchored 7.990% ACT/360
17 Black Mountain Court Industrial Industrial 8.375% ACT/360
18 Bravo Estates Mobile Home Park Manufactured Housing 7.860% ACT/360
19 Breezy Hill Mobile Home & R.V. Community Manufactured Housing 8.220% ACT/360
- -----------------------------------------------------------------------------------------------------------------------------
20 City Center Business Park Industrial Office/Warehouse 8.450% ACT/360
21 City National Bank Building Office Office 8.700% ACT/360
22 Clarion Suites Hotel Hotel Limited Service 8.580% ACT/360
23 Comfort Suites - Dallas Hotel Limited Service 8.300% ACT/360
24 Country Club - Terrace Apartments Multifamily Conventional 8.010% ACT/360
- -----------------------------------------------------------------------------------------------------------------------------
25 Country Club - Villas Apartments Multifamily Conventional 8.010% ACT/360
26 Country Inn & Suites - Rock Hill Hotel Limited Service 8.050% ACT/360
27 Crossroads Center Phase II Retail Unanchored 8.020% ACT/360
28 Cypress Shores Multifamily Conventional 7.860% ACT/360
29 Days Inn - Bellevue Hotel Limited Service 8.350% ACT/360
- -----------------------------------------------------------------------------------------------------------------------------
30 Dix McBride Apartments Multifamily Section 8 7.910% ACT/360
31 Driftwood Plaza Retail Unanchored 8.040% ACT/360
32 Emerald Coast Emporium Retail Unanchored 8.020% ACT/360
33 Enterprise Plaza Office Building Office 8.560% ACT/360
34 Fulton Landing - Office Buildings Office Office 8.200% ACT/360
- -----------------------------------------------------------------------------------------------------------------------------
35 Green Valley Self Storage Self Storage 7.930% ACT/360
36 Happy Homes Apartments Multifamily Conventional 8.110% ACT/360
37 Harwood Crossing Retail Anchored 8.350% ACT/360
38 Heather Ridge Apartments Multifamily Conventional 7.900% ACT/360
39 Heatherstone Apartments Multifamily Conventional 7.580% ACT/360
- -----------------------------------------------------------------------------------------------------------------------------
40 Hemingway House Apartments Multifamily Conventional 8.000% ACT/360
41 Hidden Valley Mobile Home Park Manufactured Housing 8.290% ACT/360
42 Holiday Inn Express - Simi Valley Hotel Limited Service 8.420% ACT/360
<CAPTION>
Original Term to Stated Remaining Original Remaining
Maturity or APD Term to Maturity or Amortization Term Amortization Term
ID Property Name (mos.) APD (mos.) (mos.) (mos.)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 1123 Broadway 120 120 360 360
2 17120 Dallas Parkway 120 117 360 357
3 3501 Soncy Medical Office Buildings 120 115 360 355
4 6333 Denton Drive 120 119 240 239
5 6502 McCarran Blvd 120 120 360 360
- ----------------------------------------------------------------------------------------------------------------------------------
6 68-60 Austin Street 120 120 360 360
7 750 University Avenue 240 240 240 240
8 Aliso Creek Market Center 120 120 360 360
9 All American Self Storage 120 119 360 359
10 Alpine Chalet Apartments 120 120 360 360
- ----------------------------------------------------------------------------------------------------------------------------------
11 Anna Plaza Shopping Center 120 118 360 358
12 Apple Blossom Mall 120 118 360 358
13 Artesia Industrial Park 120 120 360 360
14 Ashley Place Apartments 300 285 300 285
15 Atrium Court 120 119 360 359
- ----------------------------------------------------------------------------------------------------------------------------------
16 Auburn Mall 120 118 360 358
17 Black Mountain Court 120 120 360 360
18 Bravo Estates Mobile Home Park 120 119 360 359
19 Breezy Hill Mobile Home & R.V. Community 120 120 360 360
- ----------------------------------------------------------------------------------------------------------------------------------
20 City Center Business Park 120 120 360 360
21 City National Bank Building 120 120 360 360
22 Clarion Suites Hotel 120 116 300 296
23 Comfort Suites - Dallas 120 117 300 297
24 Country Club - Terrace Apartments 120 120 300 300
- ----------------------------------------------------------------------------------------------------------------------------------
25 Country Club - Villas Apartments 120 120 300 300
26 Country Inn & Suites - Rock Hill 120 115 300 295
27 Crossroads Center Phase II 120 119 360 359
28 Cypress Shores 96 95 360 359
29 Days Inn - Bellevue 120 115 300 295
- ----------------------------------------------------------------------------------------------------------------------------------
30 Dix McBride Apartments 120 119 360 359
31 Driftwood Plaza 120 118 360 358
32 Emerald Coast Emporium 120 119 360 359
33 Enterprise Plaza Office Building 120 120 360 360
34 Fulton Landing - Office Buildings 84 82 360 358
- ----------------------------------------------------------------------------------------------------------------------------------
35 Green Valley Self Storage 120 119 300 299
36 Happy Homes Apartments 120 120 360 360
37 Harwood Crossing 120 119 360 359
38 Heather Ridge Apartments 120 120 360 360
39 Heatherstone Apartments 120 118 360 358
- ----------------------------------------------------------------------------------------------------------------------------------
40 Hemingway House Apartments 120 118 360 358
41 Hidden Valley Mobile Home Park 120 118 360 358
42 Holiday Inn Express - Simi Valley 120 118 300 298
<CAPTION>
First Maturity Date Annual 1998 or Annualized or TTM
ID Property Name Payment Date or APD Debt Service 1997 NOI 1999 or 1998 NOI
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 1123 Broadway 1/10/00 12/10/09 811,368 1,230,181 1,456,322
2 17120 Dallas Parkway 9/1/99 8/1/09 369,466 308,420 292,715
3 3501 Soncy Medical Office Buildings 7/1/99 6/1/09 594,784 1,153,999 1,152,918
4 6333 Denton Drive 11/1/99 10/1/09 379,609 396,147 467,721
5 6502 McCarran Blvd 12/10/99 11/10/09 121,602
- -----------------------------------------------------------------------------------------------------------------------------------
6 68-60 Austin Street 12/1/99 11/1/09 540,013 615,360 766,725
7 750 University Avenue 12/10/99 11/10/19 1,424,670 1,244,345
8 Aliso Creek Market Center 12/1/99 11/1/09 235,943 246,453 330,540
9 All American Self Storage 11/1/99 10/1/09 693,070 1,442,174 1,497,289
10 Alpine Chalet Apartments 12/10/99 11/10/09 240,232 271,167 161,635
- -----------------------------------------------------------------------------------------------------------------------------------
11 Anna Plaza Shopping Center 10/1/99 9/1/09 562,461
12 Apple Blossom Mall 10/10/99 9/10/09 3,606,692 4,560,974 4,687,268
13 Artesia Industrial Park 12/10/99 11/10/09 297,502 452,508 473,181
14 Ashley Place Apartments 9/1/98 8/1/23 187,537 235,656 230,943
15 Atrium Court 11/10/99 10/10/09 416,953 503,056 513,888
- -----------------------------------------------------------------------------------------------------------------------------------
16 Auburn Mall 10/10/99 9/10/09 4,222,469 3,202,102 5,470,148
17 Black Mountain Court 12/10/99 11/10/09 259,945
18 Bravo Estates Mobile Home Park 11/1/99 10/1/09 574,126 686,721 677,858
19 Breezy Hill Mobile Home & R.V. Community 12/1/99 11/1/09 877,594 1,163,294 1,095,845
- -----------------------------------------------------------------------------------------------------------------------------------
20 City Center Business Park 12/1/99 11/1/09 168,994 288,202 272,658
21 City National Bank Building 12/10/99 11/10/09 1,785,541 2,130,568 3,103,185
22 Clarion Suites Hotel 8/1/99 7/1/09 741,333 1,392,348
23 Comfort Suites - Dallas 9/1/99 8/1/09 408,566 689,243
24 Country Club - Terrace Apartments 12/1/99 11/1/09 648,882 1,000,851 1,076,497
- -----------------------------------------------------------------------------------------------------------------------------------
25 Country Club - Villas Apartments 12/1/99 11/1/09 1,205,067 1,623,132 1,636,334
26 Country Inn & Suites - Rock Hill 7/1/99 6/1/09 165,103 361,885 361,377
27 Crossroads Center Phase II 11/1/99 10/1/09 105,863 83,455 110,313
28 Cypress Shores 11/10/99 10/10/07 1,155,549 1,589,676 1,434,905
29 Days Inn - Bellevue 7/1/99 6/1/09 384,532 877,618 919,088
- -----------------------------------------------------------------------------------------------------------------------------------
30 Dix McBride Apartments 11/1/99 10/1/09 890,460
31 Driftwood Plaza 10/1/99 9/1/09 360,175 551,225 548,317
32 Emerald Coast Emporium 11/1/99 10/1/09 290,770 193,402
33 Enterprise Plaza Office Building 12/1/99 11/1/09 292,258 405,004 415,274
34 Fulton Landing - Office Buildings 10/10/99 9/10/06 1,121,632 1,451,767 1,720,430
- -----------------------------------------------------------------------------------------------------------------------------------
35 Green Valley Self Storage 11/1/99 10/1/09 170,315 276,114 366,445
36 Happy Homes Apartments 12/1/99 11/1/09 357,051 563,270 586,005
37 Harwood Crossing 11/10/99 10/10/09 318,489 287,687 321,770
38 Heather Ridge Apartments 12/1/99 11/1/09 497,135 690,399 694,865
39 Heatherstone Apartments 10/1/99 9/1/09 854,943 1,177,832 1,191,632
- -----------------------------------------------------------------------------------------------------------------------------------
40 Hemingway House Apartments 10/1/99 9/1/09 200,758 328,291 306,089
41 Hidden Valley Mobile Home Park 10/1/99 9/1/09 108,588 142,403
42 Holiday Inn Express - Simi Valley 10/1/99 9/1/09 364,728 567,069 658,169
<CAPTION>
Underwritten Net Appraised Appraised
ID Property Name Cash Flow Lockbox DSCR Value Date
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 1123 Broadway 1,183,357 1.46 13,300,000 9/9/99
2 17120 Dallas Parkway 507,803 1.37 5,425,000 5/1/99
3 3501 Soncy Medical Office Buildings 871,978 1.47 9,750,000 12/1/98
4 6333 Denton Drive 534,631 1.41 5,650,000 3/16/99
5 6502 McCarran Blvd 158,113 1.30 1,800,000 9/11/99
- --------------------------------------------------------------------------------------------------------------------
6 68-60 Austin Street 711,086 1.32 8,000,000 8/11/99
7 750 University Avenue 1,628,676 1.14 19,500,000 8/31/99
8 Aliso Creek Market Center 332,089 1.41 3,900,000 9/1/99
9 All American Self Storage 1,441,849 2.08 17,050,000 6/15/99
10 Alpine Chalet Apartments 296,939 1.24 3,300,000 8/23/99
- --------------------------------------------------------------------------------------------------------------------
11 Anna Plaza Shopping Center 711,548 1.27 8,000,000 5/2/99
12 Apple Blossom Mall 4,512,384 Hard 1.25 57,000,000 6/18/99
13 Artesia Industrial Park 399,801 1.34 5,100,000 8/5/99
14 Ashley Place Apartments 229,803 1.23 2,850,000 4/1/98
15 Atrium Court 513,878 1.23 6,200,000 8/19/99
- --------------------------------------------------------------------------------------------------------------------
16 Auburn Mall 5,327,036 Hard 1.26 70,500,000 6/21/99
17 Black Mountain Court 324,879 1.25 3,765,000 8/9/99
18 Bravo Estates Mobile Home Park 737,270 1.28 9,170,000 9/10/99
19 Breezy Hill Mobile Home & R.V. Community 1,098,347 1.25 13,000,000 8/11/99
- --------------------------------------------------------------------------------------------------------------------
20 City Center Business Park 222,840 1.32 2,300,000 9/4/99
21 City National Bank Building 2,306,120 1.29 28,000,000 9/3/99
22 Clarion Suites Hotel 1,115,649 1.51 11,600,000 6/1/99
23 Comfort Suites - Dallas 587,825 1.44 6,200,000 5/22/99
24 Country Club - Terrace Apartments 952,257 1.47 11,000,000 9/27/99
- --------------------------------------------------------------------------------------------------------------------
25 Country Club - Villas Apartments 1,510,213 1.25 17,500,000 9/27/99
26 Country Inn & Suites - Rock Hill 261,851 1.59 2,500,000 1/28/99
27 Crossroads Center Phase II 132,525 1.25 1,500,000 7/7/99
28 Cypress Shores 1,390,908 1.20 17,500,000 4/22/99
29 Days Inn - Bellevue 607,992 1.58 6,500,000 3/23/99
- --------------------------------------------------------------------------------------------------------------------
30 Dix McBride Apartments 1,109,380 1.25 13,300,000 5/5/99
31 Driftwood Plaza 459,181 1.28 5,600,000 7/12/99
32 Emerald Coast Emporium 400,702 1.38 4,120,000 7/6/99
33 Enterprise Plaza Office Building 371,797 1.27 4,600,000 9/23/99
34 Fulton Landing - Office Buildings 1,371,666 1.22 18,200,000 7/7/99
- --------------------------------------------------------------------------------------------------------------------
35 Green Valley Self Storage 352,824 2.07 3,650,000 4/27/99
36 Happy Homes Apartments 438,776 1.23 5,350,000 9/2/99
37 Harwood Crossing 390,723 1.23 5,000,000 8/29/99
38 Heather Ridge Apartments 647,191 1.30 8,000,000 8/27/99
39 Heatherstone Apartments 1,167,157 1.37 13,320,000 6/1/99
- --------------------------------------------------------------------------------------------------------------------
40 Hemingway House Apartments 255,569 1.27 2,850,000 5/11/99
41 Hidden Valley Mobile Home Park 152,123 1.40 1,670,000 5/20/99
42 Holiday Inn Express - Simi Valley 560,011 1.54 5,000,000 7/26/99
<CAPTION>
Cut-off Date LTV LTV Ratio at
ID Property Name Ratio Maturity Prepayment Provisions
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 1123 Broadway 67.7% 61.0% L(1.92),D(7.83),O(0.25)
2 17120 Dallas Parkway 77.3% 69.3% L(2.25),D(7.50),O(0.25)
3 3501 Soncy Medical Office Buildings 66.5% 60.3% L(2.42),D(7.33),O(0.25)
4 6333 Denton Drive 65.4% 46.9% L(2.08),D(7.67),O(0.25)
5 6502 McCarran Blvd 73.6% 66.6% L(2.00),D(7.75),O(0.25)
- ---------------------------------------------------------------------------------------------------------------
6 68-60 Austin Street 74.4% 67.1% L(2.00),D(7.75),O(0.25)
7 750 University Avenue 68.7% 0.6% L(2.00),D(17.75),O(0.25)
8 Aliso Creek Market Center 67.4% 60.6% L(2.00),D(7.75),O(0.25)
9 All American Self Storage 46.9% 41.9% L(2.08),D(7.67),O(0.25)
10 Alpine Chalet Apartments 80.0% 72.2% L(2.00),D(7.75),O(0.25)
- ---------------------------------------------------------------------------------------------------------------
11 Anna Plaza Shopping Center 79.9% 71.6% L(2.17),D(7.58),O(0.25)
12 Apple Blossom Mall 71.8% 64.4% L(2.17),D(7.58),O(0.25)
13 Artesia Industrial Park 64.7% 58.3% L(2.00),D(7.75),O(0.25)
14 Ashley Place Apartments 74.7% 5.0% L(15.00),YM 1%(9.75),O(0.25)
15 Atrium Court 74.6% 67.2% L(2.08),D(7.67),O(0.25)
- ---------------------------------------------------------------------------------------------------------------
16 Auburn Mall 68.0% 61.0% L(2.17),D(7.58),O(0.25)
17 Black Mountain Court 75.7% 68.4% L(2.00),D(7.75),O(0.25)
18 Bravo Estates Mobile Home Park 72.0% 64.4% L(2.08),D(7.67),O(0.25)
19 Breezy Hill Mobile Home & R.V. Community 75.1% 67.6% L(2.00),D(7.75),O(0.25)
- ---------------------------------------------------------------------------------------------------------------
20 City Center Business Park 80.0% 72.4% L(2.00),D(7.75),O(0.25)
21 City National Bank Building 67.9% 61.7% L(2.00),D(7.75),O(0.25)
22 Clarion Suites Hotel 65.5% 55.2% L(2.33),D(7.42),O(0.25)
23 Comfort Suites - Dallas 69.2% 57.8% L(2.25),D(7.50),O(0.25)
24 Country Club - Terrace Apartments 63.6% 52.6% L(2.00),D(7.75),O(0.25)
- ---------------------------------------------------------------------------------------------------------------
25 Country Club - Villas Apartments 74.3% 61.4% L(2.00),D(7.75),O(0.25)
26 Country Inn & Suites - Rock Hill 70.7% 58.8% L(2.42),D(7.33),O(0.25)
27 Crossroads Center Phase II 80.0% 71.7% L(2.08),D(7.67),O(0.25)
28 Cypress Shores 76.0% 70.1% L(2.08),D(5.67),O(0.25)
29 Days Inn - Bellevue 61.7% 51.8% L(2.42),D(7.33),O(0.25)
- ---------------------------------------------------------------------------------------------------------------
30 Dix McBride Apartments 76.7% 68.6% L(2.08),D(7.67),O(0.25)
31 Driftwood Plaza 72.7% 65.2% L(2.17),D(7.58),O(0.25)
32 Emerald Coast Emporium 80.0% 71.7% L(2.08),D(7.67),O(0.25)
33 Enterprise Plaza Office Building 68.5% 62.1% L(2.00),D(7.75),O(0.25)
34 Fulton Landing - Office Buildings 68.6% 64.5% L(2.17),D(4.58),O(0.25)
- ---------------------------------------------------------------------------------------------------------------
35 Green Valley Self Storage 50.6% 41.8% L(2.08),D(7.67),O(0.25)
36 Happy Homes Apartments 75.0% 67.4% L(2.00),D(7.75),O(0.25)
37 Harwood Crossing 70.0% 63.2% L(2.08),D(7.67),O(0.25)
38 Heather Ridge Apartments 71.3% 63.7% L(2.00),D(7.75),O(0.25)
39 Heatherstone Apartments 75.8% 67.3% L(2.17),D(7.58),O(0.25)
- ---------------------------------------------------------------------------------------------------------------
40 Hemingway House Apartments 79.9% 71.7% L(2.17),D(7.58),O(0.25)
41 Hidden Valley Mobile Home Park 71.8% 64.8% L(2.17),D(7.33),O(0.50)
42 Holiday Inn Express - Simi Valley 75.9% 63.6% L(2.17),D(7.58),O(0.25)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ID Property Name Address City State
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 1123 Broadway 1123 Broadway New York NY
2 17120 Dallas Parkway 17120 Dallas Parkway Dallas TX
3 3501 Soncy Medical Office Buildings 3501 Soncy Road Amarillo TX
4 6333 Denton Drive 6333 Denton Drive Dallas TX
5 6502 McCarran Blvd 6502 South McCarran Blvd Reno NV
- -----------------------------------------------------------------------------------------------------------------------------------
6 68-60 Austin Street 68-60 Austin Street Forest Hills NY
7 750 University Avenue 750 University Avenue Los Gatos CA
8 Aliso Creek Market Center 23411 Laguna Hills Drive Aliso Viejo CA
9 All American Self Storage 2000 East 3rd Avenue San Mateo CA
10 Alpine Chalet Apartments 460 South 200 West Rexburg ID
- -----------------------------------------------------------------------------------------------------------------------------------
11 Anna Plaza Shopping Center 13201 FM 620 Austin TX
12 Apple Blossom Mall 1850 Apple Blossom Drive Winchester VA
13 Artesia Industrial Park 17115 Jersey Ave. & 17004, 17020,17120,17160 Alburtis Ave. Artesia CA
14 Ashley Place Apartments 14850 West Dixie Highway North Miami FL
15 Atrium Court 1260 N. Dutton Avenue Santa Rosa CA
- -----------------------------------------------------------------------------------------------------------------------------------
16 Auburn Mall 385 Southbridge Street Auburn MA
17 Black Mountain Court 175-177 Cassia Way Henderson NV
18 Bravo Estates Mobile Home Park 4080 Pedley Road Riverside CA
19 Breezy Hill Mobile Home & R.V. Community 800 N.E. 48th Street Pompano Beach FL
- -----------------------------------------------------------------------------------------------------------------------------------
20 City Center Business Park 6531 W. 56th Avenue Arvada CO
21 City National Bank Building 606 South Olive Street Los Angeles CA
22 Clarion Suites Hotel 325 West 8th Avenue Anchorage AK
23 Comfort Suites - Dallas 2287 West NW Highway Dallas TX
24 Country Club - Terrace Apartments 1501 Golf Club Drive Upland CA
- -----------------------------------------------------------------------------------------------------------------------------------
25 Country Club - Villas Apartments 1501 Golf Club Drive Upland CA
26 Country Inn & Suites - Rock Hill 865 Patriot Parkway Rock Hill SC
27 Crossroads Center Phase II 10009 North MacArthur Boulevard Irving TX
28 Cypress Shores 1901 Lyons Road Coconut Creek FL
29 Days Inn - Bellevue 3241 156th Avenue SE Bellevue WA
- -----------------------------------------------------------------------------------------------------------------------------------
30 Dix McBride Apartments 2229-2259 Dix Avenue Far Rockaway NY
31 Driftwood Plaza 2101-2163 U.S. Highway One South Jupiter FL
32 Emerald Coast Emporium 10859 Emerald Coast Parkway West Destin FL
33 Enterprise Plaza Office Building 13915 Burnet Road Austin TX
34 Fulton Landing - Office Buildings 25 & 30 Washington St. Brooklyn NY
- -----------------------------------------------------------------------------------------------------------------------------------
35 Green Valley Self Storage 140 North Gibson Road Henderson NV
36 Happy Homes Apartments 10110 Club Creek Drive Houston TX
37 Harwood Crossing 1060 North Main Street Euless TX
38 Heather Ridge Apartments 212 Heather Ridge Drive Fayetteville NC
39 Heatherstone Apartments 877 Heatherstone Way Mountain View CA
- -----------------------------------------------------------------------------------------------------------------------------------
40 Hemingway House Apartments 6401 East Ridge Drive Odessa TX
41 Hidden Valley Mobile Home Park 890 Hidden Valley Road Bozeman MT
42 Holiday Inn Express - Simi Valley 2550 Erringer Road Simi Valley CA
<CAPTION>
Loan per Net
Year Net Rentable Number Rentable Area
ID Property Name Zip Code Year Built Renovated Area (SF) of Units (SF)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 1123 Broadway 10010 1896 1986 96,578 93.19
2 17120 Dallas Parkway 75248 1979 1998 47,758 87.80
3 3501 Soncy Medical Office Buildings 79121 1986 1995 122,786 52.81
4 6333 Denton Drive 75235 1951 1996 264,000 13.99
5 6502 McCarran Blvd 89509 1999 11,001 120.35
- -----------------------------------------------------------------------------------------------------------------------------------
6 68-60 Austin Street 11375 1984 34,940 170.32
7 750 University Avenue 95032 1998 62,042 215.98
8 Aliso Creek Market Center 92656 1991 18,284 143.68
9 All American Self Storage 94404 1985 1999 142,971 55.93
10 Alpine Chalet Apartments 83440 1972 1999 42
- -----------------------------------------------------------------------------------------------------------------------------------
11 Anna Plaza Shopping Center 78729 1999 55,317 115.57
12 Apple Blossom Mall 22601 1982 438,133 93.47
13 Artesia Industrial Park 90701 1971 113,170 29.16
14 Ashley Place Apartments 33181 1968 1993 96
15 Atrium Court 95401 1980 1987 56,301 82.11
- -----------------------------------------------------------------------------------------------------------------------------------
16 Auburn Mall 01501 1971 1998 595,273.00 80.54
17 Black Mountain Court 89014 1998 45,792 62.24
18 Bravo Estates Mobile Home Park 92509 1985 1997 240
19 Breezy Hill Mobile Home & R.V. Community 33064 1964 1998 762
- -----------------------------------------------------------------------------------------------------------------------------------
20 City Center Business Park 80002 1984 1998 44,000 41.82
21 City National Bank Building 90014 1967 1997 283,251 67.08
22 Clarion Suites Hotel 99501 1998 111
23 Comfort Suites - Dallas 75220 1997 103
24 Country Club - Terrace Apartments 91786 1986 123
- -----------------------------------------------------------------------------------------------------------------------------------
25 Country Club - Villas Apartments 91786 1989 178
26 Country Inn & Suites - Rock Hill 29730 1997 44
27 Crossroads Center Phase II 75063 1997 9,000 133.27
28 Cypress Shores 33063 1991 300
29 Days Inn - Bellevue 98007 1981 110
- -----------------------------------------------------------------------------------------------------------------------------------
30 Dix McBride Apartments 11691 1998 1999 130
31 Driftwood Plaza 33477 1988 44,799 90.86
32 Emerald Coast Emporium 32541 1997 1998 31,320 105.19
33 Enterprise Plaza Office Building 78745 1986 50,393 62.51
34 Fulton Landing - Office Buildings 11201 1900 1990 168,089 74.29
- -----------------------------------------------------------------------------------------------------------------------------------
35 Green Valley Self Storage 89014 1997 93,164 19.84
36 Happy Homes Apartments 77036 1979 1997 216
37 Harwood Crossing 76039 1984 48,316 72.41
38 Heather Ridge Apartments 28311 1974 1991 204
39 Heatherstone Apartments 94040 1972 108
- -----------------------------------------------------------------------------------------------------------------------------------
40 Hemingway House Apartments 79762 1982 195
41 Hidden Valley Mobile Home Park 59718 1969 84
42 Holiday Inn Express - Simi Valley 93065 1986 1997 96
<CAPTION>
Underwritten Underwritten
Loan Occupancy Occupancy Rate Reserves Reserves
ID Property Name per Unit Rate as of Date per SF per unit
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 1123 Broadway 91% 10/5/99 0.25
2 17120 Dallas Parkway 98% 7/16/99 0.31
3 3501 Soncy Medical Office Buildings 95% 6/1/99 0.55
4 6333 Denton Drive 98% 9/9/99 0.15
5 6502 McCarran Blvd 100% 8/20/99 0.20
- ---------------------------------------------------------------------------------------------------------------------------
6 68-60 Austin Street 96% 7/1/99 0.26
7 750 University Avenue 100% 9/1/99 0.20
8 Aliso Creek Market Center 100% 8/1/99 0.26
9 All American Self Storage 94% 6/3/99 0.15
10 Alpine Chalet Apartments 62,857.14 95% 10/31/99 460.71
- ---------------------------------------------------------------------------------------------------------------------------
11 Anna Plaza Shopping Center 98% 10/13/99 0.15
12 Apple Blossom Mall 92% 11/2/99 0.23
13 Artesia Industrial Park 100% 7/1/98 0.21
14 Ashley Place Apartments 22,174.99 95% 5/31/99 335.78
15 Atrium Court 95% 8/19/99 0.20
- ---------------------------------------------------------------------------------------------------------------------------
16 Auburn Mall 82% 11/2/99 0.15
17 Black Mountain Court 100% 8/6/99 0.10
18 Bravo Estates Mobile Home Park 27,520.34 100% 8/31/99 41.67
19 Breezy Hill Mobile Home & R.V. Community 12,811.02 99% 8/19/99 40.00
- ---------------------------------------------------------------------------------------------------------------------------
20 City Center Business Park 100% 9/3/99 0.15
21 City National Bank Building 98% 9/30/99 0.20
22 Clarion Suites Hotel 68,441.84 79% 4/30/99 1,168.97
23 Comfort Suites - Dallas 41,640.67 59% 3/31/99 868.55
24 Country Club - Terrace Apartments 56,910.57 99% 7/31/99 295.69
- ---------------------------------------------------------------------------------------------------------------------------
25 Country Club - Villas Apartments 73,033.71 99% 7/31/99 366.54
26 Country Inn & Suites - Rock Hill 40,155.00 73% 1/31/99 652.73
27 Crossroads Center Phase II 100% 7/1/99 0.15
28 Cypress Shores 44,312.41 97% 9/21/99 250.00
29 Days Inn - Bellevue 36,477.63 79% 3/31/99 706.78
- ---------------------------------------------------------------------------------------------------------------------------
30 Dix McBride Apartments 78,425.16 100% 8/27/99 200.00
31 Driftwood Plaza 100% 9/1/99 0.15
32 Emerald Coast Emporium 100% 7/8/99 0.15
33 Enterprise Plaza Office Building 95% 10/20/99 0.19
34 Fulton Landing - Office Buildings 83% 6/21/99 0.18
- ---------------------------------------------------------------------------------------------------------------------------
35 Green Valley Self Storage 86% 6/30/99 0.15
36 Happy Homes Apartments 18,578.70 94% 9/1/99 239.00
37 Harwood Crossing 98% 9/30/99 0.15
38 Heather Ridge Apartments 27,941.18 100% 7/22/99 255.00
39 Heatherstone Apartments 93,493.64 96% 4/20/99 200.00
- ---------------------------------------------------------------------------------------------------------------------------
40 Hemingway House Apartments 11,679.16 83% 6/16/99 281.51
41 Hidden Valley Mobile Home Park 14,270.87 100% 3/1/99 29.76
42 Holiday Inn Express - Simi Valley 39,514.59 69% 6/1/99 662.90
<CAPTION>
% of Lease % of
ID Property Name Largest Tenant GLA Expiration 2nd Largest Tenant GLA
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 1123 Broadway
2 17120 Dallas Parkway
3 3501 Soncy Medical Office Buildings
4 6333 Denton Drive
5 6502 McCarran Blvd
- --------------------------------------------------------------------------------------------------------------------------------
6 68-60 Austin Street
7 750 University Avenue
8 Aliso Creek Market Center Aliso Creek Market 19% 12/31/01 Cosmo's 17%
9 All American Self Storage
10 Alpine Chalet Apartments
- --------------------------------------------------------------------------------------------------------------------------------
11 Anna Plaza Shopping Center Office Depot 54% 12/27/13 Spine Rehabilitation 8%
12 Apple Blossom Mall JCPenney 19% 11/1/02 Sears 16%
13 Artesia Industrial Park
14 Ashley Place Apartments
15 Atrium Court
- --------------------------------------------------------------------------------------------------------------------------------
16 Auburn Mall Sears 28% 1/31/17 Filene's (3)
17 Black Mountain Court
18 Bravo Estates Mobile Home Park
19 Breezy Hill Mobile Home & R.V. Community
- --------------------------------------------------------------------------------------------------------------------------------
20 City Center Business Park
21 City National Bank Building
22 Clarion Suites Hotel
23 Comfort Suites - Dallas
24 Country Club - Terrace Apartments
- --------------------------------------------------------------------------------------------------------------------------------
25 Country Club - Villas Apartments
26 Country Inn & Suites - Rock Hill
27 Crossroads Center Phase II
28 Cypress Shores
29 Days Inn - Bellevue
- --------------------------------------------------------------------------------------------------------------------------------
30 Dix McBride Apartments
31 Driftwood Plaza
32 Emerald Coast Emporium
33 Enterprise Plaza Office Building
34 Fulton Landing - Office Buildings
- --------------------------------------------------------------------------------------------------------------------------------
35 Green Valley Self Storage
36 Happy Homes Apartments
37 Harwood Crossing Eckerd 18% 3/31/06 Terminix 12%
38 Heather Ridge Apartments
39 Heatherstone Apartments
- --------------------------------------------------------------------------------------------------------------------------------
40 Hemingway House Apartments
41 Hidden Valley Mobile Home Park
42 Holiday Inn Express - Simi Valley
<CAPTION>
Lease % of Lease Crossed with
ID Property Name Expiration 3rd Largest Tenant GLA Expiration other loans
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 1123 Broadway
2 17120 Dallas Parkway
3 3501 Soncy Medical Office Buildings
4 6333 Denton Drive
5 6502 McCarran Blvd
- --------------------------------------------------------------------------------------------------------------------
6 68-60 Austin Street
7 750 University Avenue
8 Aliso Creek Market Center 6/30/04 Luke's Pizza 9% 1/31/04
9 All American Self Storage
10 Alpine Chalet Apartments
- --------------------------------------------------------------------------------------------------------------------
11 Anna Plaza Shopping Center 9/30/05 Warehouse Pool 7% 8/31/05
12 Apple Blossom Mall 7/31/02 Belk (3)
13 Artesia Industrial Park
14 Ashley Place Apartments
15 Atrium Court
- --------------------------------------------------------------------------------------------------------------------
16 Auburn Mall Cherry Web and Toura 3% 1/31/06
17 Black Mountain Court
18 Bravo Estates Mobile Home Park
19 Breezy Hill Mobile Home & R.V. Community
- --------------------------------------------------------------------------------------------------------------------
20 City Center Business Park
21 City National Bank Building
22 Clarion Suites Hotel
23 Comfort Suites - Dallas
24 Country Club - Terrace Apartments
- --------------------------------------------------------------------------------------------------------------------
25 Country Club - Villas Apartments
26 Country Inn & Suites - Rock Hill
27 Crossroads Center Phase II
28 Cypress Shores
29 Days Inn - Bellevue
- --------------------------------------------------------------------------------------------------------------------
30 Dix McBride Apartments
31 Driftwood Plaza
32 Emerald Coast Emporium
33 Enterprise Plaza Office Building
34 Fulton Landing - Office Buildings
- --------------------------------------------------------------------------------------------------------------------
35 Green Valley Self Storage
36 Happy Homes Apartments
37 Harwood Crossing 11/30/05 Joe's Pasta & Pizza 7% 9/30/04
38 Heather Ridge Apartments
39 Heatherstone Apartments
- --------------------------------------------------------------------------------------------------------------------
40 Hemingway House Apartments
41 Hidden Valley Mobile Home Park
42 Holiday Inn Express - Simi Valley
<CAPTION>
ID Property Name Owner/Sponsor
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1 1123 Broadway Seymour Spira, David Spira and Leslie Lopez-Spira
2 17120 Dallas Parkway
3 3501 Soncy Medical Office Buildings
4 6333 Denton Drive
5 6502 McCarran Blvd Johnny A. Ribeiro, Jr.; Laura Lee Ribeiro
- --------------------------------------------------------------------------------------------------------------
6 68-60 Austin Street
7 750 University Avenue Birk S. McCandless
8 Aliso Creek Market Center
9 All American Self Storage
10 Alpine Chalet Apartments Scott Satterfield and Greg Helm
- --------------------------------------------------------------------------------------------------------------
11 Anna Plaza Shopping Center
12 Apple Blossom Mall Simon Property Group
13 Artesia Industrial Park
14 Ashley Place Apartments
15 Atrium Court David L. Hagele
- --------------------------------------------------------------------------------------------------------------
16 Auburn Mall Simon Property Group
17 Black Mountain Court Ernest Domanico
18 Bravo Estates Mobile Home Park
19 Breezy Hill Mobile Home & R.V. Community H. Wayne Klekamp
- --------------------------------------------------------------------------------------------------------------
20 City Center Business Park
21 City National Bank Building Bram Goldsmith
22 Clarion Suites Hotel
23 Comfort Suites - Dallas
24 Country Club - Terrace Apartments Bill Albin Matreyek and Mary Elizabeth Burney Matreyek Trust
- --------------------------------------------------------------------------------------------------------------
25 Country Club - Villas Apartments Bill Albin Matreyek and Mary Elizabeth Burney Matreyek Trust
26 Country Inn & Suites - Rock Hill
27 Crossroads Center Phase II
28 Cypress Shores Associated Estates
29 Days Inn - Bellevue
- --------------------------------------------------------------------------------------------------------------
30 Dix McBride Apartments
31 Driftwood Plaza
32 Emerald Coast Emporium
33 Enterprise Plaza Office Building
34 Fulton Landing - Office Buildings David C. Walentas
- --------------------------------------------------------------------------------------------------------------
35 Green Valley Self Storage
36 Happy Homes Apartments
37 Harwood Crossing Gene A. Richardson, Jr.
38 Heather Ridge Apartments
39 Heatherstone Apartments Sanford N. Diller
- --------------------------------------------------------------------------------------------------------------
40 Hemingway House Apartments
41 Hidden Valley Mobile Home Park
42 Holiday Inn Express - Simi Valley
</TABLE>
<PAGE>
CHASE COMMERCIAL MORTGAGE SECURITIES CORP., SERIES 1999-2
ANNEX A - CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS AND MORTGAGED PROPERTIES
<TABLE>
<CAPTION>
% of Initial Pool Mortgage Loan
ID Property Name Balance # of Properties Seller (1) Original Balance
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
43 Holiday Inn Express - Summerville 0.41% 1 GECC 3,200,000
44 ITC Lot 9 0.66% 1 CMB 5,130,000
- -----------------------------------------------------------------------------------------------------------------------------------
45 Kensington Square 0.58% 1 GECC 4,516,000
46 Keystone Self Storage 0.24% 1 GECC 1,850,000
47 Kyrene Village 1.02% 1 CMB 7,950,000
48 Lake Biltmore Apartments 2.42% 1 GECC 18,945,000
- -----------------------------------------------------------------------------------------------------------------------------------
49 Manchester Apartments 1.03% 1 GECC 8,100,000
50 Marketplace Shopping Center 0.44% 1 GECC 3,450,000
51 McDermott Towne Crossing 0.61% 1 GECC 4,812,000
52 Midvale Park Self Storage 0.18% 1 GECC 1,433,000
- -----------------------------------------------------------------------------------------------------------------------------------
53 Mission Trace Shopping Center 0.73% 1 GECC 5,708,000
54 Mount Laurel Plaza 0.85% 1 GECC 6,682,000
55 New England Tradeport 1.04% 4 GECC 8,173,000
55 a 14 International Drive 1
55 b 15 International Drive 1
55 c 16 International Drive 1
55 d 35 International Drive 1
- -----------------------------------------------------------------------------------------------------------------------------------
56 North American Building 0.92% 1 CMB 7,225,000
57 Northpoint Square Apartments 0.38% 1 GECC 3,000,000
58 Oakwood Apartments 0.67% 1 GECC 5,270,000
59 Oneida West Manor Apartments 0.17% 1 GECC 1,300,000
- -----------------------------------------------------------------------------------------------------------------------------------
60 Orange County Industrial & Office Portfolio I (2) 3.43% 9 GECC 26,864,634
60 a Newport Freeway Business Park 1
60 b Park Redhill/Cowan Corporate Center 1
60 c Park Redhill/Cowan Property I 1
60 d Park Redhill/Fitch Property I 1
60 e Park Redhill/Mitchell Corporate Center 1
60 f Park Redhill/Mitchell Property I 1
60 g Park Redhill/Mitchell Property II 1
60 h Park Redhill/Mitchell Property III 1
60 I Redhill Business Park 1
- -----------------------------------------------------------------------------------------------------------------------------------
61 Orange County Industrial & Office Portfolio II (2) 2.84% 8 GECC 22,262,761
61 a Armstrong Corporate Plaza 1
61 b Gillette Research Center 1
61 c Lido Plaza 1
61 d MacArthur/Main Business Center 1
61 e North Point Business Center 1
61 f Parkcenter Plaza 1
61 g Taft Business Center 1
61 h Von Karman Commerce Center 1
- -----------------------------------------------------------------------------------------------------------------------------------
62 Park View Business Center 0.31% 1 GECC 2,400,000
63 Parkway East Shopping Center 0.52% 1 CMB 4,090,000
<CAPTION>
Cut-Off Date General Detailed
ID Property Name Balance Property Type Property Type Mortgage Rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
43 Holiday Inn Express - Summerville 3,192,049 Hotel Limited Service 8.440%
44 ITC Lot 9 5,130,000 Industrial Industrial 8.310%
- ------------------------------------------------------------------------------------------------------------------------------------
45 Kensington Square 4,516,000 Retail Anchored 8.080%
46 Keystone Self Storage 1,848,549 Self Storage 8.230%
47 Kyrene Village 7,950,000 Retail Anchored 8.300%
48 Lake Biltmore Apartments 18,945,000 Multifamily Conventional 7.770%
- ------------------------------------------------------------------------------------------------------------------------------------
49 Manchester Apartments 8,087,246 Multifamily Conventional 8.010%
50 Marketplace Shopping Center 3,450,000 Retail Anchored 8.240%
51 McDermott Towne Crossing 4,812,000 Retail Anchored 8.080%
52 Midvale Park Self Storage 1,433,000 Self Storage 8.710%
- ------------------------------------------------------------------------------------------------------------------------------------
53 Mission Trace Shopping Center 5,695,151 Retail Anchored 7.670%
54 Mount Laurel Plaza 6,679,121 Retail Anchored 8.110%
55 New England Tradeport 8,159,029 Industrial Warehouse 8.540%
55 a 14 International Drive Industrial Warehouse
55 b 15 International Drive Industrial Warehouse
55 c 16 International Drive Industrial Warehouse
55 d 35 International Drive Industrial Warehouse
- ------------------------------------------------------------------------------------------------------------------------------------
56 North American Building 7,225,000 Office Office 8.550%
57 Northpoint Square Apartments 2,994,950 Multifamily Conventional 7.780%
58 Oakwood Apartments 5,261,001 Multifamily Section 8 7.730%
59 Oneida West Manor Apartments 1,298,471 Multifamily Conventional 7.830%
- ------------------------------------------------------------------------------------------------------------------------------------
60 Orange County Industrial & Office Portfolio I (2) 26,824,431 Office/Industrial Office/Warehouse 8.180%
60 a Newport Freeway Business Park Industrial Office/Warehouse
60 b Park Redhill/Cowan Corporate Center Office
60 c Park Redhill/Cowan Property I Office
60 d Park Redhill/Fitch Property I Industrial Office/Warehouse
60 e Park Redhill/Mitchell Corporate Center Office
60 f Park Redhill/Mitchell Property I Industrial Office/Warehouse
60 g Park Redhill/Mitchell Property II Industrial Office/Warehouse
60 h Park Redhill/Mitchell Property III Industrial Office/Warehouse
60 I Redhill Business Park Industrial Office/Warehouse
- ------------------------------------------------------------------------------------------------------------------------------------
61 Orange County Industrial & Office Portfolio II (2) 22,229,344 Office/Industrial Office/Warehouse 8.170%
61 a Armstrong Corporate Plaza Office
61 b Gillette Research Center Industrial Office/Warehouse
61 c Lido Plaza Office
61 d MacArthur/Main Business Center Industrial Office/Warehouse
61 e North Point Business Center Industrial Office/Warehouse
61 f Parkcenter Plaza Office
61 g Taft Business Center Industrial Office/Warehouse
61 h Von Karman Commerce Center Industrial Office/Warehouse
- ------------------------------------------------------------------------------------------------------------------------------------
62 Park View Business Center 2,400,000 Industrial Office/Warehouse 8.490%
63 Parkway East Shopping Center 4,090,000 Retail Anchored 8.750%
<CAPTION>
Original Term to Stated Remaining
Interest Accrual Maturity or APD Term to Maturity or
ID Property Name Basis (mos.) APD (mos.)
