<PAGE>
Filed Pursuant to Rule 424(b)(5)
Registration File No.: 333-30082
The information in this prospectus supplement is not complete and may be
changed. This prospectus supplement is not an offer to sell these securities
and it is not soliciting an offer to buy these securities in any state where
the offer or sale is not permitted.
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT MAY BE AMENDED OR
COMPLETED, DATED MARCH 6, 2000
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED MARCH 6, 2000)
[GRAPHIC OMITTED]
$633,813,982 (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 2000-1
-------------------------
Chase Commercial Mortgage Securities Corp. is offering certain classes of
the Series 2000-1 Commercial Mortgage Pass-Through Certificates, which
represent the beneficial ownership interests in a trust. The trust's assets
will primarily be 91 mortgage loans secured by first liens on 101 commercial
and multifamily properties and are generally the sole source of payments on the
certificates. The Series 2000-1 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 INITIAL
BALANCE OR PASS-
NOTIONAL AMOUNT (1) THROUGH RATE
--------------------------- --------------
<S> <C> <C>
Class A-1 ........ $125,175,000 %
- ------------------- ------------ --------------
Class A-2 ........ $392,439,752 %
- ------------------- ------------ --------------
Class X .......... $704,237,758
- ------------------- ------------ --------------
Class B .......... $ 36,972,481 %
- ------------------- ------------ --------------
Class C .......... $ 33,451,295 %
- ------------------- ------------ --------------
Class D .......... $ 10,563,566 %
- ------------------- ------------ --------------
Class E .......... $ 24,648,322 %
- ------------------- ------------ --------------
Class F .......... $ 10,563,566 %
- ------------------- ------------ --------------
<CAPTION>
PASS- EXPECTED
THROUGH RATE ASSUMED FINAL RATINGS RATED FINAL
DESCRIPTION DISTRIBUTION DATE (5) (S&P/DCR) DISTRIBUTION DATE
-------------- ----------------------- ----------- ------------------
<S> <C> <C> <C> <C>
Class A-1 ........ Fixed June 15, 2008 AAA/AAA April 15, 2032
- ---------------------------------- ----------------------- ----------- ------------------
Class A-2 ........ Fixed February 15, 2010 AAA/AAA April 15, 2032
- ---------------------------------- ----------------------- ----------- ------------------
Class X .......... WAC/IO (2) June 15, 2012 AAAr/AAA April 15, 2032
- ---------------------------------- ----------------------- ----------- ------------------
Class B .......... Fixed (3) March 15, 2010 AA/AA April 15, 2032
- ---------------------------------- ----------------------- ----------- ------------------
Class C .......... Fixed (3) March 15, 2010 A/A April 15, 2032
- ---------------------------------- ----------------------- ----------- ------------------
Class D .......... Fixed (3) March 15, 2010 A-/A- April 15, 2032
- ---------------------------------- ----------------------- ----------- ------------------
Class E .......... Variable (4) April 15, 2010 BBB/BBB April 15, 2032
- ---------------------------------- ----------------------- ----------- ------------------
Class F .......... Variable (4) April 15, 2010 BBB-/BBB- April 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-30 IN THIS PROSPECTUS SUPPLEMENT AND PAGE 13 OF THE
PROSPECTUS.
-------------------------
The underwriters, Chase Securities Inc., Goldman, Sachs & Co., 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 March 27, 2000. We expect to
receive from this offering approximately % of the initial principal amount
of the offered certificates, plus accrued interest from March 1, 2000, before
deducting expenses payable by us.
CHASE SECURITIES INC.
Book Running Manager
GOLDMAN, SACHS & CO.
SALOMON SMITH BARNEY
March , 2000
<PAGE>
CHASE COMMERCIAL MORTGAGE SECURITIES CORP.
Commercial Mortgage Pass-Through Certificates, Series 2000-1
[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.]
WASHINGTON MISSOURI ILLINOIS
1 Property 1 Property 1 Property
$9,283,003 $9,988,747 $3,245,752
1.32% of total 1.42% of total 0.46% of total
NEVADA MICHIGAN OHIO
3 Properties 4 Properties 18 Properties
$10,313,368 $19,341,161 $100,801,499
1.46% of total 2.75% of total 14.31% of total
PENNSYLVANIA NEW YORK MASSACHUSETTS
1 Property 7 Properties 1 Property
$5,733,531 $75,263,123 $41,928,574
0.81% of total 10.69% of total 5.95% of total
NEW JERSEY DISTRICT OF COLUMBIA MARYLAND
3 Properties 1 Property 4 Properties
$23,089,110 $4,446,402 $27,894,653
3.28% of total 0.63% of total 3.96% of total
VIRGINIA SOUTH CAROLINA GEORGIA
2 Properties 1 Property 4 Properties
$4,284,791 $2,455,921 $31,812,073
0.61% of total 0.35% of total 4.52% of total
CALIFORNIA ARIZONA COLORADO
22 Properties 1 Property 4 Properties
$172,546,457 $4,041,880 $23,685,527
24.50% of total 0.57% of total 3.36% of total
TEXAS LOUISIANA MISSISSIPPI
10 Properties 3 Properties 2 Properties
$45,665,660 $6,438,796 $15,580,383
6.48% of total 0.91% of total 2.21% of total
FLORIDA RHODE ISLAND
6 Properties 1 Property
$64,102,088 $2,295,260
9.10% of total 0.33% of total
[ ] less than or equal to 1.00%
of Initial Pool Balance
[ ] 1.01 - 5.00%
of Initial Pool Balance
[ ] 5.01 - 10.00%
of Initial Pool Balance
[ ] Greater than 10.00%
of Initial Pool Balance
<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 2000-1 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 2000-1
certificates and a description of the mortgage loans; and
Risk Factors, commencing on page S-30 of this prospectus supplement, which
describe risks that apply to the Series 2000-1 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-124 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 107 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 CERTIFICATES ............................ S-7
SUMMARY OF TERMS ................................... S-8
RISK FACTORS ....................................... S-30
Geographic Concentration Entails Risks S-30
Risks Relating to Loan Concentrations ........... S-30
Risks Relating to Enforceability of
Cross-Collateralization ...................... S-32
Ability to Incur Other Borrowings Entails
Risk ......................................... S-32
Borrower May Be Unable to Repay
Remaining Principal Balance on
Maturity Date or Anticipated
Prepayment Date .............................. S-34
Commercial and Multifamily Lending Is
Dependent Upon Net Operating
Income ....................................... S-35
Tenant Concentration Entails Risk ............... S-36
Certain Additional Risks Relating to
Tenants ...................................... S-36
Mortgaged Properties Leased to
Multiple Tenants Also Have Risks ............. S-37
Tenant Bankruptcy Entails Risks ................. S-37
Mortgage Loans Are Nonrecourse and
Are Not Insured or Guaranteed ................ S-37
Multifamily Properties Have Special
Risks ........................................ S-37
Retail Properties Have Special Risks ............ S-38
Office Properties Have Special Risks ............ S-38
Hotel Properties Have Special Risks ............. S-39
Risks Relating to Affiliation with a
Franchise or Hotel Management
Company ...................................... S-39
Industrial Properties Have Special Risks S-40
Self Storage Properties Have Special
Risks ........................................ S-40
Lack of Skillful Property Management
Entails Risks ................................ S-41
Some Mortgaged Properties May Not Be
Readily Convertible to Alternative
Uses ......................................... S-41
Limitations of Appraisals ....................... S-41
Your Lack of Control Over Trust Fund Can
Create Risks ................................. S-41
Potential Conflicts of Interest ................. S-42
Directing Certificateholder May Direct
Special Servicer Actions ..................... S-42
</TABLE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Bankruptcy Proceedings Entail Certain
Risks ........................................ S-42
Risks Relating to Prepayments and
Repurchases .................................. S-43
Risks Relating to Enforceability of Yield
Maintenance Charges .......................... S-44
Risks Relating to Borrower Default .............. S-44
Risks Relating to Certain Payments .............. S-45
Risks of Limited Liquidity and Market
Value ........................................ S-45
Different Timing of Mortgage Loan
Amortization Poses Certain Risks ............. S-45
Subordination of Subordinate Offered
Certificates ................................. S-45
Environmental Risks Relating to the
Mortgaged Properties ......................... S-46
Tax Considerations Relating to
Foreclosure .................................. S-46
Risks Associated with One Action Rules S-47
Property Insurance .............................. S-47
Zoning Compliance and Use Restrictions S-47
Risks Relating to Costs of Compliance
with Applicable Laws and Regulations S-48
No Reunderwriting of the Mortgage
Loans ........................................ S-48
Litigation ...................................... S-48
Book-Entry Registration ......................... S-48
Other Risks ..................................... S-48
DESCRIPTION OF THE MORTGAGE POOL ................... S-49
General ......................................... S-49
Affiliated Borrower Concentrations .............. S-50
AEC Borrower Concentration ................... S-50
Orange County Industrial/Office
Portfolio Borrower Concentration .......... S-51
Significant Mortgage Loans ...................... S-51
Regency Plaza One ............................ S-51
Westfork Plaza ............................... S-51
Greendale Mall ............................... S-52
40 Worth Street .............................. S-53
APD Loan ........................................ S-53
Certain Terms and Conditions of the
Mortgage Loans ............................... S-54
Prepayment Provisions ........................ S-54
Defeasance; Collateral Substitution .......... S-54
</TABLE>
S-4
<PAGE>
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Due-on-Sale and
Due-on-Encumbrance Provisions ......... S-55
Additional Mortgage Loan Information ........ S-55
Underwritten Net Cash Flow .................. S-63
Revenue .................................. S-63
Expenses ................................. S-63
Replacement Reserves ..................... S-64
Assessments of Property Condition ........... S-64
Property Inspection ...................... S-64
Appraisals ............................... S-64
Environmental Reports .................... S-64
Building Condition Reports ............... S-64
Earthquake Analyses ...................... S-64
The Mortgage Loan Sellers ................... S-65
Underwriting Standards ...................... S-65
GECC's Underwriting Standards ............... S-65
General .................................. S-65
Loan Analysis ............................ S-65
Loan Approval ............................ S-65
Debt Service Coverage Ratio and LTV
Ratio ................................. S-66
Escrow Requirements ...................... S-66
Chase's Underwriting Standards .............. S-67
General .................................. S-67
Loan Analysis ............................ S-67
Loan Approval ............................ S-67
Debt Service Coverage Ratio and LTV
Ratio ................................. S-67
Escrow Requirements ...................... S-67
Representations and Warranties;
Repurchases and Substitutions ............ S-68
Lock Box Accounts ........................... S-73
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-83
Principal Distribution Amount ............ S-83
</TABLE>
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Certain Calculations with Respect to
Individual Mortgage Loans ............. S-84
Excess Interest .......................... S-84
Allocation of Acceleration Yield
Maintenance Charges ...................... S-84
Assumed Final Distribution Date; Rated
Final Distribution Date .................. S-85
Subordination; Allocation of Collateral
Support Deficit .......................... S-85
Advances .................................... S-87
Appraisal Reductions ........................ S-89
Reports to Certificateholders; Certain
Available Information .................... S-90
Voting Rights ............................... S-93
Termination; Retirement of Certificates ..... S-94
The Trustee ................................. S-94
SERVICING OF THE MORTGAGE LOANS ................ S-96
General ..................................... S-96
The Master Servicer ......................... S-98
The Primary Servicers ....................... S-98
The Special Servicer ........................ S-98
Replacement of the Special Servicer ......... S-99
Servicing and Other Compensation and
Payment of Expenses ...................... S-99
Maintenance of Insurance .................... S-100
Modifications, Waiver and Amendments S-101
Realization Upon Defaulted Mortgage
Loans .................................... S-102
Inspections; Collection of Operating
Information .............................. S-104
Certain Matters Regarding the Master
Servicer, the Special Servicer and the
Depositor ................................ S-105
Events of Default ........................... S-106
Rights Upon Event of Default ................ S-107
Amendment ................................... S-107
YIELD AND MATURITY CONSIDERATIONS .............. S-109
Yield Considerations ........................ S-109
General .................................. S-109
Pass-Through Rate ........................ S-109
Rate and Timing of Principal
Payments .............................. S-109
Losses and Shortfalls .................... S-110
Certain Relevant Factors ................. S-110
Delay in Payment of Distributions ........ S-111
Unpaid Distributable Certificate
Interest .............................. S-111
</TABLE>
S-5
<PAGE>
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Weighted Average Life ............... S-111
Yield Sensitivity of the Offered
Certificates ..................... S-116
Yield Sensitivity of the Class X
Certificates ..................... S-116
CERTAIN FEDERAL INCOME TAX
CONSEQUENCES ........................... S-118
</TABLE>
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
METHOD OF DISTRIBUTION ................. S-119
LEGAL MATTERS .......................... S-120
RATINGS ................................ S-120
LEGAL INVESTMENT ....................... S-121
ERISA CONSIDERATIONS ................... S-121
INDEX OF PRINCIPAL DEFINITIONS ......... S-124
</TABLE>
S-6
<PAGE>
SUMMARY OF CERTIFICATES
<TABLE>
<CAPTION>
INITIAL
CLASS
CERTIFICATE PASS-
BALANCE OR THROUGH
NOTIONAL APPROXIMATE RATE
CLASS AMOUNT (1) CREDIT SUPPORT DESCRIPTION
<S> <C> <C> <C>
A-1 $125,175,000 26.50% Fixed
A-2 $392,439,752 26.50% Fixed
X $704,237,758 N/A WAC (Interest-Only) (2)
B $ 36,972,481 21.25% Fixed (3)
C $ 33,451,295 16.50% Fixed (3)
D $ 10,563,566 15.00% Fixed (3)
E $ 24,648,322 11.50% Variable (4)
F $ 10,563,566 10.00% Variable (4)
G $ 24,648,321 N/A Fixed
H $ 5,281,784 N/A Fixed
I $ 6,162,080 N/A Fixed
J $ 11,443,864 N/A Fixed
K $ 3,521,189 N/A Fixed
L $ 3,521,189 N/A Fixed
M $ 15,845,349 N/A Fixed
<CAPTION>
INITIAL
ASSUMED PASS- WEIGHTED PRINCIPAL OR
FINAL THROUGH AVERAGE EXPECTED NOTIONAL
DISTRIBUTION RATE LIFE RATINGS PRINCIPAL
CLASS DATE (5) (APPROX.) (YRS.)(6) CUSIP NO. (S&P/DCR) WINDOW (6)
<S> <C> <C> <C> <C> <C> <C>
A-1 6/15/08 % 5.70 AAA/AAA 4/00 - 6/08
A-2 2/15/10 % 9.57 AAA/AAA 6/08 - 2/10
X 6/15/12 % 9.04 AAAr/AAA 4/00 - 6/12
B 3/15/10 % 9.89 AA/AA 2/10 - 3/10
C 3/15/10 % 9.97 A/A 3/10 - 3/10
D 3/15/10 % 9.97 A-/A- 3/10 - 3/10
E 4/15/10 % 9.99 BBB/BBB 3/10 - 4/10
F 4/15/10 % 10.05 BBB-/BBB- 4/10 - 4/10
G N/A % N/A N/A N/A N/A
H N/A % N/A N/A N/A N/A
I N/A % N/A N/A N/A N/A
J N/A % N/A N/A N/A N/A
K N/A % N/A N/A N/A N/A
L N/A % N/A N/A N/A N/A
M N/A % N/A N/A N/A 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 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 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
B, Class C or Class D 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 interest
rate.
(4) The pass-through rate applicable to the Class E and Class F certificates
on each distribution date will be equal to the weighted average of the
net interest rates on the mortgage loans (in each case adjusted to accrue
on the basis of a 360-day year consisting of twelve 30-day months) minus
% per annum.
(5) 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 April 15, 2032.
See "Description of the Certificates--Assumed Final Distribution Date;
Rated Final Distribution Date" in this prospectus supplement.
(6) The weighted average life and period during which distributions of
principal would be received (or applied in the case of the notional
amount of Class X certificates) 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 that there are 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
Depositor................... Chase Commercial Mortgage Securities Corp., a
New York corporation. The depositor's address is
270 Park Avenue, 9th Floor, New York, New York
10017 and its telephone number is (212) 834-5723.
See "The Depositor" in the prospectus.
Master Servicer............. The Chase Manhattan Bank, a New York banking
corporation. The master servicer's principal
address is 380 Madison Avenue, 10th Floor, New
York, New York 10017 and its telephone number is
(212) 622-3401. See "Servicing of the Mortgage
Loans--The Master Servicer" in this prospectus
supplement.
Primary Servicers........... GE Capital Loan Services, Inc., will be
responsible for the primary servicing of the
mortgage loans sold to the depositor by General
Electric Capital Corporation pursuant to a
subservicing agreement between the master
servicer and GE Capital Loan Services, Inc. The
Chase Manhattan Bank, as master servicer, will
act as primary servicer of the mortgage loans
sold to the depositor by The Chase Manhattan
Bank. Under the pooling and servicing agreement,
the primary servicers are permitted to hire
subservicers with respect to their primary
servicing duties, and GE Capital Loan Services,
Inc. has informed the depositor that it intends
to use one or more subservicers on certain of the
mortgage loans. See "Servicing of the Mortgage
Loans--The Primary Servicers" in this prospectus
supplement.
Special Servicer............ Lennar Partners, Inc., a Florida corporation.
The special servicer's address is 760 N.W. 107th
Avenue, Miami, Florida 33172 and its telephone
number is (305) 485-2000. See "Servicing of the
Mortgage Loans--The Special Servicer" in this
prospectus supplement.
Trustee..................... State Street Bank and Trust Company, a trust
company chartered under the laws of the
Commonwealth of Massachusetts. The trustee's
address is 2 Avenue de Lafayette, Boston,
Massachusetts 02111 and its telephone number is
(617) 662-1223. 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. The paying agent's address
is 450 West 33rd Street, 14th Floor, New York,
New York 10001 and its telephone number is (212)
946-3200. See "Description of the
Certificates--Paying Agent, Certificate Registrar
and Authenticating Agent" in this prospectus
supplement.
S-8
<PAGE>
Mortgage Loan Sellers....... General Electric Capital Corporation, a New
York corporation, which is contributing 50.53% 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 49.47% of the mortgage loans by
aggregate principal balance as of the cut-off
date. General Electric Capital Corporation is an
affiliate of a primary servicer. The Chase
Manhattan Bank is also the master servicer, the
paying agent, the parent of the depositor and an
affiliate of Chase Securities Inc., one of the
underwriters. See "Description of the Mortgage
Pool--The Mortgage Loan Sellers" in this
prospectus supplement.
Cut-off Date................ March 10, 2000.
Closing Date................ On or about March 27, 2000.
Distribution Date........... The 15th day of the month or, if that day is
not a business day, the next business day,
beginning in April 2000, 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 36
mortgage loans, representing approximately 49.47%
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 2000-1:
o Class A-1
o Class A-2
o Class X
o Class B
o Class C
o Class D
S-9
<PAGE>
o Class E
o Class F
Series 2000-1 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 2000-1 certificates will collectively
represent beneficial ownership interests in a
trust created by Chase Commercial Mortgage
Securities Corp. The trust's assets will
primarily be 91 mortgage loans secured by first
liens on 101 commercial and multifamily
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%:
<TABLE>
<S> <C> <C>
Class A-1 ......... $125,175,000 principal amount
Class A-2 ......... $392,439,752 principal amount
Class X ........... $704,237,758 notional amount
Class B ........... $ 36,972,481 principal amount
Class C ........... $ 33,451,295 principal amount
Class D ........... $ 10,563,566 principal amount
Class E ........... $ 24,648,322 principal amount
Class F ........... $ 10,563,566 principal amount
</TABLE>
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 E, Class F and
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 E, Class F and Class X certificates:
<TABLE>
<S> <C>
Class A-1 ......... %
Class A-2 ......... %
Class B ........... %(1)
Class C ........... %(1)
Class D ........... %(1)
</TABLE>
----------
(1) For any distribution date, if the weighted
average of the net interest rates on the
mortgage loans (in each case adjusted to
accrue on the basis of a 360-day year
consisting of twelve 30-day months and net
S-10
<PAGE>
of all servicing and trustee fees) as of the
first day of the related due period is less
than the rate specified for the Class B,
Class C or Class D 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
interest rate.
B. Class E, Class F and
Class X Certificates..... If you invest in the Class E or Class F
certificates, your pass-through rate will be
equal to the weighted average interest rate of
the mortgage loans (in each case adjusted to
accrue on the basis of a 360-day year consisting
of twelve 30-day months and net of all servicing
and trustee fees), less % per annum.
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 (in each case
adjusted to accrue on the basis of a 360-day
year consisting of twelve 30-day months and net
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 B, Class
C, 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 loan term
modifications agreed to by the special servicer
or any modifications resulting from a borrower's
bankruptcy or insolvency. In addition, all the
mortgage loans accrue interest based on a
360-day year and the actual number of days
elapsed, also known as an actual/360 basis. The
interest rate for each mortgage loan 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:
S-11
<PAGE>
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 the principal amount of 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 the
principal amount of 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.
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.
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.
S-12
<PAGE>
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 2000-1
certificates that are not being offered by this
prospectus supplement). However, no principal
payments or loan losses will be allocated to the
Class X certificates, although loan losses will
reduce the notional amount of the Class X
certificates and, therefore, the amount of
interest they accrue.
CLASS A-1, CLASS A-2,
CLASS X*
CLASS B
CLASS C
CLASS D
CLASS E
CLASS F
PRIVATE
CERTIFICATES**
* 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 principal amount of
that class.
See "Description of the Certificates" in this
prospectus supplement.
S-13
<PAGE>
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
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 modification of a mortgage loan's interest
rate or principal balance 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 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 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 fails to make a required advance of this
type, the trustee is required to make this
advance. Neither the master servicer nor 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 and the trustee, as
applicable, will be entitled to interest on these
advances, compounded monthly, at the "Prime Rate"
as published in The Wall Street Journal as
described in this prospectus supplement. Interest
accrued on outstanding advances may result in
reductions in amounts otherwise payable on the
certificates.
S-14
<PAGE>
See "Description of the Certificates--Advances"
and "--Sub-ordination; 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 91 fixed
rate mortgage loans, each evidenced by one or
more promissory notes secured by first mortgages,
deeds of trust or similar security instruments on
101 commercial and multifamily properties.
The following tables set forth certain
anticipated characteristics of the mortgage
loans as of the cut-off 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. The
principal balance of each mortgage loan as of
the cut-off date assumes the timely receipt of
principal scheduled to be paid in March 2000 on
each mortgage loan and no defaults,
delinquencies or prepayments on any mortgage
loan as of the cut-off date.
S-15
<PAGE>
The mortgage loans will have the following
approximate characteristics as of the cut-off
date:
<TABLE>
<S> <C>
Aggregate principal balance (1) ..... $704,237,759
Number of mortgage loans ............ 91
Number of mortgaged properties....... 101
Number of "balloon" mortgage
loans (2) ........................... 90
Number of mortgage loans with
anticipated prepayment dates ........ 1
Range of mortgage loan principal
balances (3) ........................ $1,073,695 to $42,500,000
Average mortgage loan principal
balance ............................. $ 7,738,876
Range of mortgage rates ............. 6.97% to 9.35%
Weighted average mortgage rate ...... 8.36%
Range of original terms to
maturity (4) ........................ 60 to 150 months
Weighted average original term to
maturity (4) ........................ 116 months
Range of remaining terms to
maturity date (4) ................... 60 months to 147 months
Weighted average remaining term
to maturity date (4) ................ 114 months
Range of original amortization
terms ............................... 300 months to 360 months
Weighted average original
amortization term ................... 353 months
Range of remaining amortization
terms ............................... 296 months to 360 months
Weighted average remaining
amortization term ................... 351 months
Range of loan to value ratios ....... 44.31% to 83.19%
Weighted average loan to value
ratio ............................... 71.14%
Range of loan to value ratios as of
the maturity date (4) ............... 36.80% to 74.58%
Weighted average loan to value
ratio as of the maturity date (4) ... 64.10%
Range of occupancy rates (5) ........ 72.80% to 100.00%
Weighted average occupancy
rate (5) ............................ 95.00%
Range of debt service coverage
ratios .............................. 1.16x to 2.24x
Weighted average debt service
coverage ratio ...................... 1.29x
</TABLE>
----------
(1) Subject to a permitted variance of plus or minus 10%.
(2) Excludes 1 mortgage loan with an anticipated prepayment date.
S-16
<PAGE>
(3) 2 cross-collateralized and cross-defaulted
mortgage loans have an aggregate principal
balance of $45,692,308.
(4) In the case of 1 mortgage loan, the
anticipated prepayment date.
(5) Includes 5 hotel properties, representing
approximately 6.19% 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
72.80% to 88.20%; if the mortgage loans
secured by hotel properties are excluded,
the range of occupancy rates of all other
mortgaged properties is 75.00% to 100.00%
and the weighted average occupancy rate of
all other mortgaged properties is 95.92%.
SELLERS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
AGGREGATE
PRINCIPAL
NUMBER OF BALANCE OF THE % OF INITIAL
MORTGAGE MORTGAGE POOL
SELLER LOANS LOANS BALANCE
- -------------------------- ----------- ---------------- -------------
<S> <C> <C> <C>
General Electric Capital
Corporation ............ 55 $355,847,280 50.53%
The Chase Manhattan
Bank ................... 36 348,390,478 49.47
-- ------------ ------
Total .................. 91 $704,237,759 100.00%
== ============ ======
</TABLE>
S-17
<PAGE>
CURRENT USES OF THE MORTGAGED PROPERTIES (1)
<TABLE>
<CAPTION>
AGGREGATE
PRINCIPAL
NUMBER OF BALANCE OF THE % OF INITIAL
MORTGAGED MORTGAGE POOL
CURRENT USE PROPERTIES LOANS BALANCE
- ----------------------------- ------------ ---------------- -------------
<S> <C> <C> <C>
Multifamily ............... 32 $211,483,427 30.03%
Office .................... 20 185,643,514 26.36
Anchored Retail ........... 21 172,162,085 24.45
Hotel (2) ................. 5 43,613,888 6.19
Industrial ................ 10 43,274,474 6.14
Unanchored Retail ......... 5 29,528,346 4.19
Self Storage .............. 8 18,532,024 2.63
-- ------------ ------
Total ..................... 101 $704,237,759 100.00%
=== ============ ======
</TABLE>
----------
(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).
(2) 4 of these mortgage loans, representing
approximately 5.90% of the aggregate
principal balance of the pool of mortgage
loans as of the cut-off date, are
considered by the applicable mortgage loan
seller to be full-service hotel mortgaged
properties.
PROPERTY TYPE
[GRAPHIC OMITTED: Pie chart depicting Property
Type by percentage of Mortgage Pool, as listed below.]
Office 26.36%
Anchored Retail 24.45%
Hotel 6.19%
Industrial 6.14%
Unanchored Retail 4.19%
Self Storage 2.63%
Multifamily 30.03%
The mortgaged properties are located in 22
states and the District of Columbia. The
following table lists the states which have
concentrations of mortgaged properties above 5%:
S-18
<PAGE>
GEOGRAPHIC DISTRIBUTION
<TABLE>
<CAPTION>
AGGREGATE
PRINCIPAL
NUMBER OF BALANCE OF THE % OF INITIAL
MORTGAGED MORTGAGE POOL
STATE PROPERTIES LOANS BALANCE
- ------------------------ ------------ ---------------- -------------
<S> <C> <C> <C>
California ........... 22 $172,546,457 24.50%
Ohio ................. 18 100,801,499 14.31
New York ............. 7 75,263,123 10.69
Florida .............. 6 64,102,088 9.10
Texas ................ 10 45,665,660 6.48
Other States ......... 38 245,858,932 34.91
--- ------------ ------
Total ................ 101 $704,237,759 100.00%
=== ============ ======
</TABLE>
RANGE OF MORTGAGE RATES
<TABLE>
<CAPTION>
AGGREGATE
PRINCIPAL
NUMBER OF BALANCE OF THE % OF INITIAL
RANGE OF MORTGAGE MORTGAGE MORTGAGE POOL
RATES LOANS LOANS BALANCE
- ---------------------------- ----------- ---------------- -------------
<S> <C> <C> <C>
6.970% to 7.499% ......... 1 $ 9,095,565 1.29%
7.500% to 7.899% ......... 19 120,028,728 17.04
7.900% to 8.199% ......... 18 125,447,767 17.81
8.200% to 8.499% ......... 24 169,951,110 24.13
8.500% to 8.749% ......... 19 177,430,111 25.19
8.750% to 8.999% ......... 6 38,429,067 5.46
9.000% to 9.350% ......... 4 63,855,410 9.07
-- ------------ ------
Total .................... 91 $704,237,759 100.00%
== ============ ======
</TABLE>
RANGE OF PRINCIPAL BALANCES
<TABLE>
<CAPTION>
AGGREGATE
PRINCIPAL
NUMBER OF BALANCE OF THE % OF INITIAL
RANGE OF CUT-OFF DATE MORTGAGE MORTGAGE POOL
BALANCES LOANS LOANS BALANCE
- ----------------------- ----------- ---------------- -------------
<S> <C> <C> <C>
$1,073,695 to
$3,000,000 .......... 29 $ 63,622,414 9.03%
$3,000,001 to
$5,000,000 .......... 19 79,030,917 11.22
$5,000,001 to
$9,000,000 .......... 18 122,152,567 17.35
$9,000,001 to
15,000,000 .......... 16 178,821,285 25.39
$15,000,001 to
$30,000,000 ......... 5 93,888,079 13.33
$30,000,001 to
$42,000,000 ......... 2 81,744,045 11.61
$42,000,001 to
$42,500,000.......... 2 84,978,452 12.07
-- ------------ ------
Total ............... 91 $704,237,759 100.00%
== ============ ======
</TABLE>
S-19
<PAGE>
RANGE OF DSCRS
<TABLE>
<CAPTION>
AGGREGATE
PRINCIPAL
NUMBER OF BALANCE OF THE % OF INITIAL
MORTGAGE MORTGAGE POOL
RANGE OF DSCRS LOANS LOANS BALANCE
- ------------------------------ ----------- ---------------- -------------
<S> <C> <C> <C>
1.1600x to 1.1999x ......... 3 $ 16,351,910 2.32%
1.2000x to 1.2299x ......... 25 182,009,508 25.84
1.2300x to 1.2599x ......... 12 132,401,322 18.80
1.2600x to 1.2999x ......... 13 135,941,957 19.30
1.3000x to 1.3699x ......... 17 114,025,069 16.19
1.3700x to 1.4999x ......... 14 81,570,387 11.58
1.5000x to 2.2400x ......... 7 41,937,607 5.96
-- ------------ ------
Total ...................... 91 $704,237,759 100.00%
== ============ ======
</TABLE>
RANGE OF LTV RATIOS
<TABLE>
<CAPTION>
AGGREGATE
PRINCIPAL
NUMBER OF BALANCE OF THE % OF INITIAL
MORTGAGE MORTGAGE POOL
RANGE OF LTV RATIOS LOANS LOANS BALANCE
- ---------------------------- ----------- ---------------- -------------
<S> <C> <C> <C>
44.31% to 59.99% ......... 7 $ 45,139,961 6.41%
60.00% to 64.99% ......... 11 93,479,661 13.27
65.00% to 68.99% ......... 12 116,376,964 16.53
69.00% to 72.99% ......... 12 91,144,851 12.94
73.00% to 76.99% ......... 27 156,855,426 22.27
77.00% to 79.99% ......... 17 176,248,807 25.03
80.00% to 83.19% ......... 5 24,992,089 3.55
-- ------------ ------
Total .................... 91 $704,237,759 100.00%
== ============ ======
</TABLE>
RANGE OF REMAINING TERM TO MATURITY DATE
OR ANTICIPATED PREPAYMENT DATE
<TABLE>
<CAPTION>
AGGREGATE
PRINCIPAL
NUMBER OF BALANCE OF THE % OF INITIAL
RANGE OF REMAINING MORTGAGE MORTGAGE POOL
TERMS (MOS.) LOANS LOANS BALANCE
- ---------------------- ----------- ---------------- -------------
<S> <C> <C> <C>
60 to 79 ........... 2 $ 19,260,157 2.73%
80 to 99 ........... 10 84,104,718 11.94
100 to 116 ......... 12 107,102,810 15.21
117 to 118 ......... 34 238,543,323 33.87
119 to 120 ......... 25 199,099,438 28.27
121 to 129 ......... 7 42,041,396 5.97
130 to 147 ......... 1 14,085,917 2.00
-- ------------ ------
Total .............. 91 $704,237,759 100.00%
== ============ ======
</TABLE>
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):
55 of the mortgage loans, representing
approximately
S-20
<PAGE>
50.53% 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 1st day of each
month, and 36 mortgage loans, representing
approximately 49.47% 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 1st 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.
