<PAGE>
FILED PURSUANT TO RULE 424(b)(3)
REGISTRATION NOS. 333-59731 AND
333-59731-01
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED NOVEMBER 17, 1998
$727,722,881
(Approximate)
[LOGO OF GREENPOINT CREDIT]
Seller and Servicer
Manufactured Housing Contract Trust
Pass-Through Certificates, Series 1998-1
----------------------------------
The certificates will represent interests only in the trust created for Series
1998-1 and will not represent interests in or obligations of GreenPoint Credit
Corp. or any of its affiliates.
CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE S-9 IN THIS PROSPECTUS
SUPPLEMENT AND PAGE 10 IN THE ACCOMPANYING PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE OFFERED CERTIFICATES OR
DETERMINED THAT THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IS ACCURATE
OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Pass- Underwriting
Principal Through Price to Discounts and Proceeds to
Balance(1) Rate(2) Public(3) Commissions Seller(4)
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class I A Certificate... $477,974,066 6.635%(5) 99.995876% 0.275% 99.720876%
Class II A Certificate.. $249,748,815 (6) 100.000000% 0.275% 99.925000%
Total................... $727,722,881 $727,703,169 $2,001,238 $725,701,931
</TABLE>
(1) Approximate, subject to a permitted variance of plus or minus 5%.
(2) The first monthly distribution date will be December 15, 1998. The Class I
A record date for the first distribution date will be November 30, 1998,
and thereafter will be the last business day of the month preceding a
distribution date. The Class II A record date for the first distribution
date will be the closing date, and thereafter will be the day prior to the
distribution date.
(3) Per certificate, plus accrued interest from November 1, 1998 in the case
of the Class I A certificates and from the date the certificates are
issued, in the case of the Class II A certificates.
(4) Before deducting expenses payable by GreenPoint Credit Corp., estimated to
be $700,000.
(5) Subject to a maximum rate equal to the weighted average net contract rates
of the group I contracts.
(6) The lesser of (a) one-month LIBOR plus the Class II A margin and (b) the
net funds cap of the group II contracts. The Class II A margin will equal
0.57% on or before the call option date, and 1.07% thereafter.
The required monthly payments of interest and scheduled principal are
unconditionally guaranteed to the holders of all classes of certificates by
[LOGO OF MBIA INSURANCE CORPORATION]
See "MBIA Insurance Corporation" and "Description of the Certificates--
Certificate Insurance Policy" herein.
Delivery of the offered certificates in book-entry form only will be made
through The Depository Trust Company on or about November 30, 1998, against
payment in immediately available funds.
CREDIT SUISSE FIRST BOSTON
BEAR, STEARNS & CO. INC.
NATIONSBANC MONTGOMERY SECURITIES LLC
Prospectus Supplement dated November 17, 1998
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS SUPPLEMENT AND
THE ACCOMPANYING PROSPECTUS
You should rely only on the information contained in this document or to
which we have referred you to herein. We have not authorized anyone to provide
you with information that is different. This document may only be used where it
is legal to sell these securities. The information in this document may only be
accurate on the date of this document.
We provide information to you about the offered certificates in two separate
documents that progressively provide more detail: (a) the accompanying
prospectus, which provides general information, some of which may not apply to
your series of certificates, and (b) this prospectus supplement, which
describes the specific terms of your series of certificates. IF THE TERMS OF
YOUR CERTIFICATES VARY BETWEEN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS, YOU SHOULD RELY ON THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT.
We include cross-references in this prospectus supplement and the
accompanying prospectus to captions in these materials where you can find
further related discussions. The following table of contents and the table of
contents included in the accompanying prospectus provide the pages on which
these captions are located.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY INFORMATION...................................................... S-3
RISK FACTORS............................................................. S-9
THE CONTRACT POOL........................................................ S-12
General.................................................................. S-12
Group I Contracts........................................................ S-13
Group II Contracts....................................................... S-17
THE SELLER AND THE SERVICER.............................................. S-24
GreenPoint's Management's Discussion and Analysis of Delinquency,
Repossession and Loan Loss Experience................................... S-25
Impact of the Year 2000.................................................. S-25
MBIA INSURANCE CORPORATION............................................... S-26
PREPAYMENT AND YIELD CONSIDERATIONS...................................... S-28
Weighted Average Life of the Certificates................................ S-30
Group I Assumptions...................................................... S-31
Group II Assumptions..................................................... S-32
DESCRIPTION OF THE CERTIFICATES.......................................... S-34
General.................................................................. S-35
Pass-Through Rates and Last Scheduled Distribution Dates................. S-35
Conveyance of Contracts.................................................. S-36
Payments on the Contracts; Certificate Accounts.......................... S-39
Distributions............................................................ S-40
Interest Distributions................................................... S-40
Priority of Distributions................................................ S-41
Cross-Collateralization Provisions....................................... S-42
Losses on Liquidated Contracts........................................... S-43
Certificate Insurance Policy............................................. S-43
Advances................................................................. S-44
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Reports to Certificateholders............................................. S-44
Optional Termination and Termination Auction.............................. S-45
Termination of the Agreement.............................................. S-46
Collection and Other Servicing Procedures................................. S-46
Servicing Compensation; Certain Other Matters Regarding the Servicer...... S-47
Rights Upon and Event of Default.......................................... S-47
The Trustee............................................................... S-47
Registration of the Certificates.......................................... S-47
FEDERAL INCOME TAX CONSEQUENCES........................................... S-51
ERISA CONSIDERATIONS...................................................... S-53
General................................................................... S-53
Certificates (other than the Class R Certificates)........................ S-53
RATINGS................................................................... S-54
LEGAL INVESTMENT.......................................................... S-55
METHOD OF DISTRIBUTION.................................................... S-55
USE OF PROCEEDS........................................................... S-56
LEGAL MATTERS............................................................. S-56
EXPERTS................................................................... S-56
INDEX OF SIGNIFICANT DEFINITIONS.......................................... S-57
ANNEX I................................................................... I-1
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES............. I-1
Initial Settlement........................................................ I-1
Secondary Market Trading.................................................. I-1
Certain U.S. Federal Income Tax Documentation Requirements................ I-3
</TABLE>
S-2
<PAGE>
SUMMARY INFORMATION
THE FOLLOWING SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROSPECTUS
SUPPLEMENT. IT DOES NOT CONTAIN ALL OF THE INFORMATION THAT YOU NEED TO
CONSIDER IN MAKING YOUR INVESTMENT DECISION. TO UNDERSTAND THE TERMS OF THE
OFFERED CERTIFICATES, READ CAREFULLY THIS ENTIRE PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS.
THIS SUMMARY PROVIDES AN OVERVIEW OF CERTAIN CALCULATIONS, CASH FLOWS AND OTHER
INFORMATION TO AID YOUR UNDERSTANDING AND IS QUALIFIED BY THE FULL DESCRIPTION
OF THESE CALCULATIONS, CASH FLOWS AND OTHER INFORMATION IN THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS.
CAPITALIZED TERMS USED IN THIS PROSPECTUS SUPPLEMENT AND NOT OTHERWISE DEFINED
HEREIN HAVE THE MEANINGS ASSIGNED IN THE PROSPECTUS.
WHAT YOU OWN
Your certificates represent ownership of a portion of the Trust. The Trust
contains a contract pool, which includes two groups of actuarial manufactured
housing installment sales contracts, installment loan agreements and certain
other assets (referred to in this summary as the contracts), as described under
"Description of the Certificates--General" in this prospectus supplement.
THE OFFERED CERTIFICATES ONLY REPRESENT INTERESTS IN THE ASSETS OF THE TRUST.
ALL PAYMENTS TO YOU WILL COME ONLY FROM THE AMOUNTS RECEIVED IN CONNECTION WITH
THOSE ASSETS.
INFORMATION ABOUT THE CONTRACT POOL
The contract pool consists of approximately 19,494 contracts with an aggregate
scheduled principal balance as of October 31, 1998 of approximately
$727,722,882.47. Each of the contracts was purchased in bulk from Bank of
America, FSB.
The contract pool consists of two contract groups. As of October 31, 1998,
contract group I consists of approximately 13,473 fixed rate contracts with an
aggregate scheduled principal balance of approximately $477,974,066.81 and
contract group II consists of approximately 6,021 adjustable rate contracts
with an aggregate scheduled principal balance of approximately $249,748,815.66.
The Class I A Certificates represent an interest in the contracts in contract
group I and the Class II A Certificates represent an interest in the contracts
in contract group II.
For a further description of the contracts in each contract group, see "The
Contract Pool--Group I Contracts" and "--Group II Contracts" in this prospectus
supplement.
S-3
<PAGE>
THE OFFERED CERTIFICATES
GreenPoint Credit Corp. will deposit the contracts into the Trust. The Trust
has been created for the purpose of issuing the Manufactured Housing Contract
Trust Pass-Through Certificates, Series 1998-1. The approximate initial
principal balance, pass-through rate and last scheduled distribution date of
each class of the offered certificates will be as follows:
<TABLE>
<CAPTION>
Initial Principal Pass-Through Last Scheduled
Class Balance(1) Rate Distribution Date
- ----- ----------------- ------------ -----------------
<S> <C> <C> <C>
I A........................... $477,974,066 6.635%(2) September 15, 2028
II A.......................... $249,748,815 (3)(4)(5) May 15, 2028
</TABLE>
- -------
(1) Approximate, subject to a permitted variance of plus or minus 5%.
(2) Subject to a maximum rate equal to the weighted average net contract rate
of the group I contracts.
(3) The Pass-Through Rate for the first distribution date will not be
determined until two days prior to the closing of the transaction.
Therefore, the initial Pass-Through Rate has not been determined as of the
date of this prospectus supplement.
(4) The Class II A Pass-Through Rate shall be the lesser of (a) the Class II A
Formula Rate (as defined below) and (b) the Net Funds Cap (as defined
below) for such distribution date. The Class II A Formula Rate shall be a
per annum rate equal to the sum of (1) LIBOR (as defined in this
prospectus supplement) plus (2) 0.57% on or before the optional
termination date and 1.07% thereafter. The Net Funds Cap for any
distribution date shall equal a per annum rate equal to the average of the
Net Contract Rates of Group II Contracts as of the first day of the
related Collection Period, weighted on the basis of the Scheduled
Principal Balance of the Group II Contracts on the first day of the
related Collection Period. With respect to any Distribution Date and each
Group II Contract, the "Net Contract Rate" is the related Contract Rate on
the first day of the related Collection Period minus the Monthly Servicing
Fee Rate minus 0.50%. See "Description of the Certificate--Pass-Through
Rates and Last Scheduled Distribution Dates" in this prospectus supplement
for more detailed information.
(5) If, on any distribution date, the Pass-Through Rate for the Class II A
certificates is based on the Net Funds Cap, holders of the Class II A
certificates will be entitled to receive, on subsequent distribution
dates, the applicable Net Funds Cap Carryover Amount (as defined in this
prospectus supplement) to the extent of funds available therefore.
However, any additional funds resulting from cross-collateralization
provisions or the certificate insurance policy described in this
prospectus supplement shall not be available to the holders of the
Class II A certificates to pay the Net Funds Cap Carryover Amount. See
"Description of the Certificates--Priority of Distributions" in this
prospectus supplement.
The Trust will also issue one or more Class R Certificates which will not be
sold to the public. The Class R Certificates are not being offered by this
prospectus supplement and are subordinated to the offered certificates and
provide some limited credit support for the offered certificates.
The certificates whose class designation begins with a roman numeral "I"
correspond to contract group I and the certificates whose class designation
begins with "II" correspond to contract group II. The certificates generally
receive distributions based only on principal and interest collected from
contracts in the corresponding contract group.
DENOMINATIONS
The offered certificates are offered in minimum denominations of $50,000 each
and multiples of $1,000 in excess thereof, except for a denomination
representing the remainder of a class of certificates.
THE CERTIFICATE INSURANCE POLICY AND MBIA INSURANCE CORPORATION
MBIA Insurance Corporation will provide an insurance policy to protect
certificateholders against certain losses. In most instances (as described in
more detail herein), if funds in the group I and group II certificate
accounts, as applicable, are insufficient to distribute interest or scheduled
principal to the certificateholders on any distribution date, MBIA Insurance
Corporation will make a payment into the respective certificate account to
cover such shortfall under a certificate insurance policy. See "MBIA Insurance
Corporation" and
S-4
<PAGE>
"Description of the Certificates--Certificate Insurance Policy" in this
prospectus supplement.
DISTRIBUTIONS ON THE CERTIFICATES
GENERAL
Each month, The First National Bank of Chicago, the trustee, will make
distributions of interest and principal to the holders of the certificates. The
first distribution date will be December 15, 1998. Thereafter, distributions
will be made on the 15th day of each month, or if such 15th day is not a
business day, on the next business day.
The obligors under the contracts will pay their interest and principal during
the month to the servicer of the contracts. Within two business days of receipt
of payments from obligors, the servicer will forward these amounts to the
trustee. On the distribution date that month, the trustee will distribute the
amount remitted by the servicer for each contract group, less fees and expenses
owed to the servicer, to the holders of the certificates related to that
contract group. See "Description of the Certificates--Priority of
Distributions" in this prospectus supplement.
DISTRIBUTIONS OF INTEREST
With respect to each distribution date, the Class I A certificates will accrue
interest for each distribution date at 1/12th of the related pass-through rate
on the related principal balance immediately prior to such distribution date.
The interest period for the Class I A certificates for each distribution date
is the calendar month preceding such distribution date. The Class II A
certificates will accrue interest for each distribution date at the product of
(i) the actual number of days during the interest period divided by 360 and
(ii) the pass-through rate on the principal balance thereof immediately prior
to such distribution date. The interest period for the Class II A certificates
for each distribution date is the period from the preceding distribution date
(or from the closing date with respect to the first distribution date) through
the day prior to the distribution date. See "Description of the Certificates--
Interest Distributions" and "Risk Factors--The Effective Yield on the Class I A
Certificates Will Be Lower Than What Would Otherwise Be Produced by the
Applicable Pass-Through Rate and Purchase Price of Such Certificates Due to the
Delay in Payment" in this prospectus supplement.
On each distribution date, interest will be distributed to certificateholders
in the order described in "Description of the Certificates--Priority of
Distributions" in this prospectus supplement. It is possible that, on any given
distribution date, there will be insufficient payments from the contracts to
cover interest owed on the certificates. If there are insufficient payments on
the contracts, and there is an event of default under the certificate insurance
policy, some classes of certificates may not receive the full amount of accrued
interest. The classes of certificates that do not receive the full interest
payment will be entitled to receive such shortfall in interest distributions in
the following month in the same priority as their distribution of current
interest. See "MBIA Insurance Corporation" and "Description of the
Certificates--Certificate Insurance Policy" and "Description of the
Certificates--Priority of Distributions" in this prospectus supplement.
LIBOR. The pass-through rate for the Class II A certificates will be adjusted
each month, based on changes in the London Interbank Offered Rate for one-month
U.S.
S-5
<PAGE>
dollar deposits, as described in "Description of the Certificates--Pass-Through
Rates and Last Scheduled Distribution Dates" in this prospectus supplement.
DISTRIBUTIONS OF PRINCIPAL
General. You will receive payments of principal corresponding to payments of
principal on the related contract group.
Class I A Certificates. On each distribution date, a certain portion of the
principal received on all of the contracts in group I will be distributed to
the Class I A certificates. See "Description of the Certificates--Priority of
Distributions" in this prospectus supplement.
Class II A Certificates. On each distribution date, a certain portion of the
principal received on all of the contracts in group II will be distributed to
the Class II A certificates. See "Description of the Certificates--Priority of
Distributions" in this prospectus supplement.
It is possible that there will be insufficient payments from the contracts to
cover principal payable to you. If there is a shortfall in collections for a
contract group and there is a default by MBIA Insurance Corporation under the
certificate insurance policy, you may not receive the full amount of principal
distributions to which you are otherwise entitled. See "MBIA Insurance
Corporation" and "Description of the Certificates--Certificate Insurance
Policy" and "Description of the Certificates--Priority of Distributions" in
this prospectus supplement.
ALLOCATION OF LOSSES
A loss is realized on a contract when the servicer determines that it has
received all amounts it expects to recover from that contract and that amount
of recovery is less than the sum of the outstanding principal balance of the
contract and the accrued and unpaid interest thereon. If there is a default by
MBIA Insurance Corporation under the certificate insurance policy, losses on
contracts in a contract group will only be allocated to the certificates
related to that contract group. See "Description of the Certificates--Losses on
Liquidated Contracts" in this prospectus supplement.
ADVANCES
For any month, if the servicer receives a payment on a contract that is less
than the full scheduled payment or receives no payment, the servicer will
advance its own funds to cover any shortfalls in payments of principal and
interest due to the Class I A certificates or the Class II A certificates.
However, advances will not exceed the delinquent contract payments and the
servicer will only make advances if it determines that such advances will be
recoverable from future payments or collections on that contract. See
"Description of the Certificates--Advances" in this prospectus supplement.
YIELD AND PREPAYMENT CONSIDERATIONS
The yield to maturity of each class of certificates will depend upon, among
other things:
. the price at which the certificates are purchased;
. the applicable pass-through rate; and
. the rate of principal prepayments on the related contracts.
A higher than anticipated rate of principal prepayments would reduce the
aggregate principal balance of the contracts more quickly than expected,
thereby reducing the aggregate
S-6
<PAGE>
interest payments that would otherwise be payable with respect to such
contracts. A higher rate of principal prepayments could result in a lower than
expected yield to maturity on classes of certificates purchased at a premium. A
lower than anticipated rate of principal prepayments could result in a lower
than expected yield to maturity on classes of certificates purchased at a
discount since payments of principal with respect to the contracts would occur
later than anticipated. For a discussion of special yield and prepayment
considerations applicable to the offered certificates, see "Risk Factors--The
Yield on Your Certificates is Directly Related to the Rate of Prepayments on
the Contracts" and "Prepayment and Yield Considerations" in this prospectus
supplement.
BOOK-ENTRY REGISTRATION
The offered certificates will be available only in book-entry form through the
facilities of The Depository Trust Company, Cedel Bank, societe anonyme and the
Euroclear System. See "Description of the Certificates--Registration of the
Certificates" in this prospectus supplement and Annex I to this prospectus
supplement.
TAX STATUS
For federal income tax purposes, GreenPoint Credit Corp. will cause an election
to be made to treat the Trust as a "real estate mortgage investment conduit".
Orrick, Herrington & Sutcliffe LLP, special counsel to GreenPoint Credit Corp.,
based on certain assumptions set forth herein and in the prospectus, is of the
opinion that the electing portion of the Trust will qualify as a "real estate
mortgage investment conduit" for federal income tax purposes and that for such
purposes the offered certificates will constitute "regular interests" in the
"real estate mortgage investment conduit" and will be treated as debt
instruments of the Trust for purposes of calculating a certificateholder's
federal income tax liability. Holders of the offered certificates that would
otherwise report income under a cash method of accounting will be required to
include in income interest on such certificates (including "original issue
discount", if any) in accordance with the accrual method of accounting with the
effect that an investor may be required to report income for federal income tax
purposes despite not yet having received a cash distribution in respect of such
income. Assuming in each case that a substantial amount of such class of
certificates is sold at the price for such class of certificates stated on the
cover of this prospectus supplement, and subject to the uncertainties
concerning the determination of "original issue discount" for variable rate
certificates discussed in "Federal Income Tax Consequences--REMIC
Certificates--Taxation of Regular Certificates--Variable Rate Certificates" in
the prospectus, the offered certificates will not be issued with "original
issue discount".
For further information regarding the federal income tax consequences of
investing in the offered certificates, see "Federal Income Tax Consequences" in
this prospectus supplement and in the accompanying prospectus.
ERISA CONSIDERATIONS
Subject to important considerations described under "ERISA Considerations" in
this prospectus supplement and in the accompanying prospectus, the offered
certificates will be eligible for purchase by persons investing assets of
employee benefit plans or individual retirement accounts.
RATINGS
The offered certificates are required to receive the ratings of "AAA" by
Standard & Poor's
S-7
<PAGE>
Ratings Services and "Aaa" by Moody's Investors Service, Inc. The ratings do
not address whether or not the Class II A certificates will receive any net
funds cap carryover amount. A rating is not a recommendation to buy, sell or
hold securities and may be subject to revision or withdrawal at any time. See
"Ratings" in this prospectus supplement.
LEGAL INVESTMENT
As of the date of their issuance, all of the offered certificates will be
"mortgage related securities" for purposes of the Secondary Mortgage Market
Enhancement Act of 1984. See "Legal Investment" in this prospectus supplement.
You should consult your own legal advisors in determining whether and to what
extent the offered certificates constitute legal investments for you.
S-8
<PAGE>
RISK FACTORS
You should carefully consider the following risk factors prior to any
decision to invest in the offered certificates. The following discussion
supplements, and does not replace or supersede, the discussion under "Risk
Factors" in the Prospectus.
THE OFFERED CERTIFICATES ARE NOT SUITABLE INVESTMENTS FOR ALL INVESTORS. IN
PARTICULAR, YOU SHOULD NOT PURCHASE ANY CLASS OF OFFERED CERTIFICATES UNLESS
YOU UNDERSTAND AND ARE ABLE TO BEAR THE PREPAYMENT, CREDIT, LIQUIDITY AND
MARKET RISKS ASSOCIATED WITH THAT CLASS.
THE OFFERED CERTIFICATES ARE COMPLEX SECURITIES AND IT IS IMPORTANT THAT YOU
POSSESS, EITHER ALONE OR TOGETHER WITH AN INVESTMENT ADVISOR, THE EXPERTISE
NECESSARY TO EVALUATE THE INFORMATION CONTAINED IN THIS PROSPECTUS SUPPLEMENT
AND THE PROSPECTUS IN THE CONTEXT OF YOUR FINANCIAL SITUATION.
LIMITED LIQUIDITY -- LACK OF SECONDARY MARKET MAY MAKE IT DIFFICULT FOR YOU TO
RESELL YOUR CERTIFICATES
The Underwriters intend to make a secondary market in the offered
certificates, but have no obligation to do so. Therefore, a secondary market
for the offered certificates may not develop. If a secondary market does
develop, it might not continue or it might not be sufficiently liquid to allow
you to resell any of your certificates. The offered certificates will not be
listed on any securities exchange. See "Risk Factors -- 1. Limited Liquidity"
in the prospectus.
THE YIELD ON YOUR CERTIFICATES IS DIRECTLY RELATED TO THE RATE OF PREPAYMENTS
ON THE CONTRACTS
GENERAL
Your certificates represent an interest in a Trust containing manufactured
housing installment sales contracts and installment loan agreements (referred
to in these Risk Factors as the contracts). As the obligors make payments of
interest and principal on the contracts, as applicable, you will receive
payments. Because the obligors are free to make those payments faster than
scheduled, you may receive distributions of principal faster than you
expected. There is no guarantee that you will receive principal payments on
your certificates at any specific rate or on specific dates.
The yield to maturity on your certificates is directly related to the rate
at which the obligors pay principal on the contracts in the related contract
group. Payment of principal on the contracts may be in the following forms:
. Scheduled payments of principal; and
. Principal prepayments which consist of:
-- Prepayments in full of a contract;
-- Repurchases of any contracts by the seller that violate any
representations and warranties in the pooling and servicing agreement;
-- Repurchases of group II contracts that have been converted to a fixed
interest rate;
-- Partial prepayments on any contract; and
-- Liquidation principal, which is the principal recovered after
foreclosing on or otherwise liquidating a defaulted contract.
In general, as prevailing interest rates decline significantly below the
interest rates on the contracts in the contract pool, the rate of prepayments
increases. General economic conditions and homeowner mobility will also affect
the rate of prepayments. All of the contracts contain "due-on-sale" clauses.
Therefore, the sale of any
S-9
<PAGE>
manufactured home, which is security for one of the contracts in the contract
pool, will cause a prepayment in full on the related contract. The rate of
prepayments will affect the yield on all of the offered certificates. See
"Prepayment and Yield Considerations" in the prospectus and this prospectus
supplement.
OFFERED CERTIFICATES BOUGHT AT PREMIUMS AND DISCOUNTS MAY RECEIVE A LOWER
YIELD THAN EXPECTED
If you purchase an offered certificate at a discount from its original
principal balance and the rate of principal payments is slower than you
expected, you may receive a lower yield than you expected. If you purchase an
offered certificate at a premium over its original principal balance and the
rate of principal payments is faster than you expected, you may receive a
lower yield than you expected. See "Prepayment and Yield Considerations" in
this prospectus supplement.
PREPAYMENTS MAY AFFECT PASS-THROUGH RATES
The pass-through rates for the offered certificates may be adjusted monthly
so as not to exceed the weighted average of the net contract rates in the
related contract group. The net contract rate of a group I contract equals the
rate of interest borne by such contract minus the rate at which the annual
servicing fee is paid to the servicer. The net contract rate of a group II
contract equals the rate of interest borne by such contract minus the rate at
which the annual servicing fee is paid to the servicer, minus .50%.
Disproportionate prepayments of contracts in the related contract group with
net contract rates in excess of the initial pass-through rates for the offered
certificates, as applicable, will increase the possibility that the pass-
through rate for such class of certificates will be adjusted to an amount
lower than the related initial pass-through rate. The above mentioned
prepayments may include prepayments due to liquidations and repurchases by
GreenPoint Credit Corp. as required or permitted by the pooling and servicing
agreement. There is no mechanism to compensate the holders of such classes of
offered certificates for any such reduction other than the payment , if any,
of the net funds cap carryover amount. To the extent that a large number of
Group II contracts convert to a fixed rate, holders of the Class II A
certificates may be paid out earlier than expected. See "Description of the
Certificates--Priority of Distributions" in this prospectus supplement.
LOSSES ON THE CONTRACTS MAY REDUCE THE YIELD ON THE OFFERED CERTIFICATES
The yield to maturity on the offered certificates will be sensitive to
losses on the contracts in the related contract group. However, MBIA Insurance
Corporation has insured all classes of offered certificates with respect to
payments of interest and scheduled principal on such certificates and as long
as MBIA Insurance Corporation has not defaulted under the certificate
insurance policy, investors will be protected against any such losses. See
"MBIA Insurance Corporation" and "Description of the Certificates--Certificate
Insurance Policy" in this prospectus supplement.
THE LACK OF PHYSICAL CERTIFICATES FOR CERTAIN CERTIFICATES MAY CAUSE DELAYS IN
PAYMENT AND CAUSE DIFFICULTY IN PLEDGING OR SELLING YOUR CERTIFICATE
The offered certificates will not be issued in physical form. As a result,
you will be able to transfer your certificates only through The Depository
Trust Company, Cedel Bank, societe anonyme, the Euroclear System,
participating organizations, indirect participants and certain banks. The
ability to pledge a certificate to a person that does not participate in The
Depository Trust Company, Cedel Bank, societe anonyme, or the Euroclear System
may be limited because of the lack of a physical certificate. In addition, you
may experience some delay in receiving distributions on these certificates
because the trustee under the pooling and servicing agreement will not send
distributions directly to you. Instead, the trustee will send all
distributions to The Depository Trust Company, which will then credit those
distributions to the participating organizations. Those organizations will in
turn credit accounts you have either directly or indirectly through indirect
participants. Also, because investors may be unwilling to purchase securities
without delivery of a physical certificate, the offered certificates may be
less liquid in any secondary market that may develop. See "Description of the
Certificates--Registration of the Certificates" in this prospectus supplement.
S-10
<PAGE>
THE EFFECTIVE YIELD ON THE CLASS I A CERTIFICATES WILL BE LOWER THAN WHAT
WOULD OTHERWISE BE PRODUCED BY THE APPLICABLE PASS-THROUGH RATE AND PURCHASE
PRICE OF SUCH CERTIFICATES DUE TO THE DELAY IN PAYMENT
The effective yield to each holder of a Class I A certificate will be below
that which would otherwise be produced by the applicable interest rate and the
purchase price of such holder's certificate because, while interest will
accrue from the first day of the month to the last day of the month, such
accrued interest will not be paid until the distribution made on the 15th day
(or, if such day is not a business day, the next succeeding business day) of
the following month. In addition, distributions of principal on any
distribution date will have the effect of reducing the outstanding principal
balance as of the open of business on the first day in the month in which such
payment occurs. Therefore, interest on the Class I A certificates will accrue
on a lower outstanding balance for the related collection period. See
"Prepayment and Yield Considerations" in this prospectus supplement.
THE EFFECTIVE YIELD ON THE CLASS II A CERTIFICATES MAY BE LOWER THAN WHAT
WOULD OTHERWISE BE PRODUCED BY THE INDEX PLUS THE GROSS MARGIN
BASIS RISK
Although all of the group II contracts are variable rate contracts and
therefore provide for periodic adjustments to the interest rates thereof, some
of such group II contracts will not have their first interest adjustment dates
for a period of time that is longer than would otherwise be indicated by the
index under which such contracts are adjusted. Until their respective first
adjustment dates, each group II contract will bear interest at a fixed rate
set at the origination of such loan. Even after such first adjustment dates,
the interest rates on the group II contracts will only adjust every 12 months
thereafter. Further, the Class II A certificates are subject to adjustment
monthly based on the LIBOR index, which is a different index than the index
with which the group II contracts adjust. LIBOR may move differently than the
index under which the group II contracts are adjusted. Since the interest rate
on the Class II A certificates is largely a function of the weighted average
of the interest rates on the group II contracts, any delay in the adjustment
of such interest rates may make it more likely that the pass-through rate on
the group II certificates will be limited by such weighted average less
certain fees. Although holders of the Class II A certificates will be entitled
to any related carryover amount from and to the limited extent of funds
available therefor as provided herein, there can be no assurance that such
funds will be available or sufficient for such purposes. In addition, the
certificate insurance policy does not cover, and the ratings of the Class II A
certificates do not address, the likelihood of payment of any carryover
amount.
CONVERSION RISK
Although all of the group II contracts are variable rate, the obligor on
each of the group II contracts can convert such variable rate to a fixed rate
as long as the obligor is current in payment on the obligor's contract. Such
fixed rate may be lower than the LIBOR index. Since the pass-through rate on
the group II certificates is largely a function of the weighted average of the
interest rates on the group II contracts, any conversion of a group II
contract to a fixed rate that has not been purchased by the holder of the
Class R Certificate may make it more likely that the pass-through rate on the
Class II A certificates will be limited by such weighted average less certain
fees. Further, there will be no carryover amount associated with any contract
that has an interest rate converted to a fixed rate of interest.
UPON THE OCCURRENCE OF EVENTS OF DEFAULT OF THE SERVICER UNDER THE POOLING AND
SERVICING AGREEMENT, MBIA INSURANCE CORPORATION WILL HAVE THE SOLE RIGHT TO
EXERCISE ANY REMEDIES
So long as MBIA Insurance Corporation is not in default in payment under the
certificate insurance policy, upon the occurrence of an event of default of
the servicer under the pooling and servicing agreement, neither the trustee
nor the certificateholders may exercise any remedies provided for in such
agreement. MBIA Insurance Corporation will generally have the right to control
all such remedies. See "MBIA Insurance Corporation" and "Description of the
Certificates--Certificate Insurance Policy" in this prospectus supplement.
S-11
<PAGE>
LIMITED ASSETS OF THE TRUST
The trust will not have, nor is it permitted or expected to have, any
significant assets or sources of funds other than the contracts and related
assets, two certificate accounts and the certificate insurance policy. Holders
of the offered certificates must rely upon payments on the contracts and
payments of claims made under the certificate insurance policy for payments on
their certificates. Although the certificate insurance policy will be
available for the offered certificates to cover shortfalls in distributions of
interest and scheduled principal due thereon, if MBIA Insurance Corporation
defaults in its obligations under the certificate insurance policy, the
trustee will depend solely on current distributions on the contracts to make
payments on the offered certificates. See "MBIA Insurance Corporation" and
"Description of the Certificates--Certificate Insurance Policy" in this
prospectus supplement.
THE CONTRACT POOL
GENERAL
Each manufactured housing installment sales contract or installment loan
agreement (each a "Contract") was originated by BankAmerica Housing Services,
a division of Bank of America, FSB and purchased by GreenPoint Credit Corp.
("GreenPoint" or the "Seller") from BankAmerica Corporation in the Acquisition
(as defined in the Prospectus). See "The Seller -- The Acquisition" in the
Prospectus. A description of the general practices of GreenPoint with respect
to the origination or purchase of manufactured housing contracts similar to
the Contracts is set forth in the Prospectus under "The Seller -- Loan
Originations" and "The Seller -- Underwriting Practices."
On the date of initial issuance of the GreenPoint Credit Manufactured
Housing Contract Trust Pass-Through Certificates, Series 1998-1 (the
"Certificates") (such date, the "Closing Date"), the Seller will convey to the
Trust Fund the Contracts. The Trust Fund will consist of two groups of
contracts (each a "Contract Group"). The Contracts in the first Contract Group
will be fixed rate Contracts (each a "Group I Contract") and the Contracts in
the second Contract Group will be variable rate Contracts (each a "Group II
Contract"). So long as GreenPoint is acting as the servicer under the
Agreement (the "Servicer"), it will obtain and maintain possession of all
Contract documents. All of the Contracts (by principal balance as of October
31, 1998 (the "Cut-off Date") will be Contracts acquired by GreenPoint in the
Acquisition. See "The Contract Pools" in the Prospectus.
The underwriting practices of GreenPoint regarding loan-to-value ratios of
Contracts it originates or purchases are set forth in the Prospectus under
"The Seller -- Loan Originations" and "The Seller --Underwriting Policies."
"Value" is equal to the total buyer's cost of the manufactured home or in the
case of some used homes, the NADA Mobile/Manufactured Housing Appraisal Guide
(including taxes, insurance and any prepaid finance charges or closing costs
that are financed). For Land Home Contracts and Land-in-Lieu Contracts,
"Value" is equal to (i) the value of the real property as determined by
appraisal or tax assessment, plus the total buyer's cost of the manufactured
home (as indicated above), plus the cost of the improvements to the land or
(ii) in the case of a manufactured home that is already located on the land,
the final appraised value of the land and manufactured home together. The
"loan-to-value ratio" or "LTV" is a fraction, expressed as a percentage, the
numerator of which is all of the amounts owing on the Contract at the time
such ratio is determined and the denominator of which is the Value. No
Contract at its origination had an LTV in excess of approximately 95%.
Manufactured homes, unlike site-built homes, generally depreciate in value,
and GreenPoint believes that, upon repossession, the market value of a
manufactured home securing a manufactured housing contract is generally lower
than the principal balance of the related manufactured housing contract.
However, because GreenPoint did not service manufactured homes prior to the
Acquisition, it has no statistical information relating to the average
percentage of principal recovered upon liquidation of certain manufactured
housing contracts. Therefore, no statistical information with respect to loss
and delinquencies can be provided. In addition, the
S-12
<PAGE>
percentage recovery of principal on liquidation of manufactured housing
contracts historically has been adversely affected by downturns in regional or
local economic conditions. These regional or local economic conditions are
often volatile and no predictions can be made regarding future economic loss
upon liquidation.
The Land Home Contracts or Land-in-Lieu Contracts will be secured by either
first mortgages or deeds of trust on the real estate on which the Manufactured
Home is located, depending upon the prevailing practice in the state in which
the underlying property is located. See "Certain Legal Aspects of the
Contracts -- Land Home and Land-in-Lieu Contracts" in the Prospectus.
Under certain limited circumstances, as set forth in the Pooling and
Servicing Agreement, dated as of November 1, 1998 (the "Agreement"), between
GreenPoint, as seller and servicer, and The First National Bank of Chicago
(the "'Trustee"), the Servicer may make a one-time modification to the annual
percentage rate of interest with respect to any Contract (the "Contract Rate")
by an amount equal to the lesser of (i) 5% of such Contract Rate and (ii)
0.50%.
The charge-off policy with respect to any particular manufactured housing
installment sales contract or installment loan agreement is determined by
GreenPoint on a case by case basis.
Each Group I Contract has a Contract Rate that is fixed and generally
provides for level payments over the term of such Contract. Each Group II
Contract has a Contract Rate that is adjustable, as further described herein.
Each Contract fully amortizes the principal balance of the Contract over the
term of the Contract. All of the Contracts are actuarial obligations. None of
the Contracts (i) is insured in whole or in part by the Veterans
Administration, the Federal Housing Administration or any other governmental
entity or instrumentality or (ii) is amortized by using the "simple interest"
amortization method.
GROUP I CONTRACTS
As of the Cut-off Date, the Group I Contracts will have an aggregate unpaid
principal balance of approximately $477,974,066.81. The average outstanding
principal balance of the Group I Contracts as of the Cut-off Date was
approximately $35,476.44. All of the Group I Contracts (by principal balance
as of the Cut-off Date) were Contracts acquired by GreenPoint in the
Acquisition. Approximately 81% of the Group I Contracts by aggregate unpaid
principal balance as of the Cut-off Date are secured by Manufactured Homes
which were new at origination and approximately 19% of the Group I Contracts
by aggregate unpaid principal balance as of the Cut-off Date are secured by
Manufactured Homes which were used at origination. Each Group I Contract has a
Contract Rate of at least 6.00% and not more than 14.50% per annum. The
weighted average Contract Rate of the Group I Contracts as of the Cut-off Date
is approximately 9.543% per annum. The Group I Contracts have remaining
maturities as of the Cut-off Date of at least 7 months but not more than 360
months and original maturities of at least 24 months but not more than 362
months. As of the Cut-off Date, the Group I Contracts had a weighted average
original term to scheduled maturity of approximately 301 months, and a
weighted average remaining term to scheduled maturity of approximately 297
months. The remaining term to stated maturity of a Group I Contract is
calculated as of the Cut-off Date. Management of GreenPoint estimates that in
excess of 95% of the Manufactured Homes are used as primary residences by the
Obligors under the Group I Contracts secured by such Manufactured Homes. The
weighted average loan-to-value ratio at the time of origination of the Group I
Contracts was approximately 88.27%. The Group I Contracts are secured by
Manufactured Homes and real estate located in 46 states. Approximately 9.97%,
8.24%, 7.01%, 6.58% and 5.07% of the Group I Contracts by aggregate unpaid
principal balance were secured by Manufactured Homes or real estate located in
Georgia, Alabama, Texas, North Carolina and Kentucky, respectively. No other
state represented more than 5.00% of the Group I Contracts by aggregate unpaid
principal balance as of the Cut-off Date. Approximately 22% (by principal
balance as of the Cut-off Date) of the Group I Contracts are Land Home
Contracts or Land-in-Lieu Contracts.
S-13
<PAGE>
Set forth below is a description of certain additional characteristics of
the Group I Contracts as of the Cut-off Date:
GEOGRAPHICAL DISTRIBUTION OF MANUFACTURED HOMES
AS OF ORIGINATION -- GROUP I CONTRACTS
<TABLE>
<CAPTION>
Aggregate Scheduled % of Group I Contracts By
Number of Contracts Principal Balance Scheduled Principal Balance
State As of Cut-off Date As of Cut-off Date As of Cut-off Date(/1/)
- ------------------------ ------------------- ------------------- ---------------------------
<S> <C> <C> <C>
Alabama................. 1,035 $39,379,762.56 8.24%
Arizona................. 415 16,919,078.83 3.54
Arkansas................ 369 12,459,840.46 2.61
California.............. 327 10,121,301.93 2.12
Colorado................ 251 8,490,286.44 1.78
Delaware................ 58 2,067,069.91 0.43
Florida................. 417 16,925,767.25 3.54
Georgia................. 1,106 47,632,321.51 9.97
Idaho................... 42 1,395,772.53 0.29
Illinois................ 234 7,911,968.38 1.66
Indiana................. 328 12,254,712.26 2.56
Iowa.................... 106 3,056,591.01 0.64
Kansas.................. 195 6,639,653.65 1.39
Kentucky................ 760 24,245,371.66 5.07
Louisiana............... 346 11,924,123.85 2.49
Maine................... 111 5,355,854.88 1.12
Maryland................ 56 1,703,823.67 0.36
Massachusetts........... 1 63,722.57 0.01
Michigan................ 238 7,724,941.67 1.62
Minnesota............... 110 2,660,953.38 0.56
Mississippi............. 523 16,593,656.45 3.47
Missouri................ 433 13,777,199.57 2.88
Montana................. 75 2,502,685.64 0.52
Nebraska................ 85 2,742,029.35 0.57
Nevada.................. 94 4,847,727.14 1.01
New Hampshire........... 39 1,845,812.12 0.39
New Jersey.............. 1 17,893.34 0.00
New Mexico.............. 133 4,572,511.75 0.96
New York................ 303 12,489,967.73 2.61
North Carolina.......... 886 31,449,730.22 6.58
North Dakota............ 34 1,011,102.59 0.21
Ohio.................... 300 9,679,453.73 2.03
Oklahoma................ 308 10,693,071.15 2.24
Oregon.................. 79 2,383,380.51 0.50
Pennsylvania............ 424 13,283,201.54 2.78
South Carolina.......... 297 9,795,958.46 2.05
South Dakota............ 61 2,005,706.53 0.42
Tennessee............... 585 21,686,484.74 4.54
Texas................... 1,000 33,520,591.96 7.01
Utah.................... 25 1,051,663.67 0.22
Vermont................. 43 1,777,085.40 0.37
Virginia................ 359 12,903,015.85 2.70
Washington.............. 98 3,359,520.76 0.70
West Virginia........... 501 16,070,982.22 3.36
Wisconsin............... 167 4,534,572.18 0.95
Wyoming................. 115 4,446,143.81 0.93
------ --------------- ------
Total................. 13,473 $477,974,066.81 100.00%
</TABLE>
- --------
(1) Entries may not add to 100.00% due to rounding.
S-14
<PAGE>
DISTRIBUTION OF ORIGINAL PRINCIPAL BALANCES OF CONTRACTS(/1/) -- GROUP I
CONTRACTS
<TABLE>
<CAPTION>
Aggregate Scheduled % of Group I Contracts By
Number of Contracts Principal Balance Scheduled Principal Balance
Original Principal Balance As of Cut-off Date As of Cut-off Date As of Cut-off Date(/2/)
- -------------------------- ------------------- ------------------- ---------------------------
<S> <C> <C> <C>
$0-5,000.............. 11 $44,477.92 0.01%
5,001-7,500.............. 143 899,251.11 0.19
7,501-10,000............. 330 2,847,642.30 0.60
10,001-12,500............. 437 4,860,055.89 1.02
12,501-15,000............. 559 7,595,833.80 1.59
15,001-17,500............. 581 9,294,884.33 1.94
17,501-20,000............. 578 10,726,208.68 2.24
20,001-22,500............. 704 14,851,387.30 3.11
22,501-25,000............. 869 20,519,611.26 4.29
25,001-27,500............. 945 24,710,536.89 5.17
27,501-30,000............. 918 26,259,668.37 5.49
30,001-32,500............. 903 28,054,207.92 5.87
32,501-35,000............. 812 27,336,799.74 5.72
35,001-40,000............. 1,289 47,908,709.30 10.02
40,001-45,000............. 958 40,588,075.82 8.49
45,001-50,000............. 821 38,754,751.59 8.11
50,001-55,000............. 655 34,261,201.76 7.17
55,001-60,000............. 528 30,183,718.48 6.31
60,001-65,000............. 347 21,580,866.23 4.52
65,001-70,000............. 302 20,267,139.08 4.24
70,001-75,000............. 219 15,851,105.94 3.32
75,001-80,000............. 152 11,734,719.74 2.46
80,001-85,000............. 103 8,487,958.89 1.78
Over $85,000.............. 309 30,355,254.47 6.35
------ --------------- ------
Total................... 13,473 $477,974,066.81 100.00%
</TABLE>
- --------
(1) The greatest original Group I Contract Scheduled Principal Balance is
$152,305.96, which represents 0.03% of the aggregate Scheduled Principal
Balance of the Group I Contracts as of the Cut-off Date.
(2) Entries may not add to 100.00% due to rounding.
DISTRIBUTION OF ORIGINAL LOAN-TO-VALUE RATIOS -- GROUP I CONTRACTS
<TABLE>
<CAPTION>
Aggregate Scheduled % of Group I Contracts By
Number of Contracts Principal Balance Scheduled Principal Balance
Loan-to-Value Ratio(/1/) As of Cut-off Date As of Cut-off Date As of Cut-off Date(/2/)
- ------------------------ ------------------- ------------------- ---------------------------
<S> <C> <C> <C>
Less than or equal to
50%.................... 143 $2,633,812.81 0.55%
51-60................... 123 2,950,719.32 0.62
61-70................... 245 7,166,518.49 1.50
71-80................... 1,386 43,579,457.33 9.12
81-85................... 1,268 50,166,523.26 10.50
86-90................... 5,841 201,964,148.39 42.25
91-95................... 4,467 169,512,887.21 35.46
------ --------------- ------
Total................. 13,473 $477,974,066.81 100.00%
</TABLE>
- --------
(1) Rounded to the nearest 1%. The definition of "Value" is set forth under
"The Contract Pool" above.
(2) Entries may not add to 100.00% due to rounding.
S-15
<PAGE>
DISTRIBUTION OF CONTRACT RATES -- GROUP I CONTRACTS
<TABLE>
<CAPTION>
Aggregate Scheduled % of Group I Contracts By
Number of Contracts Principal Balance Scheduled Principal Balance
Contract Rate As of Cut-off Date As of Cut-off Date As of Cut-off Date(/1/)
- ------------------------ ------------------- ------------------- ---------------------------
<S> <C> <C> <C>
6.00-6.24%.............. 1 $64,643.81 0.01%
6.25-6.49............... 5 440,453.79 0.09
6.50-6.74............... 9 752,595.80 0.16
6.75-6.99............... 285 20,737,477.25 4.34
7.00-7.24............... 428 31,978,413.36 6.69
7.25-7.49............... 238 12,299,152.11 2.57
7.50-7.74............... 212 10,383,023.39 2.17
7.75-7.99............... 813 41,732,484.01 8.73
8.00-8.24............... 508 27,574,860.03 5.77
8.25-8.49............... 164 6,496,985.45 1.36
8.50-8.74............... 439 14,342,901.30 3.00
8.75-8.99............... 385 16,201,484.09 3.39
9.00-9.24............... 506 22,860,856.82 4.78
9.25-9.49............... 325 13,237,496.33 2.77
9.50-9.74............... 263 10,466,239.64 2.19
9.75-9.99............... 996 40,029,464.51 8.37
10.00-10.24............. 699 26,442,005.69 5.53
10.25-10.49............. 334 10,187,465.15 2.13
10.50-10.74............. 1,080 30,645,821.42 6.41
10.75-10.99............. 802 23,921,267.93 5.00
11.00-11.24............. 642 22,986,090.04 4.81
11.25-11.49............. 288 9,470,165.74 1.98
11.50-11.74............. 298 6,599,710.90 1.38
11.75-11.99............. 912 22,185,524.97 4.64
12.00-12.24............. 1,095 22,533,711.85 4.71
12.25-12.49............. 518 11,001,046.45 2.30
12.50-12.74............. 154 3,412,701.99 0.71
12.75-12.99............. 146 3,047,818.02 0.64
13.00-13.24............. 190 3,044,817.37 0.64
13.25-13.49............. 463 7,919,302.28 1.66
13.50-13.74............. 212 3,840,636.20 0.80
13.75-13.99............. 12 240,685.91 0.05
14.00-14.24............. 8 163,751.80 0.03
14.25-14.49............. 34 546,949.54 0.11
14.50-14.74............. 9 186,061.87 0.04
------ --------------- ------
13,473 $477,974,066.81 100.00%
</TABLE>
- --------
(1) Entries may not add to 100.00% due to rounding.
S-16
<PAGE>
REMAINING MONTHS TO MATURITY -- GROUP I CONTRACTS
<TABLE>
<CAPTION>
Aggregate Scheduled % of Group I Contracts By
Months Remaining Number of Contracts Principal Balance Scheduled Principal Balance
as of Cut-off Date As of Cut-off Date As of Cut-off Date As of Cut-off Date(/1/)
- ------------------------ ------------------- ------------------- ---------------------------
<S> <C> <C> <C>
1-30.................. 11 $ 43,275.69 0.01%
31-60.................. 195 1,882,436.46 0.39
61-90.................. 301 3,871,662.44 0.81
91-120................. 825 12,683,572.39 2.65
121-150................. 267 4,150,183.93 0.87
151-180................. 2,122 44,173,248.84 9.24
181-210................. 10 266,587.08 0.06
211-240................. 3,131 95,480,014.10 19.98
241-270................. 3 130,263.58 0.03
271-300................. 1,405 54,389,707.31 11.38
301-360................. 5,203 260,903,114.99 54.59
------ --------------- ------
Total................. 13,473 $477,974,066.81 100.00%
</TABLE>
- --------
(1) Entries may not add to 100.00% due to rounding.
GROUP II CONTRACTS
Each Group II Contract either provides for a fixed Contract Rate for one
year or fixed Contract Rate for three years from the date of origination, or
with respect to any Group II Contracts that had an interest-only period,
eleven months from the date of the first payment of interest on such Contract,
and then adjusts annually (each, an "Adjustment Date") thereafter to an amount
equal to the sum, rounded, if applicable, of the Index on the date 45 days
preceding the Adjustment Date, and the number of basis points, if any (the
"Gross Margin"), set forth in the related Contract, subject to the limitation
set forth in the related Contract with respect to increases and decreases on
any Adjustment Date (the "Periodic Cap") and the maximum and minimum rates, if
any, set forth in the related Contract (the "Maximum Cap" and the "Minimum
Cap"), respectively. The "Index" with respect to each Group II Contract is the
per annum rate equal to the monthly average yield on U.S. Treasury securities
adjusted to a constant maturity ("CMT") of one year. None of the Group II
Contracts are currently in an interest-only period.
The Contract Rate on each Group II Contract can be converted to a fixed rate
at the request of the related obligor for a fee of $200.00 so long as such
obligor is not delinquent in payment on the related contract. Such fixed rate
will be the current fixed rate offered by the Seller for manufactured housing
installment sales contracts or installment loan agreements with
characteristics that are similar to such converted Contract. GreenPoint Bank,
as initial holder of the Class R Certificate, is obligated to repurchase any
such contracts so converted as of the date of such conversion in an amount
equal to the Scheduled Principal Balance of such Contract on the date of such
conversion plus accrued interest thereon. Any amounts received in respect of
such repurchase shall be deposited into the Group II Certificate Account for
distribution on the Distribution Date in the month following such repurchase.
As of the Cut-off Date, the Group II Contracts will have an aggregate unpaid
principal balance of approximately $249,748,815.66. The average outstanding
principal balance of the Group II Contracts as of the Cut-off Date was
approximately $41,479.62. All of the Group II Contracts (by principal balance
as of the Cut-off Date) were Contracts acquired by GreenPoint in the
Acquisition. Approximately 86% of the Group II Contracts by outstanding
principal balance as of the Cut-off Date are secured by Manufactured Homes
which were new at the time of origination and approximately 14% of the Group
II Contracts by outstanding principal balance as of the Cut-off Date are
secured by Manufactured Homes which were used at the time of origination. As
of the Cut-off Date, each Group II Contract has a Contract Rate of at least
5.75% and not more than 12.75% per annum. As of the Cut-off Date, the weighted
average Contract Rate of the Group II Contracts is approximately
S-17
<PAGE>
8.323% per annum. The Group II Contracts have remaining maturities as of the
Cut-off Date of at least 22 months but not more than 360 months and original
maturities of at least 24 months but not more than 360 months. As of the Cut-
off Date, the Group II Contracts had a weighted average original term to
scheduled maturity of approximately 322 months, and a weighted average
remaining term to scheduled maturity of approximately 318 months. The
remaining term to stated maturity of a Group II Contract is calculated as of
the Cut-off Date. Management of GreenPoint estimates that in excess of 95% of
the Manufactured Homes are used as primary residences by the Obligors under
the Group II Contracts secured by such Manufactured Homes. The weighted
average loan-to-value ratio at the time of origination of the Group II
Contracts was approximately 89.08%. The Group II Contracts are secured by
Manufactured Homes and real estate located in 44 states. Approximately 7.82%,
5.70%, 5.44%, 5.21%, 5.15%, 5.10% and 5.09% of the Group II Contracts by
aggregate unpaid principal balance as of the Cut-off Date were secured by
Manufactured Homes or real estate located in North Carolina, Georgia, Texas,
Alabama, Kentucky, Missouri and South Carolina, respectively. No other state
represented more than 5% of the Group II Contracts by aggregate unpaid
principal balance as of the Cut-off Date. Approximately 18% (by principal
balance as of the Cut-off Date) of the Group II Contracts are Land Home
Contracts or Land-in-Lieu Contracts.
All of the Periodic Caps for the Group II Contracts are 2.00%. The months to
the next Adjustment Date for the Group II Contracts as of the Cut-off Date
ranged from 1 to 35 months with a weighted average of approximately 9.3
months. The Maximum Rate for the Group II Contracts as of the Cut-off Date
ranged from 10.75% to 17.75% with a weighted average of approximately 13.323%.
The Gross Margins for the Group II Contracts as of the Cut-off Date ranged
from 0.50% to 8.00% with a weighted average of approximately 4.286%.
Approximately 0.42%, 97.71% and 1.87%, respectively, of the Contracts, by
principal balance as of the Cut-off Date have their first Adjustment Date in
1998, 1999, and 2001, respectively.
S-18
<PAGE>
Set forth below is a description of certain additional characteristics of the
Group II Contracts as of the Cut-off Date:
GEOGRAPHICAL DISTRIBUTION OF MANUFACTURED HOMES
AS OF ORIGINATION -- GROUP II CONTRACTS
<TABLE>
<CAPTION>
Aggregate Scheduled % of Group II Contracts By
Number of Contracts Principal Balance Scheduled Principal Balance
State As of Cut-off Date As of Cut-off Date As of Cut-off Date(/1/)
- ------------------------ ------------------- ------------------- ---------------------------
<S> <C> <C> <C>
Alabama................. 315 $13,005,730.22 5.21%
Arizona................. 183 9,522,243.15 3.81
Arkansas................ 73 2,622,587.55 1.05
California.............. 29 1,271,048.89 0.51
Colorado................ 57 2,531,061.55 1.01
Delaware................ 13 542,631.28 0.22
Florida................. 139 7,063,662.78 2.83
Georgia................. 301 14,239,015.75 5.70
Idaho................... 29 1,458,271.74 0.58
Illinois................ 208 8,133,899.49 3.26
Indiana................. 270 11,625,344.02 4.65
Iowa.................... 149 6,165,460.06 2.47
Kansas.................. 168 6,337,572.18 2.54
Kentucky................ 345 12,863,630.03 5.15
Louisiana............... 123 4,630,936.87 1.85
Maine................... 9 360,827.75 0.14
Maryland................ 21 936,698.60 0.38
Michigan................ 273 10,812,838.17 4.33
Minnesota............... 233 9,608,276.00 3.85
Mississippi............. 207 7,655,753.53 3.07
Missouri................ 353 12,748,984.89 5.10
Montana................. 32 1,794,784.54 0.72
Nebraska................ 31 1,433,798.30 0.57
Nevada.................. 26 1,463,901.80 0.59
New Hampshire........... 1 29,030.74 0.01
New Mexico.............. 41 1,739,224.64 0.70
New York................ 13 648,664.09 0.26
North Carolina.......... 458 19,526,591.33 7.82
North Dakota............ 84 3,680,221.89 1.47
Ohio.................... 78 3,063,614.69 1.23
Oklahoma................ 81 3,227,441.64 1.29
Oregon.................. 138 6,455,986.61 2.58
Pennsylvania............ 87 4,467,555.84 1.79
South Carolina.......... 294 12,716,470.93 5.09
South Dakota............ 174 6,972,640.60 2.79
Tennessee............... 254 9,258,672.01 3.71
Texas................... 353 13,590,873.40 5.44
Utah.................... 8 281,926.49 0.11
Vermont................. 5 156,525.30 0.06
Virginia................ 37 1,639,414.83 0.66
Washington.............. 61 3,315,119.35 1.33
West Virginia........... 99 3,630,268.08 1.45
Wisconsin............... 114 4,044,991.41 1.62
Wyoming................. 54 2,474,622.65 0.99
----- --------------- ------
Total................. 6,021 $249,748,815.66 100.00%
</TABLE>
- --------
(1) Entries may not add to 100.00% due to rounding.
S-19
<PAGE>
DISTRIBUTION OF ORIGINAL PRINCIPAL BALANCES OF CONTRACTS(/1/) -- GROUP II
CONTRACTS
<TABLE>
<CAPTION>
Aggregate Scheduled % of Group II Contracts By
Number of Contracts Principal Balance Scheduled Principal Balance
Original Principal Balance As of Cut-off Date As of Cut-off Date As of Cut-off Date(/2/)
- -------------------------- ------------------- ------------------- ---------------------------
<S> <C> <C> <C>
$0-5,000.................. 1 $4,181.37 0.00%
5,001-7,500............... 4 25,113.66 0.01
7,501-10,000.............. 31 264,653.91 0.11
10,001-12,500............. 54 590,308.65 0.24
12,501-15,000............. 91 1,246,918.32 0.50
15,001-17,500............. 121 1,951,808.54 0.78
17,501-20,000............. 139 2,565,564.66 1.03
20,001-22,500............. 198 4,173,312.76 1.67
22,501-25,000............. 305 7,219,675.56 2.89
25,001-27,500............. 335 8,762,983.53 3.51
27,501-30,000............. 380 10,881,135.21 4.36
30,001-32,500............. 441 13,688,931.84 5.48
32,501-35,000............. 426 14,333,908.97 5.74
35,001-40,000............. 739 27,565,661.87 11.04
40,001-45,000............. 610 25,790,802.82 10.33
45,001-50,000............. 543 25,639,731.02 10.27
50,001-55,000............. 420 21,939,734.61 8.78
55,001-60,000............. 322 18,423,487.05 7.38
60,001-65,000............. 251 15,604,905.42 6.25
65,001-70,000............. 157 10,468,457.24 4.19
70,001-75,000............. 101 7,281,487.05 2.92
75,001-80,000............. 108 8,336,697.02 3.34
80,001-85,000............. 56 4,613,459.76 1.85
Over $85,000.............. 188 18,375,894.82 7.36
----- --------------- ------
Total.................... 6,021 $249,748,815.66 100.00%
</TABLE>
- --------
(1) The greatest original Group II Scheduled Principal Balance is $163,724.50,
which represents 0.07% of the aggregate Scheduled Principal Balance of the
Group II Contracts as of the Cut-off Date.
(2) Entries may not add to 100.00% due to rounding.
DISTRIBUTION OF ORIGINAL LOAN-TO-VALUE RATIOS -- GROUP II CONTRACTS
<TABLE>
<CAPTION>
Aggregate Scheduled % of Group II Contracts By
Original Loan-to- Number of Contracts Principal Balance Scheduled Principal Balance
Value Ratio(/1/) As of Cut-off Date As of Cut-off Date As of Cut-off Date(/2/)
- ------------------------ ------------------- ------------------- ---------------------------
<S> <C> <C> <C>
Less than or equal to
50%.................... 45 $929,205.40 0.37%
51-60................... 39 1,218,344.45 0.49
61-70................... 84 3,044,957.13 1.22
71-80................... 507 20,646,729.04 8.27
81-85................... 503 22,994,808.89 9.21
86-90................... 2,901 122,585,812.63 49.08
91-95................... 1,942 78,328,958.12 31.36
----- --------------- ------
Total................. 6,021 $249,748,815.66 100.00%
</TABLE>
- --------
(1) Rounded to the nearest 1%. The definition of "Value" is set forth under
"The Contract Pool" above.
(2) Entries may not round to 100.00% due to rounding.