- -----------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <S> <C> <C> <C>
43 Holiday Inn Express - Summerville ACT/360 120 117
44 ITC Lot 9 ACT/360 120 120
- -----------------------------------------------------------------------------------------------------------------------------
45 Kensington Square ACT/360 120 120
46 Keystone Self Storage ACT/360 120 119
47 Kyrene Village ACT/360 120 120
48 Lake Biltmore Apartments 30/360 120 120
- -----------------------------------------------------------------------------------------------------------------------------
49 Manchester Apartments ACT/360 120 117
50 Marketplace Shopping Center ACT/360 120 120
51 McDermott Towne Crossing ACT/360 120 120
52 Midvale Park Self Storage ACT/360 120 120
- -----------------------------------------------------------------------------------------------------------------------------
53 Mission Trace Shopping Center ACT/360 120 116
54 Mount Laurel Plaza ACT/360 120 119
55 New England Tradeport ACT/360 120 116
55 a 14 International Drive
55 b 15 International Drive
55 c 16 International Drive
55 d 35 International Drive
- -----------------------------------------------------------------------------------------------------------------------------
56 North American Building ACT/360 120 120
57 Northpoint Square Apartments ACT/360 120 117
58 Oakwood Apartments ACT/360 120 117
59 Oneida West Manor Apartments ACT/360 120 118
- -----------------------------------------------------------------------------------------------------------------------------
60 Orange County Industrial & Office Portfolio I (2) ACT/360 120 117
60 a Newport Freeway Business Park
60 b Park Redhill/Cowan Corporate Center
60 c Park Redhill/Cowan Property I
60 d Park Redhill/Fitch Property I
60 e Park Redhill/Mitchell Corporate Center
60 f Park Redhill/Mitchell Property I
60 g Park Redhill/Mitchell Property II
60 h Park Redhill/Mitchell Property III
60 I Redhill Business Park
- -----------------------------------------------------------------------------------------------------------------------------
61 Orange County Industrial & Office Portfolio II (2) ACT/360 120 117
61 a Armstrong Corporate Plaza
61 b Gillette Research Center
61 c Lido Plaza
61 d MacArthur/Main Business Center
61 e North Point Business Center
61 f Parkcenter Plaza
61 g Taft Business Center
61 h Von Karman Commerce Center
- -----------------------------------------------------------------------------------------------------------------------------
62 Park View Business Center ACT/360 120 120
63 Parkway East Shopping Center ACT/360 120 120
<CAPTION>
Original Remaining
Amortization Term Amortization Term First
ID Property Name (mos.) (mos.) Payment Date
- ----------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <S> <C> <C> <C>
43 Holiday Inn Express - Summerville 300 297 9/1/99
44 ITC Lot 9 360 360 12/10/99
- ----------------------------------------------------------------------------------------------------------------------------
45 Kensington Square 360 360 12/1/99
46 Keystone Self Storage 300 299 11/1/99
47 Kyrene Village 360 360 12/10/99
48 Lake Biltmore Apartments 360 360 12/1/99
- ----------------------------------------------------------------------------------------------------------------------------
49 Manchester Apartments 360 357 9/1/99
50 Marketplace Shopping Center 360 360 12/1/99
51 McDermott Towne Crossing 360 360 12/1/99
52 Midvale Park Self Storage 300 300 12/1/99
- ----------------------------------------------------------------------------------------------------------------------------
53 Mission Trace Shopping Center 360 356 8/1/99
54 Mount Laurel Plaza 360 359 11/1/99
55 New England Tradeport 360 356 8/1/99
55 a 14 International Drive
55 b 15 International Drive
55 c 16 International Drive
55 d 35 International Drive
- ----------------------------------------------------------------------------------------------------------------------------
56 North American Building 360 360 12/10/99
57 Northpoint Square Apartments 360 357 9/1/99
58 Oakwood Apartments 360 357 9/1/99
59 Oneida West Manor Apartments 360 358 10/1/99
- ----------------------------------------------------------------------------------------------------------------------------
60 Orange County Industrial & Office Portfolio I (2) 360 357 9/1/99
60 a Newport Freeway Business Park
60 b Park Redhill/Cowan Corporate Center
60 c Park Redhill/Cowan Property I
60 d Park Redhill/Fitch Property I
60 e Park Redhill/Mitchell Corporate Center
60 f Park Redhill/Mitchell Property I
60 g Park Redhill/Mitchell Property II
60 h Park Redhill/Mitchell Property III
60 I Redhill Business Park
- ----------------------------------------------------------------------------------------------------------------------------
61 Orange County Industrial & Office Portfolio II (2) 360 357 9/1/99
61 a Armstrong Corporate Plaza
61 b Gillette Research Center
61 c Lido Plaza
61 d MacArthur/Main Business Center
61 e North Point Business Center
61 f Parkcenter Plaza
61 g Taft Business Center
61 h Von Karman Commerce Center
- ----------------------------------------------------------------------------------------------------------------------------
62 Park View Business Center 360 360 12/1/99
63 Parkway East Shopping Center 360 360 12/10/99
<CAPTION>
Maturity Date Annual 1998 or Annualized or TTM
ID Property Name or APD Debt Service 1997 NOI 1999 or 1998 NOI
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <S> <C> <C> <C> <C>
43 Holiday Inn Express - Summerville 8/1/09 307,656 560,195 626,229
44 ITC Lot 9 11/10/09 465,079
- -----------------------------------------------------------------------------------------------------------------------------------
45 Kensington Square 11/1/09 400,668 221,193 321,686
46 Keystone Self Storage 10/1/09 174,739 147,037 208,993
47 Kyrene Village 11/10/09 720,065 1,111,231
48 Lake Biltmore Apartments 11/1/09 1,631,835 2,002,378 1,849,246
- -----------------------------------------------------------------------------------------------------------------------------------
49 Manchester Apartments 8/1/09 713,897 1,232,009 1,252,599
50 Marketplace Shopping Center 11/1/09 310,733 481,120 483,638
51 McDermott Towne Crossing 11/1/09 426,930
52 Midvale Park Self Storage 11/1/09 140,909 148,944 181,153
- -----------------------------------------------------------------------------------------------------------------------------------
53 Mission Trace Shopping Center 7/1/09 486,933 744,190 774,324
54 Mount Laurel Plaza 10/1/09 594,522 898,434 883,728
55 New England Tradeport 7/1/09 756,902 727,103
55 a 14 International Drive
55 b 15 International Drive
55 c 16 International Drive
55 d 35 International Drive
- -----------------------------------------------------------------------------------------------------------------------------------
56 North American Building 11/10/09 669,723 665,281 831,253
57 Northpoint Square Apartments 8/1/09 258,655 471,587 515,167
58 Oakwood Apartments 8/1/09 452,185 635,125 694,765
59 Oneida West Manor Apartments 9/1/09 112,624 179,290 199,308
- -----------------------------------------------------------------------------------------------------------------------------------
60 Orange County Industrial & Office Portfolio I (2) 8/1/09 2,406,054
60 a Newport Freeway Business Park
60 b Park Redhill/Cowan Corporate Center
60 c Park Redhill/Cowan Property I
60 d Park Redhill/Fitch Property I
60 e Park Redhill/Mitchell Corporate Center
60 f Park Redhill/Mitchell Property I
60 g Park Redhill/Mitchell Property II
60 h Park Redhill/Mitchell Property III
60 I Redhill Business Park
- -----------------------------------------------------------------------------------------------------------------------------------
61 Orange County Industrial & Office Portfolio II (2) 8/1/09 1,992,027 2,342,761 2,737,767
61 a Armstrong Corporate Plaza
61 b Gillette Research Center
61 c Lido Plaza
61 d MacArthur/Main Business Center
61 e North Point Business Center
61 f Parkcenter Plaza
61 g Taft Business Center
61 h Von Karman Commerce Center
- -----------------------------------------------------------------------------------------------------------------------------------
62 Park View Business Center 11/1/09 221,243 327,716 309,601
63 Parkway East Shopping Center 11/10/09 386,113 476,126 499,315
<CAPTION>
Underwritten Net Appraised Appraised
ID Property Name Cash Flow Lockbox DSCR Value Date
- -------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <S> <C> <C> <C> <C> <C>
43 Holiday Inn Express - Summerville 504,242 1.64 4,670,000 4/14/99
44 ITC Lot 9 564,467 1.21 7,000,000 9/15/99
- -------------------------------------------------------------------------------------------------------------------------------
45 Kensington Square 500,809 1.25 5,800,000 8/20/99
46 Keystone Self Storage 237,646 1.36 2,550,000 7/14/99
47 Kyrene Village 900,296 Hard 1.25 11,600,000 9/17/99
48 Lake Biltmore Apartments 1,969,224 1.21 27,000,000 10/12/99
- -------------------------------------------------------------------------------------------------------------------------------
49 Manchester Apartments 997,681 1.40 10,150,000 5/26/99
50 Marketplace Shopping Center 406,088 1.31 4,500,000 9/1/99
51 McDermott Towne Crossing 549,438 1.29 6,500,000 8/19/99
52 Midvale Park Self Storage 176,050 1.25 2,000,000 7/8/99
- -------------------------------------------------------------------------------------------------------------------------------
53 Mission Trace Shopping Center 656,841 1.35 7,600,000 2/15/99
54 Mount Laurel Plaza 811,793 1.37 8,250,000 7/9/99
55 New England Tradeport 1,048,190 1.39 11,350,000 4/8/99
55 a 14 International Drive 1,650,000 4/8/99
55 b 15 International Drive 1,800,000 4/8/99
55 c 16 International Drive 2,500,000 4/8/99
55 d 35 International Drive 5,400,000 4/8/99
- -------------------------------------------------------------------------------------------------------------------------------
56 North American Building 787,032 1.18 9,325,000 7/27/99
57 Northpoint Square Apartments 442,975 1.71 4,315,000 4/8/99
58 Oakwood Apartments 583,449 1.29 6,700,000 7/5/99
59 Oneida West Manor Apartments 135,870 1.21 1,625,000 7/9/99
- -------------------------------------------------------------------------------------------------------------------------------
60 Orange County Industrial & Office Portfolio I (2) 3,117,897 1.30 37,750,000
60 a Newport Freeway Business Park 17,700,000 4/12/99
60 b Park Redhill/Cowan Corporate Center 2,650,000 4/15/99
60 c Park Redhill/Cowan Property I 2,000,000 4/15/99
60 d Park Redhill/Fitch Property I 1,200,000 4/15/99
60 e Park Redhill/Mitchell Corporate Center 1,500,000 4/15/99
60 f Park Redhill/Mitchell Property I 1,800,000 4/15/99
60 g Park Redhill/Mitchell Property II 1,300,000 4/15/99
60 h Park Redhill/Mitchell Property III 1,600,000 4/15/99
60 I Redhill Business Park 8,000,000 5/21/99
- -------------------------------------------------------------------------------------------------------------------------------
61 Orange County Industrial & Office Portfolio II (2) 2,585,540 1.30 31,950,000
61 a Armstrong Corporate Plaza 2,840,000 4/15/99
61 b Gillette Research Center 3,360,000 4/10/99
61 c Lido Plaza 3,500,000 4/15/99
61 d MacArthur/Main Business Center 3,740,000 4/10/99
61 e North Point Business Center 8,130,000 4/12/99
61 f Parkcenter Plaza 2,400,000 4/15/99
61 g Taft Business Center 1,200,000 4/9/99
61 h Von Karman Commerce Center 6,780,000 4/15/99
- -------------------------------------------------------------------------------------------------------------------------------
62 Park View Business Center 289,003 1.31 3,500,000 9/14/99
63 Parkway East Shopping Center 465,167 1.21 6,300,000 4/19/99
<CAPTION>
Cut-off Date LTV LTV Ratio at
ID Property Name Ratio Maturity Prepayment Provisions
- -------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <S> <C> <C> <C>
43 Holiday Inn Express - Summerville 68.4% 57.3% L(2.25),D(7.50),O(0.25)
44 ITC Lot 9 73.3% 66.1% L(2.00),D(7.75),O(0.25)
- -------------------------------------------------------------------------------------------------------------------------------
45 Kensington Square 77.9% 69.9% L(2.00),D(7.75),O(0.25)
46 Keystone Self Storage 72.5% 60.4% L(2.08),D(7.67),O(0.25)
47 Kyrene Village 68.5% 61.8% L(2.00),D(7.75),O(0.25)
48 Lake Biltmore Apartments 70.2% 61.4% L(2.00),D(7.75),O(0.25)
- -------------------------------------------------------------------------------------------------------------------------------
49 Manchester Apartments 79.7% 71.5% L(2.25),D(7.50),O(0.25)
50 Marketplace Shopping Center 76.7% 69.0% L(2.00),D(7.75),O(0.25)
51 McDermott Towne Crossing 74.0% 66.4% L(2.00),D(7.75),O(0.25)
52 Midvale Park Self Storage 71.7% 60.4% L(2.00),D(7.75),O(0.25)
- -------------------------------------------------------------------------------------------------------------------------------
53 Mission Trace Shopping Center 74.9% 66.8% L(2.33),D(7.42),O(0.25)
54 Mount Laurel Plaza 81.0% 72.8% L(2.08),D(7.67),O(0.25)
55 New England Tradeport 71.9% 65.3% L(2.33),D(7.42),O(0.25)
55 a 14 International Drive
55 b 15 International Drive
55 c 16 International Drive
55 d 35 International Drive
- -------------------------------------------------------------------------------------------------------------------------------
56 North American Building 77.5% 70.3% L(2.00),D(7.75),O(0.25)
57 Northpoint Square Apartments 69.4% 62.0% L(2.25),D(7.42),O(0.33)
58 Oakwood Apartments 78.5% 70.0% L(2.25),D(7.50),O(0.25)
59 Oneida West Manor Apartments 79.9% 71.4% L(2.17),D(7.58),O(0.25)
- -------------------------------------------------------------------------------------------------------------------------------
60 Orange County Industrial & Office Portfolio I (2) 71.1% 64.0% L(2.25),D(7.50),O(0.25)
60 a Newport Freeway Business Park
60 b Park Redhill/Cowan Corporate Center
60 c Park Redhill/Cowan Property I
60 d Park Redhill/Fitch Property I
60 e Park Redhill/Mitchell Corporate Center
60 f Park Redhill/Mitchell Property I
60 g Park Redhill/Mitchell Property II
60 h Park Redhill/Mitchell Property III
60 I Redhill Business Park
- -------------------------------------------------------------------------------------------------------------------------------
61 Orange County Industrial & Office Portfolio II (2) 69.6% 62.7% L(2.25),D(7.50),O(0.25)
61 a Armstrong Corporate Plaza
61 b Gillette Research Center
61 c Lido Plaza
61 d MacArthur/Main Business Center
61 e North Point Business Center
61 f Parkcenter Plaza
61 g Taft Business Center
61 h Von Karman Commerce Center
- -------------------------------------------------------------------------------------------------------------------------------
62 Park View Business Center 68.6% 62.1% L(2.00),D(7.75),O(0.25)
63 Parkway East Shopping Center 64.9% 59.1% L(2.00),D(7.75),O(0.25)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ID Property Name Address
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
43 Holiday Inn Express - Summerville 120 Holiday Inn Drive
44 ITC Lot 9 508-510 McCormick Dr
- -------------------------------------------------------------------------------------------------------------------------------
45 Kensington Square 4251 and 4451 F.M. 2181
46 Keystone Self Storage 4486 Riverside Drive
47 Kyrene Village 6045-6245 W Chandler Blvd
48 Lake Biltmore Apartments 10159 South Blaney Avenue
- -------------------------------------------------------------------------------------------------------------------------------
49 Manchester Apartments 100 Manchester Drive
50 Marketplace Shopping Center 5501 Northwest Expressway
51 McDermott Towne Crossing 1314 and 1328 McDermott Drive
52 Midvale Park Self Storage 6565 South Headley Road
- -------------------------------------------------------------------------------------------------------------------------------
53 Mission Trace Shopping Center 3001-3285 South Academy Boulevard
54 Mount Laurel Plaza Route 30 & Route 981
55 New England Tradeport
55 a 14 International Drive 14 International Drive
55 b 15 International Drive 15 International Drive
55 c 16 International Drive 16 International Drive
55 d 35 International Drive 35 International Drive
- -------------------------------------------------------------------------------------------------------------------------------
56 North American Building 121 South Broad Street ( Avenue of the Arts)
57 Northpoint Square Apartments 220 Northpoint Drive
58 Oakwood Apartments 503 SW Parkway
59 Oneida West Manor Apartments 2216-2230 Oneida Street
- -------------------------------------------------------------------------------------------------------------------------------
60 Orange County Industrial & Office Portfolio I (2)
60 a Newport Freeway Business Park 3176-3182 Pullman Street and 130-210 McCormick Avenue
60 b Park Redhill/Cowan Corporate Center 18001 Cowan
60 c Park Redhill/Cowan Property I 17991-17993 Cowan
60 d Park Redhill/Fitch Property I 17841-17855 Fitch Street
60 e Park Redhill/Mitchell Corporate Center 17752 Mitchell
60 f Park Redhill/Mitchell Property I 18001-18007 Mitchell Street
60 g Park Redhill/Mitchell Property II 17742 Mitchell Street
60 h Park Redhill/Mitchell Property III 17781-17791 Mitchell Street
60 I Redhill Business Park 15401-15481 Red Hill Avenue
- -------------------------------------------------------------------------------------------------------------------------------
61 Orange County Industrial & Office Portfolio II (2)
61 a Armstrong Corporate Plaza 17252 Armstrong Avenue
61 b Gillette Research Center 17809 & 17819 Gillette Avenue
61 c Lido Plaza 3366 Via Lido and 500 32nd Street
61 d MacArthur/Main Business Center 1929 Main Street
61 e North Point Business Center 22601-22609 E. La Palma Avenue
61 f Parkcenter Plaza 601 North Park Center Drive
61 g Taft Business Center 1680 North Main Street and 1434 & 1440 West Taft Avenue
61 h Von Karman Commerce Center 17145-17175 Von Karman Avenue
- -------------------------------------------------------------------------------------------------------------------------------
62 Park View Business Center W134 N5345-N5357 Campbell Dr. & W136 N5283-N5285 Campbell Ct.
63 Parkway East Shopping Center 1109-1189 Huffman Road
<CAPTION>
Year
ID Property Name City State Zip Code Year Built Renovated
- -------------------------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C> <C> <C> <C>
43 Holiday Inn Express - Summerville Summerville SC 29483 1982 1997
44 ITC Lot 9 Glen Burnie MD 21061 1998
- -------------------------------------------------------------------------------------------------------------------------------
45 Kensington Square Corinth TX 76205 1998
46 Keystone Self Storage Macon GA 31210 1997 1998
47 Kyrene Village Chandler AZ 85226 1987
48 Lake Biltmore Apartments Cupertino CA 95014 1972
- -------------------------------------------------------------------------------------------------------------------------------
49 Manchester Apartments Euless TX 76039 1968 1998
50 Marketplace Shopping Center Warr Acres OK 73132 1985
51 McDermott Towne Crossing Allen TX 75013 1998
52 Midvale Park Self Storage Tucson AZ 85746 1997
- -------------------------------------------------------------------------------------------------------------------------------
53 Mission Trace Shopping Center Colorado Springs CO 80916 1985 1986
54 Mount Laurel Plaza Latrobe PA 15650 1991
55 New England Tradeport
55 a 14 International Drive East Granby CT 06026 1983 1992
55 b 15 International Drive East Granby CT 06026 1979
55 c 16 International Drive East Granby CT 06026 1979
55 d 35 International Drive East Granby CT 06026 1998
- -------------------------------------------------------------------------------------------------------------------------------
56 North American Building Philadelphia PA 19107 1900 1980
57 Northpoint Square Apartments Houston TX 77060 1977 1998
58 Oakwood Apartments College Station TX 77840 1981
59 Oneida West Manor Apartments Joliet IL 60435 1973 1995
- -------------------------------------------------------------------------------------------------------------------------------
60 Orange County Industrial & Office Portfolio I (2)
60 a Newport Freeway Business Park Costa Mesa CA 92626 1975
60 b Park Redhill/Cowan Corporate Center Irvine CA 92614 1981
60 c Park Redhill/Cowan Property I Irvine CA 92614 1980
60 d Park Redhill/Fitch Property I Irvine CA 92614 1978
60 e Park Redhill/Mitchell Corporate Center Irvine CA 92614 1981
60 f Park Redhill/Mitchell Property I Irvine CA 92614 1978
60 g Park Redhill/Mitchell Property II Irvine CA 92614 1978
60 h Park Redhill/Mitchell Property III Irvine CA 92614 1978
60 I Redhill Business Park Tustin CA 92780 1979 1994
- -------------------------------------------------------------------------------------------------------------------------------
61 Orange County Industrial & Office Portfolio II (2)
61 a Armstrong Corporate Plaza Irvine CA 92614 1984 1993
61 b Gillette Research Center Irvine CA 92614 1977
61 c Lido Plaza Newport Beach CA 92663 1954 1992
61 d MacArthur/Main Business Center Irvine CA 92614 1977
61 e North Point Business Center Yorba Linda CA 92887 1989
61 f Parkcenter Plaza Santa Ana CA 92705 1978 1993
61 g Taft Business Center Orange CA 92865 1979
61 h Von Karman Commerce Center Irvine CA 92614 1989
- -------------------------------------------------------------------------------------------------------------------------------
62 Park View Business Center Menomenee Falls WI 53051 1986 1990
63 Parkway East Shopping Center Birmingham AL 35215 1973 1996
<CAPTION>
Loan per Net
Net Rentable Number Rentable Area Loan Occupancy
ID Property Name Area (SF) of Units (SF) per Unit Rate
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C> <C> <C> <C>
43 Holiday Inn Express - Summerville 123 25,951.62 77%
44 ITC Lot 9 91,800 55.88 94%
- -----------------------------------------------------------------------------------------------------------------------------------
45 Kensington Square 40,594 111.25 94%
46 Keystone Self Storage 65,525 28.21 84%
47 Kyrene Village 161,174 49.33 97%
48 Lake Biltmore Apartments 155 122,225.81 98%
- -----------------------------------------------------------------------------------------------------------------------------------
49 Manchester Apartments 384 21,060.54 96%
50 Marketplace Shopping Center 58,854 58.62 91%
51 McDermott Towne Crossing 42,700 112.69 92%
52 Midvale Park Self Storage 57,628 24.87 83%
- -----------------------------------------------------------------------------------------------------------------------------------
53 Mission Trace Shopping Center 129,894 43.84 97%
54 Mount Laurel Plaza 125,891 53.05 100%
55 New England Tradeport 237,667 34.33 94%
55 a 14 International Drive 40,060 100%
55 b 15 International Drive 41,632 88%
55 c 16 International Drive 58,370 83%
55 d 35 International Drive 97,605 100%
- -----------------------------------------------------------------------------------------------------------------------------------
56 North American Building 141,957 50.9 89%
57 Northpoint Square Apartments 292 10,256.68 88%
58 Oakwood Apartments 250 21,044.00 97%
59 Oneida West Manor Apartments 36 36,068.64 97%
- -----------------------------------------------------------------------------------------------------------------------------------
60 Orange County Industrial & Office Portfolio I (2) 457,671 58.61 98%
60 a Newport Freeway Business Park 211,058 98%
60 b Park Redhill/Cowan Corporate Center 21,793 100%
60 c Park Redhill/Cowan Property I 17,444 100%
60 d Park Redhill/Fitch Property I 14,567 100%
60 e Park Redhill/Mitchell Corporate Center 15,240 100%
60 f Park Redhill/Mitchell Property I 22,195 100%
60 g Park Redhill/Mitchell Property II 15,464 100%
60 h Park Redhill/Mitchell Property III 20,270 100%
60 I Redhill Business Park 119,640 95%
- -----------------------------------------------------------------------------------------------------------------------------------
61 Orange County Industrial & Office Portfolio II (2) 355,208 62.58 99%
61 a Armstrong Corporate Plaza 30,000 100%
61 b Gillette Research Center 43,417 100%
61 c Lido Plaza 15,981 94%
61 d MacArthur/Main Business Center 43,663 100%
61 e North Point Business Center 114,619 100%
61 f Parkcenter Plaza 27,916 100%
61 g Taft Business Center 17,164 100%
61 h Von Karman Commerce Center 62,448 98%
- -----------------------------------------------------------------------------------------------------------------------------------
62 Park View Business Center 50,845 47.2 100%
63 Parkway East Shopping Center 114,798 35.63 96%
<CAPTION>
Underwritten Underwritten
Occupancy Rate Reserves Reserves
ID Property Name as of Date per SF per unit
- --------------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C> <C>
43 Holiday Inn Express - Summerville 6/30/99 784.03
44 ITC Lot 9 8/11/99 0.10
- --------------------------------------------------------------------------------------------------------------------
45 Kensington Square 9/23/99 0.15
46 Keystone Self Storage 8/1/99 0.17
47 Kyrene Village 9/3/99 0.15
48 Lake Biltmore Apartments 8/25/99 250.00
- --------------------------------------------------------------------------------------------------------------------
49 Manchester Apartments 5/4/99 228.84
50 Marketplace Shopping Center 8/10/99 0.22
51 McDermott Towne Crossing 9/7/99 0.15
52 Midvale Park Self Storage 5/31/99 0.15
- --------------------------------------------------------------------------------------------------------------------
53 Mission Trace Shopping Center 4/22/99 0.24
54 Mount Laurel Plaza 5/1/99 0.15
55 New England Tradeport 9/30/99 0.10
55 a 14 International Drive 9/30/99
55 b 15 International Drive 9/30/99
55 c 16 International Drive 9/30/99
55 d 35 International Drive 9/30/99
- --------------------------------------------------------------------------------------------------------------------
56 North American Building 8/4/99 0.60
57 Northpoint Square Apartments 6/1/99 272.00
58 Oakwood Apartments 7/24/99 300.00
59 Oneida West Manor Apartments 8/26/99 290.00
- --------------------------------------------------------------------------------------------------------------------
60 Orange County Industrial & Office Portfolio I (2) 0.34
60 a Newport Freeway Business Park 9/3/99
60 b Park Redhill/Cowan Corporate Center 9/3/99
60 c Park Redhill/Cowan Property I 9/3/99
60 d Park Redhill/Fitch Property I 9/3/99
60 e Park Redhill/Mitchell Corporate Center 9/3/99
60 f Park Redhill/Mitchell Property I 9/3/99
60 g Park Redhill/Mitchell Property II 9/3/99
60 h Park Redhill/Mitchell Property III 10/4/99
60 I Redhill Business Park 9/3/99
- --------------------------------------------------------------------------------------------------------------------
61 Orange County Industrial & Office Portfolio II (2) 9/3/99 0.18
61 a Armstrong Corporate Plaza 9/3/99
61 b Gillette Research Center 9/3/99
61 c Lido Plaza 9/3/99
61 d MacArthur/Main Business Center 9/3/99
61 e North Point Business Center 9/3/99
61 f Parkcenter Plaza 9/3/99
61 g Taft Business Center 9/3/99
61 h Von Karman Commerce Center 9/3/99
- --------------------------------------------------------------------------------------------------------------------
62 Park View Business Center 8/26/99 0.16
63 Parkway East Shopping Center 10/1/99 0.25
<CAPTION>
% of Lease
ID Property Name Largest Tenant GLA Expiration
- -----------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C> <C>
43 Holiday Inn Express - Summerville
44 ITC Lot 9
- -----------------------------------------------------------------------------------------------------------
45 Kensington Square Video Update, Inc. 13% 1/31/08
46 Keystone Self Storage
47 Kyrene Village Basha's 28% 11/10/07
48 Lake Biltmore Apartments
- -----------------------------------------------------------------------------------------------------------
49 Manchester Apartments
50 Marketplace Shopping Center David's Bridal 18% 2/13/06
51 McDermott Towne Crossing Blockbuster Video 12% 10/31/03
52 Midvale Park Self Storage
- -----------------------------------------------------------------------------------------------------------
53 Mission Trace Shopping Center Arc Thrift Store 17% 10/31/01
54 Mount Laurel Plaza Kmart 69% 7/31/16
55 New England Tradeport
55 a 14 International Drive
55 b 15 International Drive
55 c 16 International Drive
55 d 35 International Drive
- -----------------------------------------------------------------------------------------------------------
56 North American Building
57 Northpoint Square Apartments
58 Oakwood Apartments
59 Oneida West Manor Apartments
- -----------------------------------------------------------------------------------------------------------
60 Orange County Industrial & Office Portfolio I (2)
60 a Newport Freeway Business Park
60 b Park Redhill/Cowan Corporate Center
60 c Park Redhill/Cowan Property I
60 d Park Redhill/Fitch Property I
60 e Park Redhill/Mitchell Corporate Center
60 f Park Redhill/Mitchell Property I
60 g Park Redhill/Mitchell Property II
60 h Park Redhill/Mitchell Property III
60 I Redhill Business Park
- -----------------------------------------------------------------------------------------------------------
61 Orange County Industrial & Office Portfolio II (2)
61 a Armstrong Corporate Plaza
61 b Gillette Research Center
61 c Lido Plaza
61 d MacArthur/Main Business Center
61 e North Point Business Center
61 f Parkcenter Plaza
61 g Taft Business Center
61 h Von Karman Commerce Center
- -----------------------------------------------------------------------------------------------------------
62 Park View Business Center
63 Parkway East Shopping Center Alabama Thrift 29% 4/1/03
<CAPTION>
% of Lease
ID Property Name 2nd Largest Tenant GLA Expiration 3rd Largest Tenant
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C> <C> <C>
43 Holiday Inn Express - Summerville
44 ITC Lot 9
- -----------------------------------------------------------------------------------------------------------------------------------
45 Kensington Square J & J Cards (Hallmark) 10% 4/30/04 Armend's Italian
46 Keystone Self Storage
47 Kyrene Village Kyrene Lanes 23% 12/31/08 The Oak Store
48 Lake Biltmore Apartments
- -----------------------------------------------------------------------------------------------------------------------------------
49 Manchester Apartments
50 Marketplace Shopping Center Crafter's Mall 17% 3/3/00 Donna's Hallmark
51 McDermott Towne Crossing Unlimited Success Martial Arts 10% 11/30/04 Parsa Burger
52 Midvale Park Self Storage
- -----------------------------------------------------------------------------------------------------------------------------------
53 Mission Trace Shopping Center The Alternate Source 8% 6/30/02 Peter Piper Pizza
54 Mount Laurel Plaza Fashion Bug 8% 1/31/02 CVS Pharmacy
55 New England Tradeport
55 a 14 International Drive
55 b 15 International Drive
55 c 16 International Drive
55 d 35 International Drive
- -----------------------------------------------------------------------------------------------------------------------------------
56 North American Building
57 Northpoint Square Apartments
58 Oakwood Apartments
59 Oneida West Manor Apartments
- -----------------------------------------------------------------------------------------------------------------------------------
60 Orange County Industrial & Office Portfolio I (2)
60 a Newport Freeway Business Park
60 b Park Redhill/Cowan Corporate Center
60 c Park Redhill/Cowan Property I
60 d Park Redhill/Fitch Property I
60 e Park Redhill/Mitchell Corporate Center
60 f Park Redhill/Mitchell Property I
60 g Park Redhill/Mitchell Property II
60 h Park Redhill/Mitchell Property III
60 I Redhill Business Park
- -----------------------------------------------------------------------------------------------------------------------------------
61 Orange County Industrial & Office Portfolio II (2)
61 a Armstrong Corporate Plaza
61 b Gillette Research Center
61 c Lido Plaza
61 d MacArthur/Main Business Center
61 e North Point Business Center
61 f Parkcenter Plaza
61 g Taft Business Center
61 h Von Karman Commerce Center
- -----------------------------------------------------------------------------------------------------------------------------------
62 Park View Business Center
63 Parkway East Shopping Center Big Lots 20% 1/1/05 TJ Maxx
<CAPTION>
% of Lease Crossed with
ID Property Name GLA Expiration other loans
- -------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C> <C>
43 Holiday Inn Express - Summerville
44 ITC Lot 9
- -------------------------------------------------------------------------------------------------
45 Kensington Square 7% 3/31/05
46 Keystone Self Storage
47 Kyrene Village 9% 7/30/00
48 Lake Biltmore Apartments
- -------------------------------------------------------------------------------------------------
49 Manchester Apartments
50 Marketplace Shopping Center 12% 7/31/02
51 McDermott Towne Crossing 7% 8/31/04
52 Midvale Park Self Storage
- -------------------------------------------------------------------------------------------------
53 Mission Trace Shopping Center 7% 4/30/03
54 Mount Laurel Plaza 6% 2/28/02
55 New England Tradeport
55 a 14 International Drive
55 b 15 International Drive
55 c 16 International Drive
55 d 35 International Drive
- -------------------------------------------------------------------------------------------------
56 North American Building
57 Northpoint Square Apartments
58 Oakwood Apartments
59 Oneida West Manor Apartments
- -------------------------------------------------------------------------------------------------
60 Orange County Industrial & Office Portfolio I (2) Yes
60 a Newport Freeway Business Park
60 b Park Redhill/Cowan Corporate Center
60 c Park Redhill/Cowan Property I
60 d Park Redhill/Fitch Property I
60 e Park Redhill/Mitchell Corporate Center
60 f Park Redhill/Mitchell Property I
60 g Park Redhill/Mitchell Property II
60 h Park Redhill/Mitchell Property III
60 I Redhill Business Park
- -------------------------------------------------------------------------------------------------
61 Orange County Industrial & Office Portfolio II (2) Yes
61 a Armstrong Corporate Plaza
61 b Gillette Research Center
61 c Lido Plaza
61 d MacArthur/Main Business Center
61 e North Point Business Center
61 f Parkcenter Plaza
61 g Taft Business Center
61 h Von Karman Commerce Center
- -------------------------------------------------------------------------------------------------
62 Park View Business Center
63 Parkway East Shopping Center 19% 1/1/03
<CAPTION>
ID Property Name Owner/Sponsor
- -------------------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C>
43 Holiday Inn Express - Summerville
44 ITC Lot 9 William Alborn
- -------------------------------------------------------------------------------------------------------------------------
45 Kensington Square Eric Brauss
46 Keystone Self Storage
47 Kyrene Village CenterTrust Retail Properties, Inc.
48 Lake Biltmore Apartments Sanford N. Diller
- -------------------------------------------------------------------------------------------------------------------------
49 Manchester Apartments
50 Marketplace Shopping Center
51 McDermott Towne Crossing Eric Brauss
52 Midvale Park Self Storage
- -------------------------------------------------------------------------------------------------------------------------
53 Mission Trace Shopping Center
54 Mount Laurel Plaza James N. Kratsa, Keith H. McGraw
55 New England Tradeport
55 a 14 International Drive
55 b 15 International Drive
55 c 16 International Drive
55 d 35 International Drive
- -------------------------------------------------------------------------------------------------------------------------
56 North American Building Craig A. Spencer
57 Northpoint Square Apartments
58 Oakwood Apartments
59 Oneida West Manor Apartments
- -------------------------------------------------------------------------------------------------------------------------
60 Orange County Industrial & Office Portfolio I (2) Igor Olenicoff, Andre Olenicoff
60 a Newport Freeway Business Park
60 b Park Redhill/Cowan Corporate Center
60 c Park Redhill/Cowan Property I
60 d Park Redhill/Fitch Property I
60 e Park Redhill/Mitchell Corporate Center
60 f Park Redhill/Mitchell Property I
60 g Park Redhill/Mitchell Property II
60 h Park Redhill/Mitchell Property III
60 I Redhill Business Park
- -------------------------------------------------------------------------------------------------------------------------
61 Orange County Industrial & Office Portfolio II (2) Igor Olenicoff, Andre Olenicoff
61 a Armstrong Corporate Plaza
61 b Gillette Research Center
61 c Lido Plaza
61 d MacArthur/Main Business Center
61 e North Point Business Center
61 f Parkcenter Plaza
61 g Taft Business Center
61 h Von Karman Commerce Center
- -------------------------------------------------------------------------------------------------------------------------
62 Park View Business Center
63 Parkway East Shopping Center Ron Bruder
</TABLE>
<PAGE>
CHASE COMMERCIAL MORTGAGE SECURITIES CORP., SERIES 1999-2
ANNEX A - CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS AND MORTGAGED PROPERTIES
<TABLE>
<CAPTION>
% of Initial Pool Mortgage Loan
ID Property Name Balance # of Properties Seller (1) Original Balance
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
64 Pepper Ridge Plaza 0.30% 1 GECC 2,383,000
65 Rancho Riverside Mobile Home Country Club 0.62% 1 GECC 4,858,000
- -----------------------------------------------------------------------------------------------------------------------------------
66 Red Rock Plaza 0.25% 1 GECC 1,950,000
67 Renaissance Towne Centre 1.28% 1 GECC 10,033,000
68 River Walk Townhomes 1.03% 1 GECC 8,050,000
69 Rockland Apartments 0.35% 1 CMB 2,720,000
- -----------------------------------------------------------------------------------------------------------------------------------
70 Romulus Tower 0.64% 1 GECC 5,075,000
71 Safari Apartments 1.62% 1 CMB 12,700,000
72 Seven Penn Center 3.07% 1 CMB 24,000,000
73 Shoppes at Corporate Plaza 0.50% 1 GECC 3,941,000
74 Solberg Tower 0.86% 1 GECC 6,758,725
- -----------------------------------------------------------------------------------------------------------------------------------
75 Sonna Building, The 0.34% 1 CMB 2,650,000
76 Sonterra Apartments 2.14% 1 GECC 16,800,000
77 The Arapahoe Business Center 2.13% 1 GECC 16,663,000
78 The Shops at Flower Mound 0.64% 1 GECC 4,986,000
79 Torrance Promenade 3.83% 1 CMB 30,000,000
- -----------------------------------------------------------------------------------------------------------------------------------
80 Towers at South Towne II 0.84% 1 CMB 6,600,000
81 Tuscan Inn at Fisherman's Wharf 4.34% 1 CMB 34,000,000
82 Ventana Apartments 1.33% 1 CMB 10,430,000
83 Villa Del Sol Mobile Home Park 0.55% 1 GECC 4,268,000
84 Vineyards Marketplace 0.66% 1 CMB 5,194,000
- -----------------------------------------------------------------------------------------------------------------------------------
85 West Hills Community Medical Center 0.66% 1 CMB 5,190,000
86 Whispering Palms Mobile Home & R.V. Community 1.01% 1 GECC 7,936,000
87 White Rock Trail Apartments 0.34% 1 GECC 2,650,000
88 Willows 124 1.53% 1 GECC 11,998,000
89 Windsor Apartments 3.51% 1 GECC 27,500,000
90 Windtree Phase II Apartments 0.43% 1 GECC 3,400,000
- -----------------------------------------------------------------------------------------------------------------------------------
91 Winstanley Portfolio 2.74% 9 CMB 21,479,500
91 a 1 Barnes Industrial Road 1
91 b 5-9 Barnes Industrial Road 1
91 c 23-27 Village Lane 1
91 d 29-33 Village Lane 1
91 e 50 Barnes Industrial Park North 1
91 f 320 Barnes Industrial Park North 1
91 g 860 North Main Street 1
91 h 866 North Main Street 1
91 I 129 Worthington Ridge Road 1
92 Wood Chase Apartments 2.04% 1 GECC 16,000,000
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Cut-Off Date General Detailed
ID Property Name Balance Property Type Property Type Mortgage Rate
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C> <C> <C>
64 Pepper Ridge Plaza 2,380,313 Retail Anchored 7.990%
65 Rancho Riverside Mobile Home Country Club 4,852,740 Manufactured Housing 8.140%
- -----------------------------------------------------------------------------------------------------------------------------------
66 Red Rock Plaza 1,950,000 Retail Unanchored 8.220%
67 Renaissance Towne Centre 10,028,164 Retail Anchored 7.800%
68 River Walk Townhomes 8,040,949 Multifamily Student 8.000%
69 Rockland Apartments 2,720,000 Multifamily Conventional 8.350%
- -----------------------------------------------------------------------------------------------------------------------------------
70 Romulus Tower 5,018,883 Multifamily Section 8 6.490%
71 Safari Apartments 12,700,000 Multifamily Conventional 7.920%
72 Seven Penn Center 24,000,000 Office Office 8.430%
73 Shoppes at Corporate Plaza 3,939,446 Retail Unanchored 8.340%
74 Solberg Tower 6,694,781 Multifamily Section 8 7.200%
- -----------------------------------------------------------------------------------------------------------------------------------
75 Sonna Building, The 2,647,115 Office Office 8.120%
76 Sonterra Apartments 16,769,989 Multifamily Conventional 7.570%
77 The Arapahoe Business Center 16,663,000 Office 8.330%
78 The Shops at Flower Mound 4,986,000 Retail Anchored 8.080%
79 Torrance Promenade 30,000,000 Retail Anchored 8.300%
- -----------------------------------------------------------------------------------------------------------------------------------
80 Towers at South Towne II 6,600,000 Office Office 8.500%
81 Tuscan Inn at Fisherman's Wharf 34,000,000 Hotel Hotel 8.830%
82 Ventana Apartments 10,425,285 Multifamily Conventional 7.980%
83 Villa Del Sol Mobile Home Park 4,265,971 Manufactured Housing 7.840%
84 Vineyards Marketplace 5,194,000 Retail Anchored 8.300%
- -----------------------------------------------------------------------------------------------------------------------------------
85 West Hills Community Medical Center 5,190,000 Office Office 8.550%
86 Whispering Palms Mobile Home & R.V. Community 7,936,000 Manufactured Housing 8.220%
87 White Rock Trail Apartments 2,650,000 Multifamily Conventional 8.110%
88 Willows 124 11,984,546 Industrial Office/Warehouse 8.010%
89 Windsor Apartments 27,487,296 Multifamily Conventional 7.920%
90 Windtree Phase II Apartments 3,363,201 Multifamily Conventional 6.960%
- -----------------------------------------------------------------------------------------------------------------------------------
91 Winstanley Portfolio 21,479,500 Office/Industrial Office/Industrial 8.440%
91 a 1 Barnes Industrial Road Office Office
91 b 5-9 Barnes Industrial Road Industrial Industrial
91 c 23-27 Village Lane Industrial Industrial
91 d 29-33 Village Lane Industrial Industrial
91 e 50 Barnes Industrial Park North Industrial Industrial
91 f 320 Barnes Industrial Park North Industrial Industrial
91 g 860 North Main Street Office Office
91 h 866 North Main Street Office Office
91 I 129 Worthington Ridge Road Industrial Industrial
92 Wood Chase Apartments 15,972,755 Multifamily Conventional 7.740%
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Original Term to Stated Remaining
Interest Accrual Maturity or APD Term to Maturity or
ID Property Name Basis (mos.) APD (mos.)