All of the mortgage loans accrue interest on an
actual/360 basis.
See "Description of the Mortgage Pool--Certain
Terms and Conditions of the Mortgage Loans" in
this prospectus supplement.
AMORTIZATION TYPES
<TABLE>
<CAPTION>
AGGREGATE
PRINCIPAL
NUMBER OF BALANCE OF THE % OF INITIAL
MORTGAGE MORTGAGE POOL
TYPE OF AMORTIZATION LOANS LOANS BALANCE
- ------------------------- ----------- ---------------- -------------
<S> <C> <C> <C>
Balloon Loans ......... 90 $695,142,193 98.71%
APD Loan .............. 1 9,095,565 1.29
-- ------------ ------
Total ................. 91 $704,237,759 100.00%
== ============ ======
</TABLE>
1 mortgage loan, representing approximately
1.29% of the aggregate principal balance of the
pool of mortgage loans as of the cut-off date,
provides 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
mortgage loan has been paid. Any amount received
in respect of that deferred interest 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 property will be applied towards the
payment of principal (without payment of a yield
maintenance charge) of the mortgage loan until
its principal balance has been reduced to zero.
A substantial principal payment would be
required to pay off this mortgage loan on its
anticipated prepayment date. The amortization
term of the mortgage loan is the same as the
remaining term to maturity if this mortgage loan
is not prepaid on its anticipated prepayment
date.
S-21
<PAGE>
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 mortgage loans do not permit voluntary
prepayment until approximately 90 days preceding
the maturity date or anticipated prepayment date
or after the anticipated prepayment date, except
with respect to 10 mortgage loans, representing
approximately 9.96% of the aggregate principal
balance of the pool of mortgage loans as of the
cut-off date, which do not permit voluntary
prepayment until approximately 120 to 180 days
prior to the stated maturity date.
All of the mortgage loans permit the related
borrower to defease the mortgage loan on any due
date following a lock-out period equal to 2
years following the Closing Date. Defeasance
permits the related borrower to substitute
direct non-callable U.S. Treasury obligations
for the related mortgaged property as collateral
for the mortgage loan.
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.
S-22
<PAGE>
SIGNIFICANT LOANS
TEN LARGEST MORTGAGE LOANS
<TABLE>
<CAPTION>
% OF
NUMBER OF INITIAL
MORTGAGED CUT-OFF DATE POOL
PROPERTY NAME PROPERTIES BALANCE BALANCE PROPERTY TYPE
- ------------------------------- ------------ -------------- --------- -------------------
<S> <C> <C> <C> <C>
Regency Plaza One ............. 1 $ 42,500,000 6.03% Office
Westfork Plaza ................ 1 42,478,452 6.03 Anchored Retail
Greendale Mall ................ 1 41,928,574 5.95 Anchored Retail
40 Worth Street ............... 1 39,815,471 5.65 Office
Orange County
Portfolio III (1) ............ 5 24,687,115 3.51 Office/Industrial
Orange County
Portfolio IV (1) ............. 4 21,005,193 2.98 Office/Industrial
Media Works ................... 1 16,535,024 2.35 Office
Timber Ridge
Apartments ................... 1 16,485,748 2.34 Multifamily
Northpark I, II & III ......... 1 15,175,000 2.15 Office
AEC II Bradford at
Easton
Apartments ................... 1 14,085,917 2.00 Multifamily
- ------------ -----
Total/Weighted
Average ...................... 17 $274,696,493 39.01%
== ============ =====
<CAPTION>
STATED
REMAINING CUT-OFF LTV RATIO
MORTGAGE TERM UNDERWRITTEN DATE LTV AT
PROPERTY NAME RATE (MOS.) DSCR RATIO MATURITY
- ------------------------------- ---------- ----------- -------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Regency Plaza One ............. 8.62% 120 1.27x 61.15% 55.59%
Westfork Plaza ................ 9.00% 118 1.20x 78.96% 72.39%
Greendale Mall ................ 8.23% 81 1.34x 65.82% 61.96%
40 Worth Street ............... 8.67% 118 1.23x 69.00% 62.82%
Orange County
Portfolio III (1) ............ 8.17% 113 1.38x 73.69% 66.54%
Orange County
Portfolio IV (1) ............. 8.17% 113 1.27x 78.00% 70.42%
Media Works ................... 8.53% 118 1.24x 73.82% 66.99%
Timber Ridge
Apartments ................... 8.28% 119 1.24x 67.29% 60.69%
Northpark I, II & III ......... 8.47% 120 1.34x 65.13% 58.95%
AEC II Bradford at
Easton
Apartments ................... 7.89% 147 1.20x 77.40% 65.93%
Total/Weighted
Average ...................... 8.48% 113 1.27x 70.35% 64.03%
</TABLE>
- ----------
(1) These mortgage loans are cross-collateralized and cross-defaulted with
each other.
Regency Plaza One........... The Regency Plaza One loan (identified as Loan
No. 75 on Annex A to this prospectus supplement)
is secured by a first lien on a 13-story
multi-tenant office building located in Santa
Clara, California. The building contains
approximately 224,334 square feet of net leasable
area. The building was constructed in 1986. As of
January 1, 2000, the mortgaged property was
approximately 100% occupied. The sponsor of the
borrower is Maskatiya, Suri & Company. Maskatiya,
Suri & Company owns 2 other commercial properties
in the San Francisco bay area.
Westfork Plaza.............. The Westfork Plaza loan (identified as Loan No.
90 on Annex A to this prospectus supplement) is
secured by a first lien on an anchored community
shopping center in Pembroke Pines, Florida.
Westfork Plaza contains approximately 396,022
square feet of net leasable area and is anchored
by K-Mart, Winn-Dixie and Regal Cinemas. Westfork
Plaza contains additional outparcels, including a
Walgreens, which are owned by third parties, and
are not part of the collateral. The center was
constructed in 1999, and as of January 31, 2000,
the mortgaged property was approximately 97.47%
occupied. The sponsor of the borrower is Swerdlow
Real Estate Group, Inc, a private REIT. The REIT
owns 13 commercial properties containing over
3,400,000 square feet of net leasable area,
primarily in South Florida.
Greendale Mall.............. The Greendale Mall loan (identified as Loan No.
52 on Annex A to this prospectus supplement) is
secured by a first lien on a one and two-story
enclosed regional mall and a four-story office
building located in Worcester, Massachusetts. The
mall contains approximately 310,909 square feet
of net leasable area and is
S-23
<PAGE>
anchored by Marshall's, T.J. Maxx and Best Buy.
The office building contains approximately
119,860 square feet of net leasable area leased
to a single tenant. The mall and office
buildings were completed in 1987 and the mall
was expanded in 1997. The mall was approximately
81.68% occupied as of January 25, 2000, and the
office building was approximately 100% occupied
as of January 25, 2000. The sponsor of the
borrower is Simon Property Group, Inc. As of
December 1999, Simon Property Group, Inc. had an
ownership interest in 259 properties in 36
states.
40 Worth Street............. The 40 Worth Street loan (identified as Loan
No. 5 on Annex A to this prospectus supplement)
is secured by a first lien on a 16-story
multi-tenant office building located in New York,
New York. The building contains approximately
560,387 square feet of net leasable area. As of
November 17, 1999, the building was approximately
96.48% occupied. The building was constructed in
1927 and renovated in 1993. The sponsors of the
borrower are Jeffrey and Aaron Gural, Barry Gosin
and Newmark and Company. Newmark and Company
manages 25 million square feet of commercial
space.
Orange County Industrial/Office
Portfolio III............... The Orange County Industrial/Office Portfolio
III loan (identified as Loan No. 71 on Annex A to
this prospectus supplement) is secured by first
liens on 3 industrial properties and 2 office
properties located throughout Orange County,
California. The portfolio contains approximately
311,263 square feet of net leasable area in the
aggregate and, as of December 27, 1999, had a
weighted average occupancy of approximately
99.22%. The 3 industrial properties contain
approximately 210,517 square feet of net leasable
area and, as of December 27, 1999, had a weighted
average occupancy rate of approximately 98.68%.
The industrial properties are located in Irvine,
California (2) and Brea, California. The 2 office
properties contain approximately 100,746 square
feet of net leasable area in the aggregate and,
as of December 27, 1999, were approximately 100%
occupied. The office properties are located in
Newport Beach, California and Tustin, California.
The Orange County Industrial/Office Portfolio III
loan is cross-collateralized and cross-defaulted
with the Orange County Industrial/Office
Portfolio IV loan. The sponsor of the borrower is
Olen Properties Corp. As of November 1999, Olen
Properties Corp.'s portfolio included over 3.5
million square feet of commercial space and 6,400
multifamily units located throughout Southern
California, Nevada and Florida.
Orange County Industrial/Office
Portfolio IV................ The Orange County Industrial/Office Portfolio
IV loan (identified as Loan No. 72 on Annex A to
this prospectus supplement) is secured by first
liens on 2 industrial properties and 2 office
properties located throughout Orange County,
California. The portfolio contains approximately
212,905 square feet of net leasable area in the
aggregate and had a weighted average
S-24
<PAGE>
occupancy rate of approximately 98.66% based on
rent rolls dated from December 27, 1999 to
February 25, 2000. The 2 industrial properties
contain a total of 137,341 square feet of net
leasable area and had a weighted averaged
occupancy rate of approximately 97.42% based on
rent rolls dated from December 27, 1999 to
February 25, 2000. The industrial properties are
located in Costa Mesa, California, and Laguna
Hills, California. The 2 office properties
contain approximately 75,564 square feet of net
leasable area in the aggregate and, as of
December 27, 1999, had a weighted average
occupancy rate of 100%. The office properties
are located in Newport Beach, California. The
Orange County Industrial/Office Portfolio IV
loan is cross-collateralized and cross-defaulted
with the Orange County Industrial/Office
Portfolio III loan. The sponsor of the borrower
is Olen Properties Corp. As of November 1999,
Olen Properties Corp.'s portfolio included over
3.5 million square feet of commercial space and
6,400 multifamily units located throughout
southern California, Nevada and Florida.
Media Works................. The Media Works loan (identified as Loan No. 65
on Annex A to this prospectus supplement) is
secured by a first lien on a 2-story multi-tenant
office building located in Marina Del Rey,
California. The building contains approximately
98,005 square feet of net leasable area and was
100% occupied as of October 1, 1999. The building
was originally constructed in 1971 and was
completely renovated in 1999. The sponsor of the
borrower is Steaven K. Jones. Mr. Jones is a
principal of Steaven Jones Development Company.
Timber Ridge Apartments..... The Timber Ridge Apartments loan (identified as
Loan No. 84 on Annex A to this prospectus
supplement) is secured by a first lien on a
311-unit, garden apartment complex consisting of
7 two-story buildings and 2 one-story buildings
located in Boulder, Colorado. The property
contains approximately 217 one-bedroom units, 91
two-bedroom units and 3 three-bedroom units.
Amenities available to residents include a
fitness center, a pool and 9 laundry rooms. The
complex was constructed in 1958 and renovated
between 1998 and 1999. As of January 25, 2000,
the mortgaged property was approximately 99.36%
occupied. The general partner of the borrower is
Mathew C. Dyroff. Mathew C. Dyroff owns 10
apartment buildings in Boulder, Colorado.
North Park I, II & III...... The North Park I, II & III loan (identified as
Loan No. 68 on Annex A to this prospectus
supplement) is secured by a first lien on an
office development in Dallas, Texas. The
mortgaged property is comprised of three
contiguous buildings, which are two, four and
eight stories in height. The three buildings
contain approximately 240,897 square feet of net
leasable area. The mortgaged property was
completed in 1974 and extensively renovated in
1999. As of November 15, 1999, the subject was
approximately 84.46% occupied. The principal of
the borrower is Kolter
S-25
<PAGE>
Holdings Texas, Inc. Kolter Holdings is a
privately owned development company that
currently owns or manages over 5.5 million
square feet of commercial space.
AEC II Bradford at
Easton Apartments........... The AEC II Bradford at Easton Apartments loan
(identified as Loan No. 12 on Annex A to this
prospectus supplement) is secured by a first lien
on a 324-unit garden and townhouse apartment
complex consisting of 37 two-story buildings
located in Columbus, Ohio. The property contains
approximately 88 one-bedroom units, 214
two-bedroom units and 22 three-bedroom units.
Amenities available to residents include an
outdoor pool, a clubhouse/fitness center and a
gazebo overlooking a wooded lake. The complex was
constructed in 1996. As of October 31, 1999, the
complex was approximately 97.53% occupied. The
sponsor of the borrower is Associated Estates
Realty Corporation, a NYSE listed company that
manages 143 multifamily properties in the United
States.
ADDITIONAL ASPECTS OF CERTIFICATES
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.
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) Clearstream
Banking, societe anonyme or The Euroclear System
in Europe. Transfers within DTC, Clearstream
Banking, societe anonyme 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.
S-26
<PAGE>
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 interest that is deferred
after the anticipated prepayment date on the
mortgage loan that has an anticipated prepayment
date and the related distribution account for
this deferred interest) as two separate REMICs--a
Lower-Tier REMIC and an Upper-Tier REMIC--for
federal income tax purposes. The portion of the
trust representing the deferred interest
described above 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.
S-27
<PAGE>
o The Class S certificate will represent an
interest in a grantor trust with respect to
interest that is deferred after the
anticipated prepayment date on the mortgage
loan that has an anticipated prepayment date.
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.
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>
<S> <C> <C>
S&P DCR
------ ------
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>
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
S-28
<PAGE>
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 "Rating" and "Yield and Maturity
Considerations" in the prospectus.
See "Ratings" in this prospectus supplement and
"Rating" in the prospectus for a discussion of
the basis upon which ratings are given and the
conclusions that may not be drawn from a rating.
S-29
<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, Ohio, New York, Florida, Texas
and Massachusetts represent 24.50%, 14.31%, 10.69%, 9.10%, 6.48% and 5.95%,
respectively, of the aggregate principal balance of the pool of mortgage loans
as of the cut-off date. 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 6.03% 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 2 mortgage loans that are cross-collateralized and cross-defaulted
represent, in the aggregate, approximately 6.49% of the aggregate
principal balance of the pool of mortgage loans as of the cut-off date.
See "--Risks Relating to Enforceability of Cross-Collateralization"
below and "Description of the Mortgage Pool--Affiliated Borrower
Concentration--Orange County Industrial/Office Portfolio Borrower
Concentration" in this prospectus supplement.
o The 3 largest mortgage loans represent, in the aggregate, approximately
18.02% 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 39.01% 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 2% 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 type concentrations in excess of
5% of the aggregate principal balance of the pool of mortgage loans as of the
cut-off date:
S-30
<PAGE>
SIGNIFICANT PROPERTY TYPE CONCENTRATIONS
<TABLE>
<CAPTION>
AGGREGATE
NUMBER OF CUT- % OF INITIAL
MORTGAGED OFF DATE POOL
PROPERTY TYPE PROPERTIES BALANCE (1) BALANCE (1)
- ------------------- ------------ --------------- --------------
<S> <C> <C> <C>
Multifamily ....... 32 $211,483,427 30.03%
Retail (3) ........ 26 $201,690,432 28.64%
Office ............ 20 $185,643,514 26.36%
Hotel (4) ......... 5 $ 43,613,888 6.19%
Industrial ........ 10 $ 43,274,474 6.14%
<CAPTION>
WEIGHTED AVERAGES
-----------------------------------------------------------------------
STATED
REMAINING
TERM TO CUT-OFF LTV
MORTGAGE MATURITY DATE LTV RATIO AT
PROPERTY TYPE RATE (MOS.) (2) OCCUPANCY DSCR RATIO MATURITY (2)
- ------------------- ---------- ------------ ----------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Multifamily ....... 8.07% 117 96.52% 1.24x 74.93% 67.28%
Retail (3) ........ 8.38% 107 93.78% 1.29x 72.78% 66.53%
Office ............ 8.52% 118 97.56% 1.29x 67.62% 61.00%
Hotel (4) ......... 8.96% 118 81.03% 1.46x 62.43% 53.07%
Industrial ........ 8.30% 103 97.81% 1.31x 71.81% 65.60%
</TABLE>
- ----------
(1) By allocated loan amount.
(2) Calculated with respect to the anticipated prepayment date for the
mortgage loan with an anticipated prepayment date.
(3) 21 of such mortgage loans, representing approximately 24.45% of the
aggregate principal balance of the pool of mortgage loan as of the
cut-off date, are considered by the mortgage loan sellers to be
"anchored" retail mortgaged properties.
(4) 4 of such mortgage loans, representing approximately 5.90% of the
aggregate principal balance of the pool of mortgage loans as of the
cut-off date, are considered by the applicable mortgage loan seller to be
full-service hotel mortgaged properties.
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 related borrower concentrations of 2 or more
mortgage loans 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 STATED
PRINCIPAL % REMAINING
NUMBER OF BALANCE OF THE OF INITIAL TERM TO
LOANS/ MORTGAGE POOL MORTGAGE MATURITY CUT-OFF DATE LTV RATIO AT
SPONSOR NAME PROPERTIES LOANS BALANCE RATE (MOS.) DSCR LTV RATIO MATURITY
- ------------------- ------------ ---------------- ------------ ---------- ---------- ---------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Associated
Estates Realty
Corp. ............ 17/17 $98,303,456 13.96% 7.86% 116 1.20x 76.59% 68.47%
Olen Properties
Corp. (1) ........ 2/9 $45,692,308 6.49% 8.17% 113 1.33x 75.67% 68.32%
</TABLE>
- ----------
(1) The mortgage loans within this group are cross-collateralized and
cross-defaulted with each other.
See "Description of the Mortgage Pool--Affiliated Borrower Concentrations"
in this prospectus supplement.
o In addition to those described above, 4 groups of mortgage loans have
borrowers related to each other, but 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 group of mortgage loans is
cross-collateralized or cross-defaulted.
o 4 mortgage loans (identified as Loan No. 27, 47, 71 and 72 on Annex A
to this prospectus supplement), representing approximately 8.06% 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.
S-31
<PAGE>
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 could 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 general, 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 1 mortgage loan (identified as Loan No. 76 on Annex A to
this prospectus supplement), representing approximately 0.34% of the aggregate
principal balance of the pool of mortgage loans as of the cut-off date, do not
require the related borrower to be a single-purpose entity. 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 (identified as Loan No. 71
and 72 on Annex A to this prospectus supplement), representing approximately
6.49% 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.
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.
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<PAGE>
o With respect to 1 mortgage loan (identified as Loan No. 62 on Annex A
to this prospectus supplement), representing approximately 1.29% of the
aggregate principal balance of the pool of mortgage loans as of the
cut-off date, the related borrower has debt payable to a third party
secured by the related mortgaged property. Such debt is not part of the
pool of mortgage loans and has been subordinated to the mortgage loan.
o With respect to 1 mortgage loan (identified as Loan No. 70 on Annex A
to this prospectus supplement), representing approximately 0.63% 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
unrelated third party.
o With respect to 5 mortgage loans (identified as Loan No. 5, 34, 36, 58
and 61 on Annex A to this prospectus supplement), representing
approximately 9.67% 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.
o With respect to 1 mortgage loan (identified as Loan No. 68 on Annex A
to this prospectus supplement), representing approximately 2.15% of the
aggregate principal balance of the pool of mortgage loans as of the
cut-off date, the related borrower has incurred secured equipment
financing.
o The terms of 2 mortgage loans (identified as Loan No. 36 and 58 on
Annex A to this prospectus supplement), representing approximately 3.16%
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 and permit 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. The
amount of such debt is limited to percentages of the outstanding
principal balance of the mortgage loans.
o The terms of certain loans permit or require the borrowers to post
letters of credit and/or surety bonds for the benefit of the mortgage
loan, which may constitute a contingent reimbursement obligation of the
related borrower or an affiliate. The issuing bank or surety will not
typically agree to subordination and standstill protection benefiting
the mortgagee.
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. Moreover, in general, any borrower
that does not meet single purpose entity criteria may not be restricted from
incurring unsecured debt.
The owner of the borrower under the Westfork Plaza loan (identified as
Loan No. 90 on Annex A to this prospectus supplement), representing
approximately 6.03% of the aggregate principal balance of the pool of mortgage
loans as of the cut-off date, has pledged its equity interests in the related
borrower as partial security for a revolving line of credit held by General
Electric Capital Corporation. The line of credit is also secured by the equity
interests in 12 other entities which own real estate in various stages of
development. See "Description of the Mortgage Pool--Significant Mortgage
Loans--Westfork Plaza" in this prospectus supplement. 1 additional mortgage
loan (identified as Loan No. 74 on Annex A to this prospectus supplement),
representing approximately 0.71% 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. These forms of mezzanine debt financing
effectively reduce the indirect equity interest of any owner in the related
mortgaged property. Also, upon default under 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.
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
non-managing 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
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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 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.
Except as described below, the subordinate debt creditors have entered
into subordination and standstill agreements with the lender acknowledging that
the subordinate debt lender will not foreclose or take other enforcement action
for so long as the mortgage loan is outstanding, 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.
With respect to 1 mortgage loan (identified as Loan No. 62 on Annex A to
this prospectus supplement), representing approximately 1.29% of the aggregate
principal balance of the pool of mortgage loans as of the cut-off date, the
related borrower has entered into a payment in lieu of tax agreement ("Pilot
Agreement") with the city of Vineland, New Jersey. Portions of the payments
under the Pilot Agreement are treated as a credit against a $1 million urban
enterprise zone loan from the city. The terms of the related loan documents
require an escrow equal to the payments required under the Pilot Agreement.
With respect to 1 mortgage loan (identified as Loan No. 61, on Annex A to
this prospectus supplement), representing approximately 0.40% of the aggregate
principal balance of the pool of mortgage loans as of the cut-off date, the
related borrower has incurred $300,282 of existing unsecured subordinate debt
to various limited partners of the borrower. The limited partners have executed
letter agreements stipulating that such debt will not bear interest and that it
is payable when the mortgaged property is sold.
With respect to 1 mortgage loan (identified as Loan No. 68 on Annex A to
this prospectus supplement), representing approximately 2.15% of the aggregate
principal balance of the pool of mortgage loans as of the cut-off date, the
secured equipment financing lender has not entered into a subordination and
standstill agreement. 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
All of the mortgage loans are expected to have substantial remaining
principal balances as of their stated maturity or anticipated prepayment dates.
90 of these mortgage loans, representing approximately 98.71% 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 1 mortgage loan,
representing approximately 1.29% of the aggregate principal balance of the pool
of mortgage loans as of the cut-off date, will have a substantial balance
outstanding at its anticipated prepayment date. 60 of the mortgage loans,
representing approximately 64.62% of the aggregate principal balance of the
pool of mortgage loans as of the cut-off date, mature in the year 2010.
Mortgage loans with substantial remaining principal balances at their stated
maturity (i.e., "balloon loans") involve greater risk than fully amortizing
loans.
A borrower's ability to repay a loan on its stated maturity date or
anticipated prepayment 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;
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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 the 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.
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;
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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 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. With
respect to the 40 Worth Street loan (identified as Loan No. 5 on Annex A to
this prospectus supplement), representing approximately 5.65% of the aggregate
principal balance of the pool of mortgage loans as of the cut-off date, leases
with respect to 68.7% of the net leasable area expire in the year 2007. The
terms of the related loan documents require leasing reserves in the amount of
approximately $87,273 per month through June 2007 for costs and expenses
associated with the lease expirations. Additionally, 80.5% of net leasable area
at the 40 Worth Street property are leased by government-sponsored tenants who
have the right to cancel their leases at any time. See "Description of the
Mortgage Pool--Significant Mortgage Loans--40 Worth Street" in this prospectus
supplement. Additionally, other mortgage loans may have concentrations of
leases expiring at varying rates in varying percentages.
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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.
Additionally, with respect to certain of the mortgage loans, the related
borrower has given to certain tenants or the project developer has retained a
right of first refusal or right of first offer to purchase all or a portion of
the mortgaged property in the event a sale is contemplated. This may impede the
mortgagee's ability to sell the related mortgaged property at foreclosure.
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).
With respect to tenant bankruptcies, 1 mortgage loan (identified as Loan
No. 73 on Annex A to this prospectus supplement), representing approximately
1.46% of the aggregate principal balance of the pool of mortgage loans, has
Service Merchandise as a tenant at the related mortgaged property which is a
debtor in bankruptcy. Service Merchandise, representing approximately 11.6% of
the mortgaged property's gross rent, has not yet ratified or rejected its
lease.
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 32 of the mortgage loans, representing
approximately 30.03% 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:
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;
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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.
RETAIL PROPERTIES HAVE SPECIAL RISKS
Retail properties secure 26 of the mortgage loans, representing
approximately 28.64% 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 revenues of retail
tenants were to decline, rents tied to a percentage of gross sales revenues 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. 21 of
the mortgage loans, representing approximately 24.45% of the aggregate
principal balance of the pool of mortgage loans as of the cut-off date, are
secured by retail properties that are considered by the applicable mortgage
loan sellers to be "anchored" and 5 of the mortgage loans, representing
approximately 4.19% of the aggregate principal balance of the pool of mortgage
loans as of the cut-off date, are secured by retail properties that are
considered by the applicable mortgage loan sellers to be"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. We cannot assure you that such space
will be occupied or that the related mortgaged property will not suffer adverse
economic consequences.
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
Office properties secure 16 of the mortgaged loans. These mortgage loans,
or, for mortgage loans with multiple property types, the portion of the
mortgage loan allocated to office properties, represent approximately 26.36% 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 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
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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.
HOTEL PROPERTIES HAVE SPECIAL RISKS
Hotel properties secure 5 of the mortgage loans, representing
approximately 6.19% of the aggregate principal balance of the pool of mortgage
loans as of the cut-off date.
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
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
3 of the mortgage loans secured by hotel properties, representing
approximately 3.04% of the aggregate principal balance of the pool of mortgage
loans as of the cut-off date, are affiliated with a franchise or hotel
management company through a franchise or management agreement. 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.
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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.
2 of the mortgage loans secured by hotel properties, representing
approximately 3.16% of the aggregate principal balance of the pool of mortgage
loans as of the cut-off date, are unaffiliated with any franchise or hotel
management company. The lack of such affiliation may negatively impact the
performance of a hotel property.
INDUSTRIAL PROPERTIES HAVE SPECIAL RISKS
Industrial properties secure 7 of the mortgage loans. These mortgage
loans, or, for mortgage loans with multiple property types, the portion of the
mortgage loan allocated to industrial properties, represent approximately 6.14%
of the aggregate principal balance of the pool of mortgage loans as of the
cut-off date. Significant factors determining the value of industrial
properties are:
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 generally desirable 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.
SELF STORAGE PROPERTIES HAVE SPECIAL RISKS
Self storage properties secure 7 of the mortgage loans, representing
approximately 2.63% of the aggregate principal balance of the pool of mortgage
loans as of the cut-off date. Self-storage properties are considered vulnerable
to competition, because both acquisition costs and break-even occupancy are
relatively low. The conversion of self-storage facilities to alternative uses
would generally require substantial capital expenditures. Thus, if the
operation of any of the self-storage mortgaged properties becomes unprofitable
due to
o decreased demand;
o competition;
o age of improvements; or
o other factors so that the borrower becomes unable to meet its
obligations on the related mortgage loan, the liquidation value of that
self-storage mortgaged property may be substantially less, relative to
the amount owing on the mortgage loan, than if the self-storage
mortgaged property were readily adaptable to other uses.
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Tenant privacy, anonymity and efficient access may heighten environmental
risks. No environmental assessment of a mortgaged property included an
inspection of the contents of the self-storage units included in the
self-storage mortgaged properties and there is no assurance that all of the
units included in the self-storage mortgaged properties are free from hazardous
substances or other pollutants or contaminants or will remain so in the future.
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.
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POTENTIAL CONFLICTS OF INTEREST
The special servicer, a primary servicer or their respective affiliates
may purchase a portion of the series 2000-1 non-offered certificates. This
could cause a conflict between the special servicer's or a primary servicer's
duties to the trust under the pooling and servicing agreement or subservicing
agreement, as applicable, and its interest as a holder of a certificate.
However, the pooling and servicing agreement provides that the mortgage loans
are required to be administered in accordance with the servicing standards
without regard to ownership of any certificate by a servicer or any of their
affiliates. See "Servicing of the Mortgage Loans--General" in this prospectus
supplement.
In addition, any of those parties may, especially if it or an affiliate
holds series 2000-1 non-offered certificates, or has financial interests in or
other financial dealings with a borrower under any of the mortgage loans, 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 2000-1 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, a servicer is not required to act in
a manner more favorable to the offered certificates or any particular class of
offered certificates than to series 2000-1 non-offered certificates.
In addition, each servicer 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 any of the
servicers 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, special servicer or a primary
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
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of a foreclosure action. In addition, even 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, 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 B, Class C, 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 are not permitted unless the loan is approximately
90 days or less from the stated maturity date or anticipated prepayment date or
after the anticipated prepayment date, as the case
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may be, except with respect to 10 mortgage loans (identified as Loan No. 28,
36, 47, 58, 62, 66, 79, 83, 89 and 91 on Annex A to this prospectus
supplement), representing approximately 9.96% of the aggregate principal
balance of the pool of mortgage loans as of the cut-off date, which do not
permit voluntary prepayment without restriction until approximately 120 to 180
days prior to the stated maturity date. See "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 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 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 loan 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, and 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. These provisions also may be
interpreted as constituting the collection of interest for usury purposes.
Accordingly, we cannot assure you that the obligation to pay any 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).
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,
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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
or the trustee, as applicable, will be entitled to receive interest on
unreimbursed advances, compounded monthly, at the "Prime Rate" as published in
The Wall Street Journal as described in this prospectus supplement. 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, for which an environmental
insurance policy was obtained from a third party insurer or for which the
consultant recommended an operations and maintenance plan or periodic
monitoring of nearby properties, which recommendations are consistent with
industry practice. 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 any environmental indemnity,
insurance or 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.
With respect to 1 mortgage loan (identified as Loan No. 51 on Annex A to
this prospectus supplement), representing approximately 1.28% of the aggregate
principal balance of the pool of mortgage loans as of the cut-off date, the
mortgaged property is currently an active Industrial Site Recovery Act site.
The previous owner, Simmons Co., has been identified by the New Jersey
Department of Environmental Protection as the responsible party. Groundwater
contamination was found at the site and Simmons Co.'s environmental consultant
continues to perform groundwater monitoring at the site to verify that natural
attenuation is occurring at the site. The mortgagee purchased a secured lender
"lesser of" policy to cover the lesser of the actual costs to remediate the
contamination, the outstanding principal balance on the mortgage loan or $1
million, subject to certain terms and conditions set forth in the policy.
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.
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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 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 24.50%, 9.10% and 6.48% of
the mortgaged properties, by aggregate principal balance of the pool of
mortgage loans as of the cut-off date, are located in California, Florida and
Texas, states that have historically been at greater risk regarding acts of
nature (such as earthquakes, floods and hurricanes) than other states. The
terms of 1 mortgage loan (identified as Loan No. 58 on Annex A to this
prospectus supplement), representing approximately 1.84% of the aggregate
principal balance of the pool of mortgage loans as of the cut-off date,
required a $1,800,000 reserve at origination which is equal to 138% of the
estimated costs for structural reinforcements to protect against earthquake
damage to comply with the requirements of an ordinance of the city of San
Francisco. An indemnity from an affiliate of the borrower was also obtained
with respect to the costs of the structural reinforcements. 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
Certain of the mortgaged properties may not comply with current zoning
laws, including density, use, parking and set back requirements, due to changes
in zoning requirements after such mortgaged properties were constructed. These
properties, as well as those for which variances or special permits were
issued, are 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 may be 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
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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 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, substitute 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.
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 91 mortgage loans
secured by 101 commercial and multifamily mortgaged properties with an
aggregate principal balance of approximately $704,237,759 (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 or multifamily
properties;
(2) with respect to 1 mortgage loan (identified as Loan No. 69 on Annex A
to this prospectus supplement), representing approximately 0.81% of the
Initial Pool Balance, the fee simple estate and a leasehold estate in all
of the commercial or multifamily property;
(3) with respect to 1 mortgage loan (identified as Loan No. 52 on Annex A
to this prospectus supplement), representing approximately 5.95% of the
Initial Pool Balance, the fee simple estate and a leasehold estate in a
non-material portion of the commercial property; or
(4) with respect to 2 mortgage loans (identified as Loan No. 34 and 78 on
Annex A to this prospectus supplement), representing approximately 0.78% of
the Initial Pool Balance, a leasehold estate in a commercial property (each
of clauses (1) through (4), a "Mortgaged Property").
The term of any ground lease securing any mortgage loan that is not also
secured by the related fee interest extends at least 10 years beyond the stated
maturity of that mortgage loan (including extensions at the lender's option).