S-20
<PAGE>
CONTRACT RATES AS OF THE CUT-OFF DATE -- GROUP II CONTRACTS
<TABLE>
<CAPTION>
Aggregate Scheduled % of Group II Contracts By
Contract Rate As of Number of Contracts Principal Balance Scheduled Principal Balance
Cut-off Date As of Cut-off Date As of Cut-off Date As of Cut-off Date(/1/)
- ------------------------ ------------------- ------------------- ---------------------------
<S> <C> <C> <C>
5.75-5.99%.............. 45 $3,496,198.64 1.40%
6.00-6.24............... 66 5,315,464.62 2.13
6.25-6.49............... 48 2,501,371.60 1.00
6.50-6.74............... 15 984,518.45 0.39
6.75-6.99............... 237 14,071,679.90 5.63
7.00-7.24............... 250 17,705,287.69 7.09
7.25-7.49............... 224 10,547,305.62 4.22
7.50-7.74............... 201 8,913,157.62 3.57
7.75-7.99............... 717 35,002,998.79 14.02
8.00-8.24............... 345 16,675,974.30 6.68
8.25-8.49............... 475 22,772,740.48 9.12
8.50-8.74............... 602 19,551,834.66 7.83
8.75-8.99............... 209 7,820,161.97 3.13
9.00-9.24............... 791 30,452,662.25 12.19
9.25-9.49............... 88 3,096,442.38 1.24
9.50-9.74............... 331 13,130,196.82 5.26
9.75-9.99............... 430 12,771,612.18 5.11
10.00-10.24............. 191 4,846,249.37 1.94
10.25-10.49............. 316 9,454,050.05 3.79
10.50-10.74............. 123 2,554,438.92 1.02
10.75-10.99............. 73 2,659,123.22 1.06
11.00-11.24............. 17 343,118.25 0.14
11.25-11.49............. 107 2,522,406.05 1.01
11.50-11.74............. 11 258,459.57 0.10
11.75-11.99............. 89 1,862,867.12 0.75
12.00-12.24............. 1 23,902.44 0.01
12.25-12.49............. 15 335,981.12 0.13
12.50-12.74............. 2 40,471.74 0.02
12.75-12.99............. 2 38,139.84 0.02
----- --------------- ------
6,021 $249,748,815.66 100.00%
</TABLE>
- --------
(1) Entries may not add to 100.00% due to rounding.
S-21
<PAGE>
REMAINING MONTHS TO MATURITY -- GROUP II CONTRACTS
<TABLE>
<CAPTION>
Aggregate Scheduled % of Group II Contracts By
Months Remaining As of Number of Contracts Principal Balance Scheduled Principal Balance
Cut-Off Date As of Cut-off Date As of Cut-off Date As of Cut-off Date(/1/)
- ------------------------ ------------------- ------------------- ---------------------------
<S> <C> <C> <C>
1-30.................... 1 $4,181.37 0.00%
31-60................... 24 281,599.28 0.11
61-90................... 41 623,825.77 0.25
91-120.................. 129 2,315,299.94 0.93
121-150................. 33 608,776.45 0.24
151-180................. 531 12,745,035.60 5.10
181-210................. 4 130,122.04 0.05
211-240................. 1,267 40,131,949.24 16.07
241-270................. 7 453,160.95 0.18
271-300................. 626 25,218,326.11 10.10
301-360................. 3,358 167,236,538.91 66.96
----- --------------- ------
Total................. 6,021 $249,748,815.66 100.00%
</TABLE>
- --------
(1) Entries may not add to 100.00% due to rounding.
DISTRIBUTION OF MAXIMUM CAP -- GROUP II CONTRACTS
<TABLE>
<CAPTION>
Aggregate Scheduled % of Group II Contracts By
Number of Contracts Principal Balance Scheduled Principal Balance
Maximum Cap As of Cut-off Date As of Cut-off Date As of Cut-off Date(/1/)
- ------------------------ ------------------- ------------------- ---------------------------
<S> <C> <C> <C>
10.50-11.00%............ 111 $8,811,663.26 3.53%
11.01-11.50............. 63 3,485,890.05 1.40
11.51-12.00............. 486 31,722,438.80 12.70
12.01-12.50............. 425 19,460,463.24 7.79
12.51-13.00............. 1,062 51,686,084.33 20.70
13.01-13.50............. 1,079 42,446,088.96 17.00
13.51-14.00............. 1,000 38,272,824.22 15.32
14.01-14.50............. 418 16,152,542.93 6.47
14.51-15.00............. 621 17,617,861.55 7.05
15.01-15.50............. 439 12,008,488.97 4.81
15.51-16.00............. 90 3,002,241.47 1.20
16.01-16.50............. 118 2,780,865.62 1.11
16.51-17.00............. 90 1,886,769.56 0.76
17.01-17.50............. 17 376,452.86 0.15
17.51-18.00............. 2 38,139.84 0.02
----- --------------- ------
Total................. 6,021 $249,748,815.66 100.00%
</TABLE>
- --------
(1) Entries may not add to 100.00% due to rounding.
S-22
<PAGE>
DISTRIBUTION OF GROSS MARGINS -- GROUP II CONTRACTS
<TABLE>
<CAPTION>
Aggregate Scheduled % of Group II Contracts By
Number of Contracts Principal Balance Scheduled Principal Balance
Gross Margin As of Cut-off Date As of Cut-off Date As of Cut-off Date(/1/)
- ------------------------ ------------------- ------------------- ---------------------------
<S> <C> <C> <C>
0.50-1.50%.............. 1 $26,049.57 0.01%
1.51-2.00............... 111 8,811,663.26 3.53
2.01-2.50............... 63 3,485,890.05 1.40
2.51-3.00............... 490 31,912,958.40 12.78
3.01-3.50............... 438 20,061,711.88 8.03
3.51-4.00............... 1,088 52,808,701.16 21.14
4.01-4.50............... 1,090 42,712,826.39 17.10
4.51-5.00............... 976 37,010,353.56 14.82
5.01-5.50............... 468 17,337,130.35 6.94
5.51-6.00............... 644 18,498,864.38 7.41
6.01-6.50............... 390 11,022,833.78 4.41
6.51-7.00............... 151 3,705,628.84 1.48
7.01-7.50............... 96 2,026,992.15 0.81
7.51-8.00............... 15 327,211.89 0.13
----- --------------- ------
Total................. 6,021 $249,748,815.66 100.00%
- --------
(1) Entries may not add to 100.00% due to rounding.
DISTRIBUTION OF NEXT ADJUSTMENT DATE -- GROUP II CONTRACTS
<CAPTION>
Aggregate Scheduled % of Group II Contracts By
Month of Next Adjustment Number of Contracts Principal Balance Scheduled Principal Balance
Date As of Cut-off Date As of Cut-off Date As of Cut-off Date(/1/)
- ------------------------ ------------------- ------------------- ---------------------------
<S> <C> <C> <C>
November 1998........... 3 $288,243.45 0.12%
December 1998........... 10 760,889.39 0.30
January 1999............ 11 872,924.14 0.35
February 1999........... 11 912,515.18 0.37
March 1999.............. 17 1,326,519.65 0.53
April 1999.............. 49 3,603,764.18 1.44
May 1999................ 257 12,286,158.91 4.92
June 1999............... 1,836 73,932,945.32 29.60
July 1999............... 1,601 65,371,133.37 26.17
August 1999............. 1,691 69,038,696.06 27.64
September 1999.......... 415 16,685,720.76 6.68
May 2001................ 1 17,291.36 0.01
June 2001............... 26 1,013,822.84 0.41
July 2001............... 33 1,232,245.80 0.49
August 2001............. 47 1,941,266.62 0.78
September 2001.......... 13 464,678.63 0.19
----- --------------- ------
Total................. 6,021 $249,748,815.66 100.00%
</TABLE>
- --------
(1) Entries may not add to 100.00% due to rounding.
S-23
<PAGE>
THE SELLER AND THE SERVICER
The following information supplements the information in the Prospectus
under the heading "The Seller."
The Seller commenced operations on September 30, 1998. See "Risk Factors"
herein. The volume of manufactured housing contracts originated by GreenPoint,
acquired by GreenPoint in the Acquisition, or purchased from dealers on an
individual basis by GreenPoint, as of October 31, 1998 and certain other
information at October 31, 1998 are as follows:
CONTRACTS ORIGINATED OR PURCHASED ON AN INDIVIDUAL BASIS
(Dollars in Thousands)
<TABLE>
<CAPTION>
Month Ended
October 31, 1998
----------------
<S> <C>
Principal Balance of Contracts Purchased(/1/)(/2/).......... $1,023,267
Number of Contracts Purchased(/1/).......................... 27,195
Average Contract Size(/2/).................................. $ 37.62
Number of Regional Offices(/3/)............................. 45
</TABLE>
- --------
(1) Does not include any portfolios acquired in bulk from third parties other
than from Bank of America, FSB in the Acquisition. Includes only contracts
originated by GreenPoint, acquired by GreenPoint in the Acquisition or
purchased from dealers.
(2) As of period end.
(3) Includes regional offices in the United States originating or purchasing
manufactured housing contracts as of the end of the time period.
The following table shows the size of the portfolio of manufactured housing
contracts serviced (including contracts already in repossession) by
GreenPoint, through the manufactured housing regional office system, as of the
dates indicated:
SIZE OF SERVICED PORTFOLIO
(Dollars in Thousands)
<TABLE>
<CAPTION>
Month Ended
October 31, 1998
----------------
<S> <C>
Unpaid Principal Balance of Contracts Being Serviced........ $11,280,376
Average Contract Unpaid Principal Balance................... $ 27.42
Number of Contracts Being Serviced.......................... 411,387
</TABLE>
As of the Cut-off Date, 0.61% of the manufactured housing contracts owned
and serviced by GreenPoint were delinquent over 30 days based upon the number
of contracts. As of the Cut-off Date, none of the Contracts in the Contract
Pool were delinquent over 30 days.
The loss and delinquency information of Bank of America, FSB, in its
capacity as servicer of its manufactured housing installment sales contracts
and installment loan agreement portfolio, has been disclosed in various
filings made by Bank of America, FSB with the Securities and Exchange
Commission and such filings are publicly available to potential investors.
GreenPoint acquired the servicing personnel and $794,958,000.00 in
manufactured housing installment sales contracts and installment loan
agreements from Bank of America, FSB in the Acquisition. See "The Acquisition"
in the Prospectus. GreenPoint is now the servicer of all of the manufactured
housing installment sales contracts and installment loan agreements that had
been serviced by Bank of America, FSB. GreenPoint makes no representation or
warranty with respect to the completeness or accuracy of such loss and
delinquency information contained in any filings made by Bank of America, FSB
with the Securities and Exchange Commission or any filings made by Bank of
America, FSB with any other public entity and disclaims any liability with
respect thereto. Further, the loss and delinquency experience of Bank of
S-24
<PAGE>
America, FSB as servicer of manufactured housing installment sales contracts
and installment loan agreements may not be reflective of the loss and
delinquency experience that GreenPoint will encounter as servicer of
manufactured housing installment sales contracts and installment loan
agreements.
GREENPOINT'S MANAGEMENT'S DISCUSSION AND ANALYSIS OF DELINQUENCY, REPOSSESSION
AND LOAN LOSS EXPERIENCE
Management has not observed any material economic development in the general
business environment of the country or in local areas where GreenPoint
originates its manufactured housing contracts which has unfavorably affected
portfolio performance in relation to delinquencies, repossessions and loan
losses. However, the delinquency, loan loss and repossession experience of
manufactured housing contracts historically has been adversely affected by a
downturn in regional or local economic conditions. These regional or local
economic conditions are often volatile, and no predictions can be made
regarding future economic loss upon repossession. Information regarding the
geographic location, at origination, of the Manufactured Homes securing the
Contracts in the Contract Pool is set forth under "The Contract Pool" herein.
IMPACT OF THE YEAR 2000
The Year 2000 issue is the result of many computer programs that were
written using two digits rather than four to define an applicable year. Any of
the computer programs used by the Servicer, its suppliers or outside service
providers that have date-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in a system failure
or miscalculations, causing disruption of operations, including, among other
things, a temporary inability to process transactions or engage in normal
business activities.
The Servicer has determined that it will be required to modify or replace
portions of its software so that its computer systems will properly utilize
dates beyond December 31, 1999. The Servicer presently believes that, if
modifications to existing software and conversions are not made, or are not
completed on a timely basis, the Year 2000 issue could have a material impact
on the operations of the Servicer.
The Servicer has also initiated formal communications with all of its
suppliers and service providers (including hardware, software, processing,
voice and data communication, facility components and services) to determine
the extent to which the Servicer is vulnerable to those third parties' failure
to remediate their respective Year 2000 issue. The Servicer is working with
each of these third parties to facilitate remediation of the Year 2000 issue
and will actively participate in testing of each system to ensure Year 2000
compliance. However, there can be no guarantee that the systems of third
parties, upon which the Servicer relies, will be timely remediated, or that a
failure to remediate by a third party would not have a materially adverse
effect on the Servicer. The Servicer will utilize both internal and external
resources for the Year 2000 project.
The Servicer's total Year 2000 project cost include estimated costs and time
associated with the impact of a third party's Year 2000 issue, together with
the costs of outside consultants and the purchase of replacement programs. The
total cost of the Year 2000 project is estimated to be immaterial to the
Servicer's financial statements. Such costs will be funded through operating
cash flows and expensed as incurred. The current status and costs of the
project are based on management's best estimates, which were derived utilizing
numerous assumptions of future events, including the continued availability of
certain resources, third party modification plans and other factors. However,
there can be no guarantee that these estimates will be achieved and actual
results could differ materially from those plans. Specific factors that might
cause such material differences include, but are not limited to, the
availability and cost of personnel trained in this area, the ability to locate
and correct all relevant computer codes, the failure of outside third parties
to remediate their Year 2000 issue on a timely basis, and similar
uncertainties.
S-25
<PAGE>
MBIA INSURANCE CORPORATION
MBIA Insurance Corporation ("MBIA") is the principal operating subsidiary of
MBIA Inc., a New York Stock Exchange listed company (the "Company"). The
Company is not obligated to pay the debts of or claims against MBIA. MBIA is
domiciled in the State of New York and licensed to do business in and subject
to regulation under the laws of all 50 states, the District of Columbia, the
Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands,
the Virgin Islands of the United States and the Territory of Guam. MBIA has
two European branches, one in the Republic of France and the other in the
Kingdom of Spain. New York has laws prescribing minimum capital requirements,
limiting classes and concentrations of investments and requiring the approval
of policy rates and forms. State laws also regulate the amount of both the
aggregate and individual risks that may be insured, the payment of dividends
by MBIA, changes in control and transactions among affiliates. Additionally,
MBIA is required to maintain contingency reserves on its liabilities in
certain amounts and for certain periods of time.
Effective February 17, 1998, the Company acquired all of the outstanding
stock of Capital Markets Assurance Corporation ("CMAC") through a merger with
its parent CapMAC Holdings Inc. Pursuant to a reinsurance agreement, CMAC has
ceded all of its net insured risks (including any amounts due but unpaid from
third party reinsurers), as well as its unearned premiums and contingency
reserves, to MBIA. The Company is not obligated to pay the debts of or claims
against CMAC.
The consolidated financial statements of MBIA, a wholly owned subsidiary of
the Company and its subsidiaries as of December 31, 1997 and December 31, 1996
and for each of the three years in the period ended December 31, 1997,
prepared in accordance with generally accepted accounting principles, included
in the Annual Report on Form 10-K of the Company for the year ended December
31, 1997 and the consolidated financial statements of MBIA and its
subsidiaries as of September 30, 1998 and for the nine month periods ending
September 30, 1998 and September 30, 1997 included in the Quarterly Report on
Form 10-Q of the Company for the period ending September 30, 1998, are hereby
incorporated by reference into this Prospectus Supplement and shall be deemed
to be a part hereof. Any statement contained in a document incorporated by
reference herein shall be modified or superseded for purposes of this
Prospectus Supplement to the extent that a statement contained herein or in
any other subsequently filed document which also is incorporated by reference
herein modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus Supplement.
All financial statements of MBIA and its subsidiaries included in documents
filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934, as amended, subsequent to the date of this
Prospectus Supplement and prior to the termination of the offering of the
Class IA Certificates and Class II A Certificates shall be deemed to be
incorporated by reference into this Prospectus Supplement and to be a part
hereof from the respective dates of filing such documents.
S-26
<PAGE>
The tables below present selected financial information of MBIA determined
in accordance with statutory accounting practices prescribed or permitted by
insurance regulatory authorities ("SAP") and generally accepted accounting
principles ("GAAP"):
<TABLE>
<CAPTION>
SAP
------------------------------------
December 31, 1997 September 30, 1998
----------------- ------------------
(Audited) (Unaudited)
(In millions)
<S> <C> <C>
Admitted Assets......................... $5,256 $6,318
Liabilities............................. 3,496 4,114
Capital and Surplus..................... 1,760 2,204
<CAPTION>
GAAP
------------------------------------
December 31, 1997 September 30, 1998
----------------- ------------------
(Audited) (Unaudited)
(In millions)
<S> <C> <C>
Assets.................................. $5,988 $7,439
Liabilities............................. 2,624 3,268
Shareholder's Equity.................... 3,364 4,171
</TABLE>
Copies of the financial statements of MBIA incorporated by reference herein
and copies of MBIA's 1997 year-end audited financial statements prepared in
accordance with statutory accounting practices are available, without charge,
from MBIA. The address of MBIA is 113 King Street, Armonk, New York 10504. The
telephone number of MBIA is (914) 273-4545.
MBIA does not accept any responsibility for the accuracy or completeness of
this Prospectus Supplement or any information or disclosure contained herein,
or omitted herefrom, other than with respect to the accuracy of the
information regarding MBIA set forth under the headings "MBIA Insurance
Corporation" and "Experts" in this Prospectus Supplement. Additionally, MBIA
makes no representation regarding the Certificates or the advisability of
investing in the Certificates.
The Certificate Insurance Policy is not covered by the Property/Casualty
Insurance Security Fund specified in Article 76 of the New York Insurance Law.
Moody's Investors Service, Inc. rates the financial strength of MBIA "Aaa."
Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies,
Inc. rates the financial strength of MBIA "AAA."
Fitch IBCA, Inc. (formerly known as Fitch Investors Service, L.P.) rates the
financial strength of MBIA "AAA."
Each rating of MBIA should be evaluated independently. The ratings reflect
the respective rating agency's current assessment of the creditworthiness of
MBIA and its ability to pay claims on its policies of insurance. Any further
explanation as to the significance of the above ratings may be obtained only
from the applicable rating agency.
The above ratings are not recommendations to buy, sell or hold the
securities, and such ratings may be subject to revision or withdrawal at any
time by the rating agencies. Any downward revision or withdrawal of any of the
above ratings may have an adverse effect on the market price of the
securities. MBIA does not guaranty the market price of the securities nor does
it guaranty that the ratings on the securities will not be revised or
withdrawn.
S-27
<PAGE>
PREPAYMENT AND YIELD CONSIDERATIONS
The Contracts have maturities at origination ranging from 24 to 362 months,
but may be prepaid in full or in part at any time. The prepayment experience
of the Contracts (including prepayments and liquidations due to defaulted
contracts, casualties and condemnations or due to the exercise of an optional
termination (see "--Optional Termination and Termination Auction" herein) )
will affect the average life of the Certificates. The weighted average life
of, and, if purchased at other than par, the yield to maturity on, the
Certificates will relate to the rate of payment of principal on the Contracts
in the related Contract Group, including, for this purpose, prepayments,
liquidations due to defaulted contracts, casualties and condemnations. Based
on GreenPoint's experience with the portfolio of conventional manufactured
housing contracts serviced by it, GreenPoint anticipates that a number of
Contracts will be prepaid in full prior to their maturity. A number of
factors, including homeowner mobility, general and regional economic
conditions and prevailing interest rates may influence prepayments. In
addition, repurchases of Contracts on account of certain breaches of
representations and warranties as described below under "Descriptions of the
Certificates--Conveyance of Contracts" will have the effect of prepayment of
such Contracts and therefore will affect the life of the Certificates. Most of
the Contracts contain provisions that prohibit the owner from selling the
Manufactured Home (as defined in the Prospectus) without the prior consent of
the holder of the related Contract. Such provisions are similar to "due-on-
sale" clauses and may not be enforceable in some states. See "Certain Legal
Aspects of the Contracts--Transfers of Manufactured Homes; Enforceability of
"Due-on-Sale' Clauses" in the Prospectus. The Servicer's policy is to permit
most sales of Manufactured Homes where the proposed buyer meets the Servicer's
then current underwriting standards and enters into an assumption agreement.
See "--Weighted Average Life of the Certificates" below and "Prepayment and
Yield Considerations" in the Prospectus.
As is the case with fixed rate obligations generally, the rate of prepayment
on a pool of Contracts with fixed rates (such as the Group I Contracts) is
affected by prevailing market rates for Contracts of a comparable term and
risk level. When the market interest rate is below the Contract Rate on a
Contract, the related Obligor may have an increased incentive to refinance its
contract. Depending on prevailing market rates, the future outlook for market
rates and economic conditions generally, some Obligors may sell or refinance
their contracts in order to realize their equity in the manufactured home, to
meet cash flow needs or to make other investments. However, no assurance can
be given as to the level of prepayments that the Group I Contracts will
experience.
As is the case with fixed rate obligations generally, adjustable rate
obligations (such as the Group II Contracts) may also be subject to a greater
rate of principal prepayments in a declining interest rate environment. For
example, if prevailing interest rates fall significantly, adjustable rate
contracts could be subject to higher prepayment rates than if prevailing
interest rates remain constant because the availability of fixed-rate
contracts at competitive interest rates may encourage Obligors to refinance
their adjustable rate contract to "lock in" a lower fixed interest rate.
However, no assurance can be given as to the level of prepayments that the
Group II Contracts will experience.
As described under "Description of the Certificates" herein, to the extent
that, on any Distribution Date, the Group I or Group II Available Distribution
Amount, as applicable, is not sufficient to permit a full distribution of the
applicable Formula Principal Distribution Amount or the portion thereof due on
such Distribution Date to the Class of Certificates entitled to such
distribution and there is an MBIA Default, the effect will be to delay the
amortization of such Class of Certificates. If a purchaser of a Class of
Certificates purchases them at a discount and calculates its anticipated yield
to maturity based on an assumed rate of payment of principal on such
Certificates that is faster than the rate actually realized, such purchaser's
actual yield to maturity will be lower than the yield so calculated by such
purchaser.
The effective yield to each holder of a Class I A Certificate will be below
that otherwise produced by the applicable Pass-Through Rate and the purchase
price of such holder's Certificate because, while interest will accrue in
respect of each calendar month, the distribution of such interest to such
holders will be made on the 15th day (or, if such day is not a business day,
the next succeeding business day) of the month following the Collection Period
in which it accrues.
S-28
<PAGE>
The rate of distributions of principal of the Certificates and the yield to
maturity of the Certificates also will be directly related to the rate of
payment of principal (including prepayments) of the Contracts. The rate of
principal distributions on the Certificates will be affected by the
amortization schedules of the Contracts and the rate of principal payments on
the Contracts (including prepayments due to liquidations upon default). The
Contracts may be prepaid by the Obligors at any time without payment of any
prepayment fee or penalty.
On any Distribution Date on or after the Distribution Date, if any, on which
the Principal Balance of the Offered Certificates of a particular Group is
greater than the aggregate Scheduled Principal Balance of the Contracts for
such Group, if the related Available Distribution Amount is not sufficient to
permit a full distribution of the related Formula Principal Distribution
Amount to such Certificateholders, such Certificateholders, in the event an
MBIA Default has occurred and is continuing, will absorb (i) all losses on
each Liquidated Contract in such Group in the amount by which its Liquidation
Proceeds (net of Liquidation Expenses and applicable Monthly Advances) are
less than its unpaid principal balance plus accrued and unpaid interest
thereon at the weighted average Pass-Through Rate and the percentage rate used
to calculate the monthly servicing fee and (ii) other shortfalls in the
related Available Distribution Amount, and will incur a loss on their
investments. See "Description of the Certificates--Distributions" herein.
The Servicer or the holder of the Class R Certificate has the option to
repurchase or purchase, as applicable, the Contracts and any property
constituting the Trust Fund if on any Distribution Date the Pool Scheduled
Principal Balance is less than 10% of the Cut-off Date Pool Principal Balance.
See "Description of the Certificates--Optional Termination and Termination
Auction" herein. The exercise of such option would effect the early retirement
of the then outstanding Certificates.
In the event that there were a sufficiently large number of delinquencies on
the Contracts in any Collection Period that were not covered by Monthly
Advances as described herein, the amounts paid to Certificateholders could be
less than the amount of principal and interest that would otherwise be payable
on the Certificates with respect to such Collection Period if an MBIA Default
has occurred and is continuing. In such event, even if delinquent payments on
the Contracts were eventually recovered upon liquidation, since the amounts
received would not include interest on delinquent interest payments, the
effective yield on the Contracts would be reduced, and under certain
circumstances it is possible that sufficient amounts might not be available
for the ultimate payment of all principal of the Certificates plus accrued
interest thereon at the related Pass-Through Rate, thus also reducing the
effective yield on the Certificates.
While partial prepayments of the principal on the Contracts are applied on
the dates upon which the payments on the related Contracts are due, (each, a
"Due Date"), Obligors are not required to pay interest on the Contracts after
the date of a full prepayment of principal). As a result, full prepayments in
advance of the related Due Dates for such Contracts in any month preceding the
month of any Distribution Date (each, "Collection Period") will reduce the
amount of interest received from Obligors during such Collection Period to
less than one month's interest. On the other hand, when a Contract is prepaid
in full during any period, but after the Due Date for such Contract in such
Collection Period, the effect will be to increase the amount of interest
received from the related Obligor during such Collection Period to more than
one month's interest. If a sufficient number of Contracts are prepaid in full
in a given Collection Period in advance of their respective Due Dates,
interest payable on all of the Contracts during that Collection Period may be
less than the interest payable on the related Classes of Certificates with
respect to such Collection Period. As a result, if an MBIA Default has
occurred and is continuing the Trust Fund may not receive sufficient monies to
pay the interest on such Certificates in the amounts set forth herein under
"Description of the Certificates--Distributions" and to make a full
distribution to the related Certificateholders of the related Formula
Principal Distribution Amounts respectively allocable to them. Although no
assurance can be given in this matter, GreenPoint does not anticipate that the
net shortfall of interest received because of prepayments in full in any
Collection Period would be great enough, in the absence of delinquencies and
Liquidation Losses, to reduce the related Available Distribution Amount for a
Distribution Date below the amount required to be distributed to the related
Certificateholders on that Distribution Date in the absence of such prepayment
interest shortfalls.
S-29
<PAGE>
WEIGHTED AVERAGE LIFE OF THE CERTIFICATES
The following information is given solely to illustrate the effect of
prepayments of the Contracts on the weighted average life of the Certificates
under the stated assumptions and is not a prediction of the prepayment rate
that might actually be experienced by the Contracts.
Weighted average life refers to the average amount of time from the date of
issuance of a security until each dollar of principal of such security will be
repaid to the investor. The weighted average life of the Certificates will be
affected by the rate at which principal on the Contracts is paid. Principal
payments on Contracts may be in the form of scheduled amortization or
prepayments (for this purpose, the term "prepayment" includes repayments and
liquidations due to default or other dispositions of Contracts and repurchases
of Contracts by the Seller due to representations and warranties contained in
the Agreement). Prepayments on contracts may be measured by a prepayment
standard or model. The model used in this Prospectus Supplement ("Prepayment
Model") is based on an assumed rate of prepayment each month of the then
unpaid principal balance of a pool of new Contracts. 100% of the Prepayment
Model assumes prepayment rates of 3.7% per annum of the then unpaid principal
balance of such Contracts in the first month of the life of the Contracts and
an additional 0.1% per annum in each month thereafter until the 24th month.
Beginning in the 24th month and in each month thereafter during the life of
the Contracts, 100% of the Prepayment Model assumes a constant prepayment rate
of 6.00% per annum.
As used in the following tables "0% of the Prepayment Model" assumes no
prepayments on the Contracts; "150% of the Prepayment Model" assumes the
Contracts will prepay at rates equal to 150% of the Prepayment Model assumed
prepayment rates; "175% of the Prepayment Model" assumes the Contracts will
prepay at rates equal to 175% of the Prepayment Model assumed prepayment
rates; "200% of the Prepayment Model" assumes the Contracts will prepay at
rates equal to 200% of the Prepayment Model assumed prepayment rates; "250% of
the Prepayment Model" assumes the Contracts will prepay at rates equal to 250%
of the Prepayment Model assumed prepayment rates; and "275% of the Prepayment
Model" assumes the Contracts will prepay at rates equal to 275% of the
Prepayment Model assumed prepayment rates.
There is no assurance, however, that prepayments of the Contracts will
conform to any level of the Prepayment Model, and no representation is made
that the Contracts will prepay at the prepayment rates shown or any other
prepayment rate. The rate of principal payments on pools of manufactured
housing contracts is influenced by a variety of economic, geographic, social
and other factors, including the level of interest rates and the rate at which
manufactured homeowners sell their manufactured homes or default on their
contracts. Other factors affecting prepayment of contracts include changes in
obligors' housing needs, job transfers, unemployment and obligors' net equity
in the manufactured homes. Because the outstanding principal balances of the
Contracts are, in general, much smaller than mortgage loan balances and the
original term to maturity of each such contract is generally shorter, the
reduction or increase in the size of the monthly payments on contracts of the
same maturity and principal balance arising from a change in the interest rate
thereon is generally much smaller. Consequently, changes in prevailing
interest rates may not have a similar effect, or may have a similar effect,
but to a smaller degree, on the prepayment rates on manufactured housing
contracts.
S-30
<PAGE>
GROUP I ASSUMPTIONS
The percentages and weighted average lives in the following tables relating
to the Class I A Certificates were determined using the following assumptions
(the "Group I Structuring Assumptions"): (i) scheduled interest and principal
payments on the Group I Contracts are received in a timely manner and
prepayments are made at the indicated percentages of the Prepayment Model with
30 days interest thereon set forth in the tables; (ii) the Servicer or
GreenPoint exercises its right of optional termination described above; (iii)
the Group I Contracts will, as of the Cut-off Date, be grouped into 15 pools
having the additional characteristics set forth below under "Assumed Contract
Characteristics for Group I"; (iv) the Initial Principal Balance, the
Pass-Through Rate and the Distribution Date of the Class I A Certificates is
as set forth under "Summary Information"; (v) no interest shortfalls will
arise in connection with prepayment in full of the Contracts; (vi) there will
be no delinquencies or losses on the Group I Contracts; (vii) the Monthly
Servicing Fee Rate is 1.00% per annum; (viii) the Group II Contracts prepay at
250% of the Prepayment Model except in the case of 0% of the Prepayment Model,
in which case, the Group II Contracts will prepay at 0% of the Prepayment
Model and (ix) the Class I A Certificates are purchased on November 30, 1998.
No representation is made that the Contracts will experience delinquencies or
losses at the respective rates assumed above or at any other rates.
ASSUMED CONTRACT CHARACTERISTICS FOR GROUP I
<TABLE>
<CAPTION>
Scheduled Original Remaining
Principal Contract Term to Term to
Pool Balance Rate Maturity Maturity
- ------------------------------------ --------------- -------- -------- ---------
<S> <C> <C> <C> <C>
1................................... $ 5,908,930.48 11.238% 106 104
2................................... 11,664,749.95 10.998 104 100
3................................... 907,266.55 11.069 123 96
4................................... 15,801,312.39 11.319 177 175
5................................... 28,878,406.26 11.019 177 173
6................................... 3,643,714.12 11.100 180 168
7................................... 31,504,024.80 10.652 240 238
8................................... 56,885,111.60 10.465 240 236
9................................... 7,357,464.78 10.565 241 230
10.................................. 17,028,068.62 9.821 300 298
11.................................. 32,061,379.87 9.673 300 296
12.................................. 5,430,522.40 9.954 302 290
13.................................. 81,181,192.11 8.860 360 358
14.................................. 148,847,759.48 8.678 360 356
15.................................. 30,874,163.40 8.676 360 348
--------------- ------ --- ---
Total or weighted average......... $477,974,066.81 9.543% 301 297
</TABLE>
Since the tables were prepared on the basis of the assumptions in the
preceding paragraph, there may be discrepancies between the characteristics of
the actual Group I Contracts and the characteristics of the Group I Contracts
assumed in preparing the tables. Any such discrepancy may have an effect upon
the percentages of the Class I A Initial Principal Balance outstanding and
weighted average lives of the Class I A Certificates set forth in the tables.
In addition, since the actual Contracts and the Trust Fund have
characteristics which differ from those assumed in preparing the tables set
forth below, the distributions of principal on the Class I A Certificates may
be made earlier or later than as indicated in the tables.
It is not likely that Contracts will prepay at any constant percentage of
the Prepayment Model to maturity or that all Contracts will prepay at the same
rate. In addition, the diverse remaining terms to maturity of the Contracts
(which include recently originated Contracts) could produce slower
distributions of principal than as indicated in the tables at the various
percentages of the Prepayment Model specified even if the weighted average
remaining term to maturity of the Contracts is the same as the weighted
average remaining term to maturity of the Assumed Contract Characteristics for
the Group I Contracts.
S-31
<PAGE>
Investors are urged to make their investment decisions on a basis that
includes their determination as to anticipated prepayment rates under a
variety of the assumptions discussed herein.
Based on the Group I Structuring Assumptions, the following tables indicate
the resulting weighted average lives of the Certificates and set forth the
percentage of the Class I A Initial Principal Balance that would be
outstanding after each of the dates shown at the indicated percentages of the
Prepayment Model.
PERCENT OF THE CLASS I A INITIAL PRINCIPAL BALANCE AT THE
RESPECTIVE PERCENTAGES OF THE PREPAYMENT MODEL
<TABLE>
<CAPTION>
Prepayments (% of Prepayment Model)
-----------------------------------------
Distribution Date 0% 150% 175% 200% 250% 275%
- ----------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Initial Percentage.................... 100 100 100 100 100 100
November 1999......................... 99 92 91 89 87 86
November 2000......................... 97 82 80 78 73 71
November 2001......................... 95 74 70 67 61 58
November 2002......................... 93 66 62 58 51 48
November 2003......................... 91 58 54 50 42 39
November 2004......................... 89 52 47 43 35 32
November 2005......................... 86 46 41 36 29 26
November 2006......................... 83 40 35 31 24 21
November 2007......................... 80 35 30 26 19 17
November 2008......................... 77 31 26 22 16 13
November 2009......................... 74 27 23 19 13 11
November 2010......................... 71 23 19 16 11 0
November 2011......................... 67 20 16 13 0 0
November 2012......................... 63 17 14 0 0 0
November 2013......................... 59 15 0 0 0 0
November 2014......................... 56 13 0 0 0 0
November 2015......................... 52 0 0 0 0 0
November 2016......................... 47 0 0 0 0 0
November 2017......................... 43 0 0 0 0 0
November 2018......................... 38 0 0 0 0 0
November 2019......................... 35 0 0 0 0 0
November 2020......................... 32 0 0 0 0 0
November 2021......................... 28 0 0 0 0 0
November 2022......................... 24 0 0 0 0 0
November 2023......................... 20 0 0 0 0 0
November 2024......................... 16 0 0 0 0 0
November 2025......................... 0 0 0 0 0 0
November 2026......................... 0 0 0 0 0 0
November 2027......................... 0 0 0 0 0 0
November 2028......................... 0 0 0 0 0 0
Weighted Average Life (years)......... 16.6 7.3 6.6 6.0 5.1 4.7
</TABLE>
GROUP II ASSUMPTIONS
The percentages and weighted average lives in the following tables relating
to the Class II A Certificates were determined using the following assumptions
(the "Group II Structuring Assumptions"): (i) scheduled interest and principal
payments on the Group II Contracts are received in a timely manner and
prepayments are made at the indicated percentages of the Prepayment Model with
30 days interest thereon set forth in the tables; (ii) the Servicer or
GreenPoint exercises its right of optional termination described above; (iii)
the Group II Contracts will, as of the Cut-off Date, be grouped into 12 pools
having the additional characteristics set forth below under "Assumed Contract
Characteristics for Group II"; (iv) the Index is 4.50%; (v) the Class II A
Initial Principal Balance, the Pass-Through Rate and the Distribution Date of
the Class II A Certificates, is as set forth or described under "Summary
Information"; (vi) no interest shortfalls will arise in connection with
prepayment in full of the Group II Contracts; (vii) there will be no losses or
delinquencies on the Group II Contracts; (viii) the Monthly Servicing Fee Rate
is 1.00% per annum; (ix) the Group I Contracts prepay at 200% of the
Prepayment
S-32
<PAGE>
Model except in the case of 0% of the Prepayment Model, in which case, the
Group I Contracts will prepay at 0% of the Prepayment Model; (x) no Contracts
convert from an adjustable rate to a fixed rate of interest; and (xi) the
Class II A Certificates are purchased on November 30, 1998. No representation
is made that the Contracts will experience delinquencies or losses at the
respective rates assumed above or at any other rates.
ASSUMED CONTRACT CHARACTERISTICS FOR GROUP II
<TABLE>
<CAPTION>
Months
to
Scheduled Original Remaining Next
Principal Contract Term to Term to Gross Rate Maximum Minimum Periodic Reset
Pool Balance Rate Maturity Maturity Margin Change Cap Floor Rate Cap Index Frequency
---- --------------- -------- -------- --------- ------ ------ ------- ------- -------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1................ $288,243.45 7.666% 360 340 3.666 1 12.666 2.666 2.000% 1YR CMT 12
2................ 760,889.39 7.323 352 341 3.323 2 12.323 2.323 2.000% 1YR CMT 12
3................ 872,924.14 7.255 355 347 3.255 3 12.255 2.255 2.000% 1YR CMT 12
4................ 912,515.18 7.459 360 346 3.459 4 12.459 2.459 2.000% 1YR CMT 12
5................ 1,326,519.65 6.792 360 354 2.792 5 11.792 1.792 2.000% 1YR CMT 12
6................ 3,603,764.18 6.976 352 346 2.950 6 11.976 1.976 2.000% 1YR CMT 12
7................ 12,286,158.91 7.900 331 324 3.883 7 12.900 2.900 2.000% 1YR CMT 12
8................ 73,932,945.32 8.308 321 316 4.280 8 13.308 3.308 2.000% 1YR CMT 12
9................ 65,371,133.37 8.302 321 317 4.275 9 13.302 3.302 2.000% 1YR CMT 12
10............... 69,038,696.06 8.475 321 318 4.448 10 13.475 3.475 2.000% 1YR CMT 12
11............... 16,685,720.76 8.584 318 316 4.546 11 13.581 3.581 2.000% 1YR CMT 12
12............... 4,669,305.25 8.838 294 289 4.265 33 13.838 3.838 2.000% 1YR CMT 12
--------------- ----- --- --- ----- --- ------ ----- ----- ------- ---
Total or weighted
average......... $249,748,815.66 8.323% 322 318 4.286 9 13.323 3.323 2.000% 1YR CMT 12
</TABLE>
Since the tables were prepared on the basis of the assumptions in the
preceding paragraph, there are discrepancies between the characteristics of
the actual Contracts and the characteristics of the Contracts assumed in
preparing the tables. Any such discrepancy may have an effect upon the
percentages of the Class II A Initial Principal Balance outstanding and
weighted average lives of the Class II A Certificates set forth in the tables.
In addition, since the actual Contracts and the Trust Fund have
characteristics which differ from those assumed in preparing the tables set
forth below, the distributions of principal on the Class II A Certificates may
be made earlier or later than as indicated in the tables.
It is not likely that Contracts will prepay at any constant percentage of
the Prepayment Model to maturity or that all Contracts will prepay at the same
rate. In addition, the diverse remaining terms to maturity of the Contracts
(which include recently originated Contracts) could produce slower
distributions of principal than as indicated in the tables at the various
percentages of the Prepayment Model specified even if the weighted average
remaining term to maturity of the Contracts is the same as the weighted
average remaining term to maturity of the Assumed Contract Characteristics.
Investors are urged to make their investment decisions on a basis that
includes their determination as to anticipated prepayment rates under a
variety of the assumptions discussed herein.
S-33
<PAGE>
Based on the Group II Structuring Assumptions, the following table indicates
the resulting weighted average lives of the Certificates and sets forth the
percentage of the Class II A Initial Principal Balance that would be
outstanding after each of the dates shown at the indicated percentages of the
Prepayment Model.
PERCENT OF THE CLASS II A INITIAL PRINCIPAL BALANCE AT THE
RESPECTIVE PERCENTAGES OF THE PREPAYMENT MODEL
<TABLE>
<CAPTION>
Prepayments (% of Prepayment Model)
-----------------------------------------
Distribution Date 0% 150% 200% 250% 275% 300%
- ----------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Initial Percentage.................... 100 100 100 100 100 100
November 1999......................... 99 92 90 87 86 85
November 2000......................... 98 83 78 74 72 70
November 2001......................... 97 75 68 62 59 56
November 2002......................... 95 67 59 52 49 46
November 2003......................... 94 60 51 44 40 37
November 2004......................... 92 54 44 36 33 30
November 2005......................... 91 48 38 30 27 24
November 2006......................... 89 43 33 25 22 19
November 2007......................... 87 38 28 21 18 15
November 2008......................... 85 34 24 17 15 12
November 2009......................... 82 30 21 14 12 10
November 2010......................... 80 26 18 12 10 8
November 2011......................... 77 23 15 10 8 6
November 2012......................... 74 20 13 0 0 0
November 2013......................... 70 17 0 0 0 0
November 2014......................... 66 15 0 0 0 0
November 2015......................... 62 0 0 0 0 0
November 2016......................... 58 0 0 0 0 0
November 2017......................... 53 0 0 0 0 0
November 2018......................... 48 0 0 0 0 0
November 2019......................... 42 0 0 0 0 0
November 2020......................... 36 0 0 0 0 0
November 2021......................... 29 0 0 0 0 0
November 2022......................... 21 0 0 0 0 0
November 2023......................... 13 0 0 0 0 0
November 2024......................... 5 0 0 0 0 0
November 2025......................... 0 0 0 0 0 0
November 2026......................... 0 0 0 0 0 0
November 2027......................... 0 0 0 0 0 0
November 2028......................... 0 0 0 0 0 0
Weighted Average Life (years)......... 17.9 7.7 6.3 5.4 5.0 4.7
</TABLE>
DESCRIPTION OF THE CERTIFICATES
The Certificates will be issued pursuant to the Agreement. A copy of a
general form of a Pooling and Servicing Agreement has been filed with the
Securities and Exchange Commission. A copy of the execution form of the
Agreement (without certain exhibits) will be filed with the Securities and
Exchange Commission after the initial issuance of the Certificates. The
following description supplements the description of the Agreement and the
Certificates under the caption "Description of the Certificates" in the
Prospectus and must be read together therewith. The following summaries
describe certain terms of the Agreement, do not purport to be complete and are
subject to, and are qualified in their entirety by reference to, the
provisions of the Agreement. When particular provisions or terms used in the
Agreement are referred to, the actual provisions (including definitions of
terms) are incorporated by reference.
S-34
<PAGE>
GENERAL
The Certificates will be issued in fully registered form only, in
denominations of $50,000 and integral multiples of $1,000 in excess thereof,
except for a denomination representing the remainder of each Class of
Certificates. The undivided percentage interest (the "Percentage Interest") of
each Class of Certificates in the distributions on such Certificates will be
equal to the percentage obtained from dividing the denomination of such
Certificate by the Principal Balance of such Class of Certificates on the
Closing Date (the "Initial Principal Balance"). Definitive Certificates, if
issued, will be transferable and exchangeable at the corporate trust office of
the Trustee. No service charge will be made for any registration of exchange
or transfer, but the Trustee may require payment of a sum sufficient to cover
any tax or other governmental charge.
The "Trust Fund" or, sometimes referred to therein as the "Trust", includes
(i) the Contract Pool, including all rights to receive payments on the
Contracts received on or after the Cut-off Date, (ii) the amounts held from
time to time in trust accounts (with respect to the Class I A Certificates,
the "Group I Certificate Account" and with respect to the Group II
Certificates, the "Group II Certificate Account" and, together with the
Group I Certificate Account, the "Certificate Accounts") maintained by the
Trustee pursuant to the Agreement, (iii) any property which initially secured
a Contract and which is acquired in the process of realizing thereon, (iv) the
Certificate Insurance Policy and (v) the proceeds of all insurance policies
described herein.
The Seller will convey the Contracts to the Trustee. See "The Contract Pool"
herein and " -- Conveyance of Contracts" below. The Servicer will service the
Contracts pursuant to the Agreement. The Contract documents will be held for
the benefit of the Trustee by the Servicer.
The Class I A Certificates represent an interest in the Group I Contracts
and the Class II A Certificates represent an interest in the Group II
Contracts.
Distributions of principal, interest or both to the holders of the
Certificates will be made on the 15th day of each month, or, if such day is
not a business day, the next succeeding business day (each, a "Distribution
Date") beginning in December, 1998 to the persons in whose names the
Certificates are registered on the Record Date. The "Record Date" with respect
to the Class I A Certificates is the close of business on the last day of the
calendar month preceding the related Distribution Date. The "Record Date" with
respect to the Class II A Certificates is, with respect to the first
Distribution Date, the close of business on the Closing Date and with respect
to subsequent Distribution Dates, the close of business on the day preceding
such Distribution Date.
PASS-THROUGH RATES AND LAST SCHEDULED DISTRIBUTION DATES
The Class I A Pass-Through Rate will be the lesser of (i) 6.635% per annum
and the Weighted Average Net Contract Rate of the Group I Contracts. The last
scheduled Distribution Date for the Class I A Certificates will be September
15, 2028.
The Class II A Pass-Through Rate shall be the lesser of (a) the Class II A
Formula Rate (as defined below) and (b) the Net Funds Cap (as defined below)
for such Distribution Date. The "Class II A Formula Rate" shall be a per annum
rate equal to the sum of (a) LIBOR (as defined herein) plus (b) 0.57% on or
before the Optional Termination Date and 1.07% thereafter. On each LIBOR
Determination Date (as defined below), the Trustee will determine LIBOR for
the next Interest Period (as defined herein) for the Class II A Certificates.
The "Optional Termination Date" is the date upon which the Pool Scheduled
Principal Balance is less than 10% of the Cut-off Date Pool Principal Balance.
The last scheduled Distribution Date for the Class II A Certificates will be
May 15, 2028.
"LIBOR" means, as of any LIBOR Determination Date, the rate for deposits in
United States dollars for a period equal to the relevant Interest Period
(commencing on the first day of such Interest Period) which appears in the
Telerate Page 3750 as of 11:00 a.m., London time, on such date. If such rate
does not appear on Telerate Page 3750, the rate for that day will be
determined on the basis of the rates at which deposits in United States
S-35
<PAGE>
dollars are offered by the Reference Banks at approximately 11:00 a.m., London
time, on that day to prime banks in the London interbank market for a period
equal to the relevant Interest Period (commencing on the first day of such
Interest Period). The Trustee will request the principal London office of each
of the Reference Banks to provide a quotation of its rate. If at least two
such quotations are provided, the rate for that day will be the arithmetic
mean of the quotations. If fewer than two quotations are provided as
requested, the rate for that day will be the arithmetic mean of the rates
quoted by major banks in New York City, selected by the Servicer, at
approximately 11:00 a.m., New York City time, on that day for loans in United
States dollars to leading European banks for a period equal to the relevant
Interest Period (commencing on the first day of such Interest Period).
"LIBOR Business Day" means a day on which banks are open for dealing in
foreign currency and exchange in London and New York City.
"LIBOR Determination Date" means, with respect to any Interest Period, the
first London business day preceding the commencement of such Interest Period.
For purposes of determining LIBOR, a "London business day" is any day on which
dealings in deposits of United States dollars are transacted in the London
interbank market.
"Telerate Page 3750" means the display page currently so designated on the
Dow Jones Telerate Service (or such other page as may replace that page on
that service for the purpose of displaying comparable rates or prices) and
"Reference Banks" means leading banks selected by the Trustee and engaged in
transactions in Eurodollar deposits in the international Eurocurrency market.
The "Weighted Average Net Contract Rate" for any Distribution Date shall
equal the per annum rate equal to the average of the Net Contract Rates of the
Group I Contracts as of the first day of the related Collection Period,
weighted on the basis of the Scheduled Principal Balances of the Group I
Contracts on the first day of the related Collection Period. The "Net Funds
Cap" for any Distribution Date shall equal a per annum rate equal to the
average of the Net Contract Rates of Group II Contracts as of the first day of
the related Collection Period, weighted on the basis of the Scheduled
Principal Balance of the Group II Contracts on the first day of the related
Collection Period. With respect to any Distribution Date and each Group II
Contract, the "Net Contract Rate" is (i) the related Contract Rate on the
first day of the related Collection Period, (ii) minus the Monthly Servicing
Fee Rate and (iii) with respect to the Group II Contracts minus 0.50%.
CONVEYANCE OF CONTRACTS
On the date of initial issuance of the Certificates, the Seller will convey
to the Trustee, without recourse, all its right, title and interest in and to
the Contracts, and all rights under the standard hazard insurance policies on
the related Manufactured Homes. The conveyance of the Contracts to the Trustee
will include a conveyance of all rights to receive Scheduled Payments thereon
that were due on or after the Cut-off Date, even if received prior to the Cut-
off Date, as well as all rights to any payments received on or after the Cut-
off Date (other than late receipts of Scheduled Payments that were due prior
to the Cut-off Date). The Contracts will be described on a schedule attached
to the Agreement (the "Contract Schedule"). The Contract Schedule will include
the principal balance of each Contract as of the Cut-off Date, the amount of
each Scheduled Payment due on each Contract as of the Cut-off Date, the
Contract Rate on each Contract (determined as of the Cut-off Date) and the
maturity date of each Contract. Prior to the conveyance of the Contracts to
the Trustee, the operations department of GreenPoint will be required to
complete a review of all of the originals of the Contracts, the certificates
of title to, or other evidence of a perfected security interest in the
Manufactured Homes, any related mortgages and any assignments or modifications
of the foregoing (collectively, the "Contract Files") confirming the accuracy
of the Contract Schedule delivered to the Trustee. Any Contract discovered not
to agree with such schedule in a manner that is materially adverse to the
interests of the Certificateholders will be repurchased by the Seller, or
replaced with another Contract, except that if the discrepancy relates to the
principal balance of a Contract (determined as described above), the Seller
may, under certain conditions, deposit cash in the applicable Certificate
Account in an amount sufficient to offset such discrepancy. The Trustee will
not review the Contract Files.
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The Servicer (or if GreenPoint is replaced as Servicer, a custodian or the
Trustee) will hold, as custodian and agent on behalf of the Trustee, the
original Contracts and copies of documents and instruments relating to each
Contract and the security interest in the Manufactured Home, and real
property, if any, relating to each Contract. See "Risk Factors -- Security
Interests of the Trust Fund in the Manufactured Homes; Transfer of Contracts
and Security Interests" and "Certain Legal Aspects of the Contracts --
Security Interests of GreenPoint in Manufactured Homes" and "Land Home and
Land-in-Lieu Contracts" in the Prospectus for discussion of the consequences
of the Servicer maintaining possession of the original Contracts and the
security interest in the related Manufactured Homes and real property securing
such Contracts, if any. In order to give notice of the Trustee's right, title
and interest in and to the Contracts, a UCC-1 financing statement identifying
the Trustee as the secured party and identifying all the Contracts as
collateral will be filed in the appropriate office in the appropriate states.
The Contracts will be stamped or otherwise marked to reflect their assignment
to the Trustee. To the extent that the Contracts do not constitute "chattel
paper", "general intangibles" or "accounts" within the meaning of the UCC as
in effect in the applicable jurisdictions or to the extent that the Contracts
do constitute chattel paper and a subsequent purchaser is able to take
physical possession of the Contracts without notice of such assignment, the
Trustee's interest in the Contracts could be defeated. See "Certain Legal
Aspects of the Contracts" in the Prospectus.
The Seller will make certain representations and warranties to the Trustee
with respect to each Contract sold by it, as of the Closing Date (unless
expressly stated otherwise), including the following: (a) as of the Cut-off
Date, no Contract is more than 59 days delinquent; (b) no provision of such
Contract has been waived, altered or modified in any respect, except by
instruments or documents identified in the related Contract File; (c) such
Contract is a legal, valid and binding obligation of the Obligor and is
enforceable in accordance with its terms (except as may be limited by laws
affecting creditors' rights generally or by general equity principles);
(d) such Contract is not subject to any right of rescission, set-off,
counterclaim or defense; (e) such Contract is covered by hazard insurance
described under "Description of the Certificates -- Servicing Compensation and
Payment of Expenses; Certain Matters Regarding the Servicer -- Hazard
Insurance Policies" in the Prospectus; (f) such Contract was either (i)
originated by a manufactured housing dealer acting, to the knowledge of the
Seller, in the regular course of its business and purchased on an individual
basis by the Seller in the ordinary course of its business, (ii) originated by
the Seller in the ordinary course of its business or (iii) purchased by the
Seller as part of bulk purchases of manufactured housing contracts in
connection with the Acquisition; (g) such Contract was neither originated in
nor is subject to the laws of any jurisdiction whose laws would make the
transfer of the Contract or an interest therein to the Trustee pursuant to the
Agreement or pursuant to the Certificates unlawful; (h) such Contract complies
with all requirements of law; (i) such Contract has not been satisfied or
subordinated in whole or in part or rescinded and the Manufactured Home
securing such Contract has not been released from the lien of such Contract;
(j) such Contract creates a valid and enforceable (except as may be limited by
laws affecting creditors' rights generally) first-priority security interest
in favor of GreenPoint in the Manufactured Home and real property securing
such Contract, if any; (k) such security interest has been assigned to the
Trustee, and, after such assignment, the Trustee has a valid and perfected
first-priority security interest in the Manufactured Home and real property
securing such Contract, if any; (l) such Contract has not been sold, assigned
or pledged to any other person, and prior to the transfer of the Contracts to
the Trustee, the Seller had good and marketable title to such Contract sold by
it, free and clear of any encumbrance, equity, loan, pledge, charge, claim or
security interest, and it was the sole owner thereof and had full right to
transfer such Contract to the Trustee; (m) as of the Cut-off Date, there was
no default, breach, violation or event permitting acceleration under such
Contract and no such event which, with notice and the expiration of any grace
or cure period, would constitute such a default, breach, violation or event
permitting acceleration (except payment delinquencies permitted by clause (a)
above), and the Seller has not waived any of the foregoing; (n) as of the
Closing Date (as defined below), there were, to the knowledge of the Seller,
no liens or claims which have been filed for work, labor or materials
affecting a Manufactured Home or real property securing such Contract, which
are or may be liens prior to or equal with or subordinate to the lien of such
Contract; (o) such Contract is a fully-amortizing loan and, with respect to
the Group I Contracts, provides for level payments over the term of such
Contract; (p) such Contract contains customary and enforceable provisions such
as to render the rights and remedies of the holder thereof adequate for
realization against the collateral of the benefits of the security; (q) the
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information contained in the Contract Schedule with respect to such Contract
is true and correct; (r) there is only one original of such Contract; (s) such
Contract did not have a loan-to-value ratio at origination greater than
approximately 95%; (t) the related Manufactured Home is not considered or
classified as part of the real estate on which it is located under the laws of
the jurisdiction in which it is located unless it is subject to a Land-in-Lieu
or Land Home Contract and as of the Closing Date such Manufactured Home is, to
the knowledge of the Seller, free of damage and in good repair; (u) such
Contract is a "qualified mortgage" under Section 860G(a)(3) of the Code; (v)
the related Manufactured Home is a "manufactured home" within the meaning of
Section 5402(6) of Title 42 of the United States Code; (w) such Contract is
secured by a "single family residence" within the meaning of Section 25(e)(10)
of the Code; (x) such Contract will be stamped to indicate its assignment to
the Trustee within 60 days of the Closing Date and (y) the Group I Contract
with the lowest Contract Rate has a Contract Rate of 6.00% and the Group I
Contract with the highest Contract Rate has a Contract Rate of 14.50% and the
Group II Contract with the lowest Contract Rate as of the Cut-off Date has a
Contract Rate of 5.75% and the Group II Contract with the highest Contract
Rate as of the Cut-off Date has a Contract Rate of 12.75%. Under the terms of
the Agreement, and subject to the Seller's option to effect a substitution as
described in the last paragraph under this subheading, the Seller will be
obligated to repurchase, at the price described below, within 90 days after
the Seller becomes aware, or after the Seller's receipt of written notice from
the Trustee or the Servicer, of a breach of any representation or warranty of
the Seller in the Agreement that materially and adversely affects the Trust
Fund's interest in any Contract unless such breach has been cured.
Notwithstanding the foregoing, the Seller will not be required to repurchase
or substitute any Contract relating to a Manufactured Home and real property
securing such Contract, if any, located in any jurisdiction on account of a
breach of the representation and warranty described in clause (k) above solely
on the basis of the failure by the Seller to cause a notation to be made on
any document of title relating to any such Manufactured Home or to execute any
transfer instrument relating to any such Manufactured Home or real property,
if any (other than a notation or transfer instrument necessary to show the
Seller as lienholder or legal title holder) unless (i) a court of competent
jurisdiction has adjudged that, because of such failure, the Trustee does not
have a perfected first-priority security interest in such related Manufactured
Home or (ii)(A) the Servicer has received written advice of counsel to the
effect that a court of competent jurisdiction has held that, solely because of
a substantially similar failure on the part of a pledgor or assignor of
manufactured housing contracts (who has perfected the assignment or pledge of
such contracts), a perfected first-priority security interest was not created
in favor of the pledgee or assignee in a related manufactured home which is
located in such jurisdiction and which is subject to the same laws regarding
the perfection of security interests therein applicable to the Manufactured
Homes located in such jurisdiction and (B) the Servicer shall not have
completed all appropriate remedial action with respect to such Manufactured
Home within 180 days after receipt of such written advice. Any such advice
will be from counsel selected by the Servicer on a non-discriminatory basis
from among the counsel used by the Servicer in its general business in the
jurisdiction in question. The Servicer will have no ongoing obligation to seek
advice with respect to the matters described in clause (ii) above. However,
the Servicer is required to seek advice with respect to such matters whenever
information comes to the attention of its counsel which causes such counsel to
determine that a holding of the type described in clause (ii)(A) might exist.
If any counsel selected by the Servicer informs the Servicer that no holding
of the type described in clause (ii)(A) exists, such advice will be conclusive
and binding on the parties to the Agreement pursuant to which a Trustee has an
interest in any Contracts in the applicable jurisdiction as of the applicable
date. If any holding described above which would give rise to a repurchase
obligation on the part of the Seller were to result from proceedings brought
by a bankruptcy trustee of the Seller, it is likely that such bankruptcy
trustee would also reject the resulting repurchase obligation.
The repurchase obligation described above generally constitutes the sole
remedy available to the Trustee and the Certificateholders for a breach of a
representation or warranty under the Agreement with respect to the Contracts.
The repurchase price for any Contract will be equal to the remaining principal
balance of such Contract as of the beginning of the month of repurchase, plus
accrued and unpaid interest from the Due Date with respect to which the
Obligor last made a payment to the Due Date occurring in the Collection Period
during which such Contract is repurchased.
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In lieu of repurchasing a Contract as specified above, during the two-year
period following the Closing Date, the Seller may, at its option, substitute
an Eligible Substitute Contract (as defined below) for the Contract that it is
otherwise obligated to repurchase (referred to herein as the "Replaced
Contract"). An "Eligible Substitute Contract" is a Contract that satisfies, as
of the date of its substitution, the representations and warranties specified
in the Agreement, has a Scheduled Principal Balance that is not greater than
the Scheduled Principal Balance of the Replaced Contract as of the beginning
of the month in which such substitution takes place, has a Contract Rate that
is at least equal to the Contract Rate (or, with respect to a variable rate
Contract, the same Index and Gross Margin) of the Replaced Contract, has a
remaining term to scheduled maturity that is not greater than the remaining
term to scheduled maturity of the Replaced Contract and has not been
delinquent for more than 31 days as to any Scheduled Payment due in the twelve
months prior to its substitution. The Seller will be required to deposit in
the applicable Certificate Account cash in the amount, if any, by which the
Scheduled Principal Balance of the Replaced Contract as of the beginning of
the month in which substitution takes place exceeds the Scheduled Principal
Balance of the Contract for which it is being substituted as of the beginning
of the month.
PAYMENTS ON THE CONTRACTS; CERTIFICATE ACCOUNTS
The Trustee will initially establish and maintain the Certificate Accounts
at a depository institution organized under the laws of the United States or
any state, the deposits of which are insured to the full extent permitted by
law by the Federal Deposit Insurance Corporation (the "FDIC") whose commercial
paper, long-term deposits or long-term unsecured senior debt has a rating of
A-1 by S&P and P-1 by Moody's in the case of commercial paper or in one of the
two highest rating categories by S&P and Moody's in the case of long-term
deposits or long-term unsecured senior debt, and which is subject to
examination by federal or state authorities or a depository institution
otherwise acceptable to S&P and Moody's (an "Eligible Institution"). The funds
in the Certificate Accounts are required to be invested by the Trustee in
common trust funds, collective investment trusts or Eligible Investments that
will mature not later than the business day preceding the applicable
Distribution Date. "Eligible Investments" include, among other investments,
obligations of the United States or of any agency thereof backed by the full
faith and credit of the United States; certificates of deposit, time deposits
and bankers' acceptances sold by eligible financial institutions; commercial
paper rated A-1 by S&P and P-1 by Moody's; money market funds acceptable to
S&P and Moody's (as evidenced by a letter from S&P and Moody's to such
effect); and other obligations acceptable to S&P and Moody's.