- ------------------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C> <C>
64 Pepper Ridge Plaza ACT/360 120 118
65 Rancho Riverside Mobile Home Country Club ACT/360 60 58
- ------------------------------------------------------------------------------------------------------------------------
66 Red Rock Plaza ACT/360 120 120
67 Renaissance Towne Centre ACT/360 120 119
68 River Walk Townhomes ACT/360 120 118
69 Rockland Apartments ACT/360 120 120
- ------------------------------------------------------------------------------------------------------------------------
70 Romulus Tower ACT/360 156 143
71 Safari Apartments ACT/360 120 120
72 Seven Penn Center ACT/360 120 120
73 Shoppes at Corporate Plaza ACT/360 120 119
74 Solberg Tower ACT/360 240 227
- ------------------------------------------------------------------------------------------------------------------------
75 Sonna Building, The ACT/360 120 118
76 Sonterra Apartments ACT/360 120 117
77 The Arapahoe Business Center ACT/360 120 120
78 The Shops at Flower Mound ACT/360 120 120
79 Torrance Promenade ACT/360 120 120
- ------------------------------------------------------------------------------------------------------------------------
80 Towers at South Towne II ACT/360 120 120
81 Tuscan Inn at Fisherman's Wharf ACT/360 120 120
82 Ventana Apartments ACT/360 120 119
83 Villa Del Sol Mobile Home Park ACT/360 120 119
84 Vineyards Marketplace ACT/360 120 120
- ------------------------------------------------------------------------------------------------------------------------
85 West Hills Community Medical Center ACT/360 120 120
86 Whispering Palms Mobile Home & R.V. Community ACT/360 120 120
87 White Rock Trail Apartments ACT/360 120 120
88 Willows 124 ACT/360 120 118
89 Windsor Apartments ACT/360 120 119
90 Windtree Phase II Apartments ACT/360 240 226
- ------------------------------------------------------------------------------------------------------------------------
91 Winstanley Portfolio ACT/360 120 120
91 a 1 Barnes Industrial Road
91 b 5-9 Barnes Industrial Road
91 c 23-27 Village Lane
91 d 29-33 Village Lane
91 e 50 Barnes Industrial Park North
91 f 320 Barnes Industrial Park North
91 g 860 North Main Street
91 h 866 North Main Street
91 I 129 Worthington Ridge Road
92 Wood Chase Apartments ACT/360 120 117
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Original Remaining
Amortization Term Amortization Term First Maturity Date
ID Property Name (mos.) (mos.) Payment Date or APD
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C> <C> <C>
64 Pepper Ridge Plaza 360 358 10/1/99 9/1/09
65 Rancho Riverside Mobile Home Country Club 360 358 10/1/99 9/1/04
- -----------------------------------------------------------------------------------------------------------------------------------
66 Red Rock Plaza 360 360 12/1/99 11/1/09
67 Renaissance Towne Centre 360 359 11/1/99 10/1/09
68 River Walk Townhomes 360 358 10/1/99 9/1/09
69 Rockland Apartments 360 360 12/10/99 11/10/09
- -----------------------------------------------------------------------------------------------------------------------------------
70 Romulus Tower 360 347 11/1/98 10/1/11
71 Safari Apartments 360 360 12/10/99 11/10/09
72 Seven Penn Center 360 360 12/10/99 11/10/09
73 Shoppes at Corporate Plaza 360 359 11/1/99 10/1/09
74 Solberg Tower 359 346 11/1/98 10/1/18
- -----------------------------------------------------------------------------------------------------------------------------------
75 Sonna Building, The 360 358 10/10/99 9/10/09
76 Sonterra Apartments 360 357 9/1/99 8/1/09
77 The Arapahoe Business Center 360 360 12/1/99 11/1/09
78 The Shops at Flower Mound 360 360 12/1/99 11/1/09
79 Torrance Promenade 360 360 12/10/99 11/10/09
- -----------------------------------------------------------------------------------------------------------------------------------
80 Towers at South Towne II 360 360 12/10/99 11/10/09
81 Tuscan Inn at Fisherman's Wharf 300 300 12/10/99 11/10/09
82 Ventana Apartments 360 359 11/10/99 10/10/09
83 Villa Del Sol Mobile Home Park 360 359 11/1/99 10/1/09
84 Vineyards Marketplace 360 360 12/10/99 11/10/09
- -----------------------------------------------------------------------------------------------------------------------------------
85 West Hills Community Medical Center 360 360 12/10/99 11/10/09
86 Whispering Palms Mobile Home & R.V. Community 360 360 12/1/99 11/1/09
87 White Rock Trail Apartments 360 360 12/1/99 11/1/09
88 Willows 124 360 358 10/1/99 9/1/09
89 Windsor Apartments 360 359 11/1/99 10/1/09
90 Windtree Phase II Apartments 360 346 10/1/98 9/1/18
- -----------------------------------------------------------------------------------------------------------------------------------
91 Winstanley Portfolio 300 300 12/10/99 11/10/09
91 a 1 Barnes Industrial Road
91 b 5-9 Barnes Industrial Road
91 c 23-27 Village Lane
91 d 29-33 Village Lane
91 e 50 Barnes Industrial Park North
91 f 320 Barnes Industrial Park North
91 g 860 North Main Street
91 h 866 North Main Street
91 I 129 Worthington Ridge Road
92 Wood Chase Apartments 360 357 9/1/99 8/1/09
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Annual 1998 or Annualized or TTM Underwritten Net
ID Property Name Debt Service 1997 NOI 1999 or 1998 NOI Cash Flow
- ----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C> <C> <C>
64 Pepper Ridge Plaza 209,628 103,517 266,191
65 Rancho Riverside Mobile Home Country Club 433,458 449,096 515,555 520,202
- ----------------------------------------------------------------------------------------------------------------------------------
66 Red Rock Plaza 175,303 136,475 220,112
67 Renaissance Towne Centre 866,695 1,167,512 1,284,006 1,130,708
68 River Walk Townhomes 708,817 943,850 869,995
69 Rockland Apartments 247,512 168,559 297,363
- ----------------------------------------------------------------------------------------------------------------------------------
70 Romulus Tower 384,529 569,954 623,459 530,406
71 Safari Apartments 1,109,770 1,463,811 1,464,108 1,407,680
72 Seven Penn Center 2,200,199 2,276,467 3,184,421 2,669,032
73 Shoppes at Corporate Plaza 358,286 491,958 454,693
74 Solberg Tower 550,979 827,888 754,281 715,883
- ----------------------------------------------------------------------------------------------------------------------------------
75 Sonna Building, The 236,003 336,716 284,952 306,564
76 Sonterra Apartments 1,419,292 40,092 1,013,130 1,710,016
77 The Arapahoe Business Center 1,513,463 1,919,716
78 The Shops at Flower Mound 442,367 341,910 562,131
79 Torrance Promenade 2,717,225 4,033,603 3,335,811
- ----------------------------------------------------------------------------------------------------------------------------------
80 Towers at South Towne II 608,979 938,513 904,856 761,999
81 Tuscan Inn at Fisherman's Wharf 3,376,550 5,035,256 6,189,510 4,915,879
82 Ventana Apartments 916,635 1,100,444
83 Villa Del Sol Mobile Home Park 370,108 404,540 425,569 447,552
84 Vineyards Marketplace 470,442 739,119 588,076
- ----------------------------------------------------------------------------------------------------------------------------------
85 West Hills Community Medical Center 481,088 569,004 595,964
86 Whispering Palms Mobile Home & R.V. Community 713,439 890,243 893,718 863,343
87 White Rock Trail Apartments 235,780 228,253 314,309 342,352
88 Willows 124 1,057,449 1,131,677 1,320,471 1,318,763
89 Windsor Apartments 2,403,045 2,722,097 2,866,236 2,906,567
90 Windtree Phase II Apartments 270,348 498,087 483,694 423,478
- ----------------------------------------------------------------------------------------------------------------------------------
91 Winstanley Portfolio 2,065,093 1,367,169 1,752,380 2,478,115
91 a 1 Barnes Industrial Road
91 b 5-9 Barnes Industrial Road
91 c 23-27 Village Lane
91 d 29-33 Village Lane
91 e 50 Barnes Industrial Park North
91 f 320 Barnes Industrial Park North
91 g 860 North Main Street
91 h 866 North Main Street
91 I 129 Worthington Ridge Road
92 Wood Chase Apartments 1,374,185 1,702,557 1,765,182 1,684,734
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Appraised Appraised Cut-off Date LTV
ID Property Name Lockbox DSCR Value Date Ratio
- ------------------------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C> <C> <C> <C>
64 Pepper Ridge Plaza 1.27 3,000,000 7/8/99 79.3%
65 Rancho Riverside Mobile Home Country Club 1.20 7,260,000 7/27/99 66.8%
- ------------------------------------------------------------------------------------------------------------------------------
66 Red Rock Plaza 1.26 2,700,000 8/16/99 72.2%
67 Renaissance Towne Centre 1.31 13,400,000 8/5/99 74.8%
68 River Walk Townhomes 1.23 10,200,000 4/12/99 78.8%
69 Rockland Apartments 1.20 3,500,000 8/23/99 77.7%
- ------------------------------------------------------------------------------------------------------------------------------
70 Romulus Tower Springing 1.38 6,600,000 7/21/98 76.0%
71 Safari Apartments 1.27 16,000,000 8/18/99 79.4%
72 Seven Penn Center 1.21 36,000,000 7/27/99 66.7%
73 Shoppes at Corporate Plaza 1.27 5,000,000 8/5/99 78.8%
74 Solberg Tower Springing 1.30 8,500,000 7/21/98 78.8%
- ------------------------------------------------------------------------------------------------------------------------------
75 Sonna Building, The 1.30 3,560,000 6/28/99 74.4%
76 Sonterra Apartments 1.21 23,500,000 5/12/99 71.4%
77 The Arapahoe Business Center 1.27 22,000,000 8/18/99 75.7%
78 The Shops at Flower Mound 1.27 6,620,000 8/15/99 75.3%
79 Torrance Promenade Hard 1.23 42,000,000 9/10/99 71.4%
- ------------------------------------------------------------------------------------------------------------------------------
80 Towers at South Towne II 1.25 9,750,000 11/1/99 67.7%
81 Tuscan Inn at Fisherman's Wharf Springing 1.46 50,900,000 9/23/99 66.8%
82 Ventana Apartments 1.20 14,000,000 8/6/99 74.5%
83 Villa Del Sol Mobile Home Park 1.21 5,380,000 8/14/99 79.3%
84 Vineyards Marketplace Hard 1.25 8,200,000 9/7/99 63.3%
- ------------------------------------------------------------------------------------------------------------------------------
85 West Hills Community Medical Center 1.24 7,400,000 8/24/99 70.1%
86 Whispering Palms Mobile Home & R.V. Community 1.21 10,100,000 8/16/99 78.6%
87 White Rock Trail Apartments 1.45 3,600,000 8/27/99 73.6%
88 Willows 124 1.25 16,500,000 7/15/99 72.6%
89 Windsor Apartments 1.21 36,000,000 7/29/99 76.4%
90 Windtree Phase II Apartments Springing 1.57 4,550,000 5/19/98 73.9%
- ------------------------------------------------------------------------------------------------------------------------------
91 Winstanley Portfolio 1.20 29,010,000 74.0%
91 a 1 Barnes Industrial Road 2,260,000 9/1/99
91 b 5-9 Barnes Industrial Road 2,400,000 7/13/99
91 c 23-27 Village Lane 1,800,000 7/13/99
91 d 29-33 Village Lane 1,550,000 7/13/99
91 e 50 Barnes Industrial Park North 8,400,000 7/13/99
91 f 320 Barnes Industrial Park North 2,100,000 7/13/99
91 g 860 North Main Street 1,900,000 7/13/99
91 h 866 North Main Street 2,100,000 7/13/99
91 I 129 Worthington Ridge Road 6,500,000 7/13/99
92 Wood Chase Apartments 1.23 19,600,000 5/3/99 81.5%
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
LTV Ratio at
ID Property Name Maturity Prepayment Provisions
- ------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C>
64 Pepper Ridge Plaza 71.1% L(2.17),D(7.58),O(0.25)
65 Rancho Riverside Mobile Home Country Club 64.2% L(2.17),D(2.58),O(0.25)
- ------------------------------------------------------------------------------------------------------
66 Red Rock Plaza 65.0% L(2.00),D(7.75),O(0.25)
67 Renaissance Towne Centre 66.8% L(2.08),D(7.67),O(0.25)
68 River Walk Townhomes 70.7% L(2.17),D(7.50),O(0.33)
69 Rockland Apartments 70.2% L(2.00),D(7.75),O(0.25)
- ------------------------------------------------------------------------------------------------------
70 Romulus Tower 61.4% L(2.92),D(9.83),O(0.25)
71 Safari Apartments 71.0% L(2.00),D(7.75),O(0.25)
72 Seven Penn Center 60.3% L(2.00),D(7.75),O(0.25)
73 Shoppes at Corporate Plaza 71.2% L(2.08),D(7.67),O(0.25)
74 Solberg Tower 49.4% L(3.08),D(16.67),O(0.25)
- ------------------------------------------------------------------------------------------------------
75 Sonna Building, The 66.9% L(2.17),D(7.58),O(0.25)
76 Sonterra Apartments 63.4% L(2.25),D(7.50),O(0.25)
77 The Arapahoe Business Center 68.4% L(2.00),D(7.75),O(0.25)
78 The Shops at Flower Mound 67.6% L(2.00),D(7.75),O(0.25)
79 Torrance Promenade 64.4% L(2.00),D(7.75),O(0.25)
- ------------------------------------------------------------------------------------------------------
80 Towers at South Towne II 61.3% L(2.00),D(7.75),O(0.25)
81 Tuscan Inn at Fisherman's Wharf 56.5% L(2.00),D(7.50),O(0.50)
82 Ventana Apartments 66.7% L(2.08),D(7.67),O(0.25)
83 Villa Del Sol Mobile Home Park 70.8% L(2.08),D(7.17),O(0.75)
84 Vineyards Marketplace 57.1% L(2.00),D(7.75),O(0.25)
- ------------------------------------------------------------------------------------------------------
85 West Hills Community Medical Center 63.6% L(2.00),D(7.50),O(0.50)
86 Whispering Palms Mobile Home & R.V. Community 70.7% L(2.00),D(7.75),O(0.25)
87 White Rock Trail Apartments 66.1% L(2.00),D(7.75),O(0.25)
88 Willows 124 65.1% L(2.17),D(7.58),O(0.25)
89 Windsor Apartments 68.3% L(2.08),D(7.67),O(0.25)
90 Windtree Phase II Apartments 45.8% L(2.92),D(16.83),O(0.25)
- ------------------------------------------------------------------------------------------------------
91 Winstanley Portfolio 61.9% L(2.00),D(7.75),O(0.25)
91 a 1 Barnes Industrial Road
91 b 5-9 Barnes Industrial Road
91 c 23-27 Village Lane
91 d 29-33 Village Lane
91 e 50 Barnes Industrial Park North
91 f 320 Barnes Industrial Park North
91 g 860 North Main Street
91 h 866 North Main Street
91 I 129 Worthington Ridge Road
92 Wood Chase Apartments 72.7% L(2.25),D(7.50),O(0.25)
- ------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
(1) CMB - Chase Manhattan Bank, GECC - General Electric Capital Corporation
(2) Loans are cross collateralized and cross defaulted
(3) Shadow anchor, not part of mortgaged collateral
<PAGE>
<TABLE>
<CAPTION>
ID Property Name Address City State
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
64 Pepper Ridge Plaza 18409 and 18413 N. Cave Creek Road Phoenix AZ
65 Rancho Riverside Mobile Home Country Club 3701 Filmore Street Riverside CA
- ------------------------------------------------------------------------------------------------------------------------------------
66 Red Rock Plaza 16425 East Palisades Boulevard Fountain Hills AZ
67 Renaissance Towne Centre 8895,8905, 8915, 8955 Towne Centre Drive San Diego CA
68 River Walk Townhomes 400 Timothy Road Athens GA
69 Rockland Apartments 235 West 400 South Rexburg ID
- ------------------------------------------------------------------------------------------------------------------------------------
70 Romulus Tower 36500 Bibbins Street Romulus MI
71 Safari Apartments 2675 S. Nellis Blvd. Las Vegas NV
72 Seven Penn Center 1635 Market Street Philadelphia PA
73 Shoppes at Corporate Plaza 6300 - 6350 North Powerline Road Ft. Lauderdale FL
74 Solberg Tower 27787 Dequindre Road Madison Heights MI
- ------------------------------------------------------------------------------------------------------------------------------------
75 Sonna Building, The 910 Main Street Boise ID
76 Sonterra Apartments 8801 North FM 620 Austin TX
77 The Arapahoe Business Center 12450, 12500, 12600 and 12650 East Arapahoe Road Englewood CO
78 The Shops at Flower Mound 2011 and 2111 Justin Road Flower Mound TX
79 Torrance Promenade 19510-19800 Hawthorne BLlvd Torrance CA
- ------------------------------------------------------------------------------------------------------------------------------------
80 Towers at South Towne II 10421 South Jordan Gateway South Jordan UT
81 Tuscan Inn at Fisherman's Wharf 425 North Point Street San Francisco CA
82 Ventana Apartments 18795 Caminito Cantilena San Diego CA
83 Villa Del Sol Mobile Home Park 6515 15th Street East Bradenton FL
84 Vineyards Marketplace 11338-11438 Kenyon Way Ranco Cucamonga CA
- ------------------------------------------------------------------------------------------------------------------------------------
85 West Hills Community Medical Center 23101 Sherman Place West Hills CA
86 Whispering Palms Mobile Home & R.V. Community 10305 U.S. 1 Highway Sebastian FL
87 White Rock Trail Apartments 6802 Skillman Street Dallas TX
88 Willows 124 12413-12421 Willows Road NE Kirkland WA
89 Windsor Apartments 911 South Park Road Hollywood FL
90 Windtree Phase II Apartments 409 Tradewinds Drive Fayetteville NC
- ------------------------------------------------------------------------------------------------------------------------------------
91 Winstanley Portfolio
91 a 1 Barnes Industrial Road 1 Barnes Industrial Road Wallingford CT
91 b 5-9 Barnes Industrial Road 5-9 Barnes Industrial Road Wallingford CT
91 c 23-27 Village Lane 23-27 Village Lane Wallingford CT
91 d 29-33 Village Lane 29-33 Village Lane Wallingford CT
91 e 50 Barnes Industrial Park North 50 Barnes Industrial Park North Wallingford CT
91 f 320 Barnes Industrial Park North 320 Barnes Industrial Park North Wallingford CT
91 g 860 North Main Street 860 North Main Street Wallingford CT
91 h 866 North Main Street 866 North Main Street Wallingford CT
91 I 129 Worthington Ridge Road 129 Worthington Ridge Road Berlin CT
92 Wood Chase Apartments 100 Chase Common Drive Norcross GA
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Year Net Rentable Number
ID Property Name Zip Code Year Built Renovated Area (SF) of Units
- --------------------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C> <C> <C> <C>
64 Pepper Ridge Plaza 85032 1998 1999 19,818
65 Rancho Riverside Mobile Home Country Club 92505 1964 194
- --------------------------------------------------------------------------------------------------------------------------
66 Red Rock Plaza 85268 1998 16,276
67 Renaissance Towne Centre 92122 1991 52,893
68 River Walk Townhomes 30606 1998 100
69 Rockland Apartments 83440 1972 1998 59
- --------------------------------------------------------------------------------------------------------------------------
70 Romulus Tower 48174 1980 1994 126
71 Safari Apartments 89121 1990 352
72 Seven Penn Center 19103 1966 1987 285,240
73 Shoppes at Corporate Plaza 33309 1989 1998 30,082
74 Solberg Tower 48071 1978 1996 170
- --------------------------------------------------------------------------------------------------------------------------
75 Sonna Building, The 83702 1876 1995 38,941
76 Sonterra Apartments 78726 1998 272
77 The Arapahoe Business Center 80112 1998 1999 179,928
78 The Shops at Flower Mound 75021 1998 1999 44,310
79 Torrance Promenade 90503 1973 1989 263,228
- --------------------------------------------------------------------------------------------------------------------------
80 Towers at South Towne II 84095 1999 71,326
81 Tuscan Inn at Fisherman's Wharf 94133 1990 1997 221
82 Ventana Apartments 92128 1998 114
83 Villa Del Sol Mobile Home Park 34203 1959 1997 207
84 Vineyards Marketplace 91701 1992 56,035
- --------------------------------------------------------------------------------------------------------------------------
85 West Hills Community Medical Center 91307 1964 1997 52,640
86 Whispering Palms Mobile Home & R.V. Community 32958 1969 1999 581
87 White Rock Trail Apartments 75231 1969 1998 129
88 Willows 124 98034 1986 1996 130,359
89 Windsor Apartments 33021 1997 388
90 Windtree Phase II Apartments 28314 1983 128
- --------------------------------------------------------------------------------------------------------------------------
91 Winstanley Portfolio 628,854
91 a 1 Barnes Industrial Road 06492 1977 1999 30,170
91 b 5-9 Barnes Industrial Road 06492 1980 1996 38,006
91 c 23-27 Village Lane 06492 1979 1997 31,734
91 d 29-33 Village Lane 06492 1974 25,745
91 e 50 Barnes Industrial Park North 06492 1979 1999 154,255
91 f 320 Barnes Industrial Park North 06492 1986 39,488
91 g 860 North Main Street 06492 1982 27,168
91 h 866 North Main Street 06492 1984 31,554
91 I 129 Worthington Ridge Road 06037 1968 1992 250,734
92 Wood Chase Apartments 30071 1986 380
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Loan per Net Underwritten
Rentable Area Loan Occupancy Occupancy Rate Reserves
ID Property Name (SF) per Unit Rate as of Date per SF
- ----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C> <C> <C> <C>
64 Pepper Ridge Plaza 120.11 93% 8/5/99 0.15
65 Rancho Riverside Mobile Home Country Club 25,014.12 92% 6/1/99
- ----------------------------------------------------------------------------------------------------------------------------------
66 Red Rock Plaza 119.81 91% 8/6/99 0.16
67 Renaissance Towne Centre 189.59 95% 9/1/99 0.17
68 River Walk Townhomes 80,409.49 96% 8/24/99
69 Rockland Apartments 46,101.69 95% 10/31/99
- ----------------------------------------------------------------------------------------------------------------------------------
70 Romulus Tower 39,832.40 100% 8/24/99
71 Safari Apartments 36,079.55 94% 7/15/99
72 Seven Penn Center 84.14 91% 10/6/99 0.20
73 Shoppes at Corporate Plaza 130.96 97% 7/20/99 0.20
74 Solberg Tower 39,381.07 99% 9/22/99
- ----------------------------------------------------------------------------------------------------------------------------------
75 Sonna Building, The 67.98 91% 6/28/99 0.24
76 Sonterra Apartments 61,654.37 96% 8/25/99
77 The Arapahoe Business Center 92.61 100% 7/31/99 0.15
78 The Shops at Flower Mound 112.53 100% 9/23/99 0.15
79 Torrance Promenade 113.97 100% 9/3/99 0.15
- ----------------------------------------------------------------------------------------------------------------------------------
80 Towers at South Towne II 92.53 93% 8/31/99 0.20
81 Tuscan Inn at Fisherman's Wharf 153,846.15 89% 8/31/99
82 Ventana Apartments 91,449.87 100% 9/2/99
83 Villa Del Sol Mobile Home Park 20,608.56 100% 7/9/99
84 Vineyards Marketplace 92.69 90% 9/3/99 0.15
- ----------------------------------------------------------------------------------------------------------------------------------
85 West Hills Community Medical Center 98.59 84% 8/31/99 0.20
86 Whispering Palms Mobile Home & R.V. Community 13,659.21 92% 6/28/99
87 White Rock Trail Apartments 20,542.64 92% 9/17/99
88 Willows 124 91.93 100% 8/10/99 0.15
89 Windsor Apartments 70,843.55 96% 9/2/99
90 Windtree Phase II Apartments 26,275.00 95% 7/31/99
- ----------------------------------------------------------------------------------------------------------------------------------
91 Winstanley Portfolio 34.16 98% 7/30/99 0.11
91 a 1 Barnes Industrial Road 100% 7/30/99
91 b 5-9 Barnes Industrial Road 100% 7/30/99
91 c 23-27 Village Lane 94% 7/30/99
91 d 29-33 Village Lane 65% 7/30/99
91 e 50 Barnes Industrial Park North 100% 7/30/99
91 f 320 Barnes Industrial Park North 100% 7/30/99
91 g 860 North Main Street 100% 7/30/99
91 h 866 North Main Street 100% 7/30/99
91 I 129 Worthington Ridge Road 100% 7/30/99
92 Wood Chase Apartments 42,033.57 96% 5/12/99
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Underwritten
Reserves % of Lease
ID Property Name per unit Largest Tenant GLA Expiration
- -------------------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C> <C> <C>
64 Pepper Ridge Plaza Hollywood Entertainment Corp. 35% 12/9/08
65 Rancho Riverside Mobile Home Country Club 47.15
- -------------------------------------------------------------------------------------------------------------------------
66 Red Rock Plaza
67 Renaissance Towne Centre Harvest Ranch Market 19% 5/31/01
68 River Walk Townhomes 300.00
69 Rockland Apartments 495.98
- -------------------------------------------------------------------------------------------------------------------------
70 Romulus Tower 285.00
71 Safari Apartments 267.06
72 Seven Penn Center
73 Shoppes at Corporate Plaza
74 Solberg Tower 293.00
- -------------------------------------------------------------------------------------------------------------------------
75 Sonna Building, The
76 Sonterra Apartments 200.00
77 The Arapahoe Business Center
78 The Shops at Flower Mound El Chico Cafe 14% 12/14/13
79 Torrance Promenade Sear's Homelife 17% 11/1/11
- -------------------------------------------------------------------------------------------------------------------------
80 Towers at South Towne II
81 Tuscan Inn at Fisherman's Wharf 2,843.75
82 Ventana Apartments 200.00
83 Villa Del Sol Mobile Home Park 25.00
84 Vineyards Marketplace Albertson's 76% 12/31/25
- -------------------------------------------------------------------------------------------------------------------------
85 West Hills Community Medical Center
86 Whispering Palms Mobile Home & R.V. Community 40.00
87 White Rock Trail Apartments 200.00
88 Willows 124
89 Windsor Apartments 200.00
90 Windtree Phase II Apartments 231.97
- -------------------------------------------------------------------------------------------------------------------------
91 Winstanley Portfolio
91 a 1 Barnes Industrial Road
91 b 5-9 Barnes Industrial Road
91 c 23-27 Village Lane
91 d 29-33 Village Lane
91 e 50 Barnes Industrial Park North
91 f 320 Barnes Industrial Park North
91 g 860 North Main Street
91 h 866 North Main Street
91 I 129 Worthington Ridge Road
92 Wood Chase Apartments 225.00
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Lease % of
ID Property Name 2nd Largest Tenant GLA Expiration 3rd Largest Tenant GLA
- ----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C> <C> <C> <C>
64 Pepper Ridge Plaza John C. Lincoln, LLC 20% 11/13/03 Camelback Pizza, Inc. 8%
65 Rancho Riverside Mobile Home Country Club
- ----------------------------------------------------------------------------------------------------------------------------------
66 Red Rock Plaza
67 Renaissance Towne Centre Nettle Creek 6% 10/31/04 Le Peep 5%
68 River Walk Townhomes
69 Rockland Apartments
- ----------------------------------------------------------------------------------------------------------------------------------
70 Romulus Tower
71 Safari Apartments
72 Seven Penn Center
73 Shoppes at Corporate Plaza
74 Solberg Tower
- ----------------------------------------------------------------------------------------------------------------------------------
75 Sonna Building, The
76 Sonterra Apartments
77 The Arapahoe Business Center
78 The Shops at Flower Mound Jones Blair Paint 10% 7/31/02 Elizabeth Peters 9%
79 Torrance Promenade Linens 'N Things 14% 1/1/10 Marshalls 10%
- ----------------------------------------------------------------------------------------------------------------------------------
80 Towers at South Towne II
81 Tuscan Inn at Fisherman's Wharf
82 Ventana Apartments
83 Villa Del Sol Mobile Home Park
84 Vineyards Marketplace Sav-on Drugs 38% 11/30/11 Videotron 9%
- ----------------------------------------------------------------------------------------------------------------------------------
85 West Hills Community Medical Center
86 Whispering Palms Mobile Home & R.V. Community
87 White Rock Trail Apartments
88 Willows 124
89 Windsor Apartments
90 Windtree Phase II Apartments
- ----------------------------------------------------------------------------------------------------------------------------------
91 Winstanley Portfolio
91 a 1 Barnes Industrial Road
91 b 5-9 Barnes Industrial Road
91 c 23-27 Village Lane
91 d 29-33 Village Lane
91 e 50 Barnes Industrial Park North
91 f 320 Barnes Industrial Park North
91 g 860 North Main Street
91 h 866 North Main Street
91 I 129 Worthington Ridge Road
92 Wood Chase Apartments
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Lease Crossed with
ID Property Name Expiration other loans
- --------------------------------------------------------------------------------------
<C> <C> <S> <C> <C>
64 Pepper Ridge Plaza 4/6/04
65 Rancho Riverside Mobile Home Country Club
- --------------------------------------------------------------------------------------
66 Red Rock Plaza
67 Renaissance Towne Centre 2/28/03
68 River Walk Townhomes
69 Rockland Apartments
- --------------------------------------------------------------------------------------
70 Romulus Tower
71 Safari Apartments
72 Seven Penn Center
73 Shoppes at Corporate Plaza
74 Solberg Tower
- --------------------------------------------------------------------------------------
75 Sonna Building, The
76 Sonterra Apartments
77 The Arapahoe Business Center
78 The Shops at Flower Mound 1/31/04
79 Torrance Promenade 1/1/04
- --------------------------------------------------------------------------------------
80 Towers at South Towne II
81 Tuscan Inn at Fisherman's Wharf
82 Ventana Apartments
83 Villa Del Sol Mobile Home Park
84 Vineyards Marketplace 11/30/02
- --------------------------------------------------------------------------------------
85 West Hills Community Medical Center
86 Whispering Palms Mobile Home & R.V. Community
87 White Rock Trail Apartments
88 Willows 124
89 Windsor Apartments
90 Windtree Phase II Apartments
- --------------------------------------------------------------------------------------
91 Winstanley Portfolio
91 a 1 Barnes Industrial Road
91 b 5-9 Barnes Industrial Road
91 c 23-27 Village Lane
91 d 29-33 Village Lane
91 e 50 Barnes Industrial Park North
91 f 320 Barnes Industrial Park North
91 g 860 North Main Street
91 h 866 North Main Street
91 I 129 Worthington Ridge Road
92 Wood Chase Apartments
- --------------------------------------------------------------------------------------
<CAPTION>
ID Property Name Owner/Sponsor
- ----------------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C>
64 Pepper Ridge Plaza
65 Rancho Riverside Mobile Home Country Club
- ----------------------------------------------------------------------------------------------------------------------
66 Red Rock Plaza
67 Renaissance Towne Centre Alan Fox
68 River Walk Townhomes
69 Rockland Apartments Scott Satterfield and Greg Helm
- ----------------------------------------------------------------------------------------------------------------------
70 Romulus Tower Leo Sklar, Irwin Obstearn, Emanuel Ravet
71 Safari Apartments
72 Seven Penn Center Craig A. Spencer
73 Shoppes at Corporate Plaza
74 Solberg Tower Leo Sklar, Irwin Obstearn, Emanuel Ravet
- ----------------------------------------------------------------------------------------------------------------------
75 Sonna Building, The John Stevenson
76 Sonterra Apartments
77 The Arapahoe Business Center
78 The Shops at Flower Mound Eric Brauss
79 Torrance Promenade CenterTrust Retail Properties, Inc.
- ----------------------------------------------------------------------------------------------------------------------
80 Towers at South Towne II James Morse, Jay Govindji, Morris Sterrett, Brett Sterrett
81 Tuscan Inn at Fisherman's Wharf William Kimpton, Thomas LaTour
82 Ventana Apartments
83 Villa Del Sol Mobile Home Park
84 Vineyards Marketplace CenterTrust Retail Properties, Inc.
- ----------------------------------------------------------------------------------------------------------------------
85 West Hills Community Medical Center Harris Toibb
86 Whispering Palms Mobile Home & R.V. Community H. Wayne Klekamp
87 White Rock Trail Apartments
88 Willows 124 Alan Fox
89 Windsor Apartments Wiener Family Partnership
90 Windtree Phase II Apartments
- ----------------------------------------------------------------------------------------------------------------------
91 Winstanley Portfolio David Winstanley
91 a 1 Barnes Industrial Road
91 b 5-9 Barnes Industrial Road
91 c 23-27 Village Lane
91 d 29-33 Village Lane
91 e 50 Barnes Industrial Park North
91 f 320 Barnes Industrial Park North
91 g 860 North Main Street
91 h 866 North Main Street
91 I 129 Worthington Ridge Road
92 Wood Chase Apartments
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
[This page intentionally left blank]
<PAGE>
CHASE COMMERCIAL MORTGAGE SECURITIES CORP., SERIES 1999-2
ANNEX B - CERTAIN INFORMATION REGARDING MULTIFAMILY MORTGAGED PROPERTIES
<TABLE>
<CAPTION>
Annex A Zip
ID # Lender Property Name Address City State Code County
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
10 CMB Alpine Chalet Apartments 460 South 200 West Rexburg ID 83440 Madison
14 GECC Ashley Place Apartments 14850 West Dixie Highway North Miami FL 33181 Miami-Dade
24 GECC Country Club - Terrace Apartments 1501 Golf Club Drive Upland CA 91786 San Bernardino
25 GECC Country Club - Villas Apartments 1501 Golf Club Drive Upland CA 91786 San Bernardino
28 CMB Cypress Shores 1901 Lyons Road Coconut Creek FL 33063 Broward
30 GECC Dix McBride Apartments 2229-2259 Dix Avenue Far Rockaway NY 11691 Queens
36 GECC Happy Homes Apartments 10110 Club Creek Drive Houston TX 77036 Harris
38 GECC Heather Ridge Apartments 212 Heather Ridge Drive Fayetteville NC 28311 Cumberland
39 GECC Heatherstone Apartments 877 Heatherstone Way Mountain View CA 94040 Santa Clara
40 GECC Hemingway House Apartments 6401 East Ridge Drive Odessa TX 79762 Ector
48 GECC Lake Biltmore Apartments 10159 South Blaney Avenue Cupertino CA 95014 Santa Clara
49 GECC Manchester Apartments 100 Manchester Drive Euless TX 76039 Tarrant
57 GECC Northpoint Square Apartments 220 Northpoint Drive Houston TX 77060 Harris
58 GECC Oakwood Apartments 503 SW Parkway College Station TX 77840 Brazos
59 GECC Oneida West Manor Apartments 2216-2230 Oneida Street Joliet IL 60435 Will
68 GECC River Walk Townhomes 400 Timothy Road Athens GA 30606 Clarke
69 CMB Rockland Apartments 235 West 400 South Rexburg ID 83440 Madison
70 GECC Romulus Tower 36500 Bibbins Street Romulus MI 48174 Wayne
71 CMB Safari Apartments 2675 S. Nellis Blvd. Las Vegas NV 89121 Clark
74 GECC Solberg Tower 27787 Dequindre Road Madison Heights MI 48071 Oakland
76 GECC Sonterra Apartments 8801 North FM 620 Austin TX 78726 Travis
82 CMB Ventana Apartments 18795 Caminito Cantilena San Diego CA 92128 San Diego
87 GECC White Rock Trail Apartments 6802 Skillman Street Dallas TX 75231 Dallas
89 GECC Windsor Apartments 911 South Park Road Hollywood FL 33021 Broward
90 GECC Windtree Phase II Apartments 409 Tradewinds Drive Fayetteville NC 28314 Cumberland
92 GECC Wood Chase Apartments 100 Chase Common Drive Norcross GA 30071 Gwinnett
<CAPTION>
General Specific
Annex A Property Property
ID # Lender Type Type
- ---------------------------------------------------
<S> <C> <C> <C>
10 CMB Multifamily Conventional
14 GECC Multifamily Conventional
24 GECC Multifamily Conventional
25 GECC Multifamily Conventional
28 CMB Multifamily Conventional
30 GECC Multifamily Section 8
36 GECC Multifamily Conventional
38 GECC Multifamily Conventional
39 GECC Multifamily Conventional
40 GECC Multifamily Conventional
48 GECC Multifamily Conventional
49 GECC Multifamily Conventional
57 GECC Multifamily Conventional
58 GECC Multifamily Section 8
59 GECC Multifamily Conventional
68 GECC Multifamily Student
69 CMB Multifamily Conventional
70 GECC Multifamily Section 8
71 CMB Multifamily Conventional
74 GECC Multifamily Section 8
76 GECC Multifamily Conventional
82 CMB Multifamily Conventional
87 GECC Multifamily Conventional
89 GECC Multifamily Conventional
90 GECC Multifamily Conventional
92 GECC Multifamily Conventional
</TABLE>
B-1
<TABLE>
<CAPTION>
Utilities Number of Number Number Number Number
Annex A Tenant Studio of 1 BR of 2 BR of 3 BR of 4 BR
ID # Lender Elevator(s) Pays (1) Units Units Units Units Units
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
10 CMB No 42
14 GECC No E 2 78 16
24 GECC No E 103 20
25 GECC No E 112 66
28 CMB No E 96 148 56
30 GECC Yes E/G 1 48 50 31
36 GECC No E 96 120
38 GECC No E/G 49 139 16
39 GECC No E 84 24
40 GECC No E 106 89
48 GECC No E 52 95 8
49 GECC No E 128 256
57 GECC No E 96 148 48
58 GECC No E 120 122 8
59 GECC No E 36
68 GECC No E 60 40
69 CMB No 18 22 19
70 GECC Yes E 115 11
71 CMB No E 136 216
74 GECC Yes E 154 16
76 GECC No E/G/W 168 88 16
82 CMB No E 38 38 38
87 GECC No E 80 49
89 GECC No E 102 216 70
90 GECC No E/G 32 96
92 GECC No E/G 216 114 50
<CAPTION>
Average Rent, Average Rent, Average Rent, Average Rent, Average Rent,
Annex A Rent Ranges - Rent Ranges - 1 Rent Ranges - 2 Rent Ranges - 3 Rent Ranges - 4
ID # Lender Studio ($) BR ($) BR ($) BR ($) BR ($)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
10 CMB 1,028
14 GECC 430 506 657
24 GECC 955 1,020
25 GECC 1,020 1,136
28 CMB 775 853 1,075
30 GECC 785 957 1,082
36 GECC 344 436
38 GECC 496 537 662
39 GECC 1,265 1,526
40 GECC 317 455
48 GECC 1,392 1,688 1,989
49 GECC 468 581
57 GECC 312 357 445
58 GECC 457 599 823
59 GECC 568
68 GECC 1,019 1,298
69 CMB 407 734 999
70 GECC 699 811
71 CMB 615 658
74 GECC 675 821
76 GECC 778 1,116 1,401
82 CMB 950 1,305 1,530
87 GECC 438 551
89 GECC 902 1,070 1,189
90 GECC 465 545
92 GECC 600 773 861
</TABLE>
- ----------------------------------------------------------------
(1) E - Electric, G - Gas, W - Water
B-2
<PAGE>
[This page intentionally left blank]
<PAGE>
ANNEX C
Weighted Average Life, Principal Window
Pre-Tax Yield to Maturity and Modified Duration of the A-1 Certificates
0% CPR During Lockout, Defeasance, Yield Maintenance or Penalty -
Otherwise at Indicated CPR
<TABLE>
<CAPTION>
Price (32nds) 0% CPR 10% CPR 20% CPR 30% CPR 50% CPR
- ---------------- ------------ ------------ ------------ ----------- ------------
CBE Yield CBE Yield CBE Yield CBE Yield CBE Yield
<S> <C> <C> <C> <C> <C>
100-04 7.043 7.043 7.043 7.043 7.043
100-06 7.028 7.028 7.028 7.028 7.028
100-08 7.014 7.014 7.014 7.014 7.014
100-10 6.999 6.999 6.999 6.999 6.999
100-12 6.985 6.985 6.985 6.985 6.985
100-14 6.971 6.971 6.971 6.970 6.970
100-16 6.956 6.956 6.956 6.956 6.956
100-18 6.942 6.942 6.942 6.942 6.942
100-20 6.927 6.927 6.927 6.927 6.927
100-22 6.913 6.913 6.913 6.913 6.913
100-24 6.898 6.898 6.898 6.898 6.898
100-26 6.884 6.884 6.884 6.884 6.884
100-28 6.870 6.870 6.870 6.870 6.870
Weighted Average
Life (yrs.) 5.50 5.50 5.50 5.50 5.49
First Principal
Payment Date 12/15/99 12/15/99 12/15/99 12/15/99 12/15/99
Last Principal
Payment Date 10/15/08 10/15/08 10/15/08 10/15/08 10/15/08
Modified Duration
@ 100-16 4.29 4.29 4.29 4.29 4.29
</TABLE>
C-1
<PAGE>
Weighted Average Life, Principal Window
Pre-Tax Yield to Maturity and Modified Duration of the A-2 Certificates
0% CPR During Lockout, Defeasance, Yield Maintenance or Penalty -
Otherwise at Indicated CPR
<TABLE>
<CAPTION>
Price (32nds) 0% CPR 10% CPR 20% CPR 30% CPR 50% CPR
- ---------------- ------------ ------------ ------------ ----------- ------------
CBE Yield CBE Yield CBE Yield CBE Yield CBE Yield
<S> <C> <C> <C> <C> <C>
100-04 7.248 7.248 7.248 7.247 7.247
100-06 7.238 7.238 7.238 7.238 7.238
100-08 7.229 7.229 7.229 7.229 7.229
100-10 7.220 7.220 7.220 7.220 7.220
100-12 7.211 7.211 7.211 7.211 7.211
100-14 7.202 7.202 7.202 7.202 7.202
100-16 7.193 7.193 7.193 7.193 7.193
100-18 7.184 7.184 7.184 7.184 7.184
100-20 7.175 7.175 7.175 7.175 7.175
100-22 7.166 7.166 7.166 7.166 7.166
100-24 7.157 7.157 7.157 7.157 7.156
100-26 7.148 7.148 7.148 7.148 7.147
100-28 7.139 7.139 7.139 7.139 7.138
Weighted Average
Life (yrs.) 9.83 9.82 9.81 9.81 9.79
First Principal
Payment Date 10/15/08 10/15/08 10/15/08 10/15/08 10/15/08
Last Principal
Payment Date 11/15/09 11/15/09 11/15/09 11/15/09 11/15/09
Modified Duration
@ 100-16 6.83 6.82 6.82 6.82 6.81
C-2
<PAGE>
Weighted Average Life, Principal Window
Pre-Tax Yield to Maturity and Modified Duration of the B Certificates
0% CPR During Lockout, Defeasance, Yield Maintenance or Penalty -
Otherwise at Indicated CPR
</TABLE>
<TABLE>
<CAPTION>
Price (32nds) 0% CPR 10% CPR 20% CPR 30% CPR 50% CPR
- ---------------- ------------ ------------ ------------ ----------- ------------
CBE Yield CBE Yield CBE Yield CBE Yield CBE Yield
<S> <C> <C> <C> <C> <C>
99-20 7.469 7.469 7.469 7.469 7.469
99-22 7.460 7.460 7.460 7.460 7.460
99-24 7.451 7.451 7.451 7.451 7.451
99-26 7.442 7.442 7.442 7.442 7.442
99-28 7.433 7.433 7.433 7.433 7.433
99-30 7.424 7.424 7.424 7.424 7.424
100-00 7.415 7.415 7.415 7.415 7.415
100-02 7.405 7.405 7.405 7.405 7.405
100-04 7.396 7.396 7.396 7.396 7.396
100-06 7.387 7.387 7.387 7.387 7.387
100-08 7.378 7.378 7.378 7.378 7.378
100-10 7.369 7.369 7.369 7.369 7.369
100-12 7.360 7.360 7.360 7.360 7.360
Weighted Average
Life (yrs.) 9.98 9.98 9.98 9.98 9.98
First Principal
Payment Date 11/15/09 11/15/09 11/15/09 11/15/09 11/15/09
Last Principal
Payment Date 11/15/09 11/15/09 11/15/09 11/15/09 11/15/09
Modified Duration
@ 100-00 6.84 6.84 6.84 6.84 6.84
</TABLE>
C-3
<PAGE>
Weighted Average Life, Principal Window
Pre-Tax Yield to Maturity and Modified Duration of the C Certificates
0% CPR During Lockout, Defeasance, Yield Maintenance or Penalty -
Otherwise at Indicated CPR
<TABLE>
<CAPTION>
Price (32nds) 0% CPR 10% CPR 20% CPR 30% CPR 50% CPR
- ---------------- ------------ ------------ ------------ ----------- ------------
CBE Yield CBE Yield CBE Yield CBE Yield CBE Yield
<S> <C> <C> <C> <C> <C>
99-20 7.650 7.650 7.650 7.650 7.650
99-22 7.641 7.641 7.641 7.641 7.641
99-24 7.631 7.631 7.631 7.631 7.631
99-26 7.622 7.622 7.622 7.622 7.622
99-28 7.613 7.613 7.613 7.613 7.613
99-30 7.604 7.604 7.604 7.604 7.604
100-00 7.595 7.595 7.595 7.595 7.595
100-02 7.586 7.586 7.586 7.586 7.586
100-04 7.576 7.576 7.576 7.576 7.576
100-06 7.567 7.567 7.567 7.567 7.567
100-08 7.558 7.558 7.558 7.558 7.558
100-10 7.549 7.549 7.549 7.549 7.549
100-12 7.540 7.540 7.540 7.540 7.540
Weighted Average
Life (yrs.) 9.98 9.98 9.98 9.98 9.98
First Principal
Payment Date 11/15/09 11/15/09 11/15/09 11/15/09 11/15/09
Last Principal
Payment Date 11/15/09 11/15/09 11/15/09 11/15/09 11/15/09
Modified Duration
@ 100-00 6.78 6.78 6.78 6.78 6.78
</TABLE>
C-4
<PAGE>
Weighted Average Life, Principal Window
Pre-Tax Yield to Maturity and Modified Duration of the D Certificates
0% CPR During Lockout, Defeasance, Yield Maintenance or Penalty -
Otherwise at Indicated CPR
<TABLE>
<CAPTION>
Price (32nds) 0% CPR 10% CPR 20% CPR 30% CPR 50% CPR
- ---------------- ------------ ------------ ------------ ----------- ------------
CBE Yield CBE Yield CBE Yield CBE Yield CBE Yield
<S> <C> <C> <C> <C> <C>
99-20 7.871 7.871 7.871 7.871 7.871
99-22 7.861 7.861 7.861 7.861 7.861
99-24 7.852 7.852 7.852 7.852 7.852
99-26 7.843 7.843 7.843 7.843 7.843
99-28 7.834 7.834 7.834 7.834 7.834
99-30 7.824 7.824 7.824 7.824 7.824
100-00 7.815 7.815 7.815 7.815 7.815
100-02 7.806 7.806 7.806 7.806 7.806
100-04 7.796 7.796 7.796 7.796 7.796
100-06 7.787 7.787 7.787 7.787 7.787
100-08 7.778 7.778 7.778 7.778 7.778
100-10 7.769 7.769 7.769 7.769 7.769
100-12 7.760 7.760 7.760 7.760 7.760
Weighted Average
Life (yrs.) 9.98 9.98 9.98 9.98 9.98
First Principal
Payment Date 11/15/09 11/15/09 11/15/09 11/15/09 11/15/09
Last Principal
Payment Date 11/15/09 11/15/09 11/15/09 11/15/09 11/15/09
Modified Duration
@ 100-00 6.71 6.71 6.71 6.71 6.71
</TABLE>
C-5
<PAGE>
Weighted Average Life, Principal Window
Pre-Tax Yield to Maturity and Modified Duration of the E Certificates
0% CPR During Lockout, Defeasance, Yield Maintenance or Penalty -
Otherwise at Indicated CPR
<TABLE>
<CAPTION>
Price (32nds) 0% CPR 10% CPR 20% CPR 30% CPR 50% CPR
- ---------------- ------------ ------------ ------------ ----------- ------------
CBE Yield CBE Yield CBE Yield CBE Yield CBE Yield
<S> <C> <C> <C> <C> <C>
96-02 8.414 8.414 8.414 8.414 8.414
96-04 8.404 8.404 8.404 8.404 8.404
96-06 8.395 8.395 8.395 8.395 8.395
96-08 8.385 8.385 8.385 8.385 8.385
96-10 8.375 8.375 8.375 8.375 8.375
96-12 8.366 8.366 8.366 8.366 8.366
96-14 8.356 8.356 8.356 8.356 8.356
96-16 8.346 8.346 8.346 8.346 8.346
96-18 8.336 8.336 8.336 8.336 8.336
96-20 8.327 8.327 8.327 8.327 8.327
96-22 8.317 8.317 8.317 8.317 8.317
96-24 8.307 8.307 8.307 8.307 8.307
96-26 8.298 8.298 8.298 8.298 8.298
Weighted Average
Life (yrs.) 9.98 9.98 9.98 9.98 9.98
First Principal
Payment Date 11/15/09 11/15/09 11/15/09 11/15/09 11/15/09
Last Principal
Payment Date 11/15/09 11/15/09 11/15/09 11/15/09 11/15/09
Modified Duration
@ 96-14 6.64 6.64 6.64 6.64 6.64
</TABLE>
C-6
<PAGE>
Weighted Average Life, Principal Window
Pre-Tax Yield to Maturity and Modified Duration of the F Certificates
0% CPR During Lockout, Defeasance, Yield Maintenance or Penalty -
Otherwise at Indicated CPR
<TABLE>
<CAPTION>
Price (32nds) 0% CPR 10% CPR 20% CPR 30% CPR 50% CPR
- ---------------- ------------ ------------ ------------ ----------- ------------
CBE Yield CBE Yield CBE Yield CBE Yield CBE Yield
<S> <C> <C> <C> <C> <C>
91-03 9.219 9.219 9.219 9.219 9.219
91-05 9.208 9.208 9.208 9.208 9.208
91-07 9.198 9.198 9.198 9.198 9.198
91-09 9.187 9.187 9.187 9.187 9.187
91-11 9.177 9.177 9.177 9.177 9.177
91-13 9.166 9.166 9.166 9.166 9.166
91-15 9.156 9.156 9.156 9.156 9.156
91-17 9.146 9.146 9.146 9.146 9.146
91-19 9.135 9.135 9.135 9.135 9.135
91-21 9.125 9.125 9.125 9.125 9.125
91-23 9.114 9.114 9.114 9.114 9.114
91-25 9.104 9.104 9.104 9.104 9.104
91-27 9.094 9.094 9.094 9.094 9.094
Weighted Average
Life (yrs.) 9.98 9.98 9.98 9.98 9.98
First Principal
Payment Date 11/15/09 11/15/09 11/15/09 11/15/09 11/15/09
Last Principal
Payment Date 11/15/09 11/15/09 11/15/09 11/15/09 11/15/09
Modified Duration
@ 91-15 6.52 6.52 6.52 6.52 6.52
</TABLE>
C-7
<PAGE>
[This page intentionally left blank]
<PAGE>
PROSPECTUS
MORTGAGE PASS-THROUGH CERTIFICATES
(ISSUABLE IN SERIES)
CHASE COMMERCIAL MORTGAGE SECURITIES CORP.