Mortgage loans secured by ground leases present certain bankruptcy and
foreclosure risks not present with mortgage loans secured by fee simple
estates. See "Certain Legal Aspects of Mortgage Loans--Foreclosure--Leasehold
Risks" and "Certain Legal Aspects of Mortgage Loans-- Bankruptcy Laws" in the
prospectus.
On or about March 27, 2000 (the "Closing Date"), Chase Commercial Mortgage
Securities Corp. (the "Depositor") will acquire the mortgage loans from General
Electric Capital Corporation ("GECC") and The Chase Manhattan Bank ("Chase,"
and collectively with GECC, 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.
The Depositor will then assign its interests in the mortgage loans, without
recourse, to State Street Bank and Trust Company, 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
March 2000.
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.
2 of the mortgage loans (identified as Loan No. 29 and 70 on Annex A to
this prospectus supplement), representing approximately 0.87% of the Initial
Pool Balance, 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"). With respect
to 1 such mortgage loan (Loan No. 29) HUD pays rent subsidies directly to the
owner pursuant to a Housing Assistance Payment Contract ("HAP Contract"). The
HAP Contract expires prior to the maturity date of the mortgage loan and
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there is no assurance it will be renewed. With respect to the other such
mortgage loan, HUD or a local housing authority pays rent subsidies directly to
the tenants (less than 10% of the tenants are so affected) pursuant to a tenant
voucher program. Tenants can use such vouchers at other properties.
As of the cut-off date, the applicable Mortgage Loan Sellers have informed
us that they are aware of the following indebtedness with respect to the
mortgage loans. With respect to 1 mortgage loan (identified as Loan No. 62 on
Annex A to this prospectus supplement), representing approximately 1.29% of the
Initial Pool Balance, the related borrower has debt payable to a third party
secured by the Mortgage Property. Such debt is not part of the pool of mortgage
loans and has been subordinated to the mortgage loan. With respect to 1
mortgage loan (identified as Loan No. 70 on Annex A to this prospectus
supplement), representing approximately 0.63% of the Initial Pool Balance, the
related borrower has unsecured debt payable to an unrelated third party. With
respect to 5 mortgage loans (identified as Loan No. 5, 34, 36, 58 and 61 on
Annex A to this prospectus supplement), representing approximately 9.67% of the
Initial Pool Balance, the related borrower has unsecured debt payable to an
affiliate of the related borrower. The terms of 2 mortgage loans (identified as
Loan No. 36 and 58 on Annex A to this prospectus supplement), representing
approximately 3.16% of the Initial Pool Balance, do not restrict the borrower
from incurring future debt which is not secured by the Mortgaged Property and
permit 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. 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. With
respect to 1 mortgage loan (identified as Loan No. 68 on Annex A to this
prospectus supplement), representing approximately 2.15% of the Initial Pool
Balance, the related borrower has incurred secured equipment financing. The
secured equipment financing lender has not executed a subordination and
standstill agreement. The terms of certain of the mortgage loans permit or
require the borrowers to post letters of credit and/or surety bonds for the
benefit of the mortgage loan, which may constitute a contingent reimbursement
obligation of the related borrower or an affiliate. The issuing bank or surety
will not typically agree to subordination and standstill protection benefiting
the mortgagee. 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.
The owner of the borrower under the Westfork Plaza loan (identified as
Loan No. 90 on Annex A to this prospectus supplement), representing
approximately 6.03% of the Initial Pool Balance, has pledged its equity
interests in the related borrower as partial security for a revolving line of
credit held by GECC. The line of credit is also secured by the equity interests
in 12 other entities which own real estate in various stages of development.
See "--Significant Mortgage Loans--Westfork Plaza" below. 1 additional mortgage
loan (identified as Loan No. 74 on Annex A to this prospectus supplement),
representing approximately 0.71% of the Initial Pool Balance, 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
non-managing 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.
AFFILIATED BORROWER CONCENTRATIONS
Set forth below is a description of each affiliated borrower concentration
of 2 or more mortgage loans with an outstanding principal balance as of the
cut-off date which exceeds 5% of the Initial Pool Balance.
AEC II Borrower Concentration. The AEC II borrower concentration
(identified as Loan No. 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22,
23, 24 and 25 on Annex A to this prospectus supplement) consists of 17 mortgage
loans (the "AEC Loans"), representing approximately 13.96% of the Initial Pool
Balance, with an
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aggregate Cut-off Date Balance of approximately $98,303,456. The related
Mortgaged Properties are managed by Associated Estates Realty Corporation, an
affiliate of each borrower, and are located in Ohio, Michigan and Maryland.
Associated Estates Realty Corporation, a NYSE listed company, manages 143
multifamily properties in the United States. The AEC Loans are not
cross-collateralized or cross defaulted.
The interest rates on the AEC Loans range from 7.850% to 7.890% per annum.
The weighted average interest rate of the AEC Loans is 7.856%. The term to
maturity for the AEC Loans ranges from 8.5 to 12.5 years, and the weighted
average term to maturity is 10 years. Each AEC Loan has a 30-year amortization
term.
Voluntary prepayment of the AEC Loans is prohibited until approximately 90
days prior to their related maturity dates, at which time they may be freely
prepaid. The AEC Loans may be defeased on any due date after 2 years after the
Closing Date. See "--Certain Terms and Conditions of the Mortgage Loans--
Defeasance; Collateral Substitution" below.
Orange County Industrial/Office Portfolio Borrower Concentration. The
Orange County Industrial/Office portfolio borrower concentration (identified as
Loan No. 71 and 72 on Annex A to this prospectus supplement) consists of 2
cross-collateralized and cross-defaulted mortgage loans (the "Orange County
Loans"), representing approximately 6.49% of the Initial Pool Balance, with an
aggregate Cut-off Date Balance of approximately $45,692,308. The related
Mortgaged Properties are owned by an affiliate of Olen Properties Corp. and are
managed by Realty Services Corporation, an affiliate of each borrower, and are
secured by 5 industrial and 4 office properties located in Orange County,
California.
The interest rate on both Orange County Industrial/Office Portfolio loans
is 8.170% per annum. The original 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 approximately
90 days prior to their related maturity dates at which time they may be freely
prepaid. The Orange County Loans may be defeased on any due date after 2 years
after the Closing Date. See "--Certain Terms and Conditions of the Mortgage
Loans--Defeasance; Collateral Substitution" below.
SIGNIFICANT MORTGAGE LOANS
Set forth below is a description of the 4 mortgage loans with an
outstanding principal balance as of the cut-off date which exceeds 5% of the
Initial Pool Balance.
Regency Plaza One. The mortgage loan identified as Loan No. 75 on Annex A
to this prospectus supplement (the "Regency Plaza One Loan") had a Cut-off Date
Balance of $42,500,000, representing approximately 6.03% of the Initial Pool
Balance. The Regency Plaza One Loan is secured by a first lien on the fee
simple estate known as Regency Plaza One, a 13-story multi-tenant office
building located in Santa Clara, California. The building contains
approximately 224,334 square feet of net leasable area. The building was
constructed in 1986. The terms of the mortgage loan permit the related borrower
to obtain a release of a portion of the unimproved land securing the mortgage
loan for the construction of a second office building and a parking lot. As of
the cut-off date, the Regency Plaza One Loan had an LTV Ratio of approximately
61.2% and a DSCR of approximately 1.27x. As of January 1, 2000, Regency Plaza
One had an occupancy rate of approximately 100.00%.
The interest rate on the Regency Plaza One Loan is 8.62% per annum,
calculated on the basis of the actual numbers of days in a month and a 360-day
year. The original term to maturity for the Regency Plaza One Loan is 10 years
with a 30-year amortization term.
Voluntary prepayment of the Regency Plaza One Loan is prohibited until
approximately 90 days prior to its related maturity date, at which time it may
be freely prepaid. The Regency Plaza One Loan may be defeased on any due date
after 2 years after the Closing Date. See "--Certain Terms and Conditions of
the Mortgage Loans--Defeasance; Collateral Substitution" below.
Westfork Plaza. The mortgage loan identified as Loan No. 90 on Annex A to
this prospectus supplement (the "Westfork Plaza Loan") had a Cut-off Date
Balance of $42,478,452, representing
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<PAGE>
approximately 6.03% of the Initial Pool Balance. The Westfork Plaza Loan is
secured by a first lien on the fee simple estate known as Westfork Plaza, a
retail property situated on approximately 52 acres located in Pembroke Pines,
Florida. Westfork Plaza is a community shopping center containing approximately
396,022 square feet of net leasable area and is anchored by K-Mart, Winn-Dixie
and Regal Cinemas. Westfork Plaza contains additional outparcels, including a
Walgreens, which are owned by third parties and are not part of the collateral.
Westfork Plaza was constructed in 1999, with approximately 728,853 square feet
of net leasable area. As of the cut-off date, the Westfork Plaza Loan had an
LTV ratio of approximately 78.96% and a DSCR of approximately 1.20x. As of
January 31, 2000, the Mortgaged Property had an occupancy rate of approximately
97.47%. Over 95% of the Mortgaged Property's net leasable area is leased by
tenants that have initial lease terms of 10 years or greater.
The interest rate on the Westfork Plaza Loan is 9.00% per annum,
calculated on the basis of the actual number of days in a month and a 360-day
year. The original term to maturity for the Westfork Plaza Loan is 10 years
with a 30-year amortization term. The Westfork Plaza Loan requires the borrower
to maintain a hard lock box.
Voluntary prepayment of the Westfork Plaza Loan is prohibited until
approximately 90 days prior to its related maturity date, at which time it may
be freely prepaid. The Westfork Plaza Loan may be defeased on any due date
after 2 years after the Closing Date. See "--Certain Terms and Conditions of
the Mortgage Loans--Defeasance; Collateral Substitution" below.
The borrower is a limited partnership affiliated with Swerdlow Real Estate
Group, Inc. (the "REIT"), a private REIT.
GECC has provided the REIT (the ultimate parent of the related borrower)
and certain affiliates (other than the borrower of the Westfork Plaza Loan)
with a revolving line of credit. The line of credit is a recourse loan to the
REIT and certain affiliates, and is secured by, among other things, the assets
of the REIT and certain affiliates, including ownership interests in 13
entities (including the borrower of the Westfork Park Loan), each of which owns
real estate (some of which are stabilized assets and others of which are in
various stages of development). GECC, as lender under the line of credit, has
entered into a subordination and intercreditor agreement with the mortgagee
restricting GECC from exercising its remedies under the line of credit to
transfer title to the pledged interests unless (a) GECC receives confirmation
from the Rating Agencies that such transfer will not result in a withdrawal,
downgrade or qualification of any of the then current ratings of the
Certificates, or (b) the transferee is GECC or another institutional
transferee.
Greendale Mall. The mortgage loan identified as Loan No. 52 on Annex A to
this prospectus supplement (the "Greendale Mall Loan") had a Cut-off Date
Balance of $41,928,574, representing approximately 5.95% of the Initial Pool
Balance. The Greendale Mall Loan is secured by a first lien on the fee simple
estate known as Greendale Mall, a retail property and office building situated
on approximately 19.3 acres of land in Worcester, Massachusetts. As additional
security for the Greendale Mall Loan, the related borrower has pledged a
leasehold interest in a portion of the parking lot located next to the fee
interest in the Greendale Mall which has been pledged to secure the Greendale
Mall Loan. The Greendale Mall is a 1 and 2-story regional mall containing
approximately 310,909 square feet of net leasable area and a 4-story
single-tenant office building containing approximately 119,860 square feet of
net leasable area. The mall is anchored by Marshall's, T. J. Maxx and Best Buy.
The buildings were constructed in 1987 and approximately 55,317 square feet of
anchor space was added in 1997.
The Greendale Mortgaged Property was found to have groundwater containing
chlorinated volatile substances. However, the environmental consultant
recommended no further action based on state and federal risk assessment
standards. As additional assurance, the borrowing entity, Mayflower Realty,
LLC, agreed to indemnify the mortgagee and others for environmental losses
relating to such contamination. As of November 15, 1999, Mayflower Realty, LLC
had a net worth of approximately $550 million.
As of the cut-off date, the Greendale Plaza Loan had an LTV Ratio of
approximately 65.82% and a DSCR of approximately 1.34x. As of January 25, 2000,
the retail portion of the Mortgaged Property was approximately 81.68% occupied
and the office portion of the Mortgaged Property was approximately 100%
occupied.
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<PAGE>
The interest rate on the Greendale Mall Loan is 8.23% per annum,
calculated on the basis of the actual numbers of days in a month and a 360-day
year. The original term to maturity for the Greendale Mall Loan is 7 years with
a 30-year amortization term. The Greendale Mall Loan requires the borrower to
maintain a hard lock box.
Voluntary prepayment of the Greendale Mall Loan is prohibited until
approximately 90 days prior to its related maturity date at which time it may
be freely prepaid. The Greendale Mall Loan may be defeased on any due date
after 2 years after the Closing Date. See "--Certain Terms and Conditions of
the Mortgage Loans--Defeasance; Collateral Substitution" below.
40 Worth Street. The mortgage loan identified as Loan No. 5 on Annex A to
this prospectus supplement (the "40 Worth Street Loan") had a Cut-off Date
Balance of $39,815,471, representing approximately 5.65% of the Initial Pool
Balance. The 40 Worth Street Loan is secured by a first lien on the fee simple
estate known as 40 Worth Street, a 16-story multi-tenant office building
located in New York City, New York. The building contains approximately 560,387
square feet of net leasable area. The building was constructed in 1927 and
renovated in 1993. As of the cut-off date, the 40 Worth Street Loan had an LTV
Ratio of approximately 69.0% and a DSCR of approximately 1.23x. As of November
17, 1999, 40 Worth Street had an occupancy rate of approximately 96.48%.
The leases with respect to approximately 68.7% of the net leasable area of
the 40 Worth Street Mortgaged Property expire in 2007. The terms of the related
loan documents require the borrower to fund a leasing reserve of approximately
$87,273 per month which is expected to equal approximately $7,700,000 in the
year 2007 to defray additional leasing and other expenses. Additionally, 80.5%
of the net leasable area at the 40 Worth Street property is leased by
government-sponsored tenants who have the right to cancel their leases at any
time.
The interest rate on the 40 Worth Street Loan is 8.67% per annum,
calculated on the basis of the actual numbers of days in a month and a 360-day
year. The original term to maturity for the 40 Worth Street Loan is 10 years
with a 30-year amortization term.
Voluntary prepayment of the 40 Worth Street Loan is prohibited until
approximately 90 days prior to its related maturity date, at which time it may
be freely prepaid. The 40 Worth Street Loan may be defeased on any due date
after 2 years after the Closing Date. See "--Certain Terms and Conditions of
the Mortgage Loans--Defeasance; Collateral Substitution" below.
APD LOAN
1 mortgage loan (identified as Loan No. 62 on Annex A to this prospectus
supplement) (the "APD Loan"), representing approximately 1.29% of the Initial
Pool Balance, provides that, if after a certain date (each, an "Anticipated
Prepayment Date"), the 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"). The Anticipated Prepayment Date is 120 months after the first
due date for the APD Loan. The Revised Rate for the APD Loan is equal to the
greater of (x) the Initial Rate or (y) the then current treasury rate, plus 2%
per annum. After the Anticipated Prepayment Date, the 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 APD Loan.
While interest at the Initial Rate continues to accrue and be payable on a
current basis on the APD Loan after the Anticipated Prepayment Date, the
payment of interest at the excess of the Revised Rate over the Initial Rate for
the 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 Loan provide that an account be
established on the Anticipated Prepayment Date into which the related property
manager and/or tenants directly deposits rents or other revenues from the
Mortgaged Property. 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 Anticipated Prepayment
Date.
S-53
<PAGE>
CERTAIN TERMS AND CONDITIONS OF THE MORTGAGE LOANS
55 of the mortgage loans, representing approximately 50.53% of the Initial
Pool Balance, have due dates that occur on the 1st day of each month, and 36
mortgage loans, representing approximately 49.47% of the Initial Pool Balance,
have due dates that occur on the 10th day of each month. All of the mortgage
loans whose due dates are the 1st day of each month provide for grace periods
of 5 days. None of the mortgage loans whose due date is the 10th day of each
month provide for grace periods. All of the mortgage loans bear interest at
fixed rates. All of the mortgage loans accrue interest on the basis of the
actual number of days in a month, assuming a 360-day year ("Actual/360 Basis").
All of the mortgage loans (other than the APD Loan) 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 1 APD Loan provides 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").
All of the mortgage loans permit only defeasance after the expiration of
the Lockout Period.
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 10 mortgage loans representing
approximately 9.96% of the Initial Pool Balance, which have no restrictions on
voluntary prepayment after a date that ranges between approximately 120 and 180
days prior to the stated maturity date.
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. Provided no event of default exists, 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. Certain of the mortgage loans may require the payment of yield
maintenance charges in connection with an acceleration of the related mortgage
loan (such yield maintenance charges, "Acceleration Yield Maintenance
Charges"). There can be no assurances that the related borrowers will pay the
Acceleration Yield Maintenance Charges. See "Risk Factors--Risks Relating to
Enforceability of Yield Maintenance Charges" in this prospectus supplement and
"Certain Legal Aspects of Mortgage Loans--Default Interest and Limitations on
Prepayments" in the prospectus.
Defeasance; Collateral Substitution. The terms of all of the mortgage
loans permit the applicable borrower on any due date 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 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, all
successive scheduled payment dates from the Release Date to the related
maturity date (or the anticipated prepayment date), assuming, in the case
of each APD Loan, that the loan prepays on the related Anticipated
Prepayment Date and (y) in amounts at least 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.
S-54
<PAGE>
The mortgage 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. 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. 1 mortgage loan (identified as Loan No.
79 on Annex A to this prospectus supplement), representing approximately 1.68%
of the Initial Pool Balance, permits partial defeasance without the release of
the lien on any Mortgaged Property securing the mortgage loan.
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 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 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 or the anticipated prepayment date 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
S-55
<PAGE>
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, one or more mortgage loans
(including mortgage loans specifically described in this prospectus supplement)
may be removed from the pool of mortgage loans as a result of prepayments,
delinquencies, incomplete documentation or for any other reason, 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 and
Annex B.
S-56
<PAGE>
TYPE OF MORTGAGED PROPERTIES (1)
<TABLE>
<CAPTION>
NUMBER OF AGGREGATE % OF INITIAL
MORTGAGED CUT-OFF DATE POOL
PROPERTY TYPE PROPERTIES BALANCE BALANCE
- -------------------------------- ------------ -------------- --------------
<S> <C> <C> <C>
Multifamily .................... 32 $211,483,427 30.03%
Office ......................... 20 185,643,514 26.36
Anchored Retail ................ 21 172,162,085 24.45
Hotel .......................... 5 43,613,888 6.19
Industrial ..................... 10 43,274,474 6.14
Unanchored Retail .............. 5 29,528,346 4.19
Self Storage ................... 8 18,532,024 2.63
-- ------------ ------
Total/Weighted Average ......... 101 $704,237,759 100.00%
=== ============ ======
<CAPTION>
WEIGHTED AVERAGES
----------------------------------------------------------------------------
STATED CUT-OFF
REMAINING DATE
MORTGAGE TERM LTV LTV RATIO AT
PROPERTY TYPE RATE (MOS.) (2) OCCUPANCY (3) DSCR RATIO MATURITY (2)
- -------------------------------- ---------- ------------ --------------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Multifamily .................... 8.07% 117 96.52% 1.24x 74.93% 67.28%
Office ......................... 8.52% 118 97.56% 1.29x 67.62% 61.00%
Anchored Retail ................ 8.39% 105 93.87% 1.30x 72.93% 66.80%
Hotel .......................... 8.96% 118 81.03% 1.46x 62.43% 53.07%
Industrial ..................... 8.30% 103 97.81% 1.31x 71.81% 65.60%
Unanchored Retail .............. 8.32% 117 93.30% 1.25x 71.91% 65.00%
Self Storage ................... 8.57% 118 91.66% 1.45x 64.22% 54.79%
Total/Weighted Average ......... 8.36% 114 95.00% 1.29x 71.14% 64.10%
</TABLE>
- -------
(1) Because this table is presented at the Mortgaged Property level, balances
and 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. As a result, the weighted averages presented in
this table may deviate slightly from weighted averages presented at the
mortgage loan level in other tables in this prospectus supplement.
(2) Calculated with respect to the Anticipated Prepayment Date for the APD
Loan.
(3) Information shown above includes 5 hotel properties, representing
approximately 6.19% of the Initial Pool Balance, which have occupancy
rates that generally range from 72.80% to 88.20%; if the mortgage loans
secured by hotel properties are excluded, the weighted average occupancy
rates of all other Mortgaged Properties is 95.92%.
S-57
<PAGE>
RANGE OF MORTGAGE RATES AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
NUMBER OF AGGREGATE
LOANS/ CUT-OFF % OF
RANGE OF MORTGAGE RATES PROPERTIES DATE BALANCE INITIAL POOL
- -------------------------- ------------ -------------- --------------
<S> <C> <C> <C>
6.970% to 7.499% ......... 1/1 $ 9,095,565 1.29%
7.500% to 7.899% ......... 19/19 120,028,728 17.04
7.900% to 8.199% ......... 18/25 125,447,767 17.81
8.200% to 8.499% ......... 24/24 169,951,110 24.13
8.500% to 8.749% ......... 19/19 177,430,111 25.19
8.750% to 8.999% ......... 6/9 38,429,067 5.46
9.000% to 9.350% ......... 4/4 63,855,410 9.07
------ ------------ ------
Total/Weighted
Average ................. 91/101 $704,237,759 100.00%
====== ============ ======
<CAPTION>
WEIGHTED AVERAGES
---------------------------------------------------------------
STATED CUT-OFF
MORTGAGE REMAINING TERM DATE LTV LTV RATIO AT
RANGE OF MORTGAGE RATES RATE (MOS.) (1) DSCR RATIO MATURITY (1)
- -------------------------- ---------- ---------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
6.970% to 7.499% ......... 6.97% 101 1.74x 68.39% 60.60%
7.500% to 7.899% ......... 7.83% 113 1.21x 77.13% 69.26%
7.900% to 8.199% ......... 8.10% 116 1.34x 72.45% 64.99%
8.200% to 8.499% ......... 8.32% 109 1.30x 69.80% 63.26%
8.500% to 8.749% ......... 8.63% 116 1.29x 67.81% 61.37%
8.750% to 8.999% ......... 8.86% 119 1.34x 64.59% 57.64%
9.000% to 9.350% ......... 9.05% 118 1.25x 74.47% 66.88%
Total/Weighted
Average ................. 8.36% 114 1.29x 71.14% 64.10%
</TABLE>
- ----------
(1) Calculated with respect to the Anticipated Prepayment Date for the APD
Loan.
MORTGAGE LOANS BY STATE
<TABLE>
<CAPTION>
NUMBER OF AGGREGATE % OF
MORTGAGED CUT-OFF DATE INITIAL POOL
STATE PROPERTIES BALANCE BALANCE
- -------------------------- ------------ -------------- --------------
<S> <C> <C> <C>
California ............... 22 $172,546,457 24.50%
Ohio ..................... 18 100,801,499 14.31
New York ................. 7 75,263,123 10.69
Florida .................. 6 64,102,088 9.10
Texas .................... 10 45,665,660 6.48
Massachusetts ............ 1 41,928,574 5.95
Georgia................... 4 31,812,073 4.52
Maryland ................. 4 27,894,653 3.96
Colorado ................. 4 23,685,527 3.36
New Jersey ............... 3 23,089,110 3.28
Michigan ................. 4 19,341,161 2.75
Mississippi .............. 2 15,580,383 2.21
Nevada ................... 3 10,313,368 1.46
Missouri ................. 1 9,988,747 1.42
Washington ............... 1 9,283,003 1.32
Louisiana ................ 3 6,438,796 0.91
Pennsylvania ............. 1 5,733,531 0.81
District of Columbia ..... 1 4,446,402 0.63
Virginia ................. 2 4,284,791 0.61
Arizona .................. 1 4,041,880 0.57
Illinois ................. 1 3,245,752 0.46
South Carolina ........... 1 2,455,921 0.35
Rhode Island ............. 1 2,295,260 0.33
--- ------------ ------
Total/Weighted
Average ................. 101 $704,237,759 100.00%
=== ============ ======
<CAPTION>
WEIGHTED AVERAGES
------------------------------------------------------------
STATED CUT-OFF
REMAINING DATE
MORTGAGE TERM LTV LTV RATIO AT
STATE RATE (MOS.) (1) DSCR RATIO MATURITY (1)
- -------------------------- ---------- ------------ ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
California ............... 8.49% 117 1.35x 66.89% 59.98%
Ohio ..................... 8.03% 116 1.22x 76.78% 68.97%
New York ................. 8.55% 118 1.24x 71.53% 64.21%
Florida .................. 8.77% 118 1.21x 77.93% 70.99%
Texas .................... 8.27% 109 1.35x 69.91% 63.48%
Massachusetts ............ 8.23% 81 1.34x 65.82% 61.96%
Georgia................... 8.04% 116 1.24x 77.61% 69.72%
Maryland ................. 8.13% 120 1.32x 72.46% 64.31%
Colorado ................. 8.35% 119 1.26x 67.87% 61.31%
New Jersey ............... 7.91% 89 1.46x 63.46% 58.24%
Michigan ................. 7.87% 117 1.24x 73.21% 64.86%
Mississippi .............. 8.15% 118 1.31x 77.80% 69.36%
Nevada ................... 8.46% 118 1.26x 74.88% 67.86%
Missouri ................. 9.14% 119 1.31x 67.49% 57.57%
Washington ............... 8.87% 118 1.37x 55.92% 47.41%
Louisiana ................ 8.87% 119 1.27x 72.35% 66.11%
Pennsylvania ............. 8.11% 115 1.33x 80.75% 72.75%
District of Columbia ..... 8.86% 119 1.49x 63.98% 58.45%
Virginia ................. 8.42% 117 1.30x 63.25% 57.29%
Arizona .................. 8.30% 118 1.31x 74.16% 66.96%
Illinois ................. 8.14% 118 1.18x 69.80% 62.80%
South Carolina ........... 8.35% 118 1.25x 72.23% 65.29%
Rhode Island ............. 8.14% 118 1.54x 62.03% 51.57%
Total/Weighted
Average ................. 8.36% 114 1.29x 71.14% 64.10%
</TABLE>
- ----------
(1) Calculated with respect to the Anticipated Prepayment Date for the APD
Loan.
S-58
<PAGE>
RANGE OF REMAINING TERMS TO MATURITY DATE OR ANTICIPATED PREPAYMENT DATE IN
MONTHS
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
--------------------------------------------------------------
STATED CUT-OFF
NUMBER OF AGGREGATE % OF REMAINING DATE
RANGE OF REMAINING LOANS/ CUT-OFF DATE INITIAL POOL MORTGAGE TERM LTV LTV RATIO AT
TERMS (MOS.) (1) PROPERTIES BALANCE BALANCE RATE (MOS.) (1) DSCR RATIO MATURITY (1)
- --------------------- ------------ -------------- -------------- ---------- ------------ ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
60 to 79 ............ 2/2 $ 19,260,157 2.73% 8.11% 66 1.27x 68.90% 65.41%
80 to 99 ............ 10/10 84,104,718 11.94 8.04% 90 1.27x 70.96% 65.85%
100 to 116 .......... 12/19 107,102,810 15.21 8.13% 113 1.39x 73.08% 65.43%
117 to 118 .......... 34/34 238,543,323 33.87 8.50% 118 1.26x 73.00% 65.57%
119 to 120 .......... 25/28 199,099,438 28.27 8.61% 120 1.31x 66.52% 59.79%
121 to 129 .......... 7/7 42,041,396 5.97 7.85% 123 1.20x 76.83% 68.08%
130 to 147 .......... 1/1 14,085,917 2.00 7.89% 147 1.20x 77.40% 65.93%
------ ------------ ------
Total/Weighted
Average ............ 91/101 $704,237,759 100.00% 8.36% 114 1.29x 71.14% 64.10%
====== ============ ======
</TABLE>
- ----------
(1) Calculated with respect to the Anticipated Prepayment Date for the APD
Loan.
YEARS OF MATURITY (1)
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
--------------------------------------------------------------
STATED CUT-OFF
NUMBER OF AGGREGATE % OF REMAINING DATE
LOANS/ CUT-OFF DATE INITIAL POOL MORTGAGE TERM LTV LTV RATIO AT
YEARS OF MATURITY PROPERTIES BALANCE BALANCE RATE (MOS.) (1) DSCR RATIO MATURITY (1)
- ------------------- ------------ -------------- -------------- ---------- ------------ ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
2005 .............. 1/1 $ 9,000,000 1.28% 8.70% 60 1.22x 58.16% 56.16%
2006 .............. 2/2 52,188,731 7.41 8.11% 79 1.34x 68.28% 64.23%
2008 .............. 10/10 51,271,709 7.28 7.69% 99 1.30x 74.71% 68.09%
2009 .............. 17/24 122,647,429 17.42 8.26% 115 1.36x 72.99% 64.87%
2010 .............. 60/63 455,043,973 64.62 8.49% 119 1.27x 70.63% 63.53%
2012 .............. 1/1 14,085,917 2.00 7.89% 147 1.20x 77.40% 65.93%
------ ------------ ------
Total/Weighted
Average .......... 91/101 $704,237,759 100.00% 8.36% 114 1.29x 71.14% 64.10%
====== ============ ======
</TABLE>
- ----------
(1) Calculated with respect to the Anticipated Prepayment Date for the APD
Loan.
RANGE OF YEARS BUILT/RENOVATED (1)
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
--------------------------------------------------------------
STATED CUT-OFF
NUMBER OF AGGREGATE % OF REMAINING DATE
RANGE OF YEARS MORTGAGED CUT-OFF DATE INITIAL POOL MORTGAGE TERM LTV LTV RATIO AT
BUILT/RENOVATED (2) PROPERTIES BALANCE BALANCE RATE (MOS.) (3) DSCR RATIO MATURITY (3)
- ----------------------- ------------ -------------- -------------- ---------- ------------ ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1966 to 1970 .......... 2 $ 14,193,502 2.02% 8.58% 81 1.26x 61.72% 58.07%
1971 to 1979 .......... 4 16,196,378 2.30 8.08% 109 1.27x 77.67% 70.44%
1980 to 1984 .......... 7 27,347,847 3.88 8.37% 115 1.32x 73.38% 64.24%
1985 to 1989 .......... 16 121,559,530 17.26 8.46% 115 1.31x 66.07% 59.31%
1990 to 1994 .......... 15 133,433,097 18.95 8.35% 113 1.28x 72.44% 65.46%
1995 to 1997 .......... 20 151,675,395 21.54 8.18% 110 1.30x 72.19% 65.18%
1998 to 1999 .......... 37 239,832,009 34.06 8.42% 118 1.29x 72.18% 65.01%
--- ------------ ------
Total/Weighted
Average .............. 101 $704,237,759 100.00% 8.36% 114 1.29x 71.14% 64.10%
=== ============ ======
</TABLE>
- ----------
(1) Because this table is presented at the Mortgaged Property level, balances
and 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. As a result, the weighted averages presented in
this table may deviate slightly from weighted averages presented at the
mortgage loan level in other tables in this prospectus supplement.
(2) Range of Years Built/Renovated references the later of the year built or
the year of the most recent renovations with respect to each Mortgaged
Property.
(3) Calculated with respect to the Anticipated Prepayment Date for the APD
Loan.
S-59
<PAGE>
TEN LARGEST MORTGAGE LOANS
<TABLE>
<CAPTION>
% OF
NUMBER OF AGGREGATE INITIAL
MORTGAGED CUT-OFF DATE POOL PROPERTY
PROPERTY NAME PROPERTIES BALANCE BALANCE TYPE
- ----------------------------- ------------ -------------- --------- -------------
<S> <C> <C> <C> <C>
Regency Plaza One ........... 1 $ 42,500,000 6.03% Office
Westfork Plaza .............. 1 42,478,452 6.03 Retail (2)
Greendale Mall .............. 1 41,928,574 5.95 Retail (2)
40 Worth Street ............. 1 39,815,471 5.65 Office
Orange County Office/
Portfolio III (1) .......... 5 24,687,115 3.51 Industrial
Orange County Office/
Portfolio IV (1) ........... 4 21,005,193 2.98 Industrial
Media Works ................. 1 16,535,024 2.35 Office
Timber Ridge
Apartments ................. 1 16,485,748 2.34 Multifamily
Northpark I, II & III ....... 1 15,175,000 2.15 Office
AEC II -- Bradford at
Easton Apartments .......... 1 14,085,917 2.00 Multifamily
- ------------ -----
Total/Weighted
Average .................... 17 $274,696,493 39.01%
== ============ =====
<CAPTION>
WEIGHTED AVERAGES
----------------------------------------------------------------
STATED CUT-OFF
REMAINING DATE
MORTGAGE TERM UNDERWRITTEN LTV LTV RATIO AT
PROPERTY NAME RATE (MOS.) (1) DSCR RATIO MATURITY (1)
- ----------------------------- ---------- ------------ -------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Regency Plaza One ........... 8.62% 120 1.27x 61.15% 55.59%
Westfork Plaza .............. 9.00% 118 1.20x 78.96% 72.39%
Greendale Mall .............. 8.23% 81 1.34x 65.82% 61.96%
40 Worth Street ............. 8.67% 118 1.23x 69.00% 62.82%
Orange County
Portfolio III (1) .......... 8.17% 113 1.38x 73.69% 66.54%
Orange County
Portfolio IV (1) ........... 8.17% 113 1.27x 78.00% 70.42%
Media Works ................. 8.53% 118 1.24x 73.82% 66.99%
Timber Ridge
Apartments ................. 8.28% 119 1.24x 67.29% 60.69%
Northpark I, II & III ....... 8.47% 120 1.34x 65.13% 58.95%
AEC II -- Bradford at
Easton Apartments .......... 7.89% 147 1.20x 77.40% 65.93%
Total/Weighted
Average .................... 8.48% 113 1.27x 70.35% 64.03%
</TABLE>
- ----------
(1) These loans are cross-collateralized and cross-defaulted with each other.