All payments in respect of principal and interest on the Contracts received
during any Collection Period by the Servicer (exclusive of Scheduled Payments
due prior to the Cut-off Date), including Liquidation Proceeds (net of
Liquidation Expenses, as defined below), are required to be paid into the
related Certificate Account not later than the second business day following
receipt thereof. Amounts received as late payment fees, extension fees,
assumption fees or similar fees may be retained by the Servicer as part of its
servicing fees. See "-- Servicing Compensation; Certain Other Matters
Regarding the Servicer" below. In addition, the amount paid by the Seller for
any Contract repurchased by it as a result of a breach of a representation or
warranty under the Agreement, and amounts required to be deposited upon
substitution of an Eligible Substitute Contract because of a breach of a
representation or warranty (which amounts will be treated as partial principal
prepayments), as described under "-- Conveyance of Contracts" above and
amounts in respect of converted Group II Contracts purchased by GreenPoint
Bank, are required to be paid into the applicable Certificate Account.
On the third business day prior to each Distribution Date (the
"Determination Date"), the Servicer will determine the Available Distribution
Amount and the amounts to be distributed on the Certificates for the following
Distribution Date. The "Available Distribution Amount" for a Group is the sum
of (a) the Monthly Advance relating to the Contracts in such Group for such
Distribution Date (as defined under "--Advances" below) and (b) the amount in
the related Certificate Account on the close of business on the last day of
the immediately preceding Collection Period, less the sum of (i) any
repossession profits (of which there are expected to be a de minimis amount);
(ii) payments on Contracts in such Group that have been repurchased as a
result of a breach of a representation or warranty that are received during or
after the month of repurchase; (iii) Excess
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Contract Payments (as defined below) and any payments not required to be
distributed to the related Certificateholders on the related Distribution
Date; (iv) reimbursements to the Servicer in the amount of expenses incurred
in connection with the liquidation of a Contracts ("Liquidation Expenses") and
certain taxes and insurance premiums advanced by the Servicer in respect of
the Manufactured Homes in such Group (as described under "--Advances" below);
(v) reimbursements to the Servicer for Nonrecoverable Advances and Monthly
Advances relating to the Contracts in such Group and Monthly Advances relating
to such, to the extent permitted by the Agreement (as described below under
"--Advances") provided that if there are insufficient funds to cover such
Nonrecoverable Advances in the Certificate Account for such Group, the
Servicer may reimburse itself from the Certificate Account for such
insufficiency from the other Group; and (vi) the Monthly Servicing Fee (as
hereinafter defined).
An "Excess Contract Payment" is a payment received on a Contract that is in
excess of the Scheduled Payment (or, generally, an integral multiple thereof)
on such Contract, is not a partial principal prepayment or prepayment in full
and is not part of any Liquidation Proceeds. Excess Contract Payments will be
held by the Trustee in the related Certificate Account and may be applied as
described under "-- Advances" below.
The Trustee or its paying agent will withdraw funds from the Certificate
Accounts on each Distribution Date (but only to the extent of the related
Available Distribution Amount) to make payments to Certificateholders as
specified under "-- Distributions" below. From time to time, as provided in
the Agreement, the Servicer will also withdraw funds from each Certificate
Accounts to make payments to it as permitted by the Agreement and described in
subclauses (i), (ii), (iv), (v) and (vi) of clause (b) in the second preceding
paragraph.
DISTRIBUTIONS
Distributions of principal and interest to holders of a Class of
Certificates will be made on each Distribution Date in an amount equal to the
respective Percentage Interests multiplied by the aggregate amount distributed
on such Class of Certificates on such Distribution Date.
Each distribution with respect to a Book-Entry Certificate will be paid to
DTC, which will credit the amount of such distribution to the accounts of its
Participants in accordance with its normal procedures. Each Participant will
be responsible for disbursing such distribution to the Certificate Owners that
it represents and to each indirect participating brokerage firm (a "brokerage
firm" or "indirect participating firm") for which it acts as agent. Each
brokerage firm will be responsible for disbursing funds to the Certificate
Owners that it represents. All such credits and disbursements with respect to
Book-Entry Certificates are to be made by DTC and the Participants in
accordance with DTC's rules.
INTEREST DISTRIBUTIONS
With respect to the Class II A Certificates and any Distribution Date, the
"Interest Period" shall be the period from the Distribution Date preceding
such Distribution Date (or in the case of the first Distribution Date, from
the Closing Date) through the day preceding such Distribution Date on the
basis of the actual number of days elapsed during the Interest Period and a
360-day year. With respect to the Class I A Certificates and any Distribution
Date, the "Interest Period" shall be the period from the first day of the
calendar month preceding the month of such Distribution Date through the last
day of such calendar month on the basis of a 360-day year consisting of twelve
30-day months.
The "Interest Distribution Amount" means with respect to any Class of
Certificates (i) interest accrued on such Class during the related Interest
Period at the then applicable Pass-Through Rate on the Principal Balance of
such Class immediately prior to that Distribution Date, plus (ii) any
previously undistributed shortfalls in interest (other than the Net Funds Cap
Carryover Amount) due to the Certificateholders of that Class in respect of
prior Distribution Dates, plus, to the extent legally permissible, interest
accrued on any such shortfalls during the related Interest Period at the then
applicable Pass-Through Rate.
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PRIORITY OF DISTRIBUTIONS
A. On each Distribution Date, the Group I Available Distribution Amount, if
any, any Enhancement Payment, and any amounts received pursuant to clause
(B) (iii) below (provided that any such Enhancement Payment and amounts
received pursuant to (B) (iii) below may only be used for the items listed in
clauses (i) and (ii) below) in the Group I Certificate Account will be
distributed in the following amounts in the following order of priority:
(i) to the Class I A Certificates, the Class I A Interest Distribution
Amount;
(ii) the Group I Formula Principal Distribution Amount, to the Class I A
Certificates until the Class I A Principal Balance is reduced to zero;
(iii) to the Class II A Certificates to fund any Group II Available Funds
Shortfall;
(iv) to the Servicer, an amount equal to any amounts owing on such
Distribution Date in respect of any unpaid Monthly Servicing Fee due in
respect of the Group II Contracts;
(v) amounts, if any, required to be deposited into the Special Account as
established under and required by the Insurance Agreement; and
(vi) any remaining available funds to the holder of the Class R
Certificate.
B. On each Distribution Date, the Group II Available Distribution Amount, if
any, any Enhancement Payment and any amounts received pursuant to clause (A)
(iii) above (provided that any such Enhancement Payment and amounts received
pursuant to (A) (iii) above may only be used for the items listed in clauses
(i) and (ii) below) in the Group II Certificate Account will be distributed in
the following amounts in the following order of priority:
(i) to the Class II A Certificates, the Class II A Interest Distribution
Amount;
(ii) the Group II Formula Principal Distribution Amount, to the Class II
A Certificates until the Class II A Principal Balance is reduced to zero;
(iii) to the Class I A Certificates to fund any Group I Available Funds
Shortfall;
(iv) to the Servicer, an amount equal to any amounts owing on such
Distribution Date in respect of any unpaid Monthly Servicing Fee due in
respect of the Group I Contracts;
(v) amounts, if any, required to be deposited into the Special Account as
established under and required by the Insurance Agreement; and
(vi) any remaining available funds up to the Net Funds Cap Carryover
Amount to the Class II A Certificateholders;
(vii) any remaining available funds to the holder of the Class R
Certificate.
The "Group I Available Funds Shortfall" with respect to any Distribution
Date, will equal the amount, if any, by which the Group I Available
Distribution Amount, prior to giving effect to any related Enhancement
Payment, for such Distribution Date is less than the amount required to be
distributed to the Class I A Certificates on such Distribution Date pursuant
to clauses (A)(i) and (A)(ii) above. The "Group II Available Funds Shortfall"
with respect to any Distribution Date, will equal the amount, if any, by which
the Group II Available Distribution Amount, prior to giving effect to any
related Enhancement Payment, for such Distribution Date is less than the
amount required to be distributed to the Class II A Certificates on such
Distribution Date pursuant to clauses (B)(i) and (B)(ii) above. The Group I
Available Funds Shortfall and the Group II Available Funds Shortfall may be
referred to as an "Available Funds Shortfall".
The "Principal Balance" of each Class of Certificates is its balance as of
the Closing Date reduced by all distributions on such Class in respect of
principal to such Class of Certificates. The balance of each Class of
Certificates as of the Closing Date or "Initial Principal Balance" for each
Class of Certificates is set forth under "Summary Information" herein.
"Offered Certificates" means the Class I A Certificates and Class II A
Certificates.
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The "Formula Principal Distribution Amount" in respect of a Distribution
Date and a Group equals the sum of (i) all scheduled payments of principal due
on each outstanding Contract in such Group during the Collection Period
preceding the month in which the Distribution Date occurs, (ii) the Scheduled
Principal Balance (as defined below) of each Contract in such Group which,
during the Collection Period preceding the month of such Distribution Date,
was purchased by GreenPoint pursuant to the Agreement on account of certain
breaches of its representations and warranties, (iii) all partial prepayments
of principal on the Contracts in such Group received during such preceding
Collection Period, (iv) the Scheduled Principal Balance of each Contract in
such Group that was prepaid in full during such preceding Collection Period,
(v) the Scheduled Principal Balance of each Contract in such Group that became
a Liquidated Contract during such preceding Collection Period, and (vi) any
previously undistributed shortfalls in the amounts in clauses (i) through (v)
in respect of the prior Distribution Dates (other than any such shortfall with
respect to which an Enhancement Payment has been made to the related
Certificateholders).
On the first Distribution Date, the "Net Funds Cap Carryover Amount" will
equal zero. On each subsequent Distribution Date, the "Net Funds Cap Carryover
Amount" means the sum of (A) if on such Distribution Date, the Pass-Through
Rate for the Class II A Certificates is based upon the Net Funds Cap, the
excess of (i) the lesser of (a) the product of (i) the Weighted Average
Maximum Cap (as defined herein) and (ii) the Class II A Principal Balance and
(b) the amount of interest the Class II A Certificates would otherwise be
entitled to receive on such Distribution Date had such rate been calculated at
the Class II A Formula Rate for such Distribution Date over (ii) the amount of
interest payable on the Class II A Certificates at the Net Funds Cap for such
Distribution Date and (B) the Net Funds Cap Carryover Amount, together with
accrued interest thereon at the Class II A Pass-Through Rate in effect on such
Distribution Date, for all previous Distribution Dates not previously paid
pursuant to clause B(vi) under "--Priority of Distributions". The "Weighted
Average Maximum Cap" with respect to any Distribution Date shall equal, on
such Distribution Date, the weighted average of the Maximum Caps of the Group
II Contracts (or with respect to any Group II Contract that has converted from
a variable rate to a fixed rate, the applicable fixed rate) multiplied by a
fraction the numerator of which is the actual number of days elapsed in the
related Interest Period and the denominator of which is 360.
The "Scheduled Principal Balance" of a Contract for any Distribution Date is
its unpaid scheduled principal balance as of the Cut-off Date reduced by all
previous partial prepayments, all previous scheduled principal payments
(whether or not paid) and the scheduled principal payment due on the Due Date
in the Collection Period immediately preceding such Distribution Date, but
without giving effect to any adjustment due to bankruptcy or similar
proceedings.
The "Cut-off Date Pool Principal Balance" is the aggregate Scheduled
Principal Balance of the Contracts as of the Cut-off Date.
The "Pool Scheduled Principal Balance" for any Distribution Date is equal to
(i) the Cut-off Date Pool Principal Balance less (ii) the aggregate of the
Formula Principal Distribution Amounts (exclusive of the amounts in clause
(vi) of the definition thereof) for all prior Distribution Dates.
A "Liquidated Contract" is a defaulted Contract as to which all amounts that
the Servicer expects to recover (the "Liquidation Proceeds") through the date
of disposition of the Manufactured Home and any real property securing such
Contract have been received.
In no event will the aggregate distributions of principal to any Class of
Certificates exceed the Initial Principal Balance of such Class of
Certificates.
CROSS-COLLATERALIZATION PROVISIONS
The Agreement provides for cross-collateralization through the application
of excess amounts generated by one Contract Group to fund shortfalls in
available funds in the other Contract Group, subject to certain prior
requirements of such Contract Group. Therefore, as to any Distribution Date,
the amount, if any, of the Group I Available Distribution Amount remaining
after payment of all then applicable prior requirements relating to the
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Class I A Certificates will be used to fund any Group II Available Funds
Shortfall for such Distribution Date. Likewise, as to any Distribution Date,
the amount, if any, of the Group II Available Distribution Amount remaining
after payment of all then applicable prior requirements relating to the Class
II A Certificates will be used to fund any Group I Available Funds Shortfall
for such Distribution Date. The payment of any amounts in respect of cross-
collateralization will be applied in the order specified above under "--
Distributions."
Additional funds resulting from the cross-collateralization provisions
described herein shall not be available to the Class II A Certificateholders
to pay the Net Funds Cap Carryover Amount.
LOSSES ON LIQUIDATED CONTRACTS
As described above, the distribution of principal to the holders of the
Offered Certificates in each Group is intended to include the Scheduled
Principal Balance of each Contract in the related Group that became a
Liquidated Contract during the Collection Period immediately preceding the
month of such distribution. If the Liquidation Proceeds, net of related
Liquidation Expenses, from such Liquidated Contract are less than the sum of
(i) the Scheduled Principal Balance of such Liquidated Contract and (ii)
accrued and unpaid interest thereon, then to the extent such deficiency is not
covered by any excess interest collections on non-defaulted Contracts and an
MBIA Default has occurred and is continuing, the deficiency may, in effect, be
absorbed by the Certificates.
On each Distribution Date, if any, on or after the date on which a
Deficiency Event occurs and there has been an MBIA Default and such default is
continuing, the Group I or Group II Certificateholders, as applicable, will
receive only their respective percentage interest of Liquidation Proceeds (net
of Liquidation Expenses) realized in respect of Liquidated Contracts, rather
than the Scheduled Principal Balances thereof, and will therefore bear all
losses on Liquidated Contracts (with no ability to recover the amount of any
liquidation loss from future principal collections on the Contracts) and incur
a loss on their investment in the Group I or Group II Certificates, as
applicable. See "Prepayment and Yield Considerations" herein.
CERTIFICATE INSURANCE POLICY
The Class I A Certificates and the Class II A Certificates will be entitled
to the benefit of an unconditional and irrevocable certificate insurance
policy (the "Certificate Insurance Policy") issued by MBIA. As of any
determination date, the aggregate amount available under the Certificate
Insurance Policy will be equal to the aggregate Principal Balance of the Class
I A Certificates and the Class II A Certificates plus interest thereon. With
respect to any Distribution Date, payments will be payable under the
Certificate Insurance Policy (an "Enhancement Payment") equal to the Available
Funds Shortfall for such Certificates (after application of the cross-
collateralization feature of the Trust Fund). See "--Cross-Collateralization
Provisions" above.
The Certificate Insurance Policy will be issued pursuant to an Insurance and
Reimbursement Agreement (the "Insurance Agreement"), to be dated the Closing
Date, among GreenPoint, the initial holder of the Class R Certificates, the
Trustee and MBIA. The "Special Account" is an account established and
maintained in accordance with the terms of the Insurance Agreement. The
Special Account is not a part of the Trust Fund and, accordingly, neither the
Class I A Certificateholders nor the Class II A Certificateholders have any
rights to and will not receive amounts on deposit in the Special Account.
The Certificate Insurance Policy will be an asset of the Trust Fund and the
Trustee will maintain possession of and make claims for payment pursuant to
the Certificate Insurance Policy for the benefit of the Trust Fund.
The terms of the Certificate Insurance Policy will provide that MBIA will
waive and agree not to assert any and all rights to require the Trustee to
make demand on or to proceed against any person, party or security prior to
demanding payment under the Certificate Insurance Policy. Under the
Certificate Insurance Policy, MBIA will also waive and agree not assert any
and all defenses, set-offs and counterclaims of any kind available to it so as
to deny payment of any amount due under the Certificate Insurance Policy.
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The Certificate Insurance Policy will provide that any rights of subrogation
acquired by MBIA as a result of any payment made under the Certificate
Insurance Policy shall, in all respects, be subordinate and junior in right of
payment to the prior indefeasible payment in full of all amounts due the
Trustee on account of payments due under the Class I A Certificates and the
Class II A Certificates.
The obligations of MBIA under the Certificate Insurance Policy will be
irrevocable, primary, absolute and unconditional (except as expressly provided
therein) and neither the failure of the Trustee, GreenPoint, or any other
person to perform any covenants or obligations in favor of MBIA (or
otherwise), nor the failure or omission to make a demand permitted thereunder,
nor the commencement of any receivership, bankruptcy, debtor or other
insolvency proceeding by or against the Trustee, GreenPoint, or any other
person shall in any way affect or limit MBIA's obligations under the
Certificate Insurance Policy. If an action or proceeding to enforce the
Certificate Insurance Policy is brought, the Trustee will be entitled to
recover from MBIA costs and expenses reasonably incurred, including without
limitation reasonable fees and expenses of counsel.
There shall be no acceleration payment due under the Certificate Insurance
Policy unless such acceleration is at the sole option of MBIA.
ADVANCES
For each Distribution Date, the Servicer will be obligated to make an
advance (a "Monthly Advance") equal to the lesser of (i) delinquent scheduled
payments of principal and interest on the Contracts that were due in the
preceding Collection Period and (ii) the amount, if any, by which scheduled
distributions of principal and interest due on the Class I A Certificates and
the Class II A Certificates exceeds the amount specified in clause (b) of the
definition of the related Available Distribution Amount (set forth above under
"--Payments on Contracts; Certificate Accounts") on such Distribution Date,
except to the extent, in the Servicer's judgment, such advance would not be
recoverable from related late payments, Liquidation Proceeds or otherwise (a
"Nonrecoverable Advance").
The Servicer may apply any Excess Contract Payments in the related
Certificate Account (rather than its own funds) to make all or a portion of a
Monthly Advance, but must replace such Excess Contract Payments to the extent
required to make scheduled payments on the related Contracts. In addition,
upon the determination that a Nonrecoverable Advance has been made in respect
of a Contract, the Servicer will reimburse itself out of funds in the related
Certificate Account, or if there are insufficient funds in such Certificate
Account, from the Certificate Account for the other Contract Group, for the
amount of such Nonrecoverable Advance.
In making Monthly Advances, the Servicer will be attempting to maintain a
regular flow of scheduled interest and principal to the Class I A
Certificateholders and the Class II A Certificateholders rather than to
guarantee or insure against losses.
The Servicer will also be obligated to make advances, to the extent
recoverable out of Liquidation Proceeds or otherwise, in respect of certain
taxes and insurance premiums not paid by an Obligor on a timely basis. Funds
so advanced are reimbursable to the Servicer as provided in the Agreement.
REPORTS TO CERTIFICATEHOLDERS
The Trustee will include with each distribution to each Certificateholder a
statement as of such Distribution Date setting forth, among other things:
(a) the aggregate amount distributed on the Class I A Certificates on
such Distribution Date;
(b) the amount of such distribution which constitutes principal;
(c) the amount of such distribution which constitutes interest;
(d) the remaining Class I A Principal Balance;
(e) the aggregate amount distributed on the Class II A Certificates on
such Distribution Date;
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(f) the amount of such distribution which constitutes principal;
(g) the amount of such distribution which constitutes interest;
(h) the remaining Class II A Principal Balance;
(i) the Enhancement Payment, if any, for such Distribution Date;
(j) the Net Funds Cap Carryover Amount;
(k) the amount of the Monthly Servicing Fee;
(l) the Class I A Pass-Through Rate;
(m) the Class II A Pass-Through Rate; and
(n) the number of and aggregate unpaid principal balance of Group I and
Group II Contracts with payments delinquent 31 to 59, 60 to 89 and 90 or
more days, respectively.
In addition, within a reasonable period of time after the end of each
calendar year, the Trustee will furnish a report to each Certificateholder of
record at any time during such calendar year as to certain aggregate of
amounts for such calendar year.
OPTIONAL TERMINATION AND TERMINATION AUCTION
The Agreement provides that on any Distribution Date after the Distribution
Date on which the Pool Scheduled Principal Balance is less than 10% of the
Cut-off Date Pool Principal Balance, the Servicer will have the option to
repurchase, upon giving notice mailed no later than the 10th day of the month
next preceding the month of the exercise of such option, all outstanding
Contracts at a price equal to the greater of (a) the sum of (x) 100% of the
Scheduled Principal Balance of each Contract (other than any Contract as to
which the related Manufactured Home has been acquired and not yet disposed of
and whose fair market value is included pursuant to clause (y) below) as of
the final Distribution Date, and (y) the fair market value of such acquired
property (as determined by the Servicer), and (b) the aggregate fair market
value (as determined by the Servicer) of all of the assets of the Trust Fund,
plus, in the case of both clause (a) and (b), an amount sufficient to
reimburse Certificateholders for any shortfall in interest due thereto in
respect of prior Distribution Dates and not previously distributed, provided,
however, that if any Enhancement Payment has been made but not yet reimbursed,
the Servicer (or the holders of the Class R Certificates) may only exercise
the option with the consent of MBIA. The Agreement will also provide that if
the Servicer does not exercise such option or if MBIA does not give its
consent if such consent is required, that the holders of the Class R
Certificates will have the option on any Distribution Date after the
Distribution Date on which the Pool Scheduled Principal Balance is less than
10% of the Cut-off Date Pool Principal Balance, to purchase, upon giving
notice mailed no later than the 10th day of the month next preceding the month
of the exercise of such option, all outstanding Contracts at a price equal to
the greater of (a) the sum of (x) 100% of the Scheduled Principal Balance of
each Contract (other than any Contract as to which the related Manufactured
Home has been acquired and not yet disposed of and whose fair market value is
included pursuant to clause (y) below) as of the final Distribution Date, and
(y) the fair market value of such acquired property (as determined by the
Servicer), and (b) the aggregate fair market value (as determined by the
Servicer) of all of the assets of the Trust Fund, plus, in the case of both
clause (a) and (b), an amount sufficient to reimburse Certificateholders for
any shortfall in interest due thereto in respect of prior Distribution Dates
and not previously distributed and an amount sufficient to reimburse MBIA for
any Enhancement Payment made, but not yet reimbursed. Notwithstanding the
foregoing, each such option shall not be exercisable if there will not be
distributed to the Certificateholders (other than the Class R
Certificateholders) an amount equal to the Principal Balance of each Class
together with any shortfall in interest due to the Certificateholders (other
than the Class R Certificateholders) in respect of prior Distribution Dates
and not previously distributed and one month's interest on the Principal
Balance, for each class of Certificates, at the applicable Pass-Through Rate
(the "Minimum Termination Amount").
On any Distribution Date after the Distribution Date on which the Pool
Scheduled Principal Balance is less than 10% of the Cut-off Date Pool
Principal Balance, the Servicer may also direct the Trustee to conduct a
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Termination Auction for the sale of all Contracts then outstanding in the
Trust Fund, and in any case the Servicer shall be obligated to direct the
Trustee to conduct such a Termination Auction within 90 days of the
Distribution Date on which the Pool Scheduled Principal Balance is less than
10% of the Cut-off Date Pool Principal Balance, unless the Servicer or the
holder of the Class R Certificates has exercised the repurchase option
described above. The Servicer shall give notice mailed no later than 10 days
preceding the date on which the Termination Auction is to occur. The Trustee
will solicit each Certificateholder, the Seller and one or more active
participants in the asset-backed securities or manufactured housing contract
market that are not affiliated with GreenPoint to make a bid to purchase the
Contracts at the Termination Auction. The Trustee will sell all the Contracts
to the highest bidder, subject, among other things, to (i) the requirement
that the highest bid equal or exceed the Minimum Termination Amount plus, an
amount sufficient to reimburse MBIA for any unreimbursed payments under the
Certificate Insurance Policy and other amounts owing under the Insurance
Agreement, if any, and (ii) the requirement that at least one bid be tendered
by an active participant in the asset-backed securities or manufactured
housing contract market that is not affiliated with GreenPoint. If the
foregoing requirements are satisfied, the successful bidder or bidders shall
deposit the aggregate purchase price for the Contracts in the Certificate
Accounts. If the foregoing requirements are not satisfied, the purchase shall
not occur and distributions will continue to be made on the Certificates. Any
sale and consequent termination of the Trust Fund as a result of a Termination
Auction must constitute a "qualified liquidation" of the Trust Fund under
Section 860F of the Code.
TERMINATION OF THE AGREEMENT
The Agreement will terminate upon the last action required to be taken by
the Trustee on the final Distribution Date following the earlier of (i) the
purchase by the Servicer of all Contracts and all property acquired in respect
of any Contract remaining in the Trust Fund as described above under " --
Optional Termination and Termination Auction", (ii) the final payment or
other liquidation (or any advance with respect thereto) of the last Contract
remaining in the Trust Fund or the disposition of all property acquired upon
repossession of any Manufactured Home or (iii) the sale in a Termination
Auction of all Contracts and all other property acquired in respect of any
Contract remaining in the Trust Fund as described above under " -- Optional
Termination and Termination Auction".
Upon presentation and surrender of the Class I A Certificates and Class II A
Certificates, the Trustee shall cause to be distributed, to the extent of
funds available, to such Certificateholders on the final Distribution Date in
proportion to their respective Percentage Interests an amount equal to the
respective unpaid Principal Balances of the Class I A Certificates and Class
II A Certificates, together with any unpaid interest on such Certificates due
on prior Distribution Dates and one month's interest at the applicable pass-
through rates on such unpaid Certificate Balances; provided that such funds
will be distributed in the applicable order of priority specified under "--
Distributions" above. If the Agreement is then being terminated, any amount
which remains on deposit in the Certificate Accounts (other than amounts
retained to meet claims) after distribution to the holders of the Class I A
Certificates and Class II A Certificates will be distributed to the Special
Account to the extent any amounts are owed to MBIA under the Insurance
Agreement, and any amount which remains will be distributed to the Class R
Certificateholders.
COLLECTION AND OTHER SERVICING PROCEDURES
The Servicer will administer, service and make collections on the Contracts,
exercising the degree of care that the Servicer exercises with respect to
similar contracts serviced by the Servicer.
Subject to the requirements of applicable law, the Servicer will be required
to commence repossession and other realization procedures with respect to any
defaulted Contract promptly after the Servicer determines that such Contract
will not be brought current. The Servicer may rescind, cancel or make material
modifications of the terms of a Contract (including modifying the amounts and
Due Dates of Scheduled Payments) in connection with a default or imminent
default thereunder.
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SERVICING COMPENSATION; CERTAIN OTHER MATTERS REGARDING THE SERVICER
For its servicing of the Contracts, the Servicer will be entitled to receive
a monthly servicing fee equal to the product of one-twelfth of 1.00% (the
"Monthly Servicing Fee Rate") of the Pool Scheduled Principal Balance for the
related Distribution Date (the "Monthly Servicing Fee"), whether or not the
related Scheduled Payments on the Contracts are received. The Available
Distribution Amounts will be net of the Monthly Servicing Fee. See "--
Payments on the Contracts; Certificate Accounts" above.
As part of its servicing fees, the Servicer will also be entitled to retain,
as compensation for the additional services provided in connection therewith,
any fees for late payments made by Obligors, extension fees paid by Obligors
for the extension of scheduled payments and assumption fees for permitted
assumptions of Contracts by purchasers of the related Manufactured Homes and
real property securing such Contracts, if any.
RIGHTS UPON AND EVENT OF DEFAULT
If an Event of Default has occurred and so long as there has been no MBIA
Default that has occurred and is continuing, MBIA may terminate all of the
rights of the Servicer under the Agreement without the consent of the
Certificateholders. Upon the occurrence of an MBIA Default, such right of
termination shall vest in the Trustee or in holders of Certificates evidencing
interests in any Class of Certificates aggregating not less than 51%. Upon
such termination of the Servicer, all authority and power of the Servicer
under the Agreement will pass to and be vested in the Trustee or a successor
servicer as provided in the Agreement.
An "MBIA Default" means the failure by MBIA to make a payment under the
Certificate Insurance Policy in accordance with its terms.
THE TRUSTEE
The First National Bank of Chicago (the "Trustee") has its corporate trust
offices at One First National Plaza, Chicago, Illinois 60670-0126. The Trustee
may resign at any time, in which event the Seller will be obligated to appoint
a successor Trustee. The Seller may also remove the Trustee if the Trustee
ceases to be eligible to continue as such under the Agreement or if the
Trustee becomes insolvent. In such circumstances, the Seller will also be
obligated to appoint a successor Trustee. Any resignation or removal of the
Trustee and appointment of a successor Trustee will not become effective until
acceptance of the appointment by the successor Trustee.
The Agreement requires the Trustee to maintain, at its own expense, an
office or agency in New York City or Chicago where Certificates may be
surrendered for registration of transfer or exchange and where notices and
demands to or upon the Trustee and the certificate registrar in respect of the
Certificates pursuant to the Agreement may be served.
The Trustee, or any of its affiliates, in its individual or any other
capacity, may become the owner or pledgee of Certificates with the same rights
as it would have if it were not Trustee.
The Trustee will also act as paying agent, certificate registrar and
authenticating agent under the Agreement.
REGISTRATION OF THE CERTIFICATES
The Offered Certificates will be book-entry Certificates (the "Book-Entry
Certificates"). Persons acquiring beneficial ownership interests in the
Certificates ("Certificate Owners") will hold their Certificates through The
Depository Trust Company ("DTC") in the United States, or Cedel Bank, societe
anonyme ("Cedel") or Euroclear System ("Euroclear") in Europe if they are
participants of such systems, or indirectly through organizations which are
participants in such systems. The Book-Entry Certificates will be issued in
one or more certificates which equal the aggregate principal balance of the
Certificates and will initially be registered in the name of Cede & Co., the
nominee of DTC. Cedel and Euroclear will hold omnibus positions on behalf of
their
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participants through customers' securities accounts in Cedel's and Euroclear's
names on the books of their respective depositaries which in turn will hold
such positions in customers' securities accounts in the depositaries' names on
the books of DTC. Citibank, N.A. will act as depositary for Cedel and The
Chase Manhattan Bank will act as depositary for Euroclear (in such capacities,
individually the "Relevant Depositary" and collectively the "European
Depositaries"). Except as described below, no person acquiring a Book-Entry
Certificate (each, a "Beneficial Owner") will be entitled to receive a
physical certificate representing such Certificate (a "Definitive
Certificate"). Unless and until Definitive Certificates are issued, it is
anticipated that the only "Certificateholder" of the Certificates will be Cede
& Co., as nominee of DTC. Certificate Owners will not be Certificateholders as
that term is used in the Agreement. Certificate Owners are only permitted to
exercise their rights indirectly through Participants and DTC.
The beneficial owner's ownership of a Book-Entry Certificate will be
recorded on the records of the brokerage firm, bank, thrift institution or
other financial intermediary (each, a "Financial Intermediary") that maintains
the beneficial owner's account for such purpose. In turn, the Financial
Intermediary's ownership of such Book-Entry Certificate will be recorded in
the records of DTC (or of a participating firm that acts as agent for the
Financial Intermediary, whose interest will in turn be recorded on the records
of DTC, if the beneficial owner's Financial Intermediary is not a DTC
participant and on the records of Cedel or Euroclear, as appropriate).
Certificate Owners will receive all distributions of principal of and
interest on the Certificates from the Trustee through DTC and DTC
participants. While the Certificates are outstanding (except under the
circumstances described below), under the rules, regulations and procedures
creating and affecting DTC and its operations (the "Rules"), DTC is required
to make book-entry transfers among Participants on whose behalf it acts with
respect to the Certificates and is required to receive and transmit
distributions of principal of, and interest on, the Certificates. Participants
and indirect participants with whom Certificate Owners have accounts with
respect to Certificates are similarly required to make book-entry transfers
and receive and transmit such distributions on behalf of their respective
Certificate Owners. Accordingly, although Certificate Owners will not possess
certificates representing their respective interests in the Certificates, the
Rules provide a mechanism by which Certificate Owners will receive
distributions and will be able to transfer their interest.
Certificateholders will not receive or be entitled to receive certificates
representing their respective interests in the Certificates, except under the
limited circumstances described below. Unless and until Definitive
Certificates are issued, Certificateholders who are not Participants may
transfer ownership of Certificates only through Participants and indirect
participants by instructing such Participants and indirect participants to
transfer Certificates, by book-entry transfer, through DTC for the account of
the purchasers of such Certificates, which account is maintained with their
respective Participants. Under the Rules and in accordance with DTC's normal
procedures, transfers of ownership of Certificates will be executed through
DTC and the accounts of the respective Participants at DTC will be debited and
credited. Similarly, the Participants and indirect participants will make
debits or credits, as the case may be, on their records on behalf of the
selling and purchasing Certificateholders.
Because of time zone differences, credits of securities received in Cedel or
Euroclear as a result of a transaction with a Participant will be made during
subsequent securities settlement processing and dated the business day
following the DTC settlement date. Such credits or any transactions in such
securities settled during such processing will be reported to the relevant
Euroclear or Cedel Participants on such business day. Cash received in Cedel
or Euroclear as a result of sales of securities by or through a Cedel
Participant (as defined below) or Euroclear Participant (as defined below) to
a DTC Participant will be received with value on the DTC settlement date but
will be available in the relevant Cedel or Euroclear cash account only as of
the business day following settlement in DTC. For information with respect to
tax documentation procedures relating to the Certificates, see "Federal Income
Tax Consequences--Taxation of Regular Certificates--Taxation of Certain
Foreign Investors" and "--Backup Withholding" in the Prospectus and "Global
Clearance, Settlement and Tax Documentation Procedures--Certain U.S. Federal
Income Tax Documentation Requirements" in Annex I hereto.
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Transfers between Participants will occur in accordance with DTC rules.
Transfers between Cedel Participants and Euroclear Participants will occur in
accordance with their respective rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Cedel
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 the Relevant Depositary; however, such cross-market
transactions will require delivery of instructions to the relevant European
international clearing system by a counterparty in such system in accordance
with its rules and procedures and within its established deadlines (European
time). The relevant European international clearing system will, if the
transaction meets its settlement requirements, deliver instructions to the
Relevant Depositary to take action to effect final settlement on its behalf by
delivering or receiving securities in DTC, and making or receiving payment in
accordance with normal procedures for same day funds settlement applicable to
DTC. Cedel Participants and Euroclear Participants may not deliver
instructions directly to the European Depositaries.
DTC, which is a New York-chartered limited purpose trust company, performs
services for its participants, some of which (and/or their representatives)
own DTC. In accordance with its normal procedures, DTC is expected to record
the positions held by each DTC participant in the Book-Entry Certificates,
whether held for its own account or as a nominee for another person. In
general, beneficial ownership of Book-Entry Certificates will be subject to
the Rules, as in effect from time to time.
Cedel Bank, societe anonyme, 67 Bd Grande-Duchesse Charlotte, L-1331
Luxembourg, was incorporated in 1970 as a limited company under Luxembourg
law. Cedel is owned by banks, securities dealers and financial institutions,
and currently has about 100 shareholders, including U.S. financial
institutions or their subsidiaries. No single entity may own more than five
percent of Cedel's stock.
Cedel is registered as a bank in Luxembourg, and as such is subject to
regulation by the Institute Monetaire Luxembourgeois, "IML", the Luxembourg
Monetary Authority, which supervises Luxembourg banks.
Cedel holds securities for its customers ("Cedel Participants") and
facilitates the clearance and settlement of securities transactions by
electronic book-entry transfers between their accounts. Cedel provides various
services, including safekeeping, administration, clearance and settlement of
internationally traded securities and securities lending and borrowing. Cedel
also deals with domestic securities markets in several countries through
established depository and custodial relationships. Cedel has established an
electronic bridge with Morgan Guaranty Trust as the Euroclear Operator in
Brussels to facilitate settlement of trades between systems. Cedel currently
accepts over 70,000 securities issues on its books.
Cedel's customers are world-wide financial institutions including
underwriters, securities brokers and dealers, banks, trust companies and
clearing corporations. Cedel's United States customers are limited to
securities brokers and dealers and banks. Currently, Cedel has approximately
3,000 customers located in over 60 countries, including all major European
countries, Canada, and the United States. Indirect access to Cedel is
available to other institutions which clear through or maintain a custodial
relationship with an account holder of Cedel.
Euroclear was created in 1968 to hold securities for its participants
("Euroclear Participants") and to clear and settle transactions between
Euroclear Participants through simultaneous electronic book-entry delivery
against payment, thereby eliminating the need for physical movement of
certificates and any risk from lack of simultaneous transfers of securities
and cash. Transactions may be settled in any of 29 currencies, including
United States dollars. Euroclear includes various other services, including
securities lending and borrowing and interfaces with domestic markets in
several countries generally similar to the arrangements for cross-market
transfers with DTC described above. Euroclear is operated by the Brussels,
Belgium office of Morgan Guaranty Trust Company of New York (the "Euroclear
Operator"), under contract with Euroclear Clearance Systems S.C., a Belgian
cooperative corporation (the "Cooperative"). All operations are conducted by
the Euroclear Operator, and all Euroclear securities clearance accounts and
Euroclear cash accounts are accounts with the
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Euroclear Operator, not the Cooperative. The Cooperative establishes policy
for Euroclear on behalf of Euroclear Participants. Euroclear Participants
include banks (including central banks), securities brokers and dealers and
other professional financial intermediaries. Indirect access to Euroclear is
also available to other firms that clear through or maintain a custodial
relationship with a Euroclear Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it
is regulated and examined by the Board of Governors of the Federal Reserve
System and the New York State Banking Department, as well as the Belgian
Banking Commission.
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 Euroclear, withdrawals of
securities and cash from Euroclear and receipts of payments with respect to
securities in Euroclear. All securities in Euroclear are held on a tangible
basis with attribution of specific certificates to specific securities
clearance accounts. The Euroclear Operator acts under the Terms and Conditions
only on behalf of Euroclear Participants, and has no record of or relationship
with persons holding through Euroclear Participants.
Distributions on the Book-Entry Certificates will be made on each
Distribution Date by the Trustee to DTC. DTC will be responsible for crediting
the amount of such payments to the accounts of the applicable DTC participants
in accordance with DTC's normal procedures. Each DTC participant will be
responsible for disbursing such payments to the beneficial owners of the Book-
Entry Certificates that it represents and to each Financial Intermediary for
which it acts as agent. Each such Financial Intermediary will be responsible
for distributing funds to the beneficial owners of the Book-Entry Certificates
that it represents.
Under a book-entry format, beneficial owners of the Book-Entry Certificates
may experience some delay in their receipt of payments, since such payments
will be forwarded by the Trustee to Cede. Distributions with respect to
Certificates held through Cedel or Euroclear will be credited to the cash
accounts of Cedel Participants or Euroclear Participants in accordance with
the relevant system's rules and procedures, to the extent received by the
Relevant Depositary. Such distributions will be subject to tax reporting in
accordance with relevant United States tax laws and regulations. See "Federal
Income Tax Consequences--Taxation of Regular Certificates--Taxation of Certain
Foreign Investors" and "--Backup Withholding" in the Prospectus. Because DTC
can only act on behalf of Financial Intermediaries, the ability of a
beneficial owner to pledge Book-Entry Certificates to persons or entities that
do not participate in the Depository system, or otherwise take actions in
respect of such Book-Entry Certificates, may be limited due to the lack of
physical certificates for such Book-Entry Certificates. In addition, issuance
of the Book-Entry Certificates in the book-entry form may reduce the liquidity
of such Certificates in the secondary market since certain potential investors
may be unwilling to purchase Certificates for which they cannot obtain
physical certificates.
Monthly and annual reports on the Trust will be provided to Cede, as nominee
of DTC, and may be made available by Cede to beneficial owners upon request,
in accordance with the rules, regulations and procedures creating and
affecting the Depository, and to the Financial Intermediaries to whose DTC
accounts the Book-Entry Certificates of such beneficial owners are credited.
DTC has advised the Trustee that, unless and until Definitive Certificates
are issued, DTC will take any action permitted to be taken by the holders of
the Book-Entry Certificates under the Agreement only at the direction of one
or more Financial Intermediaries to whose DTC accounts the Book-Entry
Certificates are credited, to the extent that such actions are taken on behalf
of Financial Intermediaries whose holdings include such Book-Entry
Certificates. Cedel or the Euroclear Operator, as the case may be, will take
any other action permitted to be taken by a Certificateholder under the
Agreement on behalf of a Cedel Participant or Euroclear Participant only in
accordance with its relevant rules and procedures and subject to the ability
of the Relevant Depository to effect such actions on its behalf through DTC.
DTC may take actions, at the direction of the related Participants, with
respect to some Certificates which conflict with actions taken with respect to
other Certificates.
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Definitive Certificates will be issued to beneficial owners of the Book-
Entry Certificates, or their nominees, rather than to DTC, only if (a) DTC or
GreenPoint advises the Trustee in writing that DTC is no longer willing,
qualified or able to discharge properly its responsibilities as nominee and
depository with respect to the Book-Entry Certificates and GreenPoint or the
Trustee is unable to locate a qualified successor, (b) GreenPoint, at its sole
option, with the consent of the Trustee, elects to terminate a book-entry
system through DTC or (c) after the occurrence of an event of default under
the Agreement, beneficial owners having Percentage Interests aggregating not
less than 51% of the Book-Entry Certificates advise the Trustee and DTC
through the Financial Intermediaries and the DTC participants in writing that
the continuation of a book-entry system through DTC (or a successor thereto)
is no longer in the best interests of beneficial owners.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the Trustee will be required to notify all beneficial
owners of the occurrence of such event and the availability through DTC of
Definitive Certificates. Upon surrender by DTC of the global certificate or
certificates representing the Book-Entry Certificates and instructions for re-
registration, the Trustee will issue Definitive Certificates, and thereafter
the Trustee will recognize the holders of such Definitive Certificates as
Certificateholders under the Agreement.
Although DTC, Cedel and Euroclear have agreed to the foregoing procedures in
order to facilitate transfer of Certificates among participants of DTC, Cedel
and Euroclear, they are under no obligation to perform or continue to perform
such procedures and such procedures may be discontinued at any time.
Neither the Seller or the Servicer nor the Trustee will have any
responsibility for any aspect of the records relating to or payments made on
account of beneficial ownership interests of the Book-Entry Certificates held
by Cede & Co., as nominee for DTC, or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
FEDERAL INCOME TAX CONSEQUENCES
Orrick, Herrington & Sutcliffe LLP, special counsel to the Seller, is of the
opinion that, assuming (i) the making of appropriate elections and (ii)
compliance by the Seller, the Servicer and the Trustee with all of the
provisions of the related Agreements, (a) the electing portion of the Trust
Fund will qualify, for federal income tax purposes, as a real estate mortgage
investment conduit (a "REMIC") within the meaning of Sections 860A through
860G of the Code (the "REMIC Provisions"), and (b) the Offered Certificates
evidence the "regular interests" in such REMIC and will be treated as debt
instruments for purposes of Chapter 1 of the Code (generally relating to the
calculation of a Certificateholder's tax liability), (c) the Class R
Certificates is the sole class of "residual interests" in such REMIC and (d)
the REMIC represented by the Trust Fund will not be subject to federal income
tax as a separate entity except for (i) the tax on "prohibited transactions"
imposed by Section 860F of the Code, (ii) the tax on "contributions after
startup date" imposed by Section 860G(d) of the Code and (iii) the tax on
"income on foreclosure property" imposed by Section 860G(c) of the Code,
respectively, each within the meaning of the REMIC Provisions in effect on the
date hereof. However, continuing qualification as a REMIC requires ongoing
compliance with applicable provisions of the Code, including the REMIC
provisions, and related Treasury regulations all of which are subject to
change.
The following are the currently applicable material federal income tax
consequences of the purchase, ownership and disposition of Certificates. In
addition to its opinions set forth above, Orrick, Herrington & Sutcliffe LLP
has prepared or reviewed the statements in the Prospectus and this Prospectus
Supplement under the headings "Federal Income Tax Consequences," and is of the
opinion that such statements in the Prospectus and as supplemented by such
statements in this Prospectus Supplement are correct in all material respects.
Such statements are intended as an explanatory discussion of the possible
effects of the classification of the Trust Fund as a REMIC for federal income
tax purposes on investors generally and of related tax matters affecting
investors generally, but do not purport to furnish information in the level of
detail or with the attention to an investor's
S-51
<PAGE>
specific tax circumstances that would be provided by an investor's own tax
advisor. Accordingly, each investor is urged to consult its own tax advisors
with regard to the tax consequences to it of investing in the Offered
Certificates.
The Offered Certificates will be Regular Certificates (as defined in the
Prospectus under "Federal Income Tax Consequences--REMIC Certificates"). As
such, the Offered Certificates will be treated as debt instruments for
purposes of calculating a Certificateholder's federal income tax liability.
Holders of Offered Certificates will be required to report income with respect
to such Certificates under the accrual method of accounting, regardless of
their normal tax accounting method.
Assuming in each case that a substantial amount of such Class is sold at the
price for such Class stated on the cover of this Prospectus Supplement, and
subject to the uncertainties concerning the determination of "original issue
discount" ("OID") for variable rate certificates discussed in "Federal Income
Tax Consequences--Taxation of Regular Certificates--Variable Rate
Certificates" in the Prospectus, the Offered Certificates will not be issued
with OID.
The prepayment assumption that will be used in determining the rate of
accrual of original issue discount, market discount and premium, if any, for
federal income tax purposes will be based on the assumption that, subsequent
to the date of any determination the Group I Contracts will prepay at a rate
equal to 200% of the Prepayment Assumption and the Group II Contracts will
prepay at a rate equal to 250% of the Prepayment Assumption. No representation
is made that the Contracts will prepay at that rate or at any other rate. See
"Federal Income Tax Consequences--Taxation of Regular Certificates--Original
Issue Discount" and "--Premium" in the Prospectus.
If the method for computing original issue discount described in the
Prospectus results in a negative amount for any period with respect to an
Offered Certificateholder, the amount of original issue discount allocable to
such period would be zero and such Certificateholder will be permitted to
offset such negative amount only against future original issue discount (if
any) attributable to such Certificates.
In certain circumstances OID Regulations permit the holder of a debt
instrument to recognize original issue discount under a method that differs
from that used by the issuer. Accordingly, it is possible that the holder of
an Offered Certificate may be able to select a method for recognizing original
issue discount that differs from that used by the REMIC administrator in
preparing reports to the Certificateholders and the IRS.
Certain classes of the Offered Certificates may be treated for federal
income tax purposes as having been issued at a premium. Whether any holder of
such a class of Offered Certificates will be treated as holding a certificate
with amortizable bond premium will depend on such Certificateholder's purchase
price and the distributions remaining to be made on such Certificate at the
time of its acquisition by such Certificateholder. Holders of such classes of
Certificates should consult their tax advisors regarding the possibility of
making an election to amortize such premium. See "Federal Income Tax
Consequences--Taxation of Regular Certificates" and "--Premium" in the
Prospectus.
The Offered Certificates will be treated as assets described in Section
7701(a)(19)(C) of the Code and "real estate assets" under Section 856(c)(4)(A)
of the Code generally in the same proportion that the assets of the Trust Fund
would be so treated. In addition, interest on the Offered Certificates will be
treated as "interest on obligations secured by mortgages on real property"
under Section 856(c)(3)(B) of the Code generally to the extent that such
Certificates are treated as "real estate assets" under Section 856(c)(4)(A) of
the Code. Moreover, the Certificates (other than the Residual Certificates)
will be "qualified mortgages" within the meaning of Section 860G(a)(3) of the
Code if transferred to another REMIC on its startup day in exchange for a
regular or residual interest therein. See "Description of the Certificates--
Termination of the Agreement" herein and "Federal Income Tax Consequences--
REMIC Certificates" in the Prospectus.
For further information regarding federal income tax consequences of
investing in the Offered Certificates, see "Federal Income Tax Consequences--
REMIC Certificates" in the Prospectus.
S-52
<PAGE>
ERISA CONSIDERATIONS
GENERAL
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and Section 4975 of the Code impose certain restrictions on employee benefit
or other plans that are subject to ERISA and/or Section 4975 of the Code
("Plans") and on persons who are fiduciaries with respect to such Plans. See
"ERISA Considerations" in the Prospectus.
Prospective Plan investors should consult with their legal advisors
concerning the impact of ERISA and the Code, the applicability of the
Exemption (defined below) and other administrative exemptions under ERISA and
the potential consequences in their specific circumstances, prior to making an
investment in the Certificates. Moreover, each Plan fiduciary should determine
whether under the general fiduciary standards of investment prudence and
diversification an investment in the 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.
CERTIFICATES (OTHER THAN THE CLASS R CERTIFICATES)
The Department of Labor ("DOL") has granted to Credit Suisse First Boston an
individual prohibited transaction exemption, Prohibited Transaction Exemption
("PTE") 89-90, 54 Fed. Reg. 42597 (Oct. 17, 1989) (as amended by PTE 97-34, 62
Fed. Reg. 39021 (July 21, 1997), the "Exemption") from certain of the
prohibited transaction rules of ERISA. The Exemption exempts from the
prohibitions of Sections 406(a) and 407(a) of ERISA, and the related excise
tax provisions of Section 4975 of the Code, the purchase, holding and resale
by Plans of pass-through certificates representing interests in trusts that
hold assets consisting primarily of certain receivables, loans and other
obligations that are secured and meet the general conditions summarized below.
The receivables covered by the Exemption include manufactured housing
installment sales contracts and installment loan agreements secured by
manufactured homes such as the Contracts.
Among the general conditions which must be satisfied for the Exemption to
apply to the acquisition, holding and resale by a Plan of the Offered
Certificates are the following:
(1) The acquisition of such Certificates by a Plan is on terms (including
the price for such Certificates) that are at least as favorable to the Plan
as they would be in an arm's-length transaction with an unrelated party.
(2) The rights and interests evidenced by the Certificates acquired by
the Plan are not subordinated to the rights and interests evidenced by
other Certificates of the Trust.
(3) The Certificates acquired by the Plan have received a rating at the
time of such acquisition that is in one of the three highest generic rating
categories from either S&P, Duff & Phelps Credit Rating Co. ("Duff &
Phelps"), Moody's or Fitch IBCA, Inc. ("Fitch") (the "Exemption Rating
Agencies").
(4) The Trustee is not an affiliate of the Underwriters, GreenPoint,
MBIA, any Obligor with respect to Contracts included in the Trust Fund
constituting more than 5% of the aggregate unamortized principal balance of
the assets in the Trust Fund, or any affiliate of such parties. (Such
parties, and the Trustee and its affiliates, are sometimes referred to
herein collectively as the "Restricted Group.") As of the date hereof, no
Obligor with respect to Contracts included in the Trust Fund is an Obligor
with respect to Contracts constituting more than 5% of the aggregate
unamortized principal balance of the assets of the Trust Fund.
(5) The sum of all payments made to and retained by the Underwriters in
connection with the distribution of the Certificates represents not more
than reasonable compensation for underwriting the Certificates. The sum of
all payments made to and retained by the Seller pursuant to the sale of the
Contracts to the Trust Fund represents not more than the fair market value
of such Contracts. The sum of all payments made to and retained by
GreenPoint, represents not more than reasonable compensation for
GreenPoint's services under the Agreement and reimbursement of GreenPoint's
reasonable expenses in connection therewith.
(6) The Plan is 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.
S-53
<PAGE>
In addition, the Exemption exempts from the prohibitions of Sections 406(a),
406(b) and 407(a) of ERISA, and the related excise tax provisions of Section
4975 of the Code, transactions undertaken in connection with the servicing,
management and operation of such a trust pursuant to a binding pooling and
servicing agreement, subject to the foregoing general conditions and to
certain additional requirements. The Seller believes that the Exemption will
apply to such transactions undertaken with respect to the Trust Fund and the
Contracts and that all conditions of the Exemption other than those within the
control of the investors have been or will be met.
The Exemption also exempts from the prohibition of Sections 406(b)(1) and
406(b)(2) of ERISA, and the related excise tax provisions of Section 4975 of
the Code, the direct or indirect sale, exchange or transfer of the Offered
Certificates between the Seller or the Underwriters and a Plan when the person
who has discretionary authority or renders investment advice with respect to
the investment of the Plan's assets in such Certificates (the "Fiduciary") is
(a) an obligor with respect to 5% or less of the fair market value of
Contracts in the Trust Fund or (b) an affiliate of any such person, subject to
the general conditions summarized above and to the following additional
requirements:
(1) No member of the Restricted Group is a sponsor of the Plan.
(2) In connection with the initial issuance of such Certificates, at
least 50% in Percentage Interests of such Class of Certificates is acquired
by persons independent of the Restricted Group and at least 50% of the
aggregate interest in the Trust Fund is acquired by persons independent of
the Restricted Group.
(3) The Plan's investment in the Certificates does not exceed 25% in
Percentage Interests of any Class of such Certificates outstanding at the
time of acquisition.
(4) Immediately after the acquisition of such Certificates, no more than
25% of the assets of a Plan with respect to which the Fiduciary has
discretionary authority or renders investment advice are invested in
certificates representing an interest in a trust containing assets sold or
serviced by the same entity.
The Exemption also applies to the direct or indirect acquisition or
disposition of Offered Certificates by a Plan in the secondary market if
certain conditions are met and the continued holding of Certificates acquired
in initial or secondary markets.
The Seller believes that the Exemption will apply to the acquisition and
holding of Offered Certificates by Plans and that all conditions of the
Exemption other than those within the control of the investors have been met.
In addition, as of the date hereof, no Obligor with respect to Contracts
included in the Trust constitutes more than 5% of the aggregate unamortized
principal balance of the assets of the Trust. Any Plan fiduciary who proposes
to cause a Plan to purchase such Certificates should consult with its own
counsel with respect to the potential consequences under ERISA and the Code of
the Plan's acquisition and ownership of Certificates. Assets of a Plan should
not be invested in Certificates unless it is clear that the Exemption will
apply and exempt all potential prohibited transactions. See "ERISA
Considerations" in the Prospectus.
Before purchasing a Certificate, a fiduciary of a Plan should make its own
determination as to the availability of the exemptive relief provided in the
Exemption or the availability of any other prohibited transaction exemptions,
and whether the conditions of any such exemption will be applicable to the
Certificate. Any fiduciary of a Plan considering whether to purchase an
Offered Certificate should also carefully review with its own legal advisors
the applicability of the fiduciary duty and prohibited transaction provisions
of ERISA and Section 4975 of the Code to such investment. See "ERISA
Considerations" in the Prospectus.
RATINGS
It is a condition to the issuance of the Certificates that the Offered
Certificates be rated "AAA" by S&P and "Aaa" by Moody's. 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. The
security rating of the Offered Certificates should be evaluated independently
of similar security ratings assigned to other kinds of securities. Ratings do
not address whether or not the Class II A Certificates will receive any Net
Funds Cap Carryover Amount.
S-54
<PAGE>
The ratings assigned by S&P and Moody's to pass-through certificates address
the likelihood of the receipt by the related certificateholders of their
allocable share of principal and/or interest on the underlying assets. S&P and
Moody's ratings take into consideration the credit quality of the related
underlying assets, any credit support arrangements, structural and legal
aspects associated with such certificates, and the extent to which the payment
stream on such underlying assets is adequate to make payments required by such
certificates. Among other things, a reduction in the rating of MBIA's claims-
paying ability may result in a reduction of the ratings of the Offered
Certificates. S&P and Moody's ratings on such Certificates do not, however,
constitute a statement regarding frequency of prepayments on the underlying
assets or as to whether yield may be adversely affected as a result thereof.
An explanation of the significance of such ratings may be obtained from
Standard & Poor's Ratings Services, 26 Broadway, 15th floor, New York, New
York 10004-1064, telephone (212) 208-8000 and Moody's Investors Service, Inc.,
99 Church Street, 4th floor, New York, New York 10007, telephone (212) 553-
0300.
The Seller has not requested a rating on the Offered Certificates by any
rating agency other than S&P and Moody's. However, there can be no assurance
as to whether any other rating agency will rate any or all of the Offered
Certificates, or if it did, what rating would be assigned to the Offered
Certificates by any such other rating agency. A rating on any or all of the
Offered Certificates by certain other rating agencies, if assigned at all, may
be lower than the rating assigned to such Certificates by S&P and Moody's.
LEGAL INVESTMENT
The Offered Certificates will constitute "mortgage related securities" under
the Secondary Mortgage Market Enhancement Act of 1984, as amended ("SMMEA") so
long as they are rated in the two highest categories by at least one
nationally recognized statistical rating organization and, as such, will
constitute legal investments for certain types of investors to the extent
provided in SMMEA. Such institutions should consult their own legal advisors
in determining whether and to what extent the Offered Certificates constitute
legal investments for such investors. See "Legal Investment" in the
Prospectus.
METHOD OF DISTRIBUTION
The Underwriters named below (the "Underwriters") have severally agreed,
subject to the terms and conditions of the Underwriting Agreement dated
November 17, 1998 (the "Underwriting Agreement"), between the Seller and the
Underwriters, to purchase from the Seller, the respective principal amounts of
the Certificates set forth next to its name in the table below.
<TABLE>
<CAPTION>
CLASS I A CLASS II A
CERTIFICATES CERTIFICATES
UNDERWRITERS ------------ ------------
<S> <C> <C>
Credit Suisse First Boston Corporation............... $159,326,066 $ 83,250,815
Bear, Stearns & Co. Inc. ............................ 159,324,000 83,249,000
NationsBanc Montgomery Securities LLC................ 159,324,000 83,249,000
------------ ------------
Total.............................................. $477,974,066 $249,748,815
============ ============
</TABLE>
In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all of the Certificates
offered hereby if any Certificates are purchased. In the event of default by
an Underwriter, the Underwriting Agreement provides that, in certain
circumstances, the Underwriting Agreement may be terminated.
The Seller has been advised by the Underwriters that they propose initially
to offer the Certificates to the public at the prices set forth herein, and to
certain dealers at such prices less the initial concession not in excess of
0.165% of the Class I A Principal Balance, and 0.165% of the Class II A
Principal Balance. The Underwriters may allow dealers, and such dealers may
allow, a concession not in excess of 0.125% of the Class I A Principal Balance
and 0.125% of the Class II A Principal Balance. After the initial public
offering of the Certificates, the public offering prices and such concessions
may be changed.
S-55
<PAGE>
The Underwriting Agreement provides that the Seller will indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended, or contribute to payments the Underwriters
may be required to make in respect thereof.
The Underwriters will reimburse certain expenses of the Seller.
In connection with the sale of the Certificates, the Underwriters and other
persons participating in the sale may engage in transactions that stabilize,
maintain or otherwise affect the price of the Certificates. Specifically, the
Underwriters may over-allot in connection with the sale, creating a short
position in the Certificates for their own account. To cover over-allotments
or to stabilize the price of the Certificates, the Underwriters may bid for,
and purchase, Certificates in the open market. The Underwriters may also
impose a penalty bid whereby they may reclaim selling concessions allowed to
an underwriter or a dealer for distributing the Certificates, if the
Underwriters repurchase previously distributed Certificates in transactions to
cover their short position, in stabilization transactions or otherwise.
Finally, the Underwriters may bid for, and purchase, Certificates in market
making transactions. These activities may stabilize or maintain the market
price of the Certificates above market levels that may otherwise prevail. The
Underwriters are not required to engage in these activities and may end any of
these activities at any time.
USE OF PROCEEDS
Substantially all of the net proceeds to be received from the sale of the
Certificates will be used by the Seller for general corporate purposes,
including the purchase of the Contracts and the payment of other expenses
connected with pooling the Contracts and issuing the Certificates.
LEGAL MATTERS
Certain legal matters relating to the Certificates, including legal matters
relating to material federal income tax consequences concerning the
Certificates, will be passed upon for the Seller by Orrick, Herrington &
Sutcliffe LLP, Los Angeles, California and for the Underwriters by Brown &
Wood LLP, New York, New York.