(DEPOSITOR)
------------------------
Chase Commercial Mortgage Securities Corp. from time to time will offer
commercial mortgage pass-through certificates in separate series. We will offer
the certificates through this prospectus and a separate prospectus supplement
for each series.
For each series we will establish a trust fund consisting primarily of a
segregated pool of various types of multifamily or commercial mortgage loans,
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, or a combination of mortgage loans and mortgage-backed securities.
If specified in the related prospectus supplement, the trust fund for a series
of certificates may include letters of credit, insurance policies, guarantees,
reserve funds or other types of credit support, interest rate exchange
agreements, interest rate cap or floor agreements or currency exchange
agreements as described in this prospectus.
The certificates of a series will evidence beneficial ownership interests in the
trust fund. We may divide the certificates of a series into two or more classes
which may have different interest rates and which may receive principal payments
in differing proportions and at different times. In addition, your rights as
holders of certain classes may be subordinate to the rights of holders of other
classes to receive principal and interest.
No series of certificates will represent an obligation of or interest in Chase
Commercial Mortgage Securities Corp. or any of its affiliates. Neither the
certificates of any series nor the assets in any trust fund will be guaranteed
or insured by any governmental agency or instrumentality or by any other person,
unless otherwise provided in the related prospectus supplement. The assets in
each trust fund will be held in trust for the benefit of the holders of the
related series of certificates, as more fully described in this prospectus.
No secondary market will exist for a series of certificates prior to its
offering. We cannot assure you that a secondary market will develop for the
certificates of any series, or, if it does develop, that it will continue.
YOU SHOULD CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 13 OF THIS
PROSPECTUS AND IN THE RELATED PROSPECTUS SUPPLEMENT.
------------------------
The Securities and Exchange Commission and state securities regulators have not
approved or disapproved of the offered certificates or notes or determined if
this prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
We may offer certain of the certificates of any series through one or more
different methods, including offerings through underwriters, which may include
our affiliate Chase Securities Inc., as more fully described in this prospectus
under "Method of Distribution" and in the related prospectus supplement. We may
retain or hold for sale one or more classes of a series of certificates.
Offerings of certain classes of the certificates, if so specified in the related
prospectus supplement, may be made in one or more transactions exempt from the
registration requirements of the Securities Act of 1933, as amended. Those
offerings are not being made pursuant to this prospectus or the related
registration statement.
This prospectus may not be used to consummate sales of the certificates of any
series unless accompanied by the prospectus supplement for that series.
The date of this Prospectus is November 4, 1999
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TABLE OF CONTENTS
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Important Notice About Information Presented in this Prospectus and Each Accompanying
Prospectus Supplement.................................................................................... 5
SUMMARY OF PROSPECTUS...................................................................................... 6
RISK FACTORS............................................................................................... 13
Limited Liquidity of Your Certificates................................................................... 13
Limited Assets of Each Trust Fund........................................................................ 14
Prepayment Considerations; Variability in Average Life of Offered Certificates;
Special Yield Considerations.......................................................................... 14
Limited Nature of Ratings................................................................................ 15
Risks Associated with Certain Mortgage Loans and Mortgaged Properties.................................... 16
Borrowers May Be Unable to Make Balloon Payments......................................................... 18
Credit Support Limitations............................................................................... 19
Leases and Rents......................................................................................... 19
Environmental Risks...................................................................................... 19
Special Hazard Losses.................................................................................... 20
Some Certificates May Not Be Appropriate For ERISA Plans................................................. 21
Certain Federal Tax Considerations Regarding Residual Certificates....................................... 21
Certain Federal Tax Considerations Regarding Original Issue Discount..................................... 21
Bankruptcy Proceedings Entails Certain Risks............................................................. 21
Book-Entry System for Certain Classes May Decrease Liquidity and Delay Payment........................... 22
Delinquent and Non-Performing Mortgage Loans............................................................. 23
DESCRIPTION OF THE TRUST FUNDS............................................................................. 24
General.................................................................................................. 24
Mortgage Loans........................................................................................... 24
MBS...................................................................................................... 28
Certificate Accounts..................................................................................... 29
Credit Support........................................................................................... 29
Cash Flow Agreements..................................................................................... 29
YIELD AND MATURITY CONSIDERATIONS.......................................................................... 30
General.................................................................................................. 30
Pass-Through Rate........................................................................................ 30
Payment Delays........................................................................................... 30
Certain Shortfalls in Collections of Interest............................................................ 30
Yield and Prepayment Considerations...................................................................... 31
Weighted Average Life and Maturity....................................................................... 32
Controlled Amortization Classes and Companion Classes.................................................... 33
Other Factors Affecting Yield, Weighted Average Life and Maturity........................................ 34
THE DEPOSITOR.............................................................................................. 36
USE OF PROCEEDS............................................................................................ 36
DESCRIPTION OF THE CERTIFICATES............................................................................ 37
General.................................................................................................. 37
Distributions............................................................................................ 37
Distributions of Interest on the Certificates............................................................ 38
Distributions of Principal on the Certificates........................................................... 39
Distributions on the Certificates in Respect of Prepayment Premiums or
in Respect of Equity Participations................................................................... 40
Allocation of Losses and Shortfalls...................................................................... 40
Advances in Respect of Delinquencies..................................................................... 40
Reports to Certificateholders............................................................................ 41
Voting Rights............................................................................................ 42
Termination.............................................................................................. 43
Book-Entry Registration and Definitive Certificates...................................................... 43
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DESCRIPTION OF THE POOLING AGREEMENTS...................................................................... 45
General.................................................................................................. 45
Assignment of Mortgage Loans; Repurchases................................................................ 45
Representations and Warranties; Repurchases.............................................................. 46
Collection and Other Servicing Procedures................................................................ 47
Sub-Servicers............................................................................................ 47
Special Servicers........................................................................................ 48
Certificate Account...................................................................................... 48
Modifications, Waivers and Amendments of Mortgage Loans.................................................. 51
Realization Upon Defaulted Mortgage Loans................................................................ 52
Hazard Insurance Policies................................................................................ 53
Due-on-Sale and Due-on-Encumbrance Provisions............................................................ 54
Servicing Compensation and Payment of Expenses........................................................... 55
Evidence as to Compliance................................................................................ 55
Certain Matters Regarding the Master Servicer and the Depositor.......................................... 55
Events of Default........................................................................................ 57
Rights Upon Event of Default............................................................................. 57
Amendment................................................................................................ 58
List of Certificateholders............................................................................... 58
The Trustee.............................................................................................. 59
Duties of the Trustee.................................................................................... 59
Certain Matters Regarding the Trustee.................................................................... 59
Resignation and Removal of the Trustee................................................................... 59
DESCRIPTION OF CREDIT SUPPORT.............................................................................. 61
General.................................................................................................. 61
Subordinate Certificates................................................................................. 61
Cross-Support Provisions................................................................................. 62
Insurance or Guarantees with Respect to Mortgage Loans................................................... 62
Letter of Credit......................................................................................... 62
Certificate Insurance and Surety Bonds................................................................... 62
Reserve Funds............................................................................................ 63
Credit Support with Respect to MBS....................................................................... 63
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS.................................................................... 64
General.................................................................................................. 64
Types of Mortgage Instruments............................................................................ 64
Leases and Rents......................................................................................... 64
Personalty............................................................................................... 65
Foreclosure.............................................................................................. 65
Bankruptcy Laws.......................................................................................... 68
Environmental Risks...................................................................................... 71
Due-on-Sale and Due-on-Encumbrance....................................................................... 73
Subordinate Financing.................................................................................... 73
Default Interest and Limitations on Prepayments.......................................................... 73
Applicability of Usury Laws.............................................................................. 73
Soldiers' and Sailors' Civil Relief Act of 1940.......................................................... 74
Type of Mortgaged Property............................................................................... 74
Americans with Disabilities Act.......................................................................... 75
Forfeitures In Drug and RICO Proceedings................................................................. 75
CERTAIN FEDERAL INCOME TAX CONSEQUENCES.................................................................... 76
Federal Income Tax Consequences for REMIC Certificates................................................... 76
Taxation of Regular Certificates......................................................................... 79
Taxation of Residual Certificates........................................................................ 86
Taxes That May Be Imposed on the REMIC Pool.............................................................. 93
Liquidation of the REMIC Pool............................................................................ 94
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Administrative Matters................................................................................... 94
Limitations on Deduction of Certain Expenses............................................................. 94
Taxation of Certain Foreign Investors.................................................................... 95
Backup Withholding....................................................................................... 96
Reporting Requirements................................................................................... 96
Federal Income Tax Consequences for Certificates as to Which No REMIC Election is Made..................... 98
Standard Certificates.................................................................................... 98
Stripped Certificates.................................................................................... 101
Reporting Requirements and Backup Withholding............................................................ 104
Taxation of Certain Foreign Investors.................................................................... 104
STATE AND OTHER TAX CONSIDERATIONS......................................................................... 105
CERTAIN ERISA CONSIDERATIONS............................................................................... 106
General.................................................................................................. 106
Plan Asset Regulations................................................................................... 106
Administrative Exemptions................................................................................ 107
Insurance Company General Accounts....................................................................... 107
Unrelated Business Taxable Income; Residual Certificates................................................. 108
LEGAL INVESTMENT........................................................................................... 108
METHOD OF DISTRIBUTION..................................................................................... 110
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE.......................................................... 112
LEGAL MATTERS.............................................................................................. 112
FINANCIAL INFORMATION...................................................................................... 112
RATING..................................................................................................... 113
INDEX OF PRINCIPAL DEFINITIONS............................................................................. 114
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IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS AND EACH ACCOMPANYING PROSPECTUS SUPPLEMENT
Information about the offered certificates is contained in two separate
documents that progressively provide more detail: (a) this prospectus, which
provides general information, some of which may not apply to the offered
certificates; and (b) the accompanying prospectus supplement for each series,
which describes the specific terms of the offered certificates. IF THE TERMS OF
THE OFFERED CERTIFICATES VARY BETWEEN THIS PROSPECTUS AND THE ACCOMPANYING
PROSPECTUS SUPPLEMENT, YOU SHOULD RELY ON THE INFORMATION IN THE PROSPECTUS
SUPPLEMENT.
You should rely only on the information contained in this prospectus and
the accompanying prospectus supplement. We have not authorized anyone to provide
you with information that is different from that contained in this prospectus
and the related prospectus supplement. The information in this prospectus is
accurate only as of the date of this prospectus.
Certain capitalized terms are defined and used in this prospectus to assist
you in understanding the terms of the offered certificates and this offering.
The capitalized terms used in this prospectus are defined on the pages indicated
under the caption "Index of Principal Definitions" beginning on page 114 in this
prospectus.
In this prospectus, the terms "Depositor," "we," "us" and "our" refer to
Chase Commercial Mortgage Securities Corp.
---------------------------------------------
If you require additional information, the mailing address of our principal
executive offices is Chase Commercial Mortgage Securities Corp., 270 Park
Avenue, New York, New York 10017-2070, and telephone number is (212) 834-5723.
5
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SUMMARY OF PROSPECTUS
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS DOCUMENT AND DOES
NOT CONTAIN ALL OF THE INFORMATION THAT YOU NEED TO CONSIDER IN MAKING AN
INVESTMENT DECISION. PLEASE READ THIS ENTIRE PROSPECTUS AND THE ACCOMPANYING
PROSPECTUS SUPPLEMENT AS WELL AS THE TERMS AND PROVISIONS OF THE RELATED POOLING
AND SERVICING AGREEMENT CAREFULLY TO UNDERSTAND ALL OF THE TERMS OF A SERIES OF
CERTIFICATES. AN INDEX OF PRINCIPAL DEFINITIONS IS INCLUDED AT THE END OF THIS
PROSPECTUS.
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TITLE OF CERTIFICATES..................... Mortgage pass-through certificates, issuable in series.
DEPOSITOR................................. Chase Commercial Mortgage Securities Corp., a wholly-owned subsidiary
of The Chase Manhattan Bank, a New York banking corporation.
MASTER SERVICER........................... The master servicer, if any, for a series of certificates will be
named in the related prospectus supplement. The master servicer for
any series of certificates may be an affiliate of the depositor or a
special servicer.
SPECIAL SERVICER.......................... One or more special servicers, if any, for a series of certificates
will be named, or the circumstances under which a special servicer
will be appointed will be described, in the related prospectus
supplement. A special servicer for any series of certificates may be
an affiliate of the depositor or the master servicer.
TRUSTEE................................... The trustee for each series of certificates will be named in the
related prospectus supplement.
THE TRUST ASSETS.......................... Each series of certificates will represent in the aggregate the
entire beneficial ownership interest in a trust fund consisting
primarily of:
A. MORTGAGE ASSETS..................... The mortgage assets with respect to each series of certificates will,
in general, consist of a pool of loans secured by liens on, or
security interests in:
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o residential properties consisting of five or more rental or
cooperatively-owned dwelling units or by shares allocable to a
number of those units and the related leases; or
o office buildings, shopping centers, retail stores and
establishments, hotels or motels, nursing homes, hospitals or
other health-care related facilities, mobile home parks, warehouse
facilities, mini-warehouse facilities, self-storage facilities,
industrial plants, parking lots, mixed use or various other types
of income-producing properties described in this prospectus or
unimproved land.
If so specified in the related prospectus supplement, a trust fund may
include mortgage loans secured by liens on real estate projects under
construction. No one will guarantee the mortgage loans, unless otherwise
provided in the related prospectus supplement. If so specified in the
related prospectus supplement, some mortgage loans may be delinquent. In no
event will delinquent mortgage loans comprise 20 percent or more of the
trust fund at the time the mortgage loans are transferred to the trust fund.
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As described in the related prospectus supplement, a mortgage loan:
o may provide for no accrual of interest or for accrual of interest
at a mortgage interest rate that is fixed over its term or that
adjusts from time to time, or that the borrower may elect to
convert from an adjustable to a fixed mortgage interest rate, or
from a fixed to an adjustable mortgage interest rate;
o may provide for level payments to maturity or for payments that
adjust from time to time to accommodate changes in the mortgage
interest rate or to reflect the occurrence of certain events, and
may permit negative amortization;
o may be fully amortizing or partially amortizing or non-
amortizing, with a balloon payment due on its stated maturity
date;
o may prohibit prepayments over its term or for a certain period
and/or require payment of a premium or a yield maintenance penalty
in connection with certain prepayments; and
o may provide for payments of principal, interest or both, on due
dates that occur monthly, quarterly, semi-annually or at another
interval specified in the related prospectus supplement.
Some or all of the mortgage loans in any trust fund may have been originated
by an affiliate of the depositor. See "Description of the Trust
Funds--Mortgage Loans" in this prospectus.
If specified in the related prospectus supplement, the mortgage assets with
respect to a series of certificates may also include, or consist of,
o private mortgage participations, mortgage pass-through
certificates or other mortgage-backed securities, or
o certificates insured or guaranteed by any of the Federal Home Loan
Mortgage Corporation, the Federal National Mortgage Association,
the Governmental National Mortgage Association or the Federal
Agricultural Mortgage Corporation.
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Each of the above mortgage assets will evidence an interest in, or
will be secured by a pledge of, one or more mortgage loans that
conform to the descriptions of the mortgage loans contained in this
prospectus. See "Description of the Trust Funds--MBS" in this
prospectus.
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B. CERTIFICATE ACCOUNT................. Each trust fund will include one or more certificate accounts
established and maintained on behalf of the certificateholders. The
person or persons designated in the related prospectus supplement
will be required to, to the extent described in this prospectus and
in that prospectus supplement, deposit all payments and other
collections received or advanced with respect to the mortgage assets
and other assets in the trust fund into the certificate accounts. A
certificate account may be maintained as an interest bearing or a
non-interest bearing account, and its funds may be held as cash or
invested in certain obligations acceptable to the rating agencies
rating one or more classes of the related series of offered
certificates. See "Description of the Trust Funds--Certificate
Accounts" and "Description of the Pooling Agreements--Certificate
Account" in this prospectus.
C. CREDIT SUPPORT...................... If so provided in the related prospectus supplement, partial or full
protection against certain defaults and losses on the mortgage assets
in the related trust fund may be provided to one or more classes of
certificates of the related series in the form of subordination of
one or more other classes of certificates of that series, which other
classes may include one or more classes of offered certificates, or
by one or more other types of credit support, such as a letter of
credit, insurance policy, guarantee, reserve fund or another type of
credit support described in this prospectus, or a combination of
these features. The amount and types of any credit support, the
identification of any entity providing it and related information
will be set forth in the prospectus supplement for a series of
offered certificates. See "Risk Factors--Credit Support Limitations",
"Description of the Trust Funds--Credit Support" and "Description of
Credit Support"in this prospectus.
D. CASH FLOW AGREEMENTS................ If so provided in the related prospectus supplement, a trust fund may
include guaranteed investment contracts pursuant to which moneys held
in the funds and accounts established for the related series will be
invested at a specified rate. The trust fund may also include
interest rate exchange agreements, interest rate cap or floor
agreements, or currency exchange agreements, all of which are
designed to reduce the effects of interest rate or currency exchange
rate fluctuations on the mortgage assets or on one or more classes of
certificates. The principal terms of that guaranteed investment
contract or other agreement, including, without limitation,
provisions relating to the timing, manner and amount of any
corresponding payments and provisions relating to their termination,
will be described in the prospectus supplement for the related
series. In addition, the related prospectus supplement will contain
certain information that pertains to the obligor under any cash flow
agreements of this type. See "Description of the Trust Funds--Cash
Flow Agreements" in this prospectus.
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DESCRIPTION OF CERTIFICATES............... We will offer certificates in one or more classes of a series of
certificates issued pursuant to a pooling and servicing agreement or
other agreement specified in the related prospectus supplement. The
certificates will represent in the aggregate the entire beneficial
ownership interest in the trust fund created by that agreement.
As described in the related prospectus supplement, the certificates
of each series, may consist of one or more classes of certificates
that, among other things:
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o are senior or subordinate to one or more other classes of
certificates in entitlement to certain distributions on the
certificates;
o are principal-only certificates entitled to distributions of
principal, with disproportionately small, nominal or no
distributions of interest;
o are interest-only certificates entitled to distributions of
interest, with disproportionately small, nominal or no
distributions of principal;
o provide for distributions of interest on, or principal of, the
certificates that begin only after the occurrence of certain
events, such as the retirement of one or more other classes of
certificates of that series;
o provide for distributions of principal of the certificates to be
made, from time to time or for designated periods, at a rate that
is faster, or 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 controlled distributions of principal to be made based
on a specified schedule or other methodology, subject to available
funds; or
o provide for distributions based on collections of prepayment
premiums, yield maintenance penalties or equity participations on
the mortgage assets in the related trust fund.
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Each class of certificates, other than interest-only certificates and
residual certificates which are only entitled to a residual interest
in the trust fund, will have a stated principal balance. Each class
of certificates, other than principal-only certificates and residual
certificates, will accrue interest on its stated principal balance
or, in the case of interest-only certificates, on a notional amount.
Each class of certificates entitled to interest will accrue interest
based on a fixed, variable or adjustable pass-through interest rate.
The related prospectus supplement will specify the principal balance,
notional amount and/or fixed pass-through interest rate, or, in the
case of a variable or adjustable pass-through interest rate, the
method for determining that rate, as applicable, for each class of
offered certificates.
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The certificates will not be guaranteed or insured by anyone, unless
otherwise provided in the related prospectus supplement. See "Risk
Factors--Limited Assets of Each Trust Fund" and "Description of the
Certificates"in this prospectus.
DISTRIBUTIONS OF INTEREST ON THE
CERTIFICATES............................ Interest on each class of offered certificates, other than certain
classes of principal-only certificates and certain classes of
residual certificates, of each series will accrue at the applicable
fixed, variable or adjustable pass-through interest rate on the
principal balance or, in the case of certain classes of interest-only
certificates, on the notional amount, outstanding from time to time.
Interest will be distributed to you as provided in the related
prospectus supplement on specified distribution dates. Distributions
of interest with respect to one or more classes of accrual
certificates may not begin until the occurrence of certain events,
such as the retirement of one or more other classes of certificates,
and interest accrued with respect to a class of accrual certificates
before the occurrence of that event will either be added to its
principal balance or otherwise deferred. Distributions of interest
with respect to one or more classes of certificates may be reduced to
the extent of certain delinquencies, losses and other contingencies
described in this prospectus and in the related prospectus
supplement. See "Risk Factors--Prepayment Considerations; Variability
in Average Life of Offered Certificates; Special Yield", "Yield and
Maturity Considerations" and "Description of the Certificates--
Distributions of Interest on the Certificates" in this prospectus.
DISTRIBUTIONS OF PRINCIPAL OF THE
CERTIFICATES............................ Each class of certificates of each series, other than certain classes
of interest-only certificates and certain classes of residual
certificates, will have a principal balance. The principal balance of
a class of certificates will represent the maximum amount that you
are entitled to receive as principal from future cash flows on the
assets in the related trust fund.
Distributions of principal with respect to one or more classes of
certificates may:
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o 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;
o 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;
o not commence until the occurrence of certain events, such as the
retirement of one or more other classes of certificates of the
same series;
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o be made, subject to certain limitations, based on a specified
principal payment schedule resulting in a controlled amortization
class of certificates; or
o 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.
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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. See "Description of the Certificates-- Distributions of
Principal of the Certificates" in this prospectus.
ADVANCES.................................. If provided in the related prospectus supplement, if a trust fund
includes mortgage loans, the master servicer, a special servicer, the
trustee, any provider of credit support and/or any other specified
person may be obligated to make, or have the option of making,
certain advances with respect to delinquent scheduled payments of
principal and/or interest on those mortgage loans. Any of the
advances of principal and interest made with respect to a particular
mortgage loan will be reimbursable from subsequent recoveries from
the related mortgage loan and otherwise to the extent described in
this prospectus and in the related prospectus supplement. If provided
in the prospectus supplement for a series of certificates, any entity
making these advances may be entitled to receive interest on those
advances while they are outstanding, payable from amounts in the
related trust fund. If a trust fund includes mortgage participations,
pass-through certificates or other mortgage-backed securities, any
comparable advancing obligation will be described in the related
prospectus supplement. See "Description of the Certificates--Advances
in Respect of Delinquencies" in this prospectus.
TERMINATION............................... If so specified in the related prospectus supplement, the mortgage
assets in the related trust fund may be sold, causing an early
termination of a series of certificates in the manner set forth in
the prospectus supplement. If so provided in the related prospectus
supplement, upon the reduction of the principal balance of a
specified class or classes of certificates by a specified percentage
or amount, the party specified in the prospectus supplement may be
authorized or required to bid for or 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, as described in the related prospectus supplement. See
"Description of the Certificates--Termination" in this prospectus.
REGISTRATION OF BOOK-ENTRY CERTIFICATES... If so provided in the related prospectus supplement, one or
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more classes of the offered certificates of any series will be
book-entry certificates offered through the facilities of The
Depository Trust Company. Each class of book-entry certificates will
be initially represented by one or more certificates registered in
the name of a nominee of The Depository Trust Company. No person
acquiring an interest in a class of book-entry certificates will be
entitled to receive definitive certificates of that class in fully
registered form, except under the limited circumstances described in
this prospectus. See "Risk Factors--Book-Entry System for Certain
Classes May Decrease Liquidity and Delay Payment" and "Description of
the Certificates--Book-Entry Registration and Definitive
Certificates" in this prospectus.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES... The federal income tax consequences to certificateholders will vary
depending on whether one or more elections are made to treat the
trust fund or specified portions of the trust fund as one or more
"real estate mortgage investment conduits" (each, a "REMIC") under
the provisions of the Internal Revenue Code. The prospectus
supplement for each series of certificates will specify whether one
or more REMIC elections will be made. See "Certain Federal Income Tax
Consequences" in this prospectus.
CERTAIN ERISA CONSIDERATIONS.............. If you are a fiduciary of any employee benefit plans or certain other
retirement plans and arrangements, including individual retirement
accounts, annuities, Keogh plans, and collective investment funds and
insurance company general and separate accounts in which those plans,
accounts, annuities or arrangements are invested, that are subject to
ERISA or Section 4975 of the Internal Revenue Code, you should
carefully review 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 permissible either under ERISA or
the Internal Revenue Code. See "Certain ERISA Considerations" in this
prospectus and "ERISA Considerations"in the related prospectus
supplement.
LEGAL INVESTMENT.......................... The applicable prospectus supplement will specify whether the offered
certificates will constitute "mortgage related securities" for
purposes of the Secondary Mortgage Market Enhancement Act of 1984, as
amended. If your investment authority is subject to legal
restrictions you should consult your own legal advisors to determine
if the offered certificates constitute legal investments for you. See
"Legal Investment"in this prospectus and in the related prospectus
supplement.
RATING.................................... At their dates of issuance, each class of offered certificates will
be rated at least investment grade by one or more nationally
recognized statistical rating agencies. See "Rating" in this
prospectus and "Ratings" in the related prospectus supplement.
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RISK FACTORS
You should carefully consider the following risks and the risks described
under "RISK FACTORS" in the prospectus supplement for the applicable series of
certificates before making an investment decision. In particular, distributions
on your certificates will depend on payments received on and other recoveries
with respect to the mortgage loans. Thus, you should carefully consider the risk
factors relating to the mortgage loans and the mortgaged properties.
LIMITED LIQUIDITY OF YOUR CERTIFICATES
We cannot assure you that a secondary market for the certificates will
develop or, if it does develop, that it will provide you with liquidity of
investment or will continue for the life of your certificates. The prospectus
supplement for any series of offered certificates may indicate that an
underwriter intends to make a secondary market in those offered certificates;
however, no underwriter will be obligated to do so. Any resulting secondary
market may provide you with less liquidity than any comparable market for
certificates that evidence interests in single-family mortgage loans.
The primary source of ongoing information regarding the offered
certificates of any series, including information regarding the status of the
related mortgage assets and any credit support for your certificates, will be
the periodic reports delivered to you. See "Description of the Certificates--
Reports to Certificateholders" in this prospectus. We cannot assure you that any
additional ongoing information regarding your certificates will be available
through any other source. The limited nature of the available information in
respect of a series of offered certificates may adversely affect its liquidity,
even if a secondary market for those certificates does develop.
Even if a secondary market does develop with respect to any series or class
of certificates, the market value of those certificates will be affected by
several factors, including:
o The perceived liquidity of the certificates;
o The anticipated cash flow of the certificates, which may vary widely
depending upon the prepayment and default assumptions applied in respect
of the underlying mortgage loans and prevailing interest rates;
o The price payable at any given time in respect of certain classes of
offered certificates may be extremely sensitive to small fluctuations in
prevailing interest rates, particularly, for a class with a relatively
long average life, a companion class to a controlled amortization class,
a class of interest-only certificates or principal-only certificates;
and
o The relative change in price for an offered certificate in response to
an upward or downward movement in prevailing interest rates may not
equal the relative change in price for that certificate in response to
an equal but opposite movement in those rates. Accordingly, the sale of
your certificates in any secondary market that may develop may be at a
discount from the price you paid.
We are not aware of any source through which price information about the
offered certificates will be generally available on an ongoing basis.
Except to the extent described in this prospectus and in the related
prospectus supplement, you will have no redemption rights, and the certificates
of each series will be subject to early retirement only under certain specified
circumstances described in this prospectus and in the related prospectus
supplement. See "Description of the Certificates--Termination" in this
prospectus.
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LIMITED ASSETS OF EACH TRUST FUND
Unless otherwise specified in the related prospectus supplement
o The certificates of any series and the mortgage assets in the related
trust fund will not be guaranteed or insured by the depositor or any of
its affiliates, by any governmental agency or instrumentality or by any
other person or entity; and
o The certificate of any series will not represent a claim against or
security interest in the trust funds for any other series.
Accordingly, if the related trust fund has insufficient assets to make
payments on a series of offered certificates, no other assets will be available
to make those payments. Additionally, certain amounts on deposit from time to
time in certain funds or accounts constituting part of a trust fund may be
withdrawn under certain conditions, as described in the related prospectus
supplement, for purposes other than the payment of principal of or interest on
the related series of certificates. If so provided in the prospectus supplement
for a series of certificates consisting of one or more classes of subordinate
certificates, if losses or shortfalls in collections have occurred with respect
to any distribution date, all or a portion of the amount of these losses or
shortfalls will be borne first by one or more classes of the subordinate
certificates, and, thereafter, by the remaining classes of certificates in the
priority and manner and subject to the limitations specified in the prospectus
supplement.
PREPAYMENT CONSIDERATIONS; VARIABILITY IN AVERAGE LIFE OF OFFERED CERTIFICATES;
SPECIAL YIELD CONSIDERATIONS
As a result of, among other things, prepayments on the mortgage loans in
any trust fund, the amount and timing of distributions of principal and/or
interest on the offered certificates of the related series may be highly
unpredictable. Prepayments on the mortgage loans in any trust fund will result
in a faster rate of principal payments on one or more classes of the related
series of certificates than if payments on those mortgage loans were made as
scheduled. Thus, the prepayment experience on the mortgage loans in a trust fund
may affect the average life of one or more classes of offered certificates of
the related series.
The rate of principal payments on pools of mortgage loans varies among
pools and from time to time is influenced by a variety of economic, demographic,
geographic, social, tax, legal and other factors. For example, if prevailing
interest rates fall significantly below the mortgage interest rates of the
mortgage loans included in a trust fund, then, subject to, among other things,
the particular terms of the mortgage loans and the ability of borrowers to get
new financing, principal prepayments on those mortgage loans are likely to be
higher than if prevailing interest rates remain at or above the rates on those
mortgage loans. Conversely, if prevailing interest rates rise significantly
above the mortgage interest rates of the mortgage loans included in a trust
fund, then principal prepayments on those mortgage loans are likely to be lower
than if prevailing interest rates remain at or below the rates on those mortgage
loans. We cannot assure you as to the actual rate of prepayment on the mortgage
loans in any trust fund or that the rate of prepayment will conform to any model
described in this prospectus or in any prospectus supplement. As a result,
depending on the anticipated rate of prepayment for the mortgage loans in any
trust fund, the retirement of any class of certificates of the related series
could occur significantly earlier or later than expected.
The extent to which prepayments on the mortgage loans in any trust fund
ultimately affect the average life of your certificates will depend on the terms
of your certificates.
o A class of certificates that entitles the holders of those certificates
to a disproportionately large share of the prepayments on the mortgage
loans in the related trust fund increases the "call risk" or the
likelihood of early retirement of that class if the rate of prepayment
is relatively fast; and
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o A class of certificates that entitles the holders of the certificates to
a disproportionately small share of the prepayments on the mortgage
loans in the related trust fund increases the likelihood of "extension
risk" or an extended average life of that class if the rate of
prepayment is relatively slow.
As described in the related prospectus supplement, the respective
entitlements of the various classes of certificate of any series to receive
payments, especially prepayments, of principal of the mortgage loans in the
related trust fund may vary based on the occurrence of certain events such as
the retirement of one or more classes of certificates of that series, or subject
to certain contingencies such as the rate of prepayments and defaults with
respect to those mortgage loans.
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 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 pool of mortgage assets
does not disappear, however, and the stability afforded to a controlled
amortization class comes at the expense of one or more companion classes of the
same series, any of which companion classes may also be a class of offered
certificates. In general, and as more specifically described in the related
prospectus supplement, a companion class may entitle 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, 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. As described
in the related prospectus supplement, a companion class absorbs some (but not
all) of the "call risk" and/or "extension risk" that would otherwise belong to
the related controlled amortization class if all payments of principal of the
mortgage loans in the related trust fund were allocated on a pro rata basis.
A series of certificates may include one or more classes of offered
certificates offered at a premium or discount. Yields on those classes of
certificates will be sensitive, and in some cases extremely sensitive, to
prepayments on the mortgage loans in the related trust fund. Where the amount of
interest payable with respect to a class is disproportionately large, as
compared to the amount of principal, as with certain classes of interest-only
certificates, you might fail to recover your original investment under some
prepayment scenarios. The extent to which the yield to maturity of any class of
offered certificates may vary from the anticipated yield will depend upon the
degree to which they are purchased at a discount or premium and the amount and
timing of distributions 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 could result in an
actual yield that is lower than the anticipated yield and, in the case of any
offered certificate purchased at a premium, the risk that a faster than
anticipated rate of principal payments could result in an actual yield that is
lower than the anticipated yield. See "Yield and Maturity Considerations" in
this prospectus.
LIMITED NATURE OF RATINGS
Any rating assigned to a class of offered certificates by a rating agency
will only reflect its assessment of the probability that you will receive
payments to which you are entitled. This rating will not constitute an
assessment of the probability that:
o principal prepayments on the related mortgage loans will be made;
o the degree to which the rate of prepayments might differ from the rate
of prepayments that was originally anticipated; or
o the likelihood of early optional termination of the related trust fund.
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Furthermore, the rating will not address the possibility that prepayment of the
related mortgage loans at a higher or lower rate than you anticipated may cause
you to experience a lower than anticipated yield or that if you purchase a
certificate at a significant premium you might fail to recover your initial
investment under certain prepayment scenarios.
The amount, type and nature of credit support, if any, provided with
respect to a series of certificates will be determined on the basis of criteria
established by each rating agency rating classes of the certificates of that
series. These criteria are sometimes based upon analysis of the behavior of
mortgage loans in a larger group. However, we cannot assure you that the
historical data supporting that analysis will accurately reflect future
experience, or that the data derived from a large pool of mortgage loans will
accurately predict the delinquency, foreclosure or loss experience of any
particular pool of mortgage loans. In other cases, the criteria may be based
upon determinations of the values of the mortgaged properties that provide
security for the mortgage loans in the related trust fund. However, we cannot
assure you that those values will not decline in the future. See "Description of
Credit Support" and "Rating" in this prospectus.
RISKS ASSOCIATED WITH CERTAIN MORTGAGE LOANS AND MORTGAGED PROPERTIES
A description of risks associated with investments in mortgage loans is
included under "Certain Legal Aspects of Mortgage Loans" in this prospectus.
Commercial and multifamily lending generally exposes the lender to a greater
risk of loss than one-to four-family residential lending. Commercial and
multifamily lending typically involves larger loans to single borrowers or
groups of related borrowers than residential one-to four-family mortgage loans.
Further, the repayment of loans secured by income producing properties is
typically dependent upon the successful operation of the related real estate
project. If the cash flow from the project is reduced (for example, if leases
are not obtained or renewed), the borrower's ability to repay the loan may be
impaired. Commercial and multifamily real estate can be affected significantly
by the supply and demand in the market for the type of property securing the
loan and, therefore, may be subject to adverse economic conditions. Market
values may vary as a result of economic events or governmental regulations
outside the control of the borrower or lender that impact the cash flow of the
property. For example, some laws, such as the Americans with Disabilities Act,
may require modifications to properties, and rent control laws may limit rent
collections in the case of multifamily properties. 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 those 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:
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;
o Acts of God; and
o Other factors beyond the control of a master servicer.
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The type and use of a particular mortgaged property may present additional
risk. For instance:
o 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.
o 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.
o The ability of a borrower to repay a mortgage loan secured by shares
allocable to one or more cooperative dwelling units may depend on 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.
The economic performance of mortgage loans that are secured by full service
hotels, limited service hotels, hotels associated with national franchise
chains, hotels associated with regional franchise chains and hotels that are not
affiliated with any franchise chain but may have their own brand identity, are
affected by various factors, including:
o Adverse economic and social conditions, either local, regional or
national (which may limit the amount that can be charged for a room and
reduce occupancy levels);
o Construction of competing hotels or resorts;
o Continuing expenditures for modernizing, refurbishing, and maintaining
existing facilities prior to the expiration of their anticipated useful
lives;
o Deterioration in the financial strength or managerial capabilities of
the owner and operator of a hotel; and
o Changes in travel patterns caused by changes in access, energy prices,
strikes, relocation of highways, the construction of additional highways
or other factors.
Additionally, the hotel and lodging industry is generally 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 property that is the franchisee of a national or
regional 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 agreements. The transferability of franchise
license agreements may be restricted and, in the event of a foreclosure on that
hotel property, the property would not have the right to use the franchise
license without the franchisor's consent. 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 property, it is unlikely that the
trustee (or servicer or special servicer) or purchaser of that hotel property
would be entitled to the rights under any existing liquor license for that hotel
property. It is more likely that those persons would have to apply for new
licenses. We cannot assure you that a new license could be obtained or that it
could be obtained promptly.
Other multifamily properties, hotels, retail properties, office buildings,
mobile home parks, nursing homes and self-storage facilities located in the
areas of the mortgaged properties compete with the mortgaged properties to
attract residents and customers. The leasing of real estate is highly
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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. Those lessors or
developers could have lower rentals, lower operating costs, more favorable
locations or better facilities. While a borrower under a mortgage loan may
renovate, refurbish or expand the mortgaged property to maintain it and remain
competitive, that 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.
It is anticipated that some or all of the mortgage loans included in any
trust fund will be nonrecourse loans or loans for which recourse may be
restricted or unenforceable. As to that 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 cannot assure you that enforcement of those
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. See "Certain
Legal Aspects of Mortgage Loans--Foreclosure" in this prospectus.
Further, the concentration of default, foreclosure and loss risks in
individual mortgage loans in a particular trust fund will generally be greater
than for pools of single-family loans because mortgage loans in a trust fund
will generally consist of a smaller number of higher balance loans than would a
pool of single-family loans of comparable aggregate unpaid principal balance.
BORROWERS MAY BE UNABLE TO MAKE BALLOON PAYMENTS
Certain of the mortgage loans included in a trust fund may be
non-amortizing or only partially amortizing over their terms to maturity and,
thus, will require substantial principal payments (that is, balloon payments) at
their stated maturity. Mortgage loans of this type involve a greater degree of
risk than self-amortizing loans because the ability of a borrower to make a
balloon payment typically will depend upon its ability either to refinance the
loan or to sell the related mortgaged property. The ability of a borrower to
accomplish either of these goals will be affected by:
o The value of the related mortgaged property;
o The level of available mortgage interest 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, rent control laws, with respect to certain residential
properties;
o Medicaid and Medicare reimbursement rates, with respect to hospitals and
nursing homes;
o Prevailing general economic conditions; and
o The availability of credit for loans secured by multifamily or
commercial real properties generally.
Neither the depositor nor any of its affiliates will be required to
refinance any mortgage loan.
If described in this prospectus and in the related prospectus supplement,
to maximize recoveries on defaulted mortgage loans, the master servicer or a
special servicer may, within prescribed limits, extend and modify mortgage loans
that are in default or as to which a payment default is reasonably foreseeable.
While a master servicer or a special servicer generally will be required to
determine that
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any extension or modification is reasonably likely to produce a greater
recovery, taking into account the time value of money, than liquidation, we
cannot assure you that any extension or modification will in fact increase the
present value of receipts from or proceeds of the affected mortgage loans.
CREDIT SUPPORT LIMITATIONS
The prospectus supplement for a series of certificates will describe any
credit support provided for those certificates. Any use of credit support will
be subject to the conditions and limitations described in this prospectus and in
the related prospectus supplement, and may not cover all potential losses or
risks. For example, it 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, if so provided in the related prospectus supplement. Although
subordination is intended to reduce the risk to holders of senior certificates
of delinquent distributions or ultimate losses, the amount of subordination will
be limited and may decline under certain circumstances described in the related
prospectus supplement. In addition, if principal payments on one or more classes
of certificates of a series are made in a specified order of priority, any
limits with respect to the aggregate amount of claims under any related credit
support may be exhausted before the principal of the later paid classes of
certificates of that series has been repaid in full. As a result, the impact of
losses and shortfalls experienced with respect to the mortgage assets may fall
primarily upon those subordinate classes of certificates. Moreover, if a form of
credit support covers more than one series of certificates, holders of
certificates of one series will be subject to the risk that the credit support
will be exhausted by the claims of the holders of certificates of one or more
other series.
The amount of any applicable credit support supporting one or more classes
of offered certificates, including the subordination of one or more classes of
certificates, will be determined on the basis of criteria established by each
rating agency rating those classes of certificates. Such criteria will be based
on an assumed level of defaults, delinquencies and losses on the underlying
mortgage assets and certain other factors. However, we cannot assure you that
the default, delinquency or loss experience on the related mortgage assets will
not exceed the assumed levels. See "Risk Factors--Limited Nature of Ratings",
"Description of the Certificates" and "Description of Credit Support" in this
prospectus.
LEASES AND RENTS
Each mortgage loan included in any trust fund secured by mortgaged property
that is subject to leases typically will be secured by an assignment of leases
and rents pursuant to which the borrower assigns to the lender its right, title
and interest as landlord under the leases of the related mortgaged property, and
the income derived from those leases, as further security for the related
mortgage loan, while retaining a license to collect rents for so long as there
is no default. If the borrower defaults, the license terminates and the lender
is entitled to collect rents. Some state laws may require that the lender take
possession of the mortgaged property and obtain a judicial appointment of a
receiver before becoming entitled to collect the rents. In addition, if
bankruptcy or similar proceedings are commenced by or in respect of the
borrower, the lender's ability to collect the rents may be adversely affected.
See "Certain Legal Aspects of Mortgage Loans--Leases and Rents" in this
prospectus.
ENVIRONMENTAL RISKS
Under federal law and the laws of certain states, contamination of real
property may give rise to a lien on the property to assure or reimburse the
costs of cleanup. In several states, that 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 the property. This liability may be imposed
without regard to whether the owner knew of, or was responsible for, the
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presence of those hazardous or toxic substances. The costs of any required
remediation and the owner or operator's liability for them as to any property
are generally not limited under these laws, ordinances and regulations and could
exceed the value of the mortgaged property and the aggregate assets of the owner
or operator. In addition, as to the owners or operators of mortgaged properties
that generate hazardous substances that are disposed of at "off-site" locations,
the owners or operators may be held strictly, jointly and severally liable if
there are releases or threatened releases of hazardous substances at the
off-site locations where that person's hazardous substances were disposed.
Under some environmental laws, such as the federal Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended, as
well as some state laws, a secured lender (such as the trust) may be liable as
an "owner" or "operator" for the costs of dealing with hazardous substances
affecting a borrower's property, if agents or employees of the lender have
participated in the management of the borrower's property. This liability could
exist even if a previous owner caused the environmental damage. The trust's
potential exposure to liability for cleanup costs may increase if the trust
actually takes possession of a borrower's property, or control of its day-to-day
operations, as for example through the appointment of a receiver. See "Certain
Legal Aspects of the Mortgage Loans--Environmental Risks" in this prospectus.
SPECIAL HAZARD LOSSES
Unless otherwise specified in a prospectus supplement, the master servicer
for the related trust fund will be required to cause the borrower on each
mortgage loan in that trust fund to maintain the insurance coverage in respect
of the related mortgaged property required under the related mortgage, including
hazard insurance. The master servicer may satisfy its obligation to cause hazard
insurance to be maintained with respect to any mortgaged property through
acquisition of a blanket policy.
In general, the standard form of fire and extended coverage policy covers
physical damage to or destruction of the improvements of the property by:
o fire;
o lightning;
o explosion;
o smoke;
o windstorm and hail; and
o riot, strike and civil commotion.
Each 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, and therefore will not contain
identical terms and conditions. However, most policies do not typically 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 certain
other kinds of risks. Unless the related mortgage specifically requires the
mortgagor to insure against physical damage arising from those causes, those
losses may be borne, at least in part, by the holders of one or more classes of
offered certificates of the related series, to the extent they are not covered
by any available credit support. See "Description of the Pooling
Agreements--Hazard Insurance Policies" in this prospectus.
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SOME CERTIFICATES MAY NOT BE APPROPRIATE FOR ERISA PLANS
Generally, ERISA applies to investments made by employee benefit plans and
transactions involving the assets of those plans. Due to the complexity of
regulations that govern those plans, if you are subject to ERISA you are urged
to consult your own counsel regarding consequences under ERISA of acquisition,
ownership and disposition of the offered certificates of any series. See
"Certain ERISA Considerations" in this prospectus.
CERTAIN FEDERAL TAX CONSIDERATIONS REGARDING RESIDUAL CERTIFICATES
If you hold certain classes of certificates that constitute a residual
interest in a "real estate mortgage investment conduit" for federal income tax
purposes, 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, as
described in "Certain Federal Income Tax Consequences--Federal Income Tax
Consequences for REMIC Certificates" in this prospectus. Accordingly, under
certain circumstances, if you hold residual certificates you may have taxable
income and tax liabilities arising from your investment during a taxable year in
excess of the cash received during that period. The requirement to report your
pro rata share of the taxable income and net loss of the REMIC will continue
until the principal balances of all classes of certificates of the related
series have been reduced to zero, even though you have received full payment of
their stated interest and principal. A portion, or, in certain circumstances,
all, of your share of the REMIC taxable income may be treated as "excess
inclusion" income to you, which:
o generally, will not be subject to offset by losses from other
activities;
o if you are a tax-exempt holder, will be treated as unrelated business
taxable income; and
o if you are a foreign holder, will not qualify for exemption from
withholding tax.