(2) These mortgage loans are considered anchored retail.
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 "--Certain Terms and Conditions of the Mortgage Loans" above.
RANGE OF DEBT SERVICE COVERAGE RATIOS AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
------------------------------------------------------------
STATED CUT-OFF
NUMBER OF AGGREGATE % OF REMAINING DATE
RANGE OF DEBT LOANS/ CUT-OFF DATE INITIAL POOL MORTGAGE TERM LTV LTV RATIO AT
SERVICE COVERAGE RATIOS PROPERTIES BALANCE BALANCE RATE (MOS.) (1) DSCR RATIO MATURITY (1)
- -------------------------- ------------ -------------- -------------- ---------- ------------ ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1.1600 to 1.1999 ......... 3/3 $ 16,351,910 2.32% 8.31% 119 1.17x 77.91% 70.34%
1.2000 to 1.2299 ......... 25/25 182,009,508 25.84 8.24% 115 1.20x 76.28% 68.84%
1.2300 to 1.2599 ......... 12/12 132,401,322 18.80 8.41% 117 1.24x 72.56% 65.76%
1.2600 to 1.2999 ......... 13/18 135,941,957 19.30 8.49% 118 1.27x 70.11% 63.07%
1.3000 to 1.3699 ......... 17/17 114,025,069 16.19 8.35% 100 1.33x 69.10% 63.19%
1.3700 to 1.4999 ......... 14/19 81,570,387 11.58 8.45% 117 1.40x 65.95% 58.36%
1.5000 to 2.2400 ......... 7/7 41,937,607 5.96 8.13% 114 1.66x 60.64% 52.81%
------ ------------ ------
Total/Weighted
Average ................. 91/101 $704,237,759 100.00% 8.36% 114 1.29x 71.14% 64.10%
====== ============ ======
</TABLE>
- ----------
(1) Calculated with respect to the Anticipated Prepayment Date for the APD
Loan.
S-60
<PAGE>
RANGE OF CURRENT OCCUPANCY RATES (1)(2)(3)
<TABLE>
<CAPTION>
NUMBER OF AGGREGATE % OF
RANGE OF CURRENT MORTGAGED CUT-OFF DATE INITIAL POOL
OCCUPANCY RATES PROPERTIES BALANCE BALANCE
- ---------------------------- ------------ -------------- --------------
<S> <C> <C> <C>
72.80% to 79.99% ........... 5 $ 33,222,224 4.72%
80.00% to 84.99% ........... 5 31,035,145 4.41
85.00% to 89.99% ........... 6 84,122,505 11.95
90.00% to 94.99% ........... 12 55,723,902 7.91
95.00% to 97.99% ........... 20 197,425,158 28.03
98.00% to 99.99% ........... 25 122,939,910 17.46
100.00% to 100.00% ......... 28 179,768,914 25.53
--- ------------ ------
Total/Weighted
Average ................... 101 $704,237,759 100.00%
=== ============ ======
<CAPTION>
WEIGHTED AVERAGES
------------------------------------------------------------
STATED CUT-OFF
REMAINING DATE
RANGE OF CURRENT MORTGAGE TERM LTV LTV RATIO AT
OCCUPANCY RATES RATE (MOS.) (4) DSCR RATIO MATURITY (4)
- ---------------------------- ---------- ------------ ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
72.80% to 79.99% ........... 8.51% 114 1.45x 66.65% 57.42%
80.00% to 84.99% ........... 8.30% 116 1.29x 68.35% 61.54%
85.00% to 89.99% ........... 8.37% 100 1.36x 67.31% 61.06%
90.00% to 94.99% ........... 8.38% 108 1.28x 69.24% 62.81%
95.00% to 97.99% ........... 8.42% 118 1.24x 73.78% 66.72%
98.00% to 99.99% ........... 8.16% 113 1.31x 73.63% 66.41%
100.00% to 100.00% ......... 8.39% 117 1.28x 70.23% 63.14%
Total/Weighted
Average ................... 8.36% 114 1.29x 71.14% 64.10%
</TABLE>
- ----------
(1) Because this table is presented at the Mortgaged Property level, balances
and 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. As a result, the weighted averages presented in
this table may deviate slightly from weighted averages presented at the
mortgage loan level in other tables in this prospectus supplement.
(2) Current occupancy rates have been calculated in this table based upon
rent rolls made available to the applicable Mortgage Loan Sellers by the
related borrowers as of the dates set forth on Annex A to this prospectus
supplement.
(3) Information shown above includes 5 hotel properties, representing
approximately 6.19% of the Initial Pool Balance, which have occupancy
rates that generally range from 72.80% to 88.20%; if the mortgage loans
secured by hotel properties are excluded, the weighted average occupancy
rate of all other mortgaged properties is 95.92%.
(4) Calculated with respect to the Anticipated Prepayment Date for the APD
Loan.
RANGE OF CUT-OFF DATE BALANCES
<TABLE>
<CAPTION>
NUMBER OF AGGREGATE % OF
RANGE OF CUT-OFF DATE LOANS/ CUT-OFF DATE INITIAL POOL
BALANCES PROPERTIES BALANCE BALANCE
- ------------------------------ ------------ -------------- --------------
<S> <C> <C> <C>
$1,073,695 to $3,000,000 ..... 29/29 $ 63,622,414 9.03%
3,000,001 to 5,000,000 ....... 19/20 79,030,917 11.22
5,000,001 to 9,000,000 ....... 18/20 122,152,567 17.35
9,000,001 to 15,000,000 ...... 16/16 178,821,285 25.39
15,000,001 to 30,000,000 ..... 5/12 93,888,079 13.33
30,000,001 to 42,000,000 ..... 2/2 81,744,045 11.61
42,000,001 to 42,500,000 ..... 2/2 84,978,452 12.07
------ ------------ ------
Total/Weighted
Average ..................... 91/101 $704,237,759 100.00%
====== ============ ======
<CAPTION>
WEIGHTED AVERAGES
-----------------------------------------------------------
STATED
REMAINING CUT-OFF
RANGE OF CUT-OFF DATE MORTGAGE TERM DATE LTV LTV RATIO AT
BALANCES RATE (MOS.) (1) DSCR RATIO MATURITY (1)
- ------------------------------ ---------- ------------ ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
$1,073,695 to $3,000,000 ..... 8.36% 118 1.36x 70.60% 62.47%
3,000,001 to 5,000,000 ....... 8.15% 112 1.28x 70.66% 63.84%
5,000,001 to 9,000,000 ....... 8.25% 113 1.28x 71.79% 65.05%
9,000,001 to 15,000,000 ...... 8.30% 117 1.31x 72.80% 64.39%
15,000,001 to 30,000,000 ..... 8.30% 116 1.30x 72.17% 65.23%
30,000,001 to 42,000,000 ..... 8.44% 99 1.29x 67.37% 62.38%
42,000,001 to 42,500,000 ..... 8.81% 119 1.24x 70.05% 63.99%
Total/Weighted
Average ..................... 8.36% 114 1.29x 71.14% 64.10%
</TABLE>
- ----------
(1) Calculated with respect to the Anticipated Prepayment Date for the APD
Loan.
S-61
<PAGE>
The following two tables set forth the range of LTV Ratios of the mortgage
loans as of the cut-off date and the stated 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 date 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.
RANGE OF LTV RATIOS AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
------------------------------------------------------------
STATED CUT-OFF
NUMBER OF AGGREGATE % OF REMAINING DATE
RANGE OF LTV RATIOS LOANS/ CUT-OFF DATE INITIAL POOL MORTGAGE TERM LTV LTV RATIO AT
AS OF THE CUT-OFF DATE PROPERTIES BALANCE BALANCE RATE (MOS.) (1) DSCR RATIO MATURITY (1)
- ------------------------ ------------ -------------- -------------- ---------- ------------ ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
44.31% to 59.99% ....... 7/8 $ 45,139,961 6.41% 8.50% 107 1.42x 55.75% 49.88%
60.00% to 64.99% ....... 11/11 93,479,661 13.27 8.58% 118 1.38x 62.19% 55.21%
65.00% to 68.99% ....... 12/12 116,376,964 16.53 8.33% 104 1.35x 66.63% 60.63%
69.00% to 72.99% ....... 12/14 91,144,851 12.94 8.56% 117 1.24x 70.24% 63.69%
73.00% to 76.99% ....... 27/31 156,855,426 22.27 8.25% 116 1.27x 74.69% 67.03%
77.00% to 79.99% ....... 17/20 176,248,807 25.03 8.26% 115 1.23x 78.69% 71.14%
80.00% to 83.19% ....... 5/5 24,992,089 3.55 7.95% 117 1.23x 81.10% 72.68%
------ ------------ ------
Total/Weighted
Average ............... 91/101 $704,237,759 100.00% 8.36% 114 1.29x 71.14% 64.10%
====== ============ ======
</TABLE>
- ----------
(1) Calculated with respect to the Anticipated Prepayment Date for the APD
Loan.
RANGE OF LTV RATIOS AS OF MORTGAGE LOAN MATURITY DATES (1)
<TABLE>
<CAPTION>
RANGE OF LTV RATIOS AS OF NUMBER OF AGGREGATE % OF
MORTGAGE LOAN MATURITY LOANS/ CUT-OFF DATE INITIAL POOL
DATES PROPERTIES BALANCE BALANCE
- ----------------------------- ------------ -------------- --------------
<S> <C> <C> <C>
36.80% to 44.99% ............ 2/2 $ 10,494,167 1.49%
45.00% to 57.49% ............ 13/14 112,265,774 15.94
57.50% to 62.49% ............ 19/19 151,997,382 21.58
62.50% to 66.99% ............ 20/26 158,540,732 22.51
67.00% to 69.99% ............ 19/19 104,943,009 14.90
70.00% to 72.99% ............ 14/17 140,055,428 19.89
73.00% to 74.58% ............ 4/4 25,941,266 3.68
------ ------------ ------
Total/Weighted
Average .................... 91/101 $704,237,759 100.00%
====== ============ ======
<CAPTION>
WEIGHTED AVERAGES
-----------------------------------------------------------
STATED CUT-OFF
RANGE OF LTV RATIOS AS OF REMAINING DATE
MORTGAGE LOAN MATURITY MORTGAGE TERM LTV LTV RATIO AT
DATES RATE (MOS.) DSCR RATIO MATURITY
- ----------------------------- ---------- ----------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
36.80% to 44.99% ............ 8.13% 119 1.67x 48.92% 43.39%
45.00% to 57.49% ............ 8.65% 114 1.37x 60.60% 53.72%
57.50% to 62.49% ............ 8.31% 107 1.35x 67.10% 60.53%
62.50% to 66.99% ............ 8.43% 119 1.27x 72.25% 65.12%
67.00% to 69.99% ............ 8.17% 116 1.24x 75.94% 68.46%
70.00% to 72.99% ............ 8.36% 117 1.22x 79.21% 71.70%
73.00% to 74.58% ............ 7.77% 90 1.26x 79.60% 73.46%
Total/Weighted
Average .................... 8.36% 114 1.29x 71.14% 64.10%
</TABLE>
- ----------
(1) Calculated with respect to the Anticipated Prepayment Date for the APD
Loan.
S-62
<PAGE>
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, credit
losses and for commercial properties, an estimate of the average annual
retention costs. 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 Net Cash Flow reflects the calculations and adjustments used
by the Mortgage Loan Sellers for their underwriting process and any updates
thereof and may or may not reflect the amounts calculated and adjusted by S&P
and DCR for their own analysis. In addition, Underwritten Net 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 and self storage
properties, the Mortgage Loan Sellers generally either reviewed rental revenue
shown on the rolling 12-month operating statements or annualized 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 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 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
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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, are 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
stated that they 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 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 22 Mortgaged Properties, securing mortgage loans representing
approximately 24.13% 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
probable maximum loss for the property in an earthquake scenario. 3 of the 22
Mortgaged Properties described above (identified as Loan No. 1, 38 and 71 on
Annex A to this prospectus supplement), representing approximately 3.02% 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. Additionally, 1 Mortgaged Property (identified as Loan No. 58 on
Annex A to this prospectus supplement) located in California, securing a
mortgage loan representing approximately 1.84% of the Initial Pool Balance was
not analyzed as described above, but is covered by earthquake insurance as
described above.
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THE MORTGAGE LOAN SELLERS
The Mortgage Loan Sellers are GECC and Chase. GECC is an affiliate of GE
Capital Loan Services, Inc., a primary servicer. Chase is the Master Servicer,
the parent corporation of the Depositor and an affiliate of Chase Securities
Inc., one of the Underwriters. See "The Depositor" in the prospectus. Chase
directly originated (generally, in accordance with the underwriting criteria
described below) all of the mortgage loans acquired by the Depositor from
Chase. GECC directly originated (generally, in accordance with the underwriting
criteria described below) all of the mortgage loans acquired by the Depositor
from GECC, except with respect to 1 mortgage loan (identified as Loan No. 67 on
Annex A to this prospectus supplement), representing approximately 0.43% of the
Initial Pool Balance that GECC purchased after underwriting and closing such
mortgage loan as origination agent on behalf of a third party, in a manner
consistent with GECC's underwriting standards.
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)
function is separate from loan origination.
Loan Analysis. All GECC credit underwriting is performed by GECC
employees. 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 staff of 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 policies. The credit committee may approve
a mortgage loan as recommended, modify the loan terms or decline a loan
transaction.
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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 ............. 1.25x 75%
Office ........................ 1.25x 75%
Industrial/Warehouse .......... 1.25x 75%
Hotel ......................... 1.40x 70%
Self-Storage .................. 1.30x 75%
</TABLE>
The debt service coverage ratio guidelines listed above are calculated
based on Underwritten Net Cash Flow. 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 or
where tenants are required in their leases to pay for the covered expenses,
GECC generally requires most borrowers to fund various escrows for taxes and
insurance, capital expenses and replacement reserves. In some cases, the
borrower is permitted to post a letter of credit in lieu of funding a given
reserve or escrow. 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 millage 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 reserves the right in the mortgage to require a separate
insurance policy and insurance escrows in certain circumstances.
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 replacement 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
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 generally required.
o Re-tenanting--In most cases, major tenants and a significant number of
smaller tenants have lease expirations within the mortgage loan term. To
mitigate this risk, reserves for loans secured by
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commercial properties are (in some 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. Chase credit underwriting is generally performed by Chase
employees although in a few instances certain of the credit underwriting has
been 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, service contracts, utility bills 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.
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:
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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 reserves the right in the mortgage to
require a separate insurance policy and insurance escrows in certain
circumstances.
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 replacement 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 reserve is required and, if necessary, an environmental
remediation reserve may be established. 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 generally 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 may be 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;
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(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 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
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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
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 4 mortgage loans (identified as Loan No. 5, 52, 75 and 90
on Annex A to this prospectus supplement), 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, 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 and all premiums have
been paid; no
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claims 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 for 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 the APD Loan, which provides that the rate at
which interest accrues on the APD Loan 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 Loan);
(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 or encumbered in connection with subordinate
financing by a lien or security interest against the related Mortgaged
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;
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(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;
(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.
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
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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; 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.
LOCK BOX ACCOUNTS
With respect to 5 mortgage loans (the "Lock Box Loans"), representing
approximately 16.44% 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 2 Lock Box
Loans (identified as Loan No. 52 and 90 on Annex A to this prospectus
supplement), representing approximately 11.99% 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 3 Lock Box Loans (identified
as Loan No. 36, 58 and 62 on Annex A to this prospectus supplement),
representing approximately 4.45% 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
2000-1 (the "Certificates") will consist of the following eighteen classes: the
Class A-1 and Class A-2 Certificates (collectively, the "Class A Certificates")
and 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 $70,423,776.
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 in excess of that amount. The "Percentage Interest"
evidenced by any Certificate (other than the Class S and Residual Certificates)
is 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.
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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 Clearstream Banking, societe anonyme ("Clearstream, Luxembourg")
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 Clearstream, Luxembourg or Euroclear (in Europe) if they
are Participants of that system, or indirectly through organizations that are
Participants in those systems. Clearstream, Luxembourg and Euroclear will hold
omnibus positions on behalf of the Clearstream, Luxembourg Participants and the
Euroclear Participants, respectively, through customers' securities accounts in
Clearstream, Luxembourg'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 Clearstream, Luxembourg 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 Clearstream, Luxembourg
Participants or Euroclear Participants, on the other, will be 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
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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 Clearstream, Luxembourg, 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 Clearstream,
Luxembourg 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 Clearstream, Luxembourg Participant or Euroclear
Participant on that business day. Cash received in Clearstream, Luxembourg or
Euroclear as a result of sales of securities by or through a Clearstream,
Luxembourg 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 Clearstream, Luxembourg 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 and cash from the Euroclear system, and receipts of
payments with respect to securities in the Euroclear system.
Although DTC, Euroclear and Clearstream, Luxembourg have implemented the
foregoing procedures in order to facilitate transfers of interests in global
Certificates among Participants of DTC, Euroclear and Clearstream, Luxembourg,
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.
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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 Clearstream,
Luxembourg, 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,
Clearstream, Luxembourg 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 global 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 April 2000 (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 distributions made with respect to a class of
Certificates will be allocated pro rata among the outstanding Certificates of
that 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
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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 each
mortgage loan, an amount equal to one day's interest at the Mortgage Rate for
each mortgage 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 Class S
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 (without duplication):
(x) 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) with respect to each mortgage 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;
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(5) Excess Interest;
(6) all Acceleration Yield Maintenance Charges; and
(7) all amounts deposited in the Certificate Account and Lower-Tier
Distribution Account in error;
(y) 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
(z) 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 36 mortgage loans, representing approximately
49.47% 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;
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;
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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;
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;
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<PAGE>
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, 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
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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 %.
The Pass-Through Rate on the Class A-2 Certificates is a per annum rate
equal to %.
The Pass-Through Rate on the Class B Certificates is a per annum rate
equal to %, subject to a maximum per annum rate equal to the WAC Rate.
The Pass-Through Rate on the Class C Certificates is a per annum rate
equal to %, subject to a maximum per annum rate equal to the WAC Rate.
The Pass-Through Rate on the Class D Certificates is a per annum rate
equal to %, subject to a maximum per annum rate equal to the WAC Rate.
The Pass-Through Rate on the Class E Certificates is a per annum rate
equal to the WAC Rate less % per annum.
The Pass-Through Rate on the Class F Certificates is a per annum rate
equal to the WAC Rate less % per annum.
The Pass-Through Rate on the Class G Certificates is a per annum rate
equal to %.
The Pass-Through Rate on the Class H Certificates is a per annum rate
equal to % .
The Pass-Through Rate on the Class I Certificates is a per annum rate
equal to % .
The Pass-Through Rate on the Class J Certificates is a per annum rate
equal to % .
The Pass-Through Rate on the Class K Certificates is a per annum rate
equal to % .
The Pass-Through Rate on the Class L Certificates is a per annum rate
equal to % .
The Pass-Through Rate on the Class M Certificates is a per annum rate
equal to % .
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 other than Excess 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.
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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. For purposes of calculating the Pass-Through Rate on
the Certificates, the Mortgage Rate of each 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 mortgage 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.
"Excess Interest" with respect to the APD Loan is the interest accrued at
an increased interest rate in respect of the APD Loan in excess of the interest
accrued at the 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 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
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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, 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 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 ACCELERATION YIELD MAINTENANCE CHARGES
On any Distribution Date, Acceleration 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 Acceleration Yield
Maintenance Charges will be distributed to holders of any other Class of
Certificates.
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For a description of Acceleration 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 "Risk
Factors--Risks Relating to Enforceability of Yield Maintenance Charges" in this
prospectus supplement and "Certain Legal Aspects of the Mortgage Loans--Default
Interest and Limitations on Prepayments" in the prospectus regarding the
enforceability of yield maintenance charges.
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 ......... June 15, 2008
Class A-2 ......... February 15, 2010
Class X ........... June 15, 2012
Class B ........... March 15, 2010
Class C ........... March 15, 2010
Class D ........... March 15, 2010
Class E ........... April 15, 2010
Class F ........... April 15, 2010
</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 Loan is prepaid in
full on its Anticipated Prepayment Date. 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 April 15, 2032 the first Distribution Date after the 24th month
following the end of the stated 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,
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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,
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.
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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, 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.
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
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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 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 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
will make the required Servicing Advance in accordance with the terms of the
Pooling and Servicing Agreement.
The Master 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, neither the Master Servicer nor 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 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. 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 and the Trustee will be entitled to be paid, out of any amounts then
on deposit in the Certificate Account, interest at the Prime Rate (the
"Reimbursement Rate") accrued on the amount of the Advance from the date made
to but not including the date of reimbursement, compounded monthly. The "Prime
Rate" will be the rate, for any day, set forth in The Wall Street Journal, New
York edition.
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 Balance 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, letters of credit 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 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 Event described in clause (2), within the 120-day period set forth in
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.
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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, or to conduct
an internal valuation, as applicable. Based upon the appraisal or valuation,
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 or valuation 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 or valuation 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 or
valuation 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 or valuation.
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, or conduct an internal valuation, as applicable. Based upon the
appraisal or valuation, 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, Chase, GECC 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
Securitization 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;
(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;
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(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 Acceleration 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;
(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
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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 and the Trustee 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; and
(29) 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, to the extent
the Paying Agent receives such information, 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 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;
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(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 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
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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 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 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
State Street Bank and Trust Company will act as Trustee of the trust fund.
The corporate trust office of the Trustee responsible for administration of the
Trust is located at 2 Avenue de Lafayette, 6th Floor, Boston, Massachusetts
02111, Attention: Global Investor Services Group, Corporate Trust Department,
Ref. Chase Commercial Mortgage Securities Corp., Series 2000-1. In its
Consolidated Report of Condition as of
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September 30, 1999, State Street Bank and Trust Company, a Massachusetts
chartered institution, and foreign and domestic subsidiaries reported total
assets of $50,196,389,000. 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 0.0021% 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 misfeasance, 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 GE Capital Loan Services, Inc. ("GE Capital") as sub-servicer with
respect to the mortgage loans sold by GECC to the Depositor. In addition to the
sub-servicing by GE Capital 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.
Each Primary Servicer will be permitted to appoint sub-servicers with respect
to their servicing obligations and duties and GE Capital intends to use one or
more subservicers with respect to certain of the mortgage loans. 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 obligation to make Advances; (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; (E) the ownership, servicing or
management for others of any other mortgage loans or mortgaged properties by
the Master Servicer or Special Servicer; and (F) any obligation of the Master
Servicer or any of its affiliates (in their capacity as a Mortgage Loan Seller)
to cure a breach of a representation or warranty or repurchase the mortgage
loan (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
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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 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 on the related maturity date
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 has 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 is imminent and is not likely to be cured by the borrower
within 60 days, 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 3 Periodic Payments (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, 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
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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
The Chase Manhattan Bank 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 380
Madison Avenue, New York, New York 10017. As of December 31, 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 $8,000,000,000 in aggregate outstanding principal amounts. The
Master Servicer will appoint GE Capital as sub-servicer with respect to the
mortgage loans sold by GECC to the Depositor.
THE PRIMARY SERVICERS
GE Capital will act as servicer of the mortgage loans sold by GECC to the
Depositor pursuant to a subservicing agreement, dated as of the cut-off date,
between GE Capital and the Master Servicer. In such capacity, GE Capital will
be responsible for servicing the mortgage loans sold to the Depositor by GECC
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. GE Capital's principal offices are located at
363 North Sam Houston Parkway East, Suite 200, Houston, Texas 77060. As of
December 31, 1999, GE Capital had a total commercial and multifamily mortgage
loan servicing portfolio of approximately $26,200,000,000. GE Capital may elect
to subservice some or all of its primary servicing duties with respect to each
of the mortgage loans sold by GECC to the Depositor. The Master Servicer will
act as the primary servicer of the mortgage loans sold to the Depositor by
Chase. The Master Servicer, its affiliates and affiliates of GE Capital own and
are in the business of acquiring assets similar in type to the assets of the
Trust Fund. Accordingly, their assets may compete with the Mortgaged Properties
for tenants, purchasers, financing and other parties and services relevant to
the business of acquiring similar assets.
THE SPECIAL SERVICER
Lennar Partners, Inc., a Florida corporation and a subsidiary of LNR
Property Corporation (the "Special Servicer"), will initially be appointed as
special servicer of the Mortgage Loans. The principal executive offices of the
Special Servicer are located at 760 N.W. 107th Avenue, Miami, Florida 33172,
and its telephone
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number is (305) 485-2000. As of November 1, 1999, the Special Servicer and its
affiliates were managing a portfolio including over 10,000 assets in most
states with an original face value of over $50 billion, most of which are
commercial real estate assets. Included in this managed portfolio are $44
billion of commercial real estate assets representing 57 securitization
transactions, for which the Special Servicer is servicer or special servicer.
The Special Servicer and its affiliates own and are in the business of
acquiring assets similar in type to the assets of the Trust Fund. Accordingly,
the assets of the Special Servicer and its affiliates may, depending upon the
particular circumstances including the nature and location of such assets,
compete with the Mortgaged Properties for tenants, purchasers, financing and so
forth.
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 0.063% per annum. In addition to the Servicing Fee, the Master
Servicer will be entitled to retain, as additional servicing compensation, (1)
all assumption and modification application fees with respect to all mortgage
loans which are not Specially Serviced Mortgaged Loans, (2) 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 Loans, all assumption and modification fees
paid by the borrowers on such mortgage loans and (3) 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. Additionally,
with respect to certain mortgage loans, the Master Servicer will be entitled to
retain a percentage of all assumption and modification fees. 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.
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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 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 application fees and all assumption, extension
and modification fees received on or with respect to the mortgage loans, other
than such 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 Loan.
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 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
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Standards), a fire and hazard insurance policy with extended coverage covering
the 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) the full
replacement cost of the improvements on REO Property, or (2) the outstanding
principal balance owing on the related mortgage loan and in any event, the
amount necessary to avoid the operation of any co-insurance provisions. 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 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 as a Servicing Advance.
The costs of the insurance may be recovered by the Master 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 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
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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, with respect to non-material
modifications, waivers and amendments, the Master Servicer) 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; or
(2) 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 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.
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
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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 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
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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. In addition, amounts otherwise distributable on the Certificates
will be further reduced by interest payable to the Master 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 2001; 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
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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, GE Capital will have
been offered the opportunity to accept the appointment and GE Capital and the
Master Servicer have been unable to agree upon terms or GE Capital 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.
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 not
reimbursed by the Trust Fund. 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
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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 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 of
the Master Servicer 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
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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 GE Capital, 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 terminated, GE Capital will be
offered the opportunity to accept the appointment. If GE Capital and the Master
Servicer have been unable to agree upon terms or GE Capital 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;
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(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);
(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.
S-108
<PAGE>
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 borrower under the APD
Loan may have certain incentives to prepay the APD Loan on its Anticipated
Prepayment Date, we cannot assure you that the borrower will be able to prepay
the APD Loan on its Anticipated Prepayment Date. The failure of the borrower to
prepay the APD Loan on its Anticipated Prepayment Date will not be an event of
default under the terms of the APD Loan, 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 the
borrower's failure to pay Excess Interest, other than requests for collection,
until the scheduled maturity of the APD Loan; 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 Loan 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 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
S-109
<PAGE>
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 E, Class F and 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 B, Class C and Class D
Certificates, for one or more future periods and therefore will also affect the
yield on those classes.
The yield on the Class X, Class B, Class C, 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 or Lockout
Periods and amortization terms that require balloon payments), the demographics
and relative economic vitality of the areas in which the Mortgaged Properties
are located and the general supply and demand for rental 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. 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 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.
S-110
<PAGE>
Delay in Payment of Distributions. Because each monthly distribution is
made on each Distribution Date, which is at least 15 days after the end of the
related Interest Accrual Period, the effective yield to the holders of the
Offered Certificates will be lower than the yield that would otherwise be
produced by the applicable Pass-Through Rates and purchase prices (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 April 2000;
(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;
(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;
S-111
<PAGE>
(f) any principal prepayments received on the mortgage loans are
prepayments in full and are received on a Due Date;
(g) the Closing Date is March 27, 2000;
(h) the APD Loan prepays on its Anticipated Prepayment Date; and
(i) 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.
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
March 15, 2001 ......................... 96 96 96 96 96
March 15, 2002 ......................... 92 92 92 92 92
March 15, 2003 ......................... 87 87 87 87 87
March 15, 2004 ......................... 82 82 82 82 82
March 15, 2005 ......................... 69 69 69 69 69
March 15, 2006 ......................... 55 55 55 55 55
March 15, 2007 ......................... 17 17 17 17 17
March 15, 2008 ......................... 11 11 11 10 10
March 15, 2009 ......................... 0 0 0 0 0
Weighted Average Life (Years) (1) ...... 5.70 5.70 5.70 5.70 5.70
Estimated Month of First Principal ..... 4/15/00 4/15/00 4/15/00 4/15/00 4/15/00
Estimated Month of Maturity ............ 6/15/08 6/15/08 6/15/08 6/15/08 6/15/08
</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.
S-112
<PAGE>
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
March 15, 2001 ......................... 100 100 100 100 100
March 15, 2002 ......................... 100 100 100 100 100
March 15, 2003 ......................... 100 100 100 100 100
March 15, 2004 ......................... 100 100 100 100 100
March 15, 2005 ......................... 100 100 100 100 100
March 15, 2006 ......................... 100 100 100 100 100
March 15, 2007 ......................... 100 100 100 100 100
March 15, 2008 ......................... 100 100 100 100 100
March 15, 2009 ......................... 89 89 89 89 89
March 15, 2010 ......................... 0 0 0 0 0
Weighted Average Life (Years) (1) ...... 9.57 9.57 9.57 9.57 9.56
Estimated Month of First Principal ..... 6/15/08 6/15/08 6/15/08 6/15/08 6/15/08
Estimated Month of Maturity ............ 2/15/10 2/15/10 2/15/10 2/15/10 2/15/10
</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.
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
March 15, 2001 ......................... 100 100 100 100 100
March 15, 2002 ......................... 100 100 100 100 100
March 15, 2003 ......................... 100 100 100 100 100
March 15, 2004 ......................... 100 100 100 100 100
March 15, 2005 ......................... 100 100 100 100 100
March 15, 2006 ......................... 100 100 100 100 100
March 15, 2007 ......................... 100 100 100 100 100
March 15, 2008 ......................... 100 100 100 100 100
March 15, 2009 ......................... 100 100 100 100 100
March 15, 2010 ......................... 0 0 0 0 0
Weighted Average Life (Years) (1) ...... 9.89 9.89 9.89 9.89 9.88
Estimated Month of First Principal ..... 2/15/10 2/15/10 2/15/10 2/15/10 2/15/10
Estimated Month of Maturity ............ 3/15/10 3/15/10 3/15/10 3/15/10 3/15/10
</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.
S-113
<PAGE>
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
March 15, 2001 ......................... 100 100 100 100 100
March 15, 2002 ......................... 100 100 100 100 100
March 15, 2003 ......................... 100 100 100 100 100
March 15, 2004 ......................... 100 100 100 100 100
March 15, 2005 ......................... 100 100 100 100 100
March 15, 2006 ......................... 100 100 100 100 100
March 15, 2007 ......................... 100 100 100 100 100
March 15, 2008 ......................... 100 100 100 100 100
March 15, 2009 ......................... 100 100 100 100 100
March 15, 2010 ......................... 0 0 0 0 0
Weighted Average Life (Years) (1) ...... 9.97 9.97 9.97 9.97 9.97
Estimated Month of First Principal ..... 3/15/10 3/15/10 3/15/10 3/15/10 3/15/10
Estimated Month of Maturity ............ 3/15/10 3/15/10 3/15/10 3/15/10 3/15/10
</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.