EXPERTS
The consolidated balance sheets of MBIA Insurance Corporation and
Subsidiaries as of December 31, 1997 and December 31, 1996 and the related
consolidated statements of income, changes in shareholder's equity and cash
flows for each of the three years in the period ended December 31, 1997,
incorporated by reference into this Prospectus Supplement, have been
incorporated herein in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
S-56
<PAGE>
INDEX OF SIGNIFICANT DEFINITIONS
<TABLE>
<S> <C>
Adjustment Date............................................................ S-17
Agreement.................................................................. S-13
Available Distribution Amount.............................................. S-39
Available Funds Shortfall.................................................. S-41
Beneficial Owner........................................................... S-48
Book-Entry Certificates.................................................... S-47
Cedel...................................................................... S-47
Cedel Participants......................................................... S-49
Certificate Accounts....................................................... S-35
Certificate Insurance Policy............................................... S-43
Certificate Owners......................................................... S-47
Certificates............................................................... S-12
Class I A Pass-Through Rate................................................ S-35
Class II A Formula Rate.................................................... S-35
Class II A Pass-Through Rate............................................... S-35
Closing Date............................................................... S-12
CMAC....................................................................... S-26
CMT........................................................................ S-17
Collection Period.......................................................... S-29
Company.................................................................... S-26
Contract................................................................... S-12
Contract Files............................................................. S-36
Contract Group............................................................. S-12
Contract Pool.............................................................. S-13
Contract Rate.............................................................. S-13
Contract Schedule.......................................................... S-36
Cooperative................................................................ S-49
Cut-off Date............................................................... S-12
Cut-off Date Pool Principal Balance........................................ S-42
Definitive Certificate..................................................... S-48
Determination Date......................................................... S-39
Distribution Date.......................................................... S-35
DOL........................................................................ S-53
DTC........................................................................ S-47
Due Date................................................................... S-29
Eligible Institution....................................................... S-39
Eligible Investments....................................................... S-39
Eligible Substitute Contract............................................... S-39
Enhancement Payment........................................................ S-43
ERISA...................................................................... S-53
Euroclear.................................................................. S-47
Euroclear Operator......................................................... S-49
Euroclear Participants..................................................... S-49
European Depositaries...................................................... S-48
Excess Contract Payment.................................................... S-40
Exemption.................................................................. S-53
Exemption Rating Agencies.................................................. S-53
FDIC....................................................................... S-39
Fiduciary.................................................................. S-54
Financial Intermediary..................................................... S-48
Formula Principal Distribution Amount...................................... S-42
GAAP....................................................................... S-27
</TABLE>
S-57
<PAGE>
<TABLE>
<S> <C>
Global Securities.......................................................... I-1
GreenPoint................................................................. S-12
Gross Margin............................................................... S-17
Group I Available Funds Shortfall.......................................... S-41
Group II Available Funds Shortfall......................................... S-41
Group I Certificate Account................................................ S-35
Group II Certificate Account............................................... S-35
Group I Contract........................................................... S-12
Group II Contract.......................................................... S-12
Group I Structuring Assumptions............................................ S-31
Group II Structuring Assumptions........................................... S-32
IML........................................................................ S-49
Index...................................................................... S-17
Insurance Agreement........................................................ S-43
Initial Principal Balance.................................................. S-35
Interest Distribution Amount............................................... S-40
Interest Period............................................................ S-40
LIBOR...................................................................... S-35
LIBOR Business Day......................................................... S-36
LIBOR Determination Date................................................... S-36
Liquidated Contract........................................................ S-42
Liquidation Expenses....................................................... S-40
Liquidation Proceeds....................................................... S-42
LTV........................................................................ S-12
Maximum Cap................................................................ S-17
MBIA....................................................................... S-26
MBIA Default............................................................... S-47
Minimum Cap................................................................ S-17
Minimum Termination Amount................................................. S-45
Monthly Advance............................................................ S-44
Monthly Servicing Fee...................................................... S-47
Monthly Servicing Fee Rate................................................. S-47
Net Contract Rate.......................................................... S-36
Net FundsCap............................................................... S-36
Net FundsCap Carryover Amount.............................................. S-42
Nonrecoverable Advance..................................................... S-44
Offered Certificates....................................................... S-41
OID........................................................................ S-52
Optional Termination Date.................................................. S-35
Percentage Interest........................................................ S-35
Periodic Cap............................................................... S-17
Plans...................................................................... S-53
Pool Scheduled Principal Balance........................................... S-42
Prepayment Model........................................................... S-30
Principal Balance.......................................................... S-41
PTE........................................................................ S-53
Record Date................................................................ S-35
Relevant Depositary........................................................ S-48
REMIC...................................................................... S-51
REMIC Provisions........................................................... S-51
Replaced Contract.......................................................... S-39
Restricted Group........................................................... S-53
Rules...................................................................... S-48
SAP........................................................................ S-27
</TABLE>
S-58
<PAGE>
<TABLE>
<S> <C>
Scheduled Principal Balance................................................ S-42
Seller..................................................................... S-12
Servicer................................................................... S-12
SMMEA...................................................................... S-55
Special Account............................................................ S-43
Telerate Page 3750......................................................... S-36
Terms & Conditions......................................................... S-50
Trust...................................................................... S-35
Trust Fund................................................................. S-35
Trustee.................................................................... S-13
U.S. Person................................................................ I-4
Underwriters............................................................... S-55
Underwriting Agreement..................................................... S-55
Value...................................................................... S-12
Weighted Average Maximum Cap............................................... S-42
Weighted Average Net Contract Rate......................................... S-36
</TABLE>
S-59
<PAGE>
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND
TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered GreenPoint
Manufactured Housing Contract Trust Pass-Through Certificates, Series 1998-1
(the "Global Securities") will be available only in book-entry form. Investors
in the Global Securities may hold such Global Securities through any of DTC,
Cedel or Euroclear. The Global Securities will be tradable as home market
instruments in both the European and U.S. domestic markets. Initial settlement
and all secondary trades will settle in same-day funds.
Secondary market trading between investors holding Global Securities through
Cedel and Euroclear will be conducted in the ordinary way in accordance with
their normal rules and operating procedures and in accordance with
conventional eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities through
DTC will be conducted according to the rules and procedures applicable to U.S.
corporate debt obligations.
Secondary cross-market trading between Cedel or Euroclear and DTC
Participants holding Certificates will be effected on a delivery-against-
payment basis through the respective Depositaries of Cedel and Euroclear (in
such capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be subject
to U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing
organizations or their participants.
INITIAL SETTLEMENT
All Global Securities will be held in book-entry form by DTC in the name of
Cede & Co. as nominee of DTC. Investors' interests in the Global Securities
will be represented through financial institutions noting on their behalf as
direct and indirect Participants in DTC. As a result, Cedel and Euroclear will
hold positions on behalf of their participants through their respective
Depositaries, which in turn will hold such positions in accounts as DTC
Participants.
Investors electing to hold their Global Securities through DTC will follow
the settlement practices applicable conventional eurobonds, except that there
will be no temporary global security and no "lock-up" or restricted period.
Investors securities custody accounts will be credited with their holdings
against payment in same-day funds on the settlement date.
Investors electing to hold their Global Securities through Cedel or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global security
and no "lock-up" restricted period. Global Securities will be credited to the
securities custody accounts on the settlement date against payment same-day
funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired
value date.
Trading between DTC Participants. Secondary market trading between DTC
Participants will be settled using the procedures applicable to prior
manufactured housing contract pass-through certificates issues in same-day
funds.
I-1
<PAGE>
Trading between Cedel and/or Euroclear Participants. Secondary market
trading between Cedel Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
Trading between DTC seller and Cedel or Euroclear purchaser. When Global
Securities are to be transferred from the account of a DTC Participant to the
account of a Cedel Participant or a Euroclear Participant, the purchaser will
send instructions to Cedel or Euroclear through a Cedel Participant or
Euroclear Participant at least one business day prior to settlement. Cedel or
Euroclear will instruct the respective Depositary, as the case may be, to
receive the Global Securities against payment. Payment will include interest
accrued on the Global Securities from and including the last coupon payment
date to and excluding the settlement date, on the basis of the actual number
of days in such accrual period and a year assumed to consist of 360 days. For
transactions settling on the 31st of the month, payment will include interest
accrued to and excluding the first day of the following month. Payment will
then be made by the respective Depositary of the DTC Participant's account
against delivery of the Global Securities. After settlement has been
completed, the Global Securities will be credited to the respective clearing
system and by the clearing system, in accordance with its usual procedures, to
the Cedel Participant's or Euroclear Participant's account. The securities
credit will appear the next day (European time) and the cash debt will be
back-valued to, and the interest on the Global Securities will accrue from,
the value date (which would be the preceding day when settlement occurred in
New York). If settlement is not completed on the intended value date (i.e.,
the trade fails), the Cedel or Euroclear cash debt will be valued instead as
of the actual settlement date.
Cedel Participants and Euroclear Participants will need to make available to
the respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to preposition funds for
settlement, either from cash on hand or existing lines of credit, as they
would for any settlement occurring within Cedel or Euroclear. Under this
approach, they may take on credit exposure to Cedel or Euroclear until the
Global Securities are credited to their accounts one day later.
As an alternative, if Cedel or Euroclear has extended a line of credit to
them, Cedel Participants or Euroclear Participants can elect not to
preposition funds and allow that credit line to be drawn upon the finance
settlement. Under this procedure, Cedel Participants or Euroclear Participants
purchasing Global Securities would incur overdraft charges for one day,
assuming they cleared the overdraft when the Global Securities were credited
to their accounts. However, interest on the Global Securities would accrue
from the value date. Therefore, in many cases the investment income on the
Global Securities earned during that one-day period may substantially reduce
or offset the amount of such overdraft charges, although this result will
depend on each Cedel Participant's or Euroclear Participant's particular cost
of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Securities
to the respective European Depositary for the benefit of Cedel Participants or
Euroclear Participants. The sale proceeds will be available to the DTC seller
on the settlement date. Thus, to the DTC Participants a cross-market
transaction will settle no differently than a trade between two DTC
Participants.
Trading between Cedel or Euroclear Seller and DTC Purchaser. Due to time
zone differences in their favor, Cedel Participants and Euroclear Participants
may employ their customary procedures for transactions in which Global
Securities are to be transferred by the respective clearing system, through
the respective Depositary, to a DTC Participant. The seller will send
instructions to Cedel Participants or Euroclear Participants through a Cedel
Participant or Euroclear Participant at least one business day prior to
settlement. In these cases Cedel or Euroclear will instruct the respective
Depositary, as appropriate, to deliver the Global Securities to the DTC
Participant's account against payment. Payment will include interest accrued
on the Global Securities from and including the last coupon payment to and
excluding the settlement date on the basis of either the actual number of days
in such accrual period and a year assumed to consist of 360 days or a 360-day
year of twelve 30-day months, as applicable to the related class of Global
Securities. For transactions settling on the 31st of the month, payment will
include interest accrued to and excluding the first day of the following
month. The payment will then be reflected in the account of the Cedel
Participant or Euroclear Participant the following day, and
I-2
<PAGE>
receipt of the cash proceeds in the Cedel Participant's or Euroclear
Participant's account would be back-valued to the value date (which would be
the preceding day, when settlement occurred in New York). Should the Cedel
Participant or Euroclear Participant have a line of credit with its respective
clearing system and elect to be in debt in anticipation of receipt of the sale
proceeds in its account, the back-valuation will extinguish any overdraft
incurred over that one-day period. If settlement is not completed on the
intended value date (i.e., the trade fails), receipt of the cash proceeds in
the Cedel Participant's or Euroclear Participant's account would instead be
valued as of the actual settlement date.
Finally, day traders that use Cedel or Euroclear and that purchase Global
Securities from DTC Participants for delivery to Cedel Participants or
Euroclear Participants should note that these trades would automatically fail
on the sale side unless affirmative action were taken. At least three
techniques should be readily available to eliminate this potential problem:
(a) borrowing through Cedel or Euroclear for one day (until the purchase
side of the day trade is reflected in their Cedel or Euroclear accounts) in
accordance with the clearing system's customary procedures;
(b) borrowing the Global Securities in the U.S. from a DTC Participant no
later than one day prior to settlement, which would give the Global
Securities sufficient time to be reflected in their Cedel or Euroclear
account in order to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the trade so
that the value date for the purchase from the DTC Participant is at least
one day prior to the value date for the sale to the Cedel Participant or
Euroclear Participant.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Securities holding securities through Cedel or
Euroclear (or through DTC if the holder has an address outside the U.S.) will
be subject to the 30% U.S. withholding tax that generally applies to payments
of interest (including original issue discount) on registered debt issued by
U.S. Persons, unless, under currently applicable laws, (i) each clearing
system, bank or other financial institution that holds customers' securities
in the ordinary course of its trade or business in the chain of intermediaries
between such beneficial owner and the U.S. entity required to withhold tax
complies with applicable certification requirements and (ii) such beneficial
owner takes one of the following steps to obtain an exemption or reduced tax
rate:
Exemption for non-U.S. Persons (Form W-8). Beneficial owners of Global
Securities that are non-U.S. Persons can obtain a complete exemption from the
withholding tax by filing a signed Form W-8 (Certificate of Foreign Status).
If the information shown on Form W-8 changes, a new Form W-8 must be filed
within 30 days of such change.
Exemption for non-U.S. Persons with effectively connected income (Form
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a U.S.
branch, for which the interest income is effectively connected with its
conduct of a trade or business in the United States, can obtain an exemption
from the withholding tax by filing Form 4224 (Exemption from Withholding of
Tax on Income Effectively Connected with the Conduct of a Trade or Business in
the United States).
Exemption or reduced rate for non-U.S. Persons resident in treaty countries
(Form 1001). Non-U.S. Persons that are Certificate Owners residing in a
country that has a tax treaty with the United States can obtain an exemption
or reduced tax rate (depending on the treaty terms) by filing Form 1001
(Ownership, Exemption or Reduced Rate Certificate). If the treaty provides
only for a reduced rate, withholding tax will be imposed at that rate unless
the filer alternatively files Form W-8. Form 1001 may be filed by the
Certificate Owner or his agent.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a complete
exemption from the withholding tax by filing Form W-9 (Payer's Request for
Taxpayer Identification Number and Certification).
I-3
<PAGE>
U.S. Federal Income Tax Reporting Procedure. The Certificate Owner of a
Global Security or, in the case of a Form 1001 or a Form 4224 filer, his
agent, files by submitting the appropriate form to the person through whom it
holds (the clearing agency, in the case of persons holding directly on the
books of the clearing agency). Form W-8 and Form 1001 are effective for three
calendar years and Form 4224 is effective for one calendar year. The term
"U.S. Person" means (i) a citizen or resident of the United States, (ii) a
corporation or partnership organized in or under the laws of the United
States, any State thereof or the District of Columbia, or (iii) an estate or
trust the income of which is includible in gross income for United States tax
purposes, regardless of its source. This summary does not deal with all
aspects of U.S. Federal income tax withholding that may be relevant to foreign
holders of the Global Securities. Investors are advised to consult their own
tax advisors for specific tax advice concerning their holding and disposing of
the Global Securities. Further, the U.S. Treasury Department has recently
finalized new regulations that will revise some aspects of the current system
for withholding on amounts paid to foreign persons. Under these regulations,
interest or OID paid to a nonresident alien would continue to be exempt from
U.S. withholding taxes (including backup withholding) provided that the holder
complies with the new certification procedures.
I-4
<PAGE>
PROSPECTUS
GREENPOINT CREDIT CORP., SELLER AND SERVICER
MANUFACTURED HOUSING CONTRACT TRUST PASS-THROUGH CERTIFICATES
(ISSUABLE IN SERIES)
Manufactured Housing Pass-Through Certificates ("Certificates") of one or
more series (each, a "Series") may be sold from time to time under this
Prospectus and a Prospectus Supplement for each such Series. The Certificates
of each Series may be issued in one or more classes or subclasses (each, a
"Class"), as further described herein. If the Certificates of a Series are
issued in more than one Class, all or less than all of such Classes may be
sold under this Prospectus, and there may be separate Prospectus Supplements
for one or more of such Classes so sold. Any reference herein to the
Prospectus Supplement relating to a Series comprised of more than one Class
should be understood to refer to each of the Prospectus Supplements relating
to the Classes sold hereunder.
The Certificates of each Series will represent interests, as specified in
the related Prospectus Supplement, in a trust fund (a "Trust Fund") created by
GreenPoint Credit Corp. ("GreenPoint" or the "Seller").
For the Index of defined terms, see page 76 herein.
CERTAIN FACTORS SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE
CERTIFICATES. SEE "RISK FACTORS" HEREIN AT PAGE 10 AND IN THE RELATED
PROSPECTUS SUPPLEMENT AT PAGE S-9.
THE CERTIFICATES WILL NOT REPRESENT INTERESTS IN OR OBLIGATIONS OF
GREENPOINT OR, UNLESS OTHERWISE SPECIFIED IN THE RELATED PROSPECTUS
SUPPLEMENT, ANY OF ITS AFFILIATES. THE CERTIFICATES WILL NOT BE INSURED OR
GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY, THE UNDERWRITER OR
ANY OF ITS AFFILIATES, GREENPOINT OR (EXCEPT AS OTHERWISE SPECIFIED IN THE
RELATED PROSPECTUS SUPPLEMENT) ANY OF ITS AFFILIATES. EXCEPT AS OTHERWISE
SPECIFIED IN THE RELATED PROSPECTUS SUPPLEMENT, THE COLLECTIONS ON THE
CONTRACTS WILL CONSTITUTE THE ONLY SOURCE OF FUNDS FOR PAYMENT ON THE
CERTIFICATES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
This Prospectus may not be used to consummate sales of Certificates unless
accompanied by a Prospectus Supplement.
The date of this Prospectus is November 17, 1998.
<PAGE>
The Trust Fund for each Series of Certificates will be separate from the
Trust Fund for any other Series of Certificates. Each Trust Fund will include
a pool (each, a "Contract Pool") of manufactured housing installment sales
contracts and installment loan agreements (the "Contracts") together with
certain contract rights and other rights relating to such Contracts.
GreenPoint will act as the servicer of the Contracts in each Trust Fund
(together with any successor servicer appointed as described herein, the
"Servicer").
The Contracts comprising each Contract Pool will be conveyed to the relevant
Trust Fund by the Seller. Each Contract will have been either (i) originated
or purchased by the Seller, in each case on an individual basis in the
ordinary course of its business or (ii) purchased by the Seller in bulk from
other lenders or finance companies (including from Bank of America, FSB in the
Acquisition (as defined herein)), from governmental agencies or
instrumentalities or from other entities. Interests in each Trust Fund will be
evidenced by a separate Series of Certificates.
If a Series of Certificates is comprised of more than one Class, the related
Prospectus Supplement will set forth the interest in the applicable Trust Fund
represented by each Class sold hereunder. The timing of distributions of
principal or of interest or of both to the holders of Certificates of such
Classes may be on a sequential, pro-rata or other basis as specified in the
related Prospectus Supplement. In addition, if specified in the related
Prospectus Supplement, the rights of the holders of the Certificates of one or
more Classes of a multiple-Class Series to receive distributions with respect
to some or all of the assets of the related Trust Fund may be subordinate to
such rights of the holders of the Certificates of one or more other Classes.
Neither the Seller nor any of its affiliates will have any obligations with
respect to any Series of Certificates except, in the case of the Seller, for
obligations arising from certain representations and warranties with respect
to the Contracts sold by it in the related Contract Pool and, in the case of
the Servicer, for certain contractual servicing obligations, each as further
described herein. See "Risk Factors--No Recourse" herein.
To the extent specified in the related Prospectus Supplement, the holders of
the Certificates of any Series, or of one or more Classes within a Series, may
be entitled to the benefit of overcollateralization or subordination of one or
more Classes of Certificates within such Series, one or more spread accounts
or other reserve funds, one or more letters of credit, one or more surety
bonds or other credit facilities and/or one or more certificate purchase
agreements or other liquidity facilities. See "Credit and Liquidity
Enhancement" herein and the related Prospectus Supplement.
If so specified in the applicable Prospectus Supplement, the Certificates of
a Series or of any Class within a Series will be issuable in the form of one
or more global certificates represented by book-entries on the records of a
depository or participating members thereof. See "Reports to
Certificateholders," "Risk Factors," and "Description of the Certificates--
Global Certificates" herein and the related Prospectus Supplement.
There will have been no public market for any Certificates sold hereunder
prior to the offering thereof and there is no assurance that any such market
will develop. The Underwriters named in the Prospectus Supplement relating to
a Series may from time to time buy and sell Certificates of such Series, but
there can be no assurance that an active secondary market therefor will
develop, and there is no assurance that any such market, if established, will
continue. See "Risk Factors--Limited Liquidity" herein.
An election may be made to cause the Trust Fund relating to a Series of
Certificates to be treated as a real estate mortgage investment conduit (a
"REMIC") for federal income tax purposes. See "Federal Income Tax
Consequences" herein.
ii
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
With respect to any Class of Certificates that is supported by a guarantee
of GreenPoint Financial Corp. ("GFC"), GFC's Annual Report on Form 10-K for
the year ended December 31, 1997 and Quarterly Reports on form 10-Q for the
periods ended March 31 and June 30, 1998, which have been filed with the
Commission, are hereby incorporated by reference in this Prospectus and the
related Prospectus Supplement.
All reports and other documents filed by the Servicer with respect to the
Trust Fund for any Series of Certificates, pursuant to Section 13(a), 13(c),
14 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") subsequent to the date of this Prospectus and prior to the termination
of the offering of the Certificates of such Series shall be deemed to be
incorporated by reference into this Prospectus and to be made a part hereof.
All reports and other documents filed by the GFC pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offering of the Certificates of
such Series shall be deemed to be incorporated by reference into this
Prospectus and the Prospectus Supplement relating to a Class of Certificates
that is supported by a guarantee of GFC, and to be a part thereof from the
respective dates of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as modified or superseded, to
constitute a part of this Prospectus.
Upon request by any person to whom this Prospectus and the applicable
Prospectus Supplement are delivered in connection with the offering of one or
more Classes of Certificates, the Servicer will provide or cause to be
provided without charge a copy of any such documents and/or reports
incorporated herein by reference, in each case to the extent such documents or
reports relate to such Classes of Certificates, other than the exhibits to
such documents (unless such exhibits are specifically incorporated by
reference in such documents). Requests to the Servicer should be directed
orally or in writing to GreenPoint Credit Corp., telephone number (212) 834-
1000. The Seller has determined that its financial statements are not material
to the offering of any Certificates.
iii
<PAGE>
ADDITIONAL INFORMATION
This Prospectus contains, and the Prospectus Supplement for each Series of
Certificates will contain, a summary of certain material terms of certain of
the documents referred to herein and therein, but neither contains or will
contain all of the information set forth in the Registration Statement of
which this Prospectus is a part (the "Registration Statement"). For further
information, reference is made to such Registration Statement and the exhibits
thereto which the Seller has filed with the Securities and Exchange Commission
(the "Commission"), Washington, D.C., under the Securities Act. Statements
contained in this Prospectus and any Prospectus Supplement describing a
provision of any contract or other document referred to are summaries, and if
this Prospectus or such Prospectus Supplement indicates that such contract or
other document has been filed as an exhibit to the Registration Statement,
reference is made to the copy of the contract or other document filed as an
exhibit. Copies of the Registration Statement can be inspected and, upon
payment of the Commission's prescribed charges, copies can be obtained at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the Commission's following regional
offices: Northeast Regional Office, 7 World Trade Center, Suite 1300, New
York, New York 10048; and Midwest Regional Office, Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. The Commission maintains
a web site at http://www.sec.gov that contains reports and other documents
filed by registrants electronically with the Commission.
REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates (as defined herein) with respect to
a Trust Fund are issued, monthly and annual reports, which contain unaudited
information concerning the Trust Fund and are prepared by the Servicer, will
be sent on behalf of the Trust Fund to Cede & Co. ("Cede"), as nominee of The
Depository Trust Company ("DTC") and registered holder of the Certificates
offered hereby, pursuant to the Agreement (as defined herein). See
"Description of the Certificates--Global Certificates." Such reports will not
constitute financial statements prepared in accordance with generally accepted
accounting principles. The Agreement will not require the sending of, and the
Seller does not intend to send, any of its financial reports to registered
holders (the "Certificateholders") of the Certificates offered hereby or to
owners (the "Certificate Owners") of beneficial interests in the Certificates.
The Servicer will file with the Commission such periodic reports with respect
to the Trust Fund as are required under the Exchange Act, and the rules and
regulations of the Commission thereunder. If the number of Certificateholders
of record is below 300, the Certificates may cease to be subject to the
periodic reporting requirements of the Exchange Act. In that case, the
Servicer may cease to file such reports with the Commission. The Trustee
would, however, continue to provide periodic reports to Certificateholders as
and to the extent described in the Prospectus Supplement.
iv
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
IN
PROSPECTUS
----------
<S> <C>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.................... iii
ADDITIONAL INFORMATION............................................. iv
REPORTS TO CERTIFICATEHOLDERS...................................... iv
SUMMARY OF TERMS................................................... 1
RISK FACTORS....................................................... 10
THE CONTRACT POOLS................................................. 14
THE PRE-FUNDING ACCOUNT............................................ 16
THE SELLER......................................................... 17
THE ACQUISITION.................................................... 17
LOAN ORIGINATIONS.................................................. 17
UNDERWRITING PRACTICES............................................. 17
SERVICING.......................................................... 20
PREPAYMENT AND YIELD CONSIDERATIONS................................ 20
PREPAYMENT CONSIDERATIONS.......................................... 20
YIELD CONSIDERATIONS............................................... 21
DESCRIPTION OF THE CERTIFICATES.................................... 22
GENERAL............................................................ 22
CONVEYANCE OF CONTRACTS............................................ 23
PAYMENTS ON CONTRACTS.............................................. 24
DISTRIBUTIONS ON CERTIFICATES...................................... 24
GLOBAL CERTIFICATES................................................ 26
DTC'S YEAR 2000 EFFORTS............................................ 28
OPTIONAL AND MANDATORY REPURCHASE OF CERTIFICATES; OPTIONAL
TERMINATION AND TERMINATION AUCTION............................... 28
TERMINATION OF THE AGREEMENT....................................... 29
COLLECTION AND OTHER SERVICING PROCEDURES.......................... 30
SERVICING COMPENSATION AND PAYMENT OF EXPENSES; CERTAIN MATTERS
REGARDING THE SERVICER............................................ 30
AMENDMENT.......................................................... 32
THE TRUSTEE........................................................ 33
INDEMNIFICATION.................................................... 33
CREDIT AND LIQUIDITY ENHANCEMENT................................... 34
SUBORDINATION...................................................... 34
RESERVE FUNDS...................................................... 36
CREDIT FACILITIES.................................................. 36
LIQUIDITY FACILITIES............................................... 37
FEDERAL INCOME TAX CONSEQUENCES.................................... 37
</TABLE>
<TABLE>
<CAPTION>
PAGE
IN
PROSPECTUS
----------
<S> <C>
REMIC ELECTIONS..................................................... 38
REMIC CERTIFICATES.................................................. 38
TAXATION OF REGULAR CERTIFICATES.................................... 41
TREATMENT OF CERTIFICATES REPRESENTING A REMIC REGULAR INTEREST
COUPLED WITH A SWAP OR CAP CONTRACT................................ 49
TAXATION OF RESIDUAL CERTIFICATES................................... 50
NON-REMIC TRUSTS.................................................... 58
OWNER TRUST CERTIFICATES OR NOTES................................... 61
TREATMENT OF THE OWNER TRUST CERTIFICATES OR NOTES AS DEBT.......... 62
TREATMENT OF THE OWNER TRUST........................................ 62
TREATMENT OF THE OWNER TRUST CERTIFICATES OR NOTES.................. 63
OTHER TAX CONSEQUENCES.............................................. 64
RESTRICTIONS ON TRANSFER OF REMIC RESIDUAL CERTIFICATES............. 64
TAX-EXEMPT INVESTORS................................................ 64
LEGAL INVESTMENT.................................................... 64
ERISA CONSIDERATIONS................................................ 65
CERTAIN LEGAL ASPECTS OF THE CONTRACTS.............................. 67
THE CONTRACTS (OTHER THAN LAND HOME AND LAND-IN-LIEU CONTRACTS).... 67
LAND HOME AND LAND-IN-LIEU CONTRACTS................................ 70
CERTAIN MATTERS RELATING TO INSOLVENCY.............................. 72
CONSUMER PROTECTION LAWS............................................ 72
TRANSFERS OF MANUFACTURED HOMES; ENFORCEABILITY OF RESTRICTIONS ON
TRANSFER.......................................................... 73
APPLICABILITY OF USURY LAWS......................................... 73
RATINGS............................................................. 74
METHOD OF DISTRIBUTION.............................................. 74
USE OF PROCEEDS..................................................... 75
LEGAL MATTERS....................................................... 75
EXPERTS............................................................. 75
INDEX OF SIGNIFICANT DEFINITIONS.................................... 76
</TABLE>
v
<PAGE>
SUMMARY OF TERMS
This section is provided only as a summary of the detailed information
appearing elsewhere in this Prospectus and the information with respect to each
Series of Certificates contained in the related Prospectus Supplement.
Reference is made to the "Index of Significant Definitions" herein beginning at
page 95 for the location in this Prospectus of the definitions of certain
terms.
Title of Certificates....... Manufactured Housing Contract Trust Pass-Through
Certificates (Issuable in Series).
Issuer...................... The Trust, a Grantor Trust or an Owner Trust as
specified in the related prospectus supplement.
Seller...................... GreenPoint Credit Corp. ("GreenPoint").
Servicer.................... GreenPoint (together with any successor servicer
under the Agreement (as defined herein), the
"Servicer").
Risk Factors................ Certain risk factors are particularly relevant to
a decision to invest in any Certificates sold
hereunder. See "Risk Factors" herein.
The Contracts............... The Certificates of any Series will represent
undivided ownership interest in a pool (a
"Contract Pool") of certain manufactured housing
installment sales contracts and installment loan
agreements (each, a "Contract" and, collectively,
the "Contracts"). Contracts comprising a Contract
Pool will have been either (i) originated or
purchased by the Seller, in each case on an
individual basis in the ordinary course of its
business or (ii) purchased by the Seller in bulk
from other lenders or finance companies
(including from Bank of America, FSB in the
Acquisition (as defined herein) and including
from lenders and finance companies with whom
GreenPoint may have or may establish referral
arrangements), from governmental agencies or
instrumentalities or from other entities. Each
Contract will be secured by a new or used
manufactured home (each manufactured home
securing a Contract being referred to herein as a
"Manufactured Home") and, in certain cases, by a
mortgage, deed of trust or other instrument
securing the real estate on which the
Manufactured Home is located ("Land Home" or
"Land-in-Lieu Contract"). If so specified in the
related Prospectus Supplement, none of the
Contracts or collections thereon will be insured
or guaranteed by any governmental agency or
instrumentality. The applicable Prospectus
Supplement will specify if any of the related
Contracts are Land Home or Land-in-Lieu Contracts
and whether the annual percentage rate ("Contract
Rate") for each such Contract is fixed, is
variable or increases ("steps up") in specified
increments on certain dates. The Prospectus
Supplement relating to each Series of
Certificates will provide information as of the
first day of the month of initial issuance of
such Certificates (the "Cut-off Date") with
respect to, among other things, (i) the number,
the aggregate unpaid principal balance, and the
range of outstanding principal balances of the
Contracts comprising the related Contract Pool;
(ii) the weighted average of the Contract Rates
("Weighted Average Contract Rate") of the
Contracts and the distribution of Contract
1
<PAGE>
Rates as of the related Cut-off Date; (iii) the
weighted average original and remaining terms to
maturity of the Contracts and the distribution of
remaining terms to maturity; (iv) the average
outstanding principal balance of the Contracts;
(v) the geographical distribution of the related
Manufactured Homes at origination; (vi) the years
of origination of the Contracts; (vii) the
distribution of original principal balances of
the Contracts; (viii) the percentage amount of
Contracts secured by new or used Manufactured
Homes; (ix) the range of and weighted average
loan-to-value ratios at origination; and (x) the
month and year in which the final scheduled
payment date for the Contract with the latest
maturity is scheduled to occur. No more than a
maximum of 5% of the Contracts (measured by
aggregate principal balance of the assets in the
Contract Pool), as described herein and the
related prospectus supplement, as of the Cut-off
Date, may deviate from the characteristics of the
assets in the Contract Pool as of the Cut-off
Date. If a Contract Pool contains Step-Up Rate
Contracts (as defined herein), the related
Prospectus Supplement will specify the percentage
of the Contract Pool comprised of such Contracts,
the period during which the Contract Rates for
such Contracts will be stepped up, the range of
increases in such Contract Rates and the range of
increases in the Scheduled Payments (as defined
herein) for such Contracts. If a Contract Pool
contains variable rate Contracts, the related
Prospectus Supplement will contain a description
of the basis on which such rates are determined,
including any maximum or minimum rates and the
frequency with which any such rate adjusts. The
Prospectus Supplement relating to a Series of
Certificates also will contain certain
information about Contracts in the related Trust
Fund that are Land Home Contracts (as defined
herein), Land-in-Lieu Contracts (as defined
herein) or Contracts that are partially
guaranteed by the Veterans Administration or
partially insured by the Federal Housing
Administration. To the extent that the Seller
believes such information to be material, any
Prospectus Supplement may also include additional
information concerning the related Contract Pool
that is stored in the electronic data processing
system of the Seller.
Pre-Funding Account......... In addition, if so specified in the related
Prospectus Supplement, additional Contracts may
be purchased from GreenPoint during the Pre-
Funding Period as defined in the related
Prospectus Supplement, from funds on deposit in a
Pre-Funding Account, as defined in the related
Prospectus Supplement. See "The Contract Pool"
herein.
Description of
Certificates................ Each Series of Certificates will be issued
pursuant to a pooling and servicing agreement
(each, an "Agreement") entered into by GreenPoint
as Seller and as Servicer, the trustee specified
in the related Prospectus Supplement (the
"Trustee"), and such other parties, if any, as
may be specified in the related Prospectus
Supplement. The Certificates of a Series may be
issued in one or more classes or subclasses (each
referred to in this Prospectus as a "Class"). If
the Certificates of a Series are issued in more
than one Class, the Certificates of all or less
than all of such Classes may be
2
<PAGE>
sold under this Prospectus, and there may be
separate Prospectus Supplements relating to one
or more of such Classes so sold. Any reference
herein to the Prospectus Supplement relating to a
Series comprised of more than one Class should be
understood to refer to each of the Prospectus
Supplements relating to the Classes of such
Series sold hereunder. Any reference herein to
the Certificates of a Class should be understood
as a reference to the Certificates of a Class
within a Series, the Certificates of a subclass
within a Class or all of the Certificates of a
single-Class Series, as the context may require.
The Certificates of each Series will evidence an
interest, as specified in the related Prospectus
Supplement, in a trust fund (a "Trust Fund")
created by the Seller pursuant to an Agreement.
Each Trust Fund will include a Contract Pool
together with certain contract rights and other
rights relating to such Contracts (as discussed
below). Each Trust Fund may from time to time
also include title to any Manufactured Home that
is repossessed following a Contract default,
hazard insurance claims and proceeds from the
sale of any such Manufactured Home or such hazard
insurance claims. The Contracts comprising each
Contract Pool will be sold to the related Trust
Fund by the Seller.
Non-Recourse Obligations.... The Certificates will not represent interests in
or obligations of GreenPoint or, if so specified
in the related Prospectus Supplement, any of its
affiliates. The Certificates will not be insured
or guaranteed by any governmental agency or
instrumentality, the Underwriter or any of its
affiliates, GreenPoint or (except as otherwise
specified in the related Prospectus Supplement)
any of its affiliates. Except as otherwise
specified in the related Prospectus Supplement,
the collections on the Contracts will constitute
the only source of funds for payment on the
Certificates.
Distributions on
Certificates................ All Certificates will entitle the holders thereof
to distributions, on the dates specified in the
related Prospectus Supplement (each, a
"Distribution Date"), from amounts collected on
the underlying Contracts. The Certificates of a
Class may entitle the holders thereof to (a)
distributions of both principal and interest, (b)
distributions of principal only or (c)
distributions of interest only. Such
distributions will be made in accordance with a
formula described in the related Prospectus
Supplement, and, if so specified in such
Prospectus Supplement, distributions allocable to
a Class of Certificates will be applied first to
interest, if any, and second to principal, if
any. To the extent specified in the related
Prospectus Supplement, the rights of the holders
of the Certificates of one or more Classes of a
multiple-Class Series to receive distributions of
principal or of interest or both from amounts
collected on the Contracts may be subordinate to
such rights of the holders of Certificates of one
or more other Classes. See "Credit and Liquidity
Enhancement" herein and the applicable Prospectus
Supplement.
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A. Distributions of
Principal................... If the Certificates of a Class entitle the holders
thereof to distributions of principal, the related
Prospectus Supplement will specify an initial
aggregate principal balance for the Certificates
of the Class (the related "Certificate Balance")
and a method of computing the amount of principal,
if any, to be distributed to the holders of such
Certificates on each Distribution Date. If so
specified in the related Prospectus Supplement,
principal distributions for the Certificates of a
Class will be computed on the basis of a formula
which, on each Distribution Date, allocates all or
a portion of the Total Regular Principal Amount
relating to that Distribution Date to the
Certificates of that Class. The "Total Regular
Principal Amount" is the total amount by which the
aggregate outstanding principal balance of the
Contracts in the related Contract Pool is reduced
during one or more collection periods prior to the
Distribution Date designated in such Prospectus
Supplement (each, a "Collection Period"). Such
reduction may occur as a result of actuarially
predetermined scheduled principal reductions,
receipt of principal prepayments, liquidation of
Contracts, losses on Contracts and repurchases of
Contracts under certain conditions, the failure of
a third party credit support provider, if any, to
make a required payment, or a combination of the
foregoing events. See "The Contract Pools,"
"Description of the Certificates--Conveyance of
Contracts," "Description of the Certificates--
Optional and Mandatory Repurchase of Certificates;
Termination Auction" and "Description of the
Certificates--Collection and Other Servicing
Procedures" herein. Distributions with respect to
all or a portion of the Total Regular Principal
Amount are sometimes referred to herein as
distributions of "Regular Principal." The Total
Regular Principal Amount with respect to any
Contract Pool and any Distribution Date may be
estimated in a manner specified in the related
Prospectus Supplement.
If, due to liquidation losses or other
circumstances adversely affecting the collections
on the underlying Contract Pool, the Contract
collections available on any Distribution Date to
make distributions of Regular Principal to the
holders of the Certificates of a Class are less
than the portion of the Total Regular Principal
Amount allocable to such Class, the deficiency
may be made up from (i) the amount, if any, by
which the interest collected on nondefaulted
Contracts during the same Collection Period
exceeds the interest distribution due to the
holders of Certificates for the related Series,
the servicing fee of the Servicer (to the extent
such servicing fee is payable prior to
distributions of interest to the holders of any
Class of Certificates) and other expenses of the
Trust Fund or (ii) funds available from one or
more forms of credit support, but only to the
extent, if any, specified in the applicable
Prospectus Supplement. Additionally, if so
specified in the related Prospectus Supplement,
if GreenPoint is acting as Servicer, GreenPoint
may subordinate the Monthly Servicing Fee for a
Series with respect to all, or a portion of, the
amounts due to the related
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Certificateholders on the terms and conditions
set forth in such Prospectus Supplement. See
"Credit and Liquidity Enhancement" herein. If
specified in the applicable Prospectus
Supplement, the Certificate Balance of the
Certificates of a Class will be reduced on each
Distribution Date by the full amount of the
portion of the Total Regular Principal Amount
allocable to such Class even if, due to deficient
Contract collections, a full distribution thereof
is not made.
The applicable distribution formula for each
Class of a multiple-Class Series may allocate the
Total Regular Principal Amount among the various
Classes on a pro rata, sequential or other basis,
as specified in the related Prospectus
Supplement. If specified in the related
Prospectus Supplement, any such formula may
entitle the holders of Certificates of a
particular Class to receive on certain
Distribution Dates, distributions of Regular
Principal from particular sources of credit
support upon the occurrence of certain losses or
delinquencies, even if the holders of the
Certificates of such Class would not have been
entitled to receive principal distributions on
such Distribution Dates from amounts collected on
the underlying Contracts in the absence of such
losses or delinquencies.
If specified in the applicable Prospectus
Supplement, the Certificates of a Class may
entitle the holders thereof to special principal
distributions on particular Distribution Dates
that are unrelated to the Total Regular Principal
Amount for any such Distribution Date ("Special
Principal Distributions"). Special Principal
Distributions may be made, under the
circumstances set forth in the applicable
Prospectus Supplement, from interest collected on
the underlying Contract Pool, from funds
available from one or more forms of credit
support or from such other source as may be
specified in such Prospectus Supplement. The
Certificates of a Class having an initial
Certificate Balance may entitle the holders
thereof to distributions of Regular Principal
only, to distributions of Regular Principal and
to Special Principal Distributions or to Special
Principal Distributions only. However, if so
specified in the related Prospectus Supplement,
the Certificates of a Class will not entitle the
holders thereof to aggregate principal
distributions in excess of the initial
Certificate Balance for such Class.
B. Distributions of
Interest.................... The distribution formula for a Class of
Certificates having an initial Certificate
Balance may, but need not, also specify a method
of computing the interest, if any, to be
distributed on specified Distribution Dates
(which may include all or less than all of the
Distribution Dates) to the holders of the
Certificates of such Class. Such interest may be
equal, subject to such adjustments as may be
described in the related Prospectus Supplement,
to a specified number of days' interest on the
applicable Certificate Balance (before giving
effect to any reduction thereof on such
Distribution Date), calculated at a rate (the
"Pass-Through Rate") specified in the related
Prospectus Supplement. The Pass-Through Rate may
be fixed or variable, and, if specified in the
related Prospectus
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<PAGE>
Supplement, may shift from a variable rate to a
fixed rate under the conditions specified in such
Prospectus Supplement. See "Description of the
Certificates--Distributions on Certificates--
Distributions of Interest" herein for a general
description of the types of variable Pass-Through
Rates that might be applicable to a Class of
Certificates. Alternatively, such interest may be
equal to all or a portion (which portion will be
determined as described in the related Prospectus
Supplement) of the interest due on the related
Contracts during one or more Collection Periods
occurring prior to such Distribution Date.
Classes of Certificates that do not entitle the
holders thereof to receive distributions of
principal may nevertheless entitle such holders
to receive interest distributions calculated on
this basis. If, due to liquidation losses or
other circumstances adversely affecting the
collections on the underlying Contract Pool, the
Contract collections available to make
distributions of interest to the holders of the
Certificates of a Class are less than the amount
of interest computed as described above, the
deficiency may be made up from other sources, but
only to the extent, if any, specified in the
related Prospectus Supplement. See "Credit and
Liquidity Enhancement" herein and the applicable
Prospectus Supplement.
C. Residual Interests....... If specified in the related Prospectus
Supplement, a Class of Certificates in any Series
may evidence a residual interest in the related
Trust Fund (the "Residual Interest"). Any such
Class will not have been registered under the
Securities Act and will not be offered or sold
pursuant to this Prospectus. Certificates
evidencing a Residual Interest will not have the
features described above. Rather, if so specified
in such Prospectus Supplement, such Certificates
will entitle the holders thereof to receive
distributions from amounts collected on the
Contracts which would not be needed to make
distributions to the holders of other interests
in the Trust Fund (or to pay expenses of the
related Trust Fund) in the absence of liquidation
losses or other events resulting in deficient
Contract collections.
In addition, if specified in the related
Prospectus Supplement, certain or all
Certificates evidencing Residual Interests may
also entitle the holders thereof to receive
additional distributions of assets of the related
Trust Fund, to the extent any such assets remain
after being applied to make distributions to the
holders of other interests in the Trust Fund (or
to pay expenses of the Trust Fund). The
Certificates evidencing a Residual Interest may
entitle the holders thereof to distributions at
various times throughout the life of the related
Trust Fund or only upon termination of the Trust
Fund, all as more fully set forth in the related
Prospectus Supplement. If an election is made to
treat the related Trust Fund as a REMIC, the
holders of a Residual Interest in such Trust Fund
will be subject to federal income taxation with
respect to their ownership of such Residual
Interest as described herein under "Federal
Income Tax Consequences --REMIC Certificates--
Taxation of Residual Certificates."
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<PAGE>
Global Certificates......... If so specified in the related Prospectus
Supplement, the Certificates of a Series, or of
one or more Classes within a Series, will be
issuable in the form of one or more global
certificates (each, a "Global Certificate") to be
held by Cede & Co. ("Cede"), as nominee of The
Depository Trust Company ("DTC"), on behalf of
the beneficial owners (the "Certificate Owners")
of the Certificates, as described herein under
"Description of the Certificates--Global
Certificates." If some or all of the Certificates
of a Series are issued in the form of one or more
Global Certificates, certain monthly and annual
reports prepared by the Servicer under the
related Agreement will be sent on behalf of the
related Trust Fund to Cede and not to the
Certificate Owners, as described in "Reports to
Certificateholders" above.
Credit and Liquidity
Enhancement................. The extent, if any, to which a Class of
Certificates in any Series may be entitled to the
benefit of one or more forms of credit and
liquidity enhancement by means of
overcollateralization or subordination of one or
more Classes of Certificates in such Series, the
deposit of funds into one or more spread accounts
or other reserve funds, the issuance of one or
more letters of credit, a limited guarantee of
GreenPoint Financial Corp. ("GFC"), surety bonds,
or other credit facilities, or a combination
thereof, and/or the performance under one or more
certificate purchase agreements or other
liquidity facilities, or a combination thereof,
will be described in the related Prospectus
Supplement. See "Credit and Liquidity
Enhancement" herein and the related Prospectus
Supplement.
Advances.................... The extent, if any, to which the Servicer will be
required to make advances of delinquent scheduled
payments on the Contracts in a Contract Pool will
be described in the related Prospectus
Supplement.
Optional Termination and
Termination Auction......... The Servicer has the option to purchase from the
Trust Fund all Contracts then outstanding and all
other property in the Trust Fund on any
Distribution Date after the First Distribution
Date if, among other conditions, the Pool
Scheduled Principal Balance is less than 10% (or
such other percentage as may be specified in the
related Prospectus Supplement) of the Cut-off
Date Pool Principal Balance. See "Description of
the Certificates--Optional Termination and
Termination Auction" herein. During that period,
the Servicer also may direct the Trustee to
conduct a Termination Auction for the sale of all
Contracts then outstanding in the Trust Fund,
and, in any event, if the Servicer has not
exercised the option call within 90 days of the
first Distribution Date when the Pool Scheduled
Principal Balance is less than 10% (or such other
percentage as may be specified in the related
Prospectus Supplement) of the Cut-off Date Pool
Principal Balance, the Servicer shall direct the
Trustee to conduct a Termination Auction. The
Trustee will sell all the Contracts to the
highest bidder, subject, among other things, to
(i) the requirement that the highest bid equal or
exceed the
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<PAGE>
Minimum Termination Amount, and (ii) the
requirement that at least one bid be tendered by
an active participant in the asset-backed
securities or manufactured housing contract
market that is not affiliated with GreenPoint.
See "Description of the Certificates--Optional
Termination and Termination Auction" herein. Any
early termination of the Trust Fund and early
retirement of the Certificates that results from
the Servicer's exercise of the option call or a
"successful Termination Auction" (a Termination
Auction where a bidder has been accepted and
funds have been deposited in the Certificate
Account) may have an effect on an investor's
yield on such Certificates. See "Prepayment and
Yield Considerations" herein and in the
Prospectus Supplement.
Federal Income Tax
Consequences................ The federal income tax consequences of the
purchase, ownership and disposition of the
Certificates in any Series will depend on, among
other factors, whether an election is made to
treat the related Trust Fund as a REMIC under the
provisions of the Internal Revenue Code of 1986,
as amended (the "Code"). See "Federal Income Tax
Consequences--REMIC Certificates" herein for a
discussion of the federal income tax consequences
of the purchase, ownership and disposition of the
Certificates in any Series if such an election is
made. See "Federal Income Tax Consequences--Non-
REMIC Trusts" for a discussion of the federal
income tax consequences of the purchase,
ownership and disposition of the Certificates in
any Series if such an election is not made.
ERISA Considerations........ A fiduciary of any employee benefit or other plan
subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or
Section 4975 of the Code should carefully review
with its own legal advisors whether the purchase
or holding of Certificates could give rise to a
transaction that is prohibited or otherwise
impermissible under ERISA or the Code. See "ERISA
Considerations" herein and in the related
Prospectus Supplement. If specified in the
related Prospectus Supplement, certain
Certificates sold hereunder will not be
transferable to certain benefit plan investors
except under the conditions set forth in such
Prospectus Supplement.
Legal Investment............ Unless otherwise indicated in the applicable
Prospectus Supplement, any Certificates offered
hereby that are rated by at least one nationally
recognized statistical rating organization in one
of its two highest rating categories will
generally constitute "mortgage related
securities" under the Secondary Mortgage Market
Enhancement Act of 1984, as amended ("SMMEA")
and, as such, would be "legal investments" for
certain types of institutional investors to the
extent provided in SMMEA. Certain state laws have
overridden SMMEA and, therefore, institutional
investors should review with their own legal
advisors whether such Certificates would
constitute a legal investment. In addition, some
Classes of Certificates offered hereby may not be
rated in one of the two highest rating categories
and thus would not constitute "mortgage related
securities." See "Legal Investment" herein and in
the related Prospectus Supplement.
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<PAGE>
Ratings..................... It is a condition to the issuance of each Class
of Certificates sold under this Prospectus that
it be rated at the time of issuance by at least
one nationally recognized statistical rating
organization in one of its four highest rating
categories. 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. The
security rating of any Class of Certificates
should be evaluated independently of similar
security ratings assigned to other kinds of
securities, including Certificates in the same
Series or Certificates of other Series sold under
this Prospectus.
Ratings on manufactured housing contract pass-
through certificates address the likelihood of
the receipt by Certificateholders of their
allocable share of principal and interest on the
underlying manufactured housing contract assets.
These ratings address structural and legal
aspects associated with such certificates, the
extent to which the payment stream on such
underlying assets is adequate to make payments
required by such certificates and the credit
quality of the credit enhancer, if any. Ratings
on the Certificates do not, however, constitute a
statement regarding the likelihood of principal
prepayments by Obligors under the Contracts in
the related Contract Pool, the degree by which
prepayments made by such Obligors might differ
from those originally anticipated or whether the
yield originally anticipated by investors of any
Series of Certificates may be adversely affected
as a result of such prepayments. As a result,
investors of any Series of Certificates might
suffer a lower than anticipated yield. See
"Rating" herein and in the related Prospectus
Supplement.
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RISK FACTORS
Prospective purchasers of Certificates should consider, among other things,
the following factors in connection with the purchase of Certificates. Actual
results could differ materially from those projected in the forward-looking
statements as a result of the risk factors set forth below and elsewhere in
this Prospectus.
1. Limited Liquidity. There can be no assurance that a secondary market will
develop for Certificates or, if it does develop, that it will provide the
holders of Certificates with liquidity of investment or that it will remain
for the term of such Certificates.
2. Book-entry Form. To the extent any Certificate is represented by a Global
Certificate, the issuance of such Certificates in book-entry form may reduce
the liquidity of such Certificates in the secondary trading market since
investors may be unwilling to purchase Certificates for which they cannot
obtain physical certificates. See "Description of the Certificates--Global
Certificates" herein.
3. Economic Conditions. An investment in Certificates may be affected by,
among other things, a downturn in national, regional or local economic
conditions. The geographic location of the Manufactured Homes in any Contract
Pool at origination of the related Contract will be set forth in the related
Prospectus Supplement under "The Contract Pool." Regional and local economic
conditions are often volatile and, historically, regional and local economic
conditions, as well as national economic conditions, have affected the
delinquency, loan loss and repossession experience of manufactured housing
installment sales contracts and/or installment loan contracts (hereinafter
generally referred to as "contracts" or "manufactured housing contracts").
Sufficiently high delinquencies and liquidation losses on the Contracts in any
contract pool will have the effect of reducing, and possibly eliminating, the
protection against loss afforded by any credit enhancement supporting any
Class of the related Certificates. If such protection is eliminated with
respect to a Class of Certificates, the holders of such Certificates will bear
all risk of loss on the related Contracts and will have to rely on the value
of the related Manufactured Homes for recovery of the outstanding principal of
and unpaid interest on any defaulted Contracts in the related Contract Pool.
See "Credit and Liquidity Enhancement" herein and the related Prospectus
Supplement.
4. Losses and Credit Risk. Manufactured housing generally depreciates in
value, regardless of its location. Thus, Certificateholders should expect
that, as a general matter, the market value of any Manufactured Home will be
lower than the outstanding balance of the related Contract. To the extent that
the Servicer is required to repossess Manufactured Homes because of owner
defaults under the Contracts, liquidation losses will likely occur. The
primary protection of Certificateholders against these liquidation losses
comes from three sources: first, the amount (the "Excess Interest"), if any,
by which the interest collected on nondefaulted Contracts during a Collection
Period exceeds interest distributions due to the holders of the Regular
Certificates and, if so specified in the related Prospectus Supplement, the
Monthly Servicing Fee; second, any Credit Facility or Reserve Fund that may
support one or more Classes of Certificates, and third, as to the holders of
Senior Certificates, the subordination in interest of the junior Classes of
Certificates. The amount of Excess Interest can vary from Contract Pool to
Contract Pool, and will be reduced if interest-only Certificates are issued.
If the liquidation losses exceed the amount of Excess Interest and any Credit
Facility or Reserve Fund, the payments on Certificates will be delayed and
losses are likely to occur that will be borne by the holders of the
Certificates. To the extent that the Certificates have been designated as
senior or subordinate, the most junior certificates would be the first to bear
these delays or losses. See "The Contract Pools" and "Credit and Liquidity
Enhancement" herein and in the related Prospectus Supplement.
5. No Recourse. The Certificates will not represent interests in or
obligations of GreenPoint or, if so specified in the related Prospectus
Supplement, any of its affiliates. The Certificates will not be insured or
guaranteed by any governmental agency or instrumentality, the Underwriter or
any of its affiliates, GreenPoint or any of its affiliates (except in the case
of a Limited Guaranty or Alternative Credit Enhancement if so specified in the
related Prospectus Supplement). Except as otherwise specified in the related
Prospectus Supplement, the collections on the Contracts will constitute the
only source of funds for payment on the Certificates. Therefore,
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<PAGE>
any delays or losses on the Contracts that occur will be borne by the holders
of the Certificates and such holders will have no recourse against GreenPoint
or any of its affiliates (except in the case of a Limited Guaranty or
Alternative Credit Enhancement if so specified in the related Prospectus
Supplement). To the extent that the Certificates have been designated as
senior or subordinate, the most junior certificates would be the first to bear
these delays or losses.
6. Security Interests of the Trust Fund in the Manufactured Homes. On the
date of initial issuance of Certificates in any Series, the Seller will convey
the related Contracts to the related Trust Fund. GreenPoint, as Servicer, will
obtain and maintain physical possession of the Contract documents as custodian
and agent for the related Trustee. Each Contract is secured by a security
interest in a Manufactured Home and, in the case of Land Home Contracts or
Land-in-Lieu Contracts (both as defined herein), the real estate on which the
related Manufactured Home is located. Perfection of security interests in the
Manufactured Homes and enforcement of rights to realize upon the value of the
Manufactured Homes as collateral for the Contracts are subject to a number of
federal and state laws, including the Uniform Commercial Code (the "UCC") as
adopted in the states in which the Manufactured Homes are located and such
states' certificate of title statutes, and, in the case of Land Home Contracts
or Land-in-Lieu Contracts, their real estate laws. Under such federal and
state laws, a number of factors may limit the ability of a holder of a
perfected security interest in Manufactured Homes to realize upon such
Manufactured Homes or may limit the amount realized to less than the amount
due under the related Contract. See "Certain Legal Aspects of the Contracts--
Security Interests of Greenpoint in the Manufactured Homes" and "Land Home and
Land-in-Lieu Contracts" herein.
GreenPoint will not retitle any certificates of title that are in the name
of Bank of America, FSB or BankAmerica Housing Services, a division of Bank of
America, FSB relating to any contracts that it purchases in the Acquisition as
described under "The Seller." Further, if so specified in the related
Prospectus Supplement, the certificates of title for the Manufactured Homes
will show "Bank of America, FSB," "BankAmerica Housing Services, a division of
Bank of America, FSB" or "GreenPoint Credit Corp." as the lienholder and the
UCC financing statements, where applicable, will show "Bank of America, FSB,"
"BankAmerica Housing Services, a division of Bank of America, FSB" or
"GreenPoint Credit Corp." as secured party. Because it is not economically
feasible to amend the certificates of title, GreenPoint will not amend the
certificates of title to change the lienholder specified therein to the
relevant Trustee at the time Contracts are conveyed to a Trust Fund, and will
not execute any transfer instrument (including, among other instruments, UCC-3
assignments) relating to any Manufactured Home in favor of the relevant
Trustee or deliver any certificate of title to such Trustee or note thereon
such Trustee's interest. Similarly, GreenPoint will not record an assignment
(except as required under the Agreement upon the occurrence of certain events
if so specified in the related Prospectus Supplement) to the Trustee of the
mortgage, deed of trust or other instrument securing each Land Home or Land-
in-Lieu Contract. In some states, in the absence of such an amendment,
notation, execution, delivery or recordation of assignment, the assignment to
the Trustee of the security interest in the Manufactured Homes, or the
mortgage, deed of trust or other instrument securing a Land Home Contract, may
not be effective or such security interest may not be perfected. If any
otherwise effectively assigned security interest in favor of the Trustee is
not perfected, such assignment of the security interest to the Trustee may not
be effective against creditors of GreenPoint or Bank of America, FSB, as the
case may be, which continues to be specified as lienholder on any certificate
of title or as secured party on any UCC filing, or against a receiver or
trustee in bankruptcy for GreenPoint or Bank of America, FSB, as applicable.
Pursuant to the Agreement, GreenPoint will (i) represent and warrant that each
Contract complies with all requirements of law and (ii) provide certain
warranties relating to the validity, perfection and priority of the security
interest in each Manufactured Home securing a Contract. A breach by GreenPoint
of any such warrant that materially and adversely affects the related Trust
Fund's interest in a Contract will create an obligation on GreenPoint to
repurchase, or at its option substitute another contract for, such Contract,
unless such breach is cured within the time period specified in the related
Agreement. If GreenPoint does not honor such repurchase or substitute
obligation in respect of a Contract, the Trustee may not have a perfected
first-priority security interest in the related Manufactured Home or, if
applicable, the related real property. Therefore, payments on Certificates may
be delayed. If losses occur, they will be borne by the holders of the
Certificates. To the extent that the Certificates have been designated as
senior or subordinate, the most junior certificates would be the first to bear
these delays or losses.
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7. Federal and State Consumer Protection Laws. Numerous federal and state
consumer protection laws could adversely affect the interest of any Trust Fund
in the Contracts comprising the related Contract Pool. For example, as
described herein under "Certain Legal Aspects of the Contracts--Consumer
Protection Laws," the Soldiers' and Sailors' Civil Relief Act of 1940, as
amended (the "Relief Act") could, under certain circumstances, cap the amount
of interest that may be charged on certain Contracts at 6% per annum and may
hinder the ability of the Servicer to foreclose on such Contracts in a timely
fashion. In addition, other federal and state consumer protection laws impose
requirements on lending under installment sales contracts and installment loan
agreements such as the Contracts, and the failure by the lender or seller of
goods to comply with such requirements could give rise to liabilities of
assignees for amounts due under such agreements and the right of set-off
against claims by such assignees. These laws could apply to any Trust Fund as
assignee of the related Contracts. Pursuant to each Agreement, GreenPoint will
represent and warrant that each Contract complies with all requirements of
law. To the extent described in the applicable Prospectus Supplement under
"Description of Certificates--Conveyance of Contracts," a breach of any such
representation or warranty that materially and adversely affects the related
Trust Fund's interest in a Contract will create an obligation by GreenPoint to
repurchase, or at its option substitute another contract for, such Contract,
unless such breach is cured within the time period specified in the related
Agreement. GreenPoint will not have any obligation to repurchase any Contract
because of limitations imposed under the Relief Act, however. Therefore,
payments on Certificates may be delayed. If losses occur, they will be borne
by the holders of the Certificates. To the extent that the Certificates have
been designated as senior or subordinate, the most junior certificates would
be the first to bear these delays or losses.