If you are an individual and you hold a class of residual certificates, you
may be limited in your ability to deduct servicing fees and other expenses of
the REMIC. In addition, classes of residual certificates are subject to certain
restrictions on transfer. Because of the special tax treatment of classes of
residual certificates, the taxable income arising in a given year on a class of
residual certificates will not be equal to the taxable income associated with
investment in a corporate bond or stripped instrument having similar cash flow
characteristics and pre-tax yield. As a result, the after-tax yield on the
classes of residual certificates may be significantly less than that of a
corporate bond or stripped instrument having similar cash flow characteristics.
CERTAIN FEDERAL TAX CONSIDERATIONS REGARDING ORIGINAL ISSUE DISCOUNT
Certain classes of certificates of a series may be issued with "original
issue discount" for federal income tax purposes, which generally will result in
recognition of some taxable income in advance of the receipt of cash
attributable to that income. See "Certain Federal Income Tax
Consequences--Federal Income Tax Consequences for REMIC Certificates--Taxation
of Regular Certificates" in this prospectus.
BANKRUPTCY PROCEEDINGS ENTAILS CERTAIN RISKS
Under the federal bankruptcy code, the filing of a petition in bankruptcy
by or against a borrower will stay the sale of the mortgaged property owned by
that borrower, as well as 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 prevent a lender from foreclosing on the mortgaged property, subject
to certain protections available to the lender. As part of a restructuring plan,
a court also may reduce the amount of secured indebtedness to the then-current
value of the mortgaged property. This 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.
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A bankruptcy court also may:
o grant a debtor a reasonable 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; or
o otherwise alter the mortgage loan's repayment schedule.
Moreover, the filing of a petition in bankruptcy by, or on behalf of, a
junior lienholder may stay the senior lienholder from taking action to foreclose
on the junior lien. Additionally, the borrower's trustee or the borrower, as
debtor-in-possession, has certain special powers to avoid, subordinate or
disallow debts. In certain circumstances, the claims of the trustee may be
subordinated to financing obtained by a debtor-in-possession subsequent to its
bankruptcy.
Under the federal bankruptcy code, the lender will be stayed from enforcing
a borrower's assignment of rents and leases. The bankruptcy code also may
interfere with the trustee's ability to enforce lockbox requirements. The legal
proceedings necessary to resolve these issues can be time consuming and costly
and may significantly delay or diminish the 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.
BOOK-ENTRY SYSTEM FOR CERTAIN CLASSES MAY DECREASE LIQUIDITY AND DELAY PAYMENT
If so provided in the related prospectus supplement, one or more classes of
the offered certificates of any series will be issued as book-entry
certificates. Each class of book-entry certificates will be initially
represented by one or more certificates registered in the name of a nominee for
The Depository Trust Company, or DTC. Since transactions in the classes of
book-entry certificates of any series generally can be effected only through The
Depository Trust Company, and its participating organizations:
o the liquidity of book-entry certificates in secondary trading market
that may develop may be limited because investors may be unwilling to
purchase certificates for which they cannot obtain physical
certificates;
o your ability to pledge certificates to persons or entities that do not
participate in the DTC system, or otherwise to take action in respect of
the certificates, may be limited due to lack of a physical security
representing the certificates;
o your access to information regarding the certificates may be limited
since conveyance of notices and other communications by The Depository
Trust Company to its participating organizations, and directly and
indirectly through those participating organizations to you, will be
governed by arrangements among them, subject to any statutory or
regulatory requirements as may be in effect at that time, and
o you may experience some delay in receiving distributions of interest and
principal on your certificates because distributions will be made by the
trustee to DTC and DTC will then be required to credit those
distributions to the accounts of its participating organizations and
only then will they be credited to your account either directly or
indirectly through DTC's participating organizations.
See "Description of the Certificates--Book-Entry Registration and
Definitive Certificates" in this prospectus.
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DELINQUENT AND NON-PERFORMING MORTGAGE LOANS
If so provided in the related prospectus supplement, the trust fund for a
particular series of certificates may include mortgage loans that are past due.
In no event will the mortgage loans that are past due comprise 20 percent or
more of the trust fund at the time the mortgage loans are transferred to the
trust fund. None of the mortgage loans will be non-performing (i.e., more than
90 days delinquent or in foreclosure) at the time the mortgage loans are
transferred by the Depositor to a trust fund for a series. If so specified in
the related prospectus supplement, a special servicer may perform the servicing
of delinquent mortgage loans or mortgage loans that become non-performing after
the time they are transferred to a trust fund. Credit support provided with
respect to a particular series of certificates may not cover all losses related
to those delinquent or non-performing mortgage loans. You should consider the
risk that the inclusion of those 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 your certificates of that series. See "Description of the
Trust Funds--Mortgage Loans--General" in this prospectus.
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DESCRIPTION OF THE TRUST FUNDS
GENERAL
The primary assets of each trust fund will consist of (1) various types of
multifamily or commercial mortgage loans, (2) mortgage participations,
pass-through certificates or other mortgage-backed securities ("MBS") that
evidence interests in, or that are secured by pledges of, one or more of various
types of multifamily or commercial mortgage loans or (3) a combination of
mortgage loans and MBS. Chase Commercial Mortgage Securities Corp. (the
"Depositor") will establish each trust fund. Each mortgage asset will be
selected by the Depositor for inclusion in a trust fund from among those
purchased, either directly or indirectly, from a prior holder of the mortgage
asset (a "Mortgage Asset Seller"), which prior holder may or may not be the
originator of that mortgage loan or the issuer of that MBS and may be our
affiliate. The mortgage assets will not be guaranteed or insured by the
Depositor or any of its affiliates or, unless otherwise provided in the related
prospectus supplement, by any governmental agency or instrumentality or by any
other person. The discussion under the heading "--Mortgage Loans" below, unless
otherwise noted, applies equally to mortgage loans underlying any MBS included
in a particular trust fund.
MORTGAGE LOANS
General. The mortgage loans will be evidenced by promissory notes (the
"Mortgage Notes") secured by mortgages, deeds of trust or similar security
instruments (the "Mortgages") that create liens on fee or leasehold estates in
properties (the "Mortgaged Properties") consisting of
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 or
o Office buildings, retail stores and establishments, hotels or motels,
nursing homes, assisted living facilities, continuum care facilities,
day care centers, schools, hospitals or other healthcare related
facilities, mobile home parks, warehouse facilities, mini-warehouse
facilities, self-storage facilities, distribution centers,
transportation centers, industrial plants, parking facilities,
entertainment and/or recreation facilities, mixed use properties and/or
unimproved land.
The multifamily properties may include mixed commercial and residential
structures, apartment buildings owned by private cooperative housing
corporations ("Cooperatives"), and shares of the Cooperative allocable to one or
more dwelling units occupied by non-owner tenants or to vacant units. 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 that leasehold will exceed the
term of the Mortgage Note by at least two years. Unless otherwise specified in
the related prospectus supplement, a person other than the Depositor will have
originated each mortgage loan, and the originator may be or may have been an
affiliate of the Depositor.
If so specified in the related prospectus supplement, mortgage assets for a
series of certificates may include mortgage loans made on the security of real
estate projects under construction. In that case, the related prospectus
supplement will describe the procedures and timing for making disbursements from
construction reserve funds as portions of the related real estate project are
completed. In addition, the mortgage assets for a particular series of
certificates may include mortgage loans that are delinquent or non-performing as
of the date those certificates are issued. In that case, the related prospectus
supplement will set forth, as to those mortgage loans, available information as
to the period of the delinquency or non-performance of those loans, 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.
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Default and Loss Considerations with Respect to the Mortgage
Loans. Mortgage loans secured by liens on income-producing properties are
substantially different from loans made on the security of owner-occupied
single-family homes. The repayment of a loan secured by a lien on an income-
producing property is typically dependent upon the successful operation of 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,
which means that, absent special facts, recourse in the case of default will be
limited to the Mortgaged Property and those 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 that loan. Unless otherwise defined in the related prospectus
supplement, the "Debt Service Coverage Ratio" of a mortgage loan at any given
time is the ratio of (1) the Net Operating Income derived from the related
Mortgaged Property for a twelve-month period to (2) the annualized scheduled
payments on the mortgage loan and any other loans senior thereto that are
secured by the related Mortgaged Property. Unless otherwise defined in the
related prospectus supplement, "Net Operating Income" means, for any given
period, the total operating revenues derived from a Mortgaged Property during
that period, minus the total operating expenses incurred in respect of that
Mortgaged Property during that period other than
o non-cash items such as depreciation and amortization,
o capital expenditures, and
o debt service on the related mortgage loan or on any other loans that are
secured by that Mortgaged Property.
The Net Operating Income of a Mortgaged Property will fluctuate over time
and may or may not be sufficient to cover debt service on the related mortgage
loan at any given time. As the primary source of the operating revenues of a
non-owner occupied, income-producing property, rental income (and, 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 area economy. In addition,
properties typically leased, occupied or used on a short-term basis, such as
certain 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 a commercial 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 ("Net
Leases"). However, the existence of these "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.
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
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o the then outstanding principal balance of the mortgage loan and any
other loans senior thereto that are secured by the related Mortgaged
Property to
o the Value of the related Mortgaged Property.
The "Value" of a Mortgaged Property is generally its fair market value
determined in an appraisal obtained by the originator at the origination of that
loan. The lower the Loan-to-Value Ratio, the greater the percentage of the
borrower's equity in a Mortgaged Property, and thus
(a) the greater the incentive of the borrower to perform under the
terms of the related mortgage loan (in order to protect its equity); and
(b) the greater the cushion provided to the lender against loss on
liquidation following a default.
Loan-to-Value Ratios will not necessarily constitute an accurate measure of
the risk of liquidation loss in a pool of mortgage loans. For example, the value
of a Mortgaged Property as of the date of initial issuance of the related series
of certificates may be less than the Value determined at loan origination, and
will likely continue to fluctuate from time to time based upon changes in
economic conditions, 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 (which compares recent resale value of
comparable properties at the date of the appraisal),
o the cost replacement method which calculates the cost of replacing the
property at that date,
o the income capitalization method which projects value based upon the
property's projected net cash flow, or
o upon a selection from or interpolation of the values derived from those
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, we cannot assure you that all of these
factors will in fact have been prudently considered by the originators of the
mortgage loans, or that, for a particular mortgage loan, they are complete or
relevant. See "Risk Factors--Risks Associated with Certain Mortgage Loans and
Mortgaged Properties" and "--Borrowers May Be Unable to Make Balloon Payments"
in this prospectus.
Payment Provisions of the Mortgage Loans. In general, each mortgage loan
o will provide for scheduled payments of principal, interest or both, to
be made on specified dates ("Due Dates") that occur monthly, quarterly,
semi-annually or annually,
o may provide for no accrual of interest or for accrual of interest at an
interest 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 interest rate, or from a fixed to an adjustable
interest rate,
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o may provide for level payments to maturity or for payments that adjust
from time to time to accommodate changes in the interest rate or to
reflect the occurrence of certain events, and may permit negative
amortization,
o may be fully amortizing or partially amortizing or non-amortizing, with
a balloon payment due on its stated maturity date, and
o may prohibit over its term or for a certain period prepayments (the
period of that prohibition, a "Lock-out Period" and its date of
expiration, a "Lock-out Date") and/or require payment of a premium or a
yield maintenance penalty (a "Prepayment Premium") in connection with
certain 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 that Mortgaged Property or the benefit, if
any, resulting from the refinancing of the mortgage loan (this provision, an
"Equity Participation"), as described in the related prospectus supplement. If
holders of any class or classes of offered certificates of a series will be
entitled to all or a portion of an Equity Participation in addition to payments
of interest on and/or principal of those offered certificates, the related
prospectus supplement will describe the Equity Participation and the method or
methods by which distributions will be made to holders of those certificates.
Mortgage Loan Information in Prospectus Supplements. Each prospectus
supplement will contain certain 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 and which, to the extent then applicable
and specifically known to the Depositor, will include the following:
o the aggregate outstanding principal balance and the largest, smallest
and average outstanding principal balance of the mortgage loans,
o the type or types of property that provide security for repayment of the
mortgage loans,
o the earliest and latest origination date and maturity date of the
mortgage loans,
o the original and remaining terms to maturity of the mortgage loans, or
the respective ranges of remaining terms to maturity, and the weighted
average original and remaining terms to maturity of the mortgage loans,
o the original Loan-to-Value Ratios of the mortgage loans, or the range of
the Loan-to-Value Ratios, and the weighted average original
Loan-to-Value Ratio of the mortgage loans,
o the interest rates borne by the mortgage loans, or range of the interest
rates, and the weighted average interest rate borne by the mortgage
loans,
o with respect to mortgage loans with adjustable mortgage interest rates
("ARM Loans"), the index or indices upon which those adjustments are
based, the adjustment dates, the range of gross margins and the weighted
average gross margin, and any limits on mortgage interest rate
adjustments at the time of any adjustment and over the life of the ARM
Loan,
o information regarding the payment characteristics of the mortgage loans,
including, without limitation, balloon payment and other amortization
provisions, Lock-out Periods and Prepayment Premiums,
o the Debt Service Coverage Ratios of the mortgage loans (either at
origination or as of a more recent date), or the range of the Debt
Service Coverage Ratios, and the weighted average of the Debt Service
Coverage Ratios, and
o the geographic distribution of the Mortgaged Properties on a
state-by-state basis.
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In appropriate cases, the related prospectus supplement will also contain
certain information available to the Depositor 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, we will provide more general
information of the nature described above in the related prospectus supplement,
and specific information will be set forth in a report which we will make
available to purchasers of those certificates at or before the initial issuance
of the certificates and will be filed as part of a Current Report on Form 8-K
with the Securities and Exchange Commission within fifteen days following that
issuance.
MBS
MBS may include:
o private (that is, not guaranteed or insured by the United States or any
agency or instrumentality of the United States) mortgage participations,
mortgage pass-through certificates or other mortgage-backed securities
or
o certificates insured or guaranteed by the Federal Home Loan Mortgage
Corporation ("FHLMC"), the Federal National Mortgage Association
("FNMA"), the Governmental National Mortgage Association ("GNMA") or the
Federal Agricultural Mortgage Corporation ("FAMC") 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
(an "MBS Agreement"). The issuer of the MBS (the "MBS Issuer") and/or the
servicer of the underlying mortgage loans (the "MBS Servicer") will have entered
into the MBS Agreement, generally with a trustee (the "MBS Trustee") or, in the
alternative, with the original purchaser or purchasers of the MBS.
The MBS may have been issued in one or more classes with characteristics
similar to the classes of certificates described in this prospectus. The MBS
Issuer, the MBS Servicer or the MBS Trustee will make distributions in respect
of the MBS on the dates specified in the related prospectus supplement. The MBS
Issuer or the MBS Servicer or another person specified in the related prospectus
supplement may have the right or obligation to repurchase or substitute assets
underlying the MBS after a certain date or under other circumstances specified
in the related prospectus supplement.
Reserve funds, subordination or other credit support similar to that
described for the certificates under "Description of Credit Support" may have
been provided with respect to the MBS. The type, characteristics and amount of
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:
o the aggregate approximate initial and outstanding principal amount and
type of the MBS to be included in the trust fund,
o the original and remaining term to stated maturity of the MBS, if
applicable,
o the pass-through or bond rate of the MBS or the formula for determining
the rates,
o the payment characteristics of the MBS,
o the MBS Issuer, MBS Servicer and MBS Trustee, as applicable,
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o a description of the credit support, if any,
o the circumstances under which the related underlying mortgage loans, or
the MBS themselves, may be purchased prior to their maturity,
o the terms on which mortgage loans may be substituted for those
originally underlying the MBS,
o the type of mortgage loans underlying the MBS and, to the extent
available to the Depositor and appropriate under the circumstances, the
other information in respect of the underlying mortgage loans described
under "--Mortgage Loans--Mortgage Loan Information in Prospectus
Supplements" above, and
o the characteristics of any cash flow agreements that relate to the MBS.
CERTIFICATE ACCOUNTS
Each trust fund will include one or more certificate 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 that 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 in a certificate account may be held as cash or invested in certain
obligations acceptable to each rating agency rating one or more classes of the
related series of offered certificates.
CREDIT SUPPORT
If so provided in the prospectus supplement for a series of certificates,
partial or full protection against certain defaults and losses on the mortgage
assets in the related trust fund may be provided to one or more classes of
certificates of that series in the form of subordination of one or more other
classes of certificates of that series or by one or more other types of credit
support, such as letters of credit, overcollateralization, insurance policies,
guarantees, surety bonds or reserve funds, or a combination of them. 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 series of
certificates. See "Risk Factors--Credit Support Limitations" and "Description of
Credit Support" in this prospectus.
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 those 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 a guaranteed investment contract
or other agreement (any of these agreements, a "Cash Flow Agreement"), and the
identity of the Cash Flow Agreement obligor, will be described in the prospectus
supplement for a series of certificates.
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YIELD AND MATURITY CONSIDERATIONS
GENERAL
The yield on any offered certificate will depend on the price you paid, the
fixed, variable or adjustable pass-through interest rate of the certificate and
the amount and timing of distributions on the certificate. See "Risk
Factors--Prepayment Considerations; Variability in Average Life of Offered
Certificates; Special Yield Considerations" in this prospectus. 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 interest 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 interest rate for each class of offered certificates of that
series or, in the case of a class of offered certificates with a variable or
adjustable pass-through interest rate, the method of determining the
pass-through interest rate; the effect, if any, of the prepayment of any
mortgage loan on the pass-through interest rate of one or more classes of
offered certificates; and whether the distributions of interest on the offered
certificates of any class will be dependent, in whole or in part, on the
performance of any obligor under a Cash Flow Agreement.
PAYMENT DELAYS
With respect to any series of certificates, a period of time will elapse
between the date upon which payments on the mortgage loans in the related trust
fund are due and the distribution date on which those 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.
CERTAIN SHORTFALLS IN COLLECTIONS OF INTEREST
When a principal prepayment in full or in part is made on a mortgage loan,
the borrower is generally charged interest on the amount of that prepayment only
through the date of prepayment, instead of through the Due Date for the next
succeeding scheduled payment. However, interest accrued on any series of
certificates and distributable on them on any distribution date will generally
correspond to interest accrued on the mortgage loans to their respective Due
Dates during the related Due Period. Unless otherwise specified in the
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 (the "Determination Date") or otherwise
advanced by the related master servicer or other specified person, be
distributed to the holders of the certificates of that series on the next
succeeding distribution date. Consequently, if a prepayment on any mortgage loan
is distributable to certificateholders on a particular distribution date, but
that prepayment is not accompanied by interest on it to the Due Date for that
mortgage loan in the related Due Period, then the interest charged to the
borrower (net of servicing and administrative fees) may be less (that shortfall,
a "Prepayment Interest Shortfall") than the corresponding amount of interest
accrued and otherwise payable on the certificates of the related
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series. If that shortfall is allocated to a class of offered certificates, their
yield will be adversely affected. The prospectus supplement for each series of
certificates will describe the manner in which those shortfalls will be
allocated among the classes of those certificates. If so specified in the
prospectus supplement for a series of certificates, the master 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 those shortfalls. The related
prospectus supplement will also describe any other amounts available to offset
those shortfalls. See "Description of the Pooling Agreements--Servicing
Compensation and Payment of Expenses" in this prospectus.
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
principal 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 the amortization schedules of the
mortgage loans (which, in the case of ARM Loans, may change periodically to
accommodate adjustments to their mortgage interest rates), the dates on which
any balloon payments are due, and the rate of principal prepayments on them
(including for this purpose, prepayments resulting from liquidations of mortgage
loans due to defaults, casualties or condemnations affecting the Mortgaged
Properties, or purchases of mortgage loans out of the related trust fund).
Because the rate of principal prepayments on the mortgage loans in any trust
fund will depend on future events and a variety of factors (as described more
fully below), we cannot assure you as to that rate.
The extent to which the yield to maturity of a class of offered
certificates of any series may vary from the anticipated yield will depend upon
the degree to which they are purchased at a discount or premium and when, and to
what degree, payments of principal on the mortgage loans in the related trust
fund are in turn distributed on those certificates, or, in the case of a class
of interest-only certificates, result in the reduction of its notional amount.
An investor should consider, in the case of any offered certificate purchased at
a discount, the risk that a slower than anticipated rate of principal payments
on the mortgage loans in the related trust fund could result in an actual yield
to that investor that is lower than the anticipated yield and, in the case of
any offered certificate purchased at a premium, the risk that a faster than
anticipated rate of principal payments on those mortgage loans could result in
an actual yield to that investor that is lower than the anticipated yield. In
addition, if an investor purchases an offered certificate at a discount (or
premium), and principal payments are made in reduction of the principal balance
or notional amount of that investor's offered certificates at a rate slower (or
faster) than the rate anticipated by the investor during any particular period,
the consequent adverse effects on that investor's 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 that date, to a disproportionately
large share (which, in some cases, may be all) of those prepayments, or to a
disproportionately small share (which, in some cases, may be none) of those
prepayments. As 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, prepayments) of
principal of the mortgage loans in the related trust fund may vary based on the
occurrence of certain events, such as, the retirement of one or more classes of
certificates of that series, or subject to certain contingencies, such as,
prepayment and default rates with respect to those mortgage loans.
In general, the notional amount of a class of interest-only certificates
will either (1) be based on the principal balances of some or all of the
mortgage assets in the related trust fund or (2) equal the principal balances of
one or more of the other classes of certificates of the same series.
Accordingly, the yield on those interest-only certificates will be inversely
related to the rate at which payments and
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other collections of principal are received on those mortgage assets or
distributions are made in reduction of the principal balances of those classes
of certificates, as the case may be.
Consistent with the foregoing, if a class of certificates of any series
consists of interest-only certificates or principal-only 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
principal-only certificates, and a higher than anticipated rate of principal
prepayments on those mortgage loans will negatively affect the yield to
investors in interest-only certificates. If the offered certificates of a series
include those certificates, the related prospectus supplement will include a
table showing the effect of various assumed levels of prepayment on yields on
those certificates. Those 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 investors 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 factors
such as:
o the availability of mortgage credit,
o the relative economic vitality of the area in which the Mortgaged
Properties are located,
o the quality of management of the Mortgaged Properties,
o the servicing of the mortgage loans,
o possible changes in tax laws and other opportunities for investment,
o the existence of Lock-out Periods,
o requirements that principal prepayments be accompanied by Prepayment
Premiums, and
o by the extent to which these 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
loan's interest rate, 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 interest 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 (1) converting
to a fixed rate loan and thereby "locking in" that rate or (2) 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 in the Mortgaged
Properties, 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 the relative importance of those factors, as to the percentage of the
principal balance of the mortgage loans that will be paid as of any date or as
to the overall rate of prepayment on the mortgage loans.
WEIGHTED AVERAGE LIFE AND MATURITY
The rate at which principal payments are received on the mortgage loans in
any trust fund will affect the ultimate maturity and the weighted average life
of one or more classes of the certificates of that series. Weighted average life
refers to the average amount of time that will elapse from the date
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of issuance of an instrument until each dollar allocable as principal of that
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 those 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 those series and the percentage of the
initial principal balance of each class 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 that prospectus supplement. Those 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,
which schedule is supported by creating priorities, as 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 those certificates. That 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 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, that
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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 on it 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 that schedule. A
targeted amortization class will generally afford the holders of those
certificates 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 pool of mortgage assets 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 those certificates to a disproportionately large
share of prepayments on the mortgage loans in the related trust fund when the
rate of prepayment is relatively fast, and will entitle the holders of those
certificates 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 of those certificates 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, or call
risk, if the rate of prepayment is relatively fast; while a class of
certificates that entitles the holders of those certificates 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,
or extension risk, if the rate of prepayment is relatively slow. Thus, as
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 that mortgage
loan may be extended in connection with a workout. In the case of defaults,
recovery of proceeds may be delayed by, among other things, bankruptcy of the
borrower or adverse conditions in the market where the property is located. In
order to minimize losses on defaulted mortgage loans, the master servicer 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 your certificates
and, if those certificates were purchased at a discount, reduce your yield.
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 it 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. This slower rate of mortgage loan amortization would correspondingly
be reflected in a slower rate of amortization for one or more
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classes of certificates of the related series. In addition, negative
amortization on one or more mortgage loans in any trust fund may result in
negative amortization on the certificates of the related series. The related
prospectus supplement will describe, if applicable, the manner in which negative
amortization in respect of the mortgage loans in any trust fund is allocated
among the respective classes of certificates of the related series. The portion
of any mortgage loan negative amortization allocated to a class of certificates
may result in a deferral of some or all of the interest payable on them, which
deferred interest may be added to the principal balance of the certificates.
Accordingly, the weighted average lives of mortgage loans that permit negative
amortization and that of the classes of certificates to which the negative
amortization would be allocated or that would bear the effects of a slower rate
of amortization on those mortgage loans, may increase as a result of that
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 interest rate, provides that its scheduled payment will adjust less
frequently than its mortgage interest rate or provides for constant scheduled
payments notwithstanding adjustments to its mortgage interest rate. Accordingly,
during a period of declining interest rates, the scheduled payment on that
mortgage loan may exceed the amount necessary to amortize the loan fully over
its remaining amortization schedule and pay interest at the then applicable
mortgage interest rate, thereby resulting in the accelerated amortization of
that mortgage loan. This acceleration in amortization of its principal balance
will shorten the weighted average life of that mortgage loan and,
correspondingly, the weighted average lives of those classes of certificates
entitled to a portion of the principal payments on that 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 (1) whether that offered certificate was
purchased at a premium or a discount and (2) the extent to which the payment
characteristics of those mortgage loans delay or accelerate the distributions of
principal on that certificate or, in the case of an interest-only certificate,
delay or accelerate the amortization of the notional amount of that certificate.
See "--Yield and Prepayment Considerations" above.
Foreclosures and Payment Plans. The number of foreclosures and the
principal amount of the mortgage loans that are foreclosed in relation to the
number and principal amount of mortgage loans that are repaid in accordance with
their terms will affect the weighted average lives of those mortgage loans and,
accordingly, the weighted average lives of and yields on the certificates of the
related series. Servicing decisions made with respect to the mortgage loans,
including the use of payment plans prior to a demand for acceleration and the
restructuring of mortgage loans in bankruptcy proceedings, may also have an
effect upon the payment patterns of particular mortgage loans and thus the
weighted average lives of and yields on the certificates of the related series.
Losses and Shortfalls on the Mortgage Assets. The yield on your
certificates will directly depend on the extent to which you 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 those
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 the effects of the shortfall.
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, those allocations
may be effected by a reduction in the entitlements to interest and/or principal
balances of one or more classes of certificates, or by establishing a priority
of payments among those classes of certificates.
The yield to maturity on a class of Subordinate Certificates may be
extremely sensitive to losses and shortfalls in collections on the mortgage
loans in the related trust fund.
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Additional Certificate Amortization. In addition to entitling the holders
of one or more classes of a series of certificates 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 those series, may provide for distributions of principal of
those certificates from (1) amounts attributable to interest accrued but not
currently distributable on one or more classes of accrual certificates,
(2) Excess Funds or (3) any other amounts described in the related prospectus
supplement. Unless otherwise specified in the related prospectus supplement,
"Excess Funds" will, in general, represent that portion of the amounts
distributable in respect of the certificates of any series on any distribution
date that represent (1) 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 of that series, or (2) 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 on, or principal of,
those certificates.
The amortization of any class of certificates out of the sources described
in the preceding paragraph would shorten the weighted average life of those
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 those sources would have any
material effect on the rate at which those certificates are amortized.
Optional Early Termination. If so specified in the related prospectus
supplement, a series of certificates may be subject to optional early
termination through the repurchase of the mortgage assets in the related trust
fund by the party or parties specified in the related prospectus supplement,
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 principal balance of a specified class or classes of
certificates by a specified percentage or amount, the specified party 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 those mortgage
assets to retire that class or classes, as 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 those
certificates and, if those certificates were purchased at premium, reduce the
yield on those certificates.
THE DEPOSITOR
Chase Commercial Mortgage Securities Corp., the Depositor, is a New York
corporation organized on August 2, 1993. The Depositor is a wholly-owned
subsidiary of The Chase Manhattan Bank. The Depositor maintains its principal
office at 270 Park Avenue, New York, New York 10017-2070. Its telephone number
is (212) 834-5723. The Depositor does not have, nor is it expected in the future
to have, any significant assets.
USE OF PROCEEDS
We will apply the net proceeds to be received from the sale of the
certificates of any series to the purchase of Trust Assets or use the net
proceeds 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 we have
acquired, 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 a trust fund. As described in the related prospectus supplement, the
certificates of each series, including the offered certificates of that series,
may consist of one or more classes of certificates that, among other things:
o provide for the accrual of interest on the certificates at a fixed,
variable or adjustable rate;
o are senior (collectively, "Senior Certificates") or subordinate
(collectively, "Subordinate Certificates") to one or more other classes
of certificates in entitlement to certain distributions on the
certificates;
o are principal-only certificates entitled to distributions of principal,
with disproportionately small, nominal or no distributions of interest;
o are interest-only certificates entitled to distributions of interest,
with disproportionately small, nominal or no distributions of principal;
o provide for distributions of interest on, or principal of, those
certificates that commence only after the occurrence of certain events,
such as the retirement of one or more other classes of certificates of
that series;
o provide for distributions of principal of those certificates 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 controlled distributions of principal of those certificates
to be made based on a specified payment schedule or other methodology,
subject to available funds; or
o provide for distributions based on collections of Prepayment Premiums
and Equity Participations on the mortgage assets in the related trust
fund.
Each class of offered certificates of a series will be issued in minimum
denominations corresponding to the principal balances or, in case of certain
classes of interest-only 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
(those certificates, "Definitive Certificates") or may be offered in book-entry
format (those certificates, "Book-Entry Certificates") through the facilities of
The Depository Trust Company ("DTC"). The offered certificates of each series
(if issued as Definitive Certificates) may be transferred or exchanged, subject
to any restrictions on transfer described in the related prospectus supplement,
at the location specified in the related prospectus supplement, without the
payment of any service charges, other than any tax or other governmental charge
payable in connection therewith. Interests in a class of Book-Entry Certificates
will be transferred on the book-entry records of DTC and its participating
organizations. See "Risk Factors--Limited Liquidity of Your Certificates" and
"--Book-Entry System for Certain Classes May Decrease Liquidity and Delay
Payment" in this prospectus.
DISTRIBUTIONS
Distributions on the certificates of each series will be made on each
distribution date as specified in the related prospectus supplement from the
Available Distribution Amount for that series and that distribution date. Unless
otherwise provided in the related prospectus supplement, the "Available
Distribution Amount" for any series of certificates and any distribution date
will refer to the total of all payments or other collections on 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 that series on
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that 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 that certificate, will be made to the persons in
whose names those certificates are registered at the close of business on the
last business day of the month preceding the month in which the applicable
distribution date occurs (the "Record Date"), and the amount of each
distribution will be determined as of the close of business on the date (the
"Determination Date") specified in the related prospectus supplement. All
distributions with respect to each class of certificates on each distribution
date will be allocated pro rata among the outstanding certificates in that
class. Payments will be made either by wire transfer in immediately available
funds to your account at a bank or other entity having appropriate facilities
for the transfer, if you have provided the person required to make those
payments with wiring instructions no later than the date specified in the
related prospectus supplement (and, if so provided in the related prospectus
supplement, that you hold certificates in the amount or denomination specified
in the prospectus supplement), or by check mailed to the address of that
certificateholder as it appears on the certificate register; provided, however,
that the final distribution in retirement of any class of certificates (whether
Definitive Certificates or Book-Entry Certificates) will be made only upon
presentation and surrender of those 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 certain classes of
principal-only certificates and residual certificates ("Residual Certificates")
that have no pass-through interest rate, may have a different pass-through
interest rate, which in each case may be fixed, variable or adjustable. The
related prospectus supplement will specify the pass-through interest rate or, in
the case of a variable or adjustable pass-through interest rate, the method for
determining the pass-through interest rate, for each class. Unless otherwise
specified in the related prospectus supplement, interest on the certificates of
each series will be calculated on the basis of a 360-day year consisting of
twelve 30-day months.
Distributions of interest in respect of any class of certificates (other
than certain classes of certificates that will be entitled to distributions of
accrued interest commencing only on the distribution date, or under the
circumstances, specified in the related prospectus supplement ("Accrual
Certificates"), and other than any class of principal-only certificates or
Residual Certificates which are not entitled to distributions of interest, will
be made on each distribution date based on the Accrued Certificate Interest for
that class and that distribution date, subject to the sufficiency of the portion
of the Available Distribution Amount allocable to that class on that
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 principal balance of those
certificates on each distribution date. With respect to each class of
certificates, other than certain classes of interest-only certificates and
certain classes of residual certificates, the "Accrued Certificate Interest" for
each distribution date will be equal to interest at the applicable pass-through
interest rate accrued for a specified time period generally corresponding in
length to the time period between distribution dates, on the outstanding
principal balance of that class of certificates immediately prior to that
distribution date.
Unless otherwise provided in the related prospectus supplement, the Accrued
Certificate Interest for each distribution date on a class of interest-only
certificates will be similarly calculated except that it will accrue on a
notional amount that is either (1) based on the principal balances of some or
all of the mortgage assets in the related trust fund, (2) equal to the principal
balances of one or more other classes of certificates of the same series or
(3) an amount or amounts specified in the applicable prospective supplement.
Reference to a notional amount with respect to a class of interest-only
certificates is solely for convenience in making certain calculations and does
not represent the right to receive any distributions of principal. If so
specified in the related prospectus supplement, the amount
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of Accrued Certificate Interest that is otherwise distributable on, or, in the
case of Accrual Certificates, that may otherwise be added to the principal
balance of, one or more classes of the certificates of a series will be reduced
to the extent that any Prepayment Interest Shortfalls, as described under "Yield
and Maturity Considerations--Certain Shortfalls in Collections of Interest" in
this prospectus, exceed the amount of any sums that are applied to offset the
amount of those shortfalls. The particular manner in which those 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 principal 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 that 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 principal balance of that class. See "Risk
Factors--Prepayment Considerations; Variability in Average Life of Offered
Certificates; Special Yield Considerations" and "Yield and Maturity
Considerations" in this prospectus.
DISTRIBUTIONS OF PRINCIPAL ON THE CERTIFICATES
Each class of certificates of each series, other than certain classes of
interest-only certificates and Residual Certificates, will have a principal
balance which, at any time, will equal the then maximum amount that the holders
of certificates of that 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 principal balance of a class
of certificates will be reduced by distributions of principal made on the
certificates from time to time and, if so provided in the related prospectus
supplement, further by any losses incurred in respect of the related mortgage
assets allocated thereto from time to time. In turn, the outstanding principal
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 that
class 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 on the certificates are required to commence, by the amount of any
Accrued Certificate Interest in respect of those certificates (reduced as
described above). The initial principal balance of each class of a series of
certificates will be specified in the related prospectus supplement. As
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 that series entitled
thereto until the principal balances of those certificates have been reduced to
zero. Distributions of principal with respect to one or more classes of
certificates may be made at a rate that is faster, and, in some cases,
substantially faster, than the rate at which payments or other collections of
principal are received on the mortgage assets in the related trust fund.
Distributions of principal with respect to one or more classes of certificates
may not commence until the occurrence of certain events, including 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 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 may be
contingent on the specified principal payment schedule for another 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.
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DISTRIBUTIONS ON THE CERTIFICATES IN RESPECT OF PREPAYMENT PREMIUMS OR IN
RESPECT OF EQUITY PARTICIPATIONS
If so provided in the related prospectus supplement, Prepayment Premiums or
payments in respect of Equity Participations received on or in connection with
the mortgage assets in any trust fund will be distributed on each distribution
date to the holders of the class of certificates of the related series entitled
thereto in accordance with the provisions described in that 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, those allocations
may be effected by a reduction in the entitlements to interest and/or principal
balances of one or more classes of certificates, or by establishing a priority
of payments among those classes of certificates.
ADVANCES IN RESPECT OF DELINQUENCIES
If provided in the related prospectus supplement, if a trust fund includes
mortgage loans, the master servicer, a special servicer, the trustee, any
provider of credit support and/or any other specified person may be obligated to
advance, or have the option of advancing, on or before each distribution date,
from its or their own funds or from excess funds held in the related certificate
account that are not part of the Available Distribution Amount for the related
series of certificates for that distribution date, an amount up to the aggregate
of any payments of principal, other than any balloon payments, and interest that
were due on or in respect of those mortgage loans during the related Due Period
and were delinquent on the related Determination Date.
Advances are intended to maintain a regular flow of scheduled interest and
principal payments to holders of the class or classes of certificates entitled
thereto, rather than to guarantee or insure against losses. Accordingly, all
advances made out of a specific entity's own funds will be reimbursable out of
related recoveries on the mortgage loans, including amounts received under any
instrument of credit support, respecting which those advances were made (as to
any mortgage loan, "Related Proceeds") and those 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 a master
servicer, special servicer or trustee if, in the good faith judgment of the
master servicer, special servicer or trustee, as the case may be, that advance
would not be recoverable from Related Proceeds or another specifically
identified source (each, a "Nonrecoverable Advance"); and, if previously made by
a master servicer, special servicer or trustee, a Nonrecoverable Advance will be
reimbursable to the advancing party from any amounts in the related certificate
account prior to any distributions being made to the related series of
certificateholders.
If advances have been made by a master servicer, special servicer, trustee
or other entity from excess funds in a certificate account, the advancing party
will be required to replace those funds in that certificate account on any
future distribution date to the extent that funds in that certificate account on
that 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 a master servicer, special servicer,
trustee or other entity to make advances may be secured by a cash advance
reserve fund or a surety bond. If applicable, information regarding the
characteristics of a surety bond, and the identity of any obligor on that surety
bond, will be set forth in the related prospectus supplement.
If so provided in the related prospectus supplement, any entity making
advances will be entitled to receive interest on those advances for the period
that those advances are outstanding at the rate
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specified in that prospectus supplement, and that entity will be entitled to
payment of that 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 described in the 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.
REPORTS TO CERTIFICATEHOLDERS
On each distribution date, together with the distribution to the holders of
each class of the offered certificates of a series, a master servicer or
trustee, as provided in the related prospectus supplement, will forward to each
holder a statement (a "Distribution Date Statement") that, unless otherwise
provided in the related prospectus supplement, will set forth, among other
things, in each case to the extent applicable:
o the amount of that distribution to holders of that class of offered
certificates that was applied to reduce the principal balance of those
certificates, expressed as a dollar amount per minimum denomination of
the relevant class of offered certificates or per a specified portion of
that minimum denomination;
o the amount of that distribution to holders of that class of offered
certificates that is allocable to Accrued Certificate Interest,
expressed as a dollar amount per minimum denomination of the relevant
class of offered certificates or per a specified portion of that minimum
denomination;
o the amount, if any, of that distribution to holders of that class of
offered certificates that is allocable to (A) Prepayment Premiums and
(B) payments on account of Equity Participations, expressed as a dollar
amount per minimum denomination of the relevant class of offered
certificates or per a specified portion of that minimum denomination;
o the amount, if any, by which that distribution is less than the amounts
to which holders of that class of offered certificates are entitled;
o if the related trust fund includes mortgage loans, the aggregate amount
of advances included in that distribution;
o if the related trust fund includes mortgage loans, the amount of
servicing compensation received by the related master 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;
o information regarding the aggregate principal balance of the related
mortgage assets on or about that distribution date;
o 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;
o 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 specified period,
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;
o the principal 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 that distribution date, separately
identifying any reduction in that principal balance or notional amount
due to the allocation of any losses in respect of the related mortgage
assets, any increase in that principal balance or notional amount due to
the allocation of any negative
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amortization in respect of the related mortgage assets and any increase
in the principal balance of a class of Accrual Certificates, if any, in
the event that Accrued Certificate Interest has been added to that
balance;
o if the class of offered certificates has a variable pass-through
interest rate or an adjustable pass-through interest rate, the
pass-through interest rate applicable to that class for that
distribution date and, if determinable, for the next succeeding
distribution date;
o the amount deposited in or withdrawn from any reserve fund on that
distribution date, and the amount remaining on deposit in that reserve
fund as of the close of business on that distribution date;
o if the related trust fund includes one or more instruments of credit
support, like a letter of credit, an insurance policy and/or a surety
bond, the amount of coverage under that instrument as of the close of
business on that distribution date; and
o to the extent not otherwise reflected through the information furnished
as described above, the amount of credit support being afforded by any
classes of Subordinate Certificates.
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 that series.
Within a reasonable period of time after the end of each calendar year, the
master servicer or trustee for a series of certificates, as the case may be,
will be required to furnish to each person who at any time during the calendar
year was a holder of an offered certificate of that series a statement
containing the information set forth in the first three categories described
above, aggregated for that calendar year or the applicable portion of that year
during which that person was a certificateholder. This obligation 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 of 1986,
as amended (the "Code"), as are from time to time in force. See, however,
"Description of the Certificates--Book-Entry Registration and Definitive
Certificates" in this prospectus.
If the trust fund for a series of certificates includes MBS, the ability of
the related master servicer or trustee, as the case may be, to include in any
Distribution Date Statement information regarding the mortgage loans underlying
that MBS will depend on the reports received with respect to that 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 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.
Certificateholders will generally not have a right to vote, except with
respect to required consents to certain amendments to the agreement pursuant to
which the certificates are issued and as otherwise specified in the related
prospectus supplement. See "Description of the Pooling Agreements--Amendment" in
this prospectus. The holders of specified amounts of certificates of a
particular series will have the right to act as a group to remove the related
trustee and also upon the occurrence of certain events which if continuing would
constitute an event of default on the part of the related master servicer. See
"Description of the Pooling Agreements--Events of Default--Rights Upon Event of
Default--Resignation and Removal of the Trustee" in this prospectus.
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TERMINATION
The obligations created by the pooling and servicing or other agreement
creating a series of certificates will terminate following:
o the final payment or other liquidation of the last mortgage asset
underlying the series or the disposition of all property acquired upon
foreclosure of any mortgage loan underlying the series, and
o the payment to the certificateholders of the series of all amounts
required to be paid to them.
Written notice of termination 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 by the party or parties
specified in the prospectus supplement, in the manner set forth in the
prospectus supplement. If so provided in the related prospectus supplement, upon
the reduction of the principal balance of a specified class or classes of
certificates by a specified percentage or amount, a party designated in the
prospectus supplement may be authorized or required to bid for or solicit bids
for the purchase of all the mortgage assets of the related trust fund, or of a
sufficient portion of those mortgage assets to retire those class or classes, in
the manner set forth in the prospectus supplement.
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 The Depository Trust Company, and
that class will be represented by one or more global certificates registered in
the name of DTC or its nominee.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking corporation" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
was created to hold securities for its participating organizations
("Participants") and facilitate the clearance and settlement of securities
transactions between Participants through electronic computerized book-entry
changes in their accounts, thereby eliminating the need for physical movement of
securities certificates. "Direct Participants", which maintain accounts with
DTC, include securities brokers and dealers, banks, trust companies and clearing
corporations and may include certain other organizations. DTC is owned by a
number of its Direct Participants and by the New York Stock Exchange, Inc., the
American Stock Exchange, Inc. and the National Association of Securities
Dealers, Inc. Access to the DTC system also is available to others like banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a Direct Participant, either directly or indirectly ("Indirect
Participants").
Purchases of Book-Entry Certificates under the DTC system must be made by
or through Direct Participants, which will receive a credit for the Book-Entry
Certificates on DTC's records. The ownership interest of each actual purchaser
of a Book-Entry Certificate (a "Certificate Owner") is in turn to be recorded on
the Direct and Indirect Participants' records. Certificate Owners will not
receive written confirmation from DTC of their purchases, but Certificate Owners
are expected to receive written confirmations providing details of those
transactions, as well as periodic statements of their holdings, from the Direct
or Indirect Participant through which each Certificate Owner entered into the
transaction. Transfers of ownership interest in the Book-Entry Certificates are
to be accomplished by entries made on the books of Participants acting on behalf
of Certificate Owners. Certificate Owners will not receive certificates
representing their ownership interests in the Book-Entry Certificates, except in
the event that use of the book-entry system for the Book-Entry Certificates of
any series is discontinued as described below.
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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 those 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 those distributions by Participants to Certificate Owners will
be governed by standing instructions and customary practices, as is the case
with securities held for the accounts of customers in bearer form or registered
in "street name", and will be the responsibility of that Participant (and not of
DTC, the Depositor or any trustee or master servicer), subject to any statutory
or regulatory requirements as may be in effect from time to time. Under a
book-entry system, Certificate Owners may receive payments after the related
distribution date.
Unless otherwise provided in the related prospectus supplement, the only
certificateholder of record will be the nominee of DTC, and the Certificate
Owners will not be recognized as certificateholders under the agreement pursuant
to which the certificates are issued. Certificate Owners will be permitted to
exercise the rights of certificateholders under that agreement only indirectly
through the Participants who in turn will exercise their rights through DTC. The
Depositor is informed that DTC will take action permitted to be taken by a
certificateholder under that agreement only at the direction of one or more
Participants to whose account with DTC interests in the Book-Entry Certificates
are credited.
Because DTC can act only on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain Certificate Owners, the ability of a
Certificate Owner to pledge its interest in Book-Entry Certificates to persons
or entities that do not participate in the DTC system, or otherwise take actions
in respect of its interest in Book-Entry Certificates, may be limited due to the
lack of a physical certificate evidencing that interest.