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
March 15, 2001 ......................... 100 100 100 100 100
March 15, 2002 ......................... 100 100 100 100 100
March 15, 2003 ......................... 100 100 100 100 100
March 15, 2004 ......................... 100 100 100 100 100
March 15, 2005 ......................... 100 100 100 100 100
March 15, 2006 ......................... 100 100 100 100 100
March 15, 2007 ......................... 100 100 100 100 100
March 15, 2008 ......................... 100 100 100 100 100
March 15, 2009 ......................... 100 100 100 100 100
March 15, 2010 ......................... 0 0 0 0 0
Weighted Average Life (Years) (1) ...... 9.97 9.97 9.97 9.97 9.97
Estimated Month of First Principal ..... 3/15/10 3/15/10 3/15/10 3/15/10 3/15/10
Estimated Month of Maturity ............ 3/15/10 3/15/10 3/15/10 3/15/10 3/15/10
</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.
S-114
<PAGE>
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
March 15, 2001 ......................... 100 100 100 100 100
March 15, 2002 ......................... 100 100 100 100 100
March 15, 2003 ......................... 100 100 100 100 100
March 15, 2004 ......................... 100 100 100 100 100
March 15, 2005 ......................... 100 100 100 100 100
March 15, 2006 ......................... 100 100 100 100 100
March 15, 2007 ......................... 100 100 100 100 100
March 15, 2008 ......................... 100 100 100 100 100
March 15, 2009 ......................... 100 100 100 100 100
March 15, 2010 ......................... 22 21 20 19 17
March 15, 2011 ......................... 0 0 0 0 0
Weighted Average Life (Years) (1) ...... 9.99 9.98 9.98 9.98 9.98
Estimated Month of First Principal ..... 3/15/10 3/15/10 3/15/10 3/15/10 3/15/10
Estimated Month of Maturity ............ 4/15/10 4/15/10 4/15/10 4/15/10 4/15/10
</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.
PERCENT OF THE INITIAL CERTIFICATE BALANCE
OF THE CLASS F 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
March 15, 2001 ......................... 100 100 100 100 100
March 15, 2002 ......................... 100 100 100 100 100
March 15, 2003 ......................... 100 100 100 100 100
March 15, 2004 ......................... 100 100 100 100 100
March 15, 2005 ......................... 100 100 100 100 100
March 15, 2006 ......................... 100 100 100 100 100
March 15, 2007 ......................... 100 100 100 100 100
March 15, 2008 ......................... 100 100 100 100 100
March 15, 2009 ......................... 100 100 100 100 100
March 15, 2010 ......................... 100 100 100 100 100
March 15, 2011 ......................... 0 0 0 0 0
Weighted Average Life (Years) (1) ...... 10.05 10.05 10.05 10.05 10.05
Estimated Month of First Principal ..... 4/15/10 4/15/10 4/15/10 4/15/10 4/15/10
Estimated Month of Maturity ............ 4/15/10 4/15/10 4/15/10 4/15/10 4/15/10
</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.
S-115
<PAGE>
YIELD SENSITIVITY OF THE OFFERED CERTIFICATES
The tables beginning on page (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 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 (i) on pages S-111
and S-112 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 March 1, 2000
to, but excluding March 27, 2000, 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 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 AND, AS A RESULT,
S-116
<PAGE>
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 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 (i) on pages S-111 and S-112 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 on it from March 1, 2000 to the Closing Date.
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>
</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.
S-117
<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. 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 and
Class 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 12 days of interest at the
Pass-Through Rates thereon) over their respective issue prices (including
accrued interest). It is also anticipated that the Class , Class , Class
, Class and Class 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 Loan prepays on its Anticipated
Prepayment Date (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.
Acceleration Yield Maintenance Charges actually collected will be
distributed to the Class X Certificates as described under "Description of the
Certificates--Allocation of Acceleration Yield Maintenance Charges" in this
prospectus supplement. It is not entirely clear under the Code when the amount
of Acceleration Yield Maintenance Charges so allocated should be taxed to the
holder of a Class X Certificate, but it is not expected, for federal income tax
reporting purposes, that Acceleration Yield Maintenance Charges will be
S-118
<PAGE>
treated as giving rise to any income to the holder of a Class X Certificate
prior to the Master Servicer's actual receipt of an Acceleration Yield
Maintenance Charge. Acceleration 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 retirement or partial
retirement of a Certificate. Class X Certificateholders should consult their
own tax advisers concerning the treatment of Acceleration 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. As of the cut-off date, 32 mortgage loans,
representing approximately 30.03% of the Initial Pool Balance are secured by
multifamily properties. 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., Goldman, Sachs & Co.
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 the respective
Certificate Balances, or Notional Amounts, as applicable, of each class of
Offered Certificates set forth below subject in each case to a variance of 10%.
<TABLE>
<CAPTION>
CLASS CHASE SECURITIES INC. GOLDMAN, SACHS & CO. SALOMON SMITH BARNEY INC.
- -------------------- ----------------------- ---------------------- --------------------------
<S> <C> <C> <C>
Class A-1 ..........
Class A-2 ..........
Class B ............
Class C ............
Class D ............
Class E ............
Class F ............
</TABLE>
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 $ , will be % of the initial aggregate Certificate Balance
of the Offered Certificates, plus accrued interest on the Offered Certificates
from March 1, 2000. 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
S-119
<PAGE>
discounts, concessions or commissions from the Underwriters. In connection with
the purchase and sale of the Offered Certificates offered hereby, the
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 the Master 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
S-120
<PAGE>
prepayments (whether voluntary or involuntary) on the mortgage loans or the
degree to which the payments might differ from those originally contemplated.
In addition, a rating does not address the likelihood or frequency of voluntary
or mandatory prepayments of mortgage loans, payment of Excess Interest, yield
maintenance charges or net default interest. 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 the 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 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.
S-121
<PAGE>
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 S&P, Moody's Investors Service, Inc. ("Moody's"), 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's or DCR's 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 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.
S-122
<PAGE>
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-123
<PAGE>
INDEX OF PRINCIPAL DEFINITIONS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
40 Worth Street Loan ............................ S-53
Acceleration Yield Maintenance Charges .......... S-54
Actual/360 Basis ................................ S-54
Administrative Cost Rate ........................ S-83
Advances ........................................ S-88
AEC Loans ....................................... S-50
Anticipated Prepayment Date ..................... S-53
APD Loan ........................................ S-53
Appraisal Reduction ............................. S-89
Appraisal Reduction Amount ...................... S-90
Appraisal Reduction Event ....................... S-89
Asset Status Report ............................. S-97
Assumed Final Distribution Date ................. S-85
Assumed Scheduled Payment ....................... S-84
Authenticating Agent ............................ S-75
Available Distribution Amount ................... S-78
Certificate Account ............................. S-77
Certificate Balance ............................. S-74
Certificate Owner ............................... S-75
Certificate Registrar ........................... S-75
Certificateholders .............................. S-49
Certificates .................................... S-74
Chase ........................................... S-49
Class A Certificates ............................ S-74
Clearstream, Luxembourg ......................... S-75
Closing Date .................................... S-49
Code ............................................ S-118
Collateral Support Deficit ...................... S-87
Constant Prepayment Rate ........................ S-111
Controlling Class ............................... S-98
Controlling Class Certificateholder ............. S-98
Corrected Mortgage Loan ......................... S-97
CPR ............................................. S-111
Cross-Over Date ................................. S-82
Cut-off Date Balance ............................ S-49
DCR ............................................. S-120
Debt Service Coverage Ratio ..................... S-60
Defeasance Lock-out Period ...................... S-54
Defeasance Option ............................... S-54
Depositor ....................................... S-49
Depositories .................................... S-75
Determination Date .............................. S-89
Direct Participants ............................. S-75
Directing Certificateholder ..................... S-98
Distributable Certificate Interest .............. S-83
Distribution Accounts ........................... S-78
Distribution Date ............................... S-77
DSCR ............................................ S-60
DTC ............................................. S-75
Due Period ...................................... S-79
ERISA ........................................... S-121
</TABLE>
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
ERISA Plan ...................................... S-121
Euroclear ....................................... S-75
Events of Default ............................... S-106
Excess Interest ................................. S-83
Excess Interest Distribution Account ............ S-78
Excluded Plan ................................... S-122
Exemption ....................................... S-121
FIRREA .......................................... S-64
Fitch ........................................... S-122
Form 8-K ........................................ S-56
GE Capital ...................................... S-96
GECC ............................................ S-49
Greendale Mall Loan ............................. S-52
HAP Contract .................................... S-49
HUD ............................................. S-49
Indirect Participants ........................... S-75
Initial Pool Balance ............................ S-49
Initial Rate .................................... S-53
Insurance and Condemnation Proceeds ............. S-77
Interest Accrual Period ......................... S-9
Interest Distribution Amount .................... S-83
Interest Reserve Account ........................ S-78
IRS ............................................. S-103
Liquidation Fee ................................. S-100
Liquidation Fee Rate ............................ S-100
Liquidation Proceeds ............................ S-78
Lock Box Accounts ............................... S-73
Lock Box Loans .................................. S-73
Lockout Period .................................. S-54
Lower-Tier Distribution Account ................. S-78
Lower-Tier REMIC ................................ S-118
LTV Ratio ....................................... S-62
MAI ............................................. S-89
Master Servicer ................................. S-98
Moody's ......................................... S-122
Mortgage ........................................ S-49
Mortgage Loan Sellers ........................... S-49
Mortgage Note ................................... S-49
Mortgage Rate ................................... S-83
Mortgaged Property .............................. S-49
Net Mortgage Rate ............................... S-83
Non-Offered Certificates ........................ S-74
Non-Offered Subordinate Certificates ............ S-86
Nonrecoverable Advance .......................... S-88
Notional Amount ................................. S-74
Offered Certificates ............................ S-74
OID ............................................. S-118
Orange County Loans ............................. S-51
P&I Advance ..................................... S-88
Participants .................................... S-75
Pass-Through Rate ............................... S-82
</TABLE>
S-124
<PAGE>
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Paying Agent .................................... S-75
Percentage Interest ............................. S-74
Periodic Payments ............................... S-60
Permitted Investments ........................... S-78
Pilot Agreement ................................. S-34
Plan ............................................ S-121
Pooling and Servicing Agreement ................. S-74
Prepayment Assumption ........................... S-118
Prime Rate ...................................... S-88
Principal Distribution Amount ................... S-83
Principal Shortfall ............................. S-84
Purchase Agreements ............................. S-49
Purchase Price .................................. S-72
Qualified Substitute Mortgage Loan .............. S-72
Rated Final Distribution Date ................... S-85
Record Date ..................................... S-77
Regency Plaza One Loan .......................... S-51
Regular Certificates ............................ S-118
Reimbursement Rate .............................. S-88
REIT ............................................ S-52
Related Proceeds ................................ S-88
Release Date .................................... S-54
REMIC ........................................... S-118
REMIC Provisions ................................ S-118
REO Account ..................................... S-101
REO Loan ........................................ S-84
REO Property .................................... S-97
Residual Certificates ........................... S-74
Restricted Group ................................ S-122
Revised Rate .................................... S-53
Rules ........................................... S-76
S&P ............................................. S-120
Scheduled Principal Distribution Amount ......... S-83
Section 8 ....................................... S-49
</TABLE>
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Senior Certificates ............................. S-74
Servicer Remittance Date ........................ S-87
Servicing Advances .............................. S-88
Servicing Fee ................................... S-99
Servicing Fee Rate .............................. S-99
Servicing Standards ............................. S-96
Similar Law ..................................... S-121
Special Servicer ................................ S-98
Special Servicing Fee ........................... S-99
Special Servicing Fee Rate ...................... S-99
Specially Serviced Mortgage Loans ............... S-97
Stated Principal Balance ........................ S-84
Statement to Certificateholders ................. S-90
Subordinate Certificates ........................ S-74
Subordinate Offered Certificates ................ S-74
Terms and Conditions ............................ S-76
Testing Date .................................... S-71
Title Exception ................................. S-69
Trustee ......................................... S-49
Trustee Fee ..................................... S-95
Trustee Fee Rate ................................ S-95
Underwriters .................................... S-119
Underwriting Agreement .......................... S-119
Underwritten Net Cash Flow ...................... S-63
Unscheduled Principal Distribution Amount S-83
Upper-Tier Distribution Account ................. S-78
Upper-Tier REMIC ................................ S-118
Voting Rights ................................... S-93
WAC Rate ........................................ S-82
Westfork Plaza Loan ............................. S-51
Withheld Amounts ................................ S-78
Workout Fee ..................................... S-99
Workout Fee Rate ................................ S-99
Yield Tables .................................... S-116
</TABLE>
S-125
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
CHASE COMMERCIAL MORTGAGE SECURITIES CORP., SERIES 2000-1
ANNEX A - CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS AND MORTGAGED PROPERTIES
<TABLE>
<CAPTION>
% OF INITIAL POOL # OF MORTGAGE LOAN
ID PROPERTY NAME BALANCE PROPERTIES SELLER (1) ORIGINAL BALANCE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 1000 Sansome Street Office Building 1.21% 1 GECC 8,500,000
2 1299 Fourth Street 0.78% 1 CMB 5,500,000
3 1370 Miners Drive 0.30% 1 GECC 2,126,000
4 15 West 34th Street 1.56% 1 CMB 11,000,000
5 40 Worth Street 5.65% 1 CMB 39,862,200
- ---------------------------------------------------------------------------------------------------------------------------
6 6512 South McCarran Blvd 0.26% 1 CMB 1,853,000
7 696 Pennsylvania Avenue 1.28% 1 GECC 9,000,000
8 Addison Town Center Outparcel 0.16% 1 GECC 1,095,000
9 AEC II - Arrowhead Station Apartments 0.58% 1 CMB 4,061,000
10 AEC II - Bedford Commons Apartments 0.83% 1 CMB 5,840,000
- ---------------------------------------------------------------------------------------------------------------------------
11 AEC II - Bolton Estates Apartments 0.66% 1 CMB 4,668,000
12 AEC II - Bradford at Easton Apartments 2.00% 1 CMB 14,112,000
13 AEC II - Country Place Apartments 0.63% 1 CMB 4,419,000
14 AEC II - Holly Park Apartments 1.01% 1 CMB 7,120,000
15 AEC II - Kensington Grove Apartments 0.51% 1 CMB 3,568,000
- ---------------------------------------------------------------------------------------------------------------------------
16 AEC II - Lake Forest Apartments 0.88% 1 CMB 6,219,000
17 AEC II - Landings at Preserve 1.03% 1 CMB 7,272,000
18 AEC II - Muirwood Village 0.58% 1 CMB 4,071,000
19 AEC II - Oak Bend 0.61% 1 CMB 4,271,000
20 AEC II - Reflections Apartments 1.48% 1 CMB 10,455,000
- ---------------------------------------------------------------------------------------------------------------------------
21 AEC II - Residence at Newark Apartments 0.50% 1 CMB 3,525,000
22 AEC II - Sheffield at Sylvan Apartments 0.54% 1 CMB 3,801,000
23 AEC II - Spring Brook Apartments 0.69% 1 CMB 4,895,000
24 AEC II - The Village of Western Reserve 0.77% 1 CMB 5,440,000
25 AEC II - Vantage Villa Apartments 0.67% 1 CMB 4,750,000
- ---------------------------------------------------------------------------------------------------------------------------
26 Agua Fria Plaza 0.57% 1 GECC 4,047,000
27 Aliso Viejo Self Storage/Mission Viejo RV Storage 0.66% 2 GECC 4,650,000
a Aliso Viejo Self Storage 1 GECC 3,853,363
b Mission Viejo RV Storage 1 GECC 796,637
28 Andover Office Building 0.40% 1 GECC 2,792,000
- ---------------------------------------------------------------------------------------------------------------------------
29 Autumnwood Apartments 0.23% 1 GECC 1,654,000
30 Bays Dulles Business Park 0.22% 1 GECC 1,572,000
31 Bedford Hills Shopping Center 1.63% 1 CMB 11,500,000
32 Boulevard Corners Shopping Center 0.45% 1 CMB 3,182,000
33 Brookshire Brothers Grocery 0.16% 1 CMB 1,155,000
- ---------------------------------------------------------------------------------------------------------------------------
34 Campus Medical Arts Building 0.45% 1 GECC 3,200,000
35 Castle Centerstone I & II 0.30% 1 GECC 2,080,000
36 Clarion Bedford Hotel 1.32% 1 CMB 9,300,000
37 Collin Creek Crossing 0.71% 1 GECC 5,000,000
38 Corona Towne Center 1.48% 1 GECC 10,423,000
- ---------------------------------------------------------------------------------------------------------------------------
39 Cort Furniture Building 0.35% 1 GECC 2,439,000
40 CVS - Ocean City 0.38% 1 GECC 2,700,000
41 Del Webb Shops 0.15% 1 CMB 1,075,000
42 Eckerd Drug Store - Cortlandville 0.30% 1 GECC 2,109,000
- ---------------------------------------------------------------------------------------------------------------------------
43 Eckerd Drug Store - Plattsburgh 0.39% 1 GECC 2,749,000
44 Eckerd Drug Store - Syracuse 0.42% 1 GECC 2,946,000
45 Embassy Suites St. Louis Airport 1.42% 1 CMB 10,000,000
46 Fairfield Inn - Gulfport 0.30% 1 GECC 2,101,000
- ---------------------------------------------------------------------------------------------------------------------------
47 FGS, Favrot and Shane, and Bankers Trust Buildings 0.91% 3 GECC 6,444,000
a Bankers Trust Building 1 GECC 2,606,562
b Favrot and Shane Office Building 1 GECC 2,751,371
c FGS Building 1 GECC 1,086,067
48 Flatiron Office Building 0.26% 1 GECC 1,842,000
- ---------------------------------------------------------------------------------------------------------------------------
49 Forest Glen 0.36% 1 GECC 2,550,000
50 Fort Knox Self Storage 0.28% 1 GECC 2,000,000
51 Goethals Park 1.28% 1 CMB 9,000,000
52 Greendale Mall 5.95% 1 CMB 42,000,000
53 Hazel Towers 0.74% 1 CMB 5,200,000
- ---------------------------------------------------------------------------------------------------------------------------
54 Hickory Grove Townhomes 0.72% 1 GECC 5,060,000
55 Highland North Apartments 1.63% 1 GECC 11,481,000
56 Highland Terrace Apartments 0.83% 1 GECC 5,833,000
57 Inn at Market, The 1.32% 1 CMB 9,300,000
58 Juliana Hotel, The 1.84% 1 CMB 13,000,000
- ---------------------------------------------------------------------------------------------------------------------------
59 Lakecrest Office Building 0.76% 1 GECC 5,323,000
60 Laurel Park Apartments 1.91% 1 GECC 13,500,000
61 Longview Drive Self Storage 0.40% 1 GECC 2,832,000
62 Maintree Shopping Center 1.29% 1 GECC 9,233,000
63 Markham East Center 0.39% 1 GECC 2,720,000
- ---------------------------------------------------------------------------------------------------------------------------
64 Meadows of Catalpa 1.56% 1 CMB 11,000,000
65 Media Works 2.35% 1 CMB 16,555,000
66 Miramar Self Storage 0.24% 1 GECC 1,725,000
67 Mission Trace II 0.43% 1 GECC 3,000,000
- ---------------------------------------------------------------------------------------------------------------------------
68 Northpark I, II & III 2.15% 1 GECC 15,175,000
69 Northtowne Square 0.81% 1 GECC 5,750,000
70 Oak Park II 0.63% 1 GECC 4,450,000
71 Orange County Portfolio III 3.51% 5 GECC 24,784,528
a Lambert Business Center 1 GECC 5,223,062
b Main Street Plaza 1 GECC 2,352,906
c Seven Corporate Plaza 1 GECC 5,441,469
d Spectrum Center 1 GECC 7,013,077
e Warner Corporate Park 1 GECC 4,754,014
- ---------------------------------------------------------------------------------------------------------------------------
72 Orange County Portfolio IV 2.98% 4 GECC 21,088,077
a Airway Business Center 1 GECC 2,080,461
b Moulton Park Place 1 GECC 8,891,837
c Newport Center 1 GECC 7,067,077
d Two Corporate Plaza 1 GECC 3,048,702
- ---------------------------------------------------------------------------------------------------------------------------
73 Plaza De Laredo 1.46% 1 GECC 10,340,000
74 Princeton Commerce Center 0.71% 1 GECC 5,000,000
75 Regency Plaza One 6.03% 1 CMB 42,500,000
76 Rite Aid - Perris 0.34% 1 GECC 2,400,000
- ---------------------------------------------------------------------------------------------------------------------------
77 Sahara Rainbow Center 1.05% 1 CMB 7,400,000
78 Security First Self Storage 0.33% 1 GECC 2,300,000
79 Statesboro Place 1.68% 1 GECC 11,870,000
80 Stonegate Commons Apartments 1.19% 1 GECC 8,400,000
- ---------------------------------------------------------------------------------------------------------------------------
81 Stor-All Self Storage 0.33% 1 GECC 2,300,000
82 Sycamore School Road Shopping Center 0.24% 1 GECC 1,700,000
83 The Gateway of Naples 1.27% 1 GECC 9,000,000
84 Timber Ridge Apartments 2.34% 1 GECC 16,500,000
85 Twinbrook Square 1.81% 1 GECC 12,781,000
- ---------------------------------------------------------------------------------------------------------------------------
86 US Self Storage 0.39% 1 GECC 2,755,000
87 Versailles Apartments 0.35% 1 GECC 2,459,000
88 Walgreens Drug Store - Lombard 0.46% 1 GECC 3,250,000
89 Wal-Mart Distribution Center 0.38% 1 GECC 2,700,000
90 Westfork Plaza 6.03% 1 GECC 42,525,000
91 Wood Meadow Apartments 0.62% 1 GECC 4,337,000
- ---------------------------------------------------------------------------------------------------------------------------
(1) CMB - Chase Manhattan Bank, GECC - General Electric Capital Corporation
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CUT-OFF GENERAL INTEREST ORIGINAL TERM STATED REMAINING
DATE PROPERTY DETAILED MORTGAGE ACCRUAL TO MATURITY TERM TO MATURITY
ID BALANCE TYPE PROPERTY TYPE RATE BASIS OR APD (MOS.) OR APD (MOS.)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 8,500,000 Office Office 8.150% ACT/360 120 120
2 5,495,474 Office Office 8.700% ACT/360 120 119
3 2,123,311 Industrial Office/Warehouse 8.300% ACT/360 120 118
4 10,970,172 Office Office 8.450% ACT/360 120 117
5 39,815,471 Office Office 8.670% ACT/360 120 118
- ------------------------------------------------------------------------------------------------------------------------------
6 1,848,658 Office Office 8.250% ACT/360 120 116
7 9,000,000 Multifamily Multifamily/Office 8.140% ACT/360 120 120
8 1,093,657 Retail Anchored 8.450% ACT/360 120 118
9 4,053,421 Multifamily Conventional 7.850% ACT/360 102 99
10 5,829,101 Multifamily Conventional 7.850% ACT/360 102 99
- ------------------------------------------------------------------------------------------------------------------------------
11 4,659,289 Multifamily Conventional 7.850% ACT/360 102 99
12 14,085,917 Multifamily Conventional 7.890% ACT/360 150 147
13 4,410,753 Multifamily Conventional 7.850% ACT/360 102 99
14 7,106,713 Multifamily Conventional 7.850% ACT/360 102 99
15 3,561,341 Multifamily Conventional 7.850% ACT/360 126 123
- ------------------------------------------------------------------------------------------------------------------------------
16 6,207,394 Multifamily Conventional 7.850% ACT/360 126 123
17 7,258,429 Multifamily Conventional 7.850% ACT/360 126 123
18 4,063,403 Multifamily Conventional 7.850% ACT/360 102 99
19 4,263,029 Multifamily Conventional 7.850% ACT/360 126 123
20 10,435,489 Multifamily Conventional 7.850% ACT/360 126 123
- ------------------------------------------------------------------------------------------------------------------------------
21 3,518,422 Multifamily Conventional 7.850% ACT/360 102 99
22 3,793,907 Multifamily Conventional 7.850% ACT/360 102 99
23 4,885,865 Multifamily Conventional 7.850% ACT/360 126 123
24 5,429,848 Multifamily Conventional 7.850% ACT/360 126 123
25 4,741,136 Multifamily Conventional 7.850% ACT/360 102 99
- ------------------------------------------------------------------------------------------------------------------------------
26 4,041,880 Retail Anchored 8.300% ACT/360 120 118
27 4,650,000 Self Storage Self Storage 8.980% ACT/360 120 120
a 3,853,363 Self Storage Self Storage 8.980% ACT/360 120 120
b 796,637 Self Storage Self Storage 8.980% ACT/360 120 120
28 2,786,114 Office Office 8.000% ACT/360 120 118
- ------------------------------------------------------------------------------------------------------------------------------
29 1,654,000 Multifamily Section 8 8.710% ACT/360 120 120
30 1,572,000 Industrial Office/Warehouse 8.440% ACT/360 120 120
31 11,490,536 Retail Anchored 8.700% ACT/360 120 119
32 3,174,701 Retail Anchored 8.340% ACT/360 120 116
33 1,155,000 Retail Anchored 8.560% ACT/360 120 120
- ------------------------------------------------------------------------------------------------------------------------------
34 3,196,348 Office Office 8.800% ACT/360 120 118
35 2,080,000 Retail Unanchored 8.540% ACT/360 120 120
36 9,289,524 Hotel Full Service 9.130% ACT/360 120 119
37 5,000,000 Retail Anchored 8.260% ACT/360 120 120
38 10,414,517 Retail Anchored 8.800% ACT/360 120 119
- ------------------------------------------------------------------------------------------------------------------------------
39 2,436,008 Industrial Warehouse 8.450% ACT/360 120 118
40 2,700,000 Retail Anchored 8.250% ACT/360 120 120
41 1,073,695 Retail Anchored 8.500% ACT/360 120 118
42 2,106,158 Retail Anchored 7.990% ACT/360 120 118
- ------------------------------------------------------------------------------------------------------------------------------
43 2,745,295 Retail Anchored 7.990% ACT/360 120 118
44 2,941,990 Retail Anchored 7.940% ACT/360 120 118
45 9,988,747 Hotel Full Service 9.140% ACT/360 120 119
46 2,098,687 Hotel Limited Service 9.350% ACT/360 120 119
- ------------------------------------------------------------------------------------------------------------------------------
47 6,438,796 Office Office 8.870% ACT/360 120 119
a 2,604,457 Office Office 8.870% ACT/360 120 119
b 2,749,149 Office Office 8.870% ACT/360 120 119
c 1,085,190 Office Office 8.870% ACT/360 120 119
48 1,838,898 Office Office 8.270% ACT/360 120 117
- ------------------------------------------------------------------------------------------------------------------------------
49 2,547,851 Multifamily Conventional 8.490% ACT/360 120 119
50 1,994,167 Self Storage Self Storage 8.060% ACT/360 120 117
51 9,000,000 Industrial Industrial/Warehouse 8.700% ACT/360 60 60
52 41,928,574 Retail Anchored 8.230% ACT/360 84 81
53 5,193,502 Multifamily Conventional 8.360% ACT/360 120 118