8. Prepayment Considerations. The prepayment experience on the Contracts
underlying any Series of Certificates (including prepayments due to
liquidations of defaulted Contracts) will affect the average life and the
maturity of such Certificates. Prepayments on the Contracts in any Contract
Pool may be influenced by a variety of economic, geographic, social and other
factors, including repossessions, aging, seasonality and interest rates. Other
factors affecting prepayment on such Contracts include changes in housing
needs, job transfers and unemployment. In addition, in the event a partial
prepayment is made on a Contract, or a Contract is prepaid in full, interest
on such Contract to the extent of such prepayment will cease to accrue as of
the date of prepayment. If, with respect to any Trust Fund, such prepayments
and related interest shortfalls were sufficiently high during a Collection
Period, the Available Distribution Amount (as defined in the applicable
Prospectus Supplement) for the related Distribution Date could be less than
the amount of principal and interest that would be distributable to the
related Certificateholders in the absence of such shortfalls which would
result in losses to the holders of Certificates. To the extent that the
Certificates have been designated as senior or subordinate, the most junior
certificates would be the first to bear these delays or losses. See
"Prepayment and Yield Considerations" herein and in the related Prospectus
Supplement.
9. Difficulty in Pledging. To the extent transactions in Certificates can be
effected only through DTC, participating organizations, indirect participants
and certain banks, the ability of a Certificate Owner to pledge any such
Certificate to persons or entities that do not participate in the DTC system,
or otherwise to take actions in respect of such Certificates, may be limited
due to the lack of physical certificates representing any such Certificate.
This may limit the holders of Certificates liquidity of investment. See
"Description of the Certificates--Global Certificates" herein.
10. Potential Delays in Receipt of Distributions. To the extent any
Certificate is represented by a Global Certificate, Certificate Owners with
respect thereto may experience some delay in their receipt of distributions.
Distributions will be forwarded by the Trustee to DTC and DTC will credit such
distributions to the accounts of its Participants (as defined herein), which
will thereafter credit them to the accounts of Certificate Owners either
directly or indirectly through indirect participants. See "Description of the
Certificates--Global Certificates" herein.
11. Insolvency or Bankruptcy of GreenPoint. GreenPoint intends that each
transfer of Certificates to the related Trust Fund constitutes a sale, rather
than a pledge of the Contracts to secure indebtedness of GreenPoint. However,
if GreenPoint were to become a debtor under the federal bankruptcy code, it is
possible that a creditor
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or trustee in bankruptcy of GreenPoint or GreenPoint as debtor-in-possession
may argue that the sale of the Contracts by GreenPoint could be
recharacterized as a borrowing secured by a pledge of the Contracts. Such an
attempt, even if unsuccessful, could result in delays in or reductions of
distributions on the Certificates to the holders of the Certificates. To the
extent that the Certificates have been designated as senior or subordinate,
the most junior certificates would be the first to bear these delays or
losses.
12. Bankruptcy of Servicer. In the event of a bankruptcy of GreenPoint, the
trustee-in-bankruptcy for GreenPoint could prevent the termination of
GreenPoint as Servicer if no event of default under the applicable Agreement
exists other than the bankruptcy of the Servicer. Such restriction could
result in a delay or possibly a reduction in payments on the Certificates to
the holders of the Certificates to the extent GreenPoint received (but did not
deposit with the Trustee) Contract collections before the date of bankruptcy.
To the extent that the Certificates have been designated as senior or
subordinate, the most junior certificates would be the first to bear these
delays or losses. See "Certain Legal Aspects of the Contracts" herein.
13. Limited Operating History of Seller and Servicer. GreenPoint was
incorporated on May 8, 1998 for the purpose of acquiring the manufactured
housing contract business from Bank of America, FSB as described under "The
Seller--The Acquisition" herein. Accordingly, GreenPoint has a limited
operating history, and no relevant delinquency and loss experience is
available. Neither GreenPoint nor any of its affiliates were previously
engaged in the origination or servicing of manufactured housing contracts
prior to the Acquisition. POTENTIAL CERTIFICATEHOLDERS ARE ENCOURAGED TO
EVALUATE THE RISKS ASSOCIATED WITH RESPECT TO THE LIMITED OPERATING HISTORY OF
GREENPOINT. As of September 30, 1998, the Servicer services manufactured
housing installment loans with an aggregate principal balance of $11.137
billion, of which $794,958,000 were acquired from Bank of America, FSB in the
Acquisition.
14. Limited Guarantee of GFC. If the related Prospectus Supplement so
specifies, certain Classes of Certificates may be entitled to the benefits of
a limited guarantee of GFC which would be an unsecured obligation of GFC and
would not be supported by any letter of credit or other enhancement
arrangement.
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THE CONTRACT POOLS
Each Contract contained in a Contract Pool will have been either (i)
originated or purchased by the Seller, in each case on an individual basis in
the ordinary course of its business and/or (ii) purchased by GreenPoint in
bulk from other lenders or finance companies (including from Bank of America,
FSB in the Acquisition (as defined herein)), from other lenders or finance
companies (including Bank of America, FSB or any of its affiliates) with whom
GreenPoint may have or may establish referral arrangements, from governmental
agencies or instrumentalities or from the portfolios of other entities that
purchase and hold manufactured housing contracts ("Bulk Sellers"), all as more
particularly specified in the related Prospectus Supplement. Each Contract
will be secured by a new or used Manufactured Home and, in the case of a Land
Home or Land-in-Lieu Contract, by real property upon which the Manufactured
Home is located. If so specified in the related Prospectus Supplement, the
Contracts will not be insured by any governmental agency or instrumentality.
However, if so specified in the related Prospectus Supplement, some or all of
the Contracts and collections thereon will, subject to the conditions
described below, be partially insured by the Federal Housing Administration or
partially guaranteed by the Veterans Administration.
On the date of initial issuance of the Certificates of any Series,
GreenPoint will convey the Contracts comprising the related Contract Pool to
the related Trust Fund. GreenPoint, as Servicer, will obtain and maintain
possession of all Contract documents.
If so specified in the applicable Prospectus Supplement, the Agreement
relating to each Contract Pool will require the related Manufactured Homes to
comply with the requirements of certain federal statutes which generally would
require the Manufactured Homes to have a minimum of 400 square feet of living
space and a minimum width of 102 inches and to be of a kind customarily used
at a fixed location. Such statutes would also require the Manufactured Homes
to be transportable in one or more sections, built on a permanent chassis and
designed to be used as dwellings, with or without permanent foundations, when
connected to the required utilities. The statutes also would require that the
security interest in any Manufactured Home include the plumbing, heating, air
conditioning and electrical systems relating to such Manufactured Home.
Each Agreement will require the Servicer to maintain hazard insurance
policies with respect to each Manufactured Home in the amounts and manner set
forth herein under "Description of the Certificates--Servicing Compensation
and Payment of Expenses; Certain Matters Regarding the Servicer--Hazard
Insurance Policies." Generally, no other insurance will be required with
respect to the Manufactured Homes, the Contracts or any Contract Pool.
Each Contract Pool may contain actuarial or simple interest Contracts (as
further described below) bearing a Contract Rate that is fixed or variable or
increases in specified increments on particular dates (a "Step-Up Rate"). The
rate at which the Contracts in a particular Contract Pool bear interest will
be further described in the applicable Prospectus Supplement. If so specified
in the applicable Prospectus Supplement, each Contract will provide for
payments on scheduled monthly due dates (each, a "Due Date"). The day of each
month constituting the Due Date will vary from Contract to Contract. Unless
the Contracts bear interest at a variable rate, the scheduled payment due on
each monthly Due Date (the "Scheduled Payment") will be specified in the
Contract. The Scheduled Payments for fixed-rate Contracts will be constant
assuming no prepayments. If so specified in the applicable Prospectus
Supplement, the Scheduled Payments for Contracts bearing interest at a Step-Up
Rate ("Step-Up Rate Contracts") will increase on the dates on which the
Contract Rates are stepped up. In addition, if so specified in the related
Prospectus Supplement, the Contracts may be prepaid in full or in part at any
time.
If so specified in the applicable Prospectus Supplement, Scheduled Payments
whether for actuarial or simple interest Contracts, may be paid prior to their
Due Dates, whether in, or in months prior to, the months of their Due Dates.
Thus, the obligor under a Contract (each, an "Obligor") may, in June, pay the
Scheduled Payments due in June, July and August. In that event, no further
payment will become due on such Contract until the September Due Date. In the
case of a simple interest Contract, the Obligor would have to instruct the
Servicer to
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apply such payment as a pay-ahead of future Scheduled Payments; otherwise such
payment would be applied as a partial principal prepayment. There is no limit
to the number of Scheduled Payments that may be paid ahead in this manner. The
effect of paid-ahead Scheduled Payments will be different for actuarial
Contracts than for simple interest Contracts, as further described below.
The Scheduled Payments for each actuarial Contract (whether a fixed rate
Contract or a Step-Up Rate Contract) will fully amortize the principal balance
of the Contract over its term. The portion of each Scheduled Payment allocable
to principal is equal to the total amount thereof less the portion allocable
to interest. The portion of each Scheduled Payment due in a particular month
that is allocable to interest is a precomputed amount equal to one month's
interest (determined on the basis of a thirty-day month and a 360-day calendar
year, except in the state of Kansas where it is determined on the basis of a
365/366-day calendar year and actual days elapsed) on the principal balance of
the Contract, which principal balance is determined by reducing the initial
principal balance by the principal portion of all Scheduled Payments that were
due in prior months (whether or not such Scheduled Payments were timely made)
and all prior partial principal prepayments. Thus, each Scheduled Payment will
be applied to interest and to principal in accordance with a precomputed
allocation, whether such Scheduled Payments are received in advance of or
subsequent to their Due Dates. If so specified in the applicable Prospectus
Supplement, all payments received in a Collection Period on an actuarial
Contract in excess of the related Obligor's Scheduled Payment (other than
payments not allocated to principal and interest (such as late payment
charges) or payments sufficient to pay in full the outstanding principal
balance of and all accrued and unpaid interest on such Contract) are applied
as a partial prepayment of principal on the Contract, unless (i) the related
Obligor notifies or confirms with the Servicer that such payments are to be
applied to future Scheduled Payments in the order of the Due Dates of such
payments or (ii) the amount of such excess payment is approximately equal
(subject to a variance of plus or minus 10%) to the amount of a future
Scheduled Payment.
If simple interest Contracts are to be included in the related Contract
Pool, the related Prospectus Supplement will describe the characteristics of
such simple interest Contracts.
If so specified in the related Prospectus Supplement, the Scheduled Payments
on variable rate Contracts will be allocated between principal and interest as
described above for actuarial Contracts based upon the Contract Rate in effect
when such Scheduled Payments are due. If so specified in the related
Prospectus Supplement, the amounts of such Scheduled Payments will be
adjusted, on the basis described in such Prospectus Supplement, whenever the
related variable rate is adjusted.
If so specified in the applicable Prospectus Supplement, the related
Contract Pool may contain Contracts which combine certain features of
actuarial and simple interest Contracts.
If specified in the related Prospectus Supplement, certain Contracts ("Land
Home Contracts" and "Land-in-Lieu Contracts") will also be secured by liens on
the real estate on which the related Manufactured Homes are located. If so
specified in the related Prospectus Supplement, all Land Home Contracts will
have financed the purchase of the related Manufactured Home together with the
real estate on which the Manufactured Home is located. In certain
jurisdictions, a lender cannot obtain separate evidence of its lien on the
Manufactured Home securing a Land Home Contract and its lien on the property
on which the Manufactured Home is located. In those jurisdictions, the only
evidence of liens on the Manufactured Homes securing Land Home Contracts will
be the deeds of trust, mortgages or similar security instruments (in each
case, a "Mortgage") on the real estate on which the Manufactured Homes are
located. It is a policy of GreenPoint, to obtain title insurance policies,
where available, with respect to any such Land Home Contract that it
originates insuring that the related Manufactured Home is subject to the lien
of the related Mortgage, although title policies may not have been obtained
with respect to Land Home Contracts acquired from Bulk Sellers and some title
insurers will not insure the Manufactured Home unless it is permanently
attached to the land. Where the real estate on which the related Manufactured
Home is located is owned by the related Obligor, the Obligor may provide a
Mortgage on the real estate in lieu of all or part of any required down
payment for any such Contract. Any such Contract is referred to herein as a
"Land-in-Lieu Contract" rather than a "Land Home Contract." Generally,
separate evidences of
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liens on Manufactured Homes and the real property securing Land-in-Lieu
Contracts are obtained. However, no title insurance is obtained in respect of
such Contracts. See "Certain Legal Aspects of the Contracts--Land Home and
Land-in-Lieu Contracts" herein.
A Contract Pool may include "staged-funding" Contracts which provide
multiple disbursements to an Obligor to finance the purchase of a Manufactured
Home or the acquisition or improvement of the real estate on which the
Manufactured Home will be located. The Obligor pays only the interest on the
disbursed amount of the loan (or an additional origination fee which is
financed, in lieu of interest) until the final disbursement, and, following
the final disbursement, pays both interest and principal. If so specified in
the related Prospectus Supplement, no Contract Pool will contain a "staged-
funding" Contract unless such "staged-funding" Contract has been fully
disbursed.
The Prospectus Supplement relating to each Series of Certificates will
provide information as of the Cut-off Date for such Series with respect to,
among other things, (i) the number, the aggregate principal balance, and the
range of outstanding principal balances of the Contracts comprising the
related Contract Pool; (ii) the weighted average of the Contract Rates
("Weighted Average Contract Rate") of the Contracts and the distribution of
Contract Rates; (iii) the weighted average original and remaining terms to
maturity of the Contracts and the distribution of remaining terms to maturity;
(iv) the average outstanding principal balance of the Contracts; (v) the
geographical distribution of the related Manufactured Homes at origination;
(vi) the years of origination of the Contracts; (vii) the distribution of
original principal balances of the Contracts; (viii) the percentage amount of
Contracts secured by new or used Manufactured Homes; (ix) the range of and
weighted average loan-to-value ratios at origination; and (x) the month and
year in which the final scheduled payment date for the Contract with the
latest maturity is scheduled to occur. Additionally, no more than a maximum of
5% of the Contracts (measured by aggregate principal balance of the assets in
the Contract Pool), as described herein and the related prospectus supplement,
as of the Cut-off Date, may deviate from the characteristics of the assets in
the Contract Pool as of the Cut-off Date. If a Contract Pool contains Step-Up
Rate Contracts, the related Prospectus Supplement will specify the percentage
of the Contract Pool comprised of such Contracts, the period during which the
Contract Rates for such Contracts will be stepped up, the range of increases
in such Contract Rates and the range of increases in the Scheduled Payments
for such Contracts. If a Contract Pool contains variable rate Contracts, the
related Prospectus Supplement will contain a description of the basis on which
such rates are determined, including any maximum or minimum rates and the
frequency with which any such rate adjusts. The Prospectus Supplement relating
to a Series of Certificates also will contain certain information about
Contracts in the related Trust Fund that are Land Home Contracts, Land-in-Lieu
Contracts or Contracts that are partially guaranteed by the Veterans
Administration or partially insured by the Federal Housing Administration.
To the extent any Contracts in a Contract Pool were purchased by GreenPoint
from one or more Bulk Sellers, the applicable Prospectus Supplement will
contain a description of certain practices observed by such seller or sellers,
as the case may be, in connection with any such purchase.
In addition, to the extent GreenPoint's management believes such information
to be material, any Prospectus Supplement may also include additional
information concerning the related Contract Pool that is stored in the
electronic data processing system of GreenPoint.
THE PRE-FUNDING ACCOUNT
If the Trust Fund includes a Pre-Funding Account, as defined in the related
Prospectus Supplement, such Prospectus Supplement will specify (i) the term or
duration of the Pre-Funding Account; (ii) the percentage of the related Series
that may be represented by the Pre-Funding Account; (iii) the types of
investments that Pre-Funding Accounts may be invested in, and (iv) the
conditions that must be satisfied prior to any transfer of Additional
Contracts and/or Subsequent Contracts, as described in such Prospectus
Supplement, including the requisite characteristics of such Additional
Contracts and/or Subsequent Contracts.
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THE SELLER
GreenPoint is a Delaware corporation and a wholly owned subsidiary of
GreenPoint Bank ("GreenPoint Bank"), a New York state chartered bank.
GreenPoint Bank is a wholly owned subsidiary of GFC, a publicly traded
corporation whose shares are traded on the New York stock exchange. As of
December 31, 1997, GFC and its consolidated subsidiaries had total deposits of
$10,973.0 million, total assets of $13,083.5 million and total stockholders'
equity of $1,269.6 million. As of September 30, 1998, GreenPoint had total
assets of $1,478.3 million, total liabilities of $1,408.3 million and total
stockholders' equity of $70.0 million. The headquarters of both GFC and
GreenPoint are located in New York, New York.
THE ACQUISITION
On April 11, 1998, GreenPoint Bank executed an agreement (the "Sale
Agreement") with BankAmerica Corporation, the parent of Bank of America, FSB
for the sale of the operating business of the BankAmerica Housing Services
division of Bank of America, FSB to GreenPoint (such sale is referred to
herein as the "Acquisition"). GreenPoint was formed in May 1998 as a Delaware
corporation for the purpose of acquiring the such operating business of the
BankAmerica Housing Services division of Bank of America, FSB from Bank of
America, FSB. The Acquisition was consummated on September 30, 1998. The
operating business of the BankAmerica Housing Services division consisted
primarily of originating, purchasing and servicing manufactured housing
installment sale contracts and installment loan agreements. Pursuant to the
terms of the Sale Agreement, GreenPoint also purchased $794,958,000 in
aggregate principal balance of manufactured housing installment sale contracts
and installment loan agreements in the Acquisition. The origination and
underwriting practices of Bank of America, FSB and its affiliates relating to
the manufactured housing installment sale contracts and installment loan
agreements acquired by GreenPoint in the Acquisition were substantially
similar to those described under "--Loan Originations" below.
As of September 30, 1998, GreenPoint owned $794,958,000 in aggregate
principal balance of manufactured housing contracts, all of which were
acquired from Bank of America, FSB in the Acquisition.
LOAN ORIGINATIONS
GreenPoint purchases and originates manufactured housing contracts on an
individual basis through 45 regional offices throughout the United States,
serving retailers and borrowers in the 48 contiguous states and the District
of Columbia. In the states of Mississippi and Minnesota, manufactured housing
contracts are purchased and originated through wholly owned subsidiaries of
GreenPoint. These subsidiaries are named GreenPoint Corp. of Mississippi and
GreenPoint Corp. of Minnesota respectively. Regional personnel of GreenPoint
arrange to purchase manufactured housing contracts originated by manufactured
housing retailers located throughout the United States. Generally, these
purchases result from GreenPoint regional office personnel contacting
retailers located in their regions and explaining GreenPoint's available
financing plans, terms, prevailing rates and credit and financing policies. If
a retailer wishes to make such financing available to its customers, the
retailer would apply for retailer approval. Upon satisfactory results of
GreenPoint's investigation of the retailer's creditworthiness and general
business reputation, GreenPoint and the retailer would enter into a retailer
agreement. GreenPoint also originates manufactured housing contracts and
installment loan agreements directly with customers.
UNDERWRITING PRACTICES
With respect to each retail manufactured housing contract that was purchased
from a retailer, the general practice of GreenPoint has been that the retailer
submit the customer's credit application, manufacturer's invoice (if the
contract was for a new home) and certain other information relating to the
contract to the applicable regional office of GreenPoint. Personnel at the
regional office analyze the creditworthiness of the customer and certain other
aspects of the proposed transaction. If the creditworthiness of the customer
and other aspects of the transaction are approved by the regional office, the
customer and the retailer execute a contract on a form
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provided or approved in advance by the GreenPoint. After the manufactured home
financed under the contract is delivered and set up by the retailer, and the
customer has moved in, GreenPoint purchases the contract from the retailer.
Because manufactured homes generally depreciate in value, GreenPoint's
management believes that the creditworthiness of a potential obligor should be
the most important criterion in determining whether to approve the purchase or
origination of a contract. As a result, the underwriting guidelines of
GreenPoint generally require regional office personnel to examine each
applicant's credit history, residence history, employment history and debt-to-
income ratio. There is no minimum requirement for any of these criteria,
although GreenPoint has developed certain guidelines for employment history
and debt-to-income ratios. In the case of employment history, GreenPoint
generally requires its regional office personnel to consider whether the
applicant had worked continuously for the same employer for at least 24 months
and, if not, whether the applicant has worked in the same occupational field
for at least 24 months. The recommended debt-to-income ratio for a particular
credit application depends on the credit score recommendation (described
below) generated for that application. In general, the maximum debt-to-income
ratio for each application that is approved by the credit scoring system
ranged from 70 percent to 53 percent, based on GreenPoint's estimate of the
applicant's after-tax income. Although GreenPoint has guidelines for some of
these criteria, GreenPoint's management does not believe that an applicant's
inability to satisfy some of these guidelines warrants denial of credit in all
cases. For example, if an applicant fails to meet a guideline by a certain
margin for one of the criteria mentioned above, the applicant generally must
exceed the threshold for one or more other criteria by a compensating margin
for such applicant's credit application to be approved. In addition, in
special cases, credit applications are approved even if certain of the
criteria are not met. For these reasons, management of GreenPoint believe that
the ultimate decision whether to approve or reject a credit application should
be made by regional office personnel. To assist personnel in evaluating credit
applications, GreenPoint utilizes a Fair-Isaacs credit scoring system
implemented in July 1997. The Fair-Isaacs credit scoring system generates a
recommendation to approve or deny a credit application based on certain
criteria established by GreenPoint. The underwriting guidelines of GreenPoint
allow the recommendation generated by the Fair-Isaacs credit scoring system to
be used by regional personnel as a guide in determining whether to extend
credit to an applicant, but do not require regional personnel to make credit
decisions based solely on the system's recommendations. GreenPoint does not
disclose the criteria used by this credit scoring system either to regional
personnel or to the retailers assisting in the preparation of credit
applications. The criteria will be periodically reviewed by of GreenPoint, and
modified as necessary.
It is the policy of GreenPoint that one authorized person provide written
approval of credit applications for amounts up to or equal to certain limits
and that two authorized persons provide written approval of credit
applications for amounts over those limits. The credit limits established by
GreenPoint vary with each regional office. In addition, each person authorized
to make these credit decisions has to be either a regional manager or another
regional office employee to whom the authority to approve credit applications
has been delegated. Any such delegated authority may be limited in that the
person to whom such authority was delegated may not have been authorized to
approve credit applications for contracts with initial principal amounts above
certain specified levels. The qualifications of all regional office personnel
authorized to approve or reject credit applications are reviewed and approved
by GreenPoint's senior management. Generally, both the retailer service
manager and the credit manager in each regional office (in addition to the
regional manager) have authority to approve credit applications. However, each
regional office may at various times have additional, or in some cases fewer,
personnel authorized to approve or reject credit applications. GreenPoint has
no set qualifications for regional managers or for other employees to whom
authority to approve credit applications may be delegated; rather, such
authority is given commensurate with such manager's or employee's experience.
It is the policy of GreenPoint that each credit application be approved or
rejected within one to seven days after receipt. Thus, there is less time for
credit investigation than is the case, for example, with loans for site-built
homes. Although GreenPoint's management believes that the one to seven-day
period for approval or rejection of each credit application is consistent with
industry practice, no assurance can be given that any credit application that
was approved in one to seven days would have been approved if a longer period
had been provided for credit investigation.
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The credit review and approval practices of each regional office are subject
to internal reviews and audits that, through sampling, examine the nature of
the verification of credit histories, residence histories, employment
histories and debt-to-income ratios of the applicants and evaluate the credit
risks associated with the contracts purchased through such regional offices by
rating the obligors on such contracts according to their credit histories,
employment histories and debt-to-income ratios. Selection of underwriting
files for review is generally made by the personnel performing the
examination, without prior knowledge on the part of regional office personnel
of the files to be selected for review. However, GreenPoint has no requirement
that any specific random selection procedures be followed and no assurance can
be given that the files reviewed in any examination process are representative
of the contract originations in the related regional office. In addition, no
statistical analysis is performed on the results of any such examination of
underwriting files.
With respect to new and used manufactured homes, Green Point's policy is to
finance no more than 95% of the total buyer's cost of any manufactured home
(including taxes and insurance premiums) plus 100% of the costs attributable
to prepaid finance charges and closing costs that are financed. In the case of
new manufactured homes, the maximum amount financed cannot exceed (i) 130% of
the manufacturer's invoice price plus (ii) taxes, insurance, freight charges,
certain retailer installed equipment, certain set-up costs and certain prepaid
finance charges and closing costs. For used manufactured homes, the amount
financed cannot exceed (i) the lesser of 95% of the total sales price or 95%
of the retail value, as specified in the NADA Mobile/Manufactured Housing
Appraisal Guide or the "Kelly Blue Book" plus (ii) taxes, insurance, certain
retailer installed equipment, certain set-up costs and certain prepaid finance
charges and closing costs.
With respect to Land/Home Contracts involving new manufactured homes,
GreenPoint's policy is to finance no more than (i) the lesser of 95% of the
value of the real property as determined by appraisal or tax assessment (for
the first five acres) or 95% of the purchase price of the land (for the first
five acres) or the payoff of the encumbered land plus (ii) 130% of the
manufacturer's invoice plus (iii) taxes, insurance, freight charges, certain
retailer installed equipment, certain set-up costs and prepaid finance charges
and closing costs plus (iv) the cost of improvements to the land, subject to
certain limitations. In the case of a manufactured home that is already
located on the land, GreenPoint's policy is to finance no more than the lesser
of (a) 95% of the total sales price or (b) 95% of the appraised value of the
land and in either case, plus (i) 95% of the NADA Mobile/Manufactured Housing
Appraisal Guide or "Kelly Blue Book" retail value of the home, (ii) taxes,
insurance, certain retailer installed equipment, certain set-up costs, prepaid
finance charges and closing costs and (iii) the cost of improvements to the
land, subject to certain limitations.
With respect to Land-in-Lieu contracts involving new manufactured homes,
GreenPoint's policy is to finance (i) up to 140% of the manufacturer's invoice
for the home depending on the borrower's down payment plus (ii) taxes,
insurance, freight charges, certain retailer installed equipment, certain set-
up costs and pre-paid finance charges and closing costs plus (iii) the costs
of improvements to the land, subject to certain limitations. In the case of a
manufactured home which is already located on the land, GreenPoint's policy is
to finance no more than the lesser of (a) 95% of the total sales price or (b)
95% of the retail value, as specified in the NADA Mobile/Manufactured Housing
Appraisal Guide or the "Kelly Blue Book" and in either case, plus (i) taxes,
insurance, certain retailer installed equipment, certain set-up costs and
prepaid finance charges and closing costs and (ii) the cost of improvements to
the land, subject to certain limitations.
GreenPoint requires a down payment in the form of cash and/or the trade-in
value of a previously owned manufactured home and/or, in the case of Land-in-
Lieu Contracts, an estimated value of equity in real property pledged as
additional collateral. For previously owned homes, the trade-in allowance
accepted by the retailer must be consistent with the value of such home
determined by GreenPoint in light of current market conditions. The value of
real property pledged as additional collateral is estimated by regional
personnel or appraisers who are familiar with the area in which the property
is located.
Underwriting policies for the origination or purchase on an individual basis
of manufactured housing contracts are established by GreenPoint's management
at its headquarters in San Diego.
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SERVICING
GreenPoint, through its regional offices, services all of the manufactured
housing contracts that it purchases or originates, whether on an individual
basis or in bulk. Generally, whenever any contracts are sold, GreenPoint will
retain servicing responsibilities with respect to such contracts. In addition,
GreenPoint may make arrangements pursuant to which it services, or would
service, manufactured housing contracts owned by other entities. Such
contracts were not originated, and would not be purchased, by GreenPoint.
Servicing responsibilities include collecting principal and interest payments,
taxes, insurance premiums and other payments from obligors and, when such
contracts are not owned by GreenPoint, remitting principal and interest
payments to the owners thereof, to the extent such owners are entitled
thereto. Collection procedures include repossession and resale of manufactured
homes securing defaulted contracts (and foreclosure if land is involved) and,
if deemed advisable by GreenPoint, entering into workout arrangements with
obligors under certain defaulted contracts. Although decisions as to whether
to repossess any manufactured home are made on an individual basis,
GreenPoint's general policy is to institute repossession procedures promptly
after regional office personnel determine that it is unlikely that a defaulted
contract will be brought current, and thereafter to diligently pursue the
resale of such manufactured homes.
Because GreenPoint is recently formed and has a limited operating history,
GreenPoint's management believes that the historical statistical data relating
to the delinquency and repossession experience of contracts serviced by
GreenPoint is not informative. If in the future, however, GreenPoint's
management believes such information may be informative, GreenPoint may
publish such information in the Prospectus Supplement.
Certain historical data relating to the delinquency and repossession
experience of the contracts serviced by Bank of America, FSB prior to the
Acquisition by GreenPoint is available. However, GreenPoint's management
likewise believes that such information is not relevant or informative since
GreenPoint, and not Bank of America, FSB, is now servicing such contracts.
PREPAYMENT AND YIELD CONSIDERATIONS
PREPAYMENT CONSIDERATIONS
If so specified in the related Prospectus Supplement, the Contracts in any
Contract Pool may be prepaid in full or in part at any time. The prepayment
experience of the Contracts (including prepayments due to liquidations of
defaulted Contracts) will affect the average life and the maturity of the
related Certificates. Except to the limited extent that may be set forth in
the related Prospectus Supplement, GreenPoint does not maintain statistics
with respect to the rate of prepayment of manufactured housing contracts in
its servicing portfolio. A Contract Pool might include Contracts with Contract
Rates that are generally higher or lower, in absolute terms or in comparison
to prevailing rates, than the contract rates of the contracts from which are
derived certain historical statistical data set forth in the Prospectus or
Prospectus Supplement. As a result, the prepayment performance of the
Contracts contained in that Contract Pool might be higher or lower than the
prepayment performance of the contracts reflected in the historical data. In
addition, GreenPoint's management is aware of limited publicly available
information relating to historical rates of prepayment on manufactured housing
contracts. However, GreenPoint's management believes that neither the
prepayment experience of other pools of manufactured housing contracts nor the
historical rates of prepayment for any other manufactured housing contracts
will necessarily be indicative of the rate of prepayment that may be expected
to be exhibited by the Contracts in any other Contract Pool. Nevertheless,
GreenPoint's management anticipates that a number of Contracts will be prepaid
in full in each year during which any related Certificates are outstanding.
The amount of prepayments on such Contracts (including prepayments due to
liquidations of defaulted Contracts) during any particular year may be
influenced by a variety of economic, geographic, social and other factors,
including repossessions, aging, seasonality, interest rates and the rate at
which manufactured homeowners sell their manufactured homes. Other factors
affecting prepayments on such Contracts include changes in Obligors' housing
needs, job transfers, unemployment and Obligors' net equity in manufactured
homes. Because of the depreciating nature of manufactured housing, which
limits the possibilities for refinancing, and because the terms
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of manufactured housing contracts are generally shorter than the terms for
mortgage loans secured by site-built homes (and changes in interest rates have
a correspondingly smaller effect on the monthly payments on manufactured
housing contracts as opposed to mortgage loans secured by site-built homes),
changes in interest rates may play a smaller role in prepayment behavior of
manufactured housing contracts than they do in the prepayment behavior of
loans secured by mortgages on site-built homes. Conversely, local economic
conditions and certain of the other factors mentioned above are likely to play
a larger role in the prepayment behavior of manufactured housing contracts
than they do in the prepayment behavior of loans secured by mortgages on site-
built homes.
Repurchases of Contracts on account of certain breaches of representations
and warranties as described in the applicable Prospectus Supplement also will
have the effect of prepaying such Contracts and therefore will affect the
average life of and yield on the Certificates. See "Description of the
Certificates--Conveyance of Contracts." In addition, most of the Contracts
contain provisions that prohibit the related owner from selling the
Manufactured Home without the prior consent of the holder of the related
Contract. Such provisions are similar to "due-on-sale" clauses and may not be
enforceable in certain states. See "Certain Legal Aspects of the Contracts--
Transfers of Manufactured Homes; Enforceability of Restrictions on Transfer"
herein. The Servicer's policy is to permit most sales of Manufactured Homes
where the proposed buyer meets the Servicer's then current underwriting
standards and enters into an assumption agreement.
To the extent provided in the related Prospectus Supplement, the Servicer
under each Agreement will have the option to purchase all of the Contracts in
the related Contract Pool, at the price and under the conditions specified in
such Prospectus Supplement, when the aggregate Pool Principal Balance (as
defined in the related Prospectus Supplement) of the Contract Pool has been
reduced to 10% (or such other percentage as may be specified in the related
Prospectus Supplement) of its initial Pool Principal Balance. The exercise of
any such option will affect the average life of and yield on the related
Certificates. To the extent provided in the related Prospectus Supplement, the
Trustee for the related Trust Fund shall solicit bids for the purchase of the
Contracts remaining in the Trust Fund at a Termination Auction (as defined
herein) within ninety days following the Distribution Date as of which the
Pool Principal Balance for a Contract Pool is less than 10% (or such other
percentage as may be specified in the related Prospectus Supplement) of such
Contract Pool's Cut-off Date Pool Principal Balance. The sale and consequent
termination of the related Trust Fund pursuant to a Termination Auction will
affect the average life and yield on the related Certificates.
The average life and maturity of the Certificates of any Class will also be
affected by the amount and timing of any Special Principal Distributions to
the holders of such Certificates. In addition, if any Certificate of a Class
is subject to mandatory repurchase, the occurrence of the Repurchase Date (as
hereinafter defined) for such Certificate will have the same effect as the
maturation of such Certificate (with the repurchase price being equivalent to
the amount due at maturity). See "Description of the Certificates--
Distributions on Certificates" and "Description of the Certificates--Optional
and Mandatory Repurchase of Certificates; Optional Termination and Termination
Auction" herein. The Prospectus Supplement relating to any Class that is
entitled to Special Principal Distributions or is subject to mandatory
repurchase will contain a description of the conditions under which such
distributions or repurchases will take place and a description of some of the
factors that might affect the rate of Special Principal Distributions or the
timing of any Repurchase Dates.
Information regarding the "Prepayment Model" (to be defined in the related
Prospectus Supplement) or any other rate of assumed prepayment, as applicable,
will be set forth in the Prospectus Supplement applicable to the relevant
Class or Classes of Certificates offered hereby.
YIELD CONSIDERATIONS
To the extent that any credit enhancement or any advancing obligation of the
Servicer described in the related Prospectus Supplement is insufficient to
protect the holders of any Class of Certificates from losses or delinquencies
on the related Contract Pool, the yield to such holders from their investment
in such Certificates will be adversely affected should such losses or
delinquencies occur. In the absence of losses or delinquencies
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which are not covered by credit enhancement or advances, respectively, on a
Distribution Date, the effective yield on the Certificates will depend upon,
among other things, the price at which the Certificates are purchased, the
rate at which the Contracts for the related Trust Fund liquidate or are
prepaid and the amount and timing of any Special Principal Distributions. If a
purchaser of Certificates purchases them at a discount (premium) and
calculates its anticipated yield to maturity based on an assumed rate of
distributions of principal on such Certificates that is faster (slower) than
the rate actually realized, such purchaser's actual yield to maturity will be
lower than the yield so calculated by such purchaser. Losses which are covered
by credit enhancement, but on later than anticipated Distribution Dates, will
have the same effect on anticipated yield as prepayments that are made later
than anticipated, as just described, depending on whether the Certificates
were purchased at a discount or premium.
The yield to holders of any Class of Certificates may be below that
otherwise produced by the applicable Pass-Through Rate because, while, in the
absence of losses or delinquencies, one month's interest on the related
Contracts will be collected during each Collection Period, the portion of such
interest to which the holders of such Certificates are entitled will not be
distributed until the first Distribution Date after such Collection Period.
If a Certificate is subject to mandatory repurchase, the yield to the
Repurchase Date will be affected by, among other things, the applicable
repurchase price, the ability of any Liquidity Facility Provider (as
hereinafter defined) to distribute the repurchase price and the date, if any,
on which the Repurchase Date occurs. If, in connection with a mandatory
repurchase, the repurchase price for a Certificate is equal to its Percentage
Interest (as hereinafter defined) of the then current Certificate Balance, and
the Certificate is purchased at a discount, and the purchaser calculates its
anticipated yield to the Repurchase Date based on an assumed Repurchase Date
that is earlier than the actual Repurchase Date, then such purchaser's actual
yield to maturity will be lower than it would have been if a repurchase
occurred on the assumed date.
The payment features of the Contracts comprising any Contract Pool (as
described above under "The Contract Pools") may, under certain extraordinary
circumstances, cause the amounts collected thereon during particular
Collection Periods to be insufficient to fund all distributions of principal
and interest to the holders of some or all of the Certificates of the related
Series, even in the absence of losses or delinquencies. Such circumstances
could occur if a sufficiently large number of partial or full prepayments, as
a percentage of the then outstanding Pool Principal Balance of the related
Contract Pool, are received on Contracts in a particular Collection Period, if
such prepayments are made in advance of such Contracts' respective Due Dates
during such Collection Period. In such case, a non-default collection
shortfall could occur because interest that actually accrues on such Contracts
is less than interest that would have accrued if the payments were paid on the
Contracts' respective Due Dates. A non-default collection shortfall could
adversely affect the yield to holders of any Class of Certificates to the
extent such shortfalls are not covered by credit enhancement or advances.
DESCRIPTION OF THE CERTIFICATES
Each Series of Certificates will be issued pursuant to a separate Agreement.
The following summaries describe only the material provisions expected to be
common to each Agreement and the related Certificates. GreenPoint recommends
that the investor read all of the provisions of the related Agreement and the
description set forth in the related Prospectus Supplement. Section references
contained herein refer to sections of the form of Agreement filed as an
exhibit to the Registration Statement. The Prospectus Supplement for each
Series will describe the specific material provisions of the Agreement
relating to such Series. Capitalized terms used and not otherwise defined
herein shall have the meanings assigned to them in the form of Agreement filed
as an exhibit to the Registration Statement.
GENERAL
The Certificates may be issued in one or more Classes. If the Certificates
of a Series are issued in more than one Class, the Certificates of all or less
than all of such Classes may be sold pursuant to this Prospectus, and
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there may be separate Prospectus Supplements relating to one or more of such
Classes so sold. Any reference herein to the Prospectus Supplement relating to
a Series comprised of more than one Class should be understood as a reference
to each of the Prospectus Supplements relating to the Classes sold hereunder.
Any reference herein to the Certificates of a Class should be understood to
refer to the Certificates of a Class within a Series, the Certificates of a
subclass within a Series or all of the Certificates of a single-Class Series,
as the context may require.
The Certificates will be issued in the denominations specified in the
related Prospectus Supplement. (Section 6.02.) The "Percentage Interest" of a
Certificate is the percentage obtained from dividing the original denomination
of such Certificate by the initial principal balance of all of the
Certificates of such Class. Interest-only Certificates will have no Percentage
Interest. Certificates, if issued in registered form ("Definitive
Certificates") to Certificate Owners or nominees thereof, will be transferable
and exchangeable at the corporate trust office of the Trustee or, if it so
elects, at the office of an agent in New York, New York. (Sections 6.02 and
9.11.) No service charge will be made for any registration of exchange or
transfer, but the Trustee may require payment of a sum sufficient to cover any
tax or other governmental charge. (Section 6.02.)
The Certificates of each Series will evidence an interest, as specified in
the related Prospectus Supplement, in a Trust Fund. Each Trust Fund will
include (i) a Contract Pool, including certain rights to receive payments on
the Contracts comprising such Contract Pool on and after the Cut-off Date,
(ii) the amounts held from time to time in the "Certificate Account" (as
described in the applicable Prospectus Supplement under "--Payment on
Contracts; Certificate Account") maintained by the Trustee pursuant to the
Agreement, (iii) any property which initially secured a Contract and which is
acquired in the process of realizing thereon, (iv) the obligations of
GreenPoint, under certain conditions, to repurchase Contracts sold by it with
respect to which certain representations and warranties have been breached and
not cured, (v) certain contractual servicing obligations of the Servicer, (vi)
the proceeds of all insurance policies described herein and (vii) if
applicable, one or more forms of credit support. If so specified in the
related Prospectus Supplement, a limited guarantee of GFC may exist and, if so
specified therein, will be a part of the Trust Fund. GreenPoint will convey
the Contracts to the Trustee. See "The Contract Pools" herein and "--
Conveyance of Contracts" below. GreenPoint, as Servicer, will service the
Contracts pursuant to the Agreement. If so specified in the related Prospectus
Supplement, the Contract documents will be held for the benefit of the Trustee
by the Servicer.
CONVEYANCE OF CONTRACTS
On the date of initial issuance of the Certificates of a Series, GreenPoint
will sell to the Trustee, without recourse, all of its right, title and
interest in and to the Contracts sold by it, and all rights under the standard
hazard insurance policies on the related Manufactured Homes. The conveyance of
the Contracts to the Trustee will include a conveyance of all rights to
receive Scheduled Payments thereon that were due on or after the Cut-off Date,
even if received prior to the Cut-off Date, as well as all rights to any
payments received on or after the Cut-off Date other than late receipts of
Scheduled Payments that were due prior to the Cut-off Date. The Contracts will
be described on a schedule attached to the Agreement (the "Contract
Schedule"). The Contract Schedule will include the principal balance of each
Contract as of the Cut-off Date, the amount of each Scheduled Payment due on
each Contract as of the Cut-off Date, the Contract Rate on each Contract
(determined as of the Cut-off Date) and the maturity date of each Contract.
GreenPoint will be required to complete a review of all of the originals of
the Contracts, the certificates of title to, or other evidence of a perfected
security interest in, the Manufactured Homes, any related Mortgages, if any,
and any assignments or modifications of the foregoing (collectively, the
"Contract Files") confirming the accuracy of the Contract Schedule delivered
to the Trustee within the time period set forth in the related Agreement. Any
Contract discovered not to agree with such schedule in a manner that is
materially adverse to the interests of the Certificateholders will be
repurchased by GreenPoint, or replaced with another Contract, except that if
the discrepancy relates to the principal balance of a Contract (determined as
described above), GreenPoint may, under certain conditions, deposit cash in
the Certificate Account in an amount sufficient to offset such discrepancy.
The Trustee will not review the Contract Files. (Section 2.01.)
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If so provided in the related Prospectus Supplement, the Servicer will hold,
as custodian and agent on behalf of the Trustee, the original Contracts and
copies of documents and instruments relating to each Contract and the security
interest in the Manufactured Home, and real property, if any, relating to each
Contract. In order to give notice of the Trustee's right, title and interest
in and to the Contracts, a UCC-1 financing statement identifying the Trustee
as the secured party and identifying all the Contracts as collateral will be
filed in the appropriate office in the appropriate states. The Contracts will
be stamped or otherwise marked to reflect their assignment to the Trustee. To
the extent that the Contracts do not constitute "chattel paper" within the
meaning of the UCC as in effect in the applicable jurisdictions or to the
extent that the Contracts do constitute chattel paper and a subsequent
purchaser is able to take physical possession of the Contracts without notice
of such assignment, the Trustee's interest in the Contracts could be defeated.
See "Certain Legal Aspects of the Contracts--Security Interests of GreenPoint
in the Manufactured Homes" and "Land Home and Land-in-Lieu Contracts" herein.
GreenPoint will make certain representations and warranties to the Trustee
with respect to each Contract sold by it. The applicable Prospectus Supplement
will describe the representations and warranties made by GreenPoint in
connection with the Contracts conveyed to the related Trust Fund, the terms
pursuant to which GreenPoint will be obligated to repurchase, at the price
specified therein, any Contract sold by it if any such representation and
warranty has been breached (unless such breach has been cured or otherwise is
not required to be cured), and the terms pursuant to which GreenPoint may
remedy any such breach. (Section 3.05.)
PAYMENTS ON CONTRACTS
The applicable Prospectus Supplement will specify the arrangements pursuant
to which Contract collections are held pending distribution to
Certificateholders. (Section 4.05.) Certain Contract collections will be
applied to pay the Servicer's servicing compensation and to reimburse it for
certain expenses, as set forth in each Prospectus Supplement and as set forth
herein under "--Servicing Compensation and Payment of Expenses; Certain
Matters Regarding the Servicer" below.
DISTRIBUTIONS ON CERTIFICATES
The Certificates of any Class will entitle the holders thereof to
distributions, on the Distribution Dates specified in the related Prospectus
Supplement, from amounts collected on the underlying Contracts. The
Certificates of a Class may entitle the holders thereof to (a) distributions
of both principal and interest, (b) distributions of principal only, or (c)
distributions of interest only. Such distributions will be made in accordance
with a formula described in the related Prospectus Supplement, and, if so
specified in such Prospectus Supplement, such distributions will be applied
first to interest, if any, and second to principal, if any. To the extent
specified in the related Prospectus Supplement, the rights of the holders of
the Certificates of one or more Classes of a multiple Class Series to receive
distributions of principal or of interest or of both from amounts collected on
the Contracts may be subordinate to such rights of the holders of Certificates
of one or more other Classes. See "Credit and Liquidity Enhancement" herein.
Distributions of Principal. If the Certificates of a Class entitle the
holders thereof to distributions of principal, the related Prospectus
Supplement will specify an initial aggregate Certificate Balance for the
Certificates of such Class and a method of computing the amount of principal,
if any, to be distributed to the holders of such Certificates on each
Distribution Date. If so specified in the related Prospectus Supplement,
principal distributions for the Certificates of a Class will be computed on
the basis of a formula which, on each Distribution Date, allocates all or a
portion of the Total Regular Principal Amount relating to such Distribution
Date to the Certificates of such Class. The "Total Regular Principal Amount"
is the total amount by which the aggregate outstanding principal balance of
the Contracts in the related Contract Pool is reduced during one or more
collection periods prior to such Distribution Date designated in such
Prospectus Supplement (each, a "Collection Period"). Such reduction may occur
as a result of actuarially predetermined scheduled principal reductions,
receipt of principal prepayments, liquidation of Contracts, repurchases of
Contracts under certain conditions, losses on Contracts, the failure of a
third party credit support provider, if any, to make a required payment, or a
combination of any of the foregoing events. See "The Contract Pools" and "--
Servicing
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Compensation and Payment of Expenses; Certain Matters Regarding the Servicer"
herein. Distributions with respect to all or a portion of the Total Regular
Principal Amount are sometimes referred to herein as distributions of "Regular
Principal." The Total Regular Principal Amount with respect to any Contract
Pool and any Distribution Date may be estimated in a manner specified in the
related Prospectus Supplement.
If, due to liquidation losses or other circumstances adversely affecting the
collections on the underlying Contract Pool, the Contract collections
available on any Distribution Date to make distributions of Regular Principal
to the holders of the Certificates of a Class are less than the portion of the
Total Regular Principal Amount allocable to such Class, the deficiency may be
made up from (i) the amount ("Excess Interest"), if any, by which the interest
collected on nondefaulted Contracts during the same Collection Period exceeds
the interest distribution due to the holders of the Certificates for the
related Series and, if so specified in the related Prospectus Supplement and
if GreenPoint is acting as Servicer, the Monthly Servicing Fee (as defined
hereinafter and in the related Prospectus Supplement), or (ii) funds available
from one or more forms of credit support referred to below, but only to the
extent, if any, specified in the applicable Prospectus Supplement. See "Credit
and Liquidity Enhancement" herein. If specified in the applicable Prospectus
Supplement, the Certificate Balance of the Certificates of a Class will be
reduced on each Distribution Date by the full amount of the portion of the
Total Regular Principal Amount allocable to such Class even if, due to
deficient Contract collections, a full distribution thereof is not made.
The applicable distribution formula for each Class of a multiple-Class
Series may allocate the Total Regular Principal Amount among the various
Classes on a pro rata, sequential or other basis, as specified in the related
Prospectus Supplement. If specified in the related Prospectus Supplement, any
such formula may entitle the holders of Certificates of a particular Class to
receive on certain Distribution Dates, distributions of Regular Principal from
particular sources of funds (e.g., one or more of the forms of credit support
referred to below) upon the occurrence of certain losses or delinquencies,
even if the holders of the Certificates of such Class would not have been
entitled to receive principal distributions on such Distribution Dates from
amounts collected on the underlying Contracts in the absence of such losses or
delinquencies.
If specified in the applicable Prospectus Supplement, the Certificates of a
Class may entitle the holders thereof to Special Principal Distributions on
particular Distribution Dates that are unrelated to the Total Regular
Principal Amount for any such Distribution Date ("Special Principal
Distributions"). Special Principal Distributions may be made, under the
circumstances set forth in the applicable Prospectus Supplement, from interest
collected on the underlying Contract Pool, from funds available from one or
more forms of credit support or from any other source specified in such
Prospectus Supplement. The Certificates of a Class having an initial
Certificate Balance may entitle the holders thereof to distributions of
Regular Principal only, to distributions of Regular Principal and to Special
Principal Distributions or to Special Principal Distributions only. However,
if so specified in the related Prospectus Supplement, the Certificates of a
Class will not entitle the holders thereof to aggregate principal
distributions in excess of the initial Certificate Balance for such Class.
Distributions of Interest. The distribution formula for a Class of
Certificates having an initial Certificate Balance may, but need not, also
specify a method of computing the interest, if any, to be distributed on
specified Distribution Dates (which may include all or less than all of the
Distribution Dates) to the holders of the Certificates of such Class. Such
interest may be equal, subject to such adjustments as may be described in the
related Prospectus Supplement, to a specified number of days' interest on the
applicable Certificate Balance (before giving effect to any reduction thereof
on such Distribution Date), calculated at a rate (the "Pass-Through Rate")
specified in the related Prospectus Supplement. The Pass-Through Rate may be
fixed or variable, and, if specified in the related Prospectus Supplement, may
shift from a variable rate to a fixed rate under the conditions specified in
such Prospectus Supplement. Variable Pass-Through Rates may vary from time to
time based upon changes in an index or other measure of certain market rates,
all as more fully described in the related Prospectus Supplement. In that
case, the time period between Pass-Through Rate adjustments (each, a "Rate
Period") and the specific basis on which the Pass-Through Rate for each Rate
Period will be determined (including the particular market rates and measures
thereof relevant for determining the Pass-Through Rate for each Rate Period)
may remain constant or may change from time to time at the election of the
Servicer or otherwise, all as
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specified in the related Prospectus Supplement. Variable Pass-Through Rates
may also vary from time to time, in the manner specified in the related
Prospectus Supplement, based upon changes in the weighted average of the
Contract Rates of the Contracts in the related Contract Pool or on any other
basis. To the extent set forth in the related Prospectus Supplement, variable
Pass-Through Rates may also have floor rates and/or ceiling rates which may be
fixed or subject to adjustment as set forth in such Prospectus Supplement. In
addition, a variable Pass-Through Rate may be converted to a fixed Pass-
Through Rate at the election of the Seller or upon the occurrence of certain
conditions. In that event, the related Prospectus Supplement will set forth
the conditions under which the variable Pass-Through Rate may be converted to
a fixed Pass-Through Rate.
Rather than entitling the holders thereof to receive distributions of
interest based upon a Pass-Through Rate, the distribution formula for the
Certificates of a Class may entitle the holders thereof to distributions of
interest on specified Distribution Dates (which may include all or less than
all of the Distribution Dates) equal, in the case of any such Distribution
Date, to all or a portion (which portion will be determined as described in
the related Prospectus Supplement) of the interest payable on the related
Contracts during one or more Collection Periods occurring prior to such
Distribution Date. Classes of Certificates that do not entitle the holders
thereof to receive distributions of principal may nevertheless entitle such
holders to receive interest distributions calculated on this basis.
If, due to liquidation losses or other circumstances adversely affecting the
collections on the underlying Contract Pool, the Contract collections
available to make distributions of interest to the holders of the Certificates
of a Class are less than the amount of interest computed as described above,
the deficiency may be made up from other sources, but only to the extent, if
any, specified in the applicable Prospectus Supplement. See "Credit and
Liquidity Enhancement" herein.
Each Prospectus Supplement will contain information relating to the full
amounts of principal and interest required to be distributed to the holders of
the related Class or Classes of Certificates, to the extent there are
sufficient Contract collections available therefor (sometimes referred to
herein as "full distributions"), from amounts paid or payable on the
underlying Contracts.
Residual Interests. If specified in the related Prospectus Supplement, a
Class of Certificates sold hereunder may evidence a residual interest in the
related Trust Fund (the "Residual Interest"). Certificates evidencing a
Residual Interest will not have the features described above. Rather, if so
specified in such Prospectus Supplement, such Certificates will entitle the
holders thereof to receive distributions from amounts collected on the
Contracts which would not be needed to make distributions to the holders of
other interests in the Trust Fund (or to pay expenses of the Trust Fund) in
the absence of liquidation losses or other events resulting in deficient
Contract collections. In addition, if specified in such Prospectus Supplement,
any such Certificates may also entitle the holders thereof to receive
additional distributions of assets of the related Trust Fund, to the extent
any such assets remain after being applied to make distributions to the
holders of other interests in the Trust Fund (or to pay expenses of the Trust
Fund). Further, is so specified in the related Prospectus Supplement, any
amounts due to the holders of a Residual Interest with respect to any Series
may be subordinated to amounts due to holders of Certificates of another
Series to the extent described in such Prospectus Supplement. The Certificates
evidencing a Residual Interest may entitle the holders thereof to
distributions at various times throughout the life of the related Trust Fund
or only upon termination of the Trust Fund, all as more fully set forth in the
related Prospectus Supplement. If an election is made to treat the related
Trust Fund as a REMIC (as hereinafter defined), the holders of a Residual
Interest in such Trust Fund will be subject to federal income taxation with
respect to their ownership of such Residual Interest as described herein under
"Federal Income Tax Consequences--REMIC Certificates--Taxation of Residual
Certificates."
GLOBAL CERTIFICATES
If so specified in the applicable Prospectus Supplement, the Certificates of
a Series, or of one or more Classes within a Series, will be issuable in the
form of one or more global certificates (each, a "Global Certificate") that
are initially registered in the name of Cede & Co. ("Cede"), as nominee of The
Depository
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Trust Company ("DTC"), on behalf of the beneficial owners (the "Certificate
Owners") of the Certificates. DTC is a limited-purpose trust company organized
under the laws of the State of New York, 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 accepts securities for deposit from
its participating organizations ("Participants") and facilitates the clearance
and settlement of securities transactions between Participants in such
securities through electronic book-entry changes in accounts of Participants,
thereby eliminating the need for physical movement of certificates.
Participants include securities brokers and dealers, banks and trust companies
and clearing corporations and may include certain other organizations.
Indirect access to the DTC system is also 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").
Certificate Owners who are not Participants but desire to purchase, sell or
otherwise transfer ownership of Certificates may do so only through
Participants (unless and until Definitive Certificates are issued). In
addition, Certificate Owners will receive all distributions of principal of,
and interest on, the Certificates from the Trustee through DTC and
Participants. Certificate Owners will not receive or be entitled to receive
certificates representing their respective interests in the Certificates,
except under the limited circumstances described below. In addition, if some
or all of the Certificates of a Series are issued in the form of one or more
Global Certificates, certain monthly and annual reports prepared by the
Servicer under the related Agreement will be sent on behalf of the related
Trust Fund to Cede and not to the Certificate Owners.
Unless and until Definitive Certificates are issued, it is anticipated that
the only "Certificateholder" of the Certificates will be Cede, as nominee of
DTC. Certificate Owners will not be Certificateholders as that term is used in
the Agreement. Certificate Owners are only permitted to exercise the rights of
Certificateholders indirectly through Participants and DTC.
If so specified in the related Prospectus Supplement, while the Certificates
are outstanding (except under the circumstances described below), under the
rules, regulations and procedures creating and affecting DTC and its
operations (the "DTC Rules"), Participants are required to make book-entry
transfers through DTC's facilities with respect to the Certificates, and DTC
as the sole holder of the Certificates is required to receive and transmit
distributions of principal of, and interest on, the Certificates. Unless and
until Definitive Certificates are issued, Certificate Owners who are not
Participants may transfer ownership of Certificates only through Participants
by instructing such Participants to transfer Certificates, by book-entry
transfer, through DTC for the account of the purchasers of such Certificates,
which account is maintained with their respective Participants. Under the DTC
Rules and in accordance with DTC's normal procedures, transfers of ownership
of Certificates will be executed through DTC, and the accounts of the
respective Participants at DTC will be debited and credited.
Definitive Certificates will be issued to Certificate Owners, or their
nominees, rather than to DTC, only if (i) the Servicer advises the Trustee in
writing that DTC is no longer willing or qualified to discharge properly its
responsibilities as nominee and depository with respect to the Certificates
and the Servicer or the Trustee is unable to locate a qualified successor,
(ii) the Seller, at its option, elects to terminate the book-entry system
through DTC, or (iii) after the occurrence of an Event of Default (See "--
Servicing Compensation and Payment of Expenses; Certain Matters Regarding the
Servicer--Events of Default" below), Certificate Owners having a majority in
Percentage Interests of each Class of the Certificates advise the Trustee and
DTC through the Participants, in writing, that the continuation of a book-
entry system through DTC (or a successor thereto) to the exclusion of any
physical certificates being issued to Certificate Owners is no longer in the
best interests of Certificate Owners. Upon issuance of Definitive Certificates
to Certificate Owners, such Certificates will be transferable directly (and
not exclusively on a book-entry basis), and registered holders will deal
directly with the Trustee with respect to transfers, notices and
distributions.
Except as otherwise specified in the related Prospectus Supplement, unless
and until Definitive Certificates are issued, DTC will take any action
permitted to be taken by a Certificateholder under the Agreement only at
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the direction of one or more Participants to whose DTC accounts the
Certificates are credited and will take such action with respect to any
Percentage Interests of the Certificates only at the direction of and on
behalf of such Participants with respect to such Percentage Interests of the
Certificates. DTC may take actions, at the direction of the related
Participants, with respect to some Certificates which conflict with actions
taken with respect to other Certificates.
DTC'S YEAR 2000 EFFORTS
DTC management is aware that some computer applications, systems, and the
like for processing data ("Systems") that are dependent upon calendar dates,
including dates before, on, and after January 1, 2000, may encounter "Year
2000 problems." DTC has informed its Participants and other members of the
financial community (the "Industry") that it has developed and is implementing
a program so that its Systems, as the same relate to the timely payment of
distributions (including principal and income payments) to securityholders,
book-entry deliveries, and settlement of trades within DTC ("DTC Services"),
continue to function appropriately. This program includes a technical
assessment and a remediation plan, each of which is complete. Additionally,
DTC's plan includes a testing phase, which is expected to be completed within
appropriate time frames.
However, DTC's ability to perform properly its services is also dependent
upon other parties, including but not limited to issuers and their agents, as
well as third party vendors from whom DTC license software and hardware, and
third party vendors on whom DTC relies for information or the provision of
services, including telecommunication and electrical utility service
providers, among others. DTC has informed the Industry that it is contacting
(and will continue to contact) third party vendors from whom DTC acquires
services to: (i) impress upon them the importance of such services being Year
2000 compliance; and (ii) determine the extent of their efforts for Year 2000
remediation (and, as appropriate, testing) for their services. In addition,
DTC is in the process of developing such contingency plans as it deems
appropriate.
According to DTC, the foregoing information with respect to DTC has been
provided to the Industry for informational purposes only and is not intended
to serve as a representation, warranty, or contract modification of any kind.
OPTIONAL AND MANDATORY REPURCHASE OF CERTIFICATES; OPTIONAL TERMINATION AND
TERMINATION AUCTION
Optional Repurchase. If so specified in the applicable Prospectus
Supplement, the Servicer for any Trust Fund will have the option to
repurchase, upon giving notice mailed no later than the Distribution Date next
preceding the month of the exercise of such option, all outstanding Contracts
after the first Distribution Date on which the Pool Scheduled Principal
Balance (as defined hereinafter) is less than 10% (or such other percentage as
may be specified in the related Prospectus Supplement) of the initial Pool
Principal Balance on the Cut-off Date. The price at which the Servicer for
such Trust Fund may repurchase the related Contracts will equal, after
deductions of related advances by the Servicer, the greater of (a) the sum of
(x) 100% of the Pool Scheduled Principal Balance of each Contract (other than
any Contract as to which the related Manufactured Home has been acquired and
not yet disposed of and whose fair market value is included pursuant to clause
(y) below) as of the final Distribution Date, and (y) the fair market value of
such acquired property (as determined by the Servicer) and (b) the aggregate
fair market value (as determined by the Servicer) of all of the assets of such
Trust Fund, plus, in the case of both clause (a) and (b), an amount sufficient
to reimburse Certificateholders for each outstanding Class for any shortfall
in interest due thereto in respect of prior Distribution Dates and, if so
specified in the related Prospectus Supplement, any amounts owing to the
Credit Facility Provider. Notwithstanding the foregoing, the Servicer's option
shall not be exercisable if there will not be distributed to the
Certificateholders for each outstanding Class an amount equal to the aggregate
Certificate Balance for each outstanding Class together with any shortfall in
interest due to such Certificateholders in respect of prior Distribution Dates
and one month's interest on the aggregate Certificate Balance for each
outstanding Class at the respective Pass-Through Rates for such Classes and,
if so specified in the related Prospectus Supplement, any amounts owing to the
Credit Facility Provider (the "Minimum Termination Amount"). The related
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Prospectus Supplement will specify whether losses suffered on the Contracts in
the normal course will be allocated to the holders of Certificates when
realized or upon the termination of the related Trust and whether an
adjustment to the Minimum Termination Amount will be made. In no event, will
losses be recognized until a liquidation of the collateral securing any such
defaulted Contract has been liquidated. See "Description of the Certificates--
Optional Termination" in the related Prospectus Supplement. (Section 10.01.)