Unless otherwise specified in the related prospectus supplement,
certificates initially issued in book-entry form will be issued as Definitive
Certificates to Certificate Owners or their nominees, rather than to DTC or its
nominee, only if
o the Depositor advises 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 the Depositor is unable to locate
a qualified successor or
o the Depositor, at its option, elects to terminate the book-entry system
through DTC with respect to those certificates.
Upon the occurrence of either of the events described above, 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 those instructions the Definitive Certificates to which they are entitled,
and thereafter the holders of those Definitive Certificates will be recognized
as certificateholders of record under the related agreement pursuant to which
the certificates are issued.
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DESCRIPTION OF THE POOLING AGREEMENTS
GENERAL
The certificates of each series will be issued pursuant to a pooling and
servicing agreement or other agreement specified in the related prospectus
supplement (in either case, a "Pooling Agreement"). In general, the parties to a
Pooling Agreement will include the Depositor, a trustee, a master servicer and,
in some cases, a special servicer appointed as of the date of the Pooling
Agreement. However, a Pooling Agreement may include a Mortgage Asset Seller as a
party, and a Pooling Agreement that relates to a trust fund that consists solely
of MBS may not include a master servicer or other servicer as a party. All
parties to each Pooling Agreement under which certificates of a series are
issued will be identified in the related prospectus supplement. If so specified
in the related prospectus supplement, an affiliate of the Depositor, or the
Mortgage Asset Seller or an affiliate of the Mortgage Asset Seller, may perform
the functions of master servicer or special servicer. Any party to a Pooling
Agreement may own certificates.
A form of a Pooling Agreement has been filed as an exhibit to the
Registration Statement of which this prospectus is a part. However, the
provisions of each Pooling Agreement will vary depending upon the nature of the
certificates to be issued and the nature of the related trust fund. The
following summaries describe certain provisions that may appear in a Pooling
Agreement under which certificates that evidence interests in mortgage loans
will be issued. The prospectus supplement for a series of certificates will
describe any provision of the related Pooling Agreement that materially differs
from the description contained in this prospectus and, if the related trust fund
includes MBS, will summarize all of the material provisions of the related
Pooling Agreement. The summaries 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 Agreement for each series of
certificates and the description of those provisions in the related prospectus
supplement. We will provide a copy of the Pooling Agreement (without exhibits)
that relates to any series of certificates without charge upon written request
of a holder of a certificate of that series addressed to Chase Commercial
Mortgage Securities Corp., 270 Park Avenue, New York, New York 10017-2070,
Attention: President.
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. The trustee will, concurrently with the
assignment, deliver the certificates to or at the direction of the Depositor in
exchange for the mortgage loans and the other assets to be included in the trust
fund for that series. Each mortgage loan will be identified in a schedule. That
schedule generally will include detailed information that pertains to each
mortgage loan included in the related trust fund, which information will
typically include the address of the related Mortgaged Property and type of that
property; the mortgage interest rate and, if applicable, the applicable index,
gross margin, adjustment date and any rate cap information; the original and
remaining term to maturity; the original amortization term; and the original and
outstanding principal balance.
With respect to each mortgage loan to be included in a trust fund, we will
deliver (or cause to be delivered) to the related trustee (or to a custodian
appointed by the trustee) certain loan documents which, unless otherwise
specified in the related prospectus supplement, will include the original
Mortgage Note endorsed, without recourse, to the order of the trustee, the
original Mortgage, or a certified copy, in each case with evidence of recording
indicated on it 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 Agreement will require us or another party to
the agreement to promptly cause each assignment of Mortgage to be recorded in
the appropriate public office for real property records.
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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 of the mortgage loan
documents, and the trustee (or that custodian) will hold those documents in
trust for the benefit of the certificateholders of that series. Unless otherwise
specified in the related prospectus supplement, if that 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 that custodian) will be required to notify the
master servicer and the Depositor, and one of those persons will be required to
notify the relevant Mortgage Asset Seller. In that case, and if the Mortgage
Asset Seller cannot deliver the document or cure the defect within a specified
number of days after receipt of that notice, then, except as otherwise specified
below or in the related prospectus supplement, the Mortgage Asset Seller will be
obligated to repurchase the related mortgage loan from the trustee at a price
that will be specified in the related prospectus supplement. If so provided in
the prospectus supplement for a series of certificates, a Mortgage Asset Seller,
in lieu of repurchasing a mortgage loan as to which there is missing or
defective loan documentation, will have the option, exercisable upon certain
conditions and/or within a specified period after initial issuance of that
series of certificates, to replace those mortgage loans with one or more other
mortgage loans, in accordance with standards that will be described in the
prospectus supplement. Unless otherwise specified in the related prospectus
supplement, this repurchase or substitution obligation will constitute the sole
remedy to holders of the certificates of any series or to the related trustee on
their behalf for missing or defective loan documentation and neither the
Depositor nor, unless it is the Mortgage Asset Seller, the master 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 on it, 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 that certified copy.
REPRESENTATIONS AND WARRANTIES; REPURCHASES
Unless otherwise provided in the prospectus supplement for a series of
certificates, the Depositor will, with respect to each mortgage loan in the
related trust fund, make or assign, or cause to be made or assigned, certain
representations and warranties (the person making those representations and
warranties, the "Warranting Party") covering, by way of example:
o the accuracy of the information set forth for that mortgage loan on the
schedule of mortgage loans delivered upon initial issuance of the
certificates;
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 Depositor or an affiliate of the Depositor, the
master servicer, a special servicer or another person acceptable to the
Depositor. The Warranting Party, if other than the Mortgage Asset Seller, will
be identified in the related prospectus supplement.
Unless otherwise provided in the related prospectus supplement, each
Pooling Agreement will provide that the master servicer and/or trustee will be
required to notify promptly any Warranting Party
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of any breach of any representation or warranty made by it in respect of a
mortgage loan that materially and adversely affects the interests of the
certificateholders of the related series. If that Warranting Party cannot cure
that breach within a specified period following the date on which it was
notified of the breach, then, unless otherwise provided in the related
prospectus supplement, it will be obligated to repurchase that mortgage loan
from the trustee at a price that will be specified in the related prospectus
supplement. If so provided in the prospectus supplement for a series of
certificates, a Warranting Party, in lieu of repurchasing a mortgage loan as to
which a breach has occurred, will have the option, exercisable upon certain
conditions and/or within a specified period after initial issuance of that
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 available to holders of the certificates of any series or to the related
trustee on their behalf for a breach of representation and warranty by a
Warranting Party and neither the Depositor nor the master servicer, in either
case unless it is the Warranting Party, will be obligated to purchase or replace
a mortgage loan if a Warranting Party defaults on its obligation to do so.
In some cases, representations and warranties will have been made in
respect of a mortgage loan as of a date prior to the date upon which the related
series of certificates is issued, and thus may not address events that may occur
following the date as of which they were made. However, 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 us to believe that the representations
and warranties made in respect of that mortgage loan will not be accurate in all
material respects as of the date of issuance. The date as of which the
representations and warranties regarding the mortgage loans in any trust fund
were made will be specified in the related prospectus supplement.
COLLECTION AND OTHER SERVICING PROCEDURES
The master servicer 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 that trust fund, and will be required to follow the
same collection procedures as it would follow with respect to mortgage loans
that are comparable to the mortgage loans in that trust fund and held for its
own account, provided those procedures are consistent with (1) the terms of the
related Pooling Agreement and any related instrument of credit support included
in that trust fund, (2) applicable law and (3) the servicing standard specified
in the related Pooling Agreement and prospectus supplement (the "Servicing
Standard").
The master servicer for any trust fund, directly or through sub-servicers,
will also be required to perform as to the mortgage loans in that trust fund
various other customary functions of a servicer of comparable loans, including
maintaining escrow or impound accounts, if required under the related Pooling
Agreement, for payment of taxes, insurance premiums, ground rents and similar
items, or otherwise monitoring the timely payment of those items; attempting to
collect delinquent payments; supervising foreclosures; negotiating
modifications; conducting property inspections on a periodic or other basis;
managing (or overseeing the management of) Mortgaged Properties acquired on
behalf of that trust fund through foreclosure, deed-in-lieu of foreclosure or
otherwise (each, an "REO Property"); and maintaining servicing records relating
to those mortgage loans. Unless otherwise specified in the related prospectus
supplement, the master servicer will be responsible for filing and settling
claims in respect of particular mortgage loans under any applicable instrument
of credit support. See "Description of Credit Support" in this prospectus.
SUB-SERVICERS
A master servicer may delegate its servicing obligations in respect of the
mortgage loans serviced thereby to one or more third-party servicers; provided
that, unless otherwise specified in the related prospectus supplement, the
master servicer will remain obligated under the related Pooling Agreement. A
sub-servicer for any series of certificates may be an affiliate of the Depositor
or master servicer.
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Unless otherwise provided in the related prospectus supplement, each
sub-servicing agreement between a master servicer and a sub-servicer (a
"Sub-Servicing Agreement") will provide that, if for any reason the master
servicer is no longer acting in that capacity, the trustee or any successor
master servicer may assume the master servicer's rights and obligations under
that Sub-Servicing Agreement. A master 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 removal to be in the best
interests of certificateholders.
Unless otherwise provided in the related prospectus supplement, a master
servicer will be solely liable for all fees owed by it to any sub-servicer,
irrespective of whether the master servicer's compensation pursuant to the
related Pooling Agreement is sufficient to pay those fees. Each sub-servicer
will be reimbursed by the master servicer that retained it for certain
expenditures which it makes, generally to the same extent the master servicer
would be reimbursed under a Pooling Agreement. See "Description of the Pooling
Agreements--Certificate Account" and "--Servicing Compensation and Payment of
Expenses" in this prospectus.
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 Agreement or may be
appointed by the master servicer or another specified party. A special servicer
for any series of certificates may be an affiliate of the Depositor or the
master 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 a
master servicer. The related prospectus supplement will describe the rights,
obligations and compensation of any special servicer for a particular series of
certificates. The master servicer will not be liable for the performance of a
special servicer.
CERTIFICATE ACCOUNT
General. The master 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 those mortgage loans, which will be
established so as to comply with the standards of each rating agency that has
rated any one or more classes of certificates of the related series. A
certificate account may be maintained as an interest-bearing or a
non-interest-bearing account and the funds held 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
("Permitted Investments"). Unless otherwise provided in the related prospectus
supplement, any interest or other income earned on funds in a certificate
account will be paid to the related master servicer, trustee or any special
servicer as additional compensation. A certificate account may be maintained
with the related master servicer, special servicer or Mortgage Asset Seller or
with a depository institution that is an affiliate of any of the foregoing or of
the Depositor, provided that it complies with applicable rating agency
standards. If permitted by the applicable rating agency or agencies and so
specified in the related prospectus supplement, a certificate account may
contain funds relating to more than one series of mortgage pass-through
certificates and may contain other funds representing payments on mortgage loans
owned by the related master servicer or any special servicer or serviced by
either on behalf of others.
Deposits. Unless otherwise provided in the related Pooling Agreement and
described in the related prospectus supplement, a master 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 Agreement,
the following payments and
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collections received or made by the master 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 master servicer or any special servicer as its
servicing compensation or as compensation to the trustee;
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 master
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 by foreclosure or otherwise ("Liquidation
Proceeds"), together with the net operating income (less reasonable
reserves for future expenses) derived from the operation of any
Mortgaged Properties acquired by the trust fund through foreclosure or
otherwise;
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" in this prospectus;
5. any advances made as described under "Description of the
Certificates--Advances in Respect of Delinquencies" in this
prospectus;
6. any amounts paid under any Cash Flow Agreement, as described under
"Description of the Trust Funds--Cash Flow Agreements" in this
prospectus;
7. all proceeds of the purchase of any mortgage loan, or property
acquired in respect of a mortgage loan, by the Depositor, any Mortgage
Asset Seller or any other specified person as described under
"--Assignment of Mortgage Loans; Repurchases" and "--Representations
and Warranties; Repurchases" in this prospectus, all proceeds of the
purchase of any defaulted mortgage loan as described under
"--Realization Upon Defaulted Mortgage Loans" in this prospectus, and
all proceeds of any mortgage asset purchased as described under
"Description of the Certificates--Termination" in this prospectus (all
of the foregoing, also "Liquidation Proceeds");
8. any amounts paid by the master servicer to cover Prepayment Interest
Shortfalls arising out of the prepayment of mortgage loans as
described under "--Servicing Compensation and Payment of Expenses" in
this prospectus;
9. to the extent that this item does not constitute additional servicing
compensation to the master 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" in this prospectus;
11. any amount required to be deposited by the master servicer or the
trustee in connection with losses realized on investments for the
benefit of the master servicer or the trustee, as the case may be, of
funds held in the certificate account; and
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12. any other amounts required to be deposited in the certificate account
as provided in the related Pooling Agreement and described in the
related prospectus supplement.
Withdrawals. Unless otherwise provided in the related Pooling Agreement
and described in the related prospectus supplement, a master servicer, 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 the certificateholders on each distribution
date;
2. to pay the master servicer, the trustee or a special servicer any
servicing fees not previously retained by them out of payments on the
particular mortgage loans as to which those fees were earned;
3. to reimburse the master 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" in this prospectus, the reimbursement to be
made out of amounts received that were identified and applied by the
master 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 form of credit support with respect to those mortgage
loans;
4. to reimburse the master servicer, the trustee or a special servicer
for unpaid servicing fees earned by it and certain unreimbursed
servicing expenses incurred by it with respect to mortgage loans in
the trust fund and properties acquired in respect of the mortgage
loans, 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 those
fees were earned or those expenses were incurred or out of amounts
drawn under any form of credit support with respect to those mortgage
loans and properties;
5. to reimburse the master 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
master 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 so provided by the related Pooling Agreement and described in the
related prospectus supplement, only from that portion of amounts
collected on those other mortgage loans that is otherwise
distributable on one or more classes of Subordinate Certificates of
the related series;
6. if described in the related prospectus supplement, to pay the master
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 they 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 those Mortgaged Properties, as described under
"--Realization Upon Defaulted Mortgage Loans" in this prospectus;
8. to reimburse the master servicer, the special servicer, the Depositor,
or any of their respective directors, officers, employees and agents,
as the case may be, for certain expenses, costs and liabilities
incurred thereby, as described under "--Certain Matters Regarding the
Master Servicer and the Depositor" in this prospectus;
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9. if 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 certain expenses, costs and
liabilities incurred thereby, as described under "--Certain Matters
Regarding the Trustee" in this prospectus;
11. if described in the related prospectus supplement, to pay the fees of
any provider of credit support;
12. if described in the related prospectus supplement, to reimburse prior
draws on any form of credit support;
13. to pay the master 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;
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
designated portions of the trust fund as a REMIC, to pay any federal,
state or local taxes imposed on the trust fund or its assets or
transactions, as described under "Certain Federal Income Tax
Consequences--Federal Income Tax Consequences for REMIC
Certificates--Taxes That May Be Imposed on the REMIC Pool" in this
prospectus;
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 in respect a defaulted
mortgage loan in connection with the liquidation of that mortgage loan
or property;
17. to pay for the cost of various opinions of counsel obtained pursuant
to the related Pooling Agreement for the benefit of
certificateholders;
18. to make any other withdrawals permitted by the related Pooling
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
A master servicer may agree to modify, waive or amend any term of any
mortgage loan serviced by it in a manner consistent with the applicable
Servicing Standard; provided that, unless otherwise set forth in the related
prospectus supplement, the modification, waiver or amendment (1) will not affect
the amount or timing of any scheduled payments of principal or interest on the
mortgage loan, (2) will not, in the judgment of the master servicer, materially
impair the security for the mortgage loan or reduce the likelihood of timely
payment of amounts due on them and (3) will not adversely affect the coverage
under any applicable instrument of credit support. Unless otherwise provided in
the related prospectus supplement, a master servicer also may agree to any other
modification, waiver or amendment if, in its judgment, (1) a material default on
the mortgage loan has occurred or a payment default is reasonably foreseeable,
(2) 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 (3) the modification, waiver or
amendment will not adversely affect the coverage under any applicable instrument
of credit support.
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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 master servicer or the
special servicer, if any, for a series of certificates will be required to
monitor any mortgage loan in the related trust fund that is in 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 the related Mortgaged Property and take any other actions as are
consistent with the Servicing Standard. A significant period of time may elapse
before the servicer is able to assess the success of the corrective action or
the need for additional initiatives.
The time within which the servicer can make the initial determination of
appropriate action, evaluate the success of corrective action, develop
additional initiatives, institute foreclosure proceedings and actually foreclose
(or accept a deed to a Mortgaged Property in lieu of foreclosure) on behalf of
the certificateholders may vary considerably depending on the particular
mortgage loan, the Mortgaged Property, the borrower, the presence of an
acceptable party to assume the mortgage loan and the laws of the jurisdiction in
which the Mortgaged Property is located. If a borrower files a bankruptcy
petition, the master 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 that mortgage loan may be restructured in the
resulting bankruptcy proceedings. See "Certain Legal Aspects of Mortgage Loans"
in this prospectus.
A Pooling Agreement may grant to the master servicer, a special servicer, a
provider of credit support and/or the holder or holders of certain classes of
the related series of certificates a right of first refusal to purchase from the
trust fund, at a predetermined purchase price (which, if insufficient to fully
fund the entitlements of certificateholders to principal and interest on the
certificates, will be specified in the related prospectus supplement), any
mortgage loan as to which a specified number of scheduled payments are
delinquent. In addition, unless otherwise specified in the related prospectus
supplement, a servicer may offer to sell any defaulted mortgage loan if and when
the master servicer determines, consistent with the applicable Servicing
Standard, that 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 Agreement will require that the servicer accept the highest cash bid
received from any person (including itself, the Depositor or any affiliate of
either of them or any certificateholder) that constitutes a fair price for that
defaulted mortgage loan. In the absence of any bid determined in accordance with
the related Pooling Agreement to be fair, the master 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 servicer's
judgment, a payment default is imminent, the servicer, on behalf of the trustee,
may at any time institute foreclosure proceedings, exercise any power of sale
contained in the related Mortgage, obtain a deed in lieu of foreclosure, or
otherwise acquire title to the related Mortgaged Property, by operation of law
or otherwise, if that action is consistent with the Servicing Standard. Unless
otherwise specified in the related prospectus supplement, the 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 that Mortgaged Property within the meaning of
certain federal environmental laws, unless the master servicer has previously
determined,
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based on a report prepared by a person who regularly conducts environmental
audits (which report will be an expense of the trust fund), that either:
1. the Mortgaged Property is in compliance with applicable environmental
laws and regulations or, if not, that taking those 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 those actions; and
2. 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 those circumstances or conditions are present
for which that action could be required, taking those 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 those actions. See "Certain Legal Aspects of Mortgage
Loans--Environmental Risks" in this prospectus.
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 servicer, on behalf of the trust fund, will be
required to sell the Mortgaged Property prior to the close of the third calendar
year following the year of acquisition, unless (1) the Internal Revenue Service
grants an extension of time to sell that property or (2) the trustee receives an
opinion of independent counsel to the effect that the holding of the property by
the trust fund beyond that period will not result in the imposition of a tax on
the trust fund or cause the trust fund (or any designated portion) to fail to
qualify as a REMIC under the Code at any time that any certificate is
outstanding. Subject to the foregoing, the servicer will generally be required
to solicit bids for any Mortgaged Property so acquired in that manner as will be
reasonably likely to realize a fair price for that property. If the trust fund
acquires title to any Mortgaged Property, the servicer, on behalf of the trust
fund, generally must retain an independent contractor to manage and operate that
property. The retention of an independent contractor, however, will not relieve
the servicer of its obligation to manage that Mortgaged Property in a manner
consistent with the Servicing Standard.
If Liquidation Proceeds collected with respect to a defaulted mortgage loan
are less than the outstanding principal balance of the defaulted mortgage loan
plus interest accrued on the mortgage loan plus the aggregate amount of
reimbursable expenses incurred by the servicer in connection with that mortgage
loan, the trust fund will realize a loss in the amount of that shortfall. The
servicer will be entitled to reimbursement out of the Liquidation Proceeds
recovered on any defaulted mortgage loan, prior to the distribution of those
Liquidation Proceeds to certificateholders, amounts that represent unpaid
servicing compensation in respect of the mortgage loan, unreimbursed servicing
expenses incurred with respect to the mortgage loan and any unreimbursed
advances of delinquent payments made with respect to the mortgage loan.
If any Mortgaged Property suffers damage so that the proceeds, if any, of
the related hazard insurance policy are insufficient to restore fully the
damaged property, the servicer will not be required to expend its own funds to
effect that restoration unless (and to the extent not otherwise provided in the
related prospectus supplement) it determines (1) that the restoration will
increase the proceeds to certificateholders on liquidation of the mortgage loan
after reimbursement of the servicer for its expenses and (2) 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 Agreement will require the master servicer to cause each mortgage loan
borrower to maintain a hazard insurance policy that provides for the coverage
required under the related Mortgage or, if the Mortgage permits the mortgagee to
dictate to the borrower the insurance coverage to be maintained on the related
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Mortgaged Property, the coverage consistent with the requirements of the
Servicing Standard. Unless otherwise specified in the related prospectus
supplement, the coverage generally will be in an amount equal to the lesser of
the principal balance owing on that mortgage loan and the replacement cost of
the related Mortgaged Property. The ability of a master servicer to assure that
hazard insurance proceeds are appropriately applied may be dependent upon its
being named as an additional insured under any hazard insurance policy and under
any other insurance policy referred to below, or upon the extent to which
information concerning covered losses is furnished by borrowers. All amounts
collected by a master servicer under that policy (except for amounts to be
applied to the restoration or repair of the Mortgaged Property or released to
the borrower in accordance with the master servicer's normal servicing
procedures and/or to the terms and conditions of the related Mortgage and
Mortgage Note) will be deposited in the related certificate account. The Pooling
Agreement may provide that the master servicer 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 the blanket policy contains a deductible clause, the master
servicer will be required, in the event of a casualty covered by the blanket
policy, to deposit in the related certificate account all sums that would have
been deposited in that certificate account but for that deductible clause.
In general, the standard form of fire and extended coverage policy covers
physical damage to or destruction of the improvements of the property by fire,
lightning, explosion, smoke, windstorm and hail, and riot, strike and civil
commotion, subject to the conditions and exclusions specified in each policy.
Although the policies covering the Mortgaged Properties will be underwritten by
different insurers under different state laws in accordance with different
applicable state forms, and therefore will not contain identical terms and
conditions, most 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 certain other kinds of risks. Accordingly,
a Mortgaged Property may not be insured for losses arising from that cause
unless the related Mortgage specifically requires, or permits the mortgagee to
require, that 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, those clauses generally provide that the insurer's
liability in the event of partial loss does not exceed the lesser of (1) the
replacement cost of the improvements less physical depreciation and (2) that
proportion of the loss as the amount of insurance carried bears to the specified
percentage of the full replacement cost of those improvements.
DUE-ON-SALE AND DUE-ON-ENCUMBRANCE PROVISIONS
Certain of the mortgage loans may contain a due-on-sale clause that
entitles the lender to accelerate payment of the mortgage loan upon any sale or
other transfer of the related Mortgaged Property made without the lender's
consent. Certain of the mortgage loans may also contain a due-on-encumbrance
clause that entitles the lender to accelerate the maturity of the mortgage loan
upon the creation of any other lien or encumbrance upon the Mortgaged Property.
Unless otherwise provided in the related prospectus supplement, the master
servicer will determine whether to exercise any right the trustee may have under
that provision in a manner consistent with the Servicing Standard. Unless
otherwise specified in the related prospectus supplement, the master servicer
will be entitled to retain as additional servicing compensation any fee
collected in connection with the permitted transfer of a Mortgaged Property. See
"Certain Legal Aspects of Mortgage Loans--Due-on-Sale and Due-on-Encumbrance" in
this prospectus.
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SERVICING COMPENSATION AND PAYMENT OF EXPENSES
Unless otherwise specified in the related prospectus supplement, a master
servicer's primary servicing compensation with respect to a series of
certificates will come from the periodic payment to it of a specified portion of
the interest payments on each mortgage loan in the related trust fund. Because
that 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 additional
compensation, the master 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 master
servicer's compensation as its sub-servicing compensation.
In addition to amounts payable to any sub-servicer, a master servicer may
be required, to the extent provided in the related prospectus supplement, to pay
from amounts that represent its servicing compensation certain expenses incurred
in connection with the administration of the related trust fund, including,
without limitation, payment of the fees and disbursements of independent
accountants and payment of expenses incurred in connection with distributions
and reports to certificateholders. Certain other expenses, including certain
expenses related to mortgage loan defaults and liquidations and, to the extent
so provided in the related prospectus supplement, interest on those expenses at
the rate specified in the prospectus supplement, and the fees of any special
servicer, may be required to be borne by the trust fund.
If provided in the related prospectus supplement, a master servicer may be
required to apply a portion of the servicing compensation otherwise payable to
it in respect of any period to Prepayment Interest Shortfalls. See "Yield and
Maturity Considerations--Certain Shortfalls in Collections of Interest" in this
prospectus.
EVIDENCE AS TO COMPLIANCE
Unless otherwise provided in the related prospectus supplement, each
Pooling Agreement will require, on or before a specified date in each year, the
master servicer to cause a firm of independent public accountants to furnish to
the trustee a statement to the effect 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 master servicer of mortgage
loans under pooling and servicing agreements substantially similar to each other
(which may include that Pooling 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, either the Audit Program for Mortgages
serviced for FHLMC, or paragraph 4 of the Uniform Single Audit Program for
Mortgage Bankers, requires it to report.
Each Pooling Agreement will also require, on or before a specified date in
each year, the master servicer to furnish to the trustee a statement signed by
one or more officers of the master servicer to the effect that the master
servicer has fulfilled its material obligations under that Pooling Agreement
throughout the preceding calendar year or other specified twelve month period.
CERTAIN MATTERS REGARDING THE MASTER SERVICER AND THE DEPOSITOR
The entity serving as master servicer under a Pooling Agreement may be an
affiliate of the Depositor and may have other normal business relationships with
the Depositor or the Depositor's affiliates. Unless otherwise specified in the
prospectus supplement for a series of certificates, the related Pooling
Agreement will permit the master servicer to resign from its obligations under
the Pooling Agreement only upon (a) the appointment of, and the acceptance of
that appointment by, a successor master servicer and receipt by the trustee of
written confirmation from each applicable
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rating agency that the resignation and appointment will not have an adverse
effect on the rating assigned by that rating agency to any class of certificates
of that series or (b) a determination that those 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. This resignation will
not become effective until the trustee or a successor servicer has assumed the
master servicer's obligations and duties under the Pooling Agreement. Unless
otherwise specified in the related prospectus supplement, the master servicer
for each trust fund will be required to maintain a fidelity bond and errors and
omissions policy or their equivalent that provides coverage against losses that
may be sustained as a result of an officer's or employee's misappropriation of
funds or errors and omissions, subject to certain limitations as to amount of
coverage, deductible amounts, conditions, exclusions and exceptions permitted by
the related Pooling Agreement.
Unless otherwise specified in the related prospectus supplement, each
Pooling Agreement will further provide that none of the master servicer, the
Depositor or any director, officer, employee or agent of either of them will be
under any liability to the related trust fund or certificateholders for any
action taken, or not taken, in good faith pursuant to the Pooling Agreement or
for errors in judgment. However, neither the master servicer nor the Depositor
will be protected against any breach of a representation, warranty or covenant
made in the Pooling Agreement, or against any expense or liability that they are
specifically required to bear pursuant to the terms of the Pooling Agreement, or
against any liability that would otherwise be imposed by reason of willful
misfeasance, bad faith or gross negligence in the performance of their
obligations or duties or by reason of reckless disregard of those obligations
and duties. Unless otherwise specified in the related prospectus supplement,
each Pooling Agreement will further provide that the master 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 Agreement or the related series of certificates. However, the
indemnification will not extend to any loss, liability or expense
o that one or both of them are specifically required to bear pursuant to
the terms of the Pooling Agreement, or is incidental to the performance
of their obligations and duties and is not otherwise reimbursable
pursuant to the Pooling Agreement;
o incurred in connection with any breach of a representation, warranty or
covenant made in the Pooling Agreement;
o incurred by reason of misfeasance, bad faith or negligence in the
performance of their obligations or duties under that the Pooling
Agreement, or by reason of negligent disregard of those obligations or
duties; or
o incurred in connection with any violation of any state or federal
securities law.
In addition, each Pooling Agreement will provide that neither the master
servicer nor the Depositor will be under any obligation to appear in, prosecute
or defend any legal action that is not incidental to its respective
responsibilities under the Pooling Agreement and that in its opinion may involve
it in any expense or liability. However, each of the master 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
Agreement and the interests of the related series of certificateholders. In that
event, the legal expenses and costs of that action, and any liability resulting
from that action, will be expenses, costs and liabilities of the related series
of certificateholders, and the master servicer or the Depositor, as the case may
be, will be entitled to charge the related certificate account for those legal
costs and expenses.
Any person into which the master servicer or the Depositor may be merged or
consolidated, or any person resulting from any merger or consolidation to which
the master servicer or the Depositor is a party, or any person succeeding to the
business of the master servicer or the Depositor, will be the
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successor of the master servicer or the Depositor, as the case may be, under the
related Pooling Agreement.
EVENTS OF DEFAULT
Unless otherwise provided in the prospectus supplement for a series of
certificates, "Events of Default" under the related Pooling Agreement will
include
o any failure by the master 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 of the failure has been
given to the master servicer by the trustee or the Depositor, or to the
master servicer, the Depositor and the trustee by certificateholders
entitled to not less than 25% (or other percentage specified in the
related prospectus supplement) of the voting rights for that series;
o any failure by the master servicer duly to observe or perform in any
material respect any of its other covenants or obligations under the
related Pooling Agreement, which failure continues unremedied for sixty
days after written notice has been given to the master servicer by the
trustee or the Depositor, or to the master servicer, the Depositor and
the trustee by certificateholders entitled to not less than 25% (or
other percentage specified in the related prospectus supplement) of the
voting rights for that series; and
o certain events of insolvency, readjustment of debt, marshalling of
assets and liabilities, or similar proceedings in respect of or relating
to the master servicer and certain actions by or on behalf of the master
servicer indicating its insolvency or inability to pay its obligations.
Material variations to the foregoing Events of Default (other than to add
to them 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 master servicer under a
Pooling Agreement, then, in each and every case, so long as the Event of Default
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 other percentage specified in the related prospectus supplement) of the
voting rights for that series, the trustee will be required, to terminate all of
the rights and obligations of the master servicer as master servicer under the
Pooling Agreement. Upon termination, the trustee will succeed to all of the
responsibilities, duties and liabilities of the master servicer under the
Pooling Agreement (except that if the master servicer is required to make
advances 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 those advances) and will be
entitled to similar compensation arrangements. Unless otherwise specified in the
related prospectus supplement, if the trustee is unwilling or unable so to act,
it may (or, at the written request of certificateholders of the related series
entitled to not less than 51% (or other percentage specified in the related
prospectus supplement) of the voting rights for that series, it will be required
to) appoint, or petition a court of competent jurisdiction to appoint, a loan
servicing institution that (unless otherwise provided in the related prospectus
supplement) is acceptable to each applicable rating agency to act as successor
to the master servicer under the Pooling Agreement. Pending that appointment,
the trustee will be obligated to act in that capacity.
No certificateholder will have the right under any Pooling Agreement to
institute any proceeding with respect to the Pooling Agreement unless that
holder previously has given to the trustee written notice of default and unless
certificateholders of the same series entitled to not less than 25% (or other
percentage specified in the related prospectus supplement) of the voting rights
for that series shall have made written request upon the trustee to institute
that proceeding in its own name as
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trustee and shall have offered to the trustee reasonable indemnity, and the
trustee for sixty days (or other period specified in the related prospectus
supplement) shall have neglected or refused to institute that proceeding. The
trustee, however, will be under no obligation to exercise any of the trusts or
powers vested in it by any Pooling Agreement or to make any investigation of
matters arising under the Pooling Agreement or to institute, conduct or defend
any litigation under the Pooling Agreement or in relation to it at the request,
order or direction of any of the holders of certificates of the related series,
unless those certificateholders have offered to the trustee reasonable security
or indemnity against the costs, expenses and liabilities which may be incurred
by that action.
AMENDMENT
Each Pooling Agreement may be amended, without the consent of any of the
holders of the related series of certificates
1. to cure any ambiguity,
2. to correct a defective provision in the Pooling Agreement or to
correct, modify or supplement any of its provisions that may be
inconsistent with any other of its provisions,
3. to add any other provisions with respect to matters or questions
arising under the Pooling Agreement that are not inconsistent with its
provisions,
4. to comply with any requirements imposed by the Code, or
5. 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 an effect satisfactory to the trustee) adversely affect in any material
respect the interests of any holder; 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 Agreement may also be amended, with the consent of the holders of the
related series of certificates entitled to not less than 51% (or other
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, that amendment
may not (1) 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, (2) adversely affect in any material respect the interests of the
holders of any class of certificates, in a manner other than as described in
clause (1), without the consent of the holders of all certificates of that class
or (3) modify the amendment provisions of the Pooling Agreement described in
this paragraph without the consent of the holders of all certificates of the
related series. Unless otherwise specified in the related prospectus supplement,
the trustee will be prohibited from consenting to any amendment of a Pooling
Agreement pursuant to which 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 the designated portion,
to fail to qualify as a REMIC at any time that the related certificates are
outstanding.
LIST OF CERTIFICATEHOLDERS
Unless otherwise specified in the related prospectus supplement, upon
written request of three or more certificateholders of record made for purposes
of communicating with other holders of certificates of the same series with
respect to their rights under the related Pooling Agreement, the trustee or
other specified person will afford those certificateholders access during normal
business hours to the
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most recent list of certificateholders of that series held by that person. If
that list is of a date more than 90 days prior to the date of receipt of that
certificateholder's request, then that person, if not the registrar for that
series of certificates, will be required to request from that registrar a
current list and to afford those requesting certificateholders access thereto
promptly upon receipt.
THE TRUSTEE
The trustee under each Pooling Agreement will be named in the related
prospectus supplement. The commercial bank, national banking association,
banking corporation or trust company that serves as trustee may have typical
banking relationships with the Depositor and its affiliates and with any master
servicer or special servicer and its affiliates.
DUTIES OF THE TRUSTEE
The trustee for each series of certificates will make no representation as
to the validity or sufficiency of the related Pooling Agreement, the
certificates or any underlying mortgage loan or related document and will not be
accountable for the use or application by or on behalf of the master servicer
for that series of any funds paid to the master 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 master 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 Agreement. However, upon receipt
of any of the various certificates, reports or other instruments required to be
furnished to it pursuant to the related Pooling Agreement, a trustee will be
required to examine those documents and to determine whether they conform to the
requirements of that agreement.
CERTAIN MATTERS REGARDING THE TRUSTEE
As described in the related prospectus supplement, the fees and normal
disbursements of any trustee may be the expense of the related master servicer
or other specified person or may be required to be borne by the related trust
fund.
Unless otherwise specified in the related prospectus supplement, the
trustee for each series of certificates will be entitled to indemnification,
from amounts held in the certificate account for that series, for any loss,
liability or expense incurred by the trustee in connection with the trustee's
acceptance or administration of its trusts under the related Pooling Agreement.
However, the indemnification will not extend to any loss, liability or expense
that constitutes a specific liability imposed on the trustee pursuant to the
related Pooling Agreement, or to any loss, liability or expense incurred by
reason of willful misfeasance, bad faith or gross negligence on the part of the
trustee in the performance of its obligations and duties under the Pooling
Agreement, or by reason of its reckless disregard of those obligations or
duties, or as may arise from a breach of any representation, warranty or
covenant of the trustee made in the Pooling 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 Agreement or perform any of its
duties under that Pooling Agreement either directly or by or through agents or
attorneys, and the trustee will not be relieved of any of its duties or
obligations by virtue of the appointment of any agents or attorneys.
RESIGNATION AND REMOVAL OF THE TRUSTEE
A trustee will be permitted at any time to resign from its obligations and
duties under the related Pooling Agreement by giving written notice to the
Depositor, the servicer, the special servicer and to all certificateholders.
Upon receiving this notice of resignation, the Depositor, or other person as may
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be specified in the related prospectus supplement, will be required to use its
best efforts to promptly appoint a successor trustee. If no successor trustee
shall have accepted an appointment within a specified period after the giving of
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 trustee under
the related Pooling Agreement, or if at any time the trustee becomes incapable
of acting, or if certain events of, or proceedings in respect of, bankruptcy or
insolvency occur with respect to the trustee, the Depositor 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 other percentage
specified in the related prospectus supplement) of the voting rights for that
series may at any time, with or without cause, remove the trustee under the
related Pooling 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.
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DESCRIPTION OF CREDIT SUPPORT
GENERAL
Credit support may be provided with respect to one or more classes of the
certificates of any series, or with respect to the related mortgage assets.
Credit support may be in the form of 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 form of credit support
may provide credit enhancement for more than one series of certificates to the
extent described in that prospectus supplement.
Unless otherwise provided in the related prospectus supplement for a series
of certificates, the credit support will not provide protection against all
risks of loss and will not guarantee payment to certificateholders of all
amounts to which they are entitled under the related Pooling Agreement. If
losses or shortfalls occur that exceed the amount covered by the related credit
support or that are not covered by that credit support, certificateholders will
bear their allocable share of deficiencies. Moreover, if a form of credit
support covers more than one series of certificates, holders of certificates of
one series will be subject to the risk that the credit support will be exhausted
by the claims of the holders of certificates of one or more other series before
the former receive their intended share of that coverage.
If credit support is provided with respect to one or more classes of
certificates of a series, or with respect to the related mortgage assets, the
related prospectus supplement will include a description of
o the nature and amount of coverage under the credit support,
o any conditions to payment under the credit support not otherwise
described in this prospectus,
o any conditions under which the amount of coverage under the credit
support may be reduced and under which that 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 certain
information with respect to the obligor under any instrument of credit support,
including
o a brief description of its principal business activities,
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. See "Risk Factors--Credit Support Limitations" in
this prospectus.
SUBORDINATE CERTIFICATES
If so specified in the related prospectus supplement, one or more classes
of certificates of a series may be Subordinate Certificates. To the extent
specified in the related prospectus supplement, the rights of the holders of
Subordinate Certificates to receive distributions from the certificate account
on any distribution date will be subordinated to the corresponding rights of the
holders of Senior Certificates. If so provided in the related prospectus
supplement, the subordination of a class may apply only in the event of (or may
be limited to) certain types of losses or shortfalls. The related prospectus
supplement will set forth information concerning the method and amount of
subordination
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provided by a class or classes of Subordinate Certificates in a series and the
circumstances under which that subordination will be available.
CROSS-SUPPORT PROVISIONS
If the mortgage assets in any trust fund are divided into separate groups,
each supporting a separate class or classes of certificates of the related
series, credit support may be provided by cross-support provisions requiring
that distributions be made on Senior Certificates evidencing interests in one
group of mortgage assets prior to distributions on Subordinate Certificates
evidencing interests in a different group of mortgage assets within the trust
fund. The prospectus supplement for a series that includes a cross-support
provision will describe the manner and conditions for applying those provisions.
INSURANCE OR GUARANTEES WITH RESPECT TO MORTGAGE LOANS
If so provided in the prospectus supplement for a series of certificates,
mortgage loans included in the related trust fund will be covered for certain
default risks by insurance policies or guarantees. To the extent deemed by the
Depositor to be material, a copy of that 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 certain
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
(the "L/C Bank"). Under a letter of credit, the L/C Bank will be obligated to
honor draws under a letter of credit 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 principal balance of one
or more classes of certificates. If so specified in the related prospectus
supplement, the letter of credit may permit draws only in the event of certain
types of losses and shortfalls. The amount available under the letter of credit
will, in all cases, be reduced to the extent of the unreimbursed payments under
the letter of credit and may otherwise be reduced as described in the related
prospectus supplement. The obligations of the L/C Bank under the letter of
credit for each series of certificates will expire at the earlier of the date
specified in the related prospectus supplement or the termination of the trust
fund. A copy of that 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.
CERTIFICATE INSURANCE AND SURETY BONDS
If so provided in the prospectus supplement for a series of certificates,
insurance policies and/or surety bonds provided by one or more insurance
companies or sureties of the insurance companies will cover deficiencies in
amounts otherwise payable on those certificates or certain classes. Those
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 that instrument. A copy of that 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.
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RESERVE FUNDS
If so provided in the prospectus supplement for a series of certificates,
deficiencies in amounts otherwise payable on those certificates or certain
classes of those certificates will be covered, to the extent of available funds,
by one or more reserve funds in which cash, a letter of credit, short-term debt
obligations, a demand note or a combination of those features will be deposited,
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 on those amounts, if any, will be applied for the purposes,
in the manner, specified in the related prospectus supplement. If so specified
in the related prospectus supplement, reserve funds may be established to
provide protection only against certain types of losses and shortfalls.
Following each distribution date, amounts in a reserve fund in excess of any
amount required to be maintained in that reserve fund may be released from it
under the conditions specified in the related prospectus supplement.
If so specified in the related prospectus supplement, amounts deposited in
any reserve fund will be invested in short-term debt obligations. Unless
otherwise specified in the related prospectus supplement, any reinvestment
income or other gain from those investments will be credited to the related
reserve fund for that series, and any loss resulting from those investments will
be charged to that reserve fund. However, that income may be payable to any
related master servicer or another service provider as additional compensation
for its services. The reserve fund, if any, for a series will not be a part of
the trust fund unless otherwise specified in the related prospectus supplement.
CREDIT SUPPORT WITH RESPECT TO MBS
If so provided in the prospectus supplement for a series of certificates,
any MBS included in the related trust fund and/or the related underlying
mortgage loans may be covered by one or more of the types of credit support
described in this prospectus. The related prospectus supplement will specify, as
to each form of credit support, the information indicated above with respect to
the credit support for each series, to the extent that information is material
and available.
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CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS
The following discussion contains general summaries of certain legal
aspects of loans secured by commercial and multifamily residential properties.
Because those 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. See "Description of the Trust
Funds--Mortgage Loans" in this prospectus.
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 in this
prospectus 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 who is the borrower and
usually the owner of the subject property, and a mortgagee, who is the lender.
In contrast, a deed of trust is a three-party instrument, among a trustor who is
the equivalent of a borrower, a trustee to whom the real property is conveyed,
and a beneficiary, who is 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 the debt is repaid. In a case where the borrower is a land trust,
there would be an additional party because a land trustee holds legal title to
the property under a land trust agreement for the benefit of the borrower. At
origination of a mortgage loan involving a land trust, the borrower executes a
separate undertaking to make payments on the mortgage note. The mortgagee's
authority under a mortgage, the trustee's authority under a deed of trust and
the grantee's authority under a deed to secure debt are governed by the express
provisions of the related instrument, the law of the state in which the real
property is located, certain federal laws (including, without limitation, the
Soldiers' and Sailors' Civil Relief Act of 1940) 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.
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In most states, hotel and motel room rates are considered accounts
receivable under the Uniform Commercial Code, also known as the UCC, in cases
where hotels or motels constitute loan security, the borrower as additional
security for the loan generally pledges the rates. In general, the lender must
file financing statements in order to perfect its security interest in the rates
and must file continuation statements, generally every five years, to maintain
perfection of that security interest. Even if the lender's security interest in
room rates 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 rates following a default. See "Certain Legal Aspects of
Mortgage Loans--Bankruptcy Laws" in this prospectus.
PERSONALTY
In the case of certain types of mortgaged properties, for instance 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 in that personal
property, 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 that 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. Those sales are made in accordance with
procedures that vary from state to state.
Equitable Limitations on Enforceability of Certain 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 those principles, a court may alter the
specific terms of a loan to the extent it considers necessary to prevent or
remedy an injustice, undue
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oppression or overreaching, or may require the lender to undertake affirmative
actions to determine the cause of the borrower's default and the likelihood that
the borrower will be able to reinstate the loan. In some cases, courts have
substituted their judgment for the 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 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 that 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, as
amended from time to time (11 U.S.C.) (the "Bankruptcy Code") and, thus, could
be rescinded in favor of the bankrupt's estate, if (1) the foreclosure sale was
held while the debtor was insolvent and not more than one year prior to the
filing of the bankruptcy petition and (2) the price paid for the foreclosed
property did not represent "fair consideration", which is "reasonably equivalent
value" under the Bankruptcy Code. Although the reasoning and result of Durrett
in respect of the Bankruptcy Code was rejected by the United States Supreme
Court in May 1994, the case could nonetheless be persuasive to a court applying
a state fraudulent conveyance law 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
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lender will have the obligation to pay debt service on any senior mortgages, to
pay taxes, obtain casualty insurance and to make those 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 restaurants or nursing or
convalescent homes or hospitals may be particularly significant because of the
expertise, knowledge and, with respect to nursing or convalescent homes or
hospitals, regulatory compliance, required to run those 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 those
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 certain 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. See "--Environmental Risks" below. Generally state law controls
the amount of foreclosure expenses and costs, including attorneys' fees, that
may be recovered by a lender.
The holder of a junior mortgage that forecloses on a mortgaged property
does so subject to senior mortgages and any other prior liens, and may be
obliged to keep senior mortgage loans current in order to avoid foreclosure of
its interest in the property. In addition, if the foreclosure of a junior
mortgage triggers the enforcement of a "due-on-sale" clause contained in a
senior mortgage, the junior mortgagee could be required to pay the full amount
of the senior mortgage indebtedness or face foreclosure.