- ------------------------------------------------------------------------------------------------------------------------------
54 5,053,332 Multifamily Conventional 8.100% ACT/360 120 118
55 11,465,115 Multifamily Conventional 7.860% ACT/360 120 118
56 5,822,757 Multifamily Conventional 8.100% ACT/360 120 117
57 9,283,003 Hotel Full-Service 8.870% ACT/360 120 118
58 12,953,927 Hotel Full-Service 8.700% ACT/360 120 116
- ------------------------------------------------------------------------------------------------------------------------------
59 5,318,585 Office Office 8.630% ACT/360 120 119
60 13,481,697 Multifamily Conventional 7.960% ACT/360 120 118
61 2,828,707 Self Storage Self Storage 8.710% ACT/360 120 118
62 9,095,565 Retail Anchored 6.970% ACT/360 120 101
63 2,712,791 Retail Unanchored 8.410% ACT/360 120 115
- ------------------------------------------------------------------------------------------------------------------------------
64 11,000,000 Multifamily Conventional 8.420% ACT/360 120 120
65 16,535,024 Office Office 8.530% ACT/360 120 118
66 1,720,251 Self Storage Self Storage 8.370% ACT/360 120 117
67 2,996,469 Retail Unanchored 8.650% ACT/360 120 118
- ------------------------------------------------------------------------------------------------------------------------------
68 15,175,000 Office Office 8.470% ACT/360 120 120
69 5,733,531 Retail Anchored 8.110% ACT/360 120 115
70 4,446,402 Multifamily Section 8 8.860% ACT/360 120 119
71 24,687,115 Various Various 8.170% ACT/360 120 113
a 5,202,533 Industrial Office/Warehouse 8.170% ACT/360 120 113
b 2,343,658 Industrial Office/Warehouse 8.170% ACT/360 120 113
c 5,420,082 Office Office 8.170% ACT/360 120 113
d 6,985,513 Industrial Office/Warehouse 8.170% ACT/360 120 113
e 4,735,329 Office Office 8.170% ACT/360 120 113
- ------------------------------------------------------------------------------------------------------------------------------
72 21,005,193 Various Various 8.170% ACT/360 120 113
a 2,072,284 Industrial Office/Warehouse 8.170% ACT/360 120 113
b 8,856,889 Industrial Office/Warehouse 8.170% ACT/360 120 113
c 7,039,301 Office Office 8.170% ACT/360 120 113
d 3,036,719 Office Office 8.170% ACT/360 120 113
- ------------------------------------------------------------------------------------------------------------------------------
73 10,260,157 Retail Anchored 7.600% ACT/360 84 72
74 4,993,544 Office Office 8.200% ACT/360 120 118
75 42,500,000 Office Office 8.620% ACT/360 120 120
76 2,393,038 Retail Anchored 8.060% ACT/360 120 115
- ------------------------------------------------------------------------------------------------------------------------------
77 7,391,015 Retail Anchored 8.500% ACT/360 120 118
78 2,293,938 Self Storage Self Storage 8.600% ACT/360 120 117
79 11,841,923 Multifamily Student 8.210% ACT/360 120 116
80 8,400,000 Multifamily Conventional 8.620% ACT/360 120 120
- ------------------------------------------------------------------------------------------------------------------------------
81 2,295,260 Self Storage Self Storage 8.140% ACT/360 120 118
82 1,698,572 Retail Anchored 8.520% ACT/360 120 119
83 8,974,091 Retail Unanchored 8.090% ACT/360 120 115
84 16,485,748 Multifamily Student 8.280% ACT/360 120 119
85 12,764,996 Retail Unanchored 8.350% ACT/360 120 118
- ------------------------------------------------------------------------------------------------------------------------------
86 2,749,700 Self Storage Self Storage 8.560% ACT/360 120 118
87 2,455,921 Multifamily Conventional 8.350% ACT/360 120 118
88 3,245,752 Retail Anchored 8.140% ACT/360 120 118
89 2,682,279 Industrial Warehouse 7.950% ACT/360 120 109
90 42,478,452 Retail Anchored 9.000% ACT/360 120 118
91 4,331,723 Multifamily Conventional 8.490% ACT/360 120 118
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ORIGINAL REMAINING FIRST MATURITY REMAINING
AMORTIZATION AMORTIZATION PAYMENT DATE ANNUAL INTEREST ONLY APD
ID TERM (MOS.) TERM (MOS.) DATE OR APD DEBT SERVICE PERIOD (MOS.) LOCKBOX (YES/NO)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 360 360 5/1/00 4/1/10 759,133 - No
2 360 359 3/10/00 2/10/10 516,867 - No
3 360 358 2/1/00 1/1/10 192,561 - No
4 300 297 1/10/00 12/10/09 1,058,456 - No
5 360 358 2/10/00 1/10/10 3,735,855 - No
- ------------------------------------------------------------------------------------------------------------------------------
6 360 356 12/10/99 11/10/09 167,052 - No
7 360 360 5/1/00 4/1/10 803,031 - No
8 360 358 2/1/00 1/1/10 100,570 - No
9 360 357 1/10/00 6/10/08 352,496 - No
10 360 357 1/10/00 6/10/08 506,913 - No
- ------------------------------------------------------------------------------------------------------------------------------
11 360 357 1/10/00 6/10/08 405,183 - No
12 360 357 1/10/00 6/10/12 1,229,625 - No
13 360 357 1/10/00 6/10/08 383,570 - No
14 360 357 1/10/00 6/10/08 618,017 - No
15 360 357 1/10/00 6/10/10 309,703 - No
- ------------------------------------------------------------------------------------------------------------------------------
16 360 357 1/10/00 6/10/10 539,810 - No
17 360 357 1/10/00 6/10/10 631,211 - No
18 360 357 1/10/00 6/10/08 353,364 - No
19 360 357 1/10/00 6/10/10 370,724 - No
20 360 357 1/10/00 6/10/10 907,496 - No
- ------------------------------------------------------------------------------------------------------------------------------
21 360 357 1/10/00 6/10/08 305,971 - No
22 360 357 1/10/00 6/10/08 329,928 - No
23 360 357 1/10/00 6/10/10 424,887 - No
24 360 357 1/10/00 6/10/10 472,193 - No
25 360 357 1/10/00 6/10/08 412,301 - No
- ------------------------------------------------------------------------------------------------------------------------------
26 360 358 2/1/00 1/1/10 366,554 - No
27 300 300 4/1/00 3/1/10 467,508 - No
a 300 300 4/1/00 3/1/10 387,414 - No
b 300 300 4/1/00 3/1/10 80,093 - No
28 300 298 2/1/00 1/1/10 258,589 - No
- ------------------------------------------------------------------------------------------------------------------------------
29 360 360 5/1/00 4/1/10 155,578 - No
30 360 360 5/1/00 4/1/10 144,246 - No
31 360 359 3/10/00 2/10/10 1,080,722 - No
32 360 356 12/10/99 11/10/09 289,283 - No
33 300 300 4/10/00 3/10/10 112,165 - No
- ------------------------------------------------------------------------------------------------------------------------------
34 360 358 2/1/00 1/1/10 303,465 - No
35 360 360 5/1/00 4/1/10 192,629 - No
36 300 299 3/10/00 2/10/10 946,498 - Springing No
37 360 360 4/1/00 3/1/10 451,182 - No
38 360 359 3/1/00 2/1/10 988,443 - No
- ------------------------------------------------------------------------------------------------------------------------------
39 360 358 2/1/00 1/1/10 224,009 - No
40 300 300 5/1/00 4/1/10 255,458 - No
41 360 358 2/10/00 1/10/10 99,190 - No
42 360 358 2/1/00 1/1/10 185,525 - No
- ------------------------------------------------------------------------------------------------------------------------------
43 360 358 2/1/00 1/1/10 241,824 - No
44 360 358 2/1/00 1/1/10 257,923 - No
45 300 299 3/10/00 2/10/10 1,018,565 - No
46 300 299 3/1/00 2/1/10 217,653 - No
- ------------------------------------------------------------------------------------------------------------------------------
47 360 359 3/1/00 2/1/10 614,979 - No
a 360 359 3/1/00 2/1/10 248,756 - No
b 360 359 3/1/00 2/1/10 262,575 - No
c 360 359 3/1/00 2/1/10 103,648 - No
48 360 357 1/1/00 12/1/09 166,371 - No
- ------------------------------------------------------------------------------------------------------------------------------
49 360 359 3/1/00 2/1/10 235,071 - No
50 300 297 1/1/00 12/1/09 186,191 - No
51 360 360 4/10/00 3/10/05 845,783 - No
52 360 357 1/10/00 12/10/06 3,779,299 - Hard No
53 360 358 2/10/00 1/10/10 473,625 - No
- ------------------------------------------------------------------------------------------------------------------------------
54 360 358 2/1/00 1/1/10 449,782 - No
55 360 358 2/1/00 1/1/10 997,509 - No
56 360 357 1/1/00 12/1/09 518,494 - No
57 300 298 2/10/00 1/10/10 926,628 - No
58 300 296 12/10/99 11/10/09 1,277,249 - Springing No
- ------------------------------------------------------------------------------------------------------------------------------
59 360 359 3/1/00 2/1/10 497,048 - No
60 360 358 2/1/00 1/1/10 1,184,184 - No
61 360 358 2/1/00 1/1/10 266,382 - No
62 360 341 9/1/98 8/1/08 734,898 - Springing Yes
63 360 355 11/1/99 10/1/09 248,894 - No
- ------------------------------------------------------------------------------------------------------------------------------
64 360 360 4/10/00 3/10/10 1,007,491 - No
65 360 358 2/10/00 1/10/10 1,531,749 - No
66 300 297 1/1/00 12/1/09 164,872 - No
67 360 358 2/1/00 1/1/10 280,645 - No
- ------------------------------------------------------------------------------------------------------------------------------
68 360 360 5/1/00 4/1/10 1,396,322 - No
69 360 355 11/1/99 10/1/09 511,599 - No
70 360 359 3/1/00 2/1/10 424,300 - No
71 360 353 9/1/99 8/1/09 2,217,670 - No
a 360 353 9/1/99 8/1/09 467,349 - No
b 360 353 9/1/99 8/1/09 210,533 - No
c 360 353 9/1/99 8/1/09 486,892 - No
d 360 353 9/1/99 8/1/09 627,516 - No
e 360 353 9/1/99 8/1/09 425,380 - No
- ------------------------------------------------------------------------------------------------------------------------------
72 360 353 9/1/99 8/1/09 1,886,919 - No
a 360 353 9/1/99 8/1/09 186,156 - No
b 360 353 9/1/99 8/1/09 795,624 - No
c 360 353 9/1/99 8/1/09 632,348 - No
d 360 353 9/1/99 8/1/09 272,792 - No
- ------------------------------------------------------------------------------------------------------------------------------
73 360 348 4/1/99 3/1/06 876,098 - No
74 360 358 2/1/00 1/1/10 448,653 - No
75 360 360 4/10/00 3/10/10 3,964,914 - No
76 360 355 11/1/99 10/1/09 212,530 - No
- ------------------------------------------------------------------------------------------------------------------------------
77 360 358 2/10/00 1/10/10 682,795 - No
78 300 297 1/1/00 12/1/09 224,106 - No
79 360 356 12/1/99 11/1/09 1,066,101 - No
80 360 360 4/1/00 3/1/10 783,654 - No
- ------------------------------------------------------------------------------------------------------------------------------
81 300 298 2/1/00 1/1/10 215,587 - No
82 360 359 3/1/00 2/1/10 157,148 - No
83 360 355 11/1/99 10/1/09 799,252 - No
84 360 359 3/1/00 2/1/10 1,491,686 - No
85 360 358 2/1/00 1/1/10 1,163,033 - No
- ------------------------------------------------------------------------------------------------------------------------------
86 300 298 2/1/00 1/1/10 267,546 - No
87 360 358 2/1/00 1/1/10 223,762 - No
88 360 358 2/1/00 1/1/10 289,984 - No
89 360 349 5/1/99 4/1/09 236,611 - No
90 360 358 2/1/00 1/1/10 4,105,989 - Hard No
91 360 358 2/1/00 1/1/10 399,805 - No
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CROSSED WITH GRACE PAYMENT APPRAISED CUT-OFF DATE LTV LTV RATIO AT PREPAYMENT
ID OTHER LOANS DSCR PERIOD DATE VALUE RATIO MATURITY PROVISIONS
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 No 1.54 5 1 17,000,000 50.0% 44.9% L(2.00),D(7.75),O(0.25)
2 No 1.29 - 10 8,050,000 68.3% 62.2% L(2.08),D(7.67),O(0.25)
3 No 1.29 5 1 2,860,000 74.2% 67.0% L(2.17),D(7.58),O(0.25)
4 No 1.28 - 10 14,850,000 73.9% 62.0% L(2.25),D(7.50),O(0.25)
5 No 1.23 - 10 57,700,000 69.0% 62.8% L(2.17),D(7.58),O(0.25)
- ---------------------------------------------------------------------------------------------------------------------------
6 No 1.32 - 10 2,500,000 74.0% 66.8% L(2.33),D(7.42),O(0.25)
7 No 1.45 5 1 15,200,000 59.2% 53.2% L(2.00),D(7.75),O(0.25)
8 No 1.39 5 1 1,650,000 66.3% 60.0% L(2.17),D(7.58),O(0.25)
9 No 1.20 - 10 5,600,000 72.4% 66.3% L(2.25),D(6.00),O(0.25)
10 No 1.24 - 10 7,300,000 79.9% 73.2% L(2.25),D(6.00),O(0.25)
- ---------------------------------------------------------------------------------------------------------------------------
11 No 1.20 - 10 6,000,000 77.7% 71.2% L(2.25),D(6.00),O(0.25)
12 No 1.20 - 10 18,200,000 77.4% 65.9% L(2.25),D(10.00),O(0.25)
13 No 1.20 - 10 6,000,000 73.5% 67.4% L(2.25),D(6.00),O(0.25)
14 No 1.21 - 10 8,900,000 79.9% 73.2% L(2.25),D(6.00),O(0.25)
15 No 1.20 - 10 4,800,000 74.2% 65.7% L(2.25),D(8.00),O(0.25)
- ---------------------------------------------------------------------------------------------------------------------------
16 No 1.20 - 10 8,100,000 76.6% 67.9% L(2.25),D(8.00),O(0.25)
17 No 1.20 - 10 9,150,000 79.3% 70.3% L(2.25),D(8.00),O(0.25)
18 No 1.20 - 10 5,400,000 75.2% 69.0% L(2.25),D(6.00),O(0.25)
19 No 1.20 - 10 5,400,000 78.9% 70.0% L(2.25),D(8.00),O(0.25)
20 No 1.20 - 10 13,600,000 76.7% 68.0% L(2.25),D(8.00),O(0.25)
- ---------------------------------------------------------------------------------------------------------------------------
21 No 1.20 - 10 5,460,000 64.4% 59.1% L(2.25),D(6.00),O(0.25)
22 No 1.20 - 10 4,980,000 76.2% 69.8% L(2.25),D(6.00),O(0.25)
23 No 1.20 - 10 6,950,000 70.3% 62.3% L(2.25),D(8.00),O(0.25)
24 No 1.22 - 10 6,800,000 79.9% 70.8% L(2.25),D(8.00),O(0.25)
25 No 1.20 - 10 6,000,000 79.0% 72.4% L(2.25),D(6.00),O(0.25)
- ---------------------------------------------------------------------------------------------------------------------------
26 No 1.31 5 1 5,450,000 74.2% 67.0% L(2.17),D(7.58),O(0.25)
27 No 1.38 5 1 7,880,000 59.0% 50.1% L(2.00),D(7.75),O(0.25)
a Yes 1.38 5 1 6,530,000 59.0% 50.1% L(2.00),D(7.75),O(0.25)
b Yes 1.38 5 1 1,350,000 59.0% 50.1% L(2.00),D(7.75),O(0.25)
28 No 1.46 5 1 4,500,000 61.9% 51.3% L(2.17),D(7.41),O(0.42)
- ---------------------------------------------------------------------------------------------------------------------------
29 No 1.36 5 1 2,200,000 75.2% 68.4% L(2.00),D(7.75),O(0.25)
30 No 1.38 5 1 2,100,000 74.9% 67.7% L(2.00),D(7.75),O(0.25)
31 No 1.22 - 10 15,800,000 72.7% 66.2% L(2.08),D(7.67),O(0.25)
32 No 1.23 - 10 4,325,000 73.4% 66.4% L(2.33),D(7.42),O(0.25)
33 No 1.20 - 10 1,550,000 74.5% 62.5% L(2.00),D(7.75),O(0.25)
- ---------------------------------------------------------------------------------------------------------------------------
34 No 1.33 5 1 4,750,000 67.3% 61.4% L(2.17),D(7.58),O(0.25)
35 No 1.25 5 1 2,750,000 75.6% 68.6% L(2.00),D(7.75),O(0.25)
36 No 1.37 - 10 14,700,000 63.2% 53.9% L(2.08),D(7.42),O(0.50)
37 No 1.55 5 1 7,750,000 64.5% 58.2% L(2.00),D(7.75),O(0.25)
38 No 1.27 5 1 15,000,000 69.4% 63.3% L(2.08),D(7.67),O(0.25)
- ---------------------------------------------------------------------------------------------------------------------------
39 No 1.20 5 1 3,065,000 79.5% 72.0% L(2.17),D(7.58),O(0.25)
40 No 1.39 5 1 4,200,000 64.3% 53.5% L(2.00),D(7.75),O(0.25)
41 No 1.34 - 10 1,475,000 72.8% 66.0% L(2.17),D(7.58),O(0.25)
42 No 1.19 5 1 2,600,000 81.0% 72.6% L(2.17),D(7.58),O(0.25)
- ---------------------------------------------------------------------------------------------------------------------------
43 No 1.20 5 1 3,300,000 83.2% 74.6% L(2.17),D(7.58),O(0.25)
44 No 1.20 5 1 3,620,000 81.3% 72.8% L(2.17),D(7.58),O(0.25)
45 No 1.31 - 10 14,800,000 67.5% 57.6% L(2.08),D(7.67),O(0.25)
46 No 1.52 5 1 3,150,000 66.6% 57.1% L(2.08),D(7.67),O(0.25)
- ---------------------------------------------------------------------------------------------------------------------------
47 No 1.27 5 1 8,900,000 72.3% 66.1% L(2.08),D(7.42),O(0.50)
a Yes 1.27 5 1 3,600,000 72.3% 66.1% L(2.08),D(7.42),O(0.50)
b Yes 1.27 5 1 3,800,000 72.3% 66.1% L(2.08),D(7.42),O(0.50)
c Yes 1.27 5 1 1,500,000 72.3% 66.1% L(2.08),D(7.42),O(0.50)
48 No 1.42 5 1 2,640,000 69.7% 62.9% L(2.25),D(7.50),O(0.25)
- ---------------------------------------------------------------------------------------------------------------------------
49 No 1.48 5 1 3,475,000 73.3% 66.4% L(2.08),D(7.67),O(0.25)
50 No 2.24 5 1 4,500,000 44.3% 36.8% L(2.25),D(7.50),O(0.25)
51 No 1.22 - 10 15,475,000 58.2% 56.2% L(2.00),D(2.75),O(0.25)
52 No 1.34 - 10 63,700,000 65.8% 62.0% L(2.25),D(4.50),O(0.25)
53 No 1.32 - 10 7,650,000 67.9% 61.4% L(2.17),D(7.58),O(0.25)
- ---------------------------------------------------------------------------------------------------------------------------
54 No 1.24 5 1 6,490,000 77.9% 70.0% L(2.17),D(7.58),O(0.25)
55 No 1.20 5 1 14,200,000 80.7% 72.2% L(2.17),D(7.58),O(0.25)
56 No 1.21 5 1 7,800,000 74.7% 67.2% L(2.25),D(7.50),O(0.25)
57 No 1.37 - 10 16,600,000 55.9% 47.4% L(2.17),D(7.58),O(0.25)
58 No 1.68 - 10 20,900,000 62.0% 52.4% L(2.33),D(7.17),O(0.50)
- ---------------------------------------------------------------------------------------------------------------------------
59 No 1.26 5 1 6,820,000 78.0% 70.9% L(2.08),D(7.67),O(0.25)
60 No 1.28 5 1 16,950,000 79.5% 71.3% L(2.17),D(7.58),O(0.25)
61 No 1.30 5 1 3,850,000 73.5% 66.9% L(2.17),D(7.58),O(0.25)
62 No 1.74 5 1 13,300,000 68.4% 60.6% L(4.92),D(4.75),O(0.33)
63 No 1.26 5 1 4,800,000 56.5% 51.3% L(2.42),D(7.33),O(0.25)
- ---------------------------------------------------------------------------------------------------------------------------
64 No 1.16 - 10 13,800,000 79.7% 72.1% L(2.00),D(7.75),O(0.25)
65 No 1.24 - 10 22,400,000 73.8% 67.0% L(2.17),D(7.58),O(0.25)
66 No 1.34 5 1 2,300,000 74.8% 62.6% L(2.25),D(7.42),O(0.33)
67 No 1.34 5 1 4,900,000 61.2% 55.6% L(2.17),D(7.58),O(0.25)
- ---------------------------------------------------------------------------------------------------------------------------
68 No 1.34 5 1 23,300,000 65.1% 59.0% L(2.00),D(7.75),O(0.25)
69 No 1.33 5 1 7,100,000 80.8% 72.7% L(2.42),D(7.33),O(0.25)
70 No 1.49 5 1 6,950,000 64.0% 58.4% L(2.08),D(7.67),O(0.25)
71 Yes 1.38 5 1 33,500,000 73.7% 66.5% L(2.58),D(7.17),O(0.25)
a Yes 1.38 5 1 6,600,000 73.7% 66.5% L(2.58),D(7.17),O(0.25)
b Yes 1.38 5 1 3,600,000 73.7% 66.5% L(2.58),D(7.17),O(0.25)
c Yes 1.38 5 1 7,000,000 73.7% 66.5% L(2.58),D(7.17),O(0.25)
d Yes 1.38 5 1 9,500,000 73.7% 66.5% L(2.58),D(7.17),O(0.25)
e Yes 1.38 5 1 6,800,000 73.7% 66.5% L(2.58),D(7.17),O(0.25)
- ---------------------------------------------------------------------------------------------------------------------------
72 Yes 1.27 5 1 26,930,000 78.0% 70.4% L(2.58),D(7.17),O(0.25)
a Yes 1.27 5 1 2,430,000 78.0% 70.4% L(2.58),D(7.17),O(0.25)
b Yes 1.27 5 1 11,900,000 78.0% 70.4% L(2.58),D(7.17),O(0.25)
c Yes 1.27 5 1 8,600,000 78.0% 70.4% L(2.58),D(7.17),O(0.25)
d Yes 1.27 5 1 4,000,000 78.0% 70.4% L(2.58),D(7.17),O(0.25)
- ---------------------------------------------------------------------------------------------------------------------------
73 No 1.32 5 1 13,100,000 78.3% 73.5% L(3.00),D(3.75),O(0.25)
74 No 1.40 5 1 7,800,000 64.0% 57.7% L(2.17),D(7.58),O(0.25)
75 No 1.27 - 10 69,500,000 61.2% 55.6% L(2.00),D(7.75),O(0.25)
76 No 1.31 5 1 3,200,000 74.8% 67.3% L(2.42),D(7.33),O(0.25)
- ---------------------------------------------------------------------------------------------------------------------------
77 No 1.23 - 10 9,800,000 75.4% 68.4% L(2.17),D(7.58),O(0.25)
78 No 1.34 5 1 3,350,000 68.5% 57.7% L(2.25),D(7.50),O(0.25)
79 No 1.25 5 1 15,300,000 77.4% 69.8% L(2.33),D(7.34),O(0.33)
80 No 1.28 5 1 11,000,000 76.4% 69.4% L(2.00),D(7.75),O(0.25)
- ---------------------------------------------------------------------------------------------------------------------------
81 No 1.54 5 1 3,700,000 62.0% 51.6% L(2.17),D(7.58),O(0.25)
82 No 1.35 5 1 2,250,000 75.5% 68.5% L(2.08),D(7.67),O(0.25)
83 No 1.23 5 1 12,000,000 74.8% 67.3% L(2.42),D(7.25),O(0.33)
84 No 1.24 5 1 24,500,000 67.3% 60.7% L(2.08),D(7.67),O(0.25)
85 No 1.25 5 1 17,000,000 75.1% 67.9% L(2.17),D(7.58),O(0.25)
- ---------------------------------------------------------------------------------------------------------------------------
86 No 1.26 5 1 3,950,000 69.6% 58.5% L(2.17),D(7.58),O(0.25)
87 No 1.25 5 1 3,400,000 72.2% 65.3% L(2.17),D(7.58),O(0.25)
88 No 1.18 5 1 4,650,000 69.8% 62.8% L(2.17),D(7.58),O(0.25)
89 No 1.42 5 1 3,750,000 71.5% 64.4% L(2.92),D(6.58),O(0.50)
90 No 1.20 5 1 53,800,000 79.0% 72.4% L(2.17),D(7.58),O(0.25)
91 No 1.26 5 1 6,500,000 66.6% 60.4% L(2.17),D(7.33),O(0.50)
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NET
RENTABLE
ZIP YEAR YEAR AREA
ID ADDRESS CITY STATE CODE BUILT RENOVATED (SF)/UNITS
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 1000 Sansome Street San Francisco CA 94111 1904 1998 53,016
2 1299 Fourth Street San Rafael CA 94901 1962 1996 42,609
3 1370 Miners Drive Lafayette CO 80026 1999 30,600
4 15 W 34th St New York NY 10001 1907 1983 49,200
5 40 Worth St New York NY 10013 1927 1993 560,387
- ------------------------------------------------------------------------------------------------------------------------------
6 6512 South McCarran Blvd Reno NV 89509 1999 15,251
7 696 Pennsylvania Avenue San Francisco CA 94107 1999 48
8 3712-3720 Belt Line Road Addison TX 75001 1998 7,610
9 5400 Lakota Dr Westerville OH 43081 1987 102
10 2645 Hard Road Columbus OH 43235 1989 1999 112
- ------------------------------------------------------------------------------------------------------------------------------
11 5400 Lindbergh Blvd Columbus OH 43228 1989 196
12 4150 Silver Springs Lane Columbus OH 43230 1996 324
13 1820 So Crawford Mt Pleasant MI 48858 1988 144
14 1666 East Main St Kent OH 44240 1990 192
15 1135-1263 Whitney Lane Westerville OH 43081 1995 76
- ------------------------------------------------------------------------------------------------------------------------------
16 4800 Lake Forest Blvd Westerville OH 43081 1994 192
17 100 Minges Creek Pl Battle Creek MI 49015 1990 190
18 3251 Haddington Drive & 6696 Gemstar Drive Reynoldsburg OH 43068 1988 164
19 6680 Oak Bend Commons Way Canal Winchester OH 43110 1997 102
20 12020 Little Patuxent Prkwy Columbia MD 21044 1985 1995 184
- ------------------------------------------------------------------------------------------------------------------------------
21 1476 Residence Dr Newark OH 43055 1993 112
22 321 Pontious Lane Circleville OH 44113 1989 136
23 1074 West 32nd St Holland MI 49423 1986 168
24 815 Frost Road Streetsboro OH 44241 1997 108
25 2423 Cheyenne Blvd Toledo OH 43614 1974 150
- ------------------------------------------------------------------------------------------------------------------------------
26 9043 West Olive Avenue Peoria AZ 85345 1998 1999 38,200
27 Various Aliso Viejo/Mission Viejo CA Various 296,339
a 36 Journey Aliso Viejo CA 92656 1998 82,964
b 26692 Avery Parkway Mission Viejo CA 92692 1994 213,375
28 4190 Telegraph Road Bloomfield Hills MI 48302 1974 1999 33,728
- ------------------------------------------------------------------------------------------------------------------------------
29 300 Lake Lamond Road Longview TX 75604 1971 1998 160
30 114 Powers Court Sterling VA 22170 1984 38,400
31 711-747 Bedford Road Bedford Hills NY 10507 1967 1990 118,584
32 5800 Beach Blvd. Jacksonville FL 32207 1985 100,589
33 1125 South Wheeler Road Jasper TX 75951 1984 31,028
- ------------------------------------------------------------------------------------------------------------------------------
34 29101 Health Campus Drive Westlake OH 44145 1983 59,082
35 350-390 Perry Street Castle Rock CO 80104 1998 1999 18,921
36 761 Post Street San Francisco CA 94109 1929 1999 144
37 900 & 904 North Central Expressway Plano TX 75074 1998 1999 51,018
38 261-401 S. Lincoln Avenue Corona CA 91720 1988 139,003
- ------------------------------------------------------------------------------------------------------------------------------
39 4415 Metric Drive Winter Park FL 32792 1999 62,837
40 12001 Coastal Highway Ocean City MD 21842 1999 10,125
41 9430 West Lake Mead Blvd. Las Vegas NV 89134 1998 7,000
42 1067 Route 222 Cortlandville NY 13045 1999 12,738
- ------------------------------------------------------------------------------------------------------------------------------
43 357 Cornelia Street Plattsburgh NY 12901 1999 10,908
44 401 West Seneca Turnpike Syracuse NY 13207 1999 12,738
45 11237 Lone Eagle Dr Bridgeton MO 63044 1994 159
46 15151 Turkey Creek Drive Gulfport MS 39503 1997 79
- ------------------------------------------------------------------------------------------------------------------------------
47 Various Metairie/Kenner LA Various 1982 1996 117,691
a 2200 Veterans Memorial Boulevard Kenner LA 70062 1982 1996 44,231
b 3925 & 3945 N. Interstate 10 Service Road Metairie LA 70001 1982 1996 50,481
c 4300 Interstate 10 Service Road Metairie LA 70001 1982 1996 22,979
48 401 East Court Street Cincinnati OH 45202 1900 1987 56,551
- ------------------------------------------------------------------------------------------------------------------------------
49 402 South Jupiter Road Garland TX 75042 1971 1998 152
50 15400 Depot Lane Upper Marlboro MD 20772 1990 1993 58,565
51 2525 Brunswick Ave Linden NJ 07036 1910 1966 524,045
52 7 Neponset Street Worcester MA 01606 1987 1997 430,769
53 1730-1740 Mulford Avenue Bronx NY 10461 1970 286
- ------------------------------------------------------------------------------------------------------------------------------
54 1691 Red Robin Road Columbus OH 43229 1974 1998 220
55 3510 Buford Highway Atlanta GA 30329 1967 1998 244
56 4939 Oakdale Road Smyrna GA 30080 1978 1999 183
57 86 Pine Street Seattle WA 98101 1985 70
58 590 Bush Street San Francisco CA 94108 1906 1986 107
- ------------------------------------------------------------------------------------------------------------------------------
59 3710 Corporex Park Drive Tampa FL 33619 1989 61,542
60 4701 Lakeland Drive Flowood MS 39208 1998 1999 312
61 4203 Industry Drive North Highlands CA 95660 1975 1999 86,148
62 301 South Main Road Vineland NJ 08360 1996 122,500
63 4231 Markham Street Annandale VA 22003 1977 1989 42,507
- ------------------------------------------------------------------------------------------------------------------------------
64 4001 Indian Runn Rd Dayton OH 45415 1972 1996 323
65 12910 Culver Boulevard Marina del Rey CA 90066 1971 1999 98,005
66 260 Geronimo Street Destin FL 32541 1985 1997 65,616
67 3345-3355 South Wadsworth Boulevard Lakewood CO 80227 1983 1998 56,836
- ------------------------------------------------------------------------------------------------------------------------------
68 8950 North Central Expressway & 8080 Park Lane Dallas TX 75231 1974 1999 240,897
69 5600 William Flynn Highway Gibsonia PA 15044 1992 113,374
70 159 Joliet Street S.W. Washington DC 20032 1944 1990 300
71 Various Various CA Various 311,263
a 411-471 West Lambert Road Brea CA 92821 1987 80,422
b 2031 SE Main Street Irvine CA 92614 1973 41,983
c Seven Corporate Plaza Newport Beach CA 92660 1996 24,500
d 23-27 Mauchly Irvine CA 92714 1990 88,112
e 1371-1431 Warner Avenue Tustin CA 92780 1982 76,246
- ------------------------------------------------------------------------------------------------------------------------------
72 Various Various CA Various 212,905
a 350 Fischer and 3115 Airway Avenue Costa Mesa CA 92626 1977 36,597
b 23121-23151 Verdugo Drive Laguna Hills CA 92653 1981 1994 100,744
c 4910 Birch Street Newport Beach CA 92660 1975 54,028
d Two Corporate Plaza Newport Beach CA 92660 1980 21,536
- ------------------------------------------------------------------------------------------------------------------------------
73 5700-5724 San Bernardo Avenue Laredo TX 78041 1992 244,239
74 29 Emmons Drive Princeton NJ 08542 1976 1999 70,375
75 2350 Mission College Boulevard Santa Clara CA 95054 1986 224,334
76 1688 North Perris Boulevard Perris CA 92571 1999 16,730
- ------------------------------------------------------------------------------------------------------------------------------
77 2260 South Rainbow Avenue Las Vegas NV 89146 1999 53,298
78 3089 Main Street Chula Vista CA 91911 1986 71,018
79 1699 Statesboro Place Circle Statesboro GA 30458 1999 132
80 1633 Red Robin Road Columbus OH 43229 1973 1995 272
- ------------------------------------------------------------------------------------------------------------------------------
81 201 Concord Street Pawtucket RI 02860 1996 1998 70,050
82 3501 Sycamore School Road Fort Worth TX 76133 1988 1998 26,474
83 2104 Ninth Street North Naples FL 34102 1991 1994 64,862
84 1025 Adams Circle Boulder CO 80303 1958 1999 311
85 1800 Rockville Pike Rockville MD 20852 1949 1997 72,986
- ------------------------------------------------------------------------------------------------------------------------------
86 4455 Panther Creek Pines The Woodlands TX 77381 1997 49,425
87 2208 Southside Boulevard Port Royal SC 29935 1976 1997 96
88 225 East Roosevelt Road Lombard IL 60148 1999 13,905
89 3235 Avondale Mill Road Macon GA 31216 1980 200,000
90 15825-15915 Pines Boulevard Pembroke Pines FL 33082 1999 396,022
91 6897 Meadow Crest Drive North Richland Hills TX 76180 1985 1997 222
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LOAN
PER NET ACTUAL,
RENTABLE OCCUPANCY ANNUALIZED,
UNITS AREA OCCUPANCY RATE ACTUAL OR TTM UNDERWRITTEN UNDERWRITTEN
ID OF MEASURE SF/UNITS RATE AS OF DATE 1998 NOI 1999 NOI NOI REVENUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Sq. Ft. 160.33 97% 1/1/00 326,792 883,289 1,264,157 1,648,312
2 Sq. Ft. 128.97 100% 1/25/00 582,415 757,122 744,718 1,006,313
3 Sq. Ft. 69.39 100% 12/1/99 85,190 278,715 284,103
4 Sq. Ft. 222.97 100% 2/1/00 656,547 650,052 1,451,943 2,086,055
5 Sq. Ft. 71.05 96% 11/17/99 4,298,318 4,908,435 5,509,653 10,274,852
- ---------------------------------------------------------------------------------------------------------------------------
6 Sq. Ft. 121.22 100% 9/3/99 245,553 293,778
7 Units 187,500.00 100% 1/20/00 1,176,004 1,528,805
8 Sq. Ft. 143.71 100% 12/3/99 169,232 147,866 153,996
9 Units 39,739.43 100% 10/31/99 463,789 501,017 448,507 829,559
10 Units 52,045.55 96% 10/31/99 740,053 696,353 657,089 981,678
- ---------------------------------------------------------------------------------------------------------------------------
11 Units 23,771.88 93% 10/31/99 660,090 573,542 535,258 973,654
12 Units 43,475.05 98% 10/31/99 1,396,700 1,423,352 1,556,612 2,525,715
13 Units 30,630.23 100% 10/31/99 539,888 586,968 497,152 913,620
14 Units 37,014.13 98% 10/31/99 994,048 947,112 816,938 1,525,855
15 Units 46,859.76 99% 10/31/99 448,630 424,922 390,679 638,933
- ---------------------------------------------------------------------------------------------------------------------------
16 Units 32,330.18 97% 10/31/99 735,588 759,185 695,773 1,152,310
17 Units 38,202.26 89% 10/31/99 969,198 866,393 805,044 1,543,911
18 Units 24,776.85 96% 10/31/99 546,558 501,816 465,139 902,294