Mandatory Repurchase. Some or all of the Certificates of a Class may be
subject to repurchase by or on behalf of the Seller at the option of the
holders thereof and/or at the option of the Seller, but only to the extent, at
the prices, on the dates and under the conditions specified in the related
Prospectus Supplement. In addition, some or all of the Certificates of a Class
may be subject to mandatory repurchase by or on behalf of the Seller to the
extent, at the prices, on the dates and under the conditions specified in the
related Prospectus Supplement. On the date on which any Certificate is subject
to repurchase (the "Repurchase Date") the holder thereof will cease to be
entitled to any benefit of the Certificate or the related Agreement and will
be entitled only to receive from the Trustee the repurchase price of the
Certificate upon surrender thereof at the office or agency designated by the
Trustee. To the extent specified in the related Prospectus Supplement, the
funds necessary to distribute the repurchase price of any Certificate subject
to mandatory or optional repurchase as described therein will be provided
under a certificate purchase agreement or other Liquidity Facility as
described in "Credit and Liquidity Enhancement" herein.
Optional or Mandatory Termination Auction. If specified in the applicable
Prospectus Supplement, on any Distribution Date after the Distribution Date on
which the Pool Scheduled Principal Balance is less than 10% (or such other
percentage as may be specified in the related Prospectus Supplement) of the
Cut-off Date Pool Principal Balance, the Servicer will, in addition to the
option to repurchase the Contracts discussed above, have the option to direct
the Trustee to solicit bids for the purchase at an auction (the "Termination
Auction") of the Contracts remaining in the Trust Fund. Unless the Servicer
has either exercised the option to repurchase the Contracts or directed the
Trustee to conduct a Termination Auction within 90 days of the Distribution
Date on which the Pool Scheduled Principal Balance is less than 10% (or such
other percentage as may be specified in the related Prospectus Supplement) of
the Cut-off Date Pool Principal Balance, the Servicer shall, to the extent
specified in the related Prospectus Supplement, be obligated to direct the
Trustee to conduct such a Termination Auction. In any Termination Auction, the
Servicer shall give notice as specified in the applicable Prospectus
Supplement before the date on which the Termination Auction is to occur. The
Trustee will solicit each Certificateholder, the Seller and one or more active
participants in the asset-backed securities or manufactured housing contract
market that are not affiliated with GreenPoint to make a bid to purchase the
Contracts at the Termination Auction. The Trustee will sell all the Contracts
to the highest bidder, subject, among other things, to (i) the requirement
that the highest bid equal or exceed the Minimum Termination Amount, and (ii)
the requirement that at least one bid be tendered by an active participant in
the asset-backed securities or manufactured housing contract market that is
not affiliated with GreenPoint. If the foregoing requirements are satisfied,
the successful bidder or bidders shall deposit the aggregate purchase price
for the Contracts in the Certificate Account. If the foregoing requirements
are not satisfied, the purchase shall not occur and distributions will
continue to be made on the Certificates. Any sale and consequent termination
of the Trust Fund as a result of a Termination Auction must constitute a
"qualified liquidation" of the Trust Fund under Section 860F of the Code.
(Section 10.1)
TERMINATION OF THE AGREEMENT
The Agreement will terminate upon the last action required to be taken by
the Trustee on the final Distribution Date following the earlier of (i) the
purchase or sale of all Contracts and all property acquired in respect of any
Contract remaining in the Trust Fund as described above under "--Optional and
Mandatory Repurchase of Certificates; Termination Auction" or (ii) the final
payment or other liquidation (or any advance with respect thereto) of the last
Contract remaining in the relevant Trust Fund (including the disposition of
all property acquired upon repossession of any Manufactured Home). (Section
10.01.)
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In the event of the termination of any Agreement, the holders of
Certificates of any Class of the related Series will be entitled to receive,
upon presentation and surrender of their Certificates at the office or agency
designated by the Trustee, a final distribution in an amount computed as
described in the related Prospectus Supplement.
COLLECTION AND OTHER SERVICING PROCEDURES
Except as otherwise provided in the related Agreement, the Servicer may
rescind, cancel or make material modifications of the terms of a Contract
(including modifying the amounts and Due Dates of Scheduled Payments) in
connection with a default or imminent default thereunder. However, if so
specified in the related Prospectus Supplement and unless required by the
applicable law or to bring Contracts into conformity with the representations
and warranties contained in the Agreement, the Servicer may not rescind,
cancel or materially modify any Contract unless the Servicer obtains an
opinion of counsel to the effect that such action will not have certain
adverse federal income tax consequences. (Section 4.07.)
SERVICING COMPENSATION AND PAYMENT OF EXPENSES; CERTAIN MATTERS REGARDING THE
SERVICER
The monthly servicing fee (the "Monthly Servicing Fee") and any additional
servicing compensation with respect to the Contracts underlying a Series of
Certificates will be specified in the applicable Prospectus Supplement.
(Section 1.01.) If so specified in the related Prospectus Supplement, if
GreenPoint is acting as Servicer, GreenPoint may subordinate the Monthly
Servicing Fee for a Series with respect to all, or a portion of, the amounts
due to the related Certificateholders on the terms and conditions set forth in
such Prospectus Supplement.
The Monthly Servicing Fee provides compensation for customary manufactured
housing contract third-party servicing activities to be performed by the
Servicer for the Trust Fund and for additional administrative services
performed by the Servicer on behalf of the Trust Fund. Customary servicing
activities include collecting and recording payments, communicating with
Obligors, investigating payment delinquencies, providing billing and tax
records to Obligors and maintaining internal records with respect to each
Contract. Administrative services performed by the Servicer on behalf of the
Trust Fund include calculating distributions to Certificateholders and
providing related data processing and reporting services for
Certificateholders and on behalf of the Trustee. If so specified in the
applicable Prospectus Supplement, expenses incurred in connection with
servicing the Contracts and paid by the Servicer from its Monthly Servicing
Fee include, without limitation, payment of fees and expenses of accountants,
payment of all fees and expenses incurred in connection with the enforcement
of Contracts (except liquidation expenses and certain other expenses) and
payment of expenses incurred in connection with distributions and reports to
Certificateholders. The Servicer will be reimbursed out of the liquidation
proceeds from a defaulted Contract for all reasonable, out-of-pocket
liquidation expenses incurred by it in realizing upon the related Manufactured
Home as well as for advances of taxes and insurance premiums previously made
with respect to any such Contract (to the extent not previously recovered).
If so specified in the related Prospectus Supplement, as part of its
servicing fees, the Servicer will also be entitled to retain, as compensation
for the additional services provided in connection therewith, any fees for
late payments made by Obligors, conversion fees relating to variable rate
Contracts, a fee associated with the enforcement of deficiency amounts on
Liquidated Contracts if deficiency amounts are recoverable under the laws of
the applicable jurisdiction, extension fees paid by Obligors for the extension
of scheduled payments and assumption fees for permitted assumptions of
Contracts by purchasers of the related Manufactured Homes. (Sections 4.15 and
5.03.) To the extent specified in the related Prospectus Supplement, the
Servicer will also be entitled to use payments of principal and interest
(including Liquidation Proceeds net of Liquidation Expenses) for its own
benefit, without an obligation to pay interest or any other investment return
thereon, until the related Distribution Date.
If so specified in the applicable Prospectus Supplement, any person with
which the Servicer is merged or consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Servicer is
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a party, or any person succeeding to the business of the Servicer, will be the
successor to the Servicer under the Agreement, so long as such successor has a
net worth of at least $50 million and has serviced at least $100 million of
manufactured housing contracts for at least one year. The Servicer may assign
its rights and delegate its duties under the Agreement (whereupon it will no
longer be liable for the obligations of the Servicer under the Agreement),
provided that, among other conditions, any rating assigned to the Certificates
will not be reduced because of such assignment and delegation. (Sections 7.04,
7.06 and 7.07.)
Hazard Insurance Policies. If so specified in the related Prospectus
Supplement, the Servicer will be obligated to cause to be maintained one or
more hazard insurance policies with respect to each Manufactured Home in an
amount at least equal to the lesser of its maximum insurable value or the
principal amount due from the Obligor under the related Contract. Such hazard
insurance policies will, at a minimum, provide fire and extended coverage on
terms and conditions customary in manufactured housing hazard insurance
policies. If a Manufactured Home is located within a federally designated
flood area, the Servicer will, to the extent required by applicable law or
regulation, also be obligated to cause flood insurance to be maintained in an
amount equal to the lesser of the amounts described above or the maximum
amount available for such Manufactured Home under the federal flood insurance
programs. Such policies may provide for customary deductible amounts. Coverage
thereunder will be required to be sufficient to avoid the application of any
co-insurance provisions. Such policies will be required to contain a standard
loss payee clause in favor of the Servicer and its successors and assigns. In
general, the Servicer will not be obligated to cause to be obtained and
maintained hazard insurance policies that provide earthquake coverage. If
earthquake coverage is required with respect to Contracts in a particular
Trust Fund, that fact will be disclosed in the related Prospectus Supplement.
If so specified in the related Prospectus Supplement, all amounts collected
by the Servicer under a hazard or flood insurance policy will be applied
either to the restoration or repair of the Manufactured Home or against the
remaining principal balance of the related Contract upon repossession of the
Manufactured Home, after reimbursing the Servicer for amounts previously
advanced by it for such purposes. The Servicer may satisfy its obligation to
maintain hazard and flood insurance policies with respect to each Manufactured
Home by maintaining a blanket policy insuring against hazard and flood losses
on the related Obligor's interest in such Manufactured Home. Such blanket
policy may contain a deductible clause, in which case the Servicer will be
required to make payments to the related Trust Fund in the amount of any
deductible amounts in connection with insurance claims on repossessed
Manufactured Homes.
If so specified in the related Prospectus Supplement, if the Servicer
repossesses a Manufactured Home on behalf of the Trustee, the Servicer is
required to either maintain a Hazard Insurance Policy with respect to such
Manufactured Home meeting the requirements set forth above, or to indemnify
the Trust Fund against any damage to such Manufactured Home prior to resale or
other disposition. (Section 4.09.)
Evidence as to Compliance. If so specified in the related Prospectus
Supplement, the Servicer will be required to deliver to the Trustee each year
an officer's certificate executed by an officer of the Servicer (i) stating
that a review of the activities of the Servicer during the preceding calendar
year and of performance under the Agreement has been made under the
supervision of such officer, and (ii) stating that to the best of such
officer's knowledge, the Servicer has fulfilled all its obligations under the
Agreement throughout such year, or, if there has been a default in the
fulfillment of any such obligation, specifying each such default known to such
officer and the nature and status thereof. Such officer's certificate will be
accompanied by a statement of a firm of independent public accountants to the
effect that, on the basis of an examination of certain documents and records
relating to servicing of the Contracts under the Agreement (or, at the
Servicer's option, the Contracts and other contracts being serviced by the
Servicer under agreements similar to the Agreement), conducted in accordance
with generally accepted auditing standards, the Servicer's servicing has been
conducted in compliance with the provisions of the Agreement (or such
agreements), except (i) such exceptions as such firm believes to be immaterial
and (ii) such other exceptions as may be set forth in such statement.
(Sections 4.20 and 4.21.)
Events of Default. Servicer events of default under the Agreement will
consist of, among other events, (i) any failure by the Servicer to make any
deposit or payment required of it under the Agreement which
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continues unremedied for five days after the giving of written notice, (ii)
any failure by the Servicer duly to observe or perform in any material respect
any of its other covenants or agreements in the Agreement which continues
unremedied for 30 days after the giving of written notice of such failure, and
(iii) certain events of insolvency, readjustment of debt, marshaling of assets
and liabilities or other similar proceedings regarding the Servicer. If so
specified in the related Prospectus Supplement, "notice" as used in this
paragraph means notice to the Servicer by the Trustee, the Seller or, if
applicable, the Credit Facility Provider, or to the Servicer, the Trustee and
the Seller by the holders of Certificates evidencing interests ("Fractional
Interests") in the outstanding principal balance of outstanding Certificates
that, in the aggregate, equal at least 25% of the principal balance of all
outstanding Certificates (excluding Certificates held by the Seller or any of
its affiliates). (Section 8.01.)
Rights Upon Event of Default. If so specified in the related Prospectus
Supplement so long as an event of default remains unremedied, the Trustee may
(but only with the consent of the Credit Facility Provider (if any) if the
Credit Facility has not expired or if the Credit Facility has expired or been
terminated and such Credit Facility Provider has not been reimbursed for all
amounts due it), and at the written direction of the holders of Certificates
evidencing Fractional Interests aggregating not less than 51% shall, terminate
all of the rights and obligations of the Servicer under the Agreement and in
and to the related Contracts, whereupon (subject to applicable law regarding
the Trustee's ability to make monthly advances) the Trustee or a successor
Servicer under the Agreement will succeed to all the responsibilities, duties
and liabilities of the Servicer under the Agreement and will be entitled to
similar compensation arrangements. If the Trustee is obligated to succeed the
Servicer but is unwilling or unable so to act, it may appoint or petition a
court of competent jurisdiction for the appointment of a Servicer. Pending
such appointment, the Trustee is obligated to act in such capacity. The
Trustee and such successor Servicer may agree upon the servicing compensation
to be paid, which in no event may be greater than a monthly amount specified
in the Agreement. (Sections 7.07 and 8.01.)
If so specified in the related Prospectus Supplement, no Certificateholder
will have any right under the Agreement to institute any proceeding with
respect to the Agreement unless such holder previously has given to the
Trustee written notice of default and unless the holders of Certificates
evidencing Fractional Interests aggregating not less than 25% have requested
the Trustee in writing to institute such proceeding in its own name as Trustee
and have offered to the Trustee reasonable indemnity and the Trustee for 60
days has neglected or refused to institute any such proceeding. The Trustee
will be under no obligation to take any action or institute, conduct or defend
any litigation under the Agreement at the request, order or direction of any
of the holders of Certificates, unless such Certificateholders have offered to
the Trustee reasonable security or indemnity against the costs, expenses and
liabilities which the Trustee may incur. (Sections 8.01 and 11.08.)
AMENDMENT
If so specified in the related Prospectus Supplement, the Agreement may be
amended by the Seller, the Servicer and the Trustee without the consent of the
Certificateholders (but only with the consent of the Credit Facility Provider
(if any) if the Credit Facility has not expired or if the Credit Facility has
expired or been terminated and such Credit Facility Provider has not been
reimbursed for all amounts due it), (i) to cure any ambiguity, (ii) to correct
or supplement any provision therein that may be inconsistent with any other
provision therein, (iii) to add to the duties or obligations of the Servicer,
(iv) to obtain a rating from a nationally recognized rating agency or to
maintain or improve the ratings of any Class of the Certificates then given by
any rating agency (it being understood that, after obtaining the rating of the
Certificates from the rating agencies specified in such Agreement, none of the
Trustee, the Seller or the Servicer is obligated to obtain, maintain or
improve any rating assigned to the Certificates), or (v) to make any other
provisions with respect to matters or questions arising under such Agreement,
provided that such action will not, as evidenced by an opinion of counsel,
adversely affect in any material respect the interests of the
Certificateholders. The Agreement may also be amended, by the Seller, the
Servicer, the Trustee and, if so specified in the related Prospectus
Supplement, the Credit Facility Provider, with the consent of at least 51% of
the holders of Certificates of each Class affected thereby for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of such Agreement or of modifying in any manner the rights of the
Certificateholders; provided,
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however, that no such amendment shall (i) reduce in any manner the amount of,
or delay the timing of, any distributions on any Certificate, without the
consent of the Holder of such Certificate as the case may be, (ii) adversely
affect in any material respect the interests of the Holders of any Class of
Certificates in a manner other than as described in (i), without the consent
of the Holders of Certificates of such Class evidencing, as to such Class,
Percentage Interests aggregating 66% or (iii) reduce the aforesaid percentage
of Certificates the holders of which are required to consent to any such
amendment, without the consent of the holders of all Certificates then
outstanding, and no such amendment shall adversely affect the status of the
Trust Fund as a REMIC.
If so specified in the applicable Prospectus Supplement, the Agreement may
also be amended from time to time, without the consent of any
Certificateholders, by the Seller, the Trustee and the Servicer to modify,
eliminate or add to the provisions of the Agreement to (i) maintain the
qualification of the Trust Fund as a REMIC under the Code or avoid, or
minimize the risk of, the imposition of any tax on the Trust Fund under the
Code that would be a claim against the Trust Fund assets, provided that an
opinion of counsel is delivered to the Trustee to the effect that such action
is necessary or appropriate to maintain such qualification or avoid any such
tax or minimize the risk of its imposition, or (ii) prevent the Trust Fund
from entering into any "prohibited transaction" as defined in Section 860F of
the Code, provided that an opinion of counsel is delivered to the Trustee to
the effect that such action is necessary or appropriate to prevent the Trust
Fund from entering into such prohibited transaction. (Section 11.01.)
The Agreement may otherwise be subject to amendment without the consent of
any Certificateholders and, under certain circumstances, without the consent
of the Trustee, if and to the extent specified in the related Prospectus
Supplement.
THE TRUSTEE
The Trustee with respect to a Series will be identified in the applicable
Prospectus Supplement. If so specified therein, the Trustee may resign at any
time, in which event the Seller will be obligated to appoint a successor
Trustee. The Seller may also remove the Trustee if the Trustee ceases to be
eligible to continue as such under the related Agreement or if the Trustee
becomes insolvent. In such circumstances, the Seller will also be obligated to
appoint a successor Trustee. Any resignation or removal of the Trustee and
appointment of a successor Trustee will not become effective until acceptance
of the appointment by the successor Trustee. (Section 9.07.)
If so specified in the related Prospectus Supplement, the Agreement for any
Series will require the Trustee to maintain, at its own expense, an office or
agency in New York City where the Certificates for such Series may be
surrendered for registration of transfer or exchange and where notices and
demands to or upon the Trustee and the Certificate Registrar in respect of
such Certificates pursuant to the related Agreement may be served.
If so specified in the related Prospectus Supplement, the Trustee, or any of
its affiliates, in its individual or any other capacity, may become the owner
or pledgee of the Certificates of any Series with the same rights as it would
have if it were not Trustee.
If so specified in the related Prospectus Supplement, the Trustee will act
as Paying Agent, Certificate Registrar and Authenticating Agent for the
related Series of Certificates.
INDEMNIFICATION
If so specified in the applicable Prospectus Supplement, each Agreement will
provide that neither the Servicer nor any of its directors, officers,
employees or agents will be under any liability to the Trustee or the
Certificateholders for any action taken or for refraining from the taking of
any action in good faith pursuant to such Agreement, or for errors in
judgment; provided, however, that such provision shall not protect the
Servicer or any such person against any liability that would otherwise be
imposed by reason of willful misfeasance, bad
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faith or gross negligence. The Servicer shall not be under any obligation to
appear in, prosecute or defend any legal action which arises under an
Agreement (other than in connection with the enforcement of any Contract in
accordance with the Agreement) and which in its opinion may involve it in any
expenses or liability; provided, however, that the Servicer may in its
discretion undertake any such other legal action which it may deem necessary
or desirable in respect of the Agreement and the rights and duties of the
parties thereto. In such event, the legal expenses and costs of such other
legal action and any liability resulting therefrom shall be expenses, costs
and liabilities payable from the Trust Fund and the Servicer shall be entitled
to be reimbursed therefor from amounts collected on the Contracts. (Section
7.05.)
CREDIT AND LIQUIDITY ENHANCEMENT
To the extent specified in the related Prospectus Supplement, a Class of
Certificates may be entitled to the benefit of one or more of the following
forms of credit and liquidity enhancement:
SUBORDINATION
The Certificates of one or more Classes of a multiple-Class Series (the
"Senior Certificates") may afford the holders thereof a right to receive
distributions of principal or of interest or of both on each Distribution Date
from amounts collected on the related Contract Pool that is prior to the right
to receive such distributions afforded by the Certificates of the other Class
or Classes (the "Junior Certificates" or "Subordinate Certificates"). If so
specified in the related Prospectus Supplement, this prior right will result
from one or both of the following two features:
The Senior Certificates will entitle the holders thereof to receive on some
or all Distribution Dates, prior to any distribution of principal or of
interest or of both (as specified in the related Prospectus Supplement) being
made to the holders of the Junior Certificates on any such Distribution Date,
a full distribution of principal or of interest or of both principal and
interest (as specified in the related Prospectus Supplement) from amounts
collected on the Contracts during the related Collection Period(s). To the
extent that Contract collections during the related Collection Period(s)
would, in the absence of liquidation losses or other circumstances adversely
affecting such Contract collections, have been applied to make distributions
to the holders of the Junior Certificates, this feature will enhance the
likelihood of timely receipt by the holders of the Senior Certificates of full
distributions of principal or of interest or of both in accordance with the
applicable distribution formula.
The distribution formula for the Senior Certificates (other than interest-
only Certificates) will entitle the holders thereof to receive, on some or all
Distribution Dates, all or a disproportionate share of the Total Regular
Principal Amount until the Certificate Balance of the Senior Certificates has
been reduced to zero. See "Description of Certificates--Distributions on
Certificates--Distributions of Principal" above. This feature, in effect, will
provide the holders of the Senior Certificates (other than holders of
interest-only Certificates) with a prior right to receive the principal
collected on the Contracts until the Certificate Balance of the Senior
Certificates has been reduced to zero. The degree of priority will depend on
the share of the Total Regular Principal Amount to which the holders of the
Senior Certificates (other than holders of interest-only Certificates) are
entitled on particular Distribution Dates. If the holders of the Senior
Certificates (other than holders of interest-only Certificates) are entitled
to receive all of the Total Regular Principal Amount on each Distribution Date
(to the extent of the Contract collections available to make distributions of
Regular Principal on such Distribution Date), then the holders of the Senior
Certificates (other than holders of interest-only Certificates) will, in
effect, have a right to receive all principal collected on the Contracts that
is absolutely prior to the right of the holders of the Junior Certificates to
receive any principal collected on the Contracts. If, however, the holders of
the Senior Certificates (other than holders of interest-only Certificates) are
entitled to receive only a disproportionate share of the Total Regular
Principal Amount, or are entitled to receive all or a disproportionate share
of the Total Regular Principal Amount only on certain Distribution Dates, then
the prior right of the holders of the Senior Certificates (other than holders
of interest-only Certificates) to receive distributions of principal collected
on the Contracts will, to that extent, be limited. The prior right to receive
distributions of principal
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collections described above will enhance the likelihood that the holders of
the Senior Certificates (other than holders of interest-only Certificates)
will ultimately receive distributions of principal in an aggregate amount
equal to the initial Certificate Balance of the Senior Certificates. It will
not, however, enhance the likelihood of timely receipt by the holders of the
Senior Certificates of full distributions of the amounts to which they would
have been entitled in the absence of liquidation losses or other circumstances
adversely affecting Contract collections.
If specified in the related Prospectus Supplement, the features described
above may be characteristic of different Classes within a multiple-Class
Series. Thus, Certificates which constitute Senior Certificates under the
criteria described in paragraph 1 above may constitute Junior Certificates
under the criteria described in paragraph 2 above, and Certificates which
constitute Senior Certificates under the criteria described in paragraph 2
above may constitute Junior Certificates under the criteria described in
paragraph 1 above. In general, the splitting of the features described above
among two separate Classes of a multiple-Class Series will undercut the
protection against loss afforded by each of such features. The particular
effects of any such splitting will be discussed in the applicable Prospectus
Supplement. The following discussion is based on the assumption that the
features described above will not be characteristic of different Classes
within a multiple-Class Series.
The degree of protection against loss provided to the holders of the Senior
Certificates at any time by either of the subordination features described
above will be determined primarily by the degree to which the aggregate
principal balance of the underlying Contracts (the "Pool Principal Balance")
exceeds the Certificate Balance of the Senior Certificates (and to a lesser
extent, if the holders of the Senior Certificates also have a prior right to
receive interest, by the degree to which the interest payable on the
Contracts, net of the portions thereof used to pay the servicing fee of the
Servicer (if such servicing fee is payable prior to distributions of interest
to the holders of the Senior Certificates) and other expenses of the Trust
Fund, exceeds the interest distributable to the holders of the Senior
Certificates). The relative levels of the Certificate Balance of the Senior
Certificates (the "Senior Certificate Balance") and the related Pool Principal
Balance, and hence the degree of protection against loss afforded by the
subordination features described above, may change over time depending on,
among other things, the formula by which principal is distributed to the
holders of the Senior Certificates and the level of liquidation losses on the
underlying Contracts. Generally, if the holders of Senior Certificates (other
than holders of interest-only Certificates) receive a disproportionate share
of the Total Regular Principal Amount on any Distribution Date, the effect
will be to increase, as a relative matter, the degree by which the Pool
Principal Balance exceeds the Certificate Balance of the Senior Certificates,
thus increasing the degree of protection against loss afforded by the
subordination of the Junior Certificates. In addition, Special Principal
Distributions to the holders of the Senior Certificates from sources other
than principal collections on the underlying Contracts generally will increase
the degree of protection against loss above the protection that would have
been provided if such distributions were not made (because the Senior
Certificate Balance will be reduced without a reduction in the Pool Principal
Balance). On the other hand, if, due to liquidation losses or other
circumstances adversely affecting Contract collections, the holders of Senior
Certificates (other than holders of interest-only Certificates) receive less
than their proportionate share of the Total Regular Principal Amount, the
effect will be to decrease, as a relative matter, the degree to which the Pool
Principal Balance exceeds the Certificate Balance of the Senior Certificates,
thus decreasing the degree of protection against loss afforded by the
subordination of the Junior Certificates. The effects of particular principal
distribution formulae in this regard will be discussed in the applicable
Prospectus Supplement. The description of any such effects in a particular
Prospectus Supplement may relate the Certificate Balances of the Senior
Certificates to Pool Principal Balances which are estimated or adjusted as
described therein. Such Pool Principal Balances may sometimes be referred to
in a Prospectus Supplement as "Pool Scheduled Principal Balances."
Where there is more than one Class of Junior Certificates, the rights of one
or more of such Classes of Junior Certificates to receive distributions of
principal, interest or principal and interest may be subordinated to the
rights of one or more other Classes of Junior Certificates to receive such
distributions. Any Class of Junior Certificates that is entitled to receive
such distributions from Contract Pool collections prior to any other Class of
Junior Certificates is a "mezzanine" Class of Junior Certificates. The
subordination of any Class of Junior
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Certificate to a mezzanine Class of Junior Certificates will enhance the
likelihood of timely receipt by the holders of such mezzanine Class of Junior
Certificates relative to any Class of Junior Certificates that is subordinate
to such mezzanine Class of Junior Certificates. Junior Certificates, including
any mezzanine Classes of Junior Certificates, may only be sold hereunder if
rated in one of the four highest rating categories of a nationally recognized
statistical rating organization. (See "Rating" herein). The effect of any
subordination on any Classes of Junior Certificates sold hereunder will be
discussed in the applicable Prospectus Supplement.
RESERVE FUNDS
The Certificates of one or more Classes may be entitled to the benefit of
one or more spread accounts or other reserve funds (each, a "Reserve Fund")
which, to the extent specified in the related Prospectus Supplement, will
cover shortfalls created when collections on the related Contract Pool that
are available to make distributions to the holders of such Certificates are
not sufficient to fund full distributions of principal, interest or principal
and interest to such Certificateholders. Any Reserve Fund may be available to
cover all or a portion of such shortfalls and may be available to cover any
shortfalls, no matter what the cause, or only shortfalls due to certain causes
(e.g., liquidation losses only or delinquencies only), all as specified in the
related Prospectus Supplement. In addition, to the extent specified in the
related Prospectus Supplement, a Reserve Fund may be used to make
distributions of interest or Regular Principal to the holders of a Class of
Certificates on particular Distribution Dates upon the occurrence of certain
losses, delinquencies or other events, even if such Certificateholders would
not have been entitled to any such distributions on such Distribution Dates in
the absence of losses, delinquencies or other events. A Reserve Fund may also
be used to fund Special Principal Distributions under the circumstances set
forth in the related Prospectus Supplement. The related Prospectus Supplement
will specify whether any Reserve Fund will be established as part of the Trust
Fund or held outside of the Trust Fund by a collateral agent or similar third
party (who may be the Trustee acting in a different capacity) and will contain
a description of any arrangement pursuant to which the Reserve Fund is held
outside of the Trust Fund.
The method of funding any Reserve Fund, and the required levels of funding,
if any, as well as the circumstances under which amounts on deposit in any
Reserve Fund may be distributed to persons other than Certificateholders, will
be described in the applicable Prospectus Supplement. To the extent that a
Reserve Fund may be funded in whole or in part from some or all of the
interest collected on the Contracts in excess of the interest needed to make
distributions to the holders of one or more Classes of Certificates, such
Reserve Fund may be referred to in the applicable Prospectus Supplement as a
"Spread Account."
CREDIT FACILITIES
The Certificates of one or more Classes may be entitled to the benefit of
one or more letters of credit, swap agreements, interest rate caps, surety
bonds or similar credit facilities (each, a "Credit Facility"). Each such
Credit Facility may be in an amount greater than, equal to or less than the
Certificate Balance of the Certificates of each Class entitled to the benefits
thereof, and may be subject to reduction or be limited as to duration, all as
described in the applicable Prospectus Supplement. To the extent specified in
the related Prospectus Supplement, amounts realized under a Credit Facility
supporting the Certificates of any Class may be used for the same purposes as
amounts on deposit in Reserve Funds. See "--Reserve Funds" above. A Credit
Facility may be held by a Trustee as part of the related Trust Fund or may be
held by a collateral agent or other third party (who may be the Trustee acting
in a different capacity). The related Prospectus Supplement will contain a
description of the material terms of any Credit Facility and any arrangement
pursuant to which the Credit Facility is held outside of the Trust Fund. Such
Prospectus Supplement will also contain certain information concerning the
provider of the Credit Facility (the "Credit Facility Provider"), which
information will have been provided to the Seller by the Credit Facility
Provider for use in such Prospectus Supplement. GreenPoint or an affiliate
thereof may be a Credit Facility Provider.
If specified in the applicable Prospectus Supplement, a Credit Facility,
rather than supporting distributions of particular amounts to the holders of
Certificates of particular Classes, may, instead, support certain collections
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on the related Contract Pool. These collections may be of all or a portion of
amounts due on Contracts in liquidation, all or a portion of the scheduled
monthly payments due on the Contracts or of other amounts. The extent to which
any such collections are supported by a Credit Facility which functions in
this manner will be described in the applicable Prospectus Supplement.
LIQUIDITY FACILITIES
The Certificates of one or more Classes may be entitled to the benefit of
one or more certificate purchase agreements or other liquidity facilities
(each, a "Liquidity Facility"), pursuant to which the provider of such
Liquidity Facility (the "Liquidity Facility Provider") will provide funds to
be used to purchase some or all of such Certificates on the Repurchase Dates
applicable thereto. If so specified in the applicable Prospectus Supplement, a
Liquidity Facility will be held outside of the Trust Fund by a third party
(which may be the Trustee acting in another capacity). The related Prospectus
Supplement will contain a description of the material terms of any such
Liquidity Facility and any arrangement pursuant to which it is held outside of
the Trust Fund, and will contain certain information concerning the Liquidity
Facility Provider, which information will have been provided to the Seller by
the Liquidity Facility Provider for use in such Prospectus Supplement.
GreenPoint or an affiliate thereof may be a Liquidity Facility Provider. If
specified in the related Prospectus Supplement, a Reserve Fund or Credit
Facility may also serve as a Liquidity Facility.
FEDERAL INCOME TAX CONSEQUENCES
The following summary describes the material federal income tax consequences
of the purchase, ownership and disposition of Certificates of any Series as of
the date hereof. In connection with the issuance of each Series, Special
counsel to GreenPoint will render its opinion that this discussion of the
federal income tax consequences, as supplemented by the discussion of federal
income tax consequences in the related prospectus supplement accompanying such
Series, is accurate in all material respects. As more fully discussed below,
special counsel to GreenPoint is also of the opinion that (A) for a Series for
which an election to be treated as a "real estate mortgage investment conduit"
("REMIC") will be made, (i) the Trust Fund will qualify as a REMIC for federal
income tax purposes, (ii) the Certificates of such Series identified in the
related prospectus supplement as "regular interests" in the REMIC ("Regular
Certificates") will be so treated for federal income tax purposes and will be
treated as debt instruments for purposes of chapter 1 of the Code (generally
relating to the calculation of a Certificateholder's federal income tax
liability), (iii) those Certificates of such Series identified in the related
prospectus supplement as "residual interests" in the REMIC ("Residual
Certificates") will be treated for federal income tax purposes as the sole
class of "residual interests" in the REMIC, (iv) the REMIC represented by the
Trust Fund will not be subject to federal income tax as a separate entity
except for (a) the tax on "prohibited transactions" imposed by Section 860F of
the Code, (b) the tax on "contributions after startup date" imposed by Section
860G(d) of the Code and (c) the tax on "income from foreclosure property"
imposed by Section 860G(c) of the Code and (v) those Certificates, if any,
identified a being comprised of a REMIC "regular interest" coupled with a swap
or cap contract will be treated as representing ownership of a "regular
interest" in a REMIC to the extent of the portion thereof identified as such
in the Prospectus Supplement, (B) for a Series for which no election to be
treated as a REMIC will be made and which is described as a "grantor trust" in
the Prospectus Supplement, for federal income tax purposes, the Trust Fund
will be classified as a grantor trust and not as a corporation or an
association which is taxable as a corporation and the Certificates will be
treated as equity in such trust, or (C) for a Series for which no election to
be treated as a REMIC will be made and which is described in the Prospectus
Supplement as an "owner trust," (i) for federal income tax purposes, the Trust
Fund will not be treated as an association, taxable mortgage pool or publicly
traded partnership taxable as a corporation and (ii) the Offered Certificates
or Notes of such Series will be treated as indebtedness for federal income tax
purposes. Except to the extent provided in a related prospectus supplement,
special counsel to GreenPoint will render no other opinions on federal income
taxes to a Trust with respect to the Certificates. Special counsel to
GreenPoint for each Series will be Orrick, Herrington & Sutcliffe LLP, and a
copy of the legal opinion of such counsel rendered in connection with any
Series of Certificates will be filed with the Commission on a Current Report
on Form 8-K prior to the sale of the related Series of Certificates.
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This discussion is directed primarily to Certificateholders that hold the
Certificates as "capital assets" within the meaning of Section 1221 of the
Code (although portions thereof also may apply to Certificateholders who do
not hold Certificates as "capital assets") and it does not purport to discuss
all federal income tax consequences that may be applicable to the individual
circumstances of particular investors, some of which (such as banks, insurance
companies and foreign investors) may be subject to special treatment under the
Code. Further, the authorities on which this discussion, and the opinion
referred to below, are based are subject to change or differing
interpretations, which could apply retroactively. Prospective investors should
note that no rulings have been or will be sought from the Internal Revenue
Service (the "Service") with respect to any of the federal income tax
consequences discussed below, and no assurance can be given that the Service
will not take contrary positions. Taxpayers and preparers of tax returns
(including those filed by any REMIC or other issuer) should be aware that
under applicable Treasury regulations a provider of advice on specific issues
of law is not considered an income tax return preparer unless the advice (i)
is given with respect to events that have occurred at the time the advice is
rendered and is not given with respect to the consequences of contemplated
actions, and (ii) is directly relevant to the determination of an entry on a
tax return. Accordingly, taxpayers should consult their tax advisors and tax
return preparers regarding the preparation of any item on a tax return, even
where the anticipated tax treatment has been discussed herein. In addition to
the federal income tax consequences described herein, potential investors are
advised to consider the state, local and other tax consequences, if any, of
the purchase, ownership and disposition of Certificates in a Series. See
"Other Tax Consequences." Certificateholders are urged to consult their tax
advisors concerning the federal, state, local or other tax consequences to
them of the purchase, ownership and disposition of Certificates in a Series.
The following discussion addresses securities of three general types: (i)
certificates ("REMIC Certificates") representing interests in a Trust Fund
with respect to which an election to be treated as a "real estate mortgage
investment conduit" ("REMIC") under Sections 860A through 860G (the "REMIC
Provisions") of the Code will be made, (ii) Grantor Trust Certificates
representing interests in a Trust Fund ("Grantor Trust Fund") as to which no
such election will be made and (iii) Owner Trust Certificates or Notes which
will be treated as indebtedness for federal income tax purposes and as to
which no REMIC election will be made.
The following discussion is based in part upon the rules governing original
issue discount that are set forth in Sections 1271-1273 and 1275 of the Code
and in the Treasury regulations issued thereunder (the "OID Regulations"), and
in part upon the REMIC Provisions and the Treasury regulations issued
thereunder (the "REMIC Regulations"). The OID Regulations do not adequately
address certain issues relevant to, and in some instances provide that they
are not applicable to, securities such as the Certificates.
The following discussion is limited in applicability to the Certificates.
For purposes of this tax discussion, references to a "Certificateholder" or a
"holder" are to the beneficial owner of a Certificate.
REMIC ELECTIONS
Under the Code, an election may be made with respect to a Trust Fund related
to any Series of Certificates to treat such Trust Fund as a "real estate
mortgage investment conduit" ("REMIC") within the meaning of Section 860D(a)
of the Code, in which case the Certificates of any Class of such Series will
be either "regular interests" in the REMIC within the meaning of Section
860G(a)(1) of the Code or "residual interests" in the REMIC within the meaning
of Section 860G(a)(2) of the Code. The Prospectus Supplement for each Series
of Certificates will indicate whether each Seller of Contracts to the related
Contract Pool intends to cause an election to be made to treat the Trust Fund
as a REMIC, and if such an election is to be made, which Certificates will be
regular interests and which will be the residual interest in the REMIC. The
discussion under the heading "--REMIC Certificates" discusses Series with
respect to which the Seller of Contracts to the related Contract Pool will
cause a REMIC election to be made and the discussion under the heading "--Non-
REMIC Trusts" discusses Series with respect to which the Seller will not cause
a REMIC election to be made.
REMIC CERTIFICATES
General. The discussion in this section applies only to a Series of
Certificates for which a REMIC election is to be made. Upon the issuance of
each Series of Certificates for which a REMIC election is to be made, Orrick,
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Herrington & Sutcliffe LLP, special counsel to GreenPoint will deliver its
opinion that, with respect to each such Series of Certificates, under then
existing law and assuming that a REMIC election is made in accordance with the
requirements of the Code and compliance by the Seller, the Servicer and the
Trustee for such Series with all of the provisions of the related Agreement,
the agreement or agreements, if any, providing for a Credit Facility or a
Liquidity Facility, together with any agreement documenting the arrangement
through which a Credit Facility or a Liquidity Facility is held outside the
related Trust Fund, and agreement or agreements with any Underwriter, the
Trust Fund will be a REMIC, and the Certificates of such Series will be
treated as either "regular interests" in the REMIC ("Regular Certificates") or
"residual interests" in the REMIC ("Residual Certificates") .
Orrick, Herrington & Sutcliffe LLP, special counsel to GreenPoint, has
prepared or reviewed the statements in this Prospectus under the heading
"Federal Income Tax Consequences-- REMIC Certificates," and are of the opinion
that such statements are correct in all material respects. Such statements are
intended as an explanatory discussion of the possible effects of the
classification of any Trust Fund as a REMIC for federal income tax purposes on
investors generally and of related tax matters affecting investors generally,
but do not purport to furnish information in the level of detail or with the
attention to an investor's specific tax circumstances that would be provided
by an investor's own tax advisor. Accordingly, each investor is urged to
consult its own tax advisors with regard to the tax consequences to it of
investing in REMIC Certificates.
Tax Status of REMIC Certificates. If so specified in the related Prospectus
Supplement, the Certificates of any Series, in their entirety, will generally
be considered (i) "real estate assets" within the meaning of
Section 856(c)(4)(A) of the Code and (ii) assets described in Section
7701(a)(19)(C) of the Code (assets qualifying under one or more of those
sections, applying each section separately, "qualifying assets") for a
calendar quarter if at least 95% of the assets of the related Trust Fund are
qualifying assets during such calendar quarter. In the event the percentage of
the Trust Fund's assets which are qualifying assets falls below 95% for any
calendar quarter, then a corresponding percentage of the Certificates will be
treated as qualifying assets for such calendar quarter. Any amount includible
in gross income with respect to the Certificates will be treated as "interest
on obligations secured by mortgages on real property or on interests in real
property" within the meaning of Section 856(c)(3)(B) of the Code to the extent
that the Certificates are treated as "real estate assets" within the meaning
of Section 856(c)(4)(A) of the Code. The assets of the Trust Fund will
include, in addition to the Contracts, payments on the Contracts held pending
distribution, and may include, among other assets, one or more Reserve Funds.
With respect to the treatment of Contracts as qualifying assets, (i) the
Treasury Regulations under Section 856 of the Code define a "real estate
asset" under Section 856(c)(4)(A) of the Code to include a loan secured by
manufactured housing that qualifies as a single family residence under the
Code, and (ii) the Treasury Regulations under Section 7701(a)(19)(C) of the
Code provide that assets described in that Section include loans secured by
manufactured housing that qualifies as a single family residence under the
Code. The Internal Revenue Service has ruled that obligations secured by
permanently installed mobile home units qualify as "real estate assets" under
Section 856(c)(4)(A) of the Code. Assets described in Section 7701(a)(19)(C)
of the Code include loans secured by mobile homes not used on a transient
basis. However, whether Manufactured Homes would be viewed as permanently
installed for purposes of Section 856 of the Code would depend on the facts
and circumstances of each case, because the Internal Revenue Service rulings
on this issue do not provide facts on which taxpayers can rely to achieve
treatment as "real estate assets". No assurance can be given that the
Manufactured Homes will be so treated. A Real Estate Investment Trust ("REIT")
will not be able to treat that portion of its investment in Certificates that
represents ownership of Contracts on Manufactured Homes that are not treated
as permanently attached as "real estate assets" for REIT qualification
purposes. In this regard, investors should note that generally, most Contracts
prohibit the Obligor from permanently attaching the related Manufactured Home
to its site if it were not so attached on the date of the Contract. If so
specified in the related Prospectus Supplement, Contracts in the related
Contract Pool may permit the Obligor to permanently attach the related
Manufactured Home to its site even if not attached at the date of the
Contract. It is unclear whether other assets of the Trust Fund would be
treated as qualifying assets under the foregoing sections of the Code. REMIC
Certificates held by a regulated investment company will not constitute
"Government Securities" within the meaning of Code Section 851(b)(4)(A)(ii).
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Qualification as a REMIC. Qualification as a REMIC requires ongoing
compliance with certain conditions. The following discussion assumes that such
requirements will be satisfied by a Trust Fund so long as any REMIC
Certificates related to such Trust Fund are outstanding. Substantially all of
the assets of the REMIC must consist of "qualified mortgages" and "permitted
investments" as of the close of the third month beginning after the day on
which the REMIC issues all of its regular and residual interests (the "Startup
Day") and at all times thereafter. The term "qualified mortgage" means any
obligation (including a participation or certificate of beneficial ownership
in such obligation) which is principally secured by an interest in real
property that is transferred to the REMIC on the Startup Day in exchange for
regular or residual interests in the REMIC or is purchased by the REMIC within
the three-month period beginning on the Startup Day if such purchase is
pursuant to a fixed price contract in effect on the Startup Day. The REMIC
Regulations provide that a manufactured housing contract is principally
secured by an interest in real property if the fair market value of the real
property securing the contract is at least equal to either (i) 80% of the
issue price (generally, the principal balance) of the contract at the time it
was originated or (ii) 80% of the adjusted issue price (the then outstanding
principal balance, with certain adjustments) of the contract at the time it is
contributed to a REMIC. The fair market value of the underlying real property
is to be determined after taking into account other liens encumbering that
real property. Alternatively, a manufactured housing contract is principally
secured by an interest in real property if substantially all of the proceeds
of the contract were used to acquire or to improve or protect an interest in
real property that, at the origination date, is the only security for the
contract (other than the personal liability of the obligor). The REMIC
Regulations as well as a published notice issued by the Internal Revenue
Service (the "Service") provide that obligations secured by interests in
manufactured housing, which qualify as "single family residences" within the
meaning of Section 25(e)(10) of the Code, are to be treated as "qualified
mortgages" for qualifying a Trust Fund as a REMIC. Under Section 25(e)(10) of
the Code, the term "single family residence" includes any manufactured home
which has a minimum of 400 square feet of living space and a minimum width in
excess of 102 inches and which is of a kind customarily used at a fixed
location. GreenPoint will represent and warrant that each of the manufactured
homes securing the Contracts conveyed by it to a Trust Fund meets this
definition of a "single family residence." A qualified mortgage also includes
a "qualified replacement mortgage" that is used to replace any "qualified
mortgage" within three months of the Startup Day or to replace a defective
mortgage within two years of the Startup Day.
"Permitted investments" consist of (a) temporary investments of cash
received under qualified mortgages before distribution to holders of interests
in the REMIC ("cash-flow investments"), (b) amounts, such as a reserve fund,
if any, reasonably required to provide for full payment of expenses of the
REMIC, the principal and interest due on regular or residual interests in the
event of defaults on qualified mortgages, lower than expected returns on cash-
flow investments, prepayment interest shortfalls or certain other
contingencies ("qualified reserve assets") and (c) certain property acquired
as a result of foreclosure of defaulted qualified mortgages ("foreclosure
property"). A reserve fund will not be qualified if more than 30% of the gross
income from the assets in the reserve fund is derived from the sale or other
disposition of property held for three months or less, unless such sale is
necessary to prevent a default in payment of principal or interest on Regular
Certificates. In accordance with Section 860G(a)(7) of the Code, a reserve
fund must be "promptly and appropriately" reduced as payments on contracts are
received. Foreclosure property will be a permitted investment only to the
extent that such property is not held for more than three years unless an
extension of such holding period is obtained from the Service.
The Code requires that in order to qualify as a REMIC an entity must make
reasonable arrangements designed to ensure that certain specified entities,
generally including governmental entities or other entities that are exempt
from United States tax, including the tax on unrelated business income
("Disqualified Organizations"), do not hold the residual interest in the
REMIC. Consequently, it is expected that in the case of any Trust Fund for
which a REMIC election is made, the transfer, sale, or other disposition of a
Residual Certificate to a Disqualified Organization will be prohibited, and
the ability of a Residual Certificate to be transferred will be conditioned on
the Trustee's receipt of a certificate or other document representing that the
proposed transferee is not a Disqualified Organization. The transferor of a
Residual Certificate must not, as of the time of the transfer, have actual
knowledge that such representation is false. The Code further requires that
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reasonable arrangements be made to enable a REMIC to provide the Service and
certain other parties, including transferors of residual interests in a REMIC,
with the information needed to compute the tax imposed by Section 860E(e)(1)
of the Code if, in spite of the steps taken to prevent Disqualified
Organizations from holding residual interests, such an organization does, in
fact, acquire a residual interest. See "Restrictions on Transfer of Residual
Certificates" below.
For certain Series of Certificates, two or more separate elections may be
made to treat segregated portions of the assets of a single Trust Fund as
REMICs for federal income tax purposes. Upon the issuance of any such series
of Certificates, Orrick, Herrington & Sutcliffe LLP, special tax counsel to
GreenPoint, will have advised GreenPoint, as described above, that at the
initial issuance of the Certificates of such Series, each such segregated
portion qualifies as a REMIC for federal income tax purposes, and that the
Certificates in such Series will be treated either as Regular Certificates or
Residual Certificates of the appropriate REMIC. Solely for the purpose of
determining whether such Regular Certificates will constitute qualifying real
estate or real property assets for certain categories of financial
institutions or real estate investment trusts as described above under "--Tax
Status of REMIC Certificates," some or all of the REMICs in a multiple-tier
REMIC structure may be treated as one. See the discussion below under "--
Taxation of Regular Certificates."
If an entity electing to be treated as a REMIC fails to comply with one or
more of the ongoing requirements of the Code for REMIC status during any
taxable year, the Code provides that the entity will not be treated as a REMIC
for such 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 interests in the REMIC may be
treated as debt or equity interests therein. If the Trust Fund were treated as
a corporation, income of the Trust Fund would be subject to corporate tax in
the hands of the Trust Fund, and, therefore, only a reduced amount might be
available for distribution to Certificateholders. The Code authorizes the
Treasury Department to issue Treasury 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 a REMIC would occur
absent regulatory relief. Investors should be aware, however, that the
Conference Committee Report (the "Committee Report") to the Tax Reform Act of
1986 (the "1986 Act") indicates that the relief may be accompanied by
sanctions, such as the imposition of a corporate income tax on all or a
portion of the REMIC's income for the period of time in which the requirements
for REMIC status are not satisfied. The Agreement with respect to each REMIC
will include provisions designed to maintain the related Trust Fund's status
as a REMIC. It is not anticipated that the status of any Trust Fund as a REMIC
will be terminated.
TAXATION OF REGULAR CERTIFICATES
General. The Regular Certificates in any Series will constitute "regular
interests" in the related REMIC. Accordingly, the Regular Certificates will be
treated for purposes of calculating a Certificateholder's federal income tax
liability as debt instruments that are issued by the related Trust Fund on the
date of issuance of the Regular Certificates and not as ownership interests in
the Trust Fund or the Trust Fund's assets. Interest, original issue discount,
and market discount accrued on a Regular Certificate will be treated as
ordinary income to the holder. Each holder must use the accrual method of
accounting with regard to Regular Certificates, regardless of the method of
accounting otherwise used by such holder with the effect that an investor may
be required to report income for federal income tax purposes despite not yet
having received a cash distribution in respect of such income. Payments of
interest on REMIC Regular Certificates may be based on a fixed rate or a
variable rate as permitted by the REMIC Regulations, or may consist of a
specified portion of the interest payments on qualified mortgages where such
portion does not vary during the period the REMIC Regular Certificate is
outstanding. If a Regular Certificate represents an interest in a REMIC that
consists of a specified portion of the interest payments on the REMIC's
qualified mortgages, the stated principal amount with respect to that Regular
Certificate may be zero.
Original Issue Discount. Certain Regular Certificates may be issued with
"original issue discount" within the meaning of Code Section 1273(a). Any
holders of Regular Certificates issued with original issue discount generally
will be required to include original issue discount in income as it accrues,
in accordance with a constant interest method that takes into account the
compounding of interest, in advance of the receipt of the
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cash attributable to such income. The Servicer will report annually (or more
often if required) to the Internal Revenue Service ("IRS") and to
Certificateholders such information with respect to the original issue
discount accruing on the REMIC Regular Certificates as may be required under
Code Section 6049 and the regulations thereunder. See "--Reporting
Requirements" below.
Rules governing original issue discount are set forth in Code Sections 1271
through 1273 and 1275 and, to some extent, in the OID Regulations. Code
Section 1272(a)(6) provides special original issue discount rules applicable
to Regular Certificates. Regulations have not yet been proposed or adopted
under Section 1272(a)(6) of the Code. Further, application of the OID
Regulations to the Regular Certificates remains unclear in some respects
because the OID Regulations generally purport not to apply to instruments to
which section 1272(a)(6) applies such as Regular Certificates, and separately
because they either do not address, or are subject to varying interpretations
with regard to, several relevant issues.
Code Section 1272(a)(6) requires that a mortgage prepayment assumption
("Prepayment Assumption") be used in computing the accrual of original issue
discount on Regular Certificates and for certain other federal income tax
purposes. The Prepayment Assumption is to be determined in the manner
prescribed in Treasury regulations. To date, no such regulations have been
promulgated. The Committee Report indicates that the regulations will provide
that the Prepayment Assumption, if any, used with respect to a particular
transaction must be the same as that used by the parties in pricing the
transaction. If so specified in the applicable Prospectus Supplement, the
Servicer will use a percentage of the prepayment assumption specified in the
applicable Prospectus Supplement in reporting original issue discount that is
consistent with this standard. However, the Servicer does not make any
representation that the Mortgage Loans will in fact prepay at a rate equal to
that prepayment assumption or at any other rate. Each investor must make its
own decision as to the appropriate prepayment assumption to be used in
deciding whether or not to purchase any of the Regular Certificates. The
Prospectus Supplement with respect to a Series of Certificates will disclose
the prepayment assumption to be used in reporting original issue discount, if
any, and for certain other federal income tax purposes.
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". Except as discussed in the following two paragraphs,
in general, the issue price of a particular Class of Regular Certificates
offered hereunder will be the price at which a substantial amount of Regular
Certificates of that Class are first sold to the public (excluding bond houses
and brokers).
If a Regular Certificate is sold with accrued interest that relates to a
period prior to the issue date of such Regular Certificate, the amount paid
for the accrued interest will be treated instead as increasing the issue price
of the Regular Certificate. In addition, that portion of the first interest
payment in excess of interest accrued from the Closing Date to the first
Distribution Date will be treated for federal income tax reporting purposes as
includible in the stated redemption price at maturity of the Regular
Certificate, and as excludible from income when received as a payment of
interest on the first Distribution Date. The OID Regulations suggest that some
or all of this pre-issuance accrued interest "may" be treated as a separate
asset (and hence not includible in a Regular Certificate's issue price or
stated redemption price at maturity), whose cost is recovered entirely out of
interest paid on the first Distribution Date. It is unclear how such treatment
would be elected under the OID Regulations and whether an election could be
made unilaterally by a Certificateholder.
The stated redemption price at maturity of a Regular Certificate is equal to
the total of all payments to be made on such Certificate other than "qualified
stated interest." Under the OID Regulations, "qualified stated interest" is
interest that is unconditionally payable at least annually during the entire
term of the Certificate at either (i) a single fixed rate that appropriately
takes into account the length of the interval between payments or (ii) the
current values of a single "qualified floating rate" or "objective rate"
(each, a "Single Variable Rate"). A "current value" is the value of a variable
rate on any day that is no earlier than three months prior to the first day on
which that value is in effect and no later than one year following that day. A
"qualified floating rate" is a rate whose variations can reasonably be
expected to measure contemporaneous variations in the cost of newly borrowed
funds in the currency in which the Certificate is denominated. Such a rate
remains qualified even
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though it is multiplied by a fixed, positive multiple not exceeding 1.35,
increased or decreased by a fixed rate, or both. Certain combinations of rates
constitute a single qualified floating rate, including (i) interest stated at
a fixed rate for an initial period of less than one year followed by a
qualified floating rate if the value of the floating rate at the closing date
is intended to approximate the fixed rate, and (ii) two or more qualified
floating rates that can be expected to have appropriately the same values
throughout the term of the Certificate. A combination of such rates is
conclusively presumed to be a single floating rate if the values of all rates
on the closing date are within 0.25% of each other. A variable rate that is
subject to an interest rate cap, floor, "governor" or similar restriction on
rate adjustment may be a qualified floating rate only if such restriction is
fixed throughout the term of the instrument, or is not reasonably expected as
of the closing date to cause the yield on the debt instrument to differ
significantly from the expected yield absent the restriction. An "objective
rate" is a rate (other than a qualified floating rate) determined using a
single formula fixed for the life of the Certificate, which is based on (i)
one or more qualified floating rates (including a multiple or inverse of a
qualified floating rate), (ii) one or more rates each of which would be a
qualified floating rate for a debt instrument denominated in a foreign
currency, (iii) the yield of changes in price of one or more items of
"actively traded" personal property, (iv) a combination of rates described in
(i), (ii) and (iii), or (v) a rate designated by the IRS. However, a variable
rate is not an objective rate if it is reasonably expected that the average
value of the rate during the first half of the Certificate's term will differ
significantly from the average value of such rate during the final half of its
term. A combination of interest stated at a fixed rate for an initial period
of less than one year followed by an objective rate is treated as a single
objective rate if the value of the objective rate at the closing date is
intended to approximate the fixed rate; such a combination of rates is
conclusively presumed to be to be a single objective rate if the objective
rate on the closing date does not differ from the fixed rate by more than
0.25%. The qualified stated interest payable with respect to certain variable
rate debt instruments not bearing stated interest at a Single Variable Rate
generally is determined under the OID Regulations by converting such
instruments into fixed rate debt instruments. Instruments qualifying for such
treatment generally include those providing for stated interest at (i) more
than one qualified floating rates, or at (ii) a single fixed rate and (a) one
or more qualified floating rates or (b) a single "qualified inverse floating
rate" (each, a "Multiple Variable Rate"). A qualified inverse floating rate is
an objective rate equal to a fixed rate reduced by a qualified floating rate,
the variations in which can reasonably be expected to inversely reflect
contemporaneous variations in the cost of newly borrowed funds (disregarding
permissible rate caps, floors, governors and similar restrictions such as are
described above). Under these rules, some of the payments of interest on a
Certificate bearing a fixed rate of interest for an initial period followed by
a qualified floating rate of interest in subsequent periods could be treated
as included in the stated redemption price at maturity if the initial fixed
rate were to differ sufficiently from the rate that would have been set using
the formula applicable to subsequent periods. See "Taxation of Regular
Certificates--Variable Rate Certificates". Regular Certificates offered hereby
other than Certificates providing for variable rates of interest or for the
accretion of interest are not anticipated to have stated interest other than
"qualified stated interest", but if any such REMIC Regular Certificates are so
offered, appropriate disclosures will be made in the Prospectus Supplement.
Some or all of the payments on REMIC Regular Certificates providing for the
accretion of interest will be included in the stated redemption price at
maturity of such Certificates.
Under a de minimis rule in the Code, as interpreted in the OID Regulations,
original issue discount on a Regular Certificate will be considered to be zero
if such original issue discount is less than 0.25% of the stated redemption
price at maturity of the Regular Certificate multiplied by the weighted
average life of the Regular Certificate. For this purpose, the weighted
average life of the Regular Certificate is computed as the sum of the amounts
determined by multiplying the amount of each payment under the instrument
(other than a payment of qualified stated interest) by a fraction, whose
numerator is the number of complete years from the issue date until such
payment is made, and whose denominator is the stated redemption price at
maturity of such Regular Certificate. The IRS may be anticipated to take the
position that this rule should be applied taking into account the prepayment
assumption and the effect of any anticipated investment income. Under the OID
Regulations, Regular Certificates bearing only qualified stated interest
except for any "teaser" rate, interest holiday or similar provision would be
treated as subject to the de minimis rule if the greater of the deferred or
foregone interest or the other original issue discount is less than such de
minimis amount.
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The OID Regulations generally would treat de minimis original issue discount
as includible in income as each principal payment is made, based on the
product of the total amount of such de minimis original issue discount and a
fraction, whose numerator is the amount of such principal payment and whose
denominator is the stated principal amount of the Regular Certificate. The OID
Regulations also would permit a Certificateholder to elect to accrue de
minimis original issue discount into income currently based on a constant
yield method. See "Taxation of Regular Certificates--Market Discount" and "--
Premium".
Each holder of a Regular Certificate must include in gross income the sum of
the "daily portions" of original issue discount on its Regular Certificate for
each day during its taxable year on which it held such Regular Certificate.
For this purpose, in the case of an original holder of a Regular Certificate,
the daily portions of original issue discount will be determined as follows. A
calculation will first be made of the portion of the original issue discount
that accrued during each accrual period, that is, if so specified in the
applicable Prospectus Supplement, each period that begins or ends on a date
that corresponds to a Distribution Date on the Regular Certificate and begins
on the first day following the immediately preceding accrual period (beginning
on the Closing Date in the case of the first such period). For any accrual
period such portion will equal the excess, if any, of (i) the sum of (A) the
present value of all of the distributions remaining to be made on the Regular
Certificate, if any, as of the end of the accrual period and (B) the
distribution made on such Regular Certificate during the accrual period of
amounts included in the stated redemption price at maturity, over (ii) the
adjusted issue price of such Regular Certificate at the beginning of the
accrual period. The present value of the remaining payments referred to in the
preceding sentence will be calculated based on (i) the yield to maturity of
the Regular Certificate, calculated as of the settlement date, giving effect
to the Prepayment Assumption, (ii) events (including actual prepayments) that
have occurred prior to the end of the accrual period, and (iii) the prepayment
assumption. The adjusted issue price of a Regular Certificate at the beginning
of any accrual period will equal the issue price of such Certificate,
increased by the aggregate amount of original issue discount with respect to
such Regular Certificate that accrued in prior accrual periods, and reduced by
the amount of any distributions made on such Regular Certificate in prior
accrual periods of amounts included in the stated redemption price at
maturity. The original issue discount accruing during any accrual period will
be allocated ratably to each day during the period to determine the daily
portion of original issue discount for each day. With respect to an accrual
period between the settlement date and the first Distribution Date on the
Regular Certificate (notwithstanding that no distribution is scheduled to be
made on such date) that is shorter than a full accrual period, the OID
Regulations permit the daily portions of original issue discount to be
determined according to any reasonable method.