Rights of Redemption. The purposes of a foreclosure action are to enable
the lender to realize upon its security and to bar the borrower, and all persons
who have interests in the property that are subordinate to that of the
foreclosing lender, from exercise of their "equity of redemption". The doctrine
of equity of redemption provides that, until the property encumbered by a
mortgage has been sold in accordance with a properly conducted foreclosure and
foreclosure sale, those having interests that are subordinate to that of the
foreclosing lender have an equity of redemption and may redeem the property by
paying the entire debt with interest. Those having an equity of redemption must
generally be made parties and joined in the foreclosure proceeding in order for
their equity of redemption to be terminated.
The equity of redemption is a common-law (non-statutory) right which should
be distinguished from post-sale statutory rights of redemption. In some states,
after sale pursuant to a deed of trust or foreclosure of a mortgage, the
borrower and foreclosed junior lienors are given a statutory period in which to
redeem the property. In some states, statutory redemption may occur only upon
payment of the foreclosure sale price. In other states, redemption may be
permitted if the former borrower pays only a portion of the sums due. The effect
of a statutory right of redemption is to diminish the ability of the lender to
sell the foreclosed property because the exercise of a right of redemption would
defeat the title of any purchaser through a foreclosure. Consequently, the
practical effect of the redemption right is to force the lender to maintain the
property and pay the expenses of ownership until the redemption period has
expired. In some states, a post-sale statutory right of redemption may exist
following a judicial foreclosure, but not following a trustee's sale under a
deed of trust.
Anti-Deficiency Legislation. Some or all of the mortgage loans may be
nonrecourse loans, as to which recourse in the case of default will be limited
to the Mortgaged Property and those other assets, if any, that were pledged to
secure the mortgage loan. However, even if a mortgage loan by its terms provides
for recourse to the borrower's other assets, a lender's ability to realize upon
those assets may be limited by state law. For example, in some states a lender
cannot obtain a deficiency judgment
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against the borrower following foreclosure or sale under a deed of trust. A
deficiency judgment is a personal judgment against the former borrower equal to
the difference between the net amount realized upon the public sale of the real
property and the amount due to the lender. Other statutes may require the lender
to exhaust the security afforded under a mortgage before bringing a personal
action against the borrower. In certain other states, the lender has the option
of bringing a personal action against the borrower on the debt without first
exhausting that security; however, in some of those states, the lender,
following judgment on that 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 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 certain risks not associated with mortgage loans secured by a lien on
the fee estate of the borrower. The most significant of these risks is that if
the borrower's leasehold were to be terminated upon a lease default, the
leasehold mortgagee would lose its security. This risk may be lessened if the
ground lease requires the lessor to give the leasehold mortgagee notices of
lessee defaults and an opportunity to cure them, permits the leasehold estate to
be assigned to and by the leasehold mortgagee or the purchaser at a foreclosure
sale, and contains certain other protective provisions typically included in a
"mortgageable" ground lease.
Cooperative Shares. Mortgage loans may be secured by a security interest
on the borrower's ownership interest in shares, and the proprietary leases
appurtenant thereto, allocable to cooperative dwelling units that may be vacant
or occupied by non-owner tenants. Those loans are subject to certain risks not
associated with mortgage loans secured by a lien on the fee estate of a borrower
in real property. This kind of 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.
BANKRUPTCY LAWS
The Bankruptcy Code and related state laws may interfere with or affect the
ability of a lender to realize upon collateral and/or to enforce a deficiency
judgment. For example, under the Bankruptcy Code, virtually all actions
(including foreclosure actions and deficiency judgment proceedings) are
automatically stayed upon the filing of the bankruptcy petition, and, usually,
no interest or principal payments are made during the course of the bankruptcy
case. The delay and the consequences of a delay caused by an automatic stay can
be significant. Also, under the Bankruptcy Code, the filing of a
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petition in bankruptcy by or on behalf of a junior lienor may stay the senior
lender from taking action to foreclose out a junior lien.
Under the Bankruptcy Code, provided certain substantive and procedural
safeguards for the lender are met, the amount and terms of a mortgage secured by
property of the debtor may be modified under certain circumstances. In many
jurisdictions, the outstanding amount of the loan secured by the real property
may be reduced to the then-current value of the property (with a corresponding
partial reduction of the amount of lender's security interest) pursuant to a
confirmed plan or lien avoidance proceeding, thus leaving the lender a general
unsecured creditor for the difference between the value and the outstanding
balance of the loan. Other modifications may include the reduction in the amount
of each scheduled payment, which reduction may result from a reduction in the
rate of interest and/or the alteration of the repayment schedule (with or
without affecting the unpaid principal balance of the loan), and/or an extension
(or reduction) of the final maturity date. Some courts with federal bankruptcy
jurisdiction have approved plans, based on the particular facts of the
reorganization case, that effected the curing of a mortgage loan default by
paying arrearages over a number of years. Also, under federal bankruptcy law, a
bankruptcy court may permit a debtor through its rehabilitative plan to
de-accelerate a secured loan and to reinstate the loan even though the lender
accelerated the mortgage loan and final judgment of foreclosure had been entered
in state court (provided no sale of the property had yet occurred) prior to the
filing of the debtor's petition. This may be done even if the full amount due
under the original loan is never repaid.
The Bankruptcy Code has been amended to provide that a lender's perfected
pre-petition security interest in leases, rents and hotel revenues continues in
the post-petition leases, rents and hotel revenues, unless a bankruptcy court
orders to the contrary "based on the equities of the case." Thus, unless a court
orders otherwise, revenues from a mortgaged property generated after the date
the bankruptcy petition is filed will constitute "cash collateral" under the
Bankruptcy Code. Debtors may only use cash collateral upon obtaining the
lender's consent or a prior court order finding that the lender's interest in
the mortgaged properties and the cash collateral is "adequately protected" as
the term is defined and interpreted under the Bankruptcy Code. 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 personalty necessary for a security interest to attach to hotel
revenues.
Federal bankruptcy law provides generally that rights and obligation under
an unexpired lease of the debtor/lessee 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 to that effect or because of certain other similar
events. This prohibition on so-called "ipso facto clauses" could limit the
ability of the trustee to exercise certain contractual remedies with respect to
the leases on any mortgaged property. In addition, Section 362 of the Bankruptcy
Code operates as an automatic stay of, among other things, any act to obtain
possession of property from a debtor's estate, which may delay a trustee's
exercise of those remedies in the event that a lessee becomes the subject of a
proceeding under the Bankruptcy Code. For example, a mortgagee would be stayed
from enforcing an assignment of the lease by a borrower related to a mortgaged
property if the related borrower was in a bankruptcy proceeding. The legal
proceedings necessary to resolve the issues could be time-consuming and might
result in significant delays in the receipt of the assigned rents. Similarly,
the filing of a petition in bankruptcy by or on behalf of a lessee of a
mortgaged property would result in a stay against the commencement or
continuation of any state court proceeding for past due rent, for accelerated
rent, for damages or for a summary eviction order with respect to a default
under the related lease that occurred prior to the filing of the lessee's
petition. Rents and other proceeds of a mortgage loan may also escape an
assignment if the assignment is not fully perfected under state law prior to
commencement of the bankruptcy proceeding.
In addition, the Bankruptcy Code generally provides that a trustee or
debtor-in-possession may, subject to approval of the court, (a) assume the lease
and retain it or assign it to a third party or (b) reject the lease. If the
lease is assumed, the trustee in bankruptcy on behalf of the lessee, or the
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lessee as debtor-in-possession, or the assignee, if applicable, must cure any
defaults under the lease, compensate the lessor for its losses and provide the
lessor with "adequate assurance" of future performance. These remedies may be
insufficient, however, as the lessor may be forced to continue under the lease
with a lessee that is a poor credit risk or an unfamiliar tenant if the lease
was assigned, and any assurances provided to the lessor may, in fact, be
inadequate. If the lease is rejected, the rejection generally constitutes a
breach of the executory contract or unexpired lease immediately before the date
of filing the petition. As a consequence, the other party or parties to the
lease, such as the 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. In addition,
pursuant to Section 502(b)(6) of the Bankruptcy Code, a lessor's damages for
lease rejection in respect of future rent installments are limited to 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.
If a trustee in bankruptcy on behalf of a lessor, or a lessor as
debtor-in-possession, rejects an unexpired lease of real property, the lessee
may treat the lease as terminated by the rejection or, in the alternative, the
lessee may remain in possession of the leasehold for the balance of the term and
for any renewal or extension of the 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 the related renewal or extension of the
lease, any damages occurring after that date caused by the nonperformance of any
obligation of the lessor under the lease after that date.
In a bankruptcy or similar proceeding of a borrower, action may be taken
seeking the recovery, as a preferential transfer or on other grounds, of any
payments made by the borrower, or made directly by the related lessee, under the
related mortgage loan to the trust fund. Payments on long-term debt 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.
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 certain 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 borrower 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 certain states also give priority to certain 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.
Certain of the borrowers may be partnerships. The laws governing limited
partnerships in certain states provide that the commencement of a case under the
Bankruptcy Code with respect to a general partner will cause a person to cease
to be a general partner of the limited partnership, unless otherwise provided in
writing in the limited partnership agreement. This provision may be construed as
an "ipso facto" clause and, in the event of the general partner's bankruptcy,
may not be enforceable. Certain limited partnership agreements of the borrowers
may provide that the commencement of a case under the Bankruptcy Code with
respect to the related general partner constitutes an event of withdrawal
(assuming the enforceability of the clause is not challenged in bankruptcy
proceedings or, if challenged, is upheld) that might trigger the dissolution of
the limited partnership, the winding up of its affairs and the payment of its
assets, unless (i) at the time there was at least one other general partner and
the written provisions of the limited partnership permit the business of the
limited partnership to be carried on by the remaining general partner and that
general partner does so or (ii) the written provisions of the limited
partnership agreement permit the limited partners to agree within a specified
time frame (often 60 days) after the withdrawal to continue the business of the
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limited partnership and to the appointment of one or more general partners and
the limited partners do so. In addition, the laws governing general partnerships
in certain states provide that the commencement of a case under the Bankruptcy
Code or state bankruptcy laws with respect to a general partner of the
partnerships triggers the dissolution of the partnership, the winding up of its
affairs and the distribution of its assets. Those state laws, however, may not
be enforceable or effective in a bankruptcy case. The dissolution of a borrower,
the winding up of its affairs and the distribution of its assets could result in
an acceleration of its payment obligation under a related debt asset, which may
reduce the yield on the notes in the same manner as a principal prepayment.
In addition, the bankruptcy of the general or limited partner of a borrower
that is a partnership, or the bankruptcy of a member of a borrower that is a
limited liability company or the bankruptcy of a shareholder of a borrower that
is a corporation may provide the opportunity in the bankruptcy case of the
partner, member or shareholder to obtain an order from a court consolidating the
assets and liabilities of the partner, member or shareholder with those of the
mortgagor pursuant to the doctrines of substantive consolidation or piercing the
corporate veil. In such a case, the respective mortgaged property, for example,
would become property of the estate of the bankrupt partner, member or
shareholder. Not only would the mortgaged property be available to satisfy the
claims of creditors of the partner, member or shareholder, but an automatic stay
would apply to any attempt by the trustee to exercise remedies with respect to
the mortgaged property. However, such an occurrence should not affect the
trustee's status as a secured creditor with respect to the mortgagor or its
security interest in the mortgaged property.
ENVIRONMENTAL RISKS
Real property pledged as security for a mortgage loan may be subject to
certain environmental risks. Under federal law, including the Comprehensive
Environmental Response and Liability Act of 1980, as amended (also known as
CERCLA) and the laws of certain states, failure to perform the remediation
required or demanded by the state or federal government of any condition or
circumstance that
o may pose an imminent or substantial endangerment to the public health or
welfare or the environment,
o may result in a release or threatened release of any hazardous material,
or
o may give rise to any environmental claim or demand,
may give rise to a lien on the property to ensure the reimbursement of remedial
costs incurred by the federal or state government. In several states, the lien
has priority over the lien of an existing mortgage against the property. Of
particular concern may be those mortgaged properties which are, or have been,
the site of manufacturing, industrial or disposal activity. Those environmental
risks may give rise to (a) a diminution in value of property securing a mortgage
note or the inability to foreclose against the property or (b) in certain
circumstances as more fully described below, liability for clean-up costs or
other remedial actions, which liability could exceed the value of the property,
the aggregate assets of the owner or operator, or the principal balance of the
related indebtedness.
The state of the law is currently unclear as to whether and under what
circumstances cleanup costs, or the obligation to take remedial actions, could
be imposed on a secured lender. Under the laws of some states and under CERCLA,
a lender may become liable as an "owner" or an "operator" of a contaminated
mortgaged property for the costs of remediation of releases or threatened
releases of hazardous substances at the mortgaged property. The liability may
attach if the lender or its agents or employees have participated in the
management of the operations of the borrower, even though the environmental
damage or threat was caused by a prior owner, operator, or other third party.
Excluded from CERCLA's definition of "owner or operator" is any person
"who, without participating in the management of a facility, holds indicia of
ownership primarily to protect his
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security interest" (the "secured-creditor exemption"). This exemption for
holders of a security interest such as a secured lender applies only in
circumstances when the lender seeks to protect its security interest in the
contaminated facility or property. Thus, if a lender's activities encroach on
the actual management of that facility or property, the lender faces potential
liability as an "owner or operator" under CERCLA. Similarly, when a lender
forecloses and takes title to a contaminated facility or property (whether it
holds the facility or property as an investment or leases it to a third party),
under some circumstances the lender may incur potential CERCLA liability.
Recent amendments to CERCLA list permissible actions that may be undertaken
by a lender holding security in a contaminated facility without exceeding the
bounds of the secured-creditor exemption, subject to certain conditions and
limitations. Additionally, the amendments provide certain protections from
CERCLA liability as an "owner or operator" to a lender who forecloses on
contaminated property, as long as it seeks to divest itself of the facility at
the earliest practicable commercially reasonable time on commercially reasonable
terms. The amendments also limit the liability of lenders under the federal
Solid Waste Disposal Act for costs of responding to leaking underground storage
tanks. However, the protections afforded lenders under the amendments are
subject to terms and conditions that have not been clarified by the courts.
Moreover, the CERCLA secured-creditor exemption does not necessarily affect the
potential for liability in actions under other federal or state laws which may
impose liability on "owners or operators" but do not incorporate the
secured-creditor exemption. Furthermore, the secured-creditor exemption does not
protect lenders from other bases of CERCLA liability, such as that imposed on
"generators" or "transporters" of hazardous substances.
Environment clean-up costs may be substantial. It is possible that those
costs could become a liability of the Trust and occasion a loss to
certificateholders if those remedial costs were incurred.
In a few states, transfers of some types of properties are conditioned upon
clean-up of contamination prior to transfer. It is possible that a property
securing a mortgage loan could be subject to these transfer restrictions. If
this occurs, and if the lender becomes the owner upon foreclosure, the lender
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 these costs could become a liability of a trust
fund and occasion a loss to certificateholders of the related series.
To reduce the likelihood of this kind of loss, and unless otherwise
provided in the related prospectus supplement, the related Pooling Agreement
will provide that the master servicer may not, on behalf of the trust fund,
acquire title to a Mortgaged Property or take over its operation unless the
master 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
Agreements--Realization Upon Defaulted Mortgage Loans" in this prospectus.
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.
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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. That
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
Certain of the mortgage loans may contain "due-on-sale" and
"due-on-encumbrance" clauses that purport to permit the lender to accelerate the
maturity of the loan if the borrower transfers or encumbers the related
Mortgaged Property. In recent years, court decisions and legislative actions
placed substantial restrictions on the right of lenders to enforce those clauses
in many states. By virtue, however, of the Garn-St Germain Depository
Institutions Act of 1982 (the "Garn Act"), effective October 15, 1982, which
purports to preempt state laws that prohibit the enforcement of due-on-sale
clauses by providing among other matters, that "due-on-sale" clauses in certain
loans made after the effective date of the Garn Act are enforceable, within
certain limitations as set forth in the Garn Act, a master servicer may
nevertheless have the right to accelerate the maturity of a mortgage loan that
contains a "due-on-sale" provision upon transfer of an interest in the property,
regardless of the master servicer's ability to demonstrate that a sale threatens
its legitimate security interest.
SUBORDINATE FINANCING
Certain of the mortgage loans may not restrict the ability of the borrower
to use the Mortgaged Property as security for one or more additional loans.
Where a borrower encumbers a mortgaged property with one or more junior liens,
the senior lender is subjected to additional risk. First, the borrower may have
difficulty servicing and repaying multiple loans. Moreover, if the subordinate
financing permits recourse to the borrower, as is frequently the case, and the
senior loan does not, a borrower may have more incentive to repay sums due on
the subordinate loan. Second, acts of the senior lender that prejudice the
junior lender or impair the junior lender's security may create a superior
equity in favor of the junior lender. For example, if the borrower and the
senior lender agree to an increase in the principal amount of or the interest
rate payable on the senior loan, the senior lender may lose its priority to the
extent any existing junior lender is harmed or the borrower is additionally
burdened. Third, if the borrower defaults on the senior loan and/or any junior
loan or loans, the existence of junior loans and actions taken by junior lenders
can impair the security available to the senior lender and can interfere with or
delay the taking of action by the senior lender. Moreover, the bankruptcy of a
junior lender may operate to stay foreclosure or similar proceedings by the
senior lender.
DEFAULT INTEREST AND LIMITATIONS ON PREPAYMENTS
Notes and mortgages may contain provisions that obligate the borrower to
pay a late charge or additional interest if payments are not timely made, and in
some circumstances, may prohibit prepayments for a specified period and/or
condition prepayments upon the borrower's payment of prepayment fees or yield
maintenance penalties. In certain states, there are or may be specific
limitations upon the late charges which a lender may collect from a borrower for
delinquent payments. Certain states also limit the amounts that a lender may
collect from a borrower as an additional charge if the loan is prepaid. In
addition, the enforceability of provisions that provide for prepayment fees or
penalties upon an involuntary prepayment is unclear under the laws of many
states.
APPLICABILITY OF USURY LAWS
Title V of the Depository Institutions Deregulation and Monetary Control
Act of 1980 ("Title V") provides that state usury limitations shall not apply to
certain types of residential, including multifamily but not commercial, first
mortgage loans originated by certain lenders after March 31,
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1980. A similar Federal statute was in effect with respect to mortgage loans
made during the first three months of 1980. The statute authorized any state to
reimpose interest rate limits by adopting, before April 1, 1983, a law or
constitutional provision that expressly rejects application of the federal law.
In addition, even where Title V is not so rejected, any state is authorized by
the law to adopt a provision limiting discount points or other charges on
mortgage loans covered by Title V. Certain states have taken action to reimpose
interest rate limits and/or to limit discount points or other charges.
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, no
mortgage loan originated after the date of that state action will (if originated
after that rejection or adoption) be eligible for inclusion in a trust fund
unless (1) the mortgage loan provides for an interest rate, discount points and
charges as are permitted in that state or (2) the mortgage loan provides that
the terms are to be construed in accordance with the laws of another state under
which the 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.
Statutes differ in their provisions as to the consequences of a usurious
loan. One group of statutes requires the lender to forfeit the interest due
above the applicable limit or impose a specified penalty. Under this statutory
scheme, the borrower may cancel the recorded mortgage or deed of trust upon
paying its debt with lawful interest, and the lender may foreclose, but only for
the debt plus lawful interest. A second group of statutes is more severe. A
violation of this type of usury law results in the invalidation of the
transaction, thereby permitting the borrower to cancel the recorded mortgage or
deed of trust without any payment or prohibiting the lender from foreclosing.
SOLDIERS' AND SAILORS' CIVIL RELIEF ACT OF 1940
Under the terms of the Soldiers' and Sailors' Civil Relief Act of 1940, as
amended (the "Relief Act"), a borrower who enters military service after the
origination of that 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 that borrower's active duty status, unless a
court orders otherwise upon application of the lender. The Relief Act applies to
individuals who are members of the Army, Navy, Air Force, Marines, National
Guard, Reserves, Coast Guard and officers of the U.S. Public Health Service
assigned to duty with the military. Because the Relief Act applies to
individuals who enter military service, including reservists who are called to
active duty, after origination of the related mortgage loan, no information can
be provided as to the number of loans with individuals as borrowers that may be
affected by the Relief Act. Application of the Relief Act would adversely
affect, for an indeterminate period of time, the ability of any servicer to
collect full amounts of interest on certain of the mortgage loans. Any
shortfalls in interest collections resulting from the application of the Relief
Act would result in a reduction of the amounts distributable to the holders of
the related series of certificates, and would not be covered by advances or,
unless otherwise specified in the related prospectus supplement, any form of
credit support provided in connection with those 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 certain circumstances, during an additional three-month
period thereafter.
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 regulations of the condominium
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association. Mortgaged Properties which are hotels or motels may present
additional risk to the lender in that:
1. hotels and motels are typically operated pursuant to franchise,
management and operating agreements which may be terminable by the
operator; and
2. 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.
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 those properties.
AMERICANS WITH DISABILITIES ACT
Under Title III of the Americans with Disabilities Act of 1990 (the "ADA"),
in order to protect individuals with disabilities, public accommodations (such
as hotels, restaurants, shopping centers, hospitals, schools and social service
center establishments) must remove architectural and communication barriers
which are structural in nature from existing places of public accommodation to
the extent "readily achievable." In addition, under the ADA, alterations to a
place of public accommodation or a commercial facility are to be made so that,
to the maximum extent feasible, the altered portions are readily accessible to
and usable by disabled individuals. The "readily achievable" standard takes into
account, among other factors, the financial resources of the affected site,
owner, landlord or other applicable person. In addition to imposing a possible
financial burden on the borrower in its capacity as owner or landlord, the ADA
may also impose these 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, also known as RICO, can be seized by the
government if the property was used in, or purchased with the proceeds of, those
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: (1) its mortgage was executed and recorded before commission
of the crime upon which the forfeiture is based, or (2) 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, illegal drug or
RICO activities.
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CERTAIN 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 change or interpretation could apply retroactively.
This discussion reflects the applicable provisions of the Code as well as
regulations (the "REMIC Regulations") promulgated by the U.S. Department of
Treasury (the "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, (1) references to the mortgage loans
include references to the mortgage loans underlying MBS included in the mortgage
assets and (2) where the applicable prospectus supplement provides for a fixed
retained yield 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 in the
trust fund as one or more REMICs within the meaning of Code Section 860D. A
trust fund or a portion of a trust fund 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
certain conditions. With respect to each series of REMIC Certificates,
Cadwalader, Wickersham & Taft, counsel to the Depositor, has advised the
Depositor that in the firm's opinion, assuming (1) the making of an election,
(2) compliance with the Pooling Agreement and (3) compliance with any changes in
the law, including any amendments to the Code or applicable Treasury regulations
under the Code, each REMIC Pool will qualify as a REMIC. In that case, the
Regular Certificates will be considered to be "regular interests" in the REMIC
Pool 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. The prospectus
supplement for each series of certificates will indicate whether one or more
REMIC elections with respect to the related trust fund will be made, in which
event references to "REMIC" or "REMIC Pool" below shall be deemed to refer to
that 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 a grantor trust for federal income tax purposes. See "--Federal Income Tax
Consequences for Certificates as to Which No REMIC Election Is Made" below.
Status of REMIC Certificates
REMIC Certificates held by a domestic building and loan association will
constitute "a regular or residual interest in a REMIC" within the meaning of
Code Section 7701(a)(19)(C)(xi), but only in the same proportion that the assets
of the REMIC Pool would be treated as "loans . . . secured by an interest in
real property which is . . . residential real property" (such as single family
or multifamily properties, but not commercial properties) within the meaning of
Code Section 7701(a)(19)(C)(v) or as other assets described in Code
Section 7701(a)(19)(C), and otherwise will not qualify for that treatment. REMIC
Certificates held by a real estate investment trust will constitute "real estate
assets" within the meaning of Code Section 856(c)(4)(A), and interest on the
Regular Certificates and income
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with respect to Residual Certificates will be considered "interest on
obligations secured by mortgages on real property or on interests in real
property" within the meaning of Code Section 856(c)(3)(B) in the same proportion
that, for both purposes, the assets of the REMIC Pool would be so treated. If at
all times 95% or more of the assets of the REMIC Pool qualify for each of the
foregoing respective treatments, the REMIC Certificates will qualify for the
corresponding status in their entirety. For purposes of Code
Section 856(c)(4)(A), payments of principal and interest on the mortgage loans
that are reinvested pending distribution to holders of REMIC Certificates
qualify for that treatment. Where two REMIC Pools are a part of a tiered
structure they will be treated as one REMIC for purposes of the tests described
above respecting asset ownership of more or less than 95%. Regular Certificates
will be "qualified mortgages" for another REMIC for purposes of Code
Section 860(G)(a)(3) and "permitted assets" for a financial asset securitization
investment trust for purposes of Section 860(L)(c). REMIC Certificates held by a
regulated investment company will not constitute "Government Securities" within
the meaning of Code Section 851(b)(3)(A)(i). REMIC Certificates held by certain
financial institutions will constitute an "evidence of indebtedness" within the
meaning of Code Section 582(c)(1). The Small Business Job Protection Act of 1996
(the "SBJPA of 1996") repealed the reserve method for bad debts of domestic
building and loan associations and mutual savings banks, and thus has eliminated
the asset category of "qualifying real property loans" in former Code
Section 593(d) for taxable years beginning after December 31, 1995. The
requirement in the SBJPA of 1996 that those institutions must "recapture" a
portion of their existing bad debt reserves is suspended if a certain portion of
their assets are maintained in "residential loans" under Code
Section 7701(a)(19)(C)(v), but only if those loans were made to acquire,
construct or improve the related real property and not for the purpose of
refinancing. However, no effort will be made to identify the portion of the
mortgage loans of any Series meeting this requirement, and no representation is
made in this regard.
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
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 Agreement for each series will contain a
provision designed to meet this requirement. See "--Taxation of Residual
Certificates--Tax-Related Restrictions on Transfer of Residual
Certificates--Disqualified Organizations" below.
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 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 whole mortgage loans, such as the mortgage loans,
certificates of beneficial interest in a grantor trust that holds mortgage
loans, including certain of the MBS, regular interests in another REMIC, such as
MBS in a trust as to which a REMIC election has been made, loans secured by
timeshare interests and loans secured by shares held by a tenant stockholder in
a cooperative housing corporation, provided, in general, (1) the fair market
value of the real property security (including buildings and structural
components) is at least 80% of the principal balance of the related mortgage
loan or mortgage loan underlying the mortgage certificate either at origination
or as of the Startup Day (an original loan-to-value ratio of not more than 125%
with respect to the real property security) or (2) substantially all the
proceeds of the mortgage loan or the underlying mortgage loan were used to
acquire, improve or protect an interest in real property that, at the
origination date,
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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 loan-to-value test
in (1) of the preceding sentence as of the date of the last modification or at
closing. A qualified mortgage includes a qualified replacement mortgage, which
is any property 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
(1) in exchange for any qualified mortgage within a three-month period
thereafter or (2) in exchange for a "defective obligation" within a two-year
period thereafter. A "defective obligation" includes
o a mortgage in default or as to which default is reasonably foreseeable,
o a mortgage as to which a customary representation or warranty made at
the time of transfer to the REMIC Pool has been breached,
o a mortgage that was fraudulently procured by the mortgagor, and
o 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).
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 the next scheduled distribution to holders of interests in the REMIC Pool.
A qualified reserve asset is any intangible property 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 certain other contingencies. The reserve fund will be
disqualified if 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,
provided the Depositor had no knowledge that the loan would go into default at
the time it was transferred to the REMIC Pool. Foreclosure Property generally
must be disposed of prior to the close of the third calendar year following the
acquisition of the property by the REMIC Pool, with an extension that may be
granted by the IRS.
In addition to the foregoing requirements, the various interests in a REMIC
Pool also must meet certain requirements. All of the interests in a REMIC Pool
must be either of the following: (1) one or more classes of regular interests or
(2) 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 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. An interest in a REMIC Pool may be treated as
a regular interest even if payments of principal with respect to that interest
are subordinated to payments on other regular interests or the residual interest
in the REMIC Pool, and 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.
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Accordingly, the Regular Certificates of a series will constitute one or more
classes of regular interests, and the Residual Certificates for each REMIC Pool
of that series will constitute a single class of residual interests on which
distributions 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 Code for REMIC status during any taxable year,
the 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 in the REMIC Pool. The 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. Investors should be aware, however, that the Conference Committee Report
to the Tax Reform Act of 1986 (the "Reform 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, original issue discount and market discount on a
Regular Certificate will be treated as ordinary income to a holder of the
Regular Certificate (the "Regular Certificateholder") as they accrue, and
principal payments on a Regular Certificate will be treated as a return of
capital to the extent of the Regular Certificateholder's basis in the Regular
Certificate allocable thereto. Regular Certificateholders must use the accrual
method of accounting with regard to Regular Certificates, regardless of the
method of accounting otherwise used by those Regular Certificateholders.
Original Issue Discount
Accrual Certificates and principal-only certificates will be, and other
classes of Regular Certificates may be, issued with "original issue discount"
within the meaning of 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 that
income. The following discussion is based in part on temporary and final
Treasury regulations issued on February 2, 1994, as amended on June 14, 1996
(the "OID Regulations") under Code Sections 1271 through 1273 and 1275 and in
part on the provisions of the Reform Act. Regular Certificateholders should be
aware, however, that the OID Regulations do not adequately address certain
issues relevant to prepayable securities, such as the Regular Certificates. To
the extent those issues are not addressed in those regulations, the Depositor
intends to apply the methodology described in the Conference Committee Report to
the Reform Act. We cannot assure you that the IRS 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 IRS 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. Investors are advised to consult their 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, except to the extent described below with respect
to a Regular Certificate on which principal is distributed by random lot
("Random Lot Certificates"), 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".
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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, the Depositor
intends 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 the Depositor 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 those 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 those 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 on those Regular Certificates. Likewise, we intend to treat
an "interest only" class, or a class on which interest is substantially
disproportionate to its principal amount, a so-called "super-premium" class, 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 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 each distribution is
scheduled to be made by a fraction, the numerator of which is the amount of each
distribution included in the stated redemption price at maturity of the Regular
Certificate and the denominator of which is the stated redemption price at
maturity of the Regular Certificate. The Conference Committee Report to the
Reform Act provides that the schedule of distributions should be determined in
accordance with the assumed rate of prepayment of the mortgage loans (the
"Prepayment Assumption") 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 that 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. See "--Election to Treat All Interest Under the Constant
Yield Method" below.
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 intend to 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
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before the related distribution date on the Regular Certificate. The Conference
Committee Report to the Reform 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
1. the sum of (a) 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 (b) 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
2. 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 (1) the yield to maturity of the
Regular Certificate at the issue date, (2) events (including actual prepayments)
that have occurred prior to the end of the accrual period and (3) 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 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, and 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 certain classes of Regular Certificates and either an
increase or decrease in the daily portions of original issue discount with
respect to those Regular Certificates.
In the case of a Random Lot Certificate, we intend to determine the yield
to maturity of that certificate based upon the anticipated payment
characteristics of the class as a whole under the Prepayment Assumption. In
general, the original issue discount accruing on each Random Lot Certificate in
a full accrual period would be its allocable share of the original issue
discount with respect to the entire class, as determined in accordance with the
preceding paragraph. However, in the case of a distribution in retirement of the
entire unpaid principal balance of any Random Lot Certificate, or portion of
that unpaid principal balance, (a) the remaining unaccrued original issue
discount allocable to that certificate (or to that portion) will accrue at the
time of that distribution, and (b) the accrual of original issue discount
allocable to each remaining certificate of the class (or the remaining unpaid
principal balance of a partially redeemed Random Lot Certificate after a
distribution of principal has been received) will be adjusted by reducing the
present value of the remaining payments on that class and the adjusted issue
price of that class to the extent attributable to the portion of the unpaid
principal balance of the class that was distributed. We believe that the
foregoing treatment is consistent with the "pro rata prepayment" rules of the
OID Regulations, but with the rate of accrual of original issue discount
determined based on the Prepayment Assumption for the class as a whole. You are
advised to consult your tax advisors as to this treatment.
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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 of the acquisition premium under the
constant yield method, as described below under the heading "--Election to Treat
All Interest Under the Constant Yield Method" below.
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, (1) the issue price does not exceed the original principal balance by
more than a specified amount and (2) the interest compounds or is payable at
least annually at current values of (a) one or more "qualified floating rates",
(b) a single fixed rate and one or more qualified floating rates, (c) a single
"objective rate", or (d) 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, 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. 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 (1) within the control of the
issuer or a related party or (2) unique to the circumstances of the issuer or a
related party. A qualified inverse floating rate is a rate 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 that bears
different rates at different times during the period it is outstanding so that
it is considered significantly "front-loaded" or "back-loaded" within the
meaning of the OID Regulations. It is possible that a class of this type 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, those 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. Investors should consult their 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 Certificate (1) bearing a rate that
qualifies as a variable rate under the OID Regulations 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 a rate (plus
or minus a specified number of basis points), or that represents a weighted
average of rates on some or all of the mortgage loans, including a rate that is
subject to one or more caps or floors, or (2) bearing one or more of these
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
qualifies as a regular interest in a REMIC. 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.
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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, except to the extent that initial "teaser" rates
cause sufficiently "back-loaded" interest to create more than de minimis
original issue discount. The yield on those 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 "teaser
rates" followed by fully 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 interest rate on the Regular Certificates.
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 thereof. Accordingly, any Deferred Interest that accrues with
respect to a Class of Regular Certificates may constitute income to the holders
of such Regular Certificates prior to the time distributions of cash with
respect to such Deferred Interest are made.
Market Discount
A purchaser of a Regular Certificate also may be subject to the market
discount rules of Code Section 1276 through 1278. Under these 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 (1) is exceeded by the then-current principal
amount of the Regular Certificate or (2) in the case of a Regular Certificate
having original issue discount, is exceeded by the adjusted issue price of that
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 the stated redemption
price at maturity of the Regular Certificate are received, in an amount not
exceeding that 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 Reform Act provides that
until regulations are issued, the market discount would accrue either (1) on the
basis of a constant interest rate or (2) 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 that 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. You 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. You will be required to defer
deduction of a portion of the excess of the interest paid or accrued on
indebtedness incurred to
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purchase or carry a Regular Certificate over the interest distributable on those
Regular Certificates. The deferred portion of an interest expense in any taxable
year generally will not exceed the accrued market discount on the Regular
Certificate for that year. The 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, you may elect to include market discount in income currently as it
accrues on all market discount instruments you acquired in that taxable year or
thereafter, in which case the interest deferral rule will not apply. See
"--Election to Treat All Interest Under the Constant Yield Method" below
regarding an alternative manner in which that election may be deemed to be made.
Market discount with respect to a Regular Certificate will be considered to
be zero if the market discount is less than 0.25% of the remaining stated
redemption price at maturity of the 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. It appears that de minimis market discount would 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 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 greater than its remaining stated
redemption price at maturity generally is considered to be purchased at a
premium. If you hold a Regular Certificate as a "capital asset" within the
meaning of Code Section 1221, you may elect under Code Section 171 to amortize
that premium under the constant yield method. Final regulations with respect to
amortization of bond premium do not by their terms apply to prepayable
obligations such as the Regular Certificates. However, the Conference Committee
Report to the Reform 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 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. See "--Election to Treat All Interest Under the Constant Yield Method"
below regarding an alternative manner in which the 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 an election, (1) "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 (2) 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 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 IRS. You should consult their
own tax advisors regarding the advisability of making an election.
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Sale or Exchange of Regular Certificates
If you sell or exchange a Regular Certificate, you will recognize gain or
loss equal to the difference, if any, between the amount received 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.
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 applicable
holding period (described below). That gain will be treated as ordinary income
1. if a Regular Certificate is held as part of a "conversion
transaction" as defined in 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 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 that transaction,
2. in the case of a non-corporate taxpayer, to the extent the
taxpayer has made an election under Code Section 163(d)(4) to have
net capital gains taxed as investment income at ordinary rates, or
3. to the extent that the gain does not exceed the excess, if any, of
(a) 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
(b) the amount of income actually includible in the gross income
of that holder with respect to the Regular Certificate.
In addition, gain or loss recognized from the sale of a Regular Certificate
by certain banks or thrift institutions will be treated as ordinary income or
loss pursuant to Code Section 582(c). Long-term capital gains of certain
non-corporate taxpayers generally are subject to a lower maximum tax rate (20%)
than ordinary income or short-term capital gains of those taxpayers (39.6%) for
property held for more than one year. 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 those
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, investors are cautioned that while they may generally cease to accrue
interest income if it reasonably appears that the interest will be
uncollectible, the IRS 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 Code Section 166.
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Under Code Section 166, 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, a loss sustained during the taxable year on account of those
Regular Certificates becoming wholly or partially worthless, and that, 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 those 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 that time as the principal balance of
any class or subclass of those Regular Certificates is reduced to reflect losses
resulting from any liquidated mortgage loans. The IRS, however, could take the
position that non-corporate 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 that class of Regular Certificates has been otherwise
retired. The IRS could also assert that losses on the Regular Certificates are
deductible based on some other method that may defer those 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. You are urged to consult
your 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 IRS 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. Banks and
thrift institutions are advised to consult their 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 certain classes of Residual Certificates ("Residual
Certificateholders"), 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 that quarter and by
allocating that daily portion among the Residual Certificateholders in
proportion to their respective holdings of certain classes of Residual
Certificates in the REMIC Pool on that 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 that (1) the limitations on deductibility
of investment interest expense and expenses for the production of income do not
apply, (2) all bad loans will be deductible as business bad debts and (3) 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.
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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 those mortgage loans is prepaid, the Residual Certificateholder
may recognize taxable income without being entitled to receive a corresponding
amount of cash because (1) the prepayment may be used in whole or in part to
make distributions in reduction of principal on the Regular Certificates and
(2) the discount on the mortgage loans which is includible in income may exceed
the deduction allowed upon those distributions on those Regular Certificates on
account of any unaccrued 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 that kind of 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 that 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 that mismatching or
unrelated deductions against which to offset that income, subject to the
discussion of "excess inclusions" below under "--Limitations on Offset or
Exemption of REMIC Income". The timing of that 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 certain periods may exceed the income
reflected by that Residual Certificateholder for those periods in accordance
with generally accepted accounting principles. You should consult their 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 you may take into account
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 that loss was disallowed and may be used by that
Residual Certificateholder only to offset any income generated by the same REMIC
Pool.
You will not be permitted to amortize directly the cost of your 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. That
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
under "--Taxation of REMIC Income" above, the period of time
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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 a negative amount for purposes of determining the
REMIC Pool's basis in its assets. The preamble to the REMIC Regulations states
that the IRS may provide future guidance on the proper tax treatment of payments
made by a transferor of a residual interest to induce the transferee to acquire
the interest, and you should consult their own tax advisors in this regard.
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 Pool's basis in the mortgage
loans, the Residual Certificateholder will not recover a portion of that basis
until termination of the REMIC Pool unless future Treasury regulations provide
for periodic adjustments to the REMIC income otherwise reportable by that
holder. The REMIC Regulations currently in effect do not so provide. See
"--Treatment of Certain 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 Certain Items of REMIC Income and Expense
Although we intend to compute REMIC income and expense in accordance with
the 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 you 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 under "--Taxation of Regular
Certificates--Original Issue Discount" and "--Variable Rate Regular
Certificates", without regard to the de minimis rule described in that section,
and "--Premium" above.
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 under "--Taxation
of Regular Certificates--Deferred Interest" above.
Market Discount. The REMIC Pool will have market discount income in
respect of mortgage loans if, in general, their unpaid principal balances exceed
the basis of the REMIC Pool allocable to those mortgage loans. The REMIC Pool's
basis in those mortgage loans is generally the fair market value of the mortgage
loans immediately after the transfer of the mortgage loans 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 the
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 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. Market discount income generally should accrue in the manner described
under "--Taxation of Regular Certificates--Market Discount" above.
Premium. Generally, if the basis of the REMIC Pool in the mortgage loans
exceeds the unpaid principal balances of the mortgage loans, the REMIC Pool will
be considered to have acquired those mortgage loans at a premium equal to the
amount of that excess. As stated above, the REMIC Pool's
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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 the
transfer of the mortgage loans 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 Code Section 1221 may
elect under 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, Code Section 171
will not be available for premium on mortgage loans, including underlying
mortgage loans, originated on or prior to September 27, 1985. Premium with
respect to those mortgage loans may be deductible in accordance with a
reasonable method regularly employed by the related holder. The allocation of
the premium pro rata among principal payments should be considered a reasonable
method; however, the IRS 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 or all of the REMIC taxable income includible in determining your
federal income tax liability 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 that quarterly period of (1) 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 Code Section 1274(d), multiplied by
(2) the adjusted issue price of such Residual Certificate at the beginning of
that 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 those 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 that
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 that
income as the adjusted issue price of the Residual Certificates diminishes.
The portion of your REMIC taxable income consisting of the excess
inclusions generally may not be offset by other deductions, including net
operating loss carryforwards, on that Residual Certificateholder's return.
However, net operating loss carryovers are determined without regard to excess
inclusion income. Further, if you are an organization subject to the tax on
unrelated business income imposed by Code Section 511, the excess inclusions
will be treated as unrelated business taxable income of that Residual
Certificateholder for purposes of Code Section 511. In addition, REMIC taxable
income is subject to 30% withholding tax with respect to certain persons who are
not U.S. Persons, as defined below under "--Tax-Related Restrictions on Transfer
of Residual Certificates--Foreign Investors" below, and that portion
attributable to excess inclusions is not eligible for any reduction in the rate
of withholding tax, by treaty or otherwise. See "--Taxation of Certain 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 certain persons who are not U.S. Persons. The SBJPA
of 1996 has eliminated the special rule permitting Section 593 institutions
("thrift institutions") to use net operating losses and other allowable
deductions to offset their excess inclusion income from Residual Certificates
that have "significant value" within the meaning of the REMIC Regulations,
effective for taxable years beginning after December 31, 1995, except with
respect to Residual Certificates continuously held by thrift institutions since
November 1, 1995.
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In addition, the SBJPA of 1996 provides three rules for determining the
effect of excess inclusions on your alternative minimum taxable income of a
Residual Certificateholder. First, your alternative minimum taxable income is
determined without regard to the special rule, discussed above, that taxable
income cannot be less than excess inclusions. Second, your 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
are effective for taxable years beginning after December 31, 1996, unless you
elect to have those rules apply only to taxable years beginning after
August 20, 1996.
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 (as defined
below), a tax would be imposed in an amount equal to the product of (1) the
present value of the total anticipated excess inclusions with respect to that
Residual Certificate for periods after the transfer and (2) 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 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 that 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" (as defined below) 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
that entity, then a tax is imposed on the entity equal to the product of (1) 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 (2) the highest marginal federal corporate
income tax rate. This 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 that person is the record holder of
the Residual Certificate, the Pass-Through Entity does not have actual knowledge
that the affidavit is false.
For taxable years beginning on or after January 1, 1998, if an "electing
large partnership" holds a Residual Certificate, all interests in the electing
large partnership are treated as held by Disqualified Organizations for purposes
of the tax imposed upon a Pass-Through Entity by section 860E(c) of the Code. An
exception to this tax, otherwise available to a Pass-Through Entity that is
furnished certain affidavits by record holders of interests in the entity and
that does not know the affidavits are false, is not available to an electing
partnership.
For these purposes, (1) "Disqualified Organization" means the United
States, any state or one of their political subdivisions, any foreign
government, any international organization, 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 a majority of its board of
directors is not selected by one of those governmental entities), any
cooperative organization furnishing electric energy or providing telephone
service to persons in rural areas as described in Code Section 1381(a)(2)(C),
and any
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organization (other than a farmers' cooperative described in Code Section 521)
that is exempt from taxation under the Code unless that organization is subject
to the tax on unrelated business income imposed by Code Section 511,
(2) "Pass-Through Entity" means any regulated investment company, real estate
investment trust, common trust fund, partnership, trust or estate and certain
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 that interest, be treated as a
Pass-Through Entity, and (3) an "electing large partnership" means any
partnership having more than 100 members during the preceding tax year (other
than certain service partnerships and commodity pools), which elect to apply
simplified reporting provisions under the Code.
The Pooling Agreement with respect to a series of certificates will provide
that no legal or beneficial interest in a Residual Certificate may be
transferred unless (1) 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 other middleman), and (2) the transferor provides a statement in
writing to the Depositor and the trustee that it has no actual knowledge that
the affidavit is false. Moreover, the Pooling 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 of the Residual Certificates, to any
amendments to the related Pooling Agreement required under the Code or
applicable Treasury regulations to effectuate the foregoing restrictions.
Information necessary to compute an applicable excise tax must be furnished to
the IRS and to the requesting party within 60 days of the request, and the
Depositor or the trustee may charge a fee for computing and providing that
information.
Noneconomic Residual Interests. The REMIC Regulations would disregard
certain 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, as defined under "--Foreign
Investors" below) 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, (1) 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 (2) 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 under "--Disqualified Organizations" above. 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 (1) 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, and (2) 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 Agreement with
respect to each series of certificates
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will require the transferee of a Residual Certificate to certify to the matters
in the preceding sentence as part of the affidavit described under the heading
"--Disqualified Organizations" above. The transferor must have no actual
knowledge or reason to know that those statements are false.