19 Units 41,794.41 98% 10/31/99 466,919 432,411 470,451 774,086
20 Units 56,714.61 95% 10/21/99 1,252,297 1,252,142 1,135,908 1,858,817
- ---------------------------------------------------------------------------------------------------------------------------
21 Units 31,414.48 85% 10/31/99 535,292 504,879 395,181 644,175
22 Units 27,896.37 99% 10/31/99 512,635 485,169 429,973 796,235
23 Units 29,082.53 99% 10/31/99 573,513 590,458 552,857 967,818
24 Units 50,276.37 98% 10/31/99 656,981 685,250 602,648 952,351
25 Units 31,607.57 95% 10/31/99 591,361 606,460 547,284 966,992
- ---------------------------------------------------------------------------------------------------------------------------
26 Sq. Ft. 105.81 95% 12/31/99 314,893 519,948 519,224
27 Sq. Ft. 15.69 100% 12/31/99 326,200 696,957 658,141 1,057,238
a Sq. Ft. 100% 12/31/99 214,759 542,333 540,161 859,058
b Sq. Ft. 98% 12/31/99 111,441 154,624 117,980 198,180
28 Sq. Ft. 82.61 100% 12/1/99 424,043 423,080 442,261 715,654
- ---------------------------------------------------------------------------------------------------------------------------
29 Units 10,337.50 98% 1/5/00 171,319 277,568 253,052 620,931
30 Sq. Ft. 40.94 100% 1/24/00 252,507 245,918 215,354 233,790
31 Sq. Ft. 96.90 100% 12/1/99 1,234,155 1,471,470 1,423,830 1,439,304
32 Sq. Ft. 31.56 99% 2/1/00 441,961 450,826 410,612 437,008
33 Sq. Ft. 37.22 100% 12/1/99 144,000 148,000 146,115 147,000
- ---------------------------------------------------------------------------------------------------------------------------
34 Sq. Ft. 54.10 94% 12/21/99 393,083 483,423 487,525 883,796
35 Sq. Ft. 109.93 100% 10/1/99 269,999 346,587
36 Units 64,510.58 78% 10/31/99 1,440,637 1,657,659 1,519,647 4,208,479
37 Sq. Ft. 98.00 100% 12/8/99 775,711 704,790 744,149
38 Sq. Ft. 74.92 96% 12/8/99 1,003,802 1,182,933 1,352,539 1,430,711
- ---------------------------------------------------------------------------------------------------------------------------
39 Sq. Ft. 38.77 100% 6/15/98 297,390 277,699 282,521
40 Sq. Ft. 266.67 100% 9/20/99 359,863 356,218 363,488
41 Sq. Ft. 153.38 82% 12/1/99 139,719 144,179
42 Sq. Ft. 165.34 100% 3/31/99 225,199 222,901 229,795
- ---------------------------------------------------------------------------------------------------------------------------
43 Sq. Ft. 251.68 100% 10/5/98 295,389 291,024 300,025
44 Sq. Ft. 230.96 100% 4/16/99 317,741 311,323 320,951
45 Units 62,822.31 73% 7/31/99 1,594,135 1,477,597 1,572,930 4,511,783
46 Units 26,565.66 76% 6/30/99 359,643 383,686 392,073 1,215,892
- ---------------------------------------------------------------------------------------------------------------------------
47 Sq. Ft. 54.71 97% 11/26/99 874,602 896,526 906,832 1,462,881
a Sq. Ft. 95% 11/26/99 350,745 387,868 377,570 557,273
b Sq. Ft. 99% 11/26/99 360,702 375,694 377,889 633,425
c Sq. Ft. 93% 11/26/99 163,155 132,964 151,372 272,183
48 Sq. Ft. 32.52 100% 1/1/00 298,354 323,239 289,922 255,027
- ---------------------------------------------------------------------------------------------------------------------------
49 Units 16,762.18 98% 10/7/99 299,043 397,155 385,010 865,537
50 Sq. Ft. 34.05 100% 11/12/99 441,101 450,236 425,890 606,794
51 Sq. Ft. 17.17 95% 1/18/00 1,336,989 1,378,646 1,243,592 1,305,452
52 Sq. Ft. 97.33 87% 1/25/00 4,813,555 5,335,003 5,678,288 6,039,280
53 Units 18,159.10 96% 2/14/00 726,263 1,151,254 695,325 2,124,968
- ---------------------------------------------------------------------------------------------------------------------------
54 Units 22,969.69 99% 11/1/99 712,997 618,488 1,087,714
55 Units 46,988.18 96% 10/31/99 1,121,646 1,339,529 1,250,681 1,935,595
56 Units 31,818.34 95% 7/25/99 531,524 677,038 1,087,412
57 Units 132,614.33 88% 9/30/99 1,561,731 1,516,549 1,509,893 3,886,464
58 Units 121,064.74 85% 8/31/99 2,323,542 2,543,458 2,383,502 4,427,790
- ---------------------------------------------------------------------------------------------------------------------------
59 Sq. Ft. 86.42 100% 8/30/99 656,804 761,360 672,312 974,276
60 Units 43,210.57 98% 9/1/99 799,927 1,577,742 2,291,818
61 Sq. Ft. 32.84 92% 12/1/99 344,495 357,195 359,931 525,773
62 Sq. Ft. 74.25 78% 12/31/99 1,280,895 1,456,899 1,316,924 1,432,178
63 Sq. Ft. 63.82 91% 10/29/99 371,531 384,705 378,435 576,613
- ---------------------------------------------------------------------------------------------------------------------------
64 Units 34,055.73 87% 1/14/00 990,448 1,133,307 1,250,984 1,895,037
65 Sq. Ft. 168.72 100% 10/1/99 161,583 827,339 2,094,611 2,243,559
66 Sq. Ft. 26.22 94% 10/12/99 194,119 220,251 231,000 353,666
67 Sq. Ft. 52.72 92% 10/15/99 381,379 397,501 423,161 508,389
- ---------------------------------------------------------------------------------------------------------------------------
68 Sq. Ft. 62.99 84% 11/15/99 1,959,405 2,133,277 3,515,351
69 Sq. Ft. 50.57 100% 12/1/99 776,368 747,905 722,238 758,947
70 Units 14,821.34 93% 7/29/99 621,604 775,849 742,009 1,720,701
71 Sq. Ft. 79.31 99% 12/27/99 2,508,305 3,145,802 3,277,133 3,474,090
a Sq. Ft. 99% 12/27/99 646,633 676,893 671,150 759,985
b Sq. Ft. 100% 12/27/99 338,017 333,936 306,334 343,034
c Sq. Ft. 100% 12/27/99 394,084 634,319 642,390
d Sq. Ft. 98% 12/27/99 878,030 1,012,149 972,693 967,583
e Sq. Ft. 100% 12/27/99 645,625 728,740 692,637 761,098
- ---------------------------------------------------------------------------------------------------------------------------
72 Sq. Ft. 98.66 99% 12/27/99 2,294,190 2,420,437 2,647,115 3,154,660
a Sq. Ft. 100% 2/25/00 257,336 267,423 247,162 263,267
b Sq. Ft. 97% 12/27/99 904,345 1,108,037 1,098,124 1,201,946
c Sq. Ft. 100% 12/27/99 806,479 728,926 908,349 1,169,983
d Sq. Ft. 100% 12/27/99 326,030 316,051 393,480 519,464
- ---------------------------------------------------------------------------------------------------------------------------
73 Sq. Ft. 42.01 98% 1/12/00 1,174,206 1,242,598 1,197,476 1,230,189
74 Sq. Ft. 70.96 97% 10/15/99 327,896 568,271 741,758 1,032,600
75 Sq. Ft. 189.45 100% 1/1/00 4,739,864 5,290,415 5,578,006 7,537,017
76 Sq. Ft. 143.04 100% 8/26/99 113,115 280,572 286,960
- ---------------------------------------------------------------------------------------------------------------------------
77 Sq. Ft. 138.67 91% 9/29/99 881,814 881,564
78 Sq. Ft. 32.30 85% 7/21/99 280,897 335,237 311,519 562,199
79 Units 89,711.53 100% 1/21/00 1,389,401 1,369,301 1,735,536
80 Units 30,882.35 100% 1/25/00 1,118,555 1,145,082 1,065,224 1,529,743
- ---------------------------------------------------------------------------------------------------------------------------
81 Sq. Ft. 32.77 94% 12/3/99 189,361 345,139 342,471 561,368
82 Sq. Ft. 64.16 87% 12/31/99 145,239 192,914 246,721 268,292
83 Sq. Ft. 138.36 83% 12/31/99 865,137 909,225 1,047,615 1,110,023
84 Units 53,008.84 99% 1/25/00 634,818 1,660,046 1,926,539 2,626,013
85 Sq. Ft. 174.90 100% 11/2/99 1,244,175 1,444,974 1,525,742 1,604,192
- ---------------------------------------------------------------------------------------------------------------------------
86 Sq. Ft. 55.63 75% 10/23/99 261,768 257,276 345,380 558,310
87 Units 25,582.51 97% 12/6/99 295,966 303,106 310,467 551,423
88 Sq. Ft. 233.42 100% 1/11/99 355,001 344,350 355,000
89 Sq. Ft. 13.41 100% 5/20/99 362,790 290,398 380,750 436,500
90 Sq. Ft. 107.26 97% 1/31/00 5,014,975 5,106,373
91 Units 19,512.27 95% 9/30/99 509,630 626,582 560,452 1,280,094
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
UNDERWRITTEN UNDERWRITTEN UNDERWRITTEN UNDERWRITTEN LEASE
ID EGI EXPENSES NET CASH FLOW RESERVES LARGEST TENANT SF EXPIRATION
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 1,698,200 434,043 1,169,278 12,194 Katsin/Loeb 8,837 10/31/03
2 1,011,683 266,965 665,492 8,535 Meridian 4,200 6/1/05
3 394,376 115,661 248,725 4,590 Cable Express Corporation 12,900 6/30/04
4 2,110,771 658,828 1,355,491 12,300 Hampton Industries 39,200 11/30/14
5 11,016,397 5,506,744 4,576,423 133,498 NYC Department of Transportation 157,675 6/30/07
- -------------------------------------------------------------------------------------------------------------------------------
6 302,416 56,863 219,795 3,050 St. Mary's Medical Center 9,909 8/31/06
7 1,528,805 352,801 1,166,404 9,600
8 198,996 51,130 139,378 1,142 Highland Park Cleaners 2,000 9/30/03
9 847,992 399,485 423,007 25,500
10 998,873 341,784 629,089 28,000
- -------------------------------------------------------------------------------------------------------------------------------
11 996,806 461,548 486,258 49,000
12 2,591,189 1,034,577 1,475,612 81,000
13 945,285 448,133 460,293 36,859
14 1,542,867 725,929 749,738 67,200
15 653,592 262,913 371,679 19,000
- -------------------------------------------------------------------------------------------------------------------------------
16 1,188,383 492,610 647,773 48,000
17 1,593,773 788,729 757,544 47,500
18 916,919 451,780 424,139 41,000
19 793,617 323,166 444,951 25,500
20 1,883,170 747,262 1,089,081 46,827
- -------------------------------------------------------------------------------------------------------------------------------
21 648,995 253,814 367,181 28,000
22 808,659 378,686 395,973 34,000
23 1,005,718 452,861 509,902 42,955
24 962,227 359,579 575,648 27,000
25 982,467 435,183 494,784 52,500
- -------------------------------------------------------------------------------------------------------------------------------
26 693,384 173,436 479,818 5,730 Hollywood Video 6,480 5/31/08
27 1,065,938 407,797 643,560 14,581
a 867,758 327,597 527,716 12,445
b 198,180 80,200 115,844 2,136
28 719,854 277,593 378,661 9,600 Shapack, McCullough & Kanter 4,579 5/31/00
- -------------------------------------------------------------------------------------------------------------------------------
29 637,803 384,751 211,292 41,760
30 272,094 56,740 198,566 5,760 Dowty Aerospace Corp. 28,800 12/31/04
31 1,940,980 517,150 1,321,581 32,018 Big V Supermarkets (Shop Rite) 40,984 11/20/16
32 573,667 163,055 355,922 15,088 Staples 75,558 7/31/13
33 188,050 41,935 135,089 4,654 Brookshire Brothers 31,028 12/31/17
- -------------------------------------------------------------------------------------------------------------------------------
34 949,796 462,271 404,309 11,816 St. John Westshore Hosp. 21,089 11/30/02
35 384,847 114,848 241,678 2,838 Copper Falls Aveda Spa 3,851 12/1/04
36 4,436,932 2,917,285 1,297,800 221,847
37 930,321 225,531 697,137 7,653 Bassett Furniture 26,000 5/31/14
38 1,930,101 577,562 1,255,472 20,850 Lucky Food Store 42,962 2/28/13
- -------------------------------------------------------------------------------------------------------------------------------
39 343,436 65,737 268,902 6,335 Cort Furniture Rental Corporation 45,225 7/31/14
40 363,488 7,270 354,699 1,519 CVS of Maryland, Inc. 10,125 9/19/19
41 164,522 24,803 132,544 1,050 Papa John's Pizza 1,400 10/19/03
42 229,795 6,894 220,990 1,911 Eckerd Corporation 12,738 3/19/19
- -------------------------------------------------------------------------------------------------------------------------------
43 300,025 9,001 289,388 1,636 Eckerd Corporation 10,908 10/4/18
44 320,951 9,628 309,412 1,911 Eckerd Corporation 12,738 4/15/19
45 4,756,978 3,184,048 1,335,081 237,849
46 1,215,892 823,819 331,278 60,795
- -------------------------------------------------------------------------------------------------------------------------------
47 1,515,235 608,403 782,320 41,241
a 585,060 207,490 333,091 12,714 American Cancer Society 7,193 10/31/01
b 642,676 264,787 323,747 19,509 Norwest Mortgage, Inc. 6,000 7/31/00
c 287,498 136,126 125,481 9,018 NGL Research Services 2,440 12/31/00
48 477,124 187,202 235,505 10,310 Directions Research, Inc. 25,010 12/1/06
- -------------------------------------------------------------------------------------------------------------------------------
49 1,000,537 615,527 347,010 38,000
50 626,811 200,921 417,105 8,785
51 2,166,071 922,479 1,033,455 59,125 Aryanna Furniture 113,538 11/30/02
52 9,193,862 3,515,574 5,056,637 114,812 Riley Stoker 119,860 6/1/02
53 2,261,130 1,565,805 623,825 71,500
- -------------------------------------------------------------------------------------------------------------------------------
54 1,120,109 501,621 557,244 61,244
55 2,046,637 795,956 1,201,881 48,800
56 1,139,612 462,574 626,530 50,508
57 4,463,562 2,953,669 1,270,720 224,707
58 4,819,024 2,435,522 2,142,551 240,951
- -------------------------------------------------------------------------------------------------------------------------------
59 1,165,742 493,430 624,522 9,231 Payroll Transfers, Inc. 37,343 9/30/01
60 2,382,476 804,734 1,515,342 62,400
61 554,273 194,342 347,009 12,922
62 1,640,541 323,617 1,278,030 18,375 Acme Superstore 60,994 11/30/16
63 617,107 238,672 314,654 23,815 Design Optical 2,800 12/31/02
- -------------------------------------------------------------------------------------------------------------------------------
64 2,075,741 824,757 1,170,234 80,750
65 2,503,178 408,567 1,897,513 19,601 Internal & External Communications 36,922 3/31/06
66 360,211 129,211 221,158 9,842
67 703,020 279,859 377,202 9,857 Citywide Bank 4,699 8/31/03
- -------------------------------------------------------------------------------------------------------------------------------
68 4,004,495 1,871,218 1,874,310 48,179 Art Institute of Dallas 89,892 8/31/13
69 1,021,107 298,869 678,301 17,006 Kmart 86,479 9/30/17
70 1,767,198 1,025,189 632,809 109,200
71 4,054,914 777,781 3,058,290 57,501
a 809,871 138,721 620,058 8,042 ADT Security Services, Inc. 5,550 6/14/00
b 346,116 39,782 275,772 10,007 OHM Remediation Services 41,983 2/28/01
c 795,768 161,449 634,319 0 Realty Services Corp. 24,500 3/31/09
d 1,200,522 227,829 912,213 4,406 Omnitron Systems Tech. 5,140 9/14/00
e 902,637 210,000 615,928 35,046 E-Funds Corporation 9,414 6/30/00
- -------------------------------------------------------------------------------------------------------------------------------
72 3,386,011 738,896 2,393,761 35,984
a 279,258 32,096 216,551 13,462 FMH Investor Group 14,676 11/30/00
b 1,340,693 242,569 1,020,000 17,126 Pro-Guard International 15,328 12/31/01
c 1,239,503 331,154 804,088 3,242 Newport Service Corporation 43,152 10/31/01
d 526,557 133,077 353,122 2,154 Stamps.Com, Inc. 6,616 5/31/02
- -------------------------------------------------------------------------------------------------------------------------------
73 1,583,102 385,626 1,155,243 24,474 Home Depot 120,530 6/30/16
74 1,059,282 317,524 628,948 14,529 Ski Barn 10,975 7/31/01
75 7,711,095 2,133,089 5,049,836 44,867 Aurum 51,475 4/30/02
76 319,405 38,833 278,062 2,510 Rite Aid Corporation 16,730 7/31/19
- -------------------------------------------------------------------------------------------------------------------------------
77 1,080,490 198,676 839,489 7,995 Dagerman's for Kids 8,125 6/1/04
78 617,355 305,836 300,866 10,653
79 2,033,444 664,143 1,329,101 40,200
80 1,593,256 528,032 1,004,024 61,200
- -------------------------------------------------------------------------------------------------------------------------------
81 561,368 218,897 331,963 10,508
82 377,292 130,571 212,128 4,455 Caryn's Hallmark 4,500 2/29/04
83 1,328,455 280,840 984,919 23,350 Ritz Camera 8,425 8/31/06
84 2,681,013 754,474 1,848,789 77,750
85 1,810,966 285,224 1,457,048 15,327 Hearth USA, Inc. 24,280 1/31/10
- -------------------------------------------------------------------------------------------------------------------------------
86 569,504 224,124 337,966 7,414
87 556,423 245,956 280,511 29,956
88 355,000 10,650 342,264 2,086 Walgreen Co. 13,905 11/30/59
89 436,500 55,750 335,458 30,000 Wal-Mart Stores, Inc. 200,000 4/30/04
90 6,303,003 1,288,028 4,907,053 40,966 Kmart Corporation 123,011 11/30/18
91 1,310,078 749,626 504,952 55,500
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LEASE LEASE
ID 2ND LARGEST TENANT SF EXPIRATION 3RD LARGEST TENANT SF EXPIRATION
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 G & S Associates 7,455 5/31/01 Ketchum 7,451 11/30/09
2 Friedlander 3,500 4/1/01 Shadetree 2,530 7/1/00
3 Four Winds Trading Co. 7,118 12/31/02 Aegis Analytical Corporation 4,800 8/31/04
4 Famous Horse Inc. 10,000 2/28/03
5 NYC Department of Employment 69,100 6/30/07 Teachers Retirement 66,286 6/30/07
- ---------------------------------------------------------------------------------------------------------------------------
6 Market Street Mortgage 3,015 7/31/04 Lamerson & Sax Doctors Office 2,327 6/1/04
7
8 CD Warehouse 2,000 5/31/04 Starbucks Corp. 1,600 8/31/08
9
10
- ---------------------------------------------------------------------------------------------------------------------------
11
12
13
14
15
- ---------------------------------------------------------------------------------------------------------------------------
16
17
18
19
20
- ---------------------------------------------------------------------------------------------------------------------------
21
22
23
24
25
- ---------------------------------------------------------------------------------------------------------------------------
26 Good China 2,400 3/31/04 Natural Life Center 2,100 6/30/04
27
a
b
28 Duffy & Robertson 4,176 6/30/01 Coldwell Banker Schweitzer 4,000 9/30/11
- ---------------------------------------------------------------------------------------------------------------------------
29
30 GSA-Mineral Mgmt. 6,200 1/14/04 Transcore (SAIC) 3,400 8/31/01
31 Family Discount Center 12,000 3/31/02 Weldon 10,500 10/31/00
32 Bamburg Uniforms 3,900 1/31/03 H&R Block 2,650 4/30/03
33
- ---------------------------------------------------------------------------------------------------------------------------
34 Stern, Robert M. MD, Inc. 3,935 11/30/01 Bacevice, Dr. Anthony Jr. 2,782 6/30/01
35 The Artsy Artichoke 2,580 11/1/04 Reach the Peak Outfitters 1,667 11/1/02
36
37 Golfsmith International Inc. 25,018 5/31/13
38 Office Depot, Inc. 23,672 3/31/09 Choc Thrift Store 17,500 5/31/02
- ---------------------------------------------------------------------------------------------------------------------------
39 Essential Medical Supply, Inc. 17,612 8/31/04
40
41 Pacifica Wireless 1,276 7/26/04 Great Clips, Inc. 1,120 10/14/03
42
- ---------------------------------------------------------------------------------------------------------------------------
43
44
45
46
- ---------------------------------------------------------------------------------------------------------------------------
47
a Lane & Associates 6,711 10/31/00 Southwest University 4,915 5/31/01
b Gulf South Engineers, Inc. 5,482 11/30/01 Favrot & Shane Companies, Inc. 4,491 12/31/01
c Brian T. Carr 2,402 6/30/01 Daniel F. Young, Inc. 2,144 5/31/01
48 Gartner, Burdick, Bauer, Nilsen, Inc. 19,187 6/1/02 Dean Houston Creative Group, Inc. 4,122 12/1/00
- ---------------------------------------------------------------------------------------------------------------------------
49
50
51 Rocket Distribution 100,325 10/31/03 Colavita USA 70,000 1/31/10
52 TJ Maxx 55,317 1/31/08 Best Buy 46,367 1/31/10
53
- ---------------------------------------------------------------------------------------------------------------------------
54
55
56
57
58
- ---------------------------------------------------------------------------------------------------------------------------
59 NPR, Inc. 20,297 2/28/03 Computer Horizons Corporation 3,902 12/31/02
60
61
62 Eckerd Drug 10,000 11/30/11 Blockbuster Video 5,800 12/31/03
63 Korea House The Chong Corp. 2,800 2/28/06 Cafe Blue 2,570 2/1/09
- ---------------------------------------------------------------------------------------------------------------------------
64
65 DZN The Design Group 11,868 8/31/07 Entertainment Boulevard 11,857 12/31/04
66
67 Delhi Darbar 4,398 7/31/00 Peripheral Test Institution 4,214 9/30/04
- ---------------------------------------------------------------------------------------------------------------------------
68 Magellan Behavioral Health 40,982 6/14/05 Nathan D. Maier Consulting 19,223 8/1/02
69 Fashion Bug 9,000 1/31/03 Wine & Spirit 4,000 8/31/02
70
71
a Trimax Systems, Inc. 4,368 5/31/00 The Injury Recovery Center 4,368 7/31/00
b
c
d Micro Optics Design Corp. 5,140 11/22/01 PC Specialists, Inc. 4,116 1/31/02
e Newtech Infosystems(USA) 4,386 11/1/01 Safety Associates, Inc. 4,386 9/30/02
- ---------------------------------------------------------------------------------------------------------------------------
72
a World Manufacturing, Inc. 12,341 1/31/01 Buchanan & Buchanan Cons. 4,900 7/31/02
b Netbuy Corporation 7,558 1/30/01 American Benefit Mortgage 6,826 8/31/01
c First Quality Vendin 10,876 5/31/04
d Cambridge Technology Partners 4,152 3/14/00 Maintenance Match, Inc. 3,568 11/30/01
- ---------------------------------------------------------------------------------------------------------------------------
73 Service Merchandise 50,000 5/31/11 Office Depot 25,055 11/30/08
74 Secure Commerce 7,825 8/31/04 CFMA 5,600 10/31/03
75 Netfish 27,249 2/28/01 Abaca 19,144 11/30/03
76
- ---------------------------------------------------------------------------------------------------------------------------
77 Gateway 2000 Country Stores 7,980 1/1/04 World Class Furniture 6,288 3/1/04
78
79
80
- ---------------------------------------------------------------------------------------------------------------------------
81
82 SFW/Horizon Dental 2,727 10/21/00 Ultra Cuts 2,422 10/31/03
83 TGIFriday's 6,952 9/29/06 L & N Seafood 5,850 12/31/11
84
85 Scan International, Inc. 20,000 5/31/03 Ethan Allen, Inc. 17,000 11/12/05
- ---------------------------------------------------------------------------------------------------------------------------
86
87
88
89
90 Regal Cinemas, Inc. 82,071 6/30/19 Winn-Dixie Stores, Inc. 51,282 4/14/19
91
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
UPFRONT ONGOING
ACTUAL ACTUAL
REPLACEMENT REPLACEMENT TI/LC TI/LC TAX INSURANCE UPFRONT ENVIRONMENTAL
ID RESERVES RESERVES UPFRONT ONGOING ESCROW ESCROW ENG. RESERVE REPORT DATE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 - - - - - - 15,875 1/14/00
2 18,000 - - - 4,462 - - 7/20/99
3 - 385 - - 634 225 - 11/2/99
4 12,000 792 - 1,884 25,209 - 9,375 10/6/99
5 - 5,012 2,620,000 87,273 109,107 9,620 2,620,000 11/9/99
- --------------------------------------------------------------------------------------------------------------------------
6 - 88 - - 929 - - 9/9/99
7 - - - - - - - 2/22/00
8 - 95 - - 1,892 232 1,075 11/4/99
9 - 2,008 - - 6,685 - 6,250 9/23/99
10 - 1,791 - - 9,659 - - 9/24/99
- --------------------------------------------------------------------------------------------------------------------------
11 - 3,396 - - 10,784 - - 9/24/99
12 - 5,156 - - 26,869 - - 9/22/99
13 - 3,072 - - 10,156 - 188 9/27/99
14 - 3,087 - - 14,466 - 1,000 9/23/99
15 - 1,656 - - 6,671 - - 9/22/99
- --------------------------------------------------------------------------------------------------------------------------
16 - 3,983 - - 10,180 - - 9/23/99
17 - 3,703 - - 14,132 - - 9/22/99
18 - 2,966 - - 9,903 - 6,250 10/4/99
19 - 1,463 - - 10,316 - - 9/29/99
20 - 3,902 - - 20,823 - 625 9/30/99
- --------------------------------------------------------------------------------------------------------------------------
21 - 2,090 - - 3,493 - - 9/24/99
22 52,780 2,523 - - 6,090 - 1,875 9/28/99
23 - 3,580 - - 11,129 - - 9/27/99
24 - 1,108 - - 2,340 - - 9/29/99
25 - 3,115 - - 9,054 - 2,500 9/23/99
- --------------------------------------------------------------------------------------------------------------------------
26 - 480 - - 1,978 677 - 12/2/99
27 - 1,225 - - 11,225 1,219 - Various
a - 1,015 - - 9,302 1,010 - 1/14/00
b - 210 - - 1,923 209 - 1/17/00
28 - - - 1,471 4,788 572 600 8/27/99
- --------------------------------------------------------------------------------------------------------------------------
29 - 3,480 - - - - 19,750 12/14/99
30 - - - - - - - 1/17/00
31 - 2,642 - - 16,509 2,834 - 12/13/99
32 - 1,104 - - 6,805 900 5,625 4/20/99
33 6,000 388 - - - - 1,250 12/21/99
- --------------------------------------------------------------------------------------------------------------------------
34 - 975 - 7,125 9,513 400 12,375 7/7/99
35 - - - - - - - 9/13/99
36 25,000 14,838 - - 9,092 - - 12/20/99
37 - - - - 5,994 - - 1/3/00
38 - 1,750 - 5,743 11,369 2,799 11,250 11/12/99
- --------------------------------------------------------------------------------------------------------------------------
39 - 528 - - 3,000 304 - 9/20/99
40 - - - - - - - 7/26/99
41 - 61 - - 523 - - 11/24/99
42 - 160 - - - - - 10/29/99
- --------------------------------------------------------------------------------------------------------------------------
43 - 135 - - - - - 10/27/99
44 - 160 - - - - - 10/27/99
45 - 15,857 - - 20,735 - - 11/22/99
46 - 4,801 - - 2,844 1,729 - 8/20/99
- --------------------------------------------------------------------------------------------------------------------------
47 - 3,440 300,000 - 6,369 - 38,435 9/1/99
a - 1,392 121,348 - 2,576 - 15,547 9/1/99
b - 1,469 128,090 - 2,719 - 16,410 9/1/99
c - 580 50,562 - 1,073 - 6,478 9/1/99
48 - 770 - 870 4,037 256 2,075 8/19/99
- --------------------------------------------------------------------------------------------------------------------------
49 - 3,170 - - 4,875 1,833 69,137 12/2/99
50 - 735 - - 4,167 315 - 10/25/99
51 - - - - 24,197 - - 2/17/00
52 - - - - 112,754 - - 7/29/99
53 100,000 - - - 31,073 - 3,506 9/28/99
- --------------------------------------------------------------------------------------------------------------------------
54 - 5,105 - - 6,422 1,083 28,713 10/25/99
55 - 4,070 - - 13,422 2,667 22,813 11/19/99
56 - 4,210 - - 6,242 1,401 194,896 9/20/99
57 - 14,638 972,204 - 11,868 3,825 972,204 10/25/99
58 - 16,121 - - 3,937 - 9,469 10/15/99
- --------------------------------------------------------------------------------------------------------------------------
59 - 770 - 3,780 12,407 927 10,375 12/13/99
60 - 5,200 - - 13,832 4,026 - 8/25/99
61 - 1,080 - - 2,162 610 - 10/22/99
62 - 2,510 - - 12,495 1,843 - 5/7/98
63 - 2,000 - 3,330 3,986 366 36,094 7/1/99
- --------------------------------------------------------------------------------------------------------------------------
64 20,000 5,438 - - 22,341 - 750 12/15/99
65 - 886 - 2,792 6,154 - - 10/25/99
66 - 550 - - 1,679 736 9,925 10/5/99
67 - 825 - 3,710 7,352 288 45,308 12/16/99
- --------------------------------------------------------------------------------------------------------------------------
68 - - - - 41,804 - - 11/18/99
69 - 1,420 - 2,245 12,539 733 32,996 7/16/99
70 - 9,100 - - 4,798 2,959 17,875 8/27/99
71 - 5,693 - 21,367 20,996 1,190 228,876 6/14/99
a - 1,200 - 4,503 4,425 251 250 6/14/99
b - 540 - 2,028 1,993 113 116,000 6/14/99
c - 1,250 - 4,691 4,610 261 438 6/14/99
d - 1,611 - 6,046 5,941 337 2,250 6/14/99
e - 1,092 - 4,099 4,027 228 109,939 6/14/99
- --------------------------------------------------------------------------------------------------------------------------
72 - 3,342 - 20,470 11,249 477 227,483 6/14/99
a - 330 - 2,020 1,110 47 172,295 6/14/99
b - 1,409 - 8,631 4,743 201 38,000 6/14/99
c - 1,120 - 6,860 3,770 160 3,500 6/14/99
d - 483 - 2,959 1,626 69 13,688 6/14/99
- --------------------------------------------------------------------------------------------------------------------------
73 - 770 100,000 - 5,500 2,500 8,750 11/9/98
74 - 1,210 - 8,190 9,171 1,000 5,938 11/4/99
75 - - - - - - - 1/14/00
76 - - - - - - - 6/23/99
- --------------------------------------------------------------------------------------------------------------------------
77 - 363 - - 4,692 - 4,800 11/24/99
78 - 920 - - 2,268 923 4,156 7/13/99
79 - 3,850 - - 10,833 1,889 - 9/10/99
80 - 5,100 - - 9,537 2,292 20,094 2/8/00
- --------------------------------------------------------------------------------------------------------------------------
81 - 875 - - 4,112 767 813 7/13/99
82 - 380 - 2,515 3,614 358 625 3/4/99
83 - 1,945 - 3,125 7,083 1,635 57,450 6/23/99
84 - 7,130 - - 7,675 3,090 - 11/22/99
85 - 1,281 - 4,630 11,448 667 4,688 12/13/99
- --------------------------------------------------------------------------------------------------------------------------
86 - 620 - - 4,978 558 1,181 11/4/99
87 - 2,497 - - 3,500 1,250 6,225 12/7/99
88 - 175 - - - - 10,000 10/5/99
89 - 1,683 - 2,000 3,542 240 285,000 11/2/98
90 - 3,414 - 11,498 41,815 13,886 - 8/20/99
91 - 4,625 - - 10,211 2,458 11,213 10/11/99
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ENGINEERING APPRAISAL
REPORT REPORT
ID DATE DATE SPONSOR
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 1/14/00 1/13/00 Ron Zeff, Michael Halper
2 7/19/99 7/12/99 Jack Krystal
3 11/2/99 11/2/99 John & Carol McCormack Family, LP, Donald & Paula Shonkwiler, Jointly
4 10/6/99 7/1/99 Hampton Industries, Inc.
5 11/9/99 10/27/99 Jeffrey and Aaron Gural, Barry Gosin, Newmark & Company
- ----------------------------------------------------------------------------------------------------------------------------
6 9/9/99 9/7/99 Johnny R. and Johnny A. Ribeiro
7 1/14/00 1/10/00 Michael Spaer, Redmond Lyons
8 11/9/99 10/29/99 Perl Family Trust, Leon Perl
9 11/1/99 8/12/99 Associated Estates Realty Corp.
10 10/28/99 8/13/99 Associated Estates Realty Corp.
- ----------------------------------------------------------------------------------------------------------------------------
11 10/28/99 8/12/99 Associated Estates Realty Corp.
12 11/4/99 8/12/99 Associated Estates Realty Corp.
13 10/28/99 9/2/99 Associated Estates Realty Corp.
14 11/2/99 9/14/99 Associated Estates Realty Corp.
15 11/1/99 8/12/99 Associated Estates Realty Corp.
- ----------------------------------------------------------------------------------------------------------------------------
16 11/1/99 8/12/99 Associated Estates Realty Corp.
17 10/28/99 9/2/99 Associated Estates Realty Corp.
18 10/28/99 8/13/99 Associated Estates Realty Corp.
19 10/28/99 8/13/99 Associated Estates Realty Corp.
20 11/3/99 8/14/99 Associated Estates Realty Corp.
- ----------------------------------------------------------------------------------------------------------------------------
21 11/3/99 9/20/99 Associated Estates Realty Corp.
22 11/3/99 9/20/99 Associated Estates Realty Corp.
23 10/28/99 9/2/99 Associated Estates Realty Corp.