A subsequent purchaser of a Regular Certificate that purchases such Regular
Certificate at a cost (not including payment for accrued qualified stated
interest) less than its remaining stated redemption price at maturity will
also be required to include in gross income, for each day on which it holds
such Regular Certificate, the daily portions of original issue discount with
respect to such Regular Certificate, but reduced, if such cost exceeds the
"adjusted issue price", by an amount equal to the product of (i) such daily
portions and (ii) a constant fraction, whose numerator is such excess and
whose denominator is the sum of the daily portions of original issue discount
on such Regular Certificate for all days on or after the day of purchase. The
adjusted issue price of a Regular Certificate on any given day is equal to the
sum of the adjusted issue price (or, in the case of the first accrual period,
the issue price) of the Regular Certificate at the beginning of the accrual
period during which such day occurs and the daily portions of original issue
discount for all days during such accrual period prior to such day, reduced by
the aggregate amount of distributions previously made other than distributions
of qualified stated interest.
Variable Rate Certificates. Purchasers of Regular Certificates bearing a
variable rate of interest should be aware that there is uncertainty concerning
the application of Section 1272(a)(6) of the Code and the OID Regulations to
such Certificates. In the absence of other authority, the Servicer intends to
be guided by the provisions of the OID Regulations governing variable rate
debt instruments in adapting the provisions of Section 1272(a)(6) of the Code
to such Certificates for the purpose of preparing reports furnished to
Certificateholders. The effect of the application of such provisions generally
will be to cause Certificateholders
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holding Certificates bearing interest at a Single Variable Rate to take into
account for each period an amount corresponding approximately to the sum of
(i) the qualified stated interest, accruing on the outstanding face amount of
the Regular Certificate as the stated interest rate for that Certificate
varies from time to time and (ii) the amount of original issue discount that
would have been attributable to that period on the basis of a constant yield
to maturity for a bond issued at the same time and issue price as the Regular
Certificate, having the same face amount and schedule of payments of principal
as such Certificate, subject to the same prepayment assumption, and bearing
interest at a fixed rate equal to the value of the applicable qualified
floating rate or qualified inverse floating rate in the case of a Certificate
providing for either such rate, or equal to the fixed rate that reflects the
reasonably expected yield on the Certificate in the case of a Certificate
providing for an objective rate other than an inverse floating rate, in each
case as of the issue date. Certificateholders holding Regular Certificates
bearing interest at a Multiple Variable Rate generally will take into account
interest and original issue discount under a similar methodology, except that
the amounts of qualified stated interest and original issue discount
attributable to such a Certificate first will be determined for an equivalent
fixed rate debt instrument, the assumed fixed rates for which are (a) for each
qualified floating rate, the value of each such rate as of the closing date
(with appropriate adjustment for any differences in intervals between interest
adjustment dates), (b) for a qualified inverse floating rate, the value of the
rate as of the closing date, (c) for any other objective rate, the fixed rate
that reflects the yield that is reasonably expected for the Certificate, and
(d) for an actual fixed rate, such hypothetical fixed rate as would result
under (a) or (b) if the actual fixed rate were replaced by a hypothetical
qualified floating rate or qualified inverse floating rate such that the fair
market value of the Certificate as of the issue date would be approximately
the same as that of an otherwise identical debt instrument providing for the
hypothetical variable rate rather than the actual fixed rate. If the interest
paid or accrued with respect to a Multiple Variable Rate Certificate during an
accrual period differs from the assumed fixed interest rate, such difference
will be an adjustment (to interest or original issue discount, as applicable
to instruments having contingent payments. The application of those provisions
to instruments such as variable rate Regular Certificates is subject to
differing interpretations. Prospective purchasers of variable rate Regular
Certificates are urged to consult their tax advisors concerning the tax
treatment of such Certificates.
Market Discount. A Certificateholder that purchases a Regular Certificate at
a market discount, that is, at a purchase price less than the adjusted issue
price (as defined under "--Taxation of Regular Certificates--Original Issue
Discount") of such Regular Certificate generally will recognize market
discount upon receipt of each distribution of principal. In particular, such a
holder will generally be required to allocate each payment of principal on a
Regular Certificate first to accrued market discount, and to recognize
ordinary income to the extent such principal payment does not exceed the
aggregate amount of accrued market discount on such Regular Certificate not
previously included in income. Such market discount must be included in income
in addition to any original issue discount includible in income with respect
to such Regular Certificate.
A Certificateholder may elect to include market discount in income currently
as it accrues, rather than including it on a deferred basis in accordance with
the foregoing. If made, such election will apply to all market discount bonds
acquired by such Certificateholder on or after the first day of the first
taxable year to which such election applies. In addition, the OID Regulations
permit a Certificateholder to elect to accrue all interest, discount
(including de minimis market or original issue discount) and premium in income
as interest, based on a constant yield method. If such an election were made
for a Regular Certificate with market discount, the Certificateholder would be
deemed to have made an election to currently include market discount in income
with respect to all other debt instruments having market discount that such
Certificateholder acquires during the year of the election or thereafter.
Similarly, a Certificateholder that makes this election for a Certificate that
is acquired at a premium is deemed to have made an election to amortize bond
premium, as described below, with respect to all debt instruments having
amortizable bond premium that such Certificateholder owns or acquires. The
election to accrue interest, discount and premium on a constant yield method
with respect to a Certificate is irrevocable.
Under a statutory de minimis exception, market discount with respect to a
Regular Certificate will be considered to be zero for purposes of Code
Sections 1276 through 1278 if such market discount is less than
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0.25% of the stated redemption price at maturity of such Regular Certificate
multiplied by the number of complete years to maturity remaining after the
date of its purchase. In interpreting a similar de minimis rule with respect
to original issue discount on obligations payable in installments, the OID
Regulations refer to the weighted average maturity of obligations, and it is
likely that the same rule will be applied in determining whether market
discount is de minimis. It appears that de minimis market discount on a
Regular Certificate would be treated in a manner similar to original issue
discount of a de minimis amount. See "Taxation of Regular Certificates--
Original Issue Discount". Such treatment would result in discount being
included in income at a slower rate than discount would be required to be
included using the method described above. However, Treasury regulations
implementing the market discount de minimis exception have not been issued in
proposed or temporary form, and the precise treatment of de minimis market
discount on obligations payable in more than one installment therefore remains
uncertain.
The 1986 Act grants authority to the Treasury Department to issue
regulations providing for the method for accruing market discount of more than
a de minimis amount on debt instruments, the principal of which is payable in
more than one installment. Until such time as regulations are issued by the
Treasury Department, certain rules described in the Committee Report will
apply. Under those rules, the holder of a bond purchased with more than de
minimis market discount may elect to accrue such market discount either on the
basis of a constant yield method or on the basis of the appropriate
proportionate method described below. Under the proportionate method for
obligations issued with original issue discount, the amount of market discount
that accrues during a period is equal to the product of (i) the total
remaining market discount, multiplied by (ii) a fraction, the numerator of
which is the original issue discount accruing during the period and the
denominator of which is the total remaining original issue discount at the
beginning of the period. Under the proportionate method for obligations issued
without original issue discount, the amount of market discount that accrues
during a period is equal to the product of (i) the total remaining market
discount, multiplied by (ii) a fraction, the numerator of which is the amount
of stated interest paid during the accrual period and the denominator of which
is the total amount of stated interest remaining to be paid at the beginning
of the period. The Prepayment Assumption, if any, used in calculating the
accrual of original issue discount is to be used in calculating the accrual of
market discount under any of the above methods. Because the regulations
referred to in this paragraph have not been issued, it is not possible to
predict what effect such regulations might have on the tax treatment of a
Regular Certificate purchased at a discount in the secondary market.
Further, a purchaser generally will be required to treat a portion of any
gain on sale or exchange of a 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. Such purchaser also may be required to defer a portion of its
interest deductions for the taxable year attributable to any indebtedness
incurred or continued to purchase or carry such Regular Certificate. Any such
deferred interest expense is, in general, allowed as a deduction not later
than the year in which the related market discount income is recognized. If
such holder elects to include market discount in income currently as it
accrues on all market discount instruments acquired by such holder in that
taxable year or thereafter, the interest deferral rule described above will
not apply.
Premium. A Regular Certificate purchased at a cost (not including payment
for accrued qualified stated interest) greater than its remaining stated
redemption price at maturity will be considered to be purchased at a premium.
The holder of such a Regular Certificate may elect to amortize such premium
under the constant yield method. The OID Regulations also permit
Certificateholders to elect to include all interest, discount and premium in
income based on a constant yield method, further treating the
Certificateholder as having made the election to amortize premium generally,
as discussed above. The Committee Report indicates a Congressional intent that
the same rules that will apply to accrual of market discount on installment
obligations will also apply in amortizing bond premium under Code Section 171
on installment obligations such as the Regular Certificates.
Effects of Defaults or Delinquencies. Certain Series of Certificates may
contain one or more Classes of Subordinate Certificates. In the event there
are defaults or delinquencies on Contracts in the related Trust Fund, amounts
that would otherwise be distributed on the Subordinate Certificates may
instead be distributed on the
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Senior Certificates. Holders of Subordinate Certificates nevertheless will be
required to report interest income with respect to such Certificates
(including original issue discount) as such income accrues without giving
effect to delays or reductions in distributions on such Subordinate
Certificates attributable to defaults and delinquencies on such Contracts,
except to the extent that it can be established that the undistributed amounts
are not collectible. As a result, the amount of income reported by a holder of
a Subordinate Certificate in any period could significantly exceed the amount
of cash distributed to such holder in that period. The holder will eventually
be allowed a loss (or will be allowed to report a lesser amount of income) to
the extent that the aggregate amount of distributions on the Subordinate
Certificate is reduced as a result of defaults or delinquencies on the related
Contracts. However, the timing of such losses or reductions in income is
uncertain, and in some circumstances losses could be capital losses that
generally can be offset only with capital gains. Holders of Subordinate
Certificates should consult their own tax advisors on these points.
Sales of Certificates. If a Regular Certificate is sold or exchanged, the
seller will recognize gain or loss equal to the difference, if any, between
the amount realized (net of accrued interest) and its adjusted basis in such
Regular Certificate. A seller's adjusted basis generally will equal the cost
of such Regular Certificate to the seller, increased by any original issue
discount reported by such seller with respect to such Regular Certificate and
reduced (but not below zero) by distributions received by such seller (other
than payments of qualified stated interest) and by any amortized premium.
Except as described above "--Market Discount" and with respect to the next
three paragraphs, any such gain or loss will be capital gain or loss provided
the Regular Certificate is held as a capital asset.
Gain from the disposition of a Regular Certificate that might otherwise be
capital gain will be treated as ordinary income to the extent that such gain
does not exceed the excess, if any, of (i) the amount that would have been
includible in the seller's gross income had income accrued at a rate equal to
110% of "the applicable Federal rate" under Section 1274(d) of the Code
(generally, an average yield of United States Treasury obligations of
different ranges of maturities published monthly by the Service), determined
as of the date of purchase of such Regular Certificate, over (ii) the amount
of income actually includible in the gross income of the seller with respect
to the Regular Certificate.
Regular Certificates will be "evidences of indebtedness" within the meaning
of Section 582(c)(1) of the Code, and accordingly, gain or loss recognized
from a sale of a Regular Certificate by a bank or thrift institution to which
such section applies would be ordinary income or loss.
If GreenPoint is determined to have intended on the date of issue of the
Regular Certificates to call all or any portion of the Regular Certificates
prior to their stated maturity within the meaning of Section 1271(a)(2)(A) of
the Code, any gain realized upon a sale, exchange, retirement, or other
disposition of a Regular Certificate would be considered ordinary income to
the extent it does not exceed the unrecognized portion of the original issue
discount, if any, with respect to the Regular Certificate. The OID Regulations
provide that the intention to call rule will not be applied to mortgage-backed
securities such as the Regular Certificates. In addition, under the OID
Regulations, a mandatory sinking fund or call option is not evidence of an
intention to call.
Pass-Through of Expenses Other Than Interest. If a Trust Fund for which a
REMIC election is made is considered a "single-class REMIC" (as defined
below), a portion of such Trust Fund's servicing, administrative and other
non-interest expenses will be allocated as a separate item to those Regular
Certificateholders that are "pass-through interest holders" (as defined
below). Such a holder would be required to add its allocable share, if any, of
such expenses to its gross income and to treat the same amount as an item of
investment expense. An individual would generally be allowed a deduction for
such an expense item for regular tax purposes only as a miscellaneous itemized
deduction subject to the limitation under Section 67 of the Code, and may not
be allowed any deduction for such item for purposes of the alternative minimum
tax. Section 67 of the Code allows deductions for miscellaneous itemized
deductions only to the extent that in the aggregate they exceed 2% of an
individual's adjusted gross income. The Revenue Reconciliation Act of 1990
further limits the itemized deductions allowed to certain individuals. If so
specified in the related Prospectus Supplement, the applicable Agreement will
require each holder to give the Trust Fund written notice immediately upon
becoming a holder,
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if it is a pass-through interest holder, or is holding a Regular Certificate
on behalf of a pass-through interest holder. The Trust Fund will report to
each holder that has given the Trust Fund such notice (and others if it is
required) and to the Service, each such holder's allocable share, if any, of
the Trust Fund's noninterest expenses. Generally, a "single-class REMIC" is
defined as (i) a REMIC that would be treated as an investment trust under
Treasury regulations but for its qualification as a REMIC or (ii) a REMIC that
is substantially similar to an investment trust but is structured with the
principal purpose of avoiding the allocation requirement imposed under Section
67 of the Code. The term "pass-through interest holder" generally refers to
individuals, entities taxed as individuals and certain pass-through entities,
but does not include real estate investment trusts. Such investors should
consult their own tax advisors regarding consequences to them of the
allocation of the Trust Fund's non-interest expenses. In addition, the amount
of itemized deductions otherwise allowable for the taxable year of an
individual whose adjusted gross income exceeds certain thresholds will be
reduced.
Taxation of Certain Foreign Investors. For purposes of this discussion, a
"Foreign Holder" is a Certificateholder who holds a Regular Certificate and
who is not (i) a citizen or resident of the United States, (ii) a corporation
or partnership organized in or under the laws of the United States, a state
(other than any partnership that is treated as not a United States person
under any Applicable Treasury regulations) thereof or the District of Columbia
or an entity taxable as such for U.S. federal income tax purposes, (iii) an
estate, the income of which is included in gross income for United States tax
purposes regardless of its source, or (iv) a trust if a court within the
United States is able to exercise primary supervision over the administration
of the trust and one or more United States fiduciaries have the authority to
control all substantial decisions of the trust. Unless the interest on a
Regular Certificate is effectively connected with the conduct by the Foreign
Holder of a trade or business within the United States, the Foreign Holder is
not subject to federal income or withholding tax on interest (or original
issue discount, if any) on a Regular Certificate (subject to possible backup
withholding of tax, discussed below), provided the Foreign Holder is not a
controlled foreign corporation related to GreenPoint and does not own actually
or constructively 10% or more of the voting stock of GreenPoint. To qualify
for this tax exemption, the Foreign Holder will be required to provide
periodically a statement signed under penalties of perjury certifying that the
Foreign Holder meets the requirements for treatment as a Foreign Holder and
providing the Foreign Holder's name and address. The statement, which may be
made on a Form W-8 or substantially similar substitute form, generally must be
provided in the year a payment occurs or in either of the two preceding years.
The statement must be provided either directly or through a clearing
organization or financial institution. This exemption may not apply to a
Foreign Holder that owns directly or indirectly both Regular Certificates and
Residual Certificates. If for any reason the exemption does not apply,
interest paid to Foreign Holders will be subject to U.S. withholding tax at
the rate of 30% (or, if applicable, a reduced rate provided in a tax treaty).
If the interest on a Regular Certificate is effectively connected with the
conduct by a Foreign Holder of a trade or business within the United States,
then the Foreign Holder will be subject to tax at regular graduated rates.
Foreign Holders should consult their own advisors regarding the specific tax
consequences of their owning a Regular Certificate.
Any gain recognized by a Foreign Holder upon a sale, retirement or other
taxable disposition of a Regular Certificate generally will not be subject to
United States federal income tax unless either (i) the Foreign Holder is a
non-resident alien individual who holds the Regular Certificate as a capital
asset and who is present in the United States for 183 days or more in the
taxable year of the disposition and either the gain is attributable to an
office or other fixed place of business maintained in the United States by the
individual or the individual has a "tax home" in the United States, or
(ii) the gain is effectively connected with the conduct by the Foreign Holder
of a trade or business within the United States.
A Regular Certificate will not be included in the estate of a Foreign Holder
who does not own actually or constructively 10% or more of the voting stock of
GreenPoint. Regular Certificateholders who are non-U.S. Persons and persons
related to such holders should not acquire any Residual Certificates, and
Residual Certificateholders and persons related to Residual Certificateholders
should not acquire any Regular Certificates without consulting their tax
advisors as to the possible adverse tax consequences of doing so.
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Backup Withholding. Under certain circumstances, a REMIC Certificateholder
may be subject to "backup withholding" at a 31% rate. Backup withholding may
apply to a REMIC Certificateholder who is a United States person if the
holder, among other circumstances, fails to furnish his Social Security number
or other taxpayer identification number to the Trustee. Backup withholding may
apply, under certain circumstances, to a REMIC Certificateholder who is a
foreign person if the REMIC Certificateholder fails to provide the Trustee or
the REMIC Certificateholder's securities broker with the statement necessary
to establish the exemption from federal income and withholding tax on interest
on the REMIC Certificates. Backup withholding, however, does not apply to
payments on a Certificate made to certain exempt recipients, such as
corporations and tax-exempt organizations, and to certain foreign persons.
Each non-exempt Certificateholder will be required to provide, under penalty
of perjury, a certificate on IRS Form W-9 containing his or her name, address,
correct federal taxpayer identification number and a statement that he or she
is not subject to backup withholding. REMIC Certificateholders should consult
their tax advisors for additional information concerning the potential
application of backup withholding to payments received by them with respect to
a Certificate.
Requirements. The Servicer will report annually to the Service, to holders
of record of the Regular Certificates that are not excepted from the reporting
requirements and, to the extent required by the Code, to other interested
parties, information with respect to the interest paid or accrued on the
Regular Certificates, original issue discount, if any, accruing on the Regular
Certificates and information necessary to compute the accrual of any market
discount or the amortization of any premium on the Regular Certificates.
New Withholding Regulations. The Treasury Department has issued new
regulations (the "New Regulations") which make certain modifications to the
withholding, backup withholding and information reporting rules described
above. The New Regulations attempt to unify certification requirements and
modify reliance standards. The New Regulations will generally be effective for
payments made after December 31, 1999, subject to certain transition rules.
Prospective investors are urged to consult their own tax advisors regarding
the New Regulations.
TREATMENT OF CERTIFICATES REPRESENTING A REMIC REGULAR INTEREST COUPLED WITH A
SWAP OR CAP CONTRACT
Holders of Certificates that represent ownership of a REMIC Regular Interest
coupled with a swap or cap contract will be treated for federal income tax
purposes as owning a REMIC Regular Interest and a swap or cap contract. They
will be required to allocate the purchase price for their Certificates between
the REMIC Regular Interest and the swap or cap contract represented thereby
according to their respective fair market values on the date of acquisition of
the Certificates for purposes of computing any market discount or premium, as
well as gain or loss on disposition. In making reports to the Internal Revenue
Service, the Servicer will make such an allocation with respect to the
original issuance of the Certificates. Such allocation will bind any holder of
such a Certificate who does not properly report the use of a different
allocation to the Internal Revenue Service for purposes of determining the
issue price and amount of original issue discount for the portion of the
Certificate representing ownership of a REMIC Regular Interest. The portions
of such Certificates representing ownership of REMIC Regular Interests will be
accorded the treatment described above in "--REMIC Certificates--General--Tax
Status of REMIC Certificates" and "--REMIC Certificates--Taxation of REMIC
Regular Certificates."
Any portion of a purchaser's investment in a Certificate treated by such
purchaser as representing the right to payments from a swap or cap contract
would be treated as an interest in a notional principal contract. Any portion
of a Class A Certificate allocable to the right to payments from a swap or cap
contract and any payments with respect thereto will not qualify for any of the
treatments described in "REMIC Certificates--General--Tax Status of REMIC
Certificate. Treasury regulations issued under Section 446 of the Code (the
"Swap Regulations") specify rules for accounting for income from and recovery
of purchase price of such investment. Under the Swap Regulations, income in
respect of the right to payments from a swap or cap contract would be taken
into account for the taxable period to which it related, which generally would
approximate accrual basis accounting regardless of an investor's usual method
of tax accounting. Such income would be ordinary income.
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The Swap Regulations further provide that an investor in a Certificate would
recover any purchase price allocable to the right to payments from a swap or
cap contract over the term of that right, generally by allocating it to each
period in accordance with the prices of a series of cash-settled option
contracts that reflected the specified index and notional amount (i.e., any
excess of the applicable Pass-Through Rate over the weighted average net
Mortgage Interest Rate and the applicable Certificate Balance, respectively)
expiring in each period. Under the Swap Regulations, straight-line or
accelerated amortization generally would be impermissible. The Swap
Regulations also permit a simplified alternative allocation methodology called
the "level payment method," under which the purchase price allocable to the
right to payments from a swap or cap contract would be allocated to each
period on the basis of the principal portion of each of a series of equal
payments having a discounted present value equal to such purchase price. There
is no explicit authority with respect to the character of such amortization
deductions, although they are generally regarded as ordinary items.
Certificateholders should be aware that the effect of allocating a portion
of their purchase price to the right to payments from a swap or cap contract
would be to increase the amount of original issue discount. It is expected
that an investor's amortization of any portion of its purchase price allocable
to the right to payments from a swap or cap contract would offset such
additional original issue discount, but the degree of offset in any given
period would depend upon the applicable amortization methodology and upon the
treatment of such amortization as an ordinary deduction, each as discussed
above. Although dependent upon the applicable discount rate, the annual amount
of offset should be relatively complete in the case of an investor amortizing
purchase price allocable to the right to payments from a swap or cap contract
under the "level payment method" described above.
On disposing of a Certificate, a holder will recognize gain or loss
separately with respect to the related regular interest and any right to
payments from a swap or cap contract. Gain or loss with respect to each asset
will be the excess of the amount realized in respect of such asset over its
adjusted basis; the amount realized will be allocated between the assets based
on their relative fair market value as of the date of disposition. The
holder's basis in its right to payments from a swap or cap contract will be
any initial purchase price allocable thereto as discussed above), reduced by
amortization of such amount allowable through the date of disposition. Gain or
loss with respect to each asset generally will be capital gain or loss, the
term of which will be based on the period such holder held the Certificate;
gain or loss attributable to the right to payments from a swap or cap contract
may be ordinary if recognized by a bank, although the matter is uncertain.
A purchaser of Certificate who is not a United States Person (as defined in
the Prospectus) and is not subject to federal income tax apart from its
ownership of a Class A Certificate should not be subject to United States
federal income or withholding tax on payments attributable to the right to
payments from a swap or cap contract, if such purchaser complies with the
identification requirements described in the Prospectus. However, the
inapplicability of federal income tax withholding to such payments is not
completely clear, and prospective investors should consult their tax advisors.
In the absence of contrary authority, income tax will not be withheld from
amounts paid in respect of the right to payment from a swap or cap contract.
See "Taxation of Certain Foreign Investors".
TAXATION OF RESIDUAL CERTIFICATES
The discussion under this heading applies only to a Series of Certificates
with respect to which a REMIC election is made and to Residual Certificates.
Such Residual Certificates will be subject to tax rules, described below, that
differ from those that would apply if they were treated for federal income tax
purposes as direct ownership interests in the related Trust Fund or as debt
instruments issued by such Trust Fund.
Although a REMIC is a separate entity for federal income tax purposes, a
REMIC is not generally subject to federal income tax. Rather, the taxable
income of a REMIC is taken into account by the holders of REMIC residual
interests.
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In general, each original holder of a Residual Certificate will report on
its federal income tax return, as ordinary income, its share of the "daily
portion" of the taxable income of the Trust Fund for each day during the
taxable year on which such Residual Certificateholder held a Residual
Certificate. The "daily portion" of the taxable income of the Trust Fund is
determined by allocating to each day in any calendar quarter its ratable
portion of the taxable income or net loss of the Trust Fund for such quarter,
and such Residual Certificateholder's share of the "daily portion" is based on
the portion of outstanding Residual Certificates that such Residual
Certificateholder owns on such day. REMIC taxable income will be taxable to
the Residual Certificateholders without regard to the timing or amounts of
cash distributions by the REMIC. Ordinary income derived from Residual
Certificates will be "portfolio income" for purposes of the taxation of
taxpayers subject to the limitation on the deductibility of "passive losses."
As residual interests, the Residual Certificates will be subject to tax rules,
described below, that differ from those that would apply if the Residual
Certificates were treated for federal income tax purposes as direct ownership
interests in the Contracts, or as debt instruments issued by the REMIC. Under
certain circumstances, a Residual Certificateholder may be required to
recognize for a given period income substantially in excess of distributions
made on the Residual Certificates.
A subsequent Residual Certificateholder also will report on its federal
income tax return amounts representing a daily share of the taxable income of
the Trust Fund for each day that such Residual Certificateholder held such
Residual Certificate. Those daily amounts generally would equal the amounts,
described above, that would have been reported for the same days by a holder
of a Residual Certificate (an "Original Holder") that purchased such Residual
Certificate at its original issuance and held it continuously thereafter. As
discussed below, the taxable income of the Trust Fund will be calculated based
in part on the initial tax basis to the Trust Fund of its assets, which in
turn equals the sum of the issue prices of the Residual Certificates and each
Class of Regular Certificates. The legislative history of the 1986 Act
indicates that certain adjustments may be appropriate to reduce (or increase)
the income of a subsequent Residual Certificateholder that purchased such
Residual Certificate at a price greater than (or less than) the adjusted basis
(as defined below in "Distributions") such Residual Certificate would have in
the hands of an Original Holder. For the present, however, adjustments are
apparently not permitted or required.
A holder's adjusted basis in a Residual Certificate will equal the purchase
price of such Residual Certificate, increased by the amount of the related
Trust Fund's taxable income that is allocated to the holder of such Residual
Certificate, and decreased (but not below zero) by the amount of distributions
received thereon by such holder and the Trust Fund's net losses allocated to
such holder. Payments on a Residual Certificate (whether at their scheduled
times or as a result of prepayments) will generally not result in any taxable
income or loss to the holder of a Residual Certificate. If the amount of such
payment exceeds a holder's adjusted basis in its Residual Certificate,
however, the holder will recognize gain (treated as gain from the sale or
exchange of its Residual Certificate) to the extent of such excess. See "--
Sale or Exchange" below.
Taxable Income of the Trust Fund. REMIC taxable income is generally
determined in the same manner as the taxable income of an individual using the
accrual method of accounting, except that (i) the limitation on deductibility
of investment interest expense and expenses for the production of income do
not apply, (ii) all bad loans will be deductible as business bad debts, and
(iii) the limitation on the deductibility of interest and expenses related to
tax-exempt income will apply. In general, the Trust Fund's taxable income will
reflect a netting of (i) the gross income produced by the assets of the Trust
Fund, including the stated interest and any original issue discount or market
discount income on the Contracts in the related Contract Pool (net of any
amortized premium on such Contracts), income from the investment or
reinvestment of cash flows and, if applicable, reserve assets, and
amortization of any issue premium with respect to the Regular Certificates and
(ii) deductions, including stated interest and original issue discount expense
on Regular Certificates that would be permitted if the Regular Certificates
were indebtedness of the Trust Fund, servicing fees, and other administrative
expenses of the Trust Fund (except as described below under "--Expenses Other
Than Interest"). Any gain or loss realized by the Trust Fund from the
disposition of any asset is treated as gain or loss from the sale or exchange
of property that is not a capital asset. If there is more than one Class of
Regular Certificates, deductions allowed to the Trust
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Fund with respect to the Regular Certificates will generally be calculated
separately with respect to each Class based on the yield of that Class.
For purposes of determining its taxable income, the Trust Fund will have an
initial aggregate tax basis in its assets equal to the sum of the issue prices
of the Regular Certificates and the Residual Certificates. The issue price of
a Certificate of a Class (whether Regular Certificates or Residual
Certificates) that is publicly offered will be the initial offering price to
the public (excluding bond houses and brokers) at which a substantial amount
of the Certificates of that Class is sold, and if not publicly offered will be
the price paid by the first buyer of a Certificate of such class. If a
Residual Certificate has a negative value, it is not clear whether its issue
price would be considered to be zero or such negative amount for purposes of
determining the REMIC's basis in its assets. The REMIC Regulations imply that
residual interest cannot have a negative basis or a negative issue price.
However, the preamble to the REMIC Regulations indicates that, while existing
tax rules do not accommodate such concepts, the Service is considering the tax
treatment of these types of residual interests, including the proper tax
treatment of a payment made by the transferor of such a residual interest to
induce the transferee to acquire that interest. Absent regulations or
administrative guidance to the contrary, and unless the related Prospectus
Supplement otherwise provides, it is not expected that any Trust Fund as to
which a REMIC election is made will treat a Class of Residual Certificates as
having a value of less than zero for purposes of determining the basis of the
related REMIC in its assets.
If a Trust Fund acquires a Contract and the principal amount of such
Contract (or revised issue price in the case of a Contract issued with
original issue discount) exceeds the Trust Fund's basis in such Contract by
more than a de minimis amount (as described above in "Taxation of Regular
Certificates--Market Discount"), such discount would generally be includible
in the Trust Fund's income as it accrues, in advance of receipt of the cash
attributable to such income, under a constant yield method, similar to the
method for accruing original issue discount on Regular Certificates described
above in "Taxation of Regular Certificates--Original Issue Discount." The
Trust Fund's deductions for original issue discount expense with respect to
Regular Certificates also will be determined under those rules, except that
the de minimis rule that may apply to holders of Regular Certificates and the
adjustments for holders of Regular Certificates that purchase their
Certificates at a price greater than the adjusted issue price described
therein will not apply.
If the Trust Fund's basis in a Contract exceeds the remaining stated
redemption price at maturity of such a Contract, the Trust Fund will be
considered to have acquired such Contract at a premium equal to the amount of
such excess. In the event that any Contract in the Contract Pool is acquired
by the Trust Fund at a premium, the Trust Fund will be entitled to amortize
such premium on a yield-to-maturity basis. Although the matter is not free
from doubt, the Trust Fund intends to make this calculation using a reasonable
prepayment assumption.
If a Class of Regular Certificates is issued at a price in excess of the
aggregate principal amount of such Class (the excess, the "Issue Premium"),
the portion of the Issue Premium that is considered to be amortized during a
taxable year will be treated as ordinary income of the Trust Fund for such
taxable year. Although the matter is not entirely certain, it is likely that
the Issue Premium would be amortized under a constant yield method in a manner
analogous to the method of accruing original issue discount described above
under "Taxation of Regular Certificates--Original Issue Discount."
The taxable income recognized by a holder of a Residual Certificate in any
taxable year will be affected by, among other factors, the relationship
between the timing of interest, original issue discount or market discount
income, or amortization of premium with respect to the Contracts, on the one
hand, and the timing of deductions for interest (including original issue
discount) on the Regular Certificates, on the other hand. In the event that an
interest in the Contracts is acquired by a REMIC at a discount, and one or
more of such Contracts is prepaid, a holder of a Residual Certificate may
recognize taxable income without being entitled to receive a corresponding
cash distribution because (i) the prepayment may be used in whole or in part
to make distributions on Regular Certificates, and (ii) the discount on the
Contracts which is included in a REMIC's income may exceed its deduction with
respect to the distributions on those Regular Certificates. When there is more
than one class of Regular Certificates that receive payments sequentially
(i.e., a fast-pay, slow-pay structure), this mismatching of
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income and deductions is particularly likely to occur in the early years
following issuance of the Regular Certificates, when distributions are being
made in respect of earlier classes of Regular Certificates to the extent that
such classes are not issued with substantial discount. If taxable income
attributable to such a mismatching is realized, in general, losses would be
allowed in later years as distributions on the later classes of Regular
Certificates are made. The taxable income recognized by a holder of a Residual
Certificate also may be greater in earlier years because the REMIC will use a
constant yield in computing income from the Contracts, while interest
deductions with respect to Regular Certificates, expressed as a percentage of
the outstanding principal amount of the Regular Certificates, may increase
over time as earlier, lower-yielding Classes are paid. The mismatching of
income and deductions described in this paragraph, if present with respect to
a series of Residual Certificates, could have a significant adverse effect
upon the holder's after-tax rate of return. In addition, a holder of a
Residual Certificate may need to have sufficient other sources of cash to pay
any federal, state, or local income taxes due as a result of such mismatching,
or such holders must have unrelated deductions against which to offset such
income, subject to the discussion of "excess inclusions" below in "--Excess
Inclusions."
A Residual Certificateholder will not be permitted to amortize the cost of
its Residual Certificate as an offset to its share of the taxable income of
the Trust Fund. However, that taxable income will not include cash received by
the Trust Fund that represents a recovery of the Trust Fund's basis in its
assets (which will include the issue price of the Residual Certificates as
well as the issue price of Regular Certificates). Such recovery of basis by
the Trust Fund will have the effect of amortization of the issue price of the
Residual Certificates over the life of the Trust Fund's assets. However, in
view of the possible acceleration of the income of holders of Residual
Certificates described above, the period of time over which such issue price
is effectively amortized may be longer than the economic life of the Residual
Certificates.
The method of taxation of Residual Certificates described above can produce
a significantly lower after-tax yield for a Residual Certificate than would be
the case if (i) Residual Certificates were taxable in the same manner as debt
instruments issued by the Trust Fund or (ii) no portion of the taxable income
on the Residual Certificates in each period were treated as "excess
inclusions" (as defined below). In certain periods, taxable income and the
resulting tax liability on a Residual Certificate are likely to exceed
payments received thereon. In addition, a substantial tax may be imposed on
certain transferors of the Residual Certificates and certain beneficial owners
of the Residual Certificates that are "pass-through" entities. Investors
should consult their tax advisors before purchasing a Residual Certificate.
Net Losses of the Trust Fund. The Trust Fund will have a net loss for a
calendar quarter if its deductions for that calendar quarter exceed its gross
income for that calendar quarter. The net loss allocable to any Residual
Certificate will not be deductible by the holder to the extent that such net
loss exceeds such holder's adjusted basis (as defined above in "--
Distributions") in such Residual Certificate at the end of the calendar
quarter in which such loss arises (or the time of disposition of the Residual
Certificate, if earlier), determined without taking into account the net loss
for such quarter. Any net loss that is not currently deductible by reason of
this limitation may be carried forward indefinitely, but may be used only to
offset taxable income of the same Trust Fund subsequently allocated to such
Residual Certificateholder. The ability of Residual Certificateholders that
are individuals or closely-held corporations to deduct net losses may be
subject to additional limitations under the Code.
Expenses Other Than Interest. Except in the limited circumstance when the
Trust Fund is considered a "single-class REMIC" (as defined above in "Taxation
of Regular Certificates--Pass-Through of Expenses Other Than Interest"), the
Trust Fund's servicing, administrative and other noninterest expenses will be
allocated entirely to the Residual Certificateholders. In the case where the
Trust Fund is considered a single-class REMIC, such expenses will be allocated
proportionately among Regular and Residual Certificateholders. See "Taxation
of Regular Certificates--Pass-Through of Expenses Other Than Interest." In
either case, such expenses will be allocated as a separate item to those
holders that are "pass-through interest holders" (as defined above in
"Taxation of Regular Certificates--Pass-Through of Expenses Other Than
Interest"). Such a holder would be required to add its allocable share, if
any, of such expenses to its gross income and treat the same amount as an item
of investment expense. Limitations on the deductibility of such expenses are
described above in "Taxation
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of Regular Certificates--Pass-Through of Expenses Other Than Interest." The
related Agreement will require each holder to give the Trust Fund written
notice upon becoming a holder if it is a pass- through interest holder, or is
holding a Residual Certificate on behalf of a pass-through interest holder.
The Trust Fund will report quarterly to each holder of a Residual Certificate
during any calendar quarter that has given the Trust Fund such notice (and
others if it is required) and to the Service annually such holder's allocable
share, if any, of the Trust Fund's non-interest expenses. Such investors
should consult their tax advisors in determining the consequences to them of
the allocation of the Trust Fund's non-interest expenses.
Prohibited Transactions; Special Taxes. Income from certain transactions by
the REMIC, 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 at a 100%
rate. Prohibited transactions generally include (i) the disposition of
qualified mortgages other than pursuant to a (a) substitution for a defective
mortgage within two years or for any qualified mortgage within three months of
the specified Startup Date, (b) repurchase of a defective mortgage, (c)
foreclosure, default, or imminent default of a qualified mortgage, (d)
bankruptcy or insolvency of the REMIC or (e) a qualified (complete)
liquidation of the REMIC, (ii) the receipt of income from assets that are not
the type of mortgage loans or investments that the REMIC is permitted to hold,
(iii) the receipt of compensation for services or (iv) the receipt of gain
from disposition of cash flow investments other than pursuant to a qualified
(complete) liquidation of the REMIC. The Trust Fund will be subject to a tax
equal to 100% of the amount of any contributions of property made to the Trust
Fund after the Startup Day, except for certain cash contributions specified in
Section 860G(d) of the Code. An additional tax may be imposed on the Trust
Fund, at the highest marginal federal corporate income tax rate, on certain
net income from foreclosure property.
It is anticipated that the Trust Fund will not engage in any prohibited
transactions in which it would recognize a material amount of net income or
receive substantial contributions of property after the Startup Date. However,
if the Trust Fund is subject to the tax on prohibited transactions or
contributions, such tax would generally be borne by the Residual
Certificateholders. It is not possible to predict the amount, if any, of net
income from foreclosure property that might be received by a Trust Fund,
because such amount will depend on the particular delinquency and foreclosure
experience of such Trust Fund. Accordingly, no assurance can be given that the
amount of tax on such income will not be material.
Excess Inclusions. A portion of the income of the Trust Fund allocable to a
Residual Certificateholder referred to in the Code as an "excess inclusion"
will be subject to federal income tax in all events. (Excess inclusions are
defined below.) Thus, for example, an excess inclusion (i) may not be offset
by any unrelated losses or net operating loss carryovers of a Residual
Certificateholder, (ii) will be treated as "unrelated business taxable income"
within the meaning of Section 512 of the Code if the Residual
Certificateholder is a pension fund or any other organization that is subject
to tax only on its unrelated business taxable income and (iii) is not eligible
for any reduction in the rate of withholding tax in the case of a Residual
Certificateholder that is a foreign investor, as further discussed in "--
Foreign Investors" below. In addition, if a real estate investment trust,
regulated investment company, or certain pass-through entities own a Residual
Certificate, a portion of dividends paid by such entities would be treated as
excess inclusions in the hands of its shareholders with the same consequences
as excess inclusions attributed directly to a Residual Certificateholder.
Except as discussed in the following paragraph, with respect to any Residual
Certificateholder, the excess inclusion for any calendar quarter will equal
the excess, if any, of (i) the amount of the Trust Fund's taxable income for
the calendar quarter allocable to the Residual Certificateholder, over (ii)
the sum of the "daily accruals" (as defined below) for all days during the
calendar quarter on which the Residual Certificateholder held such Residual
Certificate. For this purpose, daily accruals with respect to a Residual
Certificateholder will be calculated by allocating to each day in such
calendar quarter its ratable portion of the product of (i) the "adjusted issue
price" (as defined below) of the Residual Certificate at the beginning of such
calendar quarter, and (ii) 120% of the "long-term Federal rate" (defined
below), calculated on the issue date of the Residual Certificate as if it were
a debt instrument and based on quarterly compounding. For this purpose, the
"adjusted issue price" of a Residual Certificate at the beginning of any
calendar quarter will equal its issue price, increased
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by the aggregate of the daily accruals for all prior calendar quarters and the
amount of any contributions made to the Trust Fund with respect to the
Residual Certificates after the Startup Date, and decreased (but not below
zero) by the aggregate amount of distributions made with respect to the
Residual Certificate before the beginning of such calendar quarter. The "long-
term Federal rate" is an average of current yields on Treasury securities with
a remaining term of greater than nine years, computed and published monthly by
the Service. As an exception to the general rule described above, the Treasury
has authority to issue regulations that would treat 100% of the income
accruing on a Residual Certificate as an excess inclusion, if the Residual
Certificates, in the aggregate, are considered not to have "significant
value." The REMIC Regulations, however, do not contain such a rule.
The Small Business Act has eliminated a special rule that formerly permitted
certain financial institutions utilizing the reserve method of accounting for
bad debts pursuant to Section 593 of the Code to use net operating losses and
other allowable deductions to offset their excess inclusions from certain
REMIC residual certificates. In addition, the Small Business Act provides
three rules for determining the effect of excess inclusions on the alternative
minimum taxable income of a holder of a REMIC residual certificate. First,
alternative minimum taxable income for such a residual holder is determined
without regard to the special rule that taxable income cannot be less than
excess inclusions. Second, a residual holder's alternative minimum taxable
income for a tax year cannot be less than the excess inclusions for the year.
Third, the amount of any alternative minimum tax net operating loss deductions
must be computed without regard to any excess inclusions.
Effect of Defaults and Delinquencies. The Residual Certificates of a
multiple-Class Series may be subordinate to one or more Classes of Regular
Certificates (for purposes of this paragraph, "Senior Certificates"), and, in
the event there are defaults or delinquencies on the Contracts in the related
Contract Pool, amounts that would otherwise be distributed on the Residual
Certificates may instead be distributed on the Senior Certificates. However,
the Trust Fund will generally be required to report income in respect of
Contracts (and deductions with respect to the Regular Certificates) without
giving effect to default and delinquencies, except to the extent it can be
established that amounts due on the Contracts are uncollectible. To the extent
the income on a delinquent or defaulted Contract is greater than the deduction
allowed in respect of interest on the Regular Certificate that relates to such
Contract, the Trust Fund may recognize net income without making corresponding
distributions of cash on the Residual Certificates, and holders of Residual
Certificates will be required to report their pro rata share of the net income
of the Trust Fund without regard to the timing and amount of cash distributed
on such Residual Certificates.
Tax on Transfers of Residual Certificates to Certain Organizations. An
entity will not qualify as a REMIC unless there are reasonable arrangements
designed to ensure that residual interests in such entity are not held by
"disqualified organizations" (as defined below). Restrictions on the transfer
of the Residual Certificates that are intended to meet this requirement will
be included in the related Agreement and are discussed more fully in
"Restrictions on Transfer of REMIC Residual Certificates." If, notwithstanding
those restrictions, a Residual Certificate is transferred to a "disqualified
organization," a tax would be imposed in an amount equal to the product of (i)
the present value of the total anticipated excess inclusions with respect to
such Residual Certificate for periods after the transfer and (ii) the highest
marginal federal income tax rate applicable to corporations. Under the REMIC
Regulations, the anticipated excess inclusions must be determined based on (i)
events that have occurred up to the time of the transfer and (ii) the
projected payments based on the Assumed Prepayment Rate. The REMIC Regulations
also provide that the present value of the anticipated excess inclusions is
determined by discounting the anticipated excess inclusions as of the date of
the transfer using the applicable Federal rate under Section 1274(d)(1) of the
Code for the month of the transfer that would apply to a hypothetical
obligation with a term beginning on the date of the transfer and ending on the
date the life of the REMIC is anticipated to expire (as determined under rules
described above in "--Excess Inclusions"). Such a tax would generally be
imposed on the transferor of the Residual Certificate, except that where such
transfer is through an agent for a disqualified organization, the tax would
instead be imposed on such agent. However, a transferor of a Residual
Certificate (or an agent for a disqualified organization) would in no event be
liable for such tax with respect to a transfer if the transferee furnishes to
such transferor (or such agent) an affidavit that the transferee is
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not a disqualified organization, and as of the time of the transfer the
transferor or the agent does not have actual knowledge that such affidavit is
false.
In addition, if a "pass-through entity" (as defined below) includes in
income excess inclusions with respect to a Residual Certificate, and a
disqualified organization is the record holder of an interest in such entity,
then a tax will be imposed on such entity equal to the product of (i) the
amount of excess inclusions on the Residual Certificate that are allocable to
the interest in the pass-through entity held by such disqualified organization
and (ii) the highest marginal federal income tax rate imposed on corporations.
However, a pass-through entity will in no event be liable for such tax with
respect to a record holder if the record holder furnishes the pass-through
entity with an affidavit that the record holder is not a disqualified
organization, and, as of the time the record holder becomes such a holder, the
pass-through entity does not have actual knowledge that such affidavit is
false.
For these purposes, the term "disqualified organization" means (i) the
United States, any State or political subdivision thereof, any possession of
the United States, any foreign government, any international organization, or
any agency or instrumentality of the foregoing (other than an instrumentality
that is a corporation if all of its activities are subject to tax and, except
for the Federal Home Loan Mortgage Corporation, a majority of its board of
directors is not selected by an such governmental unit), (ii) an organization
(other than a cooperative described in Section 521 of the Code) which is
exempt from federal income tax (including the tax imposed by Section 511 of
the Code on unrelated business taxable income) on excess inclusions or (iii)
any organization described in Section 1381(a)(2)(C) of the Code. For these
purposes, the term "pass-through entity" means any regulated investment
company, real estate investment trust, common trust fund, partnership, trust,
estate and certain other entities described in Section 860E(e)(6) of the Code.
Except as may be provided in Treasury Regulations, any person holding an
interest in a pass-through entity as a nominee for another will, with respect
to such interest, be treated as a pass-through entity.
Sale or Exchange. If a Residual Certificate is sold or exchanged, the seller
will recognize gain or loss equal to the difference, if any, between the
amount realized and its adjusted basis in the Residual Certificate (as defined
above in "--Distributions") at the time of such sale or exchange (except that
the recognition of a loss may be limited under the "wash sale" rules described
below). In general, any such gain or loss will be capital gain or loss,
provided the Residual Certificate is held as a capital asset as defined in
Section 1221 of the Code. However, a Residual Certificate will be an "evidence
of indebtedness" within the meaning of Section 582(c)(1) of the Code, so that
gain or loss recognized from the sale of a Residual Certificate by a bank or
thrift institution to which such section applies would be ordinary income or
loss.
Section 860F(d) of the Code and the Conference Committee Report to the 1986
Act indicate that, except as provided in Treasury Regulations, the wash sale
rules of Section 1091 of the Code will apply to dispositions of Residual
Certificates where the seller of the Residual Certificate, during the period
beginning six months before the sale or disposition of the Residual
Certificate and ending six months after such sale or disposition, acquires (or
enters into any other transaction that results in the application of Section
1091 of the Code) 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.
Noneconomic Residual Interests. Under the REMIC Regulations, a transfer of a
"noneconomic residual interest" (as defined below) to a Residual Holder (other
than a Foreign Holder, as discussed below) is disregarded for all federal
income tax purposes if a significant purpose of the transfer is to enable the
transferor to impede the assessment or collection of tax. If a transfer of a
residual interest is disregarded, the transferor would continue to be treated
as the owner of the residual interest and thus would continue to be subject to
tax on its allocable portion of the net income of the REMIC. 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 transfer
(i) 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 (ii) 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
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sufficient to satisfy the accrued taxes. The anticipated excess inclusions and
the present value rate are determined in the same manner as set forth above.
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 (i) the transferor conducted, at the time
of the transfer, a reasonable investigation of the financial condition of the
transferee and, as a result of the investigation, the transferor found that
the transferee had historically paid its debts as they came due and found no
significant evidence to indicate that the transferee will not continue to pay
its debts as they come due in the future and (ii) the transferee represents to
the transferor that it understands that, as the holder of a non-economic
residual interest, the transferee may incur tax liabilities in excess of any
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
Agreement with respect to each Series of REMIC Certificates will require the
transferee of a Residual Certificate to certify to the statements in clause
(ii) of the preceding sentence as part of the affidavit described below under
"Restrictions on Transfer of REMIC Residual Certificates."
Termination. The Trust Fund related to a Series of Certificates will
terminate shortly following the retirement of Certificates in such Series. If
a Residual Certificateholder's adjusted basis in its Residual Certificate
exceeds the amount of cash distributed to such Residual Certificateholder in
final liquidation of its interest, then, although the matter is not entirely
free from doubt, it would appear that the Residual Certificateholder is
entitled to a loss equal to the amount of such excess.
Foreign Investors. Unless otherwise provided in the applicable Prospectus
Supplement, no record or beneficial ownership interest in a Residual
Certificate may be transferred to a Foreign Holder. See "Restrictions on
Transfer of REMIC Residual Certificates" below. With respect to permitted
transfers to Foreign Holders, any such Residual Certificateholders should
assume that payments made on the Residual Certificates they hold will be
subject to a 30% withholding tax, or such a lesser rate as may be provided
under any applicable tax treaty, except that the rate of withholding on any
payments made on Residual Certificates that are excess inclusions will not be
eligible for reduction under any applicable tax treaties. See "--Excess
Inclusions" above. Under the REMIC Regulations, a transfer of a residual
interest that has tax avoidance potential is disregarded for all federal
income tax purposes if the transferee is a Foreign Holder. The REMIC
Regulations state that a residual interest has tax avoidance potential unless,
at the time of the transfer, the transferor reasonably expects that, for each
excess inclusion, the REMIC will distribute to the transferee residual
interest holder an amount that will equal at least 30% of the excess
inclusion, and that each such amount will be distributed at or after the time
at which the excess inclusion accrues and not later than the close of the
calendar year following the calendar year of accrual. See "--Tax on Transfers
of Residual Certificates to Certain Organizations" above for rules regarding
the determination of anticipated excess inclusions. The above rules do not
apply to transfers of Residual Certificates if the transferee's income from
the Residual Certificate would be effectively connected with a United States
trade or business of the transferee. The REMIC Regulations also provide that a
transfer of a Residual Certificate from a Foreign Holder to a United States
person or to a Foreign Holder in whose hands the income from the Residual
Certificate would be effectively connected with a United States trade or
business of the transferee will be disregarded if the transfer has the effect
of allowing the transferor to avoid tax on accrued excess inclusions.
Mark-to-Market Rules. Treasury regulations provided that a Residual
Certificate acquired after January 3, 1995 will not be treated as a security
and therefore generally cannot be marked to market.
Additional Taxable Income of Residual Interests. Any payment received by a
holder of a Residual Certificate in connection with the acquisition of such
Residual Certificate will be taken into account in determining the income of
such holder for federal income tax purposes. Although it appears likely that
any such payment would be includible in income immediately upon its receipt or
accrual as ordinary income, the IRS might assert that such payment should be
included in income over time according to an amortization schedule or
according to some other method. Because of the uncertainty concerning the
treatment of such payments, holders of Residual Certificates should consult
their tax advisors concerning the treatment of such payments for income tax
purposes.
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Other Matters Relating to REMIC Certificates; Administrative Matters. Solely
for the purposes of the administrative provisions of the Code, each Trust Fund
for which a REMIC election is made will be treated as a partnership, and the
Residual Certificateholders will be treated as the partners thereof. The Trust
Fund must maintain its books on a calendar year basis and must file federal
information returns in a manner similar to a partnership for federal income tax
purposes. Certain information on such returns will be furnished to each
Residual Certificateholder. The Trust Fund also will be subject to the
procedural and administrative rules of the Code applicable to partnerships,
including rules for determining any adjustments to among other things, items of
REMIC income, gain, loss, deduction or credit by the Service in a unified
administrative proceeding. The holders of Residual Certificates will generally
be entitled to participate in audits of the Trust Fund by the Service to the
same extent as general partners in an audit of a partnership. Regular
Certificateholders will not be entitled to participate in any such audits.
Each Residual Certificateholder is required to treat items on its return
consistently with their treatment on the Trust Fund's return, unless the
Residual Certificateholder either files a statement identifying the
inconsistency or establishes that the inconsistency resulted from incorrect
information received from the Trust Fund. The Service may assert a deficiency
resulting from a failure to comply with the consistency requirement without
instituting an administrative proceeding at the Trust Fund level. The Trust
Fund does not intend to register as a tax shelter pursuant to Section 6111 of
the Code because it is not anticipated that the Trust Fund will have a net loss
for any of the first five taxable years of its existence. Any person that holds
a Residual Certificate as a nominee for another person will be required to
furnish the Trust Fund, in a manner provided in Treasury Regulations, with the
name and address of such person, and other information.
Each Residual Certificateholder, by purchasing its Residual Certificate, (A)
shall be deemed to consent to the appointment of the Servicer as (i) the "tax
matters person" (within the meaning of Section 1.860F-4(d) of the REMIC
Regulations) for the Trust Fund and (ii) attorney-in-fact and agent for any
person that is the tax matters person if the Servicer is unable to serve as the
tax matters person, and (B) agrees to execute any documents required to give
effect to (A) above.
NON-REMIC TRUSTS
The discussion under this heading applies only to a Series with respect to
which a REMIC election is not made ("Non-REMIC Trusts"). A Non-REMIC Trust will
be described in the related Prospectus Supplement as either a grantor trust (a
"Grantor Trust") or an owner trust (an "Owner Trust").
Characterization of the Trust Fund. Upon the issuance of any Series with
respect to which no REMIC election is made and which is described in the
related Prospectus Supplement as a grantor trust, Orrick, Herrington &
Sutcliffe LLP, special counsel to GreenPoint, will deliver its opinion that,
with respect to each such Series of Certificates, under then existing law and
assuming compliance by the Seller, the Servicer and the Trustee of such Series
with all of the provisions of the related Agreement, and agreement or
agreements, if any, providing for a Credit Facility or a Liquidity Facility,
together with any agreement documenting the arrangement through which a Credit
Facility or a Liquidity Facility is held outside the related Trust Fund, the
agreement or agreements with any Underwriter, for federal income tax purposes,
the Trust Fund will be classified as a grantor trust and not as a corporation
or an association which is taxable as a corporation and the Certificates will
be treated as equity in such trust. Accordingly, each Certificateholder in a
Grantor Trust ("Grantor Trust Certificateholder") will be treated for federal
income tax purposes as the owner of an undivided interest in the Contracts and
other assets included in the Trust Fund. As further described below, each
holder of a Certificate in a Grantor Trust (a "Grantor Trust Certificate") must
therefore report on its federal income tax return the gross income from the
portion of the Contracts that is allocable to such Grantor Trust Certificate
and may deduct its share of the expenses paid by the Trust Fund that are
allocable to such Grantor Trust Certificate, at the same time and to the same
extent as such items would be reported by such holder if it had purchased and
held directly such interest in the Contracts and received directly its share of
the payments on the Contracts and paid directly its share of the expenses paid
by the Trust Fund when those amounts are received and paid by the Trust Fund. A
Grantor Trust Certificateholder who is an individual will be allowed deductions
for such expenses only to the
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extent that the sum of those expenses and certain other of the Grantor Trust
Certificateholder's miscellaneous itemized deductions exceeds 2% of such
individual's adjusted gross income. In addition, the amount of itemized
deductions otherwise allowable for the taxable year of an individual whose
adjusted gross income exceeds certain thresholds will be reduced. Other
potential limitations on deductibility are described above in "REMIC
Certificates--Taxation of Regular Certificates--Pass-Through of Expenses Other
Than Interest." It appears that expenses paid by the Trust Fund, and the gross
income used to pay such expenses, should be allocated among the classes of
Grantor Trust Certificates in proportion to their respective fair market
values at issuance, but because other reasonable methods of allocation exist
and the allocation of such items has not been the subject of a controlling
court decision, regulation or Internal Revenue Service Ruling, no definitive
advice concerning the allocation of such items can be given.
Under current Service interpretations of applicable Treasury Regulations,
GreenPoint would be able to sell or otherwise dispose of any subordinated
Grantor Trust Certificates. Accordingly, GreenPoint expects to offer
subordinated Grantor Trust Certificates for sale to investors. In general,
such subordination should not affect the federal income tax treatment of
either the subordinated or senior Certificates, and holders of subordinated
classes of Certificates should be able to recognize any losses allocated to
such class when and if losses are realized.
To the extent that any of the Contracts comprising a Contract Pool were
originated on or after March 21, 1984 and under circumstances giving rise to
original issue discount, Certificateholders will be required to report
annually an amount of additional interest income attributable to such discount
in such Contracts prior to receipt of cash related to such discount. See the
discussion above under "REMIC Certificates--Taxation of Regular Certificates--
Original Issue Discount." Similarly, Code provisions concerning market
discount and amortizable premium will apply to the Contracts comprising a
Contract Pool to the extent that the loans were originated after July 18, 1984
and September 27, 1985, respectively. See the discussions above under "REMIC
Certificates--Taxation of Regular Certificates--Market Discount" and "REMIC
Certificates--Taxation of Regular Certificates--Premium."
Tax Status of Grantor Trust Certificates. In general, the Grantor Trust
Certificates, other than "Premium Grantor Trust Certificates" (as defined
below) will be (i) "real estate assets" within the meaning of
Section 856(c)(4)(A) of the Code and (ii) assets described in Section
7701(a)(19)(C) of the Code to the extent the Trust Fund's assets qualify under
those Sections of the Code. Any amount includible in gross income with respect
to the Grantor Trust Certificates will be treated as "interest on obligations
secured by mortgages on real property or on interests in real property" within
the meaning of Section 856(c)(3)(B) of the Code to the extent the income on
the Trust Fund's assets qualifies under that Code Section. The Internal
Revenue Service has ruled that obligations secured by permanently installed
mobile home units qualify as "real estate assets" under Section 856(c)(4)(A)
of the Code. Assets described in Section 7701(a)(19)(C) of the Code include
loans secured by mobile homes not used on a transient basis. However, whether
Manufactured Homes would be viewed as permanently installed for purposes of
Section 856 of the Code would depend on the facts and circumstances of each
case, because the Internal Revenue Service rulings on this issue do not
provide facts on which taxpayers can rely to achieve treatment as "real estate
assets". No assurance can be given that the Manufactured Homes will be so
treated. A Real Estate Investment Trust ("REIT") will not be able to treat
that portion of its investment in Certificates that represents ownership of
Contracts on Manufactured Homes that are not treated as permanently attached
as a "real estate asset" for REIT qualification purposes. In this regard,
investors should note that generally, most Contracts prohibit the Obligor from
permanently attaching the related Manufactured Home to its site if it were not
so attached on the date of the Contract. If so specified in the related
Prospectus Supplement, Contracts in the related Contract Pool may permit the
Obligor to permanently attach the related Manufactured Home to its site even
if not attached at the date of the Contract. Grantor Trust Certificates that
represent the right solely to interest payments on the Contracts and Grantor
Trust Certificates that are issued at prices that substantially exceed the
portion of the principal amount of the Contracts allocable to such Grantor
Trust Certificates (both types of Non- REMIC Certificates, "Premium Grantor
Trust Certificates") should qualify under the foregoing sections of the Code
to the same extent as other Certificates, but the matter is not free from
doubt. Prospective purchasers of Certificates who may be affected by the
foregoing Code provisions should consult their tax advisors regarding the
status of the Certificates under such provisions.
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Taxation of Grantor Trust Certificates Under Stripped Bond Rules. Certain
classes of Grantor Trust Certificates may be subject to the stripped bond
rules of Section 1286 of the Code. In general, a Grantor Trust Certificate
will be subject to the stripped bond rules where there has been a separation
of ownership of the right to receive some or all of the principal payments on
a Contract from ownership of the right to receive some or all of the related
interest payments. Grantor Trust Certificates will constitute stripped
certificates and will be subject to these rules under various circumstances,
including the following: (i) if any servicing compensation is deemed to exceed
a reasonable amount; (ii) if GreenPoint or any other party retains a retained
yield with respect to the Contracts comprising a Contract pool; (iii) if two
or more classes of Grantor Trust Certificates are issued representing the
right to non-pro rata percentages of the interest or principal payments on the
Contracts; or (iv) if Grantor Trust Certificates are issued which represent
the right to interest only payments or principal only payments. Unless the
Prospectus Supplement indicates otherwise, the Grantor Trust Certificates will
be subject to the "stripped bond" rules of Section 1286 of the Code (or, if
the application of those rules to a particular Series of Grantor Trust
Certificates is uncertain, the Trust Fund will take the position that they
apply). There is some uncertainty as to how that section will be applied to
securities such as the Grantor Trust Certificates. Investors should consult
their own tax advisors regarding the treatment of the Grantor Trust
Certificates under the stripped bond rules.