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" (as defined below), unless the
transferee's income is effectively connected with the conduct of a trade or
business within the United States. A Residual Certificate is deemed to have tax
avoidance potential unless, at the time of the transfer, (1) the future value of
expected distributions equals at least 30% of the anticipated excess inclusions
after the transfer, and (2) 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 Certificates 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 a transfer may be made. The term "U.S. Person" means a citizen
or resident of the United States, a corporation, or partnership (except to the
extent provided in applicable Treasury regulations) created or organized in or
under the laws of the United States, any state, or the District of Columbia,
including any entity treated as a corporation or partnership for federal income
tax purposes, of their political subdivisions, an estate that is subject to
United States federal income tax regardless of the source of its income, or a
trust if a court within the United States is able to exercise primary
supervision over the administration of that trust, and one or more such U.S.
Persons have the authority to control all substantial decisions of that trust
(or, to the extent provided in applicable Treasury regulations, certain trusts
in existence on August 20, 1996 which are eligible to elect to be treated as
U.S. Persons).
Sale or Exchange of a Residual Certificate
Upon the sale or exchange of a Residual Certificate, you will recognize
gain or loss equal to the excess, if any, of the amount realized over your
adjusted basis, as described under "--Taxation of Residual Certificates--Basis
and Losses" above, in the Residual Certificate at the time of the sale or
exchange. In addition to reporting the taxable income of the REMIC Pool, you
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. That income
will be treated as gain from the sale or exchange of the Residual Certificates.
It is possible that the termination of the REMIC Pool may be treated as a sale
or exchange of Residual Certificates, in which case, you have an adjusted basis
in the Residual Certificates remaining when its interest in the REMIC Pool
terminates, and if you hold the Residual Certificate as a capital asset under
Code Section 1221, then you will recognize a capital loss at that time in the
amount of the remaining adjusted basis.
Any gain on the sale of Residual Certificates will be treated as ordinary
income (1) if you hold the Residual Certificates as part of a "conversion
transaction" as defined in Code Section 1258(c), up to the amount of interest
that would have accrued on your 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 that transaction or (2) if you are a non-corporate taxpayer, to the
extent that you have made an election under 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 certain banks
or thrift institutions will be treated as ordinary income or loss pursuant to
Code Section 582(c).
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The Conference Committee Report to the Reform Act provides that, except as
provided in Treasury regulations yet to be issued, the wash sale rules of Code
Section 1091 will apply to dispositions of Residual Certificates where the
seller of those certificates, 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 IRS has issued regulations, the "Mark to Market Regulations", under
Code Section 475 relating to the requirement that a securities dealer mark to
market securities held for sale to customers. This mark-to-market requirement
applies to all securities 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 certain 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 for
(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, (b) foreclosure, default or imminent
default of a qualified mortgage, (c) bankruptcy or insolvency of
the REMIC Pool or (d) a 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 (1) during the
three months following the Startup Day, (2) made to a qualified reserve
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fund by a Residual Certificateholder, (3) in the nature of a guarantee, (4) made
to facilitate a qualified liquidation or clean-up call and (5) 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 ending with the third calendar year
following the year of acquisition of that property, with a possible extension.
Net income from foreclosure property generally means gain from the sale of a
foreclosure property that is inventory property and gross income from
foreclosure property other than qualifying rents and other qualifying income for
a real estate investment trust.
It is not anticipated that the REMIC Pool will receive income or
contributions subject to tax under the preceding three paragraphs, except as
described in the applicable prospectus supplement with respect to net income
from foreclosure property on a commercial or multifamily residential property
that secured a mortgage loan. 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 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 that 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 that 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 Code applicable to partnerships, including the
determination by the IRS 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 applicable Treasury regulations, with respect to the
REMIC Pool. Each Residual Certificateholder will be deemed, by acceptance of the
Residual Certificates, to have agreed (1) to the appointment of the tax matters
person as provided in the preceding sentence and (2) to the irrevocable
designation of the master servicer as agent for performing the functions of the
tax matters person.
LIMITATIONS ON DEDUCTION OF CERTAIN EXPENSES
An investor who is an individual, estate or trust will be subject to
limitation with respect to certain itemized deductions described in Code
Section 67, to the extent that those itemized deductions, in the aggregate, do
not exceed 2% of the investor's adjusted gross income. In addition, Code
Section 68 provides that itemized deductions otherwise allowable for a taxable
year of an individual taxpayer will be reduced by the lesser of (1) 3% of the
excess, if any, of adjusted gross income over $126,600 for 1999 ($63,300 in the
case of a married individual filing a separate return) (subject to annual
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adjustments for inflation) or (2) 80% of the amount of itemized deductions
otherwise allowable for that year. In the case of a REMIC Pool, those deductions
may include deductions under 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. Those investors who hold REMIC Certificates either directly or
indirectly through certain pass-through entities may have their pro rata share
of those expenses allocated to them as additional gross income, but may be
subject to those limitation on deductions. In addition, those expenses are not
deductible at all for purposes of computing the alternative minimum tax, and may
cause those 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,
that additional gross income and limitation on deductions will apply to the
allocable portion of those expenses to holders of Regular Certificates, as well
as holders of Residual Certificates, where those Regular Certificates are issued
in a manner that is similar to pass-through certificates in a fixed investment
trust. In general, that 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 certain 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 those expenses will be allocable to the Residual
Certificates.
TAXATION OF CERTAIN FOREIGN INVESTORS
Regular Certificates
Interest, including original issue discount, distributable to Regular
Certificateholders who are non-resident aliens, foreign corporations, or other
Non-U.S. Persons (as defined below), will be considered "portfolio interest"
and, therefore, generally will not be subject to 30% United States withholding
tax, provided that the Non-U.S. Person (1) is not a "10-percent shareholder"
within the meaning of Code Section 871(h)(3)(B) or a controlled foreign
corporation described in Code Section 881(c)(3)(C) and (2) provides the trustee,
or the person who would otherwise be required to withhold tax from those
distributions under Code Section 1441 or 1442, with an appropriate statement,
signed under penalties of perjury, identifying the beneficial owner and stating,
among other things, that the beneficial owner of the Regular Certificate is a
Non-U.S. Person. If that statement, or any other required statement, is not
provided, 30% withholding will apply unless reduced or eliminated pursuant to an
applicable tax treaty or unless the interest on the Regular Certificate is
effectively connected with the conduct of a trade or business within the United
States by the Non-U.S. Person. In the latter case, the Non-U.S. Person will be
subject to United States federal income tax at regular rates. Prepayment
Premiums distributable to Regular Certificateholders who are Non-U.S. Persons
may be subject to 30% United States withholding tax. Investors who are Non-U.S.
Persons should consult their own tax advisors regarding the specific tax
consequences to them of owning a Regular Certificate. The term "Non-U.S. Person"
means any person who is not a U.S. Person.
The IRS recently issued final regulations (the "New Regulations") which
would provide alternative methods of satisfying the beneficial ownership
certification requirement described above. The New Regulations will be effective
January 1, 2001. Current withholding certificates will remain valid until the
earlier of December 31, 2000 or the due date of expiration of the certificate
under the rules as currently in effect. The New Regulations would require, in
the case of Regular Certificates held by a foreign partnership, that (1) the
certification described above be provided by the partners rather than by the
foreign partnership and (2) the partnership provide certain information,
including a United
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States taxpayer identification number. A look-through rule would apply in the
case of tiered partnerships. Non-U.S. Persons should consult their own tax
advisors concerning the application of the certification requirements in the New
Regulations.
Residual Certificates
The Conference Committee Report to the Reform Act indicates that amounts
paid to Residual Certificateholders who are Non-U.S. Persons are treated as
interest for purposes of the 30% (or lower treaty rate) United States
withholding tax. Treasury regulations provide that amounts distributed to
Residual Certificateholders may qualify as "portfolio interest", subject to the
conditions described in "Regular Certificates" above, but only to the extent
that (1) the mortgage loans (including mortgage loans underlying MBS) were
issued after July 18, 1984 and (2) the trust fund or segregated pool of assets
in the trust fund (as to which a separate REMIC election will be made), to which
the Residual Certificate relates, consists of obligations issued in "registered
form" within the meaning of Code Section 163(f)(1). Generally, whole mortgage
loans will not be, but MBS and regular interests in another REMIC Pool will be,
considered obligations issued in registered form. Furthermore, a Residual
Certificateholder will not be entitled to any exemption from the 30% withholding
tax (or lower treaty rate) to the extent of that portion of REMIC taxable income
that constitutes an "excess inclusion". See "--Taxation of Residual
Certificates--Limitations on Offset or Exemption of REMIC Income" above. If the
amounts paid to Residual Certificateholders who are Non-U.S. Persons are
effectively connected with the conduct of a trade or business within the United
States by Non-U.S. Persons, 30% (or lower treaty rate) withholding will not
apply. Instead, the amounts paid to Non-U.S. Persons will be subject to United
States federal income tax at regular rates. If 30% (or lower treaty rate)
withholding is applicable, those amounts generally will be taken into account
for purposes of withholding only when paid or otherwise distributed (or when the
Residual Certificate is disposed of) under rules similar to withholding upon
disposition of debt instruments that have original issue discount. See
"--Tax-Related Restrictions on Transfer of Residual Certificates--Foreign
Investors" above concerning the disregard of certain transfers having "tax
avoidance potential". Investors who are Non-U.S. Persons should consult their
own tax advisors regarding the specific tax consequences to them of owning
Residual Certificates.
BACKUP WITHHOLDING
Distributions made on the Regular Certificates, and proceeds from the sale
of the Regular Certificates to or through certain brokers, may be subject to a
"backup" withholding tax under Code Section 3406 of 31% on "reportable payments"
(including interest distributions, original issue discount, and, under certain
circumstances, principal distributions) unless the Regular Certificateholder
complies with certain 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 that
certificateholder is otherwise an exempt recipient under applicable provisions
of the Code. Any amounts to be withheld from distribution on the Regular
Certificates would be refunded by the IRS or allowed as a credit against the
Regular Certificateholder's federal income tax liability. The New Regulations
will change certain of the rules relating to certain presumptions currently
available relating to information reporting and backup withholding. Non-U.S.
Persons are urged to contact their own tax advisors regarding the application to
them of backup and withholding and information reporting.
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 IRS 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,
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real estate investment trusts, investment companies, common trust funds, thrift
institutions and charitable trusts) may request that information for any
calendar quarter by telephone or in writing by contacting the person designated
in IRS Publication 938 with respect to a particular series of Regular
Certificates. Holders through nominees must request that information from the
nominee.
The IRS' 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 IRS concerning Code Section 67
expenses, see "--Limitations on Deduction of Certain Expenses" above, allocable
to those holders. Furthermore, under those regulations, information must be
furnished quarterly to Residual Certificateholders, furnished annually to
holders of Regular Certificates, and filed annually with the IRS concerning the
percentage of the REMIC Pool's assets meeting the qualified asset tests
described under "--Status of REMIC Certificates" above.
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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 in the trust fund) with respect to a series of
certificates that are not designated as "Stripped Certificates", as described
below, as a REMIC (certificates of that kind of series are referred to as
"Standard Certificates"), in the opinion of Cadwalader, Wickersham & Taft the
trust fund will be classified as a grantor trust under subpart E, Part 1 of
subchapter J of the Code and not as an association taxable as a corporation or a
"taxable mortgage pool" within the meaning of Code Section 7701(i). Where there
is no fixed retained yield with respect to the mortgage loans underlying the
Standard Certificates, the holder of a Standard Certificate (a "Standard
Certificateholder") in that series will be treated as the owner of a pro rata
undivided 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 under "--Recharacterization of Servicing Fees" below.
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 those mortgage loans, original issue
discount (if any), prepayment fees, assumption fees, and late payment charges
received by the master servicer, in accordance with that 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 those 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 certain
pass-through entities, will be subject to limitation with respect to certain
itemized deductions described in Code Section 67, including deductions under
Code Section 212 for the servicing fee and all the administrative and other
expenses of the trust fund, to the extent that those deductions, in the
aggregate, do not exceed two percent of an investor's adjusted gross income. In
addition, Code Section 68 provides that itemized deductions otherwise allowable
for a taxable year of an individual taxpayer will be reduced by the lesser of
(1) 3% of the excess, if any, of adjusted gross income over $126,600 for 1999
($63,300 in the case of a married individual filing a separate return) (subject
to annual adjustments for inflation), or (2) 80% of the amount of itemized
deductions otherwise allowable for that year. As a result, those 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 those Standard Certificates with respect to interest at the
pass-through rate on those Standard Certificates. In addition, those 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 Code, as described under "--Stripped Certificates" and
"--Recharacterization of Servicing Fees", below.
Tax Status
In the opinion of Cadwalader, Wickersham & Taft, Standard Certificates will
have the following status for federal income tax purposes:
1. Standard Certificate owned by a "domestic building and loan
association" within the meaning of 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
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of 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 that section of the Code.
2. Standard Certificate owned by a real estate investment trust will
be considered to represent "real estate assets" within the meaning
of 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 those assets will be considered "interest on obligations
secured by mortgages on real property" to such extent within the
meaning of Code Section 856(c)(3)(B).
3. 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 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
Code Section 860G(a)(3).
4. Standard Certificate owned by a financial asset securitization
investment trust will be considered to represent "permitted
assets" within the meaning of Code Section 860(L)(c).
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 under "--Federal Income
Tax Consequences for REMIC Certificates--Taxation of Residual Certificates--
Treatment of Certain Items of REMIC Income and Expense--Premium"
above.
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 Code provisions or, under certain 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 that income.
Unless indicated otherwise in the applicable prospectus supplement, no
prepayment assumption will be assumed for purposes of that accrual. However,
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 that 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 under
"--Federal Income Tax Consequences for REMIC Certificates--Taxation of Regular
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Certificates--Market Discount" above, except that the ratable accrual methods
described there 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 that accrual.
Recharacterization of Servicing Fees
If the servicing fee paid to the master servicer were deemed to exceed
reasonable servicing compensation, the amount of that 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. IRS guidance
indicates that a servicing fee in excess of reasonable compensation ("excess
servicing") will cause the mortgage loans to be treated under the "stripped
bond" rules. That guidance provides safe harbors for servicing deemed to be
reasonable and requires taxpayers to demonstrate that the value of servicing
fees in excess of those amounts is not greater than the value of the services
provided.
Accordingly, if the IRS' approach is upheld, a servicer who receives a
servicing fee in excess of those amounts would be viewed as retaining an
ownership interest in a portion of the interest payments on the mortgage loans.
Under the rules of 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 those mortgage loans as "stripped coupons" and "stripped bonds".
Subject to the de minimis rule discussed under "--Stripped Certificates" below,
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 Code would apply to
that 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 master servicer, or as
including that portion as a second class of equitable interest. Applicable
Treasury regulations treat that 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, a
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. See
"--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 on those Standard Certificates. Except as
provided above with respect to market discount on any mortgage loans, and except
for certain financial institutions subject to the provisions of Code
Section 582(c), that 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 (1) if a Standard Certificate is
held as part of a
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"conversion transaction" as defined in 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 that transaction or (2) in
the case of a non-corporate taxpayer, to the extent the taxpayer has made an
election under Code Section 163(d)(4) to have net capital gains taxed as
investment income at ordinary income rates. Long-term capital gains of certain
non-corporate taxpayers generally are subject to a lower maximum tax rate (20%)
than ordinary income or short-term capital gains of those taxpayers (39.6%) for
property held for more than one year. The maximum tax rate for corporations is
the same with respect to both ordinary income and capital gains.
STRIPPED CERTIFICATES
General
Pursuant to 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 interest-only certificates entitled
to distributions of interest, with disproportionately small, nominal or no
distributions of principal and principal-only certificates entitled to
distributions of principal, with disproportionately small, nominal or no
distributions of interest as to which no REMIC election is made.
The certificates will be subject to those rules if (1) we or any of our
affiliates retain, for our 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, (2) the master 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 (3) 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 master servicer, to the extent that those fees
represent reasonable compensation for services rendered. See discussion under
"--Standard Certificates--Recharacterization of Servicing Fees" above. 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 under "--Standard
Certificates--General" above, subject to the limitation described there.
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 certain respects at this time,
particularly where the Stripped Certificates are issued with respect to a
Mortgage Pool containing variable-rate mortgage loans, in the opinion of
Cadwalader, Wickersham & Taft (1) the trust fund will be treated as a grantor
trust under subpart E, Part 1 of subchapter J of the Code and not as an
association taxable as a corporation or a "taxable mortgage pool" within the
meaning of Code Section 7701(i), and (2) each Stripped Certificate should be
treated as a single installment obligation
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for purposes of calculating original issue discount and gain or loss on
disposition. This treatment is based on the interrelationship of Code
Section 1286, Code Sections 1272 through 1275, and the OID Regulations. While
under Code Section 1286 computations with respect to Stripped Certificates
arguably should be made in one of the ways described under "--Taxation of
Stripped Certificates--Possible Alternative Characterizations" below, 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
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 provide for the
treatment of a Stripped Certificate as a single debt instrument issued on the
date it is purchased for purposes of calculating any original issue discount. In
addition, under these regulations, a Stripped Certificate that represents a
right to payments of both interest and principal may be viewed either as issued
with original issue discount or market discount, as described below, at a de
minimis original issue discount, or, presumably, at a premium. This treatment
suggests that the interest component of that Stripped Certificate would be
treated as qualified stated interest under the OID Regulations. Further, these
final regulations provide that the purchaser of a Stripped Certificate will be
required to account for any discount as market discount rather than original
issue discount if either (1) the initial discount with respect to the Stripped
Certificate was treated as zero under the de minimis rule, or (2) no more than
100 basis points in excess of reasonable servicing is stripped off the related
mortgage loans. This market discount would be reportable as described under
"--Federal Income Tax Consequences for REMIC Certificates--Taxation of Regular
Certificates--Market Discount" above, without regard to the de minimis rule
there, assuming that a prepayment assumption is employed in that 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, in the opinion
of Cadwalader, Wickersham & Taft Stripped Certificates owned by applicable
holders should be considered to represent "real estate assets" within the
meaning of Code Section 856(c)(4)(A), "obligation[s] principally secured by an
interest in real property" within the meaning of Code Section 860G(a)(3)(A), and
"loans . . . secured by an interest in real property which is . . . residential
real property" within the meaning of 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 Code Section 856(c)(3)(B),
provided that in each case the mortgage loans and interest on those mortgage
loans qualify for that treatment.
Taxation of Stripped Certificates
Original Issue Discount. Except as described under "--General" above, 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 that income. Based in part on the OID Regulations and the
amendments to the original issue discount sections of the Code made by the
Reform 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 under "--Federal Income Tax Consequences for REMIC
Certificates--Taxation of Regular Certificates--Original Issue Discount" and
"--Variable Rate Regular Certificates" above. However, with the apparent
exception of a Stripped Certificate qualifying as a market discount obligation,
as described under "--General" above, the issue price of a Stripped Certificate
will be the purchase price paid by each holder of the Stripped Certificate, and
the stated
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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
that 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 that 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 that
Stripped Certificate to recognize an ordinary loss equal to that 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, those regulations may lead to different timing of income inclusion
that 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 Stripped Certificates as ordinary income. Investors should
consult their tax advisors regarding the appropriate tax treatment of Stripped
Certificates.
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 that Stripped Certificate, as described
under "--Federal Income Tax Consequences for REMIC Certificates--Taxation of
Regular Certificates--Sale or Exchange of Regular Certificates" above. To the
extent that a subsequent purchaser's purchase price is exceeded by the remaining
payments on the Stripped Certificates, that subsequent purchaser will be
required for federal income tax purposes to accrue and report that 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 those 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 Code provisions. For example, the Stripped Certificateholder
may be treated as the owner of
1. one installment obligation consisting of that Stripped
Certificate's pro rata share of the payments attributable to
principal on each mortgage loan and a second installment
obligation consisting of that Stripped Certificate's pro rata
share of the payments attributable to interest on each mortgage
loan,
2. as many stripped bonds or stripped coupons as there are scheduled
payments of principal and/or interest on each mortgage loan or
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3. 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 thereto.
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 that 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 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.
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 that year, the information, prepared on the basis described
above, as the trustee deems to be necessary or desirable to enable those
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 IRS. 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
under "--Federal Income Tax Consequences for REMIC Certificates--Backup
Withholding" above.
TAXATION OF CERTAIN 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 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 a 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 that
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 those persons will
be subject to the same certification requirements, described under "--Federal
Income Tax Consequences for REMIC Certificates--Taxation of Certain Foreign
Investors--Regular Certificates" above.
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STATE AND OTHER TAX CONSIDERATIONS
In addition to the federal income tax consequences described in "Certain
Federal Income Tax Consequences" above, 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. Thus, you should consult your
own tax advisors with respect to the various tax consequences of investments in
the offered certificates.
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CERTAIN ERISA CONSIDERATIONS
GENERAL
The Employee Retirement Income Security Act of 1974, as amended, or ERISA,
and the Code impose certain requirements on retirement plans, and on certain
other employee benefit 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
those plans, accounts or arrangements are invested that are subject to the
fiduciary responsibility provisions of ERISA and Section 4975 of the Code (all
of which are referred to as "Plans"), and on persons who are fiduciaries with
respect to Plans, in connection with the investment of Plan assets. Certain
employee benefit plans, such as governmental plans (as defined in ERISA
Section 3(32)), and, if no election has been made under Section 410(d) of the
Code, church plans (as defined in Section 3(33) of ERISA) are not subject to
ERISA requirements. Accordingly, assets of those 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 of
these plans which are qualified and exempt from taxation under
Sections 401(a) and 501(a) of the Code, however, are subject to the prohibited
transaction rules set forth in Section 503 of the Code.
ERISA generally imposes on Plan fiduciaries certain general fiduciary
requirements, including those of investment prudence and diversification and the
requirement that a Plan's investments be made in accordance with the documents
governing the Plan. In addition, ERISA and the Code prohibit a broad range of
transactions involving assets of a Plan and persons ("Parties in Interest") who
have certain specified relationships to the Plan, unless a statutory or
administrative exemption is available. Certain Parties in Interest that
participate in a prohibited transaction may be subject to an excise tax imposed
pursuant to Section 4975 of the Code, unless a statutory or administrative
exemption is available. These prohibited transactions generally are set forth in
Section 406 of ERISA and Section 4975 of the Code. Special caution should be
exercised before the assets of a Plan are used to purchase a certificate if,
with respect to those assets, the Depositor, the master servicer or the trustee
or one of their affiliates, either: (a) has investment discretion with respect
to the investment of those assets of that Plan; or (b) has authority or
responsibility to give, or regularly gives, investment advice with respect to
those assets 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
those 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 that
purchase under the requirements of ERISA, whether any prohibited transaction
class-exemption or any individual administrative 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 that series of certificates.
PLAN ASSET REGULATIONS
A Plan's investment in certificates may cause the Trust Assets to be deemed
Plan assets. Section 2510.3-101 of the regulations of the United States
Department of Labor ("DOL") provides that when a Plan acquires an equity
interest in an entity, the Plan's assets include both the equity interest and an
undivided interest in each of the underlying assets of the entity, unless
certain exceptions not applicable to this discussion apply, or unless the equity
participation in the entity by "benefit plan investors" (that is, Plans and
certain employee benefit plans not subject to ERISA) is not "significant". For
this purpose, in general, equity participation in a trust fund will be
"significant" on any date if, immediately after the most recent acquisition of
any certificate, 25% or more of any class of certificates is held by benefit
plan investors.
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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 those assets for a fee, is a fiduciary of the investing
Plan. If the Trust Assets constitute Plan assets, then any party exercising
management or discretionary control regarding those assets, such as a master
servicer, a special servicer or any sub-servicer, may be deemed to be a Plan
"fiduciary" with respect to the investing Plan, and thus subject to the
fiduciary responsibility provisions and prohibited transaction provisions of
ERISA and the Code. In addition, if the Trust Assets constitute Plan assets, the
purchase of certificates by a Plan, as well as the operation of the trust fund,
may constitute or involve a prohibited transaction under ERISA and the Code.
ADMINISTRATIVE EXEMPTIONS
Several underwriters of mortgage-backed securities have applied for and
obtained individual administrative ERISA prohibited transaction exemptions (the
"Exemptions") which can only 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 that exemption might 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
applicability.
In considering an investment in the offered certificates, a Plan fiduciary
also should consider the availability of prohibited transaction class exemptions
promulgated by the DOL including, among others, Prohibited Transaction Class
Exemption ("PTCE") 75-1, which exempts certain transactions between Plans and
broker/dealers, reporting dealers and banks; PTCE 90-1, which exempts certain
transactions between insurance company separate accounts and Parties in
Interest; PTCE 91-38, which exempts certain transactions between bank collective
investment funds and Parties in Interest; PTCE 84-14, which exempts certain
transactions effected on behalf of a Plan by a "qualified professional asset
manager"; PTCE 95-60, which exempts certain transactions between insurance
company general accounts and Parties in Interest; and PTCE 96-23, which exempts
certain transactions effected on behalf of a Plan by an "in-house asset
manager." We cannot assure you that any of these class exemptions will apply
with respect to any particular Plan investment in the certificates or, even if
it were deemed to apply, that any exemption would apply to all prohibited
transactions that may occur in connection with that investment. The prospectus
supplement with respect to a series of certificates may contain additional
information regarding the availability of other exemptions with respect to the
certificates offered thereby.
INSURANCE COMPANY GENERAL ACCOUNTS
Section III of Prohibited Transaction Class Exemption 95-60 ("PTCE 95-60")
exempts from the application of the prohibited transaction provisions of
Sections 406(a), 406(b) and 407(a) of ERISA and Section 4975 of the Code
transaction in connection with the servicing, management and operation of a
trust (such as the trust fund) in which an insurance company general account has
an interest as a result of its acquisition of certificates issued by the trust,
provided that certain conditions are satisfied. If these conditions are met,
insurance company general accounts would be allowed to purchase certain classes
of certificates which do not meet the requirements of the Exemptions solely
because they (1) are subordinated to other classes of certificates issued by the
trust fund and/or (2) have not received a rating at the time of the acquisition
in one of the three highest rating categories from Standard & Poor's Ratings
Services, a division of The McGraw Hill Companies, Inc., Moody's Investors
Service, Inc., Duff & Phelps Credit Rating Co. or Fitch IBCA, Inc. All other
conditions of the Exemptions would have to be satisfied in order for PTCE 95-60
to be available. Before purchasing that class of certificates, an insurance
company general account seeking to rely on Section III of PTCE 95-60 should
itself confirm that all applicable conditions and other requirements have been
satisfied.
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The Small Business Job Protection Act of 1996 added a new
Section 401(c) to ERISA, which provides certain exemptive relief from the
provisions of Part 4 of Title I of ERISA and Section 4975 of the Code, including
the prohibited transaction restrictions imposed by ERISA and the related excise
taxes imposed by the Code, for transactions involving an insurance company
general account. Pursuant to Section 401(c) of ERISA, the DOL was required to
issue final regulations ("401(c) Regulations") no later than December 31, 1997
which were to provide guidance for the purpose of determining, in cases where
insurance policies supported by an insured'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. On December 22, 1997, the DOL proposed those
regulations. Section 401(c) of ERISA generally provides that, until the date
which is 18 months after the 401(c) Regulations become final, no person shall be
subject to liability under Part 4 of Tile I of ERISA and Section 4975 of the
Code on the basis of a claim that the assets of an insurance company general
account constitute Plan assets, unless (1) as otherwise provided by the
Secretary of Labor in the 401(c) Regulations to prevent avoidance of the
regulations or (2) an action is brought by the Secretary of Labor for certain
breaches of fiduciary duty which would also constitute a violation of federal or
state criminal law. Any assets of an insurance company general account which
support insurance policies issued to a Plan after December 31, 1998 or issued to
Plans on or before December 31, 1998 for which the insurance company does not
comply with the 401(c) Regulations may be treated as Plan assets. In addition,
because Section 401(c) does not relate to insurance company separate accounts,
separate account assets are still treated as Plan assets of any Plan invested in
that 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 date the
401(c) Regulations become final.
UNRELATED BUSINESS TAXABLE INCOME; RESIDUAL CERTIFICATES
The purchase of a Residual Certificate by any employee benefit plan
qualified under Code Section 401(a) and exempt from taxation under Code
Section 501(a), including most varieties of Plans, may give rise to "unrelated
business taxable income" as described in Code Sections 511-515 and 860E.
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 certain tax-exempt entities
not subject to Code Section 511 including certain governmental plans, as
discussed above under the caption "Certain 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 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.
The sale of certificates to an employee benefit plan is in no respect a
representation by the Depositor or the Underwriter that this investment meets
all relevant legal requirements with respect to investments by plans generally
or by any particular plan, or that this investment is appropriate for plans
generally or for any particular plan.
LEGAL INVESTMENT
The offered certificates will constitute "mortgage related securities" for
purposes of the Secondary Mortgage Market Enhancement Act of 1984, as amended
("SMMEA"), only if so specified in the related prospectus supplement. The
appropriate characterization of those certificates not qualifying as "mortgage
related securities" ("Non-SMMEA Certificates") under various legal investment
restrictions,
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and thus the ability of investors subject to these restrictions to purchase
those certificates, may be subject to significant interpretive uncertainties.
Generally, only classes of offered certificates that (1) are rated in one
of the two highest rating categories by one or more rating agencies and (2) are
part of a series evidencing interests in a trust fund consisting of loans
secured by first liens and originated by certain types of originators as
specified in SMMEA, will be "mortgage related securities" for purposes of SMMEA.
As "mortgage related securities," those 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, under applicable law, 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 those entities.
Under SMMEA, a number of states enacted legislation, on or prior to the
October 3, 1991 cut-off for those enactments, limiting to various extents the
ability of certain 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, which amended the definition of "mortgage related security" to include,
in relevant part, offered 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, states were authorized to enact legislation, on or before
September 23, 2001, specifically referring to Section 347 and prohibiting or
restricting the purchase, holding or investment by state-regulated entities in
those types of offered certificates. Section 347 also provides that the
enactment by a state of any of those legislative restrictions shall not affect
the validity of any contractual commitment to purchase, hold or invest in
securities qualifying as "mortgage related securities" solely by reason of
Section 347 that was made, and shall not require the sale or disposition of any
securities acquired, prior to the enactment of that state legislation.
Accordingly, the investors affected by any of that kind of state legislation,
when and if enacted, will be authorized to invest in offered certificates
qualifying as "mortgage related securities" only to the extent provided in that
legislation.
SMMEA also amended the legal investment authority of federally-chartered
depository institutions as follows: federal savings and loan associations and
federal savings banks may invest in, sell or otherwise deal in "mortgage related
securities" without limitation as to the percentage of their assets represented
thereby, federal credit unions may invest in those securities, and national
banks may purchase those 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 those regulations as the
applicable federal regulatory authority may prescribe. In this connection, the
Office of the Comptroller of the Currency (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 certain general standards in 12 C.F.R. (Section)1.5
concerning "safety and soundness" and retention of credit information), certain
"Type IV securities," defined in 12 C.F.R. (Section)1.2(1) to include certain
"commercial mortgage-related securities" and "residential mortgage-related
securities." As so defined, "commercial mortgage-related security" and
"residential mortgage-related security" mean, in relevant part, "mortgage
related security" within the meaning of SMMEA, provided that, in the case of a
"commercial mortgage-related security," it "represents ownership of a promissory
note or certificate of interest or participation that is directly secured by a
first lien on one or more parcels of real estate upon which one or more
commercial structures are located and that is fully secured by interests in a
pool of loans to numerous obligors." In the absence of any rule or
administrative interpretation by the OCC defining the term "numerous obligors,"
no representation is made as to whether any class of offered certificates will
qualify as
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"commercial mortgage-related securities," and thus as "Type IV securities," for
investment by national banks. The National Credit Union Administration (the
"NCUA") has adopted rules, codified at 12 C.F.R. Part 703, which permit federal
credit unions to invest in "mortgage related securities" under certain limited
circumstances, other than 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. The Office of Thrift Supervision (the "OTS") has issued Thrift
Bulletin 13a (December 1, 1998), "Management of Interest Rate Risk, Investment
Securities, and Derivative Activities," which thrift institutions subject to the
jurisdiction of the OTS should consider before investing in any of the offered
certificates.
All depository institutions considering an investment in the offered
certificates should review the "Supervisory Policy Statement on Investment
Securities and End-User Derivatives Activities" (the "1998 Policy Statement") of
the Federal Financial Institutions Examination Council, which has been adopted
by the Board of Governors of the Federal Reserve System, the OCC, the Federal
Deposit Insurance Corporation and the OTS, effective May 26, 1998, and by the
NCUA, effective October 1, 1998. The 1998 Policy Statement sets forth general
guidelines which depository institutions must follow in managing risks
(including market, credit, liquidity, operational (transaction), 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 those authorities before purchasing any offered
certificates, as certain classes may be deemed unsuitable investments, or may
otherwise be restricted, under those rules, policies or guidelines (in certain
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 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 certain classes of offered certificates as
"mortgage related securities," no representations are made as to the proper
characterization of offered certificates for legal investment purposes,
financial institution regulatory purposes, or other purposes, or as to the
ability of particular investors to purchase offered certificates under
applicable legal investment restrictions. The uncertainties described above (and
any unfavorable future determinations concerning legal investment or financial
institution regulatory characteristics of the offered certificates) may
adversely affect the liquidity of the offered certificates.
Accordingly, all investors whose investment activities are subject to legal
investment laws and regulations, regulatory capital requirements or review by
regulatory authorities should consult with their own legal advisors in
determining whether and to what extent the offered certificates of any class
constitute legal investments or are subject to investment, capital or other
restrictions, and, if applicable, whether SMMEA has been overridden in any
jurisdiction relevant to that investor.
METHOD OF DISTRIBUTION
The offered certificates offered by this prospectus and by the 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
our net proceeds from that sale.
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We intend that offered certificates will be offered through the following
methods from time to time and that offerings may be made concurrently through
more than one of these methods or that an offering of a particular series of
certificates may be made through a combination of two or more of these methods.
Those methods are as follows:
1. by negotiated firm commitment underwriting and public offering by
one or more underwriters specified in the related prospectus
supplement;
2. by placements through one or more placement agents specified in
the related prospectus supplement primarily with institutional
investors and dealers; and
3. through direct offerings by the Depositor.
If underwriters are used in a sale of any offered certificates (other than
in connection with an underwriting on a best efforts basis), those 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. The underwriters
may be broker-dealers affiliated with us. Their identities and material
relationships to us will be set forth in the related prospectus supplement. The
managing underwriter or underwriters with respect to the offer and sale of a
particular series of 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 that 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 offered certificates may be deemed to
be underwriters in connection with those offered certificates, and any discounts
or commissions received by them from us and any profit on the resale of offered
certificates by them may be deemed to be underwriting discounts and commissions
under the Securities Act of 1933, as amended (the "Securities Act").
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 certain conditions precedent, that the underwriters will be
obligated to purchase all offered certificates if any are purchased (other than
in connection with an underwriting on a best efforts basis) and that we will
indemnify the several underwriters, and each person, if any, who controls that
underwriter within the meaning of Section 15 of the Securities Act, against
certain civil liabilities, including liabilities under the Securities Act, or
will contribute to payments required to be made in respect of these liabilities.
The prospectus supplement with respect to any series offered by placements
through dealers will contain information regarding the nature of that offering
and any agreements to be entered into between us and purchasers of offered
certificates of that series.
We anticipate that the offered certificates offered by this prospectus and
the related prospectus supplement will be sold primarily to institutional
investors. Purchasers of offered certificates, including dealers, may, depending
on the facts and circumstances of those purchases, be deemed to be
"underwriters" within the meaning of the Securities Act in connection with
reoffers and sales by them of offered certificates. You should consult with your
legal advisors in this regard prior to any similar 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 by this
prospectus. We may initially retain any unrated class and we may sell it at any
time to one or more institutional investors.
If required by applicable law or regulation, this prospectus will be used
by Chase Securities Inc., our affiliate, in connection with offers and sales
related to market-making transactions in the offered certificates previously
offered by this prospectus in transactions in which Chase Securities Inc. acts
as
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principal. Chase Securities Inc. may also act as agent in those transactions.
Sales may be made at negotiated prices determined at the time of sale.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
With respect to each series of certificates offered by this prospectus,
there are incorporated in this prospectus and in the related prospectus
supplement by reference all documents and reports filed or caused to be filed by
the Depositor with respect to a trust fund pursuant to Section 13(a), 13(c), 14
or 15(d) of the Securities Exchange Act of 1934, that relate specifically to the
related series of certificates. The Depositor will provide or cause to be
provided without charge to each person to whom this prospectus is delivered in
connection with the offering of one or more classes of offered certificates,
upon written or oral request of that person, a copy of any or all documents or
reports incorporated in this prospectus by reference, in each case to the extent
the documents or reports relate to one or more of the classes of offered
certificates, other than the exhibits to those documents (unless the exhibits
are specifically incorporated by reference in those documents). Requests to the
Depositor should be directed in writing to its principal executive offices at
270 Park Avenue, New York, New York 10017-2070, Attention: President, or by
telephone at (212) 834-5588. The Depositor has determined that its financial
statements will not be material to the offering of any Offered Certificates.
The Depositor filed a registration statement (the "Registration Statement")
relating to the certificates with the Securities and Exchange Commission. This
prospectus is part of the Registration Statement, but the Registration Statement
includes additional information.
Copies of the Registration Statement may be obtained from the Public
Reference Section of the Securities and Exchange Commission, Washington, D.C.
20549, upon payment of the prescribed charges, or may be examined free of charge
at the Securities and Exchange Commission's offices, 450 Fifth Street N.W.,
Washington, D.C. 20549 or at the regional offices of the Securities and Exchange
Commission located at Suite 1300, 7 World Trade Center, New York, New York 10048
and Suite 1400, Citicorp Center, 500 West Madison Street, Chicago, Illinois
60661-2511. The Securities and Exchange Commission also maintains a site on the
World Wide Web at "http://www.sec.gov" at which you can view and download copies
of reports, proxy and information statements and other information filed
electronically through the Electronic Data Gathering, Analysis and Retrieval
("EDGAR") system. The Depositor has filed the Registration Statement, including
all exhibits thereto, through the EDGAR system, so the materials should be
available by logging onto the Securities and Exchange Commission's Web site. The
Securities and Exchange Commission maintains computer terminals providing access
to the EDGAR system at each of the offices referred to above.
LEGAL MATTERS
The validity of the certificates of each series and certain federal income
tax matters will be passed upon for us by Cadwalader, Wickersham & Taft, New
York, New York.
FINANCIAL INFORMATION
A new trust fund will be formed with respect to each series of
certificates, and no trust fund will engage in any business activities or have
any assets or obligations prior to the issuance of the related series of
certificates. Accordingly, no financial statements with respect to any trust
fund will be included in this prospectus or in the related prospectus
supplement.
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RATING
It is a condition to the issuance of any class of offered certificates that
they shall have been rated not lower than investment grade, that is, in one of
the four highest rating categories, by at least one rating agency.
Ratings on mortgage pass-through certificates address the likelihood of
receipt by the holders of those certificates of all collections on the
underlying mortgage assets to which those holders are entitled. These ratings
address the structural, legal and issuer-related aspects associated with those
certificates, the nature of the underlying mortgage assets and the credit
quality of the guarantor, if any. Ratings on mortgage pass-through certificates
do not represent any assessment of the likelihood of principal prepayments by
borrowers or of the degree by which those 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.
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INDEX OF PRINCIPAL DEFINITIONS
<TABLE>
<CAPTION>
PAGE
<S> <C>
1998 Policy Statement................... 110
Accrual Certificates.................... 38
Accrued Certificate Interest............ 38
ADA..................................... 75
ARM Loans............................... 27
Available Distribution Amount........... 37
Bankruptcy Code......................... 66
Book-Entry Certificates................. 37
capital asset........................... 84
Cash Flow Agreement..................... 29
Certificate Owner....................... 43
Code.................................... 42
Cooperatives............................ 24
CPR..................................... 33
Debt Service Coverage Ratio............. 25
Definitive Certificates................. 37
Depositor............................... 5, 24
Determination Date...................... 30, 38
Direct Participants..................... 43
Disqualified Organization............... 90, 108
Distribution Date Statement............. 41
DOL..................................... 106
DTC..................................... 37
Due Dates............................... 26
Due Period.............................. 30
EDGAR................................... 112
Equity Participation.................... 27
Events of Default....................... 57
Excess Funds............................ 36
excess servicing........................ 100
Exemptions.............................. 107
FAMC.................................... 28
FHLMC................................... 28
FNMA.................................... 28
Garn Act................................ 73
GNMA.................................... 28
Indirect Participants................... 43
Insurance and Condemnation Proceeds..... 49
L/C Bank................................ 62
Liquidation Proceeds.................... 49
Loan-to-Value Ratio..................... 25
Lock-out Date........................... 27
Lock-out Period......................... 27
<CAPTION>
PAGE
<S> <C>
Mark to Market Regulations.............. 93
market discount......................... 83
MBS..................................... 24
MBS Agreement........................... 28
MBS Issuer.............................. 28
MBS Servicer............................ 28
MBS Trustee............................. 28
Mortgage Asset Seller................... 24
Mortgage Notes.......................... 24
Mortgaged Properties.................... 24
Mortgages............................... 24
NCUA.................................... 110
Net Leases.............................. 25
Net Operating Income.................... 25
New Regulations......................... 95
Non-SMMEA Certificates.................. 108
Non-U.S. Person......................... 95
Nonrecoverable Advance.................. 40
OCC..................................... 109
OID Regulations......................... 79
OTS..................................... 110
Participants............................ 43
Parties in Interest..................... 106
Pass-Through Entity..................... 90, 91
Permitted Investments................... 48
Plans................................... 106
Pooling Agreement....................... 45
Prepayment Assumption................... 80
Prepayment Interest Shortfall........... 30
Prepayment Premium...................... 27
PTCE.................................... 107
PTCE 95-60.............................. 107
Random Lot Certificates................. 79
Record Date............................. 38
Reform Act.............................. 79
Registration Statement.................. 112
Regular Certificateholder............... 79
Regular Certificates.................... 76, 96
Related Proceeds........................ 40
Relief Act.............................. 74
REMIC................................... 12, 76
REMIC Certificates...................... 76
REMIC Pool.............................. 76
REMIC Regulations....................... 76
</TABLE>
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<TABLE>
<CAPTION>
PAGE
<S> <C>
REO Property............................ 47
Residual Certificateholders............. 86
Residual Certificates................... 38
SBJPA of 1996........................... 77
secured-creditor exemption.............. 72
Securities Act.......................... 111
Senior Certificates..................... 37
Servicing Standard...................... 47
SMMEA................................... 108
SPA..................................... 33
Standard Certificateholder.............. 98
<CAPTION>
PAGE
<S> <C>
Standard Certificates................... 98
Standard Prepayment Assumption.......... 33
Startup Day............................. 77
Stripped Certificates................... 98, 101
Sub-Servicing Agreement................. 48
Subordinate Certificates................ 37
thrift institutions..................... 89
Title V................................. 73
Treasury................................ 76
U.S. Person............................. 92
Value................................... 26
Warranting Party........................ 46
</TABLE>
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YOU SHOULD RELY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN
THIS PROSPECTUS SUPPLEMENT AND THE ATTACHED PROSPECTUS. WE HAVE NOT AUTHORIZED
ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION.
WE ARE NOT OFFERING THESE CERTIFICATES IN ANY STATE WHERE THE OFFER IS NOT
PERMITTED.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PROSPECTUS SUPPLEMENT
Summary of Terms.............................. S-8
Risk Factors.................................. S-27
Description of the Mortgage Pool.............. S-47
Description of the Certificates............... S-74
Servicing of the Mortgage Loans............... S-98
Yield and Maturity Considerations............. S-113
Certain Federal Income Tax Consequences....... S-123
Method of Distribution........................ S-124
Legal Matters................................. S-125
Ratings....................................... S-125
Legal Investment.............................. S-126
ERISA Considerations.......................... S-126
Index of Principal Definitions................ S-129
PROSPECTUS
Summary of Prospectus......................... 6
Risk Factors.................................. 13
Description of the Trust Funds................ 24
Yield and Maturity Considerations............. 30
The Depositor................................. 36
Use of Proceeds............................... 36
Description of the Certificates............... 37
Description of the Pooling Agreements......... 45
Description of Credit Support................. 61
Certain Legal Aspects of Mortgage Loans....... 64
Certain Federal Income Tax Consequences....... 76
State and Other Tax Considerations............ 105
Certain ERISA Considerations.................. 106
Legal Investment.............................. 108
Method of Distribution........................ 110
Incorporation of Certain Information by
Reference................................... 112
Legal Matters................................. 112
Financial Information......................... 112
Rating........................................ 113
Index of Principal Definitions................ 114
</TABLE>
DEALERS WILL BE REQUIRED TO DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN
ACTING AS UNDERWRITERS OF THESE CERTIFICATES AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS. IN ADDITION, ALL DEALERS SELLING THESE CERTIFICATES
WILL DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS UNTIL FEBRUARY 15, 2000.
$704,388,241 (APPROXIMATE)
CHASE COMMERCIAL
MORTGAGE SECURITIES
CORP.
(Depositor)
COMMERCIAL MORTGAGE
PASS-THROUGH
CERTIFICATES, SERIES 1999-2
------------------------
CLASS A-1 CERTIFICATES $105,920,000
CLASS A-2 CERTIFICATES $469,330,397
CLASS X CERTIFICATES $782,653,601
CLASS B CERTIFICATES $ 41,089,314
CLASS C CERTIFICATES $ 37,176,046
CLASS D CERTIFICATES $ 11,739,804
CLASS E CERTIFICATES $ 27,392,876
CLASS F CERTIFICATES $ 11,739,804
------------------------
PROSPECTUS SUPPLEMENT
------------------------
CHASE SECURITIES INC.
SALOMON SMITH BARNEY
NOVEMBER 17, 1999
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