24 11/2/99 8/13/99 Associated Estates Realty Corp.
25 10/28/99 8/18/99 Associated Estates Realty Corp.
- ----------------------------------------------------------------------------------------------------------------------------
26 11/10/99 11/1/99 Peter E. Williams, Sr., Peter E. Williams, Jr., Donald S. Williams, Robert D. Williams
27 1/11/00 Various Renato U. Arcenas, Regina D. Arcenas
a 1/11/00 1/5/00 Renato U. Arcenas, Regina D. Arcenas
b 1/11/00 1/13/00 Renato U. Arcenas, Regina D. Arcenas
28 8/23/99 8/30/99 Capital Resources Corporation, Richard Shapack
- ----------------------------------------------------------------------------------------------------------------------------
29 12/16/99 12/7/99 James W. Davis, John R. Barrett, John Beck
30 1/17/00 1/5/00 Jack B. Bays, Louis Donatelli
31 12/7/99 12/2/99 Richard Albert
32 4/20/99 4/13/99 Gus Sankers, Victor Fransen
33 12/2/99 12/8/99 Arnon Adar of CNA Enterprises
- ----------------------------------------------------------------------------------------------------------------------------
34 7/12/99 7/14/99 Lewis Wallner II
35 9/10/99 1/1/00 Bradley K. Brown, Tom Walls, Tim White
36 1/7/00 12/1/99 William Kimpton
37 1/12/00 1/3/00 One Liberty Properties, Inc.
38 11/18/99 12/15/99 Hunt Enterprises, Donald Hunt
- ----------------------------------------------------------------------------------------------------------------------------
39 8/17/99 8/26/99 Metric Partners I, Ltd., CNL Metric Venture, Ltd., Tom Hutchison III
40 10/14/99 9/1/99 Lawrence F. Remby, John P. Remby
41 11/23/99 11/5/99 Harold S. Zlot
42 10/29/99 10/19/99 Robert DiMucci
- ----------------------------------------------------------------------------------------------------------------------------
43 10/29/99 10/19/99 Robert DiMucci
44 10/29/99 10/20/99 Robert DiMucci
45 11/9/99 11/4/99 Felcor Suites Hotels, Inc.
46 8/26/99 8/24/99 Richard A. O'Krepki
- ----------------------------------------------------------------------------------------------------------------------------
47 Various 9/1/99 H.M. Favrot Jr., W.H. Shane, Jr.
a 9/4/99 9/1/99 H.M. Favrot Jr., W.H. Shane, Jr.
b 9/4/99 9/1/99 H.M. Favrot Jr., W.H. Shane, Jr.
c 9/8/99 9/1/99 H.M. Favrot Jr., W.H. Shane, Jr.
48 8/19/99 8/12/99 Jacobs & Cassity, A.P. Barton, Jr., Charles G. Atkins, Thomas C. Rink
- ----------------------------------------------------------------------------------------------------------------------------
49 10/28/99 9/15/99 Juanita Werra
50 9/30/99 7/8/99 Richard P. Moran, Jr., Dennis Schraf, James J. McCarthy
51 12/17/99 12/7/99 Sterling Equities
52 7/2/99 6/25/99 Simon Property Group
53 9/28/99 9/1/99 DZ Nelson Management Corp.
- ----------------------------------------------------------------------------------------------------------------------------
54 10/11/99 1/12/00 Robert J. Beggs, Peter L. Coratola, John Gioffre, Anthony Gioffre
55 11/19/99 11/16/99 Cherry Hill Management Co., Inc., Daniel J. Miles
56 9/24/99 9/28/99 Daniel J. Miles, GMD Investments, LLC, Kendall H. Doble
57 10/25/99 10/15/99 Robert Thurston
58 10/15/99 9/23/99 William Kimpton
- ----------------------------------------------------------------------------------------------------------------------------
59 12/13/99 12/9/99 Stanley Gottsegen, Neil Malamud, Gabriel Ehrenstein
60 8/24/99 8/23/99 Larry L. Johnson, William D. Mounger, Michael E. Johnson
61 10/22/99 10/13/99 Paul F. Schmitt, A. Michael Casey, Robert A. Braghetta, Bartlett T. Grimes
62 5/5/98 5/3/98 Henry C. Steenland, David Lerman, Miles Lerman
63 6/30/99 7/13/99 Sang Y. Choi, Bog N. Choi
- ----------------------------------------------------------------------------------------------------------------------------
64 12/8/99 12/7/99 Lawrence Connor & James Murphy
65 11/19/99 10/1/99 Steaven K. Jones/Steaven Jones Development Company
66 10/7/99 10/6/99 Robert T. Love
67 12/7/99 11/30/99 Francis J. Greenburger
- ----------------------------------------------------------------------------------------------------------------------------
68 11/10/99 11/16/99 Fulcrum Park I, Ltd., Fulcrum Park Holdings, Fulcrum Park GP, Kolter Holdings Texas
69 7/16/99 7/15/99 James N. Kratsa, Keith H. McGraw
70 8/26/99 8/25/99 Thomas P. Gallagher, James H. Edmondson
71 Various Various Igor Olenicoff, Andre Olenicoff
a 4/22/99 4/9/99 Igor Olenicoff, Andre Olenicoff
b 4/22/99 4/10/99 Igor Olenicoff, Andre Olenicoff
c 5/11/99 4/15/99 Igor Olenicoff, Andre Olenicoff
d 5/11/99 4/16/99 Igor Olenicoff, Andre Olenicoff
e 4/22/99 4/15/99 Igor Olenicoff, Andre Olenicoff
- ----------------------------------------------------------------------------------------------------------------------------
72 Various Various Igor Olenicoff, Andre Olenicoff
a 4/22/99 4/10/99 Igor Olenicoff, Andre Olenicoff
b 4/22/99 4/16/99 Igor Olenicoff, Andre Olenicoff
c 5/11/99 4/15/99 Igor Olenicoff, Andre Olenicoff
d 4/22/99 4/15/99 Igor Olenicoff, Andre Olenicoff
- ----------------------------------------------------------------------------------------------------------------------------
73 12/4/98 1/30/99 Andrew J. Schlosser, Bradley F. Schlosser, Schlosser 4.2.56 Inc., Schlosser 5.31.59 Inc.
74 11/4/99 10/28/99 Harry Levine
75 12/27/99 12/1/99 Maskatiya, Suri & Company
76 7/19/99 7/9/99 Dennis Berryman, Arn Youngman, James Costanzo
- ----------------------------------------------------------------------------------------------------------------------------
77 11/23/99 11/5/99 Harold S. Zlot
78 7/14/99 7/21/99 Russell W. Millard, Joseph L. Millard, Douglas C. Johns, Donald A. Slater
79 8/17/99 8/20/99 Secil M. Phillips, Place Collegiate Properties, L.P.
80 1/27/00 11/10/99 Melvin W. Deardorf, David W. Hart, John J. Wanek
- ----------------------------------------------------------------------------------------------------------------------------
81 7/15/99 7/14/99 Peter J. Sangermano, III, Peter J. Sangermano, Jr., Diane M. Sangermano
82 3/19/99 4/1/99 Thomas O. Hicks
83 6/23/99 7/21/99 John A. Luetkemeyer, Jr.
84 11/19/99 11/18/99 Matthew C. Dyroff, RJW Irrevocable Trust, Ronald E. Romano, Jr.
85 12/13/99 12/2/99 Ralph Dweck
- ----------------------------------------------------------------------------------------------------------------------------
86 11/4/99 11/3/99 Raymond Betz, Ray Drake, Karl Willmann
87 11/24/99 11/22/99 L. Christopher Kettles, 21 Limited Partners
88 12/2/99 9/28/99 Leonard Marcus, Diane Marcus Trust
89 2/12/99 2/3/99 Columbia Holdings, Ltd., Gerald J. Kostelny
90 8/20/99 10/31/99 Swerdlow Real Estate Group, Inc.
91 10/6/99 10/14/99 Calvin O. Johnson, Glenn Austin Thomason, Larry White
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
CHASE COMMERCIAL MORTGAGE SECURITIES CORP., SERIES 2000-1
ANNEX B - CERTAIN INFORMATION REGARDING MULTIFAMILY MORTGAGED PROPERTIES
<TABLE>
<CAPTION>
ANNEX A
ID # LENDER PROPERTY NAME ADDRESS CITY
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
7 GECC 696 Pennsylvania Avenue 696 Pennsylvania Avenue San Francisco
9 CMB AEC II - Arrowhead Station Apartments 5400 Lakota Dr Westerville
10 CMB AEC II - Bedford Commons Apartments 2645 Hard Road Columbus
11 CMB AEC II - Bolton Estates Apartments 5400 Lindbergh Blvd Columbus
12 CMB AEC II - Bradford at Easton Apartments 4150 Silver Springs Lane Columbus
13 CMB AEC II - Country Place Apartments 1820 So Crawford Mt Pleasant
14 CMB AEC II - Holly Park Apartments 1666 East Main St Kent
15 CMB AEC II - Kensington Grove Apartments 1135-1263 Whitney Lane Westerville
16 CMB AEC II - Lake Forest Apartments 4800 Lake Forest Blvd Westerville
17 CMB AEC II - Landings at Preserve 100 Minges Creek Pl Battle Creek
18 CMB AEC II - Muirwood Village 3251 Haddington Drive & 6696 Gemstar Drive Reynoldsburg
19 CMB AEC II - Oak Bend 6680 Oak Bend Commons Way Canal Winchester
20 CMB AEC II - Reflections Apartments 12020 Little Patuxent Prkwy Columbia
21 CMB AEC II - Residence at Newark Apartments 1476 Residence Dr Newark
22 CMB AEC II - Sheffield at Sylvan Apartments 321 Pontious Lane Circleville
23 CMB AEC II - Spring Brook Apartments 1074 West 32nd St Holland
24 CMB AEC II - The Village of Western Reserve 815 Frost Road Streetsboro
25 CMB AEC II - Vantage Villa Apartments 2423 Cheyenne Blvd Toledo
29 GECC Autumnwood Apartments 300 Lake Lamond Road Longview
49 GECC Forest Glen 402 South Jupiter Road Garland
53 CMB Hazel Towers 1730-1740 Mulford Avenue Bronx
54 GECC Hickory Grove Townhomes 1691 Red Robin Road Columbus
55 GECC Highland North Apartments 3510 Buford Highway Atlanta
56 GECC Highland Terrace Apartments 4939 Oakdale Road Smyrna
60 GECC Laurel Park Apartments 4701 Lakeland Drive Flowood
64 CMB Meadows of Catalpa 4001 Indian Runn Rd Dayton
70 GECC Oak Park II 159 Joliet Street S.W. Washington
79 GECC Statesboro Place 1699 Statesboro Place Circle Statesboro
80 GECC Stonegate Commons Apartments 1633 Red Robin Road Columbus
84 GECC Timber Ridge Apartments 1025 Adams Circle Boulder
87 GECC Versailles Apartments 2208 Southside Boulevard Port Royal
91 GECC Wood Meadow Apartments 6897 Meadow Crest Drive North Richland Hills
- --------------------------------------------------------------
(1) E - Electric, G - Gas, W - Water
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GENERAL UTILITIES NUMBER NUMBER NUMBER
ANNEX A ZIP PROPERTY DETAILED TENANT OF STUDIO OF 1 BR OF 2 BR
ID # STATE CODE COUNTY TYPE PROPERTY TYPE ELEVATOR(S) PAYS (1) UNITS UNITS UNITS
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
7 CA 94107 San Francisco Multifamily Multifamily/Office N E 16 20
9 OH 43081 Franklin Multifamily Conventional N E,W 102
10 OH 43235 Franklin Multifamily Conventional N E,G,W 112
11 OH 43228 Franklin Multifamily Conventional N E,G,W 68 128
12 OH 43230 Franklin Multifamily Conventional N E,W 88 214
13 MI 48858 Isabella Multifamily Conventional N E,G 64 80
14 OH 44240 Portage Multifamily Conventional N E,W 112
15 OH 43081 Franklin Multifamily Conventional N E,W 12 64
16 OH 43081 Franklin Multifamily Conventional N E,W 60 132
17 MI 49015 Calhoun Multifamily Conventional N E,W 12 178
18 OH 43068 Franklin Multifamily Conventional N E,W 60 104
19 OH 43110 Franklin Multifamily Conventional N E,W 102
20 MD 21044 Howard Multifamily Conventional N E 68 112
21 OH 43055 Licking Multifamily Conventional N E 56 56
22 OH 44113 Pickaway Multifamily Conventional N E 60 76
23 MI 49423 Allegan Multifamily Conventional N E,G 64 104
24 OH 44241 Portage Multifamily Conventional N E,G 40 68
25 OH 43614 Lucas Multifamily Conventional N E,W 24 92
29 TX 75604 Gregg Multifamily Section 8 N E 32 96
49 TX 75042 Dallas Multifamily Conventional N E 40 92
53 NY 10461 Bronx Multifamily Conventional Y None 106 144
54 OH 43229 Franklin Multifamily Conventional N E 220
55 GA 30329 DeKalb Multifamily Conventional N E,W 92 104
56 GA 30080 Cobb Multifamily Conventional N E,W 65 117
60 MS 39208 Rankin Multifamily Conventional N E,G 88 224
64 OH 45415 Montgomery Multifamily Conventional N E 165 158
70 DC 20032 N/A Multifamily Section 8 N E 26 111 157
79 GA 30458 Bulloch Multifamily Student N E
80 OH 43229 Franklin Multifamily Conventional N E,G 236
84 CO 80303 Boulder Multifamily Student N E,G 217 91
87 SC 29935 Beaufort Multifamily Conventional N W 16 64
91 TX 76180 Tarrant Multifamily Conventional N E 103 119
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NUMBER NUMBER AVERAGE AVERAGE AVERAGE AVERAGE
ANNEX A OF 3 BR OF 4 BR AVERAGE RENT, RENT, RENT, RENT, RENT, 4+
ID # UNITS UNITS STUDIO ($) 1 BR ($) 2 BR ($) 3 BR ($) BR ($)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
7 12 2,116 2,625 4,533
9 765
10 815
11 445 510
12 22 580 746 1,100
13 575 669
14 80 648 861
15 630 846
16 510 580
17 546 645
18 475 555
19 725
20 4 873 955 1,300
21 540 663
22 470 584
23 505 562
24 724 854
25 34 525 595 725
29 32 300 371 435
49 20 412 515 651
53 36 547 665 872
54 434
55 48 588 712 861
56 1 519 587 785
60 610 677
64 492 646
70 6 380 464 590 807
79 132 1,140
80 36 479 579
84 3 670 888 1,283
87 16 450 525 575
91 479 585
</TABLE>
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
DATED MARCH 6, 2000
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 March 6, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
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 ....................................................... 13
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 ................... 15
Borrowers May Be Unable to Make Balloon Payments ........................................ 17
Credit Support Limitations .............................................................. 18
Leases and Rents ........................................................................ 18
Environmental Risks ..................................................................... 19
Special Hazard Losses ................................................................... 19
Some Certificates May Not Be Appropriate for ERISA Plans ................................ 20
Certain Federal Tax Considerations Regarding Residual Certificates ...................... 20
Certain Federal Tax Considerations Regarding Original Issue Discount .................... 20
Bankruptcy Proceedings Entail Certain Risks ............................................. 20
Book-Entry System for Certain Classes May Decrease Liquidity and Delay Payment .......... 21
Delinquent and Non-Performing Mortgage Loans ............................................ 22
DESCRIPTION OF THE TRUST FUNDS ........................................................... 23
General ................................................................................. 23
Mortgage Loans .......................................................................... 23
MBS ..................................................................................... 26
Certificate Accounts .................................................................... 27
Credit Support .......................................................................... 28
Cash Flow Agreements .................................................................... 28
YIELD AND MATURITY CONSIDERATIONS ........................................................ 29
General ................................................................................. 29
Pass-Through Rate ....................................................................... 29
Payment Delays .......................................................................... 29
Certain Shortfalls in Collections of Interest ........................................... 29
Yield and Prepayment Considerations ..................................................... 30
Weighted Average Life and Maturity ...................................................... 31
Controlled Amortization Classes and Companion Classes ................................... 32
Other Factors Affecting Yield, Weighted Average Life and Maturity ....................... 33
THE DEPOSITOR ............................................................................ 35
USE OF PROCEEDS .......................................................................... 35
DESCRIPTION OF THE CERTIFICATES .......................................................... 36
General ................................................................................. 36
Distributions ........................................................................... 36
Distributions of Interest on the Certificates ........................................... 37
Distributions of Principal on the Certificates .......................................... 38
Distributions on the Certificates in Respect of Prepayment Premiums or in Respect of
Equity Participations .................................................................. 38
Allocation of Losses and Shortfalls ..................................................... 38
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
Advances in Respect of Delinquencies .................................... 39
Reports to Certificateholders ........................................... 39
Voting Rights ........................................................... 41
Termination ............................................................. 41
Book-Entry Registration and Definitive Certificates ..................... 42
DESCRIPTION OF THE POOLING AGREEMENTS .................................... 44
General ................................................................. 44
Assignment of Mortgage Loans; Repurchases ............................... 44
Representations and Warranties; Repurchases ............................. 45
Collection and Other Servicing Procedures ............................... 46
Sub-Servicers ........................................................... 46
Special Servicers ....................................................... 47
Certificate Account ..................................................... 47
Modifications, Waivers and Amendments of Mortgage Loans ................. 50
Realization Upon Defaulted Mortgage Loans ............................... 50
Hazard Insurance Policies ............................................... 52
Due-on-Sale and Due-on-Encumbrance Provisions ........................... 52
Servicing Compensation and Payment of Expenses .......................... 53
Evidence as to Compliance ............................................... 53
Certain Matters Regarding the Master Servicer and the Depositor ......... 53
Events of Default ....................................................... 55
Rights Upon Event of Default ............................................ 55
Amendment ............................................................... 56
List of Certificateholders .............................................. 56
The Trustee ............................................................. 56
Duties of the Trustee ................................................... 57
Certain Matters Regarding the Trustee ................................... 57
Resignation and Removal of the Trustee .................................. 57
DESCRIPTION OF CREDIT SUPPORT ............................................ 58
General ................................................................. 58
Subordinate Certificates ................................................ 58
Cross-Support Provisions ................................................ 58
Insurance or Guarantees with Respect to Mortgage Loans .................. 59
Letter of Credit ........................................................ 59
Certificate Insurance and Surety Bonds .................................. 59
Reserve Funds ........................................................... 59
Credit Support with Respect to MBS ...................................... 60
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS .................................. 61
General ................................................................. 61
Types of Mortgage Instruments ........................................... 61
Leases and Rents ........................................................ 61
Personalty .............................................................. 62
Foreclosure ............................................................. 62
Bankruptcy Laws ......................................................... 65
Environmental Risks ..................................................... 67
Due-on-Sale and Due-on-Encumbrance ...................................... 69
Subordinate Financing ................................................... 69
Default Interest and Limitations on Prepayments ......................... 70
Applicability of Usury Laws ............................................. 70
Soldiers' and Sailors' Civil Relief Act of 1940 ......................... 70
</TABLE>
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<TABLE>
<S> <C>
Type of Mortgaged Property ............................................................ 71
Americans with Disabilities Act ....................................................... 71
Forfeitures In Drug and RICO Proceedings .............................................. 71
CERTAIN FEDERAL INCOME TAX CONSEQUENCES ................................................ 72
Federal Income Tax Consequences for REMIC Certificates ................................ 72
Taxation of Regular Certificates ...................................................... 75
Taxation of Residual Certificates ..................................................... 81
Taxes That May Be Imposed on the REMIC Pool ........................................... 88
Liquidation of the REMIC Pool ......................................................... 89
Administrative Matters ................................................................ 89
Limitations on Deduction of Certain Expenses .......................................... 89
Taxation of Certain Foreign Investors ................................................. 90
Backup Withholding .................................................................... 91
Reporting Requirements ................................................................ 91
Federal Income Tax Consequences for Certificates as to Which No REMIC Election Is Made 93
Standard Certificates ................................................................. 93
Stripped Certificates ................................................................. 96
Reporting Requirements and Backup Withholding ......................................... 98
Taxation of Certain Foreign Investors ................................................. 99
STATE AND OTHER TAX CONSIDERATIONS ..................................................... 99
CERTAIN ERISA CONSIDERATIONS ........................................................... 100
General ............................................................................... 100
Plan Asset Regulations ................................................................ 100
Administrative Exemptions ............................................................. 101
Insurance Company General Accounts .................................................... 101
Unrelated Business Taxable Income; Residual Certificates .............................. 102
LEGAL INVESTMENT ....................................................................... 102
METHOD OF DISTRIBUTION ................................................................. 104
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE ...................................... 105
LEGAL MATTERS .......................................................................... 106
FINANCIAL INFORMATION .................................................................. 106
RATING ................................................................................. 106
INDEX OF PRINCIPAL DEFINITIONS ......................................................... 107
</TABLE>
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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 106 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
<PAGE>
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.
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:
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
6
<PAGE>
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.
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.
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.
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
7
<PAGE>
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.
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
8
<PAGE>
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:
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.
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.
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.
9
<PAGE>
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 Considerations", "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:
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;
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
10
<PAGE>
for a controlled amortization class of the
same series and the rate at which payments
and other collections of principal on the
mortgage assets in the related trust fund are
received.
Unless otherwise specified in the related
prospectus supplement, distributions of
principal of any class of offered certificates
will be made on a pro rata basis among all of
the certificates of that class. See "Description
of the Certificates--Distributions of Principal
on 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 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
11
<PAGE>
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.
12
<PAGE>
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.
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
13
<PAGE>
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
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
14
<PAGE>
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.
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
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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.
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;
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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
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:
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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 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 "--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
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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
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
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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.
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" and
"--Taxation of Regular Certificates" in this prospectus.
BANKRUPTCY PROCEEDINGS ENTAIL 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, even 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
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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.
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.
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See "Description of the Certificates--Book-Entry Registration and
Definitive Certificates" in this prospectus.
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.
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
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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
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
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(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,
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
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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.
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
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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,
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.
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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
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
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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 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
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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 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
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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 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
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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 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.
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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.
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
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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 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.
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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 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
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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.
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
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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 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:
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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 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.
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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" and "--Resignation and Removal of the Trustee"
in this prospectus.
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.
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BOOK-ENTRY REGISTRATION AND DEFINITIVE CERTIFICATES
If so provided in the prospectus supplement for a series of certificates,
one or more classes of the offered certificates of that series will be offered
in book-entry format through the facilities of 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.
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
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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.
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
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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 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
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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. 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
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same extent the master servicer would be reimbursed under a Pooling Agreement.
See "--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 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;
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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
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
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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;
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" and
"--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;
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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.
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
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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, based on a report
prepared by a person who regularly conducts environmental audits (which report
will be an expense of the trust fund), that:
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
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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 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
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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.
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
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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 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 successor
of the master servicer or the Depositor, as the case may be, under the related
Pooling Agreement.
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EVENTS OF DEFAULT
Unless otherwise provided in the prospectus supplement for a series of
certificates, "Events of Default" under the related Pooling 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 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
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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 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.
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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 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 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
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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.
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
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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.
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
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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
"--Bankruptcy Laws" below.
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 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
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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 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
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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 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
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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 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,
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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 property 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
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
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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
distribution 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 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 the borrower's mortgage loan, 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,
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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 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.
Environmental 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.
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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 substantial expense.
In addition, a lender may be obligated to disclose environmental
conditions on a property to government entities and/or to prospective buyers,
including prospective buyers at a foreclosure sale or following foreclosure.
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.
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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, 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
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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 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 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
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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, 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
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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 mortgage 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. 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
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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". 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
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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
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
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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.
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
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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.
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.
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Deferred Interest
Under the OID Regulations, all interest on a Regular Certificate as to
which there may be deferred interest is includible in the stated redemption
price at maturity 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 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
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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.
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.
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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.
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
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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.
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
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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 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 your 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 will
be used 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.
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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 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.
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
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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 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
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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
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.
In addition to the two conditions set forth above for the transferor of a
noneconomic residual interest to be presumed not to have knowledge that the
transferee would be unwilling or unable to pay taxes due on its share of the
taxable income of the REMIC, recently proposed Treasury regulations (the
"Proposed Regulations") would add a third condition for the transferor to be
presumed to lack such knowledge. This third condition would require that the
present value of the anticipated tax liabilities associated with holding the
noneconomic residual interest not exceed the sum of
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(i) the present value of any consideration given to the transferee to
acquire the interest;
(ii) the present value of the expected future distributions on the
interest; and
(iii) the present value of the anticipated tax savings associated with
holding the interest as the REMIC generates losses.
For purposes of the computations under this third condition, the transferee is
assumed to pay tax at the highest rate of tax specified in Section 11(b)(1) of
the Code. Further, present values generally are computed using a discount rate
equal to the applicable Federal rate set forth in Section 1274(d) of the Code
compounded semiannually. However, a lower rate may be used if the transferee
can demonstrate that it regularly borrows, in the course of its trade or
business, substantial funds at such lower rate from unrelated third parties. If
adopted, the Proposed Regulations may apply to the transfer of a noneconomic
residual interest made as early as February 4, 2000 and thereafter. Prospective
investors should consult their own tax advisors as to the applicability and
effect of the Proposed Regulations.
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, or their political subdivisions, including any entity treated as a
corporation or partnership for federal income tax purposes, 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
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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).
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
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REMIC Pool (1) during the three months following the Startup Day, (2) made to a
qualified reserve 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 $128,950 for 2000 ($64,475 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. 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
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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 has 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 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
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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,
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
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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 $128,950 for 2000 ($64,475 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 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
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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 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
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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 "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.
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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 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
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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 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.
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Sale or Exchange of Stripped Certificates. Sale or exchange of a Stripped
Certificate prior to its maturity will result in gain or loss equal to the
difference, if any, between the amount received and the Stripped
Certificateholder's adjusted basis in 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
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
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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.
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 in those exemptions 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.
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
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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.
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 regulations
("401(c) Regulations") 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 January 5, 2000, the DOL
published the 401(c) 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
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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 became 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, and thus the ability of investors subject to these restrictions
to purchase those certificates, may be subject to significant interpretive
uncertainties. Accordingly, investors whose investment authority is subject to
legal restrictions should consult their own legal advisors to determine whether
and to what extent the Non-SMMEA Certificates constitute legal investments for
them.
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.
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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 "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.
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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.
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
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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 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
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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.
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 ........................ 103
401(c) Regulations ........................... 101
Accrual Certificates ......................... 37
Accrued Certificate Interest ................. 37
ADA .......................................... 71
ARM Loans .................................... 26
Available Distribution Amount ................ 36
Bankruptcy Code .............................. 63
Book-Entry Certificates ...................... 36
capital asset ................................ 79
Cash Flow Agreement .......................... 28
Certificate Owner ............................ 42
Code ......................................... 41
Constant Prepayment Rate ..................... 31
Cooperatives ................................. 23
CPR .......................................... 31
Debt Service Coverage Ratio .................. 24
Definitive Certificates ...................... 36
Depositor .................................... 5, 23
Determination Date ........................... 29, 37
Direct Participants .......................... 42
Disqualified Organization .................... 85
Distribution Date Statement .................. 39
DOL .......................................... 100
DTC .......................................... 36
Due Dates .................................... 25
Due Period ................................... 29
EDGAR ........................................ 106
Equity Participation ......................... 25
Events of Default ............................ 55
Excess Funds ................................. 34
excess servicing ............................. 95
Exemptions ................................... 101
FAMC ......................................... 27
FHLMC ........................................ 27
FNMA ......................................... 27
Garn Act ..................................... 69
GNMA ......................................... 27
Indirect Participants ........................ 42
Insurance and Condemnation Proceeds .......... 47
L/C Bank ..................................... 59
Liquidation Proceeds ......................... 47
Loan-to-Value Ratio .......................... 24
Lock-out Date ................................ 25
Lock-out Period .............................. 25
Mark to Market Regulations ................... 88
market discount .............................. 79
MBS .......................................... 23
MBS Agreement ................................ 27
MBS Issuer ................................... 27
MBS Servicer ................................. 27
MBS Trustee .................................. 27
</TABLE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
Mortgage Asset Seller ........................ 23
Mortgage Notes ............................... 23
Mortgaged Properties ......................... 23
Mortgages .................................... 23
NCUA ......................................... 103
Net Leases ................................... 24
Net Operating Income ......................... 24
New Regulations .............................. 90
Non-SMMEA Certificates ....................... 102
Non-U.S. Person .............................. 90
Nonrecoverable Advance ....................... 39
OCC .......................................... 103
OID Regulations .............................. 75
OTS .......................................... 103
Participants ................................. 42
Parties in Interest .......................... 100
Pass-Through Entity .......................... 85
Permitted Investments ........................ 47
Plans ........................................ 100
Pooling Agreement ............................ 44
Prepayment Assumption ........................ 76
Prepayment Interest Shortfall ................ 29
Prepayment Premium ........................... 25
Proposed Regulations ......................... 86
PTCE ......................................... 101
PTCE 95-60 ................................... 101
Random Lot Certificates ...................... 75
Record Date .................................. 37
Reform Act ................................... 75
Registration Statement ....................... 105
Regular Certificateholder .................... 75
Regular Certificates ......................... 72
Related Proceeds ............................. 39
Relief Act ................................... 70
REMIC ........................................ 12
REMIC Certificates ........................... 72
REMIC Pool ................................... 72
REMIC Regulations ............................ 72
REO Property ................................. 46
Residual Certificateholders .................. 81
Residual Certificates ........................ 37
RICO ......................................... 71
SBJPA of 1996 ................................ 73
secured-creditor exemption ................... 68
Securities Act ............................... 105
Senior Certificates .......................... 36
Servicing Standard ........................... 46
SMMEA ........................................ 102
SPA .......................................... 31
Standard Certificateholder ................... 93
Standard Certificates ........................ 93
Standard Prepayment Assumption ............... 31
</TABLE>
107
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<TABLE>
<CAPTION>
PAGE
<S> <C>
Startup Day ........................ 73
Stripped Certificateholder ......... 97
Stripped Certificates .............. 93, 96
Sub-Servicing Agreement ............ 46
Subordinate Certificates ........... 36
thrift institutions ................ 84
</TABLE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
Title V ............................ 70
Treasury ........................... 72
U.S. Person ........................ 87
Value .............................. 24
Warranting Party ................... 45
</TABLE>
108
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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>
PROSPECTUS SUPPLEMENT PAGE
<S> <C>
Summary of Certificates .......................... S-7
Summary of Terms ................................. S-8
Risk Factors ..................................... S-30
Description of the Mortgage Pool ................. S-49
Description of the Certificates .................. S-74
Servicing of the Mortgage Loans .................. S-96
Yield and Maturity Considerations ................ S-109
Certain Federal Income Tax Consequences .......... S-118
Method of Distribution ........................... S-119
Legal Matters .................................... S-120
Ratings .......................................... S-120
Legal Investment ................................. S-121
ERISA Considerations ............................. S-121
Index of Principal Definitions ................... S-124
PROSPECTUS
Summary of Prospectus ............................ 6
Risk Factors ..................................... 13
Description of the Trust Funds ................... 23
Yield and Maturity Considerations ................ 29
The Depositor .................................... 35
Use of Proceeds .................................. 35
Description of the Certificates .................. 36
Description of the Pooling Agreements ............ 44
Description of Credit Support .................... 58
Certain Legal Aspects of Mortgage Loans .......... 61
Certain Federal Income Tax Consequences .......... 72
State and Other Tax Considerations ............... 99
Certain ERISA Considerations ..................... 100
Legal Investment ................................. 102
Method of Distribution ........................... 104
Incorporation of Certain Information By
Reference ..................................... 105
Legal Matters .................................... 106
Financial Information ............................ 106
Rating ........................................... 106
Index of Principal Definitions ................... 107
</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
JUNE , 2000.
$633,813,982 (APPROXIMATE)
CHASE COMMERCIAL
MORTGAGE SECURITIES
CORP.
(DEPOSITOR)
COMMERCIAL MORTGAGE PASS-THROUGH
CERTIFICATES, SERIES 2000-1
[GRAPHIC OMITTED]
<TABLE>
<S> <C>
CLASS A-1 CERTIFICATES ......... $125,175,000
CLASS A-2 CERTIFICATES ......... $392,439,752
CLASS X CERTIFICATES ........... $704,237,758
CLASS B CERTIFICATES ........... $ 36,972,481
CLASS C CERTIFICATES ........... $ 33,451,295
CLASS D CERTIFICATES ........... $ 10,563,566
CLASS E CERTIFICATES ........... $ 24,648,322
CLASS F CERTIFICATES ........... $ 10,563,566
</TABLE>
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PROSPECTUS SUPPLEMENT
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CHASE SECURITIES INC.
GOLDMAN, SACHS & CO.
SALOMON SMITH BARNEY
MARCH , 2000
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