Although the matter is not entirely clear and alternative characterizations
could be imposed, it appears that each stripped Grantor Trust Certificate
should be considered to be a single debt instrument issued on the day it is
purchased for purposes of calculating original issue discount. Thus, in each
month the holder of a Grantor Trust Certificate (whether a cash or accrual
method taxpayer) will be required to report interest income from the Grantor
Trust Certificate equal to the income that accrues on the Grantor Trust
Certificate in such month, calculated, in accordance with the rules of the
Code relating to original issue discount, under a constant yield method. In
general, the amount of such income reported in any month would equal the
product of such holder's adjusted basis in such Grantor Trust Certificate at
the beginning of such month (see "--Sales of Certificates" below) and the
yield of such Grantor Trust Certificate to such holder. Such yield would be
the monthly rate (assuming monthly compounding) determined as of the date of
purchase that, if used in discounting the remaining payments on the portion of
the Contracts that is allocable to such Grantor Trust Certificate, would cause
the present value of those payments to equal the price at which the holder
purchased the Grantor Trust Certificate.
With respect to certain categories of debt instruments, the Code requires
the use of a reasonable prepayment assumption in accruing original issue
discount and provides a method of adjusting those accruals to account for
differences between the assumed prepayment rate and the actual rate. These
rules apply to "regular interests" in a REMIC and are described under "REMIC
Certificates--Taxation of Regular Certificates--Original Issue Discount."
Regulations could be adopted applying these rules to the Grantor Trust
Certificates. Although the matter is not free from doubt, it appears that the
Taxpayer Relief Act of 1997 has expanded the requirement of the use of a
reasonable prepayment assumption to instruments such as the Grantor Trust
Certificates. In the absence of regulations interpreting the application of
this requirement to such instruments particularly where such instruments are
subject to the Stripped Bond Rules, it is uncertain whether the assumed
prepayment rate would be determined based on conditions at the time of the
first sale of the Grantor Trust Certificates or, with respect to any holder,
at the time of purchase of the Grantor Trust Certificate by that holder.
Finally, if these rules were applied to the Grantor Trust Certificates, and
the principles used in calculating the amount of original issue discount that
accrues in any month would produce a negative amount of original issue
discount, it is unclear when such loss would be allowed.
In the case of a Grantor Trust Certificate acquired at a price equal to the
principal amount of the Contracts allocable to such Grantor Trust Certificate,
the use of a reasonable prepayment assumption would not have any significant
effect on the yield used in calculating accruals of interest income. In the
case, however, of a Grantor Trust Certificate acquired at a discount or
premium (that is, at a price less than or greater than such principal amount,
respectively), the use of a reasonable prepayment assumption would increase or
decrease such yield, and thus accelerate or decelerate the reporting of
interest income, respectively.
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If the yield used by the holder of a Grantor Trust Certificate in
calculating the amount of interest that accrues in any month is determined
based on scheduled payments on the Contracts (that is, without using a
reasonable prepayment assumption) and such Grantor Trust Certificate was
acquired at a discount or premium, then such holder generally will recognize a
net amount of ordinary income or loss if a Contract prepays in full in an
amount equal to the difference between the portion of the prepaid principal
amount of the Contract that is allocable to the Grantor Trust Certificate and
the portion of the adjusted basis of the Grantor Trust Certificate (see "--
Sales of Certificates" below) that is allocable to the Contract. In general,
basis would be allocated among the Contracts in proportion to their respective
principal balances determined immediately before such prepayment. It is not
clear whether any other adjustments would be required or permitted to take
account of prepayments of the Contracts.
Solely for purposes of reporting income on the Grantor Trust Certificates to
the Service and to certain holders, as required under the Code, it is
anticipated that, unless provided otherwise in the related Prospectus
Supplement, the yield of the Grantor Trust Certificates will be calculated
based on (i) a representative initial offering price of the Grantor Trust
Certificates to the public and (ii) a reasonable Assumed Prepayment Rate,
which will be the rate used in pricing the initial offering of the Grantor
Trust Certificates. (Such yield may differ significantly from the yield to any
particular holder that would be used in calculating the interest income of
such holder.) No representation is made that the Contracts will in fact prepay
at the Assumed Prepayment Rate or at any other rate.
Sales of Certificates. Upon the sale or exchange of a Grantor Trust
Certificate, a Grantor Trust Certificateholder will recognize gain or loss
equal to the difference between the amount realized in the sale and its
aggregate adjusted basis in the Contracts represented by the Grantor Trust
Certificate. Generally, the aggregate adjusted basis will equal the Grantor
Trust Certificateholder's cost for the Grantor Trust Certificate increased by
the amount of any previously reported gain with respect to the Grantor Trust
Certificate and decreased by the amount of any losses previously reported with
respect to the Grantor Trust Certificate and the amount of any distributions
received thereon. Except as provided above with respect to the original issue
discount and market discount rules, any such gain or loss would be capital
gain or loss if the Grantor Trust Certificate was held as a capital asset.
Foreign Investors. Generally, interest or original issue discount paid to or
accruing for the benefit of a Grantor Trust Certificateholder who is a Foreign
Holder (as defined above in "REMIC Certificates--Taxation of Regular
Certificates--Taxation of Certain Foreign Investors") will be treated as
"portfolio interest" and therefore will be exempt from the 30% withholding
tax. Such Grantor Trust Certificateholder will be entitled to receive interest
payments and original issue discount on the Grantor Trust Certificates free of
United States federal income tax, but only to the extent the Contracts were
originated after July 18, 1984 and provided that such Grantor Trust
Certificateholder periodically provides the Trustee (or other person who would
otherwise be required to withhold tax) with a statement certifying under
penalty of perjury that such Grantor Trust Certificateholder is not a United
States person and providing the name and address of such Grantor Trust
Certificateholder. For additional information concerning interest or original
issue discount paid to a Foreign Holder and the treatment of a sale or
exchange of a Grantor Trust Certificate by a Foreign Holder, which will
generally have the same tax consequences as the sale of a Regular Certificate,
see the discussion above under "REMIC Certificates--Taxation of Regular
Certificates--Taxation of Certain Foreign Investors" and "--New Withholding
Regulations."
OWNER TRUST CERTIFICATES OR NOTES
Upon the issuance of any Series with respect to which no REMIC election is
made and which is described in the related Prospectus Supplement as an owner
trust, Orrick, Herrington & Sutcliffe LLP, special counsel to GreenPoint, will
deliver its opinion that with respect to each such Series of Certificates or
notes ("Notes"), under then existing law and assuming compliance by the
Seller, the Servicer and the Trustee of such Series with all of the provisions
of the related Agreement, and agreement or agreements, if any, providing for a
Credit Facility or a Liquidity Facility, together with any agreement
documenting the arrangement through which a Credit Facility
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or a Liquidity Facility is held outside the related Trust Fund, and the
agreement or agreements with any Underwriter, for federal income tax purposes,
(i) the Trust Fund will not be classified as a corporation or publicly traded
partnership and (ii) the Owner Trust Certificates or Notes offered by the
Prospectus will be treated as indebtedness.
TREATMENT OF THE OWNER TRUST CERTIFICATES OR NOTES AS DEBT
The Transferor will express in the Agreement the intent that for federal,
state and local income and franchise tax purposes, the Owner Trust
Certificates or Notes will be debt secured by the Contracts. The Transferor,
by entering into the Agreement, and each investor, by the acceptance of a
beneficial interest in a Certificate or Note, will agree to treat the Owner
Trust Certificates or Notes as debt for federal, state and local income and
franchise tax purposes. However, the Agreement may be ambiguous in
characterizing the transfer of Contracts, and because different criteria are
used in determining the non-tax accounting treatment of the transaction, the
Transferor may treat the Agreement for certain non-tax accounting purposes as
causing a transfer of an ownership interest in the Contracts and not as
creating a debt obligation.
A basic premise of federal income tax law is that the economic substance of
a transaction generally determines its tax consequences. The form and non-tax
characterization of a transaction, while relevant factors, are not conclusive
evidence of its economic substance. In appropriate circumstances, the courts
have allowed taxpayers as well as the Internal Revenue Service (the "IRS") to
treat a transaction in accordance with its economic substance as determined
under federal income tax law, even though the participants in the transaction
have characterized it differently for non-tax purposes.
The determination of whether the economic substance of a transfer of an
interest in property is instead a loan secured by the transferred property has
been made by the IRS and the courts on the basis of numerous factors designed
to determine whether the transferor has relinquished (and the transferee has
obtained) substantial incidents of ownership in the property. Among those
factors, the primary ones examined are whether the transferee had the
opportunity to gain if the property increases in value, and has the risk of
loss if the property decreases in value. Based on its analysis of such
factors, special counsel to GreenPoint is of the opinion that, under current
law, although not transaction closely comparable to the contemplated in this
Prospectus has been the subject of any Treasury regulation, revenue ruling or
judicial decision, for federal income tax purposes the Owner Trust
Certificates or Notes will not constitute an ownership interest in the
Contracts but will properly be characterized as debt.
TREATMENT OF THE OWNER TRUST
The Agreement permits the issuance of Owner Trust Certificates or Notes and
certain other interests in the Trust, each of which may be treated for federal
income tax purposes either as debt or as equity interests in the Trust. If all
of the Owner Trust Certificates or Notes and other interests (other than the
Transferor Certificate) in the Trust were characterized as debt, the Trust
might be characterized as a security arrangement for debt collateralized by
the Contracts and issued directly by the Transferor (or other holder of the
Transferor Certificate). Under such a view, the Trust would be disregarded for
federal income tax purposes. Alternatively, if some of were characterized as
equity therein, the Trust might be characterized as a separate entity owning
the Contracts, issuing its own debt, and jointly owned by the Transferor (or
other holder of the Transferor Certificate) and any other holders of equity
interests in the Trust. However, special counsel to GreenPoint is of the
opinion that, under current law, any such entity constituted by the Trust will
not be an association, taxable mortgage pool or publicly traded partnership
taxable as a corporation.
Possible Treatment of the Trust as a Taxable Mortgage Pool. Although, as
described above, Special Counsel is of the opinion that the Certificates will
properly be treated as debt for federal income tax purposes and that the Trust
will not be treated as a taxable mortgage pool taxable as a corporation, such
opinion will not bind the IRS and thus no assurance can be given that such
treatment will prevail. If the IRS were to contend successfully that the Trust
were a taxable mortgage pool taxable as a corporation, that entity would be
subject to
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federal income tax at corporate tax rates on its taxable income generated by
ownership of the related Mortgage Loans. That tax could result in reduced
distributions to Certificate Owners. No distributions from the Trust would be
deductible in computing the taxable income of the corporation, except to the
extent that any Certificates were treated as debt of the corporation and
distributions to the related Certificate Owners were treated as payments of
interest thereon. In addition, distributions to Certificate Owners not related
as holding debt would be dividend income to the extent of the current and
accumulated earnings and profits of the corporation (and Certificate Owners
may not be entitled to any dividends received deduction in respect of such
income).
TREATMENT OF THE OWNER TRUST CERTIFICATES OR NOTES
Treatment of the Owner Trust Certificates or Notes as Indebtedness. If the
Owner Trust Certificates or Notes are treated as indebtedness for federal
income tax purposes, the taxation of holders of such interests generally will
be the same as that described, above, for holders of REMIC Regular Interests
with the following exceptions: Holders not otherwise required to use the
accrual method of accounting for tax purposes would not be required to adopt
that method of accounting for the Owner Trust Certificates or Notes. The
treatment described under "REMIC Certificates--General--Tax Status of REMIC
Certificates" would not apply. Gain on the sale of Owner Trust Certificates or
Notes would not be subject to re-characterization as ordinary income solely as
a result of failure of income otherwise accrued on such Owner Trust
Certificates or Notes to have accrued at a rate exceeding 110% of the
"applicable federal rate" as described for REMIC Regular Interests in the
second paragraph of "REMIC Certificates--Taxation of Regular Certificates--
Sales of Certificates." The discussion under "REMIC Certificates--Taxation of
Regular Certificates--Pass-Through of Expenses Other Than Interest" would not
apply. See "REMIC Certificates--Taxation of REMIC Regular Certificates."
Possible Treatment of the Owner Trust Certificates or Notes as Partnership
Interests. Although, as described above, special counsel to GreenPoint is of
the opinion that the Owner Trust Certificates or Notes will properly be
treated as debt for federal income tax purposes, such opinion will not bind
the IRS and thus no assurance can be given that such treatment will prevail.
If the IRS were to contend successfully that some or all of the Owner Trust
Certificates or Notes were equity in the Trust for federal income tax
purposes, the Owner Trust Certificates or Notes could be classified as
partnership interests for such purposes. Because special counsel to GreenPoint
is of the opinion that the Owner Trust Certificates or Notes will be
characterized as debt for federal income tax purposes, no attempt will be made
to comply with any tax reporting requirements that would apply as a result of
such alternative characterizations.
If the Trust were treated as a partnership, that partnership would not be
subject to federal income tax. Rather, each item of income, gain, loss and
deduction of the partnership generated computing taxable income of the
Transferor (or the holder of the Transferor Certificate) and any Certificate
or Note Owners treated as partners in accordance with their respective
partnership interests therein. The amounts, character and timing of income
reportable by any Certificate or Note Owners treated as partners would likely
differ from that reportable by such Certificates or Note Owners had they been
treated as owning debt. In addition, if the Trust were treated in whole or in
part as a partnership, income derived from the partnership by any Certificates
or Note Owner that is a pension fund or other tax-exempt entity may be treated
as unrelated business taxable income. Also, any Certificate or Note owner that
is a Non-United States Person could be subject to withholding at the rate of
30% on its share of the partnership's income from the Contracts. Partnership
characterization also may have adverse state and local income or franchise tax
consequences for a Certificate or Note Owner. If the Trust were treated in
whole or in part as a partnership and the number of holders of interest in the
publicly offered Owner Trust Certificates or Notes and other interests in the
Trust treated as partners equaled or exceeded 100, the Transferor may cause
the Trust to elect to be an "electing large partnership." The consequence of
such election to investors could include the determination of certain tax
items at the partnership level and the disallowance of otherwise allowable
deductions. No representation is made as to whether such election will be
made.
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OTHER TAX CONSEQUENCES
No advice has been received as to local income, franchise, personal
property, or other taxation in any state or locality, or as to the tax effect
of ownership of Certificates in any state or locality. Certificateholders are
advised to consult their own tax advisors with respect to any state or local
income, franchise, personal property, or other tax consequences arising out of
their ownership of Certificates.
RESTRICTIONS ON TRANSFER OF REMIC RESIDUAL CERTIFICATES
As discussed in "Federal Income Tax Consequences--Taxation of Residual
Certificates--Tax on Transfers of Residual Certificates to Certain
Organizations," in order for the Trust Fund to qualify as a REMIC, there must
be reasonable arrangements designed to ensure that the Residual Certificates
are not held by disqualified organizations. Further, transfers to "electing
large partnerships" within the meaning of Section 775 of the Code or persons
that are not United States persons raise special tax issues. Accordingly,
unless the related Prospectus Supplement provides otherwise, no record or
beneficial ownership interest in a Residual Certificate that is sold under
this Prospectus may be transferred unless, among other things, the Trustee
receives (i) an affidavit from the proposed transferee to the effect that it
is not a "disqualified organization" or electing large partnership and is not
purchasing on behalf of a disqualified organization or electing large
partnership (see "Federal Income Tax Consequences--Taxation of Residual
Certificates--Tax on Transfers of Residual Certificates to Certain
Organizations"), (ii) a representation from the proposed transferee to the
effect that it is a citizen or resident of the United States, a corporation,
partnership or other entity created or organized in or under the laws of the
United States or any political subdivision thereof, or an estate or trust
whose income from sources without the United States is includible in gross
income for United States federal income tax purposes regardless of its
connection with the conduct of a trade or business within the United States
and (iii) a covenant of the proposed transferee to the effect that the
proposed transferee agrees to be bound by and to abide by the transfer
restrictions applicable to such REMIC Residual Certificate.
TAX-EXEMPT INVESTORS
A qualified pension plan or other entity that is exempt from federal income
taxation pursuant to Section 501 of the Code (a "Tax-Exempt Investor")
nonetheless will be subject to federal income taxation to the extent that its
income is "unrelated business taxable income" ("UBTI") within the meaning of
Section 512 of the Code. All "excess inclusions" of a "REMIC" allocated to a
"Residual Certificate" held by a Tax-Exempt investor will be considered UBTI
and thus will be subject to federal income tax. See "Federal Income Tax
Consequences--Certificates as REMIC Residual Interests--Excess Inclusions."
LEGAL INVESTMENT
The Prospectus Supplement for each Series of Certificates will specify
which, if any, of the Classes of Certificates offered thereby constitute
"mortgage related securities" for purposes of the Secondary Mortgage Market
Enhancement Act of 1984 ("SMMEA"). Classes of Certificates that qualify as
"mortgage related securities" will be legal investments for persons, trusts,
corporations, partnerships, associations, business trusts and business
entities (including depository institutions, life insurance companies 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 as, under applicable law, obligations issued by or guaranteed as to
principal and interest by the United States or any such entities. Under SMMEA,
if a state enacted legislation prior to October 4, 1991 specifically limiting
the legal investment authority of any such entities with respect to "mortgage
related securities," Certificates will constitute legal investments for
entities subject to such legislation only to the extent provided therein.
Approximately twenty-one states adopted such legislation prior to the October
4, 1991 deadline.
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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 Certificates
without limitations as to the percentage of their assets represented thereby,
federal credit unions may invest in mortgage related securities, and national
banks may purchase Certificates 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 such regulations as the
applicable federal authority may prescribe. In this connection, federal credit
unions should review the National Credit Union Administration ("NCUA") Letter
to Credit Unions No. 96, as modified by Letter to Credit Unions No. 108, which
includes guidelines to assist federal credit unions in making investment
decisions for mortgage related securities, and the NCUAs regulation
"Investment and Deposit Activities" (12 C.F.R. Part 703), which sets forth
certain restrictions on investment by federal credit unions in mortgage
related securities.
All depository institutions considering an investment in the Certificates
(whether or not the Class of Certificates under consideration for purchase
constitutes a "mortgage related security") should review the Federal Financial
Institutions Examination Council's Supervisory Policy Statement on the
Securities Activities (to the extent adopted by their respective regulators)
(the "Policy Statement"), setting forth, in relevant part, certain securities
trading and sales practices deemed unsuitable for an institution's investment
portfolio, and guidelines for (and restrictions on) investing in mortgage
derivative products, including "mortgage related securities," which are "high-
risk mortgage securities" as defined in the Policy Statement. According to the
Policy Statement, such "high-risk mortgage securities" include securities such
as certificates not entitled to distributions allocated to principal or
interest, or subordinated certificates. Under the Policy Statement, it is the
responsibility of each depository institution to determine, prior to purchase
(and at stated intervals thereafter), whether a particular mortgage derivative
product is a "high-risk mortgage security," and whether the purchase (or
retention) of such a product would be consistent with the Policy Statement.
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 and
provisions which may restrict or prohibit investment in securities which are
not "interest bearing" or "income paying."
There may be other restrictions on the ability of certain investors,
including depository institutions, either to purchase Certificates or to
purchase Certificates representing more than a specified percentage of the
investor's assets. Investors should consult their own legal advisors in
determining whether and to what extent the Certificates constitute legal
investments for such investors.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
imposes certain restrictions on employee benefit or other plans subject to
ERISA and/or Section 4975 of the Code ("Plans") and on persons having certain
specified relationships to a Plan ("Parties in Interest") with respect to such
Plans, including, for this purpose, individual retirement arrangements
described in Section 408 of the Code. Certain employee benefit plans, such as
governmental plans and church plans (if no election has been made under
Section 410(d) of the Code), are not subject to the requirements of ERISA, and
assets of such plans may be invested in Certificates without regard to the
ERISA considerations described below, subject to the provisions of other
applicable federal and state law. Any such plan which is qualified under
Section 401(a) of the Code and exempt from taxation under Section 501(a) of
the Code is, however, subject to the prohibited transaction rules set forth in
Section 503 of the Code.
Investments by Plans are subject to ERISA's general fiduciary requirements,
including the requirement of investment prudence and diversification and the
requirement that a Plan's investments be made in accordance with the documents
governing the Plan. A fiduciary which decides to invest the assets of a Plan
in Certificates
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should consider, among other factors, the sensitivity of the investments to
the rate of principal payments (including prepayments) on the Contracts as
discussed in "Prepayment and Yield Considerations" herein.
The United States Department of Labor (the "DOL") has issued regulations
concerning the definition of what constitutes the assets of a Plan (DOL Reg.
Section 2510.3-101). Under the DOL regulations, the underlying assets and
properties of corporations, partnerships and certain other entities in which a
Plan makes an "equity" investment could be deemed for purposes of ERISA to be
assets of the investing Plan in certain circumstances. A beneficial interest
in a trust is defined as an "equity" interest under the DOL regulations.
However, the DOL regulations provide that, generally, the assets of an entity
in which a Plan makes an equity investment will not be deemed for purposes of
ERISA to be assets of such Plan if the equity interest acquired by the
investing Plan is a publicly offered security. A publicly offered security, as
defined in DOL Reg. Section 2510.3-101 is a security that is widely held,
freely transferable and either registered under the Exchange Act or sold to
the Plan as part of a public offering under the Securities Act that then
becomes so registered. There can be no assurance that any Class of Certificate
will qualify for this or any other exception under the DOL regulations.
In addition to the imposition of general fiduciary standards of investment
prudence and diversification, ERISA prohibits a broad range of transactions
involving "plan assets" and Parties in Interest, and imposes additional
prohibitions where Parties in Interest are fiduciaries with respect to such
Plan. To the extent that the Contracts may be deemed "plan assets" of each
Plan that purchases Certificates, an investment in the Certificates by a Plan
could result in a prohibited transaction under ERISA Sections 406 and 407 and
be subject to an excise tax under Section 4975 of the Code unless a statutory
or administrative exemption applies.
In DOL Prohibited Transaction Class Exemption ("PTCE") 83-1, which amended
PTCE 81-7, the DOL exempted from ERISA's prohibited transaction rules certain
transactions relating to the operation of residential mortgage pool investment
trusts and the purchase, sale and holding of "mortgage pool pass-through
certificates" in the initial issuance of such certificates. However, PTCE 83-1
does not apply to trusts that hold Contracts.
Each Plan fiduciary who is responsible for making the investment decisions
whether to purchase or commit to purchase and to hold Certificates must make
its own determination as to the availability of any prohibited transaction
exemptions under ERISA. Each Plan fiduciary should also determine whether,
under the general fiduciary standards of investment prudence and
diversification, an investment in the 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.
Several underwriters of asset-backed securities have applied for and
obtained ERISA prohibited transaction exemptions which are in some respects
broader than PTCE 83-1 and the exceptions to the DOL regulations referred to
above. Such exemptions can only apply to securities backed by certain
receivables, loans and other obligations that are secured and, among other
conditions, are sold in an offering with respect to which such an underwriter
serves as the sole or a managing underwriter, or as a selling or placement
agent. If such an exemption might be applicable to a Series of Certificates,
the related Prospectus Supplement will refer to such possibility.
Any Plan fiduciary that proposes to cause a Plan to purchase Certificates
should consult with its counsel concerning the impact of ERISA and the Code,
the applicability of any exemption under ERISA and the potential consequences
in its specific circumstances, prior to making such investment. Moreover, each
Plan fiduciary should determine whether, under the general fiduciary standards
of investment prudence and diversification, an investment in the 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.
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CERTAIN LEGAL ASPECTS OF THE CONTRACTS
The following discussion contains summaries of certain legal aspects of
manufactured housing contracts, including Land Home and Land-in-Lieu
Contracts, which are general in nature. Because such legal aspects are
governed by applicable state law (which laws may differ substantially), the
summaries should be viewed only as an overview and therefore do not reflect
the laws of any particular state, nor do they encompass the laws of all states
in which the security for the Contracts or Land-and-Home Contracts is
situated.
THE CONTRACTS (OTHER THAN LAND HOME AND LAND-IN-LIEU CONTRACTS)
General. As a result of the assignment of Contracts in a Contract Pool to
the Trustee, the related Trust Fund will succeed collectively to all of the
rights (including the right to receive payment on such Contracts), and will
assume the obligations of the obligee, under such Contracts. Each Contract
evidences both (a) the obligation of the Obligor to repay the loan evidenced
thereby, and (b) the grant of a security interest in either the Manufactured
Home, and, in the case of a Land Home Contract or Land-in-Lieu Contract, the
real estate on which the related Manufactured Home is located, to secure
repayment of such loan. Certain aspects of both features of the Contracts are
described more fully below.
The following discussion focuses on issues relating generally to
GreenPoint's or any lender's interest in manufactured housing contracts. See
"Risk Factors--Security Interests of a Trust Fund in the Manufactured Homes"
herein for a discussion of certain issues relating to the transfer to a Trust
Fund of Contracts and the related security interests in the Manufactured Homes
comprising the related Contract Pool.
Security Interests of GreenPoint in the Manufactured Homes. Each Contract
generally will be "chattel paper" as defined in the UCC as in effect in New
York (where GreenPoint's chief executive offices are located) and the
jurisdiction in which the related Manufactured Home was located at
origination. Under the UCC as in effect in each such jurisdiction, the sale of
chattel paper is treated in a manner similar to perfection of a security
interest in chattel paper. GreenPoint will make or cause to be made
appropriate filings of UCC-1 financing statements to give notice of the
Trustee's ownership of the Contracts sold by it. The Trustee's interest in the
Contracts could be defeated if a subsequent purchaser were able to take
physical possession of the Contracts without notice of such assignment.
GreenPoint will not retitle any certificates of title that are in the name of
Bank of America, FSB or BankAmerica Housing Services, a division of Bank of
America, FSB relating to any contracts that it purchases in the Acquisition as
described under "The Seller." If so specified in the applicable Prospectus
Supplement, GreenPoint will be required under the related Agreement to stamp
or cause to be stamped each Contract sold by it to indicate its transfer to
the Trustee. To the extent the Contracts do not constitute "chattel paper"
within the meaning of the UCC as in effect in New York and the jurisdictions
in which the related Manufactured Homes were located at origination, these
steps may not be sufficient to protect the Trustee's interest in the Contracts
against the claims of GreenPoint's (or an affiliate's) or Bank of America,
FSB's creditors, as the case may be, a trustee in bankruptcy of GreenPoint or
a receiver, conservator or trustee in bankruptcy of an affiliate thereof that
sold such Contracts to GreenPoint or Bank of America, FSB, as applicable.
The Manufactured Homes securing the Contracts in a Contract Pool may be
located in all 50 states and the District of Columbia. Security interests in
manufactured homes similar to the ones securing the Contracts ("manufactured
homes") generally may be perfected either by notation of the secured party's
lien on the certificate of title or by delivery of the required documents and
payment of a fee to the state motor vehicle authority, depending on state law.
In some non-title states, perfection pursuant to the provisions of the UCC is
required. Generally, with respect to manufactured housing contracts
individually originated or purchased by GreenPoint, GreenPoint effects such
notation or delivery of the required documents and fees, and obtains
possession of the certificate of title or a lien certificate, as appropriate,
under the laws of the state in which any manufactured home securing a
manufactured housing contract is registered. If GreenPoint and its affiliates
fails, due to clerical errors or otherwise, to effect such notation or
delivery, or files the security interest under the
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wrong law (for example, under a motor vehicle title statute rather than under
the UCC, in a few states), GreenPoint (for itself, or as agent of the secured
lender) may not have a first-priority security interest in the manufactured
home securing a contract. As manufactured homes have become larger and often
have been attached to their sites without any apparent intention to move them,
courts in many states have held that manufactured homes, under certain
circumstances, may become subject to real estate title and recording laws. As
a result, a security interest in a manufactured home could be rendered
subordinate to the interests of other parties claiming an interest in the home
under applicable state real estate law. In order to perfect a security
interest in a manufactured home under real estate laws, the holder of the
security interest must file either a "fixture filing" under the provisions of
the UCC or a real estate mortgage under the real estate laws of the state
where the home is located. These filings must be made in the real estate
records office of the county where the home is located. If so specified in the
related Prospectus Supplement, most of the Contracts in any Contract Pool will
contain provisions prohibiting the Obligor from permanently attaching the
Manufactured Home to its site if it was not so attached on the date of the
Contract. As long as each Manufactured Home was not so attached on the date of
the Contract and the Obligor does not violate this agreement, a security
interest in the Manufactured Home will be governed by the certificate of title
laws or the UCC, and the notation of the security interest on the certificate
of title or the filing of a UCC financing statement will be effective to
maintain the priority of GreenPoint's security interest in the Manufactured
Home. If any such Manufactured Home does become attached after the date of the
related Contract, the related Contract provides that such attachment
constitutes an "event of default" that, if unremedied, gives rise to certain
discrete remedies including acceleration of the unpaid principal balance of
the Contract plus accrued interest and repossession of the Manufactured Home.
Regardless of whether a full recovery is obtained from an Obligor whose
Manufactured Home becomes attached, GreenPoint will represent that, at the
date of the initial issuance of Certificates in any Series, it had obtained a
perfected first-priority security interest in each of the Manufactured Homes
securing the related Contracts sold by it. Such representation, however, will
not be based upon an inspection of the site of any Manufactured Home to
determine if the Manufactured Home had become permanently attached to its
site. See "Description of the Certificates--Conveyance of Contracts" herein.
GreenPoint will not be required to make fixture filings or to file Mortgages
with respect to any of the Manufactured Homes (except in the case of Land Home
and Land-in-Lieu Contracts, as described below). Consequently, if a
Manufactured Home is deemed subject to real estate title or recording laws
because the owner attaches it to its site or otherwise, the Trustee's interest
therein may be subordinated to the interests of others that may claim an
interest therein under applicable real estate laws.
In addition, a federal circuit court decision may adversely affect a
Trustee's interest in the Contract Pool related to a Series of Certificates
even if the related Contracts constitute chattel paper. In Octagon Gas
Systems, Inc. v. Rimmer, 995 F.2d 948 (10th Cir. 1993), the court's decision
included language to the effect that accounts sold by an entity which
subsequently became bankrupt remained property of the debtor's bankruptcy
estate. Sales of chattel paper, like sales of accounts, are governed by
Article 9 of the UCC. If GreenPoint is subject to the federal bankruptcy code
and becomes a debtor under the federal bankruptcy code, and a court were to
follow the reasoning of the Tenth Circuit and apply such reasoning to chattel
paper, Certificateholders for such Series could experience a delay in, or
reduction of, distributions as to the Contracts that constitute chattel paper
and were sold to the related Trust Fund.
In the absence of fraud, forgery or permanent affixation of a manufactured
home to its site by the manufactured home owner, or administrative error by
state recording officials, the notation of the lien of GreenPoint on the
certificate of title or delivery of the required documents and fees (or if
applicable, perfection under the UCC) will be sufficient to protect GreenPoint
against the rights of subsequent purchasers of a manufactured home or
subsequent lenders who take a security interest in the manufactured home. If
there are any manufactured homes as to which the security interest in favor of
GreenPoint is not perfected, such security interest would be subordinate to
the claims of, among others, subsequent purchasers for value of and holders of
perfected security interests in such manufactured homes.
In the event that the owner of a manufactured home moves it to a state other
than the state in which such manufactured home initially is registered, under
the laws of most states, the perfected security interest in the
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manufactured home would continue for four months after such relocation and
thereafter until the owner registers the manufactured home in such state. If
the owner were to relocate a manufactured home to another state and were to
re-register the manufactured home in such state, and if steps are not taken to
re-perfect an existing security interest in such state, the security interest
in the manufactured home would cease to be perfected. A majority of states
generally require surrender of a certificate of title to re-register a
manufactured home. GreenPoint must therefore surrender possession if it holds
the certificate of title to such manufactured home or, in the case of
manufactured homes registered in states which provide for notation of lien,
GreenPoint would receive notice of surrender if its security interest in the
manufactured home is noted on the certificate of title. Accordingly,
GreenPoint would have the opportunity to re-perfect its security interest in
the manufactured home in the state of relocation. In states which do not
require a certificate of title for registration of a manufactured home, re-
registration could defeat the perfection. In the ordinary course of servicing
manufactured housing contracts, GreenPoint takes steps to effect such re-
perfection upon receipt of notice of re-registration or information from the
obligor as to relocation. Similarly, when an obligor under a contract sells a
manufactured home, GreenPoint must surrender possession of the certificate of
title or GreenPoint will receive notice as a result of its lien noted thereon;
accordingly, GreenPoint will have an opportunity to require satisfaction of
the related contract before release of the lien. Such protections generally
would not be available in the case of security interests in manufactured homes
located in non-title states where perfection of such security interest is
achieved by appropriate filings under the UCC (as in effect in such state).
Consequently, the security interest in the manufactured home could cease to be
perfected.
Under the laws of most states, liens for repairs performed on a manufactured
home and liens for personal property taxes take priority over a perfected
security interest in the manufactured home. GreenPoint will warrant in the
Agreement with respect to each Series of Certificates that, as of the date of
initial issuance of such Series of Certificates, no Manufactured Home relating
to a Contract it sold was, to its knowledge, subject to any such lien.
However, such warranty will not be based on any lien searches or other review.
See "Description of the Certificates--Conveyance of Contracts" in the
Prospectus Supplement related to a Series of Certificates for a description of
the remedies for a breach of the representations and warranties made by
GreenPoint under the related Agreement. In addition, such liens could arise
after the date of initial issuance of the Certificates. Notice may not be
given to GreenPoint, the Servicer, the Trustee or Certificateholders in the
event such a lien arises.
Enforcement of Security Interests in Manufactured Homes. If so specified in
the applicable Prospectus Supplement, the Servicer on behalf of the Trustee,
to the extent required by the related Agreement, may take action to enforce
the Trustee's security interest with respect to Contracts in default by
repossession and resale of the Manufactured Homes securing such defaulted
Contracts. In general, as long as a manufactured home has not become subject
to the real estate law, a creditor can repossess a manufactured home by
voluntary surrender, by "self-help" repossession that is "peaceful" (i.e.,
without breach of the peace) or, in the absence of voluntary surrender and the
ability to repossess without breach of the peace, by judicial process. The
holder of a manufactured housing contract generally must give the obligor a
number of days' notice prior to commencement of any repossession. The UCC and
consumer protection laws in most states place restrictions on repossession
sales, including requiring prior notice to the obligor and commercial
reasonableness in effecting such a sale. The law in most states also requires
that the obligor be given notice of any sales prior to resale of the unit so
that the obligor may redeem at or before such resale.
Under the laws applicable in most states, a creditor is entitled to obtain a
deficiency judgment from an obligor for any deficiency on repossession and
resale of the manufactured home securing such obligor's contract. However,
some states impose prohibitions or limitations on deficiency judgments, and in
many cases the defaulting obligor would have no assets with which to pay a
judgment.
Certain other statutory provisions, including federal and state bankruptcy
and insolvency laws, and general equitable principles may limit or delay
GreenPoint's ability to repossess and resell any Manufactured Home or enforce
a deficiency judgment.
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LAND HOME AND LAND-IN-LIEU CONTRACTS
General. To the extent described in the applicable Prospectus Supplement,
the related Contract Pool may contain Land Home Contracts or Land-in-Lieu
Contracts. The Land Home Contracts and the Land-in-Lieu Contracts will be
secured by either first mortgages or deeds of trust, depending upon the
prevailing practice in the state in which the underlying property is located.
A mortgage creates a lien upon the real property described in the mortgage.
There are two parties to a mortgage: the mortgagor, who is the borrower, and
the mortgagee, who is the lender. In a mortgage state, the mortgagor delivers
to the mortgagee a note or bond evidencing the loan and the mortgage. Although
a deed of trust is similar to a mortgage, a deed of trust has three parties:
the borrower, a lender as beneficiary, and a third-party grantee called the
trustee. Under a deed of trust, the borrower grants the property, irrevocably
until the debt is paid, in trust, generally with a power of sale, to the
trustee to secure payment of the loan. The trustee's authority under a deed of
trust and the mortgagee's authority under a mortgage are governed by the
express provisions of the deed of trust or mortgage, applicable law, and, in
some cases, with respect to the deed of trust, the directions of the
beneficiary.
Foreclosure. Foreclosure of a mortgage is generally accomplished by judicial
action. Generally, the action is initiated by the service of legal pleadings
upon all parties having an interest of record in the real property. Delays in
completion of the foreclosure occasionally may result from difficulties in
locating necessary parties defendants. When the mortgagee's right to
foreclosure is contested, the legal proceedings necessary to resolve the issue
can be time-consuming and expensive. After the completion of a judicial
foreclosure proceeding, the court may issue a judgment of foreclosure and
appoint a receiver or other officer to conduct the sale of the property. In
some states, mortgages may also be foreclosed by advertisement, pursuant to a
power of sale provided in the mortgage. Foreclosure of a mortgage by
advertisement is essentially similar to foreclosure of a deed of trust by non-
judicial power of sale.
Foreclosure of a deed of trust is generally accomplished by a non-judicial
trustee's sale under a specific provision in the deed of trust that authorizes
the trustee to sell property to a third party upon any default by the borrower
under the terms of the note or deed of trust. In certain states, such
foreclosure also may be accomplished by judicial action in the manner provided
for foreclosure of mortgages. In some states the trustee must record a notice
of default and send a copy to the borrower-trustor and to any person who has
recorded a request for a copy of a notice of default and the notice of sale.
In addition, the trustee must provide notice in some states to any other
individual having an interest of record in the real property, including any
junior lienholders. If the deed of trust is not reinstated within any
applicable cure period, 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. In addition, some state laws require that a copy of the notice of
sale be posted on the property and sent to all parties having an interest of
record in the property.
In some states, the borrower-trustor has the right to reinstate the loan at
any time following default until shortly before the trustee's sale. In
general, the borrower, or any other person having a junior encumbrance on the
real estate, may, during a reinstatement period, cure the default by paying
the entire amount in arrears plus the costs and expenses incurred in enforcing
the obligation. Certain state laws control the amount of foreclosure expenses
and costs, including attorneys' fees, that may be recovered by a lender.
In the case of foreclosure under either a mortgage or a deed of trust, the
sale by the receiver or other designated officer, or by the trustee, is a
public sale. However, because of the difficulty a potential buyer at the sale
would have in determining the exact status of title and because the physical
condition of the property may have deteriorated during the foreclosure
proceedings, it is not common for a third party to purchase the property at
the foreclosure sale. Rather, the lender generally purchases the property from
the trustee or receiver for an amount equal to the unpaid principal amount of
the note, accrued and unpaid interest and the expenses of foreclosure.
Thereafter, subject to the right of the borrower in some states to remain in
possession during the redemption period, the lender will assume the burdens of
ownership, including obtaining hazard insurance and making such repairs at its
own expense as are necessary to render the property suitable for sale. The
lender commonly will obtain the services of a real estate broker and pay the
broker a commission in connection with
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the sale of the property. Depending upon market conditions, the ultimate
proceeds of the sale of the property may not equal the lender's investment in
the property.
Because of certain requirements of the REMIC Provisions, a Trust Fund as to
which a REMIC election has been made generally must dispose of any related
Manufactured Homes acquired pursuant to repossession, foreclosure, or similar
proceedings within three years after acquisition. Consequently, if the
Servicer, acting on behalf of the Trust, is unable to sell a Manufactured Home
in the course of its ordinary commercial practices within 33 months after its
acquisition thereof (or a longer period as permitted by the Agreement), the
Servicer will auction such home to the highest bidder (which bidder may be the
Servicer) in an auction reasonably designed to produce a fair price. There can
be no assurance that the price for any Manufactured Home would not be
substantially lower than the unpaid principal balance of the Contract relating
thereto. In fact, manufactured homes, unlike site-built homes, generally
depreciate in value, and it has been industry experience that, upon
repossession and resale, the amount recoverable on a manufactured home
securing an installment sales contract is generally lower than the principal
balance of the contract.
Rights of Redemption. In some states, after sale pursuant to a deed of trust
or foreclosure of a mortgage, the borrower and certain foreclosed junior
lienholders or other parties are given a statutory period in which to redeem
the property from the foreclosure sale. In certain other states, this right of
redemption applies only to sale following judicial foreclosure, and not sale
pursuant to a non-judicial power of sale. In most states where the right of
redemption is available, statutory redemption may occur upon payment of the
foreclosure purchase price, accrued interest and taxes. In some states the
right to redeem is an equitable right. The effect of a right of redemption is
to diminish the ability of the lender to sell the foreclosed property. The
exercise of a right of redemption would defeat the title of any purchaser at a
foreclosure sale, or of any purchaser from the lender subsequent to judicial
foreclosure or sale under a deed of trust. Consequently, the practical effect
of the redemption right is to force the lender to maintain the property and
pay the expense of ownership until the expiration of the redemption period.
Anti-Deficiency Legislation and Other Limitations on Lenders. Certain states
have imposed statutory restrictions that limit the remedies of a beneficiary
under a deed of trust or a mortgagee under a mortgage relating to a single
family residence. In some states, statutes limit the right of the beneficiary
or mortgagee to 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 borrower equal in most cases to the difference between
the amount due to the lender and the net amount realized upon the foreclosure
sale.
Some state statutes may require the beneficiary or mortgagee to exhaust the
security afforded under a deed of trust or mortgage by foreclosure in an
attempt to satisfy the full debt before bringing a personal action against the
borrower. In certain other states, the lender has the option of bringing a
personal action against the borrower on the debt without first exhausting such
security; however, in some of these states, the lender, following judgment on
such personal action, may be deemed to have elected a remedy and may be
precluded from exercising remedies with respect to the security. Consequently,
the practical effect of the election requirement, when applicable, is that
lenders will usually proceed first against the security rather than bringing a
personal action against the borrower.
Other statutory provisions may limit any deficiency judgment against the
former borrower following a foreclosure sale to the excess of the outstanding
debt over the fair market value of the property at the time of such sale. The
purpose of these statutes is to prevent a beneficiary or a mortgagee from
obtaining a large deficiency judgment against the former borrower as a result
of low or no bids at the foreclosure sale.
In some states, exceptions to the anti-deficiency statutes are provided for
in certain instances where the value of the lender's security has been
impaired by acts or omissions of the borrower, for example, in the event of
waste of the property.
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In addition to anti-deficiency and related legislation, numerous other
federal and state statutory provisions, including the federal bankruptcy laws,
the federal Soldiers' and Sailors' Civil Relief Act of 1940 and state laws
affording relief to debtors, may interfere with or affect the ability of a
secured mortgage lender to realize upon its security and/or enforce a
deficiency judgment. For example, with respect to a Land Home Contract, in a
proceeding under the federal Bankruptcy Code, the court may prevent a lender
from foreclosing on the home, and when a court determines that the value of a
home is less than the principal balance of the loan, the court may reduce the
amount of the secured indebtedness to the value of the home as it exists at
the time of the proceeding, leaving the lender as a general unsecured creditor
for the difference between that value and the amount of outstanding
indebtedness. A bankruptcy court may grant the debtor a reasonable time to
cure a payment default, reduce the monthly payments due under such mortgage
loan, change the rate of interest and/or alter the mortgage loan repayment
schedule.
The Code provides priority to certain tax liens over the lien of the
mortgage or deed of trust. The laws of some states provide priority to certain
tax liens over the lien mortgage or deed of trust. Numerous federal and some
state consumer protection laws impose substantive requirements upon mortgage
lenders in connection with the origination, servicing and the enforcement of
mortgage loans. These laws include the federal Truth in Lending Act, Real
Estate Settlement Procedures Act, Equal Credit Opportunity, Fair Credit
Billing Act, Fair Credit Reporting Act, and related statutes and regulations.
These federal laws and state laws impose specific statutory liabilities upon
lenders who originate or service mortgage loans and who fail to comply with
the provisions of the law. In some cases, this liability may affect assignees
of the Contracts.
CERTAIN MATTERS RELATING TO INSOLVENCY
GreenPoint intends that each transfer of Certificates to the related Trust
Fund constitutes a sale, rather than a pledge of the Contracts to secure
indebtedness of GreenPoint. However, if GreenPoint were to become a debtor
under the federal bankruptcy code, it is possible that a creditor or trustee
in bankruptcy of GreenPoint or GreenPoint as debtor-in-possession may argue
that the sale of the Contracts by GreenPoint could be recharacterized as a
borrowing secured by a pledge of the Contracts. Such an attempt, even if
unsuccessful, could result in delays in or reductions of distributions on the
Certificates.
CONSUMER PROTECTION LAWS
The so-called "Holder-in-Due-Course" rule of the Federal Trade Commission is
intended to defeat the ability of the transferor of a consumer credit contract
which is the seller of goods which gave rise to the transaction (and certain
related lenders and assignees) to transfer such contract free of notice of
claims by the obligor thereunder. The effect of this rule is to subject the
assignee of such a contract to all claims and defenses which the obligor could
assert against the seller of goods. Liability under this rule is limited to
amounts paid under such a contract; however, the obligor also may be able to
assert the rule to set off remaining amounts due as a defense against a claim
brought by the assignee against such obligor. Generally, this rule will apply
to any Contracts conveyed to the Trustee and to any claims made by the
Servicer on behalf of the Trustee, as GreenPoint's assignee. Numerous other
federal and state consumer protection laws impose requirements applicable to
the origination and lending pursuant to such Contracts, including the Truth in
Lending Act, the Federal Trade Commission Act, the Fair Credit Billing Act,
the Fair Credit Reporting Act, the Equal Credit Opportunity Act, the Fair Debt
Collection Practices Act and the Uniform Consumer Credit Code. In the case of
some of these laws, the failure to comply with their provisions may affect the
enforceability of the related Contract or create liability for the Trust Fund.
The Soldiers' and Sailors' Civil Relief Act of 1940, as amended (the "Relief
Act") could, under certain circumstances, cap the amount of interest that may
be charged on certain Contracts at 6% and may hinder the ability of the
Servicer to foreclose on such Contracts in a timely fashion. Under the terms
of the Relief Act, if so required by an obligor under a manufactured housing
contract who enters military service after the origination of such obligor's
contract (including an obligor who is a member of the National Guard or is in
reserve status at the time of the origination of the contract and is later
called to active duty), such obligor may not be charged
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<PAGE>
interest above an annual rate of 6% during the period of such obligor's active
duty status, unless a court orders otherwise upon application of the lender.
In addition, the Relief Act imposes limitations which would impair the ability
of any lender to foreclose on an affected contract during the obligor's period
of active duty status and within three months thereafter. It is possible that
application of the Relief Act to certain of the Contracts could have an
effect, for an indeterminate period of time, on the ability of the Servicer to
collect full amounts of interest or foreclose on such Contract, and could
result in delays in payment or losses to the holders of the Certificates.
GreenPoint will not make any representation or warranty as to whether any
Contract is or could become subject to the Relief Act.
TRANSFERS OF MANUFACTURED HOMES; ENFORCEABILITY OF RESTRICTIONS ON TRANSFER
If so specified in the related Prospectus Supplement, the Contracts
comprising any Contract Pool generally will prohibit the sale or transfer of
the related Manufactured Homes without the consent of the obligee and permit
the acceleration of the maturity of the Contracts by the obligee upon any such
sale or transfer to which GreenPoint has not consented. Under the Agreement
for a Series of Certificates (if so specified in the related Prospectus
Supplement), GreenPoint will be required to consent to any such transfer and
to permit the assumption of the related Contract if the proposed buyer meets
the Servicer's underwriting standards and enters into an assumption agreement,
the Servicer determines that permitting such assumption will not materially
increase the risk of nonpayment of the Contract and such action will not
adversely affect or jeopardize any coverage under any insurance policy
required by such Agreement. If the Servicer determines that these conditions
have not been fulfilled, then it will be required to withhold its consent to
the transfer, but only to the extent permitted under the Contract and
applicable law and governmental regulations and only to the extent that such
action will not adversely affect or jeopardize any coverage under any
insurance policy required by the Agreement. In certain cases, a delinquent
Obligor may attempt to transfer a Manufactured Home in order to avoid a
repossession proceeding with respect to such Manufactured Home.
In the case of a transfer of a Manufactured Home after which the obligee
desires to accelerate the maturity of the related Contract, the obligee's
ability to do so will depend on the enforceability under state law of the
clause permitting acceleration on transfer. The Garn-St. Germain Depository
Institutions Act of 1982 preempts, subject to certain exceptions and
conditions, state laws prohibiting enforcement of such clauses applicable to
manufactured homes. To the extent such exceptions and conditions apply in some
states, the Servicer may be prohibited from enforcing such a clause in respect
of certain Manufactured Homes.
APPLICABILITY OF USURY LAWS
Title V of the Depository Institutions Deregulation and Monetary Controls
Act of 1980, as amended ("Title V"), provides that, subject to the following
conditions, state usury limitations shall not apply to any loan which is
secured by a first lien on certain kinds of manufactured housing. The
Contracts related to any Series of Certificates would be covered under Title V
if, among other things, they satisfy certain conditions governing the terms of
any prepayments, late charges and deferral fees and contain a requirement of a
30-day notice period prior to instituting any action leading to repossession
of the related unit.
Title V authorized any state to reimpose limitations on interest rates and
finance charges by adopting before April 1, 1983 a law or constitutional
provision which expressly rejected application of the federal law. Fifteen
states adopted such a law prior to the April 1, 1983 deadline. In addition,
even where Title V was not so rejected, any state is authorized by the law to
adopt a provision limiting discount points or other charges on loans covered
by Title V. GreenPoint will represent, in the Agreement for a Series of
Certificates (if so specified in the related Prospectus Supplement), that the
Contracts sold by it comply with applicable usury laws.
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<PAGE>
RATINGS
It is a condition to the issuance of the Certificates of each Series offered
hereby that at the time of issuance they shall have been rated in one of the
four highest rating categories by the nationally recognized statistical rating
agency or agencies specified in the related Prospectus Supplement.
Ratings on manufactured housing contract pass-through certificates address
the likelihood of the receipt by Certificateholders of their allocable share
of principal and interest on the underlying manufactured housing contract
assets. These ratings address structural and legal aspects associated with
such certificates, the extent to which the payment stream on such underlying
assets is adequate to make payments required by such certificates and the
credit quality of the credit enhancer or guarantor, if any. Ratings on the
Certificates do not, however, constitute a statement regarding the likelihood
of principal prepayments by Obligors under the Contracts in the related
Contract Pool, the degree by which prepayments made by such Obligors might
differ from those originally anticipated or whether the yield originally
anticipated by investors of any Series of Certificates may be adversely
affected as a result of such prepayments. As a result, investors of any Series
of Certificates might suffer a lower than anticipated yield.
A rating on any or all of the Certificates of any Series by certain other
rating agencies, if assigned at all, may be lower than the rating or ratings
assigned to such Certificates by the rating agency or agencies specified in
the related Prospectus Supplement. A security rating is not a recommendation
to buy, sell or hold securities and may be subject to revision or withdrawal
at any time by the assigning rating agency. Each security rating should be
evaluated independently of any other security rating.
METHOD OF DISTRIBUTION
The Seller may sell Certificates of each Series to or through underwriters
(the "Underwriters") by a negotiated firm commitment underwriting and public
reoffering by the Underwriters, and also may sell and place Certificates
directly to other purchasers or through agents. The Seller intends that
Certificates be offered through such various 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 such methods.
The distribution of the Certificates may be effected from time to time in
one or more transactions at a fixed price or prices, which may be changed, or
at market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
If so specified in the Prospectus Supplement relating to a Series of
Certificates, the Seller or any affiliate thereof may purchase some or all of
one or more Classes of Certificates of such Series from the Underwriter or
Underwriters at a price specified in such Prospectus Supplement. Such
purchaser may thereafter from time to time offer and sell, pursuant to this
Prospectus, some or all of such Certificates so purchased directly, through
one or more Underwriters to be designated at the time of the offering of such
Certificates or through broker-dealers acting as agent and/or principal. Such
offering may be restricted in the manner specified in such Prospectus
Supplement. Such transactions may be effected at market prices prevailing at
the time of sale, at negotiated prices or at fixed prices.
In connection with the sale of the Certificates, Underwriters may receive
compensation from the Seller or from purchasers of Certificates for whom they
may act as agents in the form of discounts, concessions or commissions.
Underwriters may sell the Certificates of a Series to or through dealers and
such dealers may receive compensation in the form of discounts, concessions or
commissions from the Underwriters and/or commissions from the purchasers for
whom they may act as agents. Underwriters, dealers and agents that participate
in the distribution of the Certificates of a Series may be deemed to be
Underwriters, and any discounts or commissions received by them from the
Seller and any profit on the resale of the Certificates by them may be
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deemed to be underwriting discounts and commissions, under the Securities Act.
Any such Underwriters or agents will be identified, and any such compensation
received from the Seller will be described, in the Prospectus Supplement.
Under agreements which may be entered into by GreenPoint, Underwriters and
agents who participate in the distribution of the Certificates may be entitled
to indemnification by GreenPoint against certain liabilities, including
liabilities under the Securities Act.
The Underwriters may, from time to time, buy and sell Certificates, but
there can be no assurance that an active secondary market will develop and
there is no assurance that any such market, if established, will continue.
USE OF PROCEEDS
If so specified in the applicable Prospectus Supplement, substantially all
of the net proceeds to be received from the sale of the Certificates will be
used by the Seller for general corporate purposes, including the payment of
expenses in connection with pooling the Contracts and issuing the
Certificates.
LEGAL MATTERS
Certain legal matters relating to the Certificates, including legal matters
relating to material federal income tax consequences concerning the
Certificates, will be passed upon for GreenPoint by Orrick, Herrington &
Sutcliffe LLP, Los Angeles, California.
EXPERTS
The consolidated financial statements of GFC as of December 31, 1997 and
1996 incorporated in this Prospectus by reference to GFC's Annual Report on
Form 10-K for the year ended December 31, 1997 have been so incorporated in
reliance on the report by PricewaterhouseCoopers LLP, independent accountants,
given on the authority of said firm as experts in accounting and auditing.
The consolidated financial statements of GFC for the year ended December 31,
1995, incorporated in this Prospectus by reference to GFC's Annual Report on
Form 10-K for the year ended December 31, 1997, have been so incorporated in
reliance upon the report of KPMG Peat Marwick LLP, independent certified
public accountants, incorporated by reference in this Prospectus and upon the
authority of said firm as experts in accounting and auditing.
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<PAGE>
INDEX OF SIGNIFICANT DEFINITIONS
<TABLE>
<CAPTION>
PAGE IN PROSPECTUS
ON WHICH TERM
IS DEFINED
------------------
<S> <C>
1986 Act..................................................... 41
Acquisition.................................................. 17
Agreement.................................................... 2
Bulk Sellers................................................. 14
Cede......................................................... iv
Certificate Account.......................................... 23
Certificate Balance.......................................... 4
Certificate Owners........................................... iv
Certificateholder............................................ 27
Certificateholders........................................... iv
Certificates................................................. COVER
Class........................................................ COVER
Code......................................................... 8
Collection Period............................................ 4
Commission................................................... iv
Committee Report............................................. 41
Contract..................................................... 1
Contract Files............................................... 23
Contract Pool................................................ ii
Contract Rate................................................ 1
Contract Schedule............................................ 23
Contracts.................................................... ii
Credit Facility.............................................. 36
Credit Facility Provider..................................... 36
Cut-off Date................................................. 1
Definitive Certificates...................................... 23
Disqualified Organizations................................... 40
Distribution Date............................................ 3
DOL.......................................................... 66
DTC.......................................................... iv
DTC Rules.................................................... 27
DTC Services................................................. 28
Due Date..................................................... 14
ERISA........................................................ 8
Excess Interest.............................................. 10
Exchange Act................................................. iii
Foreign Holder............................................... 48
Fractional Interests......................................... 32
GFC.......................................................... iii
Global Certificate........................................... 7
Government Securities........................................ 42
Grantor Trust Fund........................................... 38
GreenPoint .................................................. COVER
GreenPoint Bank.............................................. 17
Holder-in-Due-Course......................................... 72
Indirect Participants........................................ 27
Industry..................................................... 28
IRS.......................................................... 42
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
PAGE IN PROSPECTUS
ON WHICH TERM
IS DEFINED
------------------
<S> <C>
Issue Premium................................................ 52
Junior Certificates.......................................... 34
Kelly Blue Book.............................................. 19
Land Home.................................................... 1
Land Home Contract........................................... 15
Land Home Contracts.......................................... 15
Land-in-Lieu Contract........................................ 1
Land-in-Lieu Contracts....................................... 15
Liquidity Facility........................................... 37
Liquidity Facility Provider.................................. 37
Manufactured Home............................................ 1
Minimum Termination Amount................................... 28
Monthly Servicing Fee........................................ 30
Mortgage..................................................... 15
Multiple Variable Rate....................................... 43
NCUA......................................................... 65
New Regulations.............................................. 49
Non-REMIC Trust.............................................. 58
Notes........................................................ 61
Obligor...................................................... 14
OID Regulations.............................................. 38
Original Holder.............................................. 51
Participants................................................. 27
Parties in Interest.......................................... 65
Pass-Through Rate............................................ 5
Percentage Interest.......................................... 23
Plans........................................................ 65
Policy Statement............................................. 65
Pool Principal Balance....................................... 35
Pool Scheduled Principal Balances............................ 35
Premium Grantor Trust Certificates........................... 59
Prepayment Assumption........................................ 42
Prepayment Model............................................. 21
PTCE......................................................... 66
Rate Period.................................................. 25
Registration Statement....................................... iv
Regular Certificates......................................... 37
Regular Principal............................................ 4
REIT......................................................... 39
Relief Act................................................... 12
REMIC........................................................ ii
REMIC Certificates........................................... 38
REMIC Provisions............................................. 38
REMIC Regulations............................................ 38
Repurchase Date.............................................. 29
Reserve Fund................................................. 36
Residual Certificates........................................ 37
Residual Interest............................................ 6
Sale Agreement............................................... 17
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
PAGE IN PROSPECTUS
ON WHICH TERM
IS DEFINED
------------------
<S> <C>
Scheduled Payment............................................ 14
Senior Certificate Balance................................... 35
Senior Certificates.......................................... 34
Series....................................................... COVER
Service...................................................... 38
Servicer..................................................... ii
Single Variable Rate......................................... 42
SMMEA........................................................ 8
Special Principal Distributions.............................. 5
Spread Account............................................... 36
Startup Day.................................................. 40
Step-Up Rate................................................. 14
Step-Up Rate Contracts....................................... 14
Subordinate Certificates..................................... 34
successful Termination Auction............................... 8
Swap Regulations............................................. 49
Systems...................................................... 28
Tax-Exempt Investor.......................................... 64
Termination Auction.......................................... 29
Title V...................................................... 73
Total Regular Principal Amount............................... 4
Trust Fund................................................... COVER
Trustee...................................................... 2
UBTI......................................................... 64
UCC.......................................................... 11
Underwriters................................................. 74
Weighted Average Contract Rate............................... 1
</TABLE>
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<PAGE>
[LOGO OF GREENPOINT CREDIT]
Seller and Servicer
$727,722,881
(APPROXIMATE)
MANUFACTURED HOUSING CONTRACT TRUST
PASS-THROUGH CERTIFICATES, SERIES 1998-1
----------------
PROSPECTUS SUPPLEMENT
----------------
UNDERWRITERS
CREDIT SUISSE FIRST BOSTON
BEAR, STEARNS & CO. INC.
NATIONSBANC MONTGOMERY SECURITIES LLC
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE
IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION.
WE ARE NOT OFFERING THE OFFERED CERTIFICATES IN ANY STATE WHERE THE OFFER IS
NOT PERMITTED.
WE DO NOT CLAIM THE ACCURACY OF THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT
AND THE ACCOMPANYING PROSPECTUS AS OF ANY DATE OTHER THAN THE DATES STATED ON
THEIR RESPECTIVE COVERS.
DEALERS WILL DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN ACTING AS
UNDERWRITERS OF THE OFFERED CERTIFICATES AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS. IN ADDITION, ALL DEALERS SELLING THE OFFERED
CERTIFICATES WILL DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS UNTIL FEBRUARY
16, 1999